Title: Brethorst v. Allstate Property & Casualty Ins. Co.
Citation: 2011 WI 41
Docket Number: 2008AP002595
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: June 14, 2011

2011 WI 41 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2008AP2595 
COMPLETE TITLE: 
 
Wanda Brethorst, 
          Plaintiff-Respondent, 
     v. 
Allstate Property and Casualty Insurance 
Company, 
          Defendant-Appellant. 
 
 
 
ON CERTIFICATION FROM THE COURT OF APPEALS 
 
 
OPINION FILED: 
June 14, 2011   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
September 7, 2010 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Racine   
 
JUDGE: 
Wayne J. Marik 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
BRADLEY, J. concurs (Opinion filed). 
ABRAHAMSON, C.J. joins concurrence.   
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the defendant-appellant there were briefs by James M. 
Ryan, Jason P. Gehring, and Kasdorf, Lewis, & Sweitlik, S.C., 
Milwaukee, and oral argument by James M. Ryan. 
For the plaintiff-respondent there was a brief and oral 
argument by Timothy S. Knurr and Schoone, Leuck, Kelley, Pitts & 
Knurr, S.C., Racine. 
An amicus curiae brief was filed by James A. Friedman, 
Kendall W. Harrison and Godfrey & Kahn, S.C. for Wisconsin 
Insurance Alliance. 
 
 
2011 WI 41
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2008AP2595   
(L.C. No. 
2008CV737) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Wanda Brethorst, 
 
          Plaintiff-Respondent, 
 
     v. 
 
Allstate Property and Casualty Insurance 
Company, 
 
          Defendant-Appellant. 
 
 
 
FILED 
 
JUN 14, 2011 
 
A. John Voelker 
Acting Clerk of Supreme 
Court 
 
 
 
 
 
 
APPEAL from an order of the Circuit Court for Racine 
County, Wayne J. Marik, Judge.  Affirmed and cause remanded.   
 
¶1 
DAVID T. PROSSER, J.   This case comes to the court on 
certification by the court of appeals, pursuant to Wis. Stat. 
§ (Rule) 809.61 (2007-08).1  The case arises out of an uninsured 
motorist (UM) claim submitted by Wanda Brethorst (Brethorst) to 
her insurer, Allstate Property and Casualty Insurance Company 
(Allstate).  When Brethorst made a demand for settlement, 
                                                 
1All references to the Wisconsin Statutes are to the 2007-08 
version unless otherwise noted. 
No.  2008AP2595 
2 
 
Allstate offered only a partial settlement of Brethorst's claim 
for $4,789 in medical expenses above the $5,000 in medical 
expenses covered by her policy.  Brethorst rejected the offer, 
then filed suit against Allstate for bad faith.   
¶2 
Allstate filed a motion with the circuit court asking 
that Brethorst's contract claim for UM coverage of her personal 
injuries be bifurcated from her bad faith claim.  Allstate also 
requested that discovery on the bad faith claim be stayed until 
the contract claim was resolved.  Brethorst opposed the motion 
on grounds that she had filed only one claim——bad faith——and 
thus no bifurcation or stay of discovery was appropriate.   
¶3 
The circuit court agreed with Brethorst and denied 
both parts of Allstate's motion.  The court concluded that a 
party may maintain a bad faith claim without first proving a 
breach of contract claim as a condition precedent.   
¶4 
Allstate appealed, and the court of appeals certified 
the matter to this court.  We granted certification on the 
following issues: 
(1) Whether a finding of wrongful denial of 
benefits is a condition precedent to proceeding with 
discovery in a first-party bad faith claim based on 
wrongful denial of benefits? 
(2) In a first-party bad faith claim, if a 
finding of wrongful denial of benefits is a condition 
precedent to proceeding with bad faith discovery, does 
the trial court err if it refuses to grant the 
insurance company’s motion to bifurcate the issues for 
discovery?  Do the same policy considerations that 
make it error for the trial court to refuse a motion 
to bifurcate simultaneous bad faith and breach of 
contract 
claims——avoiding 
undue 
prejudice 
to 
the 
insurance 
company, 
avoiding 
jury 
confusion 
and 
No.  2008AP2595 
3 
 
promoting settlement——make it error to refuse a motion 
to bifurcate the same two issues when the insured’s 
only claim is bad faith? 
¶5 
We conclude the following:  
(A) Some breach of contract is a fundamental prerequisite 
for a first-party bad faith claim against an insurer. 
(B) Breach of contract and first-party bad faith are 
separate claims. 
(C) An insured may file a bad faith claim without also 
filing a breach of contract claim.  The policies articulated in 
Dahmen v. American Family Mutual Insurance Co., 2001 WI App 198, 
247 Wis. 2d 541, 635 N.W.2d 1, which require bifurcation when 
both bad faith and breach of contract claims are brought 
together, are only partially applicable when a party has chosen 
to plead only a bad faith claim. 
(D) The insured may not proceed with discovery on a first-
party bad faith claim until she has: 
 
(1) pleaded a breach of contract by the insurer as 
part of a separate bad faith claim, and 
 
(2) satisfied the court that she has established such 
a breach or will be able to prove such a breach in the future. 
(E) In this case, Brethorst has supplied the insurer and 
the court with sufficient evidence of a breach of contract by 
the insurer that she may proceed with discovery on her bad faith 
claim. 
 
On 
the 
facts 
before 
us, 
Brethorst 
has 
shown 
uncontradicted evidence that she incurred $9,789 in medical 
expense 
for 
treatment 
from 
injuries 
she 
suffered 
in 
an 
automobile accident caused by an uninsured motorist.  The 
No.  2008AP2595 
4 
 
insurer's failure to pay all these expenses without submitting 
any reasonable basis in law or fact (as opposed to theory) for 
its failure to do so justifies Brethorst going forward with 
discovery on her bad faith claim. 
I. BACKGROUND AND PROCEDURAL HISTORY 
¶6 
This is an appeal from a nonfinal order of the Racine 
County Circuit Court, Wayne J. Marik, Judge, denying Allstate's 
motion to bifurcate claims and stay discovery.  The court heard 
argument but did not conduct an evidentiary hearing.  The 
following facts are drawn from the parties' pleadings and 
communications found in the record. 
¶7 
On December 12, 2006, around 8 p.m., Brethorst and her 
husband William were involved in a motor vehicle accident near 
the intersection of State Highway 32/Douglas Avenue and 4 Mile 
Road in Racine County.  The accident was caused by an uninsured 
motorist, Margy L. Raymond, who was highly intoxicated when she 
pulled her vehicle onto the highway in front of the Brethorsts' 
vehicle.  William Brethorst was driving the Brethorsts' vehicle 
at the time, and Wanda Brethorst sustained injuries as a result 
of the ensuing collision.  The Brethorsts were insured under an 
automobile liability policy with Allstate.  Their policy 
included coverage for injuries caused by an uninsured motorist 
as well as $5,000 in medical expenses.   
¶8 
Wanda Brethorst submitted a UM claim to Allstate for 
her injuries from the accident about January 23, 2007.  In a 
No.  2008AP2595 
5 
 
March 1 letter to the law firm representing the Brethorsts,2 an 
Allstate employee, Diane Watke, acknowledged receipt of the 
claim and stated that she had begun working on it.  The letter 
added, "Losses are always difficult, but rest assured that we 
will work to make the claim process smooth and resolve the claim 
promptly."   
¶9 
On March 27, Ms. Watke sent a second letter addressed 
to attorney Timothy S. Knurr (Knurr), inquiring whether William 
Brethorst had received medical treatment and "how much longer" 
Wanda Brethorst would continue to be treated by PT Plus, which 
was providing Brethorst with physical therapy.  On April 4, 
Knurr responded that William was not claiming injury and that 
Knurr did not know how much longer Wanda Brethorst's treatment 
would continue, but that "[w]e will keep you posted." 
¶10 In another letter dated April 4, an Allstate employee 
named Michael Kahn (Kahn) informed Knurr that he had assumed the 
handling of Brethorst's claim.  Kahn stated that Allstate viewed 
the occurrence as "a minor accident" and "wouldn't expect much 
of any injury and treatment."  The letter added: "Please send us 
your demand material so we can attempt to conclude this matter 
in the near future."   The letter also attached photos and a 
damage estimate on the Brethorsts' vehicle.  The damage estimate 
for the vehicle——a Jeep Cherokee with a plow undercarriage——was 
listed as $486.62.   
                                                 
2 The Brethorsts were represented by Schoone, Leuck, Kelley, 
Pitts & Knurr, S.C., of Racine, Wisconsin. 
No.  2008AP2595 
6 
 
¶11 In the following months, Brethorst continued to 
receive physical therapy for her injuries and provided Allstate 
notice of that ongoing treatment.  In total, Brethorst incurred 
$9,789 in medical expenses related to treatment of her injuries.  
Brethorst submitted a demand for settlement of her claim on 
September 12, 2007.   
¶12 On October 9 Kahn offered to settle the injury claim 
for $1,500 above the $5,000 in medical expenses already paid.  
His letter cited the severity of the impact, the damages 
sustained by the vehicles, injuries claimed, and medical records 
provided as factors considered in arriving at this amount.  Kahn 
also reiterated Allstate's position that "this was a minor 
accident and [we] question any injury resulting from this 
accident."   
¶13 Brethorst responded on November 16 with a letter from 
her treating physician, Dr. Jerome Lerner, of Advanced Pain 
Management.  The letter stated that Dr. Lerner had examined 
Brethorst nine days after the accident, reviewed the report and 
diagnosis 
of 
her 
primary 
physician, 
recommended 
physical 
therapy, and had seen her several times during the course of her 
treatment.  Dr. Lerner explained that, while Brethorst had 
suffered 
from 
chronic 
pain 
stemming 
from 
arthritis 
and 
fibromyalgia prior to December 12, 2006, the accident had 
resulted 
in 
"acute 
cervical 
and 
back 
strain/sprain," 
exacerbating her pre-existing conditions.  Lerner wrote that the 
physical therapy he ordered ultimately resulted in returning 
Brethorst to the baseline pain she had experienced prior to the 
No.  2008AP2595 
7 
 
accident.  Dr. Lerner further stated that in his opinion, "to a 
reasonable degree of medical certainty," the physical therapy 
had not been ordered to treat the pre-existing conditions but 
instead was reasonably necessary "to treat the acute injuries 
from" the accident.  
¶14 Upon receiving this letter, Kahn increased Allstate's 
settlement offer to $1,800.  This second offer, dated December 
14, referenced the low dollar amount of damage sustained by the 
vehicle and reiterated Allstate's assessment that the collision 
was only a minor accident.  Kahn also pointed out that Allstate 
had already paid $5,000 under the policy's medical payments 
coverage.   
¶15 After 
receiving 
this 
second 
offer 
of 
partial 
settlement, Brethorst filed suit for bad faith denial of 
benefits.  Her January 11, 2008, complaint alleged that Allstate 
had adopted a company-wide policy of routinely "offering sums 
substantially less than the medical bills incurred" in accidents 
involving "minor impact soft tissue" (MIST) injuries.  She 
asserted that her claim was assigned to Kahn because he was 
responsible for implementing this MIST policy.  Specifically, 
Brethorst alleged that Allstate, by and through Kahn's actions, 
acted in bad faith (a) by failing to conduct a full and fair 
investigation of the case, (b) by failing to have her claim 
evaluated by anyone with medical training, and (c) by ignoring 
No.  2008AP2595 
8 
 
both the medical opinion of Dr. Lerner and the law of Wisconsin 
governing liability for medical bills and expenses.3   
¶16 In its answer, Allstate admitted that it did have a 
MIST policy but denied Brethorst's characterization of that 
policy.  Allstate also asserted various affirmative defenses, 
including a contention that to the extent Brethorst set forth a 
valid claim for bad faith, that claim should be bifurcated from 
other claims, and proceedings on bad faith should be stayed 
until all other claims were resolved.   
¶17 In keeping with this defense, Allstate filed the 
motion to bifurcate Brethorst's contract claim from her bad 
faith claim.  The motion also requested a stay of all 
proceedings on the bad faith claim until the breach of contract 
claim could be resolved.  In opposition to this motion, 
Brethorst argued that she had asserted only one claim, for bad 
faith, and there was accordingly nothing to bifurcate.   
¶18 In a lengthy ruling from the bench, the circuit court 
denied Allstate's motion on grounds that Wisconsin law allows a 
                                                 
3 Brethorst's complaint alleged that Allstate acted in bad 
faith by offering a settlement amount that "completely ignores 
the medical records, reports, billing statements, the law in the 
state of Wisconsin, and her pain and suffering and disability 
associated with the injuries particularly given her pre-accident 
medical history."  At oral argument, Brethorst's counsel was 
asked what Allstate could have done, other than pay the $9,789 
demand for medical bills.  Counsel responded, "They could have 
paid the medical bills plus something reasonable above and 
beyond that for pain and suffering that she went through for 
that period of about six months."  Brethorst's written demand 
for settlement was not attached to her complaint and is not 
included in the record.   
No.  2008AP2595 
9 
 
party to bring a bad faith claim separate and distinct from any 
underlying breach of contract claim.  The court noted that the 
policy reasons requiring bifurcation where both breach of 
contract and bad faith claims are raised, as articulated by the 
court of appeals in Dahmen, are inapplicable where a party 
elects to bring only a claim of bad faith. 
¶19 Allstate petitioned the court of appeals for leave to 
file an interlocutory appeal.  The court of appeals granted the 
petition, then certified the case to this court, noting that the 
issues presented are both novel and "ripe for clarification."  
We accepted certification. 
II. STANDARD OF REVIEW 
¶20 The decision to bifurcate claims or issues in a single 
claim falls within the discretion of the circuit court,4 subject 
to statutory limitations.  Waters v. Pertzborn, 2001 WI 62, ¶31, 
243 
Wis. 2d 703, 
627 
N.W.2d 497; 
see 
also 
Dahmen, 
247 
Wis. 2d 541, ¶11.  Whether to grant a stay of discovery also is 
a matter of discretion.  See Hofflander v. St. Catherine's 
Hosp., 2003 WI 77, ¶113, 262 Wis. 2d 539, 664 N.W.2d 545; 
Dahmen, 247 Wis. 2d 541, ¶11. 
                                                 
4 As the court of appeals correctly noted in Dahmen v. 
American Family Mutual Insurance Co., 2001 WI App 198, ¶9, 247 
Wis. 2d 541, 635 N.W.2d 1, this court held in Waters v. 
Pertzborn that only claims, not issues, may be bifurcated under 
Wis. Stat. § 805.05(2).  Waters v. Pertzborn¸ 2001 WI 62, ¶¶18-
24, 243 Wis. 2d  703, 627 N.W.2d 497.  To every rule there is an 
exception, however; the statute's legislative history clearly 
demonstrates that the rule barring bifurcation of issues was not 
intended to apply to cases involving insurance coverage.  Id., 
¶¶21, 23. 
No.  2008AP2595 
10 
 
¶21 In determining whether the circuit court erroneously 
exercised its discretion, we look to whether the court examined 
all relevant facts, applied the proper standard of law, and 
reached a conclusion that a reasonable judge could reach.  Loy 
v. Bunderson, 107 Wis. 2d 400, 414-15, 320 N.W.2d 175 (1982).  A 
decision based on a substantive error of law constitutes an 
erroneous exercise of discretion.  State v. Jorgensen, 2003 WI 
105, ¶12, 264 Wis. 2d 157, 667 N.W.2d 318. 
III. DISCUSSION 
¶22 The court of appeals asks this court to decide whether 
an insured must prove a breach of contract——such as a wrongful 
denial of benefits——prior to seeking discovery and litigating a 
claim of bad faith against an insurer where there is no 
accompanying claim for breach of contract.   
¶23 To 
resolve 
this 
issue, 
we 
first 
examine 
the 
development of the tort of bad faith in Wisconsin.  We then turn 
to Allstate's request for bifurcation in the context of 
Brethorst's bad faith claim.  Next we carefully examine the 
distinction between first-party and third-party bad faith claims 
and discuss the threshold showing that an insured must make to 
pursue a claim of bad faith without filing an accompanying claim 
for breach of contract.  We then apply these principles to the 
first question certified in this case, regarding discovery.  
Finally, we briefly discuss the effect of this case as it 
proceeds beyond these preliminary procedural stages.   
A. 
Development of First-Party Bad Faith in Wisconsin 
No.  2008AP2595 
11 
 
¶24 This court initially recognized the tort of bad faith 
in a first-party action in Anderson v. Continental Insurance 
Co., 85 Wis. 2d 675, 271 N.W.2d 368 (1978).  The Andersons filed 
suit against their insurer for both breach of contract and bad 
faith refusal to negotiate a payment after a furnace fire or 
explosion resulted in damage to the contents of their home.  Id. 
at 680-83.  Continental objected to the bad faith claim in this 
circumstance on grounds that Wisconsin did not recognize such a 
cause of action.  Id. at 684.  This court held that, while a 
claim for first-party bad faith had "never been explicitly 
recognized in this state," an insured is entitled to bring a 
claim against her own insurance company for bad faith.  Id. at 
684, 686.   
¶25 The court in Anderson made clear that a bad faith 
claim is separate and distinct from a breach of contract.  Id. 
at 686.  Bad faith is not the same as breach of contract, which 
is a "failure to pay the claim in accordance with the policy."  
Id.  Rather, bad faith "is a separate intentional wrong, which 
results from a breach of duty imposed as a consequence of the 
relationship established by contract."  Id. at 687.   
¶26 The court explained that when a claim is "fairly 
debatable," the insurer is entitled to debate it, whether the 
debate concerns a matter of fact or law.  Id. at 691 (citing 
Drake v. Milwaukee Mut. Ins. Co., 70 Wis. 2d 977, 984, 236 
N.W.2d 204 (1975)).  Thus, to bring a bad faith claim, "a 
plaintiff must show the absence of a reasonable basis for 
denying benefits of the policy and the defendant's knowledge or 
No.  2008AP2595 
12 
 
reckless disregard of the lack of a reasonable basis for denying 
the claim."  Id. at 691.  The knowing failure of an insurer to 
proceed in a manner that is honest and informed constitutes bad 
faith.  Id. at 692 (citing Hilker v. W. Auto. Ins. Co., 204 Wis. 
1, 15, 231 N.W. 257, 235 N.W. 413 (1930, 1931) (an insurer has a 
duty to conduct an appropriate and careful investigation prior 
to assessing claims)).  Thus, bad faith is an intentional tort.  
Id. at 691. 
¶27 Continental argued that recognition of a first-party 
bad faith cause of action would lead to extortionate lawsuits.  
Id. at 693.  The court rejected this argument, noting: 
[A]n 
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.   
We are satisfied that the application of the test 
formulated above, which recognizes the intentional 
nature of the tort of bad faith and puts the test upon 
an 
objective 
basis, 
will 
minimize 
the 
fears 
expressed . . . that to permit claims for bad faith 
will result in extortionate lawsuits.  Such result 
cannot follow when an insurance company in the 
exercise of ordinary care makes an investigation of 
the facts and law and concludes on a reasonable basis 
that the claim is at least debatable. 
Id.   
¶28 Three years later, the court reaffirmed the Anderson 
holding in the context of a bad faith refusal to negotiate.  
Davis v. Allstate Ins. Co., 101 Wis. 2d 1, 7-8, 303 N.W.2d 596 
(1981).  In Davis, the insured was covered by a business owner's 
fire insurance policy with a limit of $15,000 that the insurer 
had recommended be raised to $25,000 after inspecting the 
No.  2008AP2595 
13 
 
insured's personal property.  Id. at 3-4.  After a fire 
destroyed the contents of the insured's office, the insurance 
company internally recognized the damage to be approximately 
$15,000, but its adjuster decided to start with a settlement 
offer around $4,000 and negotiate to a maximum of $14,860.  Id. 
at 4.  This strategy was countermanded by higher authority, 
which capped a payment offer at roughly $4,000, leading to a bad 
faith suit.  Id. at 4, 9.  The court applied the test set forth 
in Anderson and found that the insured had brought proper claims 
for his loss and for bad faith.  Id. at 8-10.  Because 
sufficient 
evidence 
had 
been 
submitted 
on 
the 
issue 
of 
valuation, the insured was entitled to have the question 
submitted to a jury.  Id. at 10. 
¶29 The court reexamined the conflicting interests of 
insurers and insureds in Mowry v. Badger State Mutual Casualty 
Co., 129 Wis. 2d 496, 385 N.W.2d 171 (1986).  Based on its 
belief that the automobile involved in the claim was not owned 
by its insured, the insurance company initially denied coverage 
to the tortfeasor for his actions in causing the accident.  Id. 
at 505-06.  The court found this failure of the insurer to enter 
into settlement negotiations until after a jury determined the 
issue of coverage did not make the insurer liable for bad faith.  
Id. at 509, 520.  Because the question of coverage was fairly 
debatable and a reasonable basis existed for denying the claim, 
the insurer could not have committed the tort of bad faith.  Id. 
at 516.  The court said that in the process of determining 
whether a reasonable basis exists for denying a claim or making 
No.  2008AP2595 
14 
 
a settlement offer, an insurer "must exercise reasonable 
diligence in ascertaining facts upon which a good-faith decision 
to settle or not settle must be based."  Id. at 510. 
¶30 The test for bad faith as articulated in Anderson 
includes both an objective and subjective component.  Weiss v. 
United Fire & Cas. Co., 197 Wis. 2d 365, 377, 541 N.W.2d 753 
(1995) (citing Benke v. Mukwonago-Vernon Mut. Ins. Co., 110 
Wis. 2d 356, 362, 329 N.W.2d 243 (Ct. App. 1982)).  In Weiss, a 
jury found that the insurer had acted in bad faith in 
investigating and settling the plaintiff's claim.  Id. at 377.  
This finding was overturned by the circuit court.  Id. at 373.  
Upon review, this court pointed to the insurer's disregard for 
the 
conclusions 
of 
a 
knowledgeable 
firefighter 
that 
the 
insured's home fire was not the result of arson, id. at 384, and 
other evidence surrounding the insured's claim.  The court 
explained that a trier of fact must first determine whether the 
insurer acted as a reasonable insurer would have acted "under 
the particular facts and circumstances to conduct a fair and 
neutral evaluation of the claim."  Id. at 378.  The trier of 
fact then must consider whether a subjective intent "can be 
inferred from a reckless disregard of a lack of a reasonable 
basis for denial or a reckless indifference to facts or to 
proofs submitted by the insured."  Id. at 392 (quoting Anderson, 
85 Wis. 2d at 693).   
¶31 In Danner v. Auto-Owners Insurance, 2001 WI 90, ¶54, 
245 Wis. 2d 49, 629 N.W.2d 159, we reiterated the principle that 
every insurance contract has an implied duty of good faith and 
No.  2008AP2595 
15 
 
fair dealing between the insurer and insured.  Although the 
insurance contract in Danner gave both the insurer and the 
insured the right to seek arbitration in disagreements about the 
presence or amount of coverage, id., ¶21, the existence of that 
right did not relieve the insurer of its duty to act in good 
faith from the inception of the contract.  Id., ¶54.  When the 
duty of good faith is breached by the insurer and that breach 
results in damages, an insured has a cause of action for bad 
faith.  Id., ¶59. 
¶32 The logic underlying Danner was extended the following 
year in Jones v. Secura Insurance Co., 2002 WI 11, 249 
Wis. 2d 623, 638 N.W.2d 575.  In Jones, the plaintiffs' breach 
of contract claim was dismissed as barred by the statute of 
limitations, leaving only their bad faith claim.  Id., ¶¶1-2.  
The court held that an insurer is liable for any damages arising 
as a proximate result of the insurer's bad faith, including the 
same damages that may be recovered under a breach of contract.  
Id., ¶¶2, 33, 34 (citing DeChant v. Monarch Life Ins. Co., 200 
Wis. 2d 559, 569, 571, 547 N.W.2d 592 (1996)).   
¶33 In response to the insurer's argument that such a 
holding would expand the scope of bad faith claims in Wisconsin, 
the Jones court pointed out that bad faith is an intentional 
tort.  Id., ¶37.  As such, a plaintiff asserting a bad faith 
claim assumes a higher burden than that required for breach of 
contract.  Id. 
¶34 Recently, in a third-party case, the court held that 
an insured may assert a bad faith claim where the insurer, 
No.  2008AP2595 
16 
 
acting in bad faith, fails to settle the claim for less than the 
policy deductible, even though the resulting judgment does not 
exceed policy limits.  Roehl Transp., Inc. v. Liberty Mut. Ins. 
Co., 2010 WI 49, ¶7, 325 Wis. 2d 56, 784 N.W.2d 542.  The 
insurer argued that the insured's claim should not be recognized 
as arising within the scope of bad faith law in Wisconsin.  Id., 
¶¶19-20.  The insurer identified three types of bad faith claims 
that had previously been recognized: (1) a third-party bad faith 
claim where the insurer subjects its insured to potential 
liability by failing to settle a claim within liability limits; 
(2) a first-party bad faith claim for unreasonable withholding 
of payments; and (3) a first-party claim for an insurer's 
failure to reimburse a claimant for a worker's compensation 
claim.  Id., ¶27.   
¶35 The court determined that these three categories were 
not exhaustive of bad faith claims that may be brought in 
Wisconsin.  Id., ¶36.  In recognizing the plaintiff's claim in 
Roehl, the court stated that "the three identified types of 
insurance bad faith claims arise from fact situations presented 
to the court to date."  Id. (emphasis added).  Where a new fact 
pattern is presented, the court must look to the principles of 
the tort of bad faith to determine whether the claim is proper.  
Id., ¶37.  Significantly, a bad faith claim arises from the 
contractual relationship between the parties, but is not a 
contract action.  Id., ¶¶40-42.  The purpose behind providing a 
bad faith cause of action to an insured is to "protect against 
the risk that an insurance company may place its own interests 
No.  2008AP2595 
17 
 
above those of the insured and that the recovery available to 
the insured for breach of contract would not fully compensate 
the insured for the resulting harms."  Id., ¶50. 
¶36 The court's holdings on first-party bad faith have 
been summed up in the civil jury instructions.  The standard 
instruction for "Bad Faith By Insurance Company: Assured's 
Claim" provides as follows: 
To prove bad faith against (insurance company), 
the (plaintiff) must establish that there was no 
reasonable basis for the insurance company's denying 
(plaintiff)'s claim for benefits under (his)(her) 
policy and that (insurance company), in denying the 
claim, either knew or recklessly failed to ascertain 
that the claim should have been paid. 
Bad faith on the part of an insurance company 
towards 
its 
insured 
is 
the 
absence 
of 
honest, 
intelligent action or consideration of its insured's 
claim. 
Bad faith exists if, upon an examination of the 
facts found by you, you are able to conclude that 
(defendant) had no reasonable basis for denying 
(plaintiff)'s claim. 
In answering this question, you may consider 
whether (plaintiff)'s claim was properly investigated 
and whether the results of the investigation were 
given a reasonable evaluation and review.  If you find 
that (insurance company) either refused to consider 
the 
(plaintiff)'s 
claim 
for 
damages, 
made 
no 
investigation, or conducted its investigation in such 
a way as to prevent it from learning the true facts 
upon which the (plaintiff)'s claim is based, the 
insurance company can be found to have exercised bad 
faith.  This is because you may infer from these facts 
a reckless disregard on the insurance company's part 
to learn that there was no reasonable basis for it to 
deny (plaintiff)'s claim. 
No.  2008AP2595 
18 
 
If, on the other hand, you find that the 
insurance 
company, 
after 
conducting 
a 
thorough 
investigation of the facts and circumstances giving 
rise to the (plaintiff)'s claim, reasonably concluded 
that the claim is debatable or questionable, then 
there is no bad faith even though it refused to pay 
the claim. 
Wis JI——Civil 2761. 
¶37 With these principles in mind, we turn to Allstate's 
arguments in favor of bifurcation of Brethorst's bad faith claim 
and stay of discovery. 
B. 
Allstate's Request for Bifurcation 
 
¶38 In Dahmen, the court of appeals was faced with an 
underinsured motorist (UIM) case in which the insured sued the 
insurer for (1) UIM benefits under the insured's policy, and (2) 
bad faith.  The insurer's request to bifurcate the two separate 
claims and to stay discovery on the second claim was denied by 
the circuit court.  The court of appeals reversed.  It concluded 
that the risk of prejudice and jury confusion inherent in 
litigating a claim of bad faith with an underlying claim of UIM 
benefits required bifurcation and a stay of discovery.  Dahmen, 
247 Wis. 2d 541, ¶1. 
 
¶39 The 
court 
of 
appeals 
addressed 
the 
request 
to 
bifurcate claims, saying that "the trial court must consider the 
potential prejudice to the parties, the complexity of the 
issues, the potential for jury confusion and the issues of 
convenience, economy and delay."  Id., ¶11 (citing Hoffman v. 
Merrell Dow Pharm., Inc., 857 F.2d 290, 306-08 (6th Cir. 1988)).  
It noted that in litigating a claim of bad faith, the Dahmens 
"will be entitled to discovery of [the insurer's] work product 
No.  2008AP2595 
19 
 
and attorney/client material containing information relevant as 
to how the [ ] claim was handled.  This information would 
include [the insurer's] internal determination to deny benefits, 
its evaluation as to how a jury may value the Dahmens' claim and 
its approach to settlement."  Id., ¶13.  It added: "This 
information would not be available to the Dahmens if they were 
proceeding solely on a claim for UIM benefits."  Id.  The court 
concluded that: 
[T]he 
considerations 
bearing 
on 
the 
bifurcation 
decision weigh in favor of bifurcation for the 
following reasons: (1) the failure to bifurcate a 
claim of bad faith from an underlying claim for UIM 
benefits 
would 
significantly 
prejudice 
American 
Family; (2) the two distinct claims present differing 
evidentiary requirements that increase the complexity 
of the issues and the potential for jury confusion; 
and (3) a separate initial trial on the claim of UIM 
benefits increases the prospect of settlement and 
promotes economy by narrowing the issues for the jury 
and potentially eliminating the need for a later trial 
on the bad faith claim. 
Id., ¶20. 
 
¶40 The analysis and policy embodied in Dahmen are the 
source of Allstate's two-part motion in this case.  Allstate 
moved the circuit court for bifurcation of "the plaintiff's bad 
faith claim from the [UM] contract claim and staying all 
proceedings on the bad faith claim until the contract claim is 
resolved."  (Emphasis added.)  Allstate's trial brief expanded 
on this motion, asking that "discovery on the bad faith claim be 
stayed 
while 
the 
plaintiff's 
personal 
injury 
claim 
is 
litigated." (Emphasis added.)  "[T]he plaintiff should not be 
entitled to discover or use privileged material by virtue of 
No.  2008AP2595 
20 
 
having filed a bad faith claim unless and until the underlying 
personal injury claim has been finally resolved.  Otherwise, the 
defendant will be unfairly prejudiced."   
 
¶41 Conversely, the plaintiff and the circuit court 
emphasized a key distinction between this case and Dahmen: that 
the plaintiff had filed only a bad faith claim.  The circuit 
court thought this distinction was material.  The court said: 
The plaintiff absolutely insists . . . that it has not 
and does not intend to plead a cause of action for 
breach of the insurance [contract].  That [its] 
pleading be interpreted and be prosecuted solely as a 
bad faith claim. 
[T]he ultimate issue as it was framed here . . . is 
basically whether the plaintiff can do that or whether 
a party must prevail upon a claim for breach of 
contract by establishing an inadequate offer before it 
can proceed on the separate and independent cause of 
action for bad faith. . . .  
[F]rom the Court's perspective [the] issue as it was 
refined raises a question as to what relief the Court 
might properly be able to grant on this motion.  It's 
a motion to bifurcate and stay where essentially there 
is nothing to bifurcate because a party refuses to 
bring one of the causes of action that would be 
bifurcated. 
C. 
Analyzing the Tort of Bad Faith 
 
¶42 Allstate's motion implicates a question that this 
court avoided in Danner, namely, whether an insured's first-
party claim of bad faith may exist in the absence of coverage or 
in the absence of some other breach of contract by the insurer.  
See Danner, 245 Wis. 2d 49, ¶54 & n.6.  The answer to this 
question affects whether or when an insured may file a bad faith 
claim without filing a simultaneous claim for breach of 
No.  2008AP2595 
21 
 
contract.  If a first-party bad faith claim may be filed 
independent 
of 
a 
claim 
for 
breach 
of 
contract, 
what 
prerequisites, if any, are required for the plaintiff to proceed 
to discovery on the bad faith claim? 
 
¶43 In Anderson the court was dealing with a direct claim 
by insureds (the Andersons) against their insurer.  The 
Andersons claimed that the insurer not only breached their 
contract but also acted in bad faith.   
¶44 Anderson is a landmark case because it was the first 
case in Wisconsin to recognize an intentional tort in an 
insurer's bad faith handling of a damage claim by its own 
insureds under the insureds' policy.  In short, Anderson was the 
first successful first-party claim against an insurer.   
¶45 Anderson 
was 
not 
the 
first 
bad 
faith 
case 
in 
Wisconsin.  Almost a half-century earlier, Hilker involved an 
insurer's bad faith handling of a liability claim by a third-
party against its insured.  Hilker, 204 Wis. at 3.  The insured 
was a tortfeasor; however, the insurer's bad faith handling of 
the case against the insured tortfeasor saddled the insured with 
more than twice the damages covered by the insured's policy.  
Id. at 9-10.  The insurer's misconduct in handling the claim led 
to the insurer's liability for damages well beyond the limits of 
the insured's policy.  Id. 
¶46 The court in Hilker explained this result: 
In express terms the contract imposes no duty at 
all a breach of which makes the insurer liable to the 
insured for a failure to settle or compromise a claim.  
However, all courts are agreed that the insurer does 
No.  2008AP2595 
22 
 
owe to the insured some duty in this respect.  This 
duty is implied as a correlative duty growing out of 
certain rights and privileges which the contract 
confers upon the insurer.  By the terms of this 
contract the absolute control for the defense of such 
actions is turned over to the insurer, and the insured 
is excluded from any interference in any negotiations 
for settlement or legal procedure.  It is generally 
understood that these are rights and privileges which 
it is necessary for the insurer to have in order to 
justify or enable it to assume the obligations which 
it does in the contract of insurance. . . . [W]here an 
injury occurs for which a recovery may be had in a sum 
exceeding the amount of the insurance, the interest of 
the insured becomes one of concern to him.  At this 
point a duty on the part of the insurer to the insured 
arises.  It arises because the insured has bartered to 
the insurance company all of the rights possessed by 
him to enable him to discover the extent of the injury 
and to protect himself as best he can from the 
consequences of the injury.  He has contracted with 
the insurer that it shall have the exclusive right to 
settle or compromise the claim, to conduct the 
defense, and that he will not interfere except at his 
own cost and expense. . . . 
It is the right of the insurer to exercise its 
own judgment upon the question of whether the claim 
should be settled or contested.  But because it has 
taken over this duty, and because the contract 
prohibits the insured from settling, or negotiating 
for a settlement, or interfering in any manner except 
upon the request of the insurer, such as assisting in 
the securing of witnesses, etc., its exercise of this 
right should be accompanied by considerations of good 
faith.  Its decision not to settle should be an honest 
decision.  
Id. at 13-14 (emphasis added). 
¶47 The Anderson court quoted some of this language to 
support its statement that, "In Hilker, the duty on the 
insurance company was found to be analogous to that of a 
fiduciary."  Anderson, 85 Wis. 2d at 688.   
No.  2008AP2595 
23 
 
¶48 In circumstances like Hilker, the insurer's complete 
takeover of the insured's defense creates a quasi-fiduciary 
relationship.  That relationship is different from the insurer-
insured relationship in a first-party claim.  In a first-party 
bad faith claim, the insured insists that the insurer wrongfully 
denied benefits or intentionally mishandled a legitimate claim 
for benefits. 
¶49 Traditionally, to prove a first-party bad faith claim, 
the insured has been required to establish two elements.  The 
first element is that there is no reasonable basis for the 
insurer to deny the insured's claim for benefits under the 
policy.  This "first prong . . . is objective."  Weiss, 197 
Wis. 2d at 377 (citing Benke, 110 Wis. 2d at 362).  The second 
element is that the insurer knew of or recklessly disregarded 
the lack of a reasonable basis to deny the claim.  This second 
prong is subjective.  Id. 
¶50 This traditional analysis is derived from the Anderson 
case in which bad faith was acknowledged to be a separate claim, 
but the bad faith claim was accompanied by a claim for breach of 
contract.  Historically, the two separate claims have gone 
together.  Even in Jones, there was little dispute that there 
had been a breach of contract by the insurer. 
¶51 The present case is the first to come before this 
court in which the insured has initiated a bad faith claim 
without filing any accompanying claim for breach of contract.  
Thus, this case is not covered by our longstanding law, and it 
requires additional analysis. 
No.  2008AP2595 
24 
 
¶52 Clearly, a person cannot have a valid first-party bad 
faith claim against an insurer if the person has no contract 
with the insurer: first, because there would be no coverage, and 
second, because the insurer's implied covenant of good faith and 
fair dealing arises out of the relationship created by the 
contract.  If there is no contract, the insurer has no duty to 
act in good faith with respect to a claim. 
¶53 The issue becomes a bit more complicated when there is 
in fact an insurance contract.  Still, it is hard to conceive of 
a situation in which the insurer would have "no reasonable 
basis" for denying the insured's claim if there were no coverage 
for the claim under the insurance contract.  This is the 
hypothetical situation posed in Danner: "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."  
Danner, 245 Wis. 2d 49, ¶54 n.6. 
¶54 In discussing first-party claims, Arnold Anderson has 
written the following: 
Three elements are needed to establish the tort of bad 
faith: (1) the terms of the policy obligated the 
insurance company to pay the claim; (2) the insurer 
lacked a reasonable basis in law or fact for denying 
the claim; and (3) the insurer either knew there was 
no reasonable basis for denying the claim or acted 
with reckless disregard for whether such a basis 
existed. 
Arnold Anderson, Wisconsin Insurance Law, § 9.4, at 5 (6th ed. 
2010). 
No.  2008AP2595 
25 
 
¶55 Anderson's treatise makes explicit what is implicit in 
the two-prong test, namely, that the insurance contract provided 
coverage and required payment by the insurer.  His analysis also 
parallels Couch on Insurance 3d, §§ 198:28: 
 
An insurer's duty of investigation is generally 
construed 
to 
require 
sufficient 
investigation 
to 
determine coverage under the policy in question.  The 
duty therefore requires that the insurer investigate 
before it denies or settles a claim . . . . 
 
If a claim is beyond the scope of coverage, 
however, the duty to investigate is not separately 
actionable, as that would be outside the entire 
contractual basis for both the duty to investigate, 
and the duty of good faith and fair dealing. 
14 Lee R. Russ & Thomas F. Segalla, Couch on Insurance §§ 198:28 
at 198-53 to 198-55 (3d ed. 2007) (emphasis added). 
¶56 This analysis substantiates the need to establish a 
wrongful denial of some contracted-for benefit before permitting 
discovery for a bad faith claim.  The fact that a first-party 
bad faith claim is a separate tort and may be brought without 
also bringing a breach of contract claim, does not change the 
fact that first-party bad faith cannot exist without some 
wrongful denial of benefit under the insurance contract.5 
                                                 
5 In DeChant v. Monarch Life Ins. Co., 200 Wis. 2d 559, 569, 
547 N.W.2d 592 (1996), the court observed, in relation to a 
first-party bad faith claim: "It is well-settled that if an 
insurer fails to deal in good faith with its insured by 
refusing, without proper cause, to compensate its insured for a 
loss covered by the policy, such conduct may give rise to a 
cause of action in tort for bad faith."  (Emphasis added.)  This 
follows the language in Anderson v. Continental Insurance Co., 
85 Wis. 2d 675, 691, 271 N.W.2d 368 (1978), that "a plaintiff 
must show the absence of a reasonable basis for denying benefits 
of the policy."  (Emphasis added.) 
No.  2008AP2595 
26 
 
¶57 There is, of course, an opposite viewpoint.  It is 
outlined in Justice Bradley's concurrence which cites Attorney 
Stephen S. Ashley's treatise in Bad Faith Actions.  Ashley 
writes that the question "whether an insurer may recover damages 
for bad faith, even if the court ultimately determines that his 
policy did not cover his claim," is one of the most "hotly 
debated issues in the law."  Stephen S. Ashley, Bad Faith 
Actions: Liability & Damages, § 5A:02 at 2 (2d ed. 1997). 
¶58 Attorney Ashley acknowledges that the "problem of bad 
faith in the absence of coverage arises infrequently."  Id. at 
7.  He states that some cases support "the recovery of 
compensation for bad faith in the absence of coverage; others do 
not."  Id. at 6.  We note that some of the cases Attorney Ashley 
cites in support of compensation are based on statutes governing 
insurance trade practices.  There appear to be relatively few 
cases that actually provide damages for an insurer's bad faith 
in the absence of a wrongful denial of benefits. 
¶59 Our principal concern in this case involves what 
prerequisites, if any, are required for a plaintiff to proceed 
to discovery on a bad faith claim.  May the circuit court 
authorize discovery on a bad faith claim without any showing by 
the plaintiff that the insurer has wrongfully denied benefits 
under the insurance contract? 
¶60 In her concurrence, Justice Bradley points to a 
hypothetical devised by Attorney Ashley as a pertinent example 
of an insurer's bad faith, despite the absence of coverage under 
an insurance contract.  Justice Bradley's concurrence, ¶13 
No.  2008AP2595 
27 
 
(citing Ashley, supra, at §5A:10).  In the hypothetical, the 
insured observes cracks in the foundation of his house.  The 
insured cannot tell by looking at the cracks whether they were 
caused by "subsidence" (an excluded peril under the policy) or 
by contractor negligence (a covered peril).  "The insured 
submits a claim under his policy and requests that the insurer 
investigate the matter."  Id.  The suggestion is made that the 
insurer, on these facts, is required to hire a soils engineer to 
investigate the cause of the cracks.  When the insurer fails to 
do so and the insured incurs $5,000 in expenses to hire the 
soils engineer, the insurer is liable in bad faith for the cost 
of the soils engineer, even though the engineer discovers that 
contractor negligence had nothing to do with the cracks.  Id. 
¶61 An insurer in Wisconsin is required to conduct an 
appropriate and careful investigation before assessing a claim.  
We think the insurer in the hypothetical would be obliged to 
explain to the insured that only contractor negligence, not 
subsidence, would be covered by the policy and that the insured 
would be required to claim contractor negligence as the source 
of the cracks.  An appropriate and careful investigation would 
not necessarily require the insurer to hire a soils engineer to 
evaluate the cause of the cracks.   
¶62 Sometimes, the insured has the burden to establish 
coverage.  When the insured accomplishes this objective and is 
able to show his insurer's bad faith, the insurer will be liable 
to the insured "for any damages which are the proximate result" 
No.  2008AP2595 
28 
 
of the bad faith, including attorney fees.  DeChant, 200 
Wis. 2d at 571. 
¶63 Jones is consistent with our analysis.  The Joneses 
presented a notice of loss to their insurer in May 1997.  They 
did not file a lawsuit alleging breach of contract until March 
1999.  This specific claim in their suit was dismissed on 
grounds that it was barred by a one-year statute of limitations.  
The facts of the case show that the insurer did not conduct a 
complete investigation of the claim before summarily denying 
coverage for a loss insured by an all-risk policy and that there 
was ample evidence that there had been coverage under the 
policy.  Before this court, quoting Taylor v. State Farm Fire & 
Casualty Co., 981 P.2d 1253, 1258 (Okla. 1999), the insureds' 
counsel, Shane W. Falk, contended that: 
[W]hile no identifiable ex contractu recovery is 
achieved 
by 
the 
victorious 
bad-faith 
plaintiff, 
indemnity for loss (under the contract) constitutes 
the centerpiece element of damages included in every 
ex delicto recovery for bad-faith refusal to settle. 
(Emphasis added.) 
¶64 Thus, while Jones held that a bad faith claim need not 
be accompanied by a breach of contract claim, it did not hold 
that a first-party bad faith claim need not be accompanied by a 
breach of contract.  Instead, the court in Jones focused on the 
proximate result standard for damages in a bad faith claim; its 
analysis revolved around the damages stage of proceedings.  
Jones, 249 Wis. 2d 623, ¶35.  In the instant case, however, the 
court focuses on a different, earlier stage of the proceedings, 
No.  2008AP2595 
29 
 
and determines whether a claim may even be brought when a party 
has a choice between a breach of contract accompanied by a bad 
faith claim, or a bad faith claim alone.  What damages may be 
available to Brethorst in the final analysis——if she prevails——
cannot be determined until she has first been allowed to proceed 
with her claim——and to proceed with discovery.  If she is 
allowed to go forward and prevails, then the principles and 
rationale in DeChant and Jones will control what damages are 
recoverable. 
¶65 In sum, we conclude that some breach of contract by an 
insurer is a fundamental prerequisite for a first-party bad 
faith claim against the insurer by the insured. 
¶66 We reach this conclusion with some misgivings because 
we do not countenance bad behavior by insurers against their 
insureds.  The hypothetical issue presented is whether an 
insurer's egregious conduct toward its insured is sufficient, in 
effect, to create coverage for the insured that does not 
otherwise exist under the policy.  We conclude that creating 
coverage is not an appropriate remedy in this situation. 
¶67 First, creating coverage is not consistent with the 
thrust of DeChant, namely, that "the insurer is liable for any 
damages which are the proximate result" of the "duty imposed as 
a consequence of the relationship established by contract."  
DeChant, 200 Wis. 2d at 569-70 (quoting Anderson, 85 Wis. 2d at 
687).  Contract damages are not the "proximate result" of bad 
behavior; they are the result of a breach of contract. 
No.  2008AP2595 
30 
 
¶68 Second, creating coverage is not consistent with the 
principle that no contract of insurance should be rewritten to 
bind an insurer to a risk which it did not contemplate and for 
which it was not paid.  Folkman v. Quamme, 2003 WI 116, ¶34, 264 
Wis. 2d 617, 665 N.W.2d 857; Sentry Ins. v. Ziegler, 172 
Wis. 2d 70, 79, 492 N.W.2d 621 (1992). 
¶69 Third, permitting a party to succeed on a first-party 
bad faith claim completely uncoupled from a prerequisite breach 
of contract would invite the filing of unmeritorious claims, 
focused on the insurer's alleged misconduct.6 
¶70 An insurer's bad behavior unrelated to a breach of 
contract might be subject to some sanction, but it does not 
warrant a first-party bad faith claim. 
D. 
Discovery 
                                                 
6 In a recent law review article, Victor E. Schwartz and 
Christopher E. Appel write: 
As intended, plaintiffs' ability to bring a separate 
tort action has helped to curb abuse and unfair 
practices.  Unfortunately, as quickly as bad-faith law 
developed to come to the aid of the disadvantaged 
party in a contract or fiduciary relationship, it has 
evolved into a litigation quandary that often misses 
its basic purpose. . . .  In some cases, enterprising 
plaintiffs' attorneys seek out technical violations to 
bring a bad-faith action where there is no purposeful 
or malevolent will, or even a remotely unfair act.  In 
legitimizing such claims, bad-faith law has lost its 
way. 
Victor 
E. 
Schwartz 
& 
Christopher 
E. 
Appel, 
Common-Sense 
Construction of Unfair Claims Settlement Statutes: Restoring the 
Good Faith in Bad Faith, 58 Am. U. L. Rev. 1477, 1478 (2009). 
No.  2008AP2595 
31 
 
¶71 The discussion in section C. is a necessary prelude to 
the resolution to the first certified question: "Whether a 
finding of wrongful denial of benefits is a condition precedent 
to proceeding with discovery in a first-party bad faith claim 
based on wrongful denial of benefits?" 
¶72 If the procedural facts in this case were the same as 
the procedural facts in Dahmen, the answer would appear to be 
"yes."  But the procedural facts here are not the same as in 
Dahmen.   
¶73 Brethorst filed only one claim——bad faith.  Her 
strongest argument is that she demanded compensation for $9,789 
in medical expenses, and the insurer, without a reasonable 
basis, never offered more than $1,800 above the $5,000 in 
medical expenses provided by the policy. 
¶74 The gap between what was demanded——$9,789——and what 
was offered——$6,800——is $2,989.  This small amount would be 
costly for the insured to prove if the court were to require a 
separate trial.  Requiring a separate trial to litigate a breach 
of contract on this amount would seriously disadvantage the 
insured.  However, permitting the court to "find" a wrongful 
denial of benefits without affording the insurer a trial by 
jury, if one were requested, would create constitutional 
problems. 
¶75 We conclude that the policies articulated in Dahmen, 
which require bifurcation and a stay of discovery when both bad 
faith and breach of contract claims are brought together, are 
only partially applicable when a party has chosen to plead only 
No.  2008AP2595 
32 
 
a bad faith claim.  In that circumstance, the circuit court must 
fashion means to protect the insurer from unwarranted discovery 
of the insurer's "work product and attorney/client material," 
Dahmen, 247 Wis. 2d 541, ¶13.7 
¶76 Given our analysis of the requirements for a first-
party bad faith claim, we conclude that the insured may not 
proceed with discovery on a first-party bad faith claim until it 
has pleaded a breach of contract by the insurer as part of a 
separate bad faith claim and satisfied the court that the 
insured has established such a breach or will be able to prove 
such a breach in the future.  Stated differently, an insured 
must plead, in part, that she was entitled to payment under the 
insurance contract and allege facts to show that her claim under 
the contract was not fairly debatable.  To go forward in 
discovery, 
these allegations must withstand the insurer's 
rebuttal. 
¶77 The insurer, in turn, must be permitted to challenge 
the elements of the claim, not only by a responsive pleading, 
but also by motion.  It must be permitted to show that it did 
not breach the contract or that there was a reasonable basis for 
                                                 
7 The scope of bad faith discovery is more expansive than 
that allowed for breach of contract actions.  Because a 
plaintiff must show that the insurer did not have a reasonable 
basis for its actions in order to prove bad faith, internal 
information that would otherwise be privileged is subject to 
discovery.  Dahmen, 247 Wis. 2d 541, ¶¶12-13.  A plaintiff 
bringing a bad faith claim is entitled to the insurer's work 
product as well as attorney-client material related to how the 
claim was handled.  Id.   
No.  2008AP2595 
33 
 
its 
conduct 
in 
denying, 
paying, 
or 
processing 
a 
claim.  
Anderson, 85 Wis. 2d at 693. 
¶78 An insured choosing to pursue only a claim for bad 
faith must plead facts which, if proven, would demonstrate not 
only that the insurer breached its contract with the insured but 
also that there was no reasonable basis for not honoring the 
terms of the contract.  
¶79 A plaintiff's failure to make this preliminary showing 
would be grounds for the court to grant a motion for summary 
judgment under Wis. Stat. § 802.08(2).  See Artmar, Inc. v. 
United Fire & Cas. Co., 34 Wis. 2d 181, 188, 148 N.W.2d 641 
(1967) (summary judgment is appropriate where there is no issue 
of fact and the party has made a prima facie case through its 
pleadings and affidavits).  In other circumstances, such a 
failure might warrant dismissal under Wis. Stat. § 802.06(2)(f).  
See Larson v. City of Tomah, 193 Wis. 2d 225, 227, 532 
N.W.2d 726 (1995) (a complaint should be dismissed when, even 
taking all the facts set forth in the complaint as true, the 
complaint fails to state a claim upon which relief may be 
granted). 
¶80 The court of appeals recognized the importance of this 
preliminary showing of the bad faith element in Farmers 
Automobile Insurance Ass'n v. Union Pacific Railway Co., 2008 WI 
App 116, 313 Wis. 2d 93, 756 N.W.2d 461.  In Farmers, the 
circuit court granted the insurer's motion for summary judgment 
before the insured had an opportunity to conduct discovery on 
the claim file.  Id., ¶26.  "A prerequisite to discovery in a 
No.  2008AP2595 
34 
 
bad-faith case is [ ] some evidence that what the insurance 
company did was objectively unreasonable because there is no 
claim for bad faith if it was not."  Id.  Because the insured 
had failed to put forth evidence that the insurer's conduct was 
objectively unreasonable, there was no entitlement to bad faith 
discovery.  Id., ¶28.  We affirmed the court of appeals in all 
respects, noting that if the insured "shows prima facie evidence 
of a reviewable claim . . . discovery is potentially available."  
Farmers Auto. Ins. Ass'n v. Union Pac. Ry. Co., 2009 WI 73, ¶52, 
319 Wis. 2d 52, 768 N.W.2d 596.   
¶81 The need to make a preliminary showing on bad faith 
applies even more to a claimed breach of contract.  The court 
must be satisfied that the claimed breach of contract is well 
founded and can be proved in the future.   
E. 
Effect of This Case 
¶82 The requirements set out above are designed to protect 
the interests of both the insurer and the insured.  They do not 
benefit the insurer here. 
¶83 In this case, the insured did not fail to plead a 
breach of contract through her bad faith claim.  The complaint 
discussed the accident; alleged that Margy L. Raymond, an 
uninsured motorist, was negligent in causing the accident; 
alleged that Brethorst "did sustain injuries and damages 
including past medical bills and past pain/suffering and 
disability," "as a direct and proximate result of the motor 
vehicle accident"; alleged that Brethorst's Allstate policy 
covered UM claims and that given the facts and circumstances of 
No.  2008AP2595 
35 
 
the accident, "Allstate . . . would be liable and obligated to 
pay to Brethorst 100 per cent of the damages sustained by 
Brethorst as a direct result of" the uninsured motorist's 
negligence.  The complaint alleged that Brethorst incurred not 
less than $9,789 in past medical and hospital expenses, that she 
made a demand for these expenses and provided documentation of 
them, but that "at all times material hereto, the offer of 
Allstate . . . was less than the medical bills incurred by Wanda 
Brethorst."   
¶84 The complaint also referred to the report prepared by 
Dr. Jerome Lerner and attached it as an exhibit.  The report 
stated Dr. Lerner's opinions, "to a reasonable degree of medical 
certainty," that the physical therapy he ordered was "not 
ordered to treat her pre-existing conditions," but was "ordered 
and provided to treat acute injuries from the motor vehicle 
accident and the associated aggravation of her pre-existing 
pain." 
¶85 No doubt Allstate disagreed with Brethorst's claim, 
believing that her accident was minor and questioning whether 
"any injury" resulted from the accident.  But Allstate's belief 
that Brethorst's injury did not result from the accident is 
speculation, not yet supported by fact.  Allstate provided 
nothing to the circuit court to undermine Brethorst's story.  It 
provided nothing to justify its failure to pay, except its 
wholly unsubstantiated theory that a minor accident could not 
seriously aggravate a pre-existing injury, causing $9,789 in 
No.  2008AP2595 
36 
 
medical expenses and compensable pain.  Allstate's theory is not 
enough. 
¶86 At any future trial, Brethorst will be required to 
prove her injuries and the resulting breach of contract, but at 
this point the complaint with supporting documentation fully 
satisfies the burden she was required to meet to proceed with 
discovery on her claim for bad faith.  Although we disagree with 
some of the circuit court's analysis, we conclude that Judge 
Marik properly exercised his discretion in denying Allstate's 
motion for a bifurcated trial and a stay of discovery.  
Therefore, the order of the circuit court is affirmed.  We offer 
no 
comment 
on 
Allstate's 
response 
to 
Brethorst's 
demand 
respecting pain and suffering, inasmuch as Brethorst's demand in 
this regard is not part of the record.   
By the Court.—The order of the circuit court is affirmed 
and the cause is remanded to the circuit court for further 
proceedings consistent with this opinion. . 
 
 
 
 
No.  2008AP2595.awb 
 
1 
 
 
¶87 ANN 
WALSH 
BRADLEY, J.   (concurring).  Like the 
majority, I conclude that Brethorst's freestanding claim for bad 
faith can proceed.  In my view, however, the majority obscures 
what 
should 
be 
a 
straightforward 
analysis. 
 
Because 
it 
needlessly alters the well-established law and creates out of 
whole cloth new pleading requirements and uncertain procedures 
that are unnecessary and confusing, I respectfully concur.    
I 
¶88 In this case, Brethorst's complaint alleged only one 
cause of action: a tort claim for bad faith.  She did not file a 
breach of contract claim along with the tort claim.  The court 
of appeals certified this appeal, asking whether a finding of 
wrongful denial of benefits is a condition precedent to 
proceeding with discovery in a first-party bad faith claim based 
on wrongful denial of benefits.  See majority op., ¶4.  The 
majority appears to conclude that it is.  Id., ¶65.   
¶89 Initially, the majority cites and seems to embrace 
well-established precedent providing that the tort of bad faith 
has two elements: "[A] plaintiff must show [1] the absence of a 
reasonable basis for denying benefits of the policy and [2] the 
defendant's knowledge or reckless disregard of the lack of a 
reasonable basis for denying the claim."  Id., ¶26.  Yet, rather 
than relying on Wisconsin case law, the majority cites instead 
two treatises which assert that there are three elements to a 
bad faith claim.  Id., ¶¶54-55 (citing Arnold Anderson, 
No.  2008AP2595.awb 
 
2 
 
Wisconsin Insurance Law (6th ed. 2010); Russ & Segalla, Couch on 
Insurance (3d ed. 2007)).  
¶90 To be entitled to discovery on a freestanding bad 
faith claim, the majority concludes that an insured must make a 
"threshold showing."  Id., ¶23.  In explaining what is required, 
it says that the insured must "plead[] breach of contract by the 
insurer as part of a separate bad faith claim," "must 
plead . . . that she was entitled to payment under the insurance 
contract," must "allege facts to show that her claim under the 
contract was not fairly debatable," and "must plead facts which, 
if proven, would demonstrate . . . that the insurer beached its 
contract."  Id., ¶¶76, 78.  The insurer then has the opportunity 
to 
rebut 
those 
pleadings 
and 
allegations. 
 
Id., 
¶76.  
Ultimately, the insured must "satisf[y] the court that the 
insured has established such a breach or will be able to prove 
such a breach in the future."  Id., ¶76.   
II 
¶91 It is well established that in Wisconsin, there are 
two elements of a bad faith claim.  A plaintiff must show (1) 
"the absence of a reasonable basis for denying benefits of the 
policy"; 
and 
(2) 
"the 
defendant's 
knowledge 
or 
reckless 
disregard of the lack of a reasonable basis for denying the 
claim."  Anderson v. Cont'l Ins. Co., 85 Wis. 2d 675, 691, 271 
N.W.2d 368 (1978);  Trinity Evangelical Lutheran Church v. Tower 
Ins. Co., 2003 WI 46, 261 Wis. 2d 333, 661 N.W.2d 789; Weiss v. 
United Fire & Cas. Co., 197 Wis. 2d 365, 377, 541 N.W.2d 753 
(1995); Warmka v. Hartland Cicero Mut. Ins. Co., 136 Wis. 2d 31, 
No.  2008AP2595.awb 
 
3 
 
34, 400 N.W.2d 923 (1987); Danner v. Auto-Owners Ins., 2001 WI 
90, ¶61, 245 Wis. 2d 49, 629 N.W.2d 159; Mowry v. Badger State 
Mut. Cas. Co., 129 Wis. 2d 496, 516, 385 N.W.2d 171 (1986). 
¶92 The jury instruction confirms that there are two 
elements of the tort:  
To prove bad faith against (insurance company) the 
(plaintiff) 
must 
establish 
that 
there 
was 
no 
reasonable basis for the insurance company's denying 
(plaintiff)'s claim for benefits under (his)(her) 
policy and that (insurance company), in denying the 
claim, either knew or recklessly failed to ascertain 
that the claim should have been paid. 
Bad faith on the part of an insurance company towards 
its insured is the absence of honest, intelligent 
action or consideration of the insured's claim.   
Bad faith exists if, upon an examination of the facts 
found 
by 
you, 
you 
are 
able 
to 
conclude 
that 
(defendant) had no reasonable basis for denying 
(plaintiff)'s claim. . . .     
Wis. JI-Civil 2761.    
¶93 Rather than affirming this well-established standard, 
the majority relies on treatises for the proposition that the 
tort of bad faith has three elements.1  In so doing, it is clear 
that the majority is altering well-established law.  But to 
what, exactly, is the majority altering the law?  It is unclear 
whether the majority is really adding an additional element to 
the tort of bad faith, or whether it instead concludes that 
breach of contract is merely a shadow element of the tort. 
                                                 
1 I have for years appreciated the work of Attorney Arnold 
Anderson and have consulted his treatise, Wisconsin Insurance 
Law. 
 
Here, 
however, 
I 
respectfully 
disagree 
with 
the 
proposition that the tort of bad faith has three elements.  
No.  2008AP2595.awb 
 
4 
 
¶94 The majority's apparent need to alter the well-settled 
law arises because it fails to fully grasp the relationship 
between an insurance contract and the tort of bad faith.  An 
insurance contract and the relationship it creates contain more 
than the company's bare promise to cover and pay certain claims 
and amounts.  Implicit in the contract and the relationship is 
the insurer's obligation to play fairly with its insured——the 
implied contract of good faith and fair dealing.   
¶95 One 
court 
has explained that "[t]he [insurance] 
industry itself seems to recognize these principles" because its 
advertising portrays customers as being "in good hands." Such 
slogans "emphasize a special type of relationship between the 
insured and the insurer" in which trust and confidence have some 
part.  Rawlings v. Apodaca, 726 P.2d 565, 571 n.3 (Ariz. 1986). 
¶96 Accordingly, in every insurance contract, there is an 
implied contractual duty of good faith and fair dealing.  Jones 
v. Secura Ins. Co., 2002 WI 11, ¶13, 249 Wis. 2d 623, 638 
N.W.2d 575.  When the existing elements of the tort of bad faith 
are examined, it becomes apparent that there is overlap between 
a breach of the implied contractual duty of good faith and fair 
dealing and the first element of the tort of bad faith.   
¶97 The first element, the absence of a reasonable basis 
for denying benefits of the policy, is objective.  Weiss, 197 
Wis. 2d at 377-78.  At trial, the plaintiff will be required to 
prove a negative——that there was no reasonable basis for denying 
benefits.  The plaintiff's bad faith claim would be defeated by 
No.  2008AP2595.awb 
 
5 
 
the existence of an objectively reasonable basis for denying the 
benefits. 
¶98 If an insurance company denies payment without an 
objectively reasonable basis for doing so, then the insurance 
company has breached its duty of good faith and fair dealing.  
Contrary to the majority's conclusion, breach of contract is 
neither an element nor a condition precedent of a bad faith 
claim.  Rather, a breach of the implied contractual duty of good 
faith and fair dealing is inherent in the first element of the 
tort.   
¶99 Further, the majority's analysis fails to distinguish 
between the contractual duty of good faith and fair dealing and 
coverage.  It contends that "it is difficult to conceive of a 
situation" where there could be bad faith in the absence of 
coverage.  Yet, such a scenario is readily envisioned in a 
leading treatise about bad faith actions:  
[S]uppose that an insured observes cracks in the 
foundation of his house.  The insured cannot tell by 
looking at the cracks whether they were caused by 
subsidence (an excluded peril under the policy) or by 
contractor negligence (a covered peril).  The insured 
submits a claim under his policy and requests that the 
insurer investigate the matter.  Instead of hiring a 
soils engineer to investigate the cause of the cracks, 
the insurer embarks on a campaign to intimidate the 
insured into accepting a pittance in settlement of the 
claim.  The insured incurs $5,000 in expenses to hire 
a 
soils 
engineer, 
who 
conducts 
a 
competent 
investigation and discovers that contractor negligence 
had nothing to do with the cracks.  The thesis that no 
coverage means no bad faith would leave the insured 
without compensation in this example.  
Stephen S. Ashley, Bad Faith Actions § 5A:02 (2d ed. 1997).   
No.  2008AP2595.awb 
 
6 
 
¶100 Because the majority fails to detangle the concepts of 
coverage and the contractual duty of good faith and fair 
dealing, it sets up a false choice.  It contends that bad faith 
in the absence of a breach of contract is tantamount to 
"creating coverage."  Majority op., ¶66.  The above scenario 
illustrates that an insurer's breach of the implied duty of good 
faith and fair dealing may cause compensable harm to the 
insured——even if it were later determined that there was no 
coverage under the policy.   
III 
¶101 The majority creates out of whole cloth new pleading 
requirements and uncertain procedures that are unnecessary and 
confusing. 
¶102 It is clear that the majority has created new pleading 
requirements for bringing a bad faith claim.  What is unclear, 
however, is why the majority feels compelled to do so and what 
the new requirements mean.  The majority even acknowledges that 
it has "misgivings" that its analysis may "countenance bad 
behavior by insurers against their insureds."  Id.   
¶103 Some of the new pleading requirements seem to be 
specific averments and others appear to require that facts be 
alleged.  The majority requires as a specific averment that an 
insured must plead that the contract has been breached by the 
insurer "as part of a separate bad faith claim."  Id., ¶76. 
Another specific averment appears to be that "an insured must 
plead, in part, that she was entitled to payment under the 
insurance contract[.]"  Id.  Additionally, certain facts must be 
No.  2008AP2595.awb 
 
7 
 
alleged.  The insured must "allege facts to show that her claim 
under the contract was not fairly debatable," id., and "must 
plead facts which, if proven, would demonstrate . . . that the 
insurer breached its contract[.]"  Id., ¶78.   
¶104 So much for notice pleading.  More importantly, 
however, why set such a trap?  The majority elucidates the 
consequences for failing to abide by these new requirements:  "A 
plaintiff's failure to make this preliminary showing would be 
grounds for the court to grant a motion for summary judgment 
[against the plaintiff]."  Id., ¶79.  There is something out of 
balance when the plaintiff suffers such a consequence for 
failing to thread the needle of specific averments or factual 
allegations while at the same time the insurer will escape 
responsibility for egregious conduct towards its insured.  See 
id., ¶66.   
¶105 The majority mandates that facts be alleged to 
establish the newly required legal conclusions.  However, it 
provides little guidance on how courts should evaluate the 
sufficiency of the facts alleged.  An examination of the 
majority's own application of its new requirements exacerbates 
the uncertainty.  In determining that discovery on Brethorst's 
bad faith claim may proceed, the majority relies at times on 
Brethorst's assertion of legal conclusions rather than relying 
on any allegations of fact.2    
                                                 
2 The majority notes that Brethorst "alleged" that the 
policy "covered [uninsured motorist] claims" and that Allstate 
"would be liable and obligated to pay to Brethorst 100 per cent 
of the damages sustained by Brethorst as a direct result of the 
uninsured motorist's negligence."  Majority op., ¶83.    
No.  2008AP2595.awb 
 
8 
 
¶106 It is also unclear what procedure should be undertaken 
by circuit courts to evaluate the "threshold showing" mandated 
by the majority.  See id., ¶23.  A court must be "satisfied" 
that the insured "has established [a breach of contract] or will 
be able to prove such a breach in the future."  Id., ¶76.  What 
does this mean?   
¶107 Should a circuit court base its determination on a gut 
feeling about whether it looks like the insurance contract has 
been breached?  Or is an evidentiary showing necessary?  If so, 
what evidence is required to "satisfy the court" that the 
insured has established or will be able to prove breach of 
contract in the future?  Must circuit courts guard against the 
possibility of turning the hearing into a trial on the threshold 
element or shadow element of breach of contract——the result the 
insured intended to avoid by bringing a freestanding claim for 
bad faith? 
¶108 The majority's approach raises more questions than it 
answers.  Its approach is also unnecessary because established 
procedures already exist to address the claim before us. 
¶109 Wisconsin's 
summary 
judgment 
procedure 
is 
well 
established.  Summary judgment is appropriate if there is no 
substantial issue to be tried.  Jay E. Grenig, Wisconsin 
Practice Series: Civil Procedure § 208.3 (4th ed. 2010).  In 
support of a motion for summary judgment, an insurer may submit 
affidavits to introduce any necessary facts.   
¶110 If the insurer can show that an objectively reasonable 
basis for denying the insurance claim exists, no reasonable, 
No.  2008AP2595.awb 
 
9 
 
properly instructed jury could find that the elements of bad 
faith are met.3  Under those circumstances, there is no 
substantial issue to be tried, and the insurer would be entitled 
to prevail as a matter of law.4   
¶111 The majority's creativity appears to be motivated by 
concerns about public policy.  It echoes Allstate's expressed 
                                                 
3 The Anderson court recognized that "put[ting] the test on 
an 
objective 
basis[] 
will 
minimize 
the 
fears 
expressed . . . that to permit claims for bad faith will result 
in extortionate lawsuits.  Such result cannot follow when an 
insurance company in the exercise of ordinary care makes an 
investigation of the facts and law and concludes on a reasonable 
basis that the claim is at least debatable."  Majority op., ¶27 
(quoting Anderson v. Cont'l Ins. Co., 85 Wis. 2d 675, 693, 271 
N.W.2d 368 (1978). 
Our cases give guidance on what constitutes an objectively 
reasonable basis for denying benefits.  In Danner v. Auto-Owners 
Ins., 2001 WI 90, ¶58, 245 Wis. 2d 49, 629 N.W.2d 159, we 
explained that "[a]n insurance company may 'challenge claims 
which are fairly debatable and will be found liable [for bad 
faith] only where it has intentionally denied (or failed to 
process or pay) a claim without a reasonable basis.'"   
If, for example, the insurer can demonstrate that there is 
no contract, see majority op., ¶52, then it would appear that 
there is a reasonably objective basis for denying benefits.  Or 
it may be that there is a fairly debatable argument that there 
is no coverage under the policy.  See id., ¶53.  In that case, 
if there is no other reason to conclude that the insurer 
breached the duty of bad faith causing damages, then it would 
appear that the insurer had a reasonably objective basis for 
denying benefits and summary judgment should be granted.    
4 "The mere existence of an alleged factual dispute between 
parties will not defeat an otherwise properly supported motion 
for summary judgment.  The requirement is that there be no 
genuine triable issue of material fact.  A factual issue is a 
genuine issue of material fact if the evidence is such that a 
reasonable jury could return a verdict for the nonmoving party."  
Jay E. Grenig, Wisconsin Practice Series: Civil Procedure 
§ 208.3 (4th ed. 2010). 
No.  2008AP2595.awb 
 
10 
 
public policy concern about allowing a freestanding claim of bad 
faith to proceed without a threshold finding of breach of 
contract.  It cites Dahmen for the proposition that discovery of 
an insurer's work product would be unlimited:  
[The Dahmens] will be entitled to discovery of the 
insurer's work product and attorney/client material 
containing information relevant as to how the claim 
was handled.  This information would include the 
insurer's internal determination to deny benefits, its 
evaluation as to how a jury may value the Dahmens' 
claim and its approach to settlement.   
Majority op., ¶39 (citing Dahmen v. American Family Mut. Ins. 
Co., 2001 WI App 198, 247 Wis. 2d 541, 635 N.W.2d 1); see also 
id., ¶¶75, 75 n.7.    
¶112 The majority's concern is exaggerated for two reasons.  
First, Dahmen does not stand for the proposition that once a bad 
faith claim is made, an insurer must blindly turn over its 
entire file.  There are well-established procedures for curbing 
discovery abuses.  Wisconsin Stat. § 804.01(3) "confers broad 
powers on the courts to regulate or prevent discovery, even 
where the materials sought" may otherwise be discoverable.  
Grenig, supra § 401.3.  The majority gives short shrift to the 
circuit court's broad discretion to issue protective orders on a 
case-by-case basis.  
¶113 Second, 
under 
the 
established 
rules 
of 
civil 
procedure, the insurer's motion for summary judgment may be 
heard once the pleadings are complete.  Wis. Stat. § 802.08(1).  
Accordingly, the insurer need not wait until discovery is 
finished——or even until after discovery has begun——to argue that 
it is entitled to summary judgment.  "[A] court should not 
No.  2008AP2595.awb 
 
11 
 
enforce a discovery request if the material sought is relevant 
to a claim upon which no relief can be granted."  Grenig, supra 
§ 401.3.     
¶114 In sum, unlike the majority, I would rely upon 
established law and procedures to resolve these issues.  I 
conclude that the legal questions raised by the court of appeals 
and the public policy issues raised by Allstate can be readily 
addressed through a straightforward application of the well-
established summary judgment procedure to the longstanding 
elements of a bad faith claim.    
¶115 Here, Allstate has not made a motion for summary 
judgment at this time, and it has advanced no argument that it 
had an objectively reasonable basis for denying the benefits.  
Rather, this is an appeal of an order denying Allstate's motion 
to bifurcate.  Brethorst raised only one claim and there is no 
issue of insurance coverage, so there is nothing to bifurcate.5  
                                                 
5 In addition to obfuscating the standard and procedure for 
a bad faith tort claim, the majority also confuses the law 
relating to bifurcation under Wis. Stat. § 805.05(2).  See 
majority op., ¶20.  We recently explained that the statute 
permits bifurcation of separate claims, but it does not 
authorize bifurcation of separate "issues" within a single 
claim.  Waters v. Pertzborn, 2001 WI 62, ¶31, 243 Wis. 2d 703, 
627 N.W.2d 497.   
There is only one statutory exception to this otherwise 
hard-and-fast 
rule: 
"An 
exception 
to 
[the 
rule] 
is 
the 
bifurcation 
of 
an 
issue 
of 
insurance 
coverage 
under 
803.04(2)(b)."  Id., ¶21.  Wisconsin Stat. § 803.04(2)(b) 
provides: "Nothing herein contained shall be construed as 
prohibiting the trial court from directing and conducting 
separate trials on the issue of liability . . . and on the issue 
of whether the insurance policy in question affords coverage." 
No.  2008AP2595.awb 
 
12 
 
I agree with the analysis of the learned circuit court.  It 
properly denied Allstate's motion.   
¶116 For the reasons stated above, I respectfully concur.  
¶117 I am authorized to state that Chief Justice SHIRLEY S. 
ABRAHAMSON joins this concurrence.  
 
 
                                                                                                                                                             
The majority confuses the law by asserting that "the 
legislative 
history" 
of 
Wis. 
Stat. 
§ 805.05(2) 
"clearly 
demonstrates that the rule barring bifurcation of issues was not 
intended to apply to cases involving insurance coverage."  
Majority op., ¶20, n.4.  What does the majority mean?  The 
majority's 
attempted explanation misstates our holding in 
Waters, and it misstates the applicable statutes.     
No.  2008AP2595.awb 
 
 
 
1