Olson v Zurich American Ins. Co. (WI)

Summary: It does not contravene public policy to hold a title insurance agency liable for negligence based upon the actions of its agent.

Olson v Zurich American Ins. Co., 2010 AP 1207 (Wis. Ct. App., 2012).

Facts: Thomas L. Olson (Olson) had a real estate transaction from which he was to receive $175,968.19 in net proceeds.  Olson’s real estate agent, David Reed (Reed), suggested that Olson use Coulee County Title (the local office of Ibarras-McClary Global LLC (I-M)) to handle the title work and serve as the closing agent for the sale.  Pamela Harris (Harris) served as the closing agent.  At the time of the transaction, I-M served as the underwriting agent for Commonwealth Land Title Insurance Company (Commonwealth).  Prior to working for Commonwealth, I-M worked as the underwriting agent for Stewart Title Guaranty Company (Stewart Title).  Olson alleged that Stewart Title ended its relationship with I-M due to irregularities in the trust accounts and non-payments of premiums.  However in discussions Commonwealth, Stewart Title stated that I-M was a good agent and that it stopped using I-M because it found another agent in the area.  The sale closed and Harris deposited the proceeds.  After the closing, Harris gave Olson a check for the proceeds.  When Olson tried to deposit the check, the account was found to have insufficient funds.  Olson commenced suit against Reed, Harris, I-M, Commonwealth and Stewart Title.

Olson alleged that: (I) I-M was negligent in hiring, training, and supervising Harris, (II) Stewart Title, I-M, and Harris colluded to hide why Stewart Title stopped using I-M, (III) Reed negligently recommended I-M, and (IV) Harris acted negligently and committed theft or misappropriation. Commonwealth commenced suit against Stewart Title for intentional or negligent misrepresentation.  Based upon a five part question on the allocation of comparative negligence, the jury allocated 14% of the damages to Stewart Title.  On Commonwealth’s claims, the jury found that Stewart title was guilty of negligent misrepresentation and not guilty of intentional misrepresentation.  However, Commonwealth was 57 % causally negligent in relying upon the promise, and therefore Commonwealth’s negligence outweighed Stewart Title’s as a cause of its damages.  The parties filed motions after the verdict on which the circuit court issued orders.  The circuit court entered a judgment: (1) in favor of Olson against I-M for $113,458.11, (2) in favor of Olson against Commonwealth in the amount of $26,383.28, (3) that dismissed Olson’s claim against Stewart Title on public policy ground, and (4) that dismissed Olson’s claim against Reed.  Olson appealed and Commonwealth cross-appealed.

Holding: Affirmed.  The Wisconsin Court of Appeals held that the six nonexclusive public policy reasons for not imposing liability for negligence are: “(1) The injury is too remote from the negligence; or (2) the injury is too wholly out of proportion to the culpability of the negligent tort-feasor; or (3) in retrospect it appears too highly extraordinary that the negligence should have brought about the harm; or (4) because allowance of recovery would place too unreasonable a burden on the negligent tort-feasor; or (5) because allowance of recovery would be too likely to open the way for fraudulent claims; or (6) allowance of recovery would enter a field that has no sensible or just stopping point.” Olson’s appeal against Stewart Title was dismissed because the argument was underdeveloped. 

Commonwealth’s claim that applying liability would contravene public policy was rejected.  When applying the six public policy reasons for not imposing liability to Commonwealth, the appellate court found that (1) the injury is the type expected from the mismanagement of a trust account, (2) the injury is not out of proportion to the culpability, (3) it is not highly extraordinary that the failure to investigate a person in a position of trust involved in money would lead to a mismanagement of the trust which in turn would lead to insufficient funds, (4) it would not place an unreasonable burden to expect Commonwealth to investigate the financial dealings of someone who presents themselves and Commonwealth’s agent, (5) requiring Commonwealth to investigate the financial dealings would not lead to fraud, (6) there is no worry of a slippery slope.  As applied, the first three would be inapplicable, and the latter three would indicate that Commonwealth should be held liable.

Commonwealth’s attempt to invoke the economic loss doctrine failed because Olson was not a purchaser with respect to Commonwealth.

Olson argued that the trial court erred in including Harris in a special verdict form relating to comparative negligence because Harris’s actions were intentional.  Stewart Title responded stating that Harris negligently maintained the trust account, and the issue was moot because the circuit court combined the liability of Harris and her employer.  Because Olson did not respond to Stewart Titles arguments, the arguments were admitted and the issue was not further addressed.  For the above reasons, the court affirmed the holding of the trial court.

Opinion Year: 
By: ATG Underwriting Department | Posted on: Wed, 06/20/2012 - 2:11pm