Title: Darci K. Danner v. Auto-Owners Insurance
Citation: 2001 WI 90
Docket Number: 1999AP001052
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: July 6, 2001

2001 WI 90 
 
SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
99-1052 
 
 
Complete Title 
of Case: 
 
Darci K. Danner, Frederick Danner and Rita 
Danner,  
 
Plaintiffs-Respondents, 
 
v. 
Auto-Owners Insurance,  
 
Defendant-Appellant-Petitioner.  
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at:  237 Wis. 2d 695, 616 N.W.2d 923 
(Ct. App. 2000-Unpublished) 
 
 
Opinion Filed: 
July 6, 2001 
Submitted on Briefs: 
      
Oral Argument: 
February 5, 2001 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Oneida 
 
JUDGE: 
Robert A. Kennedy 
 
 
JUSTICES: 
 
Concurred: 
      
 
Dissented: 
      
 
Not Participating: BRADLEY, J., did not participate. 
 
 
ATTORNEYS: 
For the defendant-appellant-petitioner there were 
briefs by Douglas J. Klingberg, Mary Sue Anderson and Ruder, Ware 
& Michler, Wausau, and oral argument by Douglas J. Klingberg. 
 
 
For the plaintiffs-respondents there was a brief 
by William A. Schroeder and Sommer, Olk, Schroeder & Payant, 
Rhinelander, and oral argument by Richard E. Sommer. 
 
 
 
2 
 
An amicus curiae brief was filed by Mark L. 
Thomsen, Edward E. Robinson and Cannon & Dunphy, S.C., 
Brookfield, on behalf of the Wisconsin Academy of Trial Lawyers. 
 
 
An amicus curiae brief was filed by Eric Englund, 
Madison, on behalf of the Wisconsin Insurance Alliance. 
 
2001 WI 90 
 
NOTICE 
This opinion is subject to further editing and 
modification.  The final version will appear 
in the bound volume of the official reports. 
 
 
No. 99-1052 
 
STATE OF WISCONSIN                    :  
  IN SUPREME COURT 
 
 
Darci K. Danner, Frederick Danner and Rita 
Danner, 
 
 
Plaintiffs-Respondents, 
 
 
v. 
 
Auto-Owners Insurance, 
 
 
Defendant-Appellant-Petitioner. 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed. 
 
¶1 
WILLIAM A. BABLITCH, J.   Darci, Frederick and Rita 
Danner (the Danners) brought a bad faith claim against their 
insurance carrier, Auto-Owners Insurance Co. (Auto-Owners).  The 
bad faith claim arose out of the Danners' efforts to obtain the 
payment of benefits pursuant to the policy's underinsured 
motorist clause.  A trial was held on the Danners' bad faith 
claim.  The jury issued a verdict that found in favor of the 
Danners.   
¶2 
On this review, we consider three issues.  First, 
Auto-Owners argues that because of the basic adversarial 
relationship that exists between an insured and an insurer in an 
FILED 
 
JUL 6, 2001 
 
Cornelia G. Clark 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
No. 
99-1052 
 
 
2 
underinsured claim, a bad faith claim cannot be brought against 
a UIM carrier until a duty to pay arises which, it is argued, 
arose in this case after the arbitration hearing.  The Danners 
argue that an underinsured motorist carrier has a duty to deal 
in good faith with its insured at all times, including during 
its investigation, evaluation, and process of a claim. 
¶3 
We agree with the Danners.  Every insurance contract 
contains an implied covenant of good faith and fair dealing 
between the insured and the insurer.  When this duty of good 
faith and fair dealing is breached, and the insured incurs 
damages as a result of that breach, a claim for bad faith will 
lie. 
¶4 
Second, Auto-Owners contends that there were several 
issues in the Danner claim that were fairly debatable and thus a 
finding of bad faith is precluded.  Because we conclude that 
there is credible evidence to support the jury's verdict, we are 
unpersuaded by Auto-Owners' argument.   
¶5 
Third, Auto-Owners argues that the circuit court erred 
in granting the Danners' motion to change the answer to two 
special verdict questions.  We find no merit in Auto-Owners' 
arguments.  Accordingly, we affirm.   
FACTS 
¶6 
The genesis of this case was a traffic accident that 
occurred in April 1990 at the intersection of River Street and 
Lynne Street in Rhinelander, Wisconsin.  Tod Kraus was traveling 
west on River Street.  While attempting to negotiate a left turn 
onto Lynne Street the Kraus vehicle collided into a vehicle 
No. 
99-1052 
 
 
3 
driven by Darci Danner (Ms. Danner), which had been proceeding 
east on River Street.   
¶7 
Kraus claimed that after he activated his turn signal, 
he stopped to avoid hitting several bicyclists.  Despite Kraus' 
contention, other witnesses stated that he did not signal his 
turn, there were no bicyclists, and Kraus pulled directly in 
front of Ms. Danner's on-coming vehicle.  Following the 
accident, Kraus was cited for failure to yield the right-of-way. 
¶8 
Kraus 
carried 
a 
$25,000 
liability 
policy 
with 
Dairyland Insurance.  At the time of the accident, Ms. Danner 
lived with her parents.  Her father, Frederick Danner, insured 
the vehicle she was driving with a policy purchased from Auto-
Owners Insurance.  The Danner policy also insured two other 
Danner family vehicles, each with $100,000 of underinsured 
motorist coverage.  Wisconsin law at that time permitted the 
policies to be stacked, thus affording total underinsurance 
limits of $300,000 in this case.   
¶9 
Auto-Owners retained Crawford and Company Insurance 
Adjusters (Crawford) to investigate the accident.  Crawford's 
investigation 
determined 
that 
the 
Kraus 
vehicle, 
without 
signaling, made a left turn directly into the path of the Danner 
vehicle.  Crawford submitted written reports to Auto-Owners.  On 
April 13, 1990, it reported the basic facts concerning how the 
accident occurred, and stated that there appeared to be no 
liability on the part of Ms. Danner.  The April 13 report also 
noted that Danner had indicated that she was treated at St. 
Mary's Hospital emergency room for sore muscles, neck, and head. 
No. 
99-1052 
 
 
4 
A Crawford supervisor, William Toivonen, testified at trial. 
Toivonen stated that Crawford's investigation established that 
Ms. Danner had sustained some soft tissue injuries.  In 
addition, 
Crawford's 
report 
informed 
Auto-Owners 
that 
an 
appraiser had assessed the Danner vehicle and reached a 
settlement with the insured on the loss of the vehicle.  
Crawford requested Auto-Owners to forward to it a draft in the 
amount of $4,400, payable to Frederick Danner, which Crawford 
would exchange for a Proof of Loss.   
¶10 In a letter dated April 19, 1990, Crawford advised 
Kraus that it had determined that the Danner vehicle was totaled 
out as a result of the accident for a loss of $4,600.  This 
amount included the Danners' $200 deductible.  The letter also 
stated:  "Our investigation revealed that the accident was a 
result of your negligence, therefore we will be looking to you 
for reimbursement of the amounts paid out."  Toivonen testified 
that Crawford later negotiated a settlement on the subrogation 
with Dairyland.  This was settled on an 80/20 basis:  80 percent 
liability on Kraus and 20 percent on Danner.  Dairyland 
forwarded to Crawford a draft for $3,264.80.   
¶11 In a subsequent report dated May 25, 1990, Crawford 
reported to Auto-Owners that a witness had indicated that Kraus' 
vehicle did not have its signal lights on and that the Danner 
vehicle was traveling at a proper speed.  The report also noted 
that Kraus had indicated that his turn signal was on and that he 
believed that the Danner vehicle was exceeding the posted speed 
limit of 25 m.p.h.  
No. 
99-1052 
 
 
5 
¶12 In a report dated September 12, 1990, Crawford stated 
that it was forwarding to Auto-Owners medical records obtained 
from the emergency room at Sacred Heart-St. Mary's Hospital, 
where Ms. Danner had been taken after the accident, and a copy 
of a record from her chiropractor.   
¶13 On November 8, 1990, Crawford informed Auto-Owners 
that it had been advised by Rita Danner, Ms. Danner's mother, 
that Darci was continuing to have back and leg pain and was 
consulting a chiropractor.  Subsequently, in January 1991 Auto-
Owners asked Crawford to close the file in the Danner case 
because the only item left in the file was medical payments for 
Ms. Danner.   
¶14 In a letter dated May 13, 1991, counsel for the 
Danners notified Auto-Owners that the underinsured motorist 
coverage under the Auto-Owners' policy may be applicable.  In 
its written reply, Auto-Owners asked counsel to advise Auto-
Owners as to the underlying limits under Tod Kraus' policy and 
requested any medical information or reports counsel had 
concerning Danner.  In December 1991 medical reports were 
forwarded to Auto-Owners.  Additional medical information was 
forwarded to Auto-Owners on January 23, 1992.  As to Auto-
Owners' request of the Danners for a copy of Kraus' liability 
policy, in a letter dated April 1992 counsel for Danner informed 
Auto-Owners 
that 
although 
it 
had 
twice 
requested 
that 
information, Kraus' insurer refused to provide it.   
¶15 In May 1992 Ms. Danner, who was diagnosed with a 
herniated disc, underwent fusion surgery on her back.  Her 
No. 
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6 
physician believed that because she was neurologically intact 
before the accident and had a disc herniation subsequent 
thereto, that the accident caused this back problem.   
¶16 In September 1992 counsel for the Danners forwarded 
additional medical reports to Auto-Owners.  This letter notified 
Auto-Owners that a demand had been made of Dairyland Insurance 
Co., Kraus' insurer, for the full policy limits of $25,000.  The 
letter stated that Dairyland had rejected a similar demand made 
in May on the grounds that Ms. Danner's current medical status 
was in part caused by pre-existing medical conditions.   
¶17 In November 1992 Danner filed an action in Oneida 
County Circuit Court against Kraus, Dairyland, and Auto-Owners. 
 In response, Auto-Owners retained attorney Todd McEldowney 
(McEldowney).   
¶18 In May 1993 McEldowney filed a report with Auto-
Owners.  McEldowney described the elements of the accident just 
as Crawford had previously done:  Kraus made a left turn in 
front of the Danner vehicle and was struck by Ms. Danner; Ms. 
Danner contended that Kraus did not have his blinker on; Kraus 
claimed that he had stopped to yield to a bicycle and then 
proceeded 
after 
illuminating 
the 
vehicle's 
left 
blinker.  
McEldowney's report noted that three witnesses indicated that 
the Kraus vehicle did not have its left turn signal on, and that 
the Danner vehicle was operating at a prudent rate of speed.  
McEldowney also reported that the witnesses agreed that Danner 
did not have enough time to avoid hitting the truck, and that 
the accident was caused by Kraus.  On the issue of liability, 
No. 
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7 
McEldowney advised Auto-Owners that a 90-10 split of negligence 
would not be inconceivable and that a jury would likely believe 
that the accident caused her physical complaints and award 
Danner over $22,000 in medical specials.  In his damage 
evaluation, McEldowney reported that prior to the accident 
Danner had been in several prior motor vehicle accidents, 
including a roll-over accident in 1989, and had complained of 
low back pain and occasional pain in her left leg.   
¶19 At the same time, Dairyland was evaluating Danner's 
pre-1990 medical records.  Dairyland determined that in 1986 
Danner had complained of back pain after water skiing and after 
participating in a gymnastic activity.  Dairyland also was aware 
that after the 1989 roll-over accident Danner again complained 
of back and leg pain.  Dairyland's analysis also revealed that 
following 
the 
accident 
with 
Kraus, 
Danner 
again 
sought 
chiropractic treatment for back pain.  At the same time, Ms. 
Danner was working for the Wisconsin Conservation Corps in a job 
that required frequent lifting, bending, and at times working 
with a chain saw.   
¶20 In March 1993 Dairyland believed that there was a 
question regarding causation of injury sustained by Ms. Danner 
because of the earlier motor vehicle accidents.  Dairyland 
believed, however, that if a jury accepted that surgery was 
necessitated as a result of the automobile accident with Kraus, 
then the verdict would be above the policy limits because the 
medical costs alone approached the $25,000 limits of the policy. 
No. 
99-1052 
 
 
8 
¶21 In June 1993 McEldowney asked Auto-Owners whether to 
invoke the policy's voluntary arbitration provision.  This 
clause in the policy provided in part: 
 
We and a person entitled to coverage under this 
agreement may not agree as to whether that person is 
entitled to recover damages or the amount of damages. 
 In that case, either party may make a written demand 
for arbitration.  If a demand is made, each party will 
select an arbitrator.  The two arbitrators will select 
a third.  If they cannot agree within 30 days, either 
may 
request 
that 
a 
judge 
of 
a 
court 
having 
jurisdiction make the selection.  Each party will pay 
its own arbitrator and bear equally the other expenses 
of arbitration.   
McEldowney 
was 
advised 
by 
Auto-Owners 
to 
"leave 
it 
in 
litigation.  We are not interested in mediation or arb."  
¶22 In August McEldowney sought additional information 
from Ms. Danner concerning medical expenses, as well as 
employment and school authorizations.  At this point, the 
Danners invoked the policy's arbitration provision.  
¶23 In December 1993 the circuit court ordered that the 
action between the Danners and Dairyland continue, but that 
Auto-Owners' participation in the suit was stayed.   
¶24 In May 1994 McEldowney wrote to Kraus' attorney and 
stated:  
 
In the meantime, from my obviously biased perspective, 
I would like to see this case settled for less than 
your policy limits. I would tend to believe that Auto-
Owners Insurance Company would be willing to pay an 
amount 
to 
your 
Company 
to 
help 
defray 
costs, 
settlement offers, etc., provided that you would be 
able to resolve this case for less than policy limits.  
¶25 At the same time, McEldowney reported to Auto-Owners: 
 
No. 
99-1052 
 
 
9 
Due to the substantial amount of medical specials in 
this case, [counsel for Kraus] is considering offering 
policy limits.  I have attempted to talk her out of 
that 
telephonically 
and 
have 
followed 
up 
said 
conversations with the attached letter.   
 
If we can get out from under this case via a payment 
on behalf of Kraus for less than policy limits, it may 
be in our best interest to offer some money to Sentry 
Insurance.  Realistically, if things continue the way 
they have been, it would not surprise me if the policy 
limits are tendered and that this matter will be going 
into arbitration.  
¶26 That same month, Dairyland tendered Kraus' policy 
limits of $25,000 contingent upon a full release of Kraus and 
Dairyland.  Auto-Owners' Green Bay claims office advised its 
home office legal department as follows:  
 
As you know, we put all discovery on the back burner, 
awaiting the outcome of Dairyland's claim.  There was 
the possibility that they would settle within their 
limits and we would be out of this matter.  However, 
since that has not happened and they have now paid 
their limits, we will resume our investigation of the 
injury and the medical discovery.  
¶27 In June, McEldowney notified counsel for the Danners 
that Auto-Owners was willing to agree to the settlement proposal 
and released its subrogation rights against Kraus and Dairyland. 
 In July 1994 Ms. Danner executed a release of Dairyland and 
Kraus.  
¶28 By 
August 
1994 
Auto-Owners 
had 
copies 
of 
the 
depositions taken in the circuit court proceeding.  Counsel for 
the Danners notified McEldowney that their settlement demand was 
$300,000.  In response McEldowney informed them that it was 
Auto-Owners' 
position 
that 
only 
$100,000 
of 
underinsured 
motorist benefits were available under their policy.  Counsel 
No. 
99-1052 
 
 
10
for 
the 
Danners 
advised 
McEldowney 
that 
three 
$100,000 
underinsured motorist coverages provided in the Danner policy 
are stacked for the purpose of determining the amount of 
coverage available.  Auto-Owners subsequently offered to settle 
the Danners' claim for $10,000.  
¶29 In November 1994, in response to a request for 
admissions, Auto-Owners denied that $300,000 was their liability 
limit under the three policies and denied that the amount paid 
by Dairyland should be deducted from the Danners' total damages 
instead of Auto-Owners total liability limits.  In December 
McEldowney advised the Danners' attorney that he believed the 
three $100,000 policies should be stacked and would discuss his 
views with Auto-Owners.  
¶30 At the end of 1994 McEldowney submitted to Auto-Owners 
an updated case summary and evaluation.  He again estimated that 
negligence in the case would be split 90-10.  Concerning 
injuries, he noted that Ms. Danner had been treated for two 
herniated discs with accompanying pain in her leg and back and 
had undergone one disc operation.  McEldowney also noted that 
prior to the accident Dr. Robert Kitzman had treated Ms. Danner 
for low back pain and occasional pain in her left leg.  
McEldowney wrote that it would be possible for a jury to award 
$75,000 over and above the approximately $22,000 in medical 
expenses already incurred.   
¶31 In February 1995 Dr. Joseph Tambornino examined Danner 
at the behest of Auto-Owners.  Dr. Tambornino reported that 
Danner had pre-existing back pain, and that there did not appear 
No. 
99-1052 
 
 
11
to be a clear relationship between the accident and her 
subsequent back problem requiring surgery.   
¶32 In a letter dated April 7, 1995, Auto-Owners offered 
to settle the case for $50,000.  In June, the Danners indicated 
a willingness to accept $175,000.   
¶33 In April 1995 Robert Ellis of Auto-Owners legal 
department, who was responsible for valuing the claim, wrote to 
the Green Bay claims office that he did not "have a good handle 
on the limits issue" and was unsure whether the Danners would be 
able to stack all three policies.  McEldowney, however, 
testified that he never had any doubt that Ms. Danner was a 
member of her parent's household, thus enabling her to stack the 
policies.  
¶34 Arbitration was scheduled to occur on July 31, 1995.  
Throughout July negotiations between the parties continued.  
¶35 On July 24, 1995, McEldowney and counsel for the 
Danners were notified that the three arbitrators had considered 
whether the issue of "bad faith" would be arbitrated.  The 
arbitrators concluded that arbitration would be limited to 
damages and liability as to the automobile accident and that, 
presuming that there is a viable bad faith issue after the 
arbitrators' award, that the circuit court was the proper place 
to litigate that issue.   
¶36 On July 31, 1995, the arbitration hearing occurred.  
The arbitrators awarded the Danners $220,050.  Auto-Owners 
forwarded a draft for $196,797.39.  Auto-Owners deducted $25,000 
from the arbitrators' award, concluding that this amount 
No. 
99-1052 
 
 
12
represented Dairyland's payment and should be deducted to 
prevent double recovery.  Subsequently the circuit court granted 
the Danners' motion to confirm the entire award and entered 
judgment for $220,050.  Auto-Owners forwarded the remaining 
$25,000 to the Danners. 
¶37 In December 1995 the Danners brought this bad faith 
action against Auto-Owners.  In their complaint, the Danners' 
alleged that Auto-Owners acted in bad faith in refusing to honor 
their claim and make prompt monetary settlement by:   
 
A.  Failing to initiate and conclude a claims 
investigation with all reasonable dispatch and failing 
to 
take 
prompt 
action 
to 
locate 
and 
interview 
witnesses to the accident;  
 
B.  Recklessly ignoring and disregarding the 
facts made known by the plaintiffs with respect to 
liability and damages;  
 
C.  Knowingly misrepresenting to the plaintiffs 
the pertinent facts relating to the extent of coverage 
available by attempting to invoke reducing clauses and 
limitations on stacking of policy coverages which were 
contrary to the state of the law at that time; and  
 
D. 
 
Failing 
to 
attempt 
in 
good 
faith 
to 
effectuate 
fair and 
equitable settlement 
of the 
plaintiffs' claims when liability was clear;  
 
E.  In utilizing the Arbitration process as a 
means of delaying prompt payment of the claim, thereby 
causing the plaintiffs unnecessary expense and loss of 
use of monies rightfully belonging to them as well as 
the costs incurred in preparation for and presentation 
of the claim at Arbitration and the expense of 
attorneys fees incurred in doing so.  
 
F.  In knowingly failing to exercise honest and 
informed judgment on the undisputed facts which were 
known to them, or should have been known to them had 
No. 
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13
they conducted an honest and intelligent investigation 
of the facts underlying the liability issues and 
damage issues. 
¶38 The jury found that Auto-Owners exercised bad faith by 
denying the Danners' claim.  The jury awarded $125,000 in 
attorneys' fees for prosecuting the bad faith action, but 
awarded no attorneys' fees for the underlying claim or any other 
compensatory or punitive damages.  
¶39 At post-verdict proceedings, the circuit court denied 
Auto-Owners' motion for judgment notwithstanding the verdict.  
It granted the Danners' motion to change the attorneys' fees 
award on the bad faith claim from $125,000 to $142,967.10 and 
from –0- to $81,012.97 for attorneys' fees on the underlying 
claim. 
¶40 In an unpublished opinion, the court of appeals 
affirmed.  Danner v. Auto-Owners Ins., No. 99-1052, unpublished 
slip op. (Wis. Ct. App. May 2, 2000).  This court granted 
review.  We now affirm the decision of the court of appeals. 
ANALYSIS 
I 
¶41 The first issue we consider is whether an underinsured 
motor carrier has a duty to act in good faith at all times with 
its insured.  Auto-Owners raised this issue in a motion for 
judgment notwithstanding the verdict pursuant to Wis. Stat. 
§ 805.14(5)(b) (1997-98).1  This motion was denied by the 
                     
 
1 Wisconsin Stat. § 805.14(5) provides as follows: 
 
No. 
99-1052 
 
 
14
Honorable Robert A. Kennedy, Circuit Court Judge for Forest and 
Florence Counties.  A motion for judgment notwithstanding the 
verdict "does not challenge the sufficiency of the evidence to 
support the verdict."  Mgmt. Comp. Serv. v. Hawkins, Ash, Baptie 
& Co., 206 Wis. 2d 158, 177, 557 N.W.2d 67 (1996).  Instead, the 
movant asserts that "for reasons evident in the record which 
                                                                  
Motions after verdict.  (a) Motion for judgment.   A 
motion for judgment on the verdict is not required.  
If no motion after verdict is filed within the time 
period specified in s. 805.16, judgment shall be 
entered on the verdict at the expiration thereof.  If 
a motion after verdict is timely filed, judgment on 
the verdict shall be entered upon denial of the 
motion. 
 
. . . 
 
(c) Motion to change answer.   Any party may move the 
court to change an answer in the verdict on the ground 
of insufficiency of the evidence to sustain the 
answer. 
 
(d) Motion for directed verdict.   A party who has 
made a motion for directed verdict or dismissal on 
which the court has not ruled pending return of the 
verdict may renew the motion after verdict.  In the 
event the motion is granted, the court may enter 
judgment in accordance with the motion. 
 
(e) Preliminary motions.   It is not necessary to move 
for 
a 
directed 
verdict 
or 
dismissal 
prior 
to 
submission of the case to the jury in order to move 
subsequently 
for 
a 
judgment 
notwithstanding 
the 
verdict or to change answer. 
 
(f) 
Telephone 
hearings. 
 
 
Motions 
under 
this 
subsection may be heard as prescribed in s. 807.13. 
 
All statutory references are to the 1997-98 volume, unless 
noted otherwise. 
No. 
99-1052 
 
 
15
bear upon matters not included in the verdict, the movant should 
have judgment."  Wis. Stat. § 805.14(5)(b).  Review of the 
circuit 
court's 
decision 
on 
a 
motion 
for 
judgment 
not 
withstanding the verdict presents a question of law that we 
review independently of the decisions reached by the court of 
appeals and circuit court, although with the benefit of their 
analysis.  See Mgmt. Comp. Serv., 206 Wis. 2d at 177. 
¶42 Auto-Owners asserts that a bad faith claim against an 
underinsured motorist carrier is fundamentally different from 
other first-party bad faith claims.  It contends that prior to a 
finding of liability by verdict or arbitration, the insurer 
takes the place of the underinsured (or uninsured) motorist and 
may raise any defense that was available to the uninsured or 
underinsured 
motorist; 
the 
insurer 
is 
in 
an 
adversarial 
relationship with its insured.2  
¶43 Auto-Owners contends no cause of action for bad faith 
failure to pay can arise until after the arbitration award 
established legal entitlement and imposed a duty.  In this case, 
the underinsured motorist insurance contract provided that Auto-
Owners "will pay all sums which an insured person is legally 
entitled to recover as damages:  (1) because of bodily injury, 
sickness or disease, including resulting death; and (2) arising 
out of the ownership, maintenance, or sue of an automobile which 
is underinsured."  The contract also contained an arbitration 
                     
2 This view is also set forth in Arnold P. Anderson, 
Wisconsin Insurance Law § 9.12, at 9-54 to -55 (4th ed. 1998)  
No. 
99-1052 
 
 
16
clause, which stated in part:  "We and a person entitled to 
coverage under this agreement may not agree as to whether that 
person is entitled to recover damages or the amount of damages. 
 In that case, either party may make a written demand for 
arbitration."  Auto-Owners argues that under the insurance 
policy's plain language, it had no duty to pay until it was 
determined that the Danners were legally entitled to recover 
damages.  Auto-Owners contends that without a contractual duty 
to pay, there can be no delay in payment and no basis for a bad 
faith claim. 
¶44 We begin by considering Auto-Owners' argument that, as 
a matter of law, no cause of action for bad faith can arise 
until after an arbitration award imposed a duty.  To properly 
evaluate Auto-Owners' arguments we must first examine the tort 
of bad faith in Wisconsin.   
¶45 This court recognized an independent tort cause of 
action for bad faith in first-party insurance cases in Anderson 
v. Continental Insurance Co., 85 Wis. 2d 675, 271 N.W.2d 368 
(1978).  The first-party insurance at issue in Anderson was a 
homeowner's policy.  The insureds brought a claim of bad faith 
against the insurer, alleging that it had "acted in bad faith 
intentionally and maliciously for the purpose of harassing the 
plaintiffs to discourage them from asserting their rightful 
claim and to prevent them from collecting the amounts due under 
the insurance policy."  Id. at 684.  In adopting the tort of bad 
faith, we followed the reasoning of the California Supreme Court 
in Gruenberg v. Aetna Insurance Co., 510 P.2d 1032 (Cal. 1973). 
No. 
99-1052 
 
 
17
 Id. at 690.  In Gruenberg, the California Supreme Court 
determined that the basis for this tort was a breach of the 
implied covenant of good faith and fair dealing that is present 
in every insurance contract.  Gruenberg, 510 P.2d at 1037.  "The 
duty violatedthat of dealing fairly and in good faith with the 
other party to a contract of insuranceis a duty imposed by law, 
not one arising from the terms of the contract itself.  In other 
words, this duty of dealing fairly and in good faith is 
nonconsensual in origin rather than consensual.  Breach of this 
duty is a tort."  Id. 
¶46 Our opinion in Anderson similarly relied upon the duty 
of good faith and fair dealing.  First, we noted that the 
rational for Gruenberg was rooted in Wisconsin precedent, Hilker 
v. Western Automobile Insurance Co., 204 Wis. 1, 231 N.W. 257, 
235 N.W. 413 (1930, 1931).  Anderson, 85 Wis. 2d at 687.  In 
Hilker, the plaintiff had an automobile insurance policy that 
limited liability to $5,000 per person.  Plaintiff's vehicle 
struck a child.  An action was brought against the plaintiff and 
a $10,500 judgment was recovered.  The plaintiff then brought a 
claim against the insurer, seeking to recover the $5,500 he was 
required to pay in excess of the coverage of the policy.   
Plaintiff further alleged that the insurance company acted in 
bad faith in conducting the defense of the third-party's action, 
in withholding information as to the action, and in failing to 
settle the action for a sum less than $5,000.  Hilker, 204 Wis. 
at 3.  A jury found for the plaintiff and the insurer appealed. 
 In affirming the judgment for plaintiff, Hilker recognized the 
No. 
99-1052 
 
 
18
implied covenant of good faith and fair dealing in every 
contract. Id. at 4 (citing Brassil v. Maryland Cas. Co., 104 
N.E. 622 (N.Y. 1914)).   
¶47 Our decision in Anderson built upon the Hilker 
analysis: 
 
The rationale which recognizes an ancillary duty 
on an insurance company to exercise good faith in the 
settlement of third-party claims is equally applicable 
and of equal importance when the insured seeks payment 
of legitimate damages from his own insurance company. 
 That such a duty arises out of the relationship 
between the contracting parties themselves cannot be 
doubted.  As black letter law, Restatement, Law of 
Contracts 2d, sec. 231 (Tentative Drafts Nos. 1-7, 
Rev. and Edited, 1973), provides:  "Every contract 
imposes upon each party a duty of good faith and fair 
dealing in its performance and its enforcement."   
Anderson, 85 Wis. 2d at 688-89.  
¶48 In Anderson, this court incorporated the following 
statement from Gruenberg as the law of Wisconsin: 
 
"It is manifest that a common legal principle 
underlies all of the foregoing decisions; namely, that 
in every insurance contract there is an implied 
covenant of good faith and fair dealing.  The duty to 
so act is imminent in the contract whether the company 
is attending to the claims of third persons against 
the insured or the claims of the insured itself.  
Accordingly, when the insurer unreasonably and in bad 
faith withholds payment of the claim of its insured, 
it is subject to liability in tort." 
Id. at 689 (quoting Gruenberg, 510 P.2d at 1032) (emphasis 
supplied).  
¶49 Our decision in Anderson emphasized that a special 
duty between the parties arose as a result of the relationship 
created by the contract.  Breach of this special duty is a tort 
No. 
99-1052 
 
 
19
and is unrelated to contract damages.  Id. at 686.   This 
special duty of good faith and fair dealing runs throughout the 
contract relationship between the insurer and the insured. 
Pursuant to our decision in Anderson, the duty of good faith and 
fair dealing is firmly established as present in first-party 
insurance contracts.  Breach of this duty may give rise to tort 
damages 
because 
an 
insurer 
has 
a 
"special 
'fiduciary' 
relationship" to its insured.  DeChant v. Monarch Life Ins. Co., 
200 Wis. 2d 559, 570, 547 N.W.2d 592 (1996).3    The present case 
                     
3 The opinions of this court have consistently characterized 
the cause of action identified in Anderson v. Continental 
Insurance Co., 85 Wis. 2d 675, 271 N.W.2d 368 (1978), as one 
based 
upon 
a 
"fiduciary" 
relationship 
or 
a 
relationship 
analogous to a fiduciary.  DeChant v. Monarch Life Ins. Co, 200 
Wis. 2d 559, 570, 547 N.W.2d 592 (1996); Elliott v. Donahue, 169 
Wis. 2d 310, 317 n.1, 485 N.W.2d 403 (1992) (noting that in 
Anderson, "this court explained that the tort of bad faith 
results from a breach of the insurer's fiduciary duty imposed as 
a consequence of the relationship established by the insurance 
contract"); Kranzush v. Badger State Mut. Cas. Co., 103 Wis. 2d 
56, 64, 307 N.W.2d 256 (1981) ("The heart of the tort recognized 
in Anderson is the fiduciary relationship between the insurer 
and the insured and the insurer's breach of the duty of good 
faith and fair dealing implicit in every contract."); Davis v. 
Allstate Ins. Co., 101 Wis. 2d 1, 7-8, 289 N.W.2d 373 (1981) 
("Bad faith is an intentional tort which results from a breach 
of duty imposed as a consequence of the relationship established 
by contract.  The duty imposed on an insurance company has been 
characterized as being analogous to that of a fiduciary." 
(internal quotation marks and citation omitted)). 
 
No. 
99-1052 
 
 
20
concerns underinsured motorist coverage.  Underinsured motorist 
coverage is first-party insurance.4 
¶50  Another California case, Richardson v. Employers 
Liability Assurance Corp., 25 Cal. App.3d 232 (Ct. App. 1972), 
decided one year before Gruenberg, illustrates the operation of 
the duty of good faith.5  In Richardson the plaintiffs obtained a 
judgment against their insurer based upon the refusal of the 
insurer to settle in good faith, without arbitration, the 
insured's claim on their uninsured motorist coverage. In 
discussing the insurer's actions the Richardson court wrote:  
 
[The insurer] deliberately, willfully and in bad faith 
withheld payment of the [insured's] claim months after 
it knew the claim to be completely valid; it forced an 
arbitration hearing on a claim against which it 
already knew that it had no defense; even after the 
award was made, it instructed its local office to 
attempt "to make the best possible settlement," and 
forced plaintiffs to resort to litigation to have the 
award judicially confirmed.  This conduct toward its 
own insured was unconscionable, and constituted a 
tortious breach of contract.   
                     
4 See Dennis J. Wall, Litigation and Prevention of Insurer 
Bad Faith § 9.01, at 384 (2d ed. 1994) listing examples of 
first-party insurance and including in that list uninsured and 
underinsured motorist coverage; 3 Alan I. Widiss, Uninsured and 
Underinsured Motorist Insurance § 31.4, at 5 (Revised 2d ed. 
2001). 
5 Richardson v. Employers Liability Assurance Corp., 25 Cal. 
App.3d 232 (Ct. App. 1972) was disapproved of by Gruenberg v. 
Aetna Insurance Co., 9 Cal. 3d 566, 580-81, n. 10 (1973).  This 
disapproval, however, was directed at Richardson's discussion of 
the criteria for an award of damages for anxiety and emotional 
distress.      
No. 
99-1052 
 
 
21
Id. at 239.  In the present case, of course, we are not 
concerned with tortious breach of contract; our analysis rests 
upon the breach of the covenant of good faith and fair dealing 
that is implied by law into the insurance contract.  Richardson 
illustrates how a breach of the duty of good faith and fair 
dealing 
may 
arise 
in 
the 
investigation, 
evaluation 
and 
processing of a claim.   
¶51 Insurance policies are unique contracts.  DeChant, 200 
Wis. 2d at 570.  Underinsured motorist coverage is not purchased 
to obtain commercial advantage but is instead obtained as 
protection against calamity.  Egan v. Mut. of Omaha Ins. Co., 
620 P.2d 141, 145 (Cal. 1979) (discussing the implied covenant 
of good faith and fair dealing in a disability insurance 
policy).  Although our tort law intends that the party at fault 
should pay the cost of injuries he or she has caused, not all 
operators of motor vehicles have sufficient financial resources 
or insurance to do so.  Underinsured motorist coverage provides 
"first party coverage that affords compensation for injured 
persons whenever a tortfeasor is inadequately insured".  3 Alan 
I. Widiss, Uninsured and Underinsured Motorist Insurance § 31.4, 
at 5 (Revised 2d ed. 2001).  Having paid a premium for this 
first-party coverage, an insured has a right to be protected 
from acts of bad faith by the insurer prior to a final 
determination that he or she is legally entitled to payment 
under the insurance contract.   
¶52 With first-party insurance, the insurer establishes 
"the conditions for both the presentment and payment of claims." 
No. 
99-1052 
 
 
22
Rawlings v. Apodaca, 726 P.2d 565, 570 (Ariz. 1986).  The 
insurer has what the Arizona Supreme Court has characterized as 
"an almost adjudicatory responsibility."  Id.  "The insurer 
evaluates the claim, determines whether it falls within the 
coverage provided, assesses its monetary value, decides on its 
validity and passes upon payment."  Id.  In the case at hand, 
for example, a condition of the payment of benefits was the 
exhaustion of the tortfeasor's limits of liability.  Evidence 
submitted at the trial showed that McEldowney, acting on behalf 
of Auto-Owners, sought to convince Dairyland to not pay its 
liability limits, thus cutting off any duty to pay benefits from 
the Auto-Owners' policy.  Dairyland did, nevertheless, pay the 
full limits of Kraus' policy to the Danners.  However this 
illustrates the significant amount of control, and potential 
exposure to economic loss, that can occur prior to a final 
determination of liability.   
¶53 If the insured disagrees with the insurer's decision, 
he or she does have remedies to pursue.  Yet "the very 
invocation of those remedies detracts significantly from the 
protection or security which was the object of the transaction." 
Id.  
¶54 We disagree with Auto-Owners' argument that until 
arbitration established a legal obligation to pay, there is no 
duty to pay and, accordingly, no predicate for a bad faith 
claim.  An action based upon bad faith is founded upon a breach 
of the covenant of good faith and fair dealing implied by law.  
Whether or not a claim of bad faith may occur in the absence of 
No. 
99-1052 
 
 
23
coverage is not an issue in this case because the arbitration 
award established legal entitlement and imposed upon Auto-Owners 
a duty to pay.6  Therefore, we hold that every insurance contract 
from its inception has an implied covenant of good faith and 
fair dealing between the insured and the insurer. When this duty 
of good faith and fair dealing is breached, and the insured 
incurs damages as a result of that breach, a claim for bad faith 
will lie. 
¶55 Auto-Owners asserts that a claim of bad faith against 
an underinsured motorist carrier is fundamentally different from 
other first-party bad faith claims.  In its view, the insurer 
and the insured occupy an adversarial position and as a result, 
no cause of action for bad faith can arise until after the 
arbitration award established legal entitlement and imposed a 
duty to pay benefits.  In other words, it is Auto-Owners' view 
there can be no bad faith claim against an underinsured motorist 
carrier for the investigation, evaluation or processing of a 
claim.   
¶56 In support of its position, Auto-Owners cites cases 
from 
other 
jurisdictions 
where 
courts 
have 
held 
that, 
notwithstanding the nature of the insurance contract or the 
premiums that have been paid for coverage, the insured and 
insurance carrier are adversaries until and unless an award or 
judgment is made in favor of the insured.  LeFevre v. Westberry 
                     
6 We do not address in this case whether an insured may 
recover 
damages 
for 
first-party 
bad 
faith 
when 
a 
court 
determines that the policy does not cover the insured's claim.  
No. 
99-1052 
 
 
24
and State Farm Mut. Auto. Ins. Co., 590 So.2d 154 (Ala. 1991) 
(discussing uninsured motorist coverage); Quick v. State Farm 
Mut. Auto. Ins. Co., 429 So.2d 1033 (Ala. 1983) (discussing 
uninsured motorist coverage).  In LeFevre the Alabama Supreme 
Court characterized uninsured motorist coverage as a "hybrid" 
instrument containing features of both first-party and third-
party coverage.  LeFevre, 590 S. 2d at 159.   
¶57 Other 
jurisdictions, 
however, 
have 
rejected 
this 
"hybrid" view.  In State Farm Mutual Automobile Insurance Co. v. 
Shrader, 882 P.2d 813 (Wyo. 1994), the Wyoming Supreme Court 
determined that the "hybrid" view was premised upon the idea 
that the insurer is adverse to the insured because it may assert 
the defenses that would be available to the uninsured motorist. 
 It concluded, however, that "'substituted liability' does not 
obviate the insurer's duty of good faith and fair dealing."  Id. 
at 827.7  The Arizona court of appeals relied upon Shrader when 
                     
7  State Farm Mutual Automobile Insurance Co. v. Shrader, 
882 P.2d 813 (Wyo. 1994), like the two Alabama cases cited in 
¶50, is a case concerning uninsured motorist coverage. In its 
argument Auto-Owners contends that a bad faith claim against an 
uninsured motorist carrier, as well as an underinsured motorist 
insurance carrier, should be analyzed differently than other 
first-party bad faith claims.  In support of its position, Auto-
Owners cites cases examining uninsured motorist claims, although 
the present case concerns underinsured motorist coverage.  In 
our analysis, we have also examined cases discussing uninsured 
motorist coverage as well as underinsured motorist coverage.  We 
want to particularly note, however, that our analysis might be 
somewhat different if this case concerned uninsured motorist 
coverage.  Every policy of motor vehicle liability insurance 
must contain an uninsured motorist provision.  Wis. Stat. 
§ 632.32(4)(a)1 (1999-2000).  A leading treatise on uninsured 
motorist coverage states:  
No. 
99-1052 
 
 
25
it wrote that "[a]lthough a UM carrier may assert all defenses 
which would be available to the uninsured motorist, it still 
owes 
a 
duty 
of 
good 
faith 
and 
fair 
dealing 
to 
its 
insured/claimant."  Voland v. Farmers Ins. Co. of Ariz., 943 
P.2d 808, 811 (Ariz. Ct. App. 1997).8  The Washington Supreme 
Court has also held that "the duty of good faith and fair 
                                                                  
[T]he standard by which the conduct of insurers is 
judged 
arguably 
should 
be 
higher 
for 
uninsured 
motorist claims than it is for first party insurance 
coverages that are not mandated by statute.  In other 
words, 
given 
the 
fact 
that 
uninsured 
motorist 
insurance is the subject of statutory requirements in 
forty-nine states, a persuasive argument can be made 
for the proposition that the duty of an insurer to act 
in good faith and fairly should be of the highest 
order claims arising under this coverage.  The public 
interest in this coverage means that insurers should 
be obligated to exercise the greatest care and highest 
level of good faith and fair dealing. 
 
2 Alan I. Widiss, Uninsured and Underinsured Motorist 
Insurance §  20.4, at 242 (Revised 2d ed. 2000).  See also 
Shrader, 882 P.2d at 826. 
 
Because the present case does not concern uninsured 
motorist coverage we need not consider whether uninsured 
motorist coverage in this jurisdiction requires a higher 
standard of good faith and fair dealing.   
 
8 In Voland v. Farmers Insurance Co. of Arizona, 943 P.2d 
808, 811 (Ariz. Ct. App. 1997), the court also noted that it 
generally agreed with certain observations set forth in LeFevre 
v. Westberry, 590 So.2d 154, 159 (Ala. 1991).  Although Voland 
quoted LeFevre at length, the opinion stopped short and did not 
quote LeFevre's statement that "there can be no action based on 
the tort of bad faith based on conduct arising prior to [the 
time that the uninsured motorist's liability is fixed], only for 
subsequent bad faith."  Given Voland's omission of this portion 
of LeFevre, and its subsequent citation to Shrader, 882 P.2d at 
826-27, we conclude that Voland did not agree with the Alabama 
court on this point. 
No. 
99-1052 
 
 
26
dealing survives within the UIM relationship.  This is because, 
although the relationship becomes adversarial, the insured still 
has 'the reasonable expectation that he will be dealt with 
fairly and in good faith by his insurer . . . .'"  Ellwein v. 
Hartford Accident and Indem. Co., 15 P.3d 640, 647 (Wash. 2001) 
(quoting Craft v. Econ. Fire & Cas. Co., 572 F.2d 565, 568-69 
(7th Cir. 1978)).  These statements are in accord with this 
court's analysis of the relationship between the insured and 
insurer.  The duty of good faith and fair dealing is implied in 
the insurance contract.  We interpret insurance contracts to 
meet the reasonable expectation of the insured.  Therefore, we 
conclude that the correct view is that the duty of good faith 
and fair dealing exists at all times, including during the 
investigation, evaluation and processing of an underinsured 
motorist claim.       
¶58 An insurer may at times have difficulty distinguishing 
legitimate claims from fraudulent claims, and should not be 
found to have acted in bad faith for thoroughly investigating a 
claim if its concerns are reasonable.  Although an underinsured 
motorist carrier may assert all defenses that would be available 
to the underinsured motorist, the carrier still owes a duty of 
good faith and fair dealing to its insured during this 
investigation.  An insurance company may "'challenge claims 
which are fairly debatable and will be found liable only where 
it has intentionally denied (or failed to process or pay) a 
claim without a reasonable basis.'"  Radlein v. Indus. Fire & 
No. 
99-1052 
 
 
27
Cas. Ins. Co., 117 Wis. 2d 605, 626, 345 N.W.2d 874 (1984) 
(quoting Anderson, 85 Wis. 2d at 693).9 
¶59 In sum we hold the in the underinsured motorist 
insurance contract there is an implied covenant of good faith 
and fair dealing between the insured and the insurer.  When this 
duty is breached, and the insured incurs damages as a result of 
that breach, a claim for bad faith will lie.  
II 
¶60 Auto-Owners also appeals the circuit court's denial of 
its motion for judgment notwithstanding the verdict in which it 
argued that there were fairly debatable issues precluding a 
finding of bad faith.  Auto-Owners contends that causation, 
damages and negligence were all fairly debatable.   
¶61 To establish a claim for bad faith, the insured "must 
show the absence of a reasonable basis for denying benefits of 
the policy and the defendant's knowledge or reckless disregard 
of the lack of a reasonable basis for denying the claim."  
Anderson, 85 Wis. 2d at 691.  In the present case, the jury 
determined that Auto-Owners exercised bad faith.  The circuit 
court denied Auto-Owners' motion after verdict to change this 
answer.  Under these circumstances we apply a narrow standard of 
review.  Morden v. Cont'l AG, 2000 WI 51, ¶38, 235 Wis. 2d 325, 
611 N.W.2d 659.  A jury verdict will be sustained if there is 
                     
9 The discussion in Radlein v. Industrial Fire & Casualty 
Insurance Co., 117 Wis. 2d 605, 345 N.W.2d 874 (1984) of a 
reducing clause was disapproved of as dicta in Nicholson v. Home 
Insurance Co., 137 Wis. 2d 581, 602, 405 N.W.2d 327 (1987).  
This is not an issue in the present case. 
No. 
99-1052 
 
 
28
any credible evidence to support it.  Id.  "[I]f there is any 
credible evidence, under any reasonable view, that leads to an 
inference supporting the jury's finding, we will not overturn 
that finding."  Id.  
¶62 First, Auto-Owners asserts that negligence and its 
apportionment were reasonably debatable.  According to Auto-
Owners, in this intersection collision Kraus claimed to have 
made an emergency stop to avoid bicyclists in a crosswalk.  In 
contrast, Ms. Danner and other witnesses testified that there 
were no bicyclists.  Therefore, Auto-Owners asserts that 
negligence was fairly debatable at the time the case was 
submitted to arbitration because it rested on credibility 
determinations.   
¶63 The evidence adduced at trial showed, however, that as 
early as May 1990 Auto-Owners was apprised that Kraus was the 
cause of the accident.  First, the police cited Kraus for 
failing to yield the right of way.  Second, the report of 
adjuster Toivonen of Crawford and Co. Insurance Adjusters, hired 
by Auto-Owners, stated that there appeared to be no liability on 
the part of Ms. Danner.  Third, in May 1993 Auto-Owners' 
attorney, McEldowney, apportioned negligence at 90 percent to 
Kraus, 10 percent to Ms. Danner.  Accordingly, we are satisfied 
that the evidence and all reasonable inferences supports the 
conclusion that there is credible evidence to support the jury's 
verdict of bad faith, to wit, that negligence was not fairly 
debatable.   
No. 
99-1052 
 
 
29
¶64 Next, Auto-Owners asserts that causation was fairly 
debatable.  First, it contends that Dr. Tambornino, who 
conducted an examination of Ms. Danner at the behest of Auto-
Owners, offered the opinion that she had a pre-existing back 
problem and that the April 1990 accident with Kraus did not 
cause her injuries.  Second, it contends that two of plaintiffs' 
witnesses, Attorney Merrick Domnitz and Attorney George Curtis, 
testified that Danner's prior history could be evidence of a 
preexisting condition.  Finally, Auto-Owners asserts that Ms. 
Danner's medical records revealed a longstanding history of 
lower back pain.   
¶65 The evidence adduced at trial showed that during the 
years between the accident in April 1990 and Dr. Tambornino 
examination of Ms. Danner in February 1995 she was treated by 
three other physicians, Drs. Gmeiner, Langheim and Szmanda.  All 
three physicians stated, to a reasonable degree of medical 
certainty or probability, that the accident with Kraus was the 
cause of Danner's herniated disc.   
¶66 Attorney Domnitz testified that he did not believe 
that the cause of the injury and the value of the injury were 
reasonably 
debatable 
"because 
there's 
no 
legal 
proof 
on 
causation.  Nothing that would be admissible in evidence." 
Attorney Domnitz also testified: 
 
[E]ven if Darci did have problems with her back going 
back 
to 
childhood 
that 
was 
aggravated 
by 
this 
automobile accident, that would be a compensable 
injury.  An injury for which she would have the right 
to seek damages for the aggravation.  That was what I 
No. 
99-1052 
 
 
30
talked about yesterday when I said it could be a cause 
instead of the cause. 
¶67 Attorney Curtis testified as follows: 
 
Q:  Do you think that Auto-Owners or McEldowney had a 
reasonable basis for concluding that the Danner claim 
was in  some way debatable or questionable?  
 
A:  No.  There certainly was no basis on the 
negligence issue.  The treating physicians were strong 
and unanimous.  The insurance medical examiner was so 
weak that not only was his report something that 
wouldn't meet the standard of admissibility, but Mr. 
McEldowney complained to Mr. Ellis it was so weak and 
never even brought him to the arbitration.  So there's 
no basis for a debate there. 
Accordingly, we are satisfied that the evidence and all 
reasonable inferences supports the conclusion that there is 
credible evidence to support the jury's verdict of bad faith 
because causation was not fairly debatable. 
¶68 Next, Auto-Owners contends that a substantial issue 
existed regarding the case's value.  First, Auto-Owners asserts 
that its own attorney valued the case from $10,000 to $150,000. 
It points out that plaintiffs valued the case from $175,000 to 
$300,000.  Second, Auto-Owners asserts that personal injury 
claims are fairly debatable as a matter of law because such 
claims 
involve 
multiple 
factors 
subject 
to 
substantial 
differences of opinion. Third, Auto-Owners' expert, attorney 
Anderson, testified that the claim was not worth the plaintiff's 
lowest demand of $175,000. 
¶69 Auto-Owners relies upon Voland, 942 P.2d at 812-13, in 
support of its argument on this point.  In Voland, the Arizona 
court of appeals considered whether the implied covenant of good 
No. 
99-1052 
 
 
31
faith and fair dealing requires an uninsured motorist carrier to 
pay the amount of an unaccepted settlement offer that fully 
covers all aspects of an uninsured motorist claim before the 
insured executed a release or obtains an arbitration award. The 
court concluded that a payment in advance was not required.  In 
support of its conclusion, the Arizona Court of Appeals wrote  
 
Unlike the stolen personal property and lost earnings 
claims involved in those cases, a personal injury 
claim is unique and generally not divisible or 
susceptible 
to 
relatively 
precise 
evaluation 
or 
calculation. The "pain and suffering"/general damage 
elements of a personal injury claim, for example, are 
inherently flexible and subject to differing and 
potentially changing evaluations based on various 
factors. In short, evaluating personal injury claims, 
and particularly the "general damage" component, is 
far from an exact science.  Oftentimes it is no more 
precise or predictable than throwing darts at a board. 
Id.  The issue under consideration in Voland is distinguishable 
from the present case.  We do not agree with Auto-Owners' 
contention that personal injury claims are fairly debatable as a 
matter of law.  Each case will turn upon its own facts.    
¶70 The evidence adduced at trial established that the 
arbitrators awarded the Danners $220,050.  The Danners' demands 
during negotiations ranged from $175,000 to $300,000.  Auto-
Owners' expert witness testified that, in his opinion, the value 
of the case was $150,000.  Attorney Curtis testified that he 
believed the value of the case to be between $175,000 and 
$250,000.   
¶71 The trial record also shows that as of April 1995 
Auto-Owners' legal department was still uncertain as to the 
No. 
99-1052 
 
 
32
limits of liability available under the Danner policy.  Auto-
Owners' attorney Robert Ellis wrote in a memo: 
 
I do not believe that I have a good handle on the 
limits issue here.  Am I to understand that if the 
claimant is a resident relative insured, she is 
entitled to stack all the vehicles on her parents' 
policy?  If she was not living with the insured at the 
time of the loss, is she a mere "occupancy insured," 
and entitled only to the UIM benefits available for 
that vehicle?  Please confirm how we are going to 
prove the facts on any limits issue and our chances of 
success. 
In June of 1995 Attorney Ellis wrote a second memo stating 
"[p]lease confirm how many vehicles we did insure for Mr. 
Danner, and what the limits on those vehicles are.  Please 
confirm what our total limits are for this claim."  Given the 
confusion that apparently existed at Auto-Owners concerning 
stacking, even if it valued the case at the same amount the 
Danners did, it apparently did not know if it could make such an 
offer.  In a second memo in June 1995 Attorney Ellis wrote: 
 
The branch has requested authority in the amount of 
$125,000 to settle this matter.  Prior to granting any 
authority, 
I 
have 
requested 
further 
information 
concerning whether or not Darcey (sic) Danner was 
insured on the vehicles which were not involved in 
this matter, and I have requested a full set of 
medical records for review. 
We concur with the court of appeals that the jury in this case 
could find that "Auto-Owners' failure to act on the Danners' 
claim was not the result of exercising its right to fairly 
debate it."  Danner, No. 99-1052, unpublished slip op. at ¶35 
(Wis. Ct. App. May 2, 2000).  We conclude therefore that the 
No. 
99-1052 
 
 
33
circuit court did not err in denying Auto-Owners' motion for 
judgment notwithstanding the verdict. 
III 
¶72 Finally, Auto-Owners contends that the circuit court 
erred by granting the Danners' motion pursuant to Wis. Stat. 
§ 805.14(5)(c) to change answers to two questions on the special 
verdict.  A motion to change a jury's special verdict answer 
challenges the sufficiency of the evidence to sustain the 
answer.  Wis. Stat. § 805.14(5)(c).   
¶73 This case was presented to the jury in the form of a 
special verdict consisting of five questions, set forth below.10 
                     
10 QUESTION #1:  Did Auto-Owners Insurance Company 
exercise bad faith in denying the claim of the 
plaintiffs?  ANSWER:  Yes. 
QUESTION #2:  If you answered Question #1 "Yes", 
then answer this question:  Was such bad faith a cause 
of compensatory damages to the plaintiff?  ANSWER: 
Yes. 
QUESTION #3:  If you answered Question #2 "Yes", 
then answer this question:  What sum of money will 
fairly and reasonably compensate the plaintiffs for 
their damages in the following respects: 
a)  Attorney fees and costs incurred by the 
plaintiff 
which 
are 
the 
proximate 
result 
of 
prosecuting their bad faith claim?  ANSWER:  $125,000. 
b)  Attorney fees and costs incurred by the 
plaintiffs in the underlying claim, which included the 
arbitration hearing, caused by bad faith of the 
defendant?  Answer:  -0- 
c)  All other compensatory damages incurred by 
the plaintiffs which are the proximate result of the 
defendant's bad faith conduct?  ANSWER:  -0- 
No. 
99-1052 
 
 
34
 The jury answered "yes" to questions 1 and 2, finding that 
Auto-Owners exercised bad faith in denying the Danners' claim 
and that this bad faith was a cause of compensatory damages.  As 
to question 3, the jury determined that $125,000 was the sum of 
money that would fairly and reasonably compensate the Danners 
for attorneys' fees and costs incurred as a proximate result of 
prosecuting their bad faith claim. 
¶74 As to special verdict question 3 (b), concerning what 
sum of money would fairly and reasonably compensate the Danners 
and asking if attorneys' fees and costs incurred by the 
plaintiffs 
in 
the 
underlying 
claim, 
which 
included 
the 
arbitration hearing, caused by bad faith of the defendant, the 
jury answered "-0-."   
¶75 The Danners filed a motion pursuant to Wis. Stat. 
§ 805.14(5) for an order changing the answers to questions 3 (a) 
and (b) of the special verdict.  As to question 3 (a), the 
Danners sought to have the jury's answer of $120,000 changed to 
$142,967.10.   
¶76 Judge Kennedy granted the Danners' motion.  The Judge 
changed the answer 
to 
question 3 
(a) from 
$120,000 to 
                                                                  
QUESTION #4:  If you answered "Yes" to Question 
#1, answer this question:  Did the defendant act 
maliciously 
towards 
the 
plaintiffs 
or 
in 
an 
intentional disregard of the rights of the plaintiffs? 
 ANSWER:  No. 
QUESTION #5:  If you answered the preceding 
question "Yes", answer this question:  What sum, if 
any, do you assess against Auto-Owners Insurance as 
punitive damages?  ANSWER:_______. 
No. 
99-1052 
 
 
35
$142,967.10.  The answer to question (3)(b) was determined to be 
$81,012.97.  As to question (3)(a), Judge Kennedy determined 
that there was no evidence to support $125,000; the only 
specific evidence offered was $142,967.10, and therefore he 
granted the Danners' motion to change the answer.  As to 
question 3(b), the court determined that DeChant provides that 
plaintiff is entitled to an award for attorneys' fees in the 
underlying claim.  Therefore, the judge changed the answer from 
–0- to $81,012.97.   
¶77 First, as to question 3(a) we agree with the circuit 
court's changing the answer from $120,000 to $142,967.10.  This 
was the only amount presented in evidence at the trial.  No 
credible evidence exists in the record to support $125,000.   
¶78 As to the second question, Auto-Owners argues that 
because the jury determined that it had exercised bad faith by 
denying the Danners' claim, but the jury did not award 
attorneys' fees and costs the plaintiffs incurred in prosecuting 
the arbitration hearing, the jury necessarily found that Auto-
Owners did not exercise bad faith until after the arbitration 
hearing.   
¶79 We conclude that there is no credible evidence to 
support the jury's verdict awarding zero for question 3(b).    
The Danners had entered into evidence proof that $81,012.97 in 
attorneys' fees had accrued in the underlying claim.  We held in 
DeChant that "a plaintiff is allowed to recover for all 
detriment proximately resulting from the insurer's bad faith, 
which includes both bond premiums and those attorney's fees that 
No. 
99-1052 
 
 
36
were incurred to obtain the policy benefits that would not have 
been incurred but for the insurer's tortious conduct."  200 
Wis. 2d at 572-73 (footnote omitted).  The special verdict does 
not indicate at what point it believed that Auto-Owners acted in 
bad faith.  Further, as the court of appeals pointed out, the 
record does not contain any evidence of what fees were incurred 
before 
arbitration 
and 
what 
fees 
were 
incurred 
after 
arbitration.  Accordingly, the record does not support a finding 
of zero for pursuing the underlying claim.  
By the Court.—The decision of the court of appeals is 
affirmed. 
¶80 ANN WALSH BRADLEY, J., did not participate. 
 
 
 
 
 
 
 
 
 
 
No. 
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