Will this indemnity or liability-limiting clause in a construction contract survive in Wisconsin?
Wis. Stat. § 895.447(1) makes against public policy and void any provision to limit or eliminate tort liability as part of or in connection with any contract, covenant or agreement relating to the construction, alteration, repair or maintenance of a building, structure, or other work related to construction, including any moving, demolition or excavation. The section states its own exceptions: it does not apply to any insurance contract or worker's compensation plan (§ 895.447(2)), and it does not apply to any provision of a contract, covenant or agreement entered into prior to July 1, 1978 (§ 895.447(3)).
The trap
The operative words are 'limit or eliminate tort liability', and the Supreme Court of Wisconsin has given them their plain meaning: finding no statutory definition, it treated 'tort liability' as a legal term of art meaning the legal obligation or responsibility to another resulting from a civil wrong or injury for which a remedy may be obtained. In Rural Mutual the court concluded that § 895.447 does not void a subrogation waiver in a construction contract because the waiver does not limit or eliminate tort liability, and separately that the subrogation waiver is not an unenforceable exculpatory contract contrary to public policy. So a clause that reallocates who bears an insured loss can sit inside a Wisconsin construction contract where a clause that caps or excludes the contractor's tort liability cannot, and the drafting question is which of the two the words actually do. Read what carried Rural Mutual before relying on it: the contractors stayed liable to the owner for their negligent acts, the waiver reached only damages covered by a property insurance policy, and the owner could still recover losses the policy did not cover, including its deductibles. The court held the waiver was not an exculpatory contract precisely because it did not immunise the allegedly negligent parties or require the injured party to go uncompensated, so a clause that does leave the owner uncompensated is not this case. On indemnity in particular, the court recorded that only one decision has ever applied § 895.447's plain language, and it held an indemnity clause not void because the clause made the indemnitor the insurer should damages result rather than limiting the owner's tort liability to third parties.
10 authorities
- statuteWis. Stat. § 895.447enactment date not established
The words that state the rule
Any provision to limit or eliminate tort liability as a part of or in connection with any contract, covenant or agreement relating to the construction, alteration, repair or maintenance of a building, structure, or other work related to construction, including any moving, demolition or excavation, is against public policy and void.
- statuteWis. Stat. § 895.447enactment date not established
The words that state the rule
895.447(2) (2) This section does not apply to any insurance contract or worker’s compensation plan. 895.447(3) (3) This section shall not apply to any provision of any contract, covenant or agreement entered into prior to July 1, 1978.
- case2019 WI 70Rural Mutual Insurance Company v. Lester Buildings, LLCWis.decided 2019read it at the source ↗
The words that state the rule
We conclude that Wis. Stat. § 895.447 does not void the subrogation waiver in Lester Buildings' contract because the waiver does not limit or eliminate tort liability. We also conclude that the subrogation waiver is not an unenforceable exculpatory contract contrary to public policy.
- case2019 WI 70Rural Mutual Insurance Company v. Lester Buildings, LLCWis.decided 2019read it at the source ↗
The words that state the rule
We first interpret Wis. Stat. § 895.447 to determine whether it voids the subrogation waiver. Statutory interpretation begins with the language of the statute and if the meaning is plain, the inquiry *423 ordinarily ends. State ex rel. Kalal v. Circuit Court for Dane Cty. , 2004 WI 58 , ¶45, 271 Wis. 2d 633 , 681 N.W.2d 110 . "A statute's purpose or scope may be readily apparent from its plain language or its relationship to surrounding or closely-related statutes-that is, from its context or the structure of the statute as a coherent whole.
- case2019 WI 70Rural Mutual Insurance Company v. Lester Buildings, LLCWis.decided 2019read it at the source ↗
The words that state the rule
The dispute lies in whether the subrogation waiver here limits or eliminates "tort liability" and is therefore void. Due to the absence of a statutory definition for the legal term "tort liability," we *185 look to Black's Law Dictionary for assistance. A "tort" is defined *424 as a "civil wrong ... for which a remedy may be obtained." Tort , Black's Law Dictionary 1717 (10th ed. 2014); see also Curda-Derickson v. Derickson , 2003 WI App 167 , ¶17, 266 Wis. 2d 453 , 668 N.W.2d 736 (citing to Black's Law Dictionary for the definition of tort). "Liability" is defined as "[t]he quality, state, or condition of being legally obligated or accountable; legal responsibility to another or to society, enforceable by civil remedy or criminal punishment." Liability , Black's Law Dictionary 1053 (10th ed. 2014). Taken together, "tort liability" is the legal obligation or responsibility to another resulting from a civil wrong or injury for which a remedy may be obtained.
- case2019 WI 70Rural Mutual Insurance Company v. Lester Buildings, LLCWis.decided 2019read it at the source ↗
The words that state the rule
The subrogation waiver does not limit or eliminate the legal responsibility of the Contractors to Herman for the collapse of Herman's barn. The Contractors and any other subcontractors or suppliers who constructed the barn are still liable to Herman for their negligent acts. 11 Instead, the subrogation waiver waives Herman's right to recover damages from the Contractors for their wrongful acts to the extent those damages are covered by a property insurance policy such as the one between Herman and Rural Mutual. Responsibility for payment of damages, the remedy for tort liability, has shifted from the Contractors to Rural Mutual.
- case2019 WI 70Rural Mutual Insurance Company v. Lester Buildings, LLCWis.decided 2019read it at the source ↗
The words that state the rule
Moreover, the remedy that may be obtained as a result of the Contractors' civil wrong is not limited because Herman may still recover damages that are not covered by its policy with Rural Mutual, including any deductibles applicable to its losses.
- case2019 WI 70Rural Mutual Insurance Company v. Lester Buildings, LLCWis.decided 2019read it at the source ↗
The words that state the rule
Only one case has applied the plain language of Wis. Stat. § 895.447 , Gerdmann , 119 Wis. 2d 367 , 350 N.W.2d 730 , and it supports our conclusion regarding the subrogation waiver at issue. In Gerdmann , the court of appeals held that an indemnity clause between Roen, a contractor, and Manitowoc, the property owner, was not void under Wis. Stat. § 895.49 , the statutory precursor to § 895.447. 16 Gerdmann , 119 Wis. 2d at 374 , 350 N.W.2d 730 . The *427 Gerdmann court reasoned that the indemnity agreement at issue "neither limits nor eliminates Manitowoc's tort liability to third parties [Gerdmann]. Rather, it makes Roen the insurer should damages result.
- case2019 WI 70Rural Mutual Insurance Company v. Lester Buildings, LLCWis.decided 2019read it at the source ↗
The words that state the rule
In Merten v. Nathan , 108 Wis. 2d 205 , 210, 321 N.W.2d 173 (1982), we defined an exculpatory contract as one which "relieve[s] a party from liability for harm caused by his or her own negligence.
- case2019 WI 70Rural Mutual Insurance Company v. Lester Buildings, LLCWis.decided 2019read it at the source ↗
The words that state the rule
The subrogation waiver in this case does not immunize the allegedly negligent parties from *430 liability or require the injured party to go uncompensated, and thus it is *188 not an unenforceable exculpatory contract contrary to public policy.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.