Take care when entering stipulations

Listen to this article

Attorneys should be very careful when it comes to entering stipulations in the future.

You may think you are merely conceding liability and damages, where those issues aren’t seriously in dispute, while preserving all legal issues for appeal. But the stipulation could be read to be much broader than intended.

That’s the lesson attorneys need to take from the April 11 decision by the Wisconsin Supreme Court in Stone v. Acuity, according to attorney Arthur P. Simpson, of Simpson & Deardorff, S.C. Simpson represented Acuity in the case.

In the wake of the opinion, Simpson warned, “Never stipulate to anything if you are planning on appealing.” If a stipulation is entered, attorneys need to be “very guarded” about exactly what they are stipulating to.

Simpson called the holding “ironic” because courts generally encourage stipulations over issues that are not in dispute. “I think it is good practice, but it could come back to haunt you later.”

Stipulation Upheld

However, the attorneys for the plaintiff, William A. Jennaro and Thomas J. Lonzo, of Cook & Franke, S.C., disagreed that the opinion would have a chilling effect on stipulations.

“It could, but only if you’re not careful about what you are stipulating to. In fact, the stipulation was upheld,” Jennaro said.

In the case, G. Vaughn Stone was severely injured in a bicycle-automobile accident with a driver who had $500,000 in liability coverage.

Stone had UIM coverage with Acuity in the amount of $300,000, and an umbrella policy with a limit of $1 million.

Acuity began including UIM coverage with its umbrella policies in 1999, and while it included notice of such coverage to new applicants, it failed to give notice to existing policyholders, including Stone.

Sought Umbrella Coverage

Stone settled with the driver, and brought suit against Acuity, seeking coverage under the umbrella policy.

While the case was pending, the Court of Appeals issued Rebernick v. Wausau Gen. Ins. Co., 2005 WI App 15, 278 Wis.2d 461, 692 N.W.2d 348. Rebernick held that sec. 632.32(4m), which requires notice of UIM coverage, applies not just to automobile policies, but to umbrella policies, as well.

After the circuit court found Acuity’s policy contextually ambiguous, without addressing the statute, Acuity and Stone entered into a stipulation, reserving Acuity’s right to appeal, but conceding damages and liability in the amount of $500,000.

In a published decision, the court of appeals held that Acuity violated sec. 632.32(4m) by failing to provide notice that UIM coverage was available as part of the umbrella policy., and that Stone was entitled to UIM coverage as part of the umbrella insurance.

The Supreme Court granted review, and affirmed, in a decision by Justice Ann Walsh Bradley.

No Proper Notice

The court unanimously agreed that Acuity failed to provide the proper notice, but the justices disagreed on the proper remedy.

The majority opinion by Justice Bradley concluded that the proper remedy for failure to provide notice is that the insured should receive $50,000 in coverage — the minimum required by sec. 632.32(4m).

Because of the stipulation, however, the court concluded that Stone should recover $500,000.

Justice Patience Drake Roggensack dissented in part, concluding that Acuity should only pay $50,000.

Justice Louis B. Butler, Jr., also dissented in part, concluding that the case should be remanded to the circuit court to determine how much coverage Stone would have bought had he received notice.

The stipulation in this case provided that $500,000 “would be the amount that Acuity would pay for the injuries and damages sustained … in the event insurance coverage is found on appeal to exist from Acuity…”

The majority concluded that, because the umbrella policy must be conformed to the statute, therefore, insurance coverage was found on appeal to exist from Acuity.

Thus, the court held that the plain language of the stipulation requires Acuity to pay Stone $500,000. Because the language was unambiguous, the court found extrinsic evidence of the parties’ intent irrelevant.

Ambiguous Stipulation

Justice Roggensack concluded that the stipulation was ambiguous, and Acuity should be subject to the same penalty as any other insurer who fails to give the proper UIM notice.

Looking at extrinsic evidence, Roggensack found that the stipulation was merely a procedural device to move the case forward toward appellate review, by foregoing a trial on damages, which were not seriously contested, and did not contemplate the holding by the Supreme Court.

Justice Butler dissented from the remedy adopted by the majority, concluding that insureds should only be able to recover under Rebernick only if they can show that they would have purchased insurance if given notice.

Butler also took issue with the remedy, because, if an insured were to have purchased UIM coverage through an umbrella policy, coverage would be at least $1 million — the minimum coverage required by statute for such policies by Wis. Admin. Code INS 6.77(3) — not a mere $50,000.

Chilling Effect?

Jennaro and Lonzo agreed with Butler’s criticisms of the lead opinion, and suggested that the unusual remedy adopted in the lead opinion minimizes any likelihood that the opinion would have a chilling effect on stipulations.

At the time the stipulation was entered, Jennaro noted, none of the parties contemplated such a remedy. The parties assumed at that time that Acuity would pay either $500,000 or nothing, depending on the result on appeal.

It was not until after briefing and oral argument in front of the Supreme Court, when the court ordered supplemental briefs and a second argument, that anyone considered that a $50,000 payment was a possible outcome.

Because neither party even contemplated the ultimate holding by the court, when the stipulation was entered, Jennaro contended that the decision is not likely to have a chilling effect on stipulations.