J&J Enterprises of De Pere, LLP v. Cincinnati Insurance Company

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
September 6, 2023
A party may file with the Supreme Court a
Samuel A. Christensen petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2022AP1120 Cir. Ct. No. 2020CV589

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT III

J&J ENTERPRISES OF DE PERE, LLP,

PLAINTIFF-APPELLANT-CROSS-RESPONDENT,

V.

CINCINNATI INSURANCE COMPANY,

DEFENDANT-RESPONDENT-CROSS-APPELLANT,

ANSAY & ASSOCIATES, LLC,

DEFENDANT.

APPEAL and CROSS-APPEAL from an order of the circuit court
for Brown County: DONALD R. ZUIDMULDER, Judge. Affirmed in part;
reversed in part and cause remanded with directions.

Before Stark, P.J., Hruz and Gill, JJ.
No. 2022AP1120

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).

¶1 PER CURIAM. J&J Enterprises of De Pere, LLP (“J&J”) appeals a
circuit court order granting summary judgment in favor of Cincinnati Insurance
Company (“Cincinnati”) on J&J’s claims for negligence and breach of contract.
Specifically, J&J argues that the court erred in concluding that Cincinnati was not
liable for failing to advise J&J that it was underinsured. Cincinnati cross-appeals
the court’s denial of costs under WIS. STAT. § 814.03 (2021-22).1 We reject J&J’s
arguments in its appeal, but we agree with Cincinnati that an award of costs was
mandatory. We therefore affirm the court’s order granting summary judgment to
Cincinnati and remand this matter for the limited purpose of awarding costs to
Cincinnati.

BACKGROUND

¶2 This appeal arises from an insurance coverage dispute following a
2019 fire that destroyed several of J&J’s buildings. J&J had an insurance policy
with Cincinnati that was issued and delivered through an independent agent,
Ansay & Associates, LLC (“Ansay”). The policy provided replacement cost
coverage up to the policy limit of $2,086,000. At the time of the fire, however,
Cincinnati was aware that the replacement cost for J&J’s buildings was between
$3.1 and 3.4 million.

1
All references to the Wisconsin Statutes are to the 2021-22 version unless otherwise
noted.

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¶3 Specifically, in 2017, Cincinnati created a replacement cost
valuation report for J&J’s property which showed that the property was
underinsured. Cincinnati sent the 2017 report to Ansay with an instruction to
review the report with J&J to see whether J&J wanted to increase its coverage.
Ansay did not share the report with J&J, and J&J’s policy remained at the existing
level of coverage. In 2018, Cincinnati created a second report showing that J&J
remained underinsured. Cincinnati did not share this 2018 report with Ansay or
with J&J. After the fire, Cincinnati informed Ansay that Cincinnati usually
forwards these reports to its agents when they are created, and that the failure to
send Ansay the 2018 report “was most likely just an error on our part!”

¶4 After the fire, Cincinnati determined that the replacement cost for
J&J’s buildings was $4,175,000. J&J asked Cincinnati to reform the policy due to
mutual mistake, but Cincinnati refused to pay more than the policy limit of
$2,086,000. J&J then sued Ansay and Cincinnati, alleging several theories of
liability based on negligence and breach of contract. Ansay cross-claimed against
Cincinnati for breaching its agency agreement by failing to forward the 2018
report.2 Following Ansay’s cross-claim, J&J filed an amended complaint that
modified its original breach of contract claim to allege that J&J was a third-party
beneficiary of Cincinnati’s agency agreement with Ansay.

¶5 Both defendants filed motions for summary judgment on J&J’s
claims. The circuit court denied Ansay’s motion, concluding that it was “Ansay

2
The circuit court initially stayed Ansay’s cross-claim based on an arbitration clause in
the agency agreement. Cincinnati and Ansay subsequently stipulated to the dismissal of this
cross-claim with prejudice and without costs.

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that dropped the ball” by not discussing the 2017 report with J&J. 3 However, the
court granted Cincinnati’s motion for summary judgment, concluding that
Cincinnati did not breach any duty to J&J.

¶6 After the circuit court granted Cincinnati summary judgment,
Cincinnati submitted a bill of costs to the court totaling $6,796.75. The court
denied the bill of costs, stating that “[t]he Court did not award costs on the
Summary Judgement motion.” Cincinnati filed a motion for reconsideration,
which the court denied after a hearing.

¶7 J&J now appeals the circuit court’s order granting summary
judgment to Cincinnati, and Cincinnati cross-appeals the order denying costs.

DISCUSSION

I. J&J’s Negligence Claim

¶8 To prevail on a negligence claim, a plaintiff must establish “four
elements: ‘(1) [a] duty of care on the part of the defendant; (2) a breach of that
duty; (3) a causal connection between the conduct and the injury; and (4) an actual
loss or damage as a result of the injury.’” Martindale v. Ripp, 2001 WI 113, ¶33,
246 Wis. 2d 67, 629 N.W.2d 698 (alteration in original; citation omitted).
“[W]hether a duty exists and the scope of such a duty are questions of law for the
courts to decide.” Hoida, Inc. v. M&I Midstate Bank, 2006 WI 69, ¶23 n.12, 291
Wis. 2d 283, 717 N.W.2d 17.

3
J&J has since settled its claims against Ansay and stipulated to the dismissal of its
complaint against Ansay with prejudice and without costs. The settlement amount is not part of
the record.

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¶9 J&J’s negligence claim alleged that Cincinnati should be liable for
the harm caused by not following up with Ansay or J&J on the 2017 report
showing that J&J did not have full replacement cost coverage and by not sending
Ansay the 2018 report showing that J&J remained underinsured. The circuit court
granted summary judgment on J&J’s negligence claim because it could not
“ascertain a duty that was breached between Cincinnati and the plaintiff[].” J&J
argues that the court erred in granting summary judgment on its negligence claim
because there were disputed material facts as to whether Cincinnati had a duty to
J&J.

¶10 “We review a decision granting summary judgment de novo,
applying the same methodology as the [circuit] court.” Lemke-Wojnicki v.
Kolodziaj, 2002 WI App 316, ¶6, 258 Wis. 2d 950, 655 N.W.2d 212. Summary
judgment may be granted when the record “show[s] that there is no genuine
dispute as to any material fact and that the moving party is entitled to judgment as
a matter of law.” WIS. STAT. § 802.08(2). “In reviewing a grant of summary
judgment, we view the facts in a light most favorable to … the nonmoving party.”
CED Props., LLC v. City of Oshkosh, 2018 WI 24, ¶19, 380 Wis. 2d 399, 909
N.W.2d 136. “Any doubts as to whether a genuine issue of material fact exists
should be resolved against … the moving party.” Id. However, “[t]he ultimate
burden of demonstrating that there is sufficient evidence … to go to trial at
all … is on the party that has the burden of proof on the issue that is the object of
the motion.” Kaufman v. State St. Ltd. P’ship, 187 Wis. 2d 54, 58, 522 N.W.2d
249 (Ct. App. 1994) (alterations in original; citation omitted).

¶11 In Wisconsin, “generally an insurance agent does not have an
affirmative duty to advise a client regarding the availability or adequacy of
coverage.” Nelson v. Davidson, 155 Wis. 2d 674, 682, 456 N.W.2d 343 (1990),

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modified by statute on other grounds as stated in Avery v. Diedrich, 2007 WI 80, ¶
26 n.3, 301 Wis. 2d 693, 734 N.W.2d 159. An exception to the general rule may
apply “when a statutory obligation or a special relationship arises between agent
and buyer.” Id. Our supreme court has explained that “it is apparent that
something more than the standard insured-insurer relationship is required in order
to create a special relationship obligating the insurer to advise the policyholder
concerning his or her insurance coverage.” Id. at 683.

¶12 Cincinnati argues that J&J’s own admissions establish that there was
no special relationship between J&J and Cincinnati that would require Cincinnati
to advise J&J about the adequacy of its coverage. Specifically, Jerome Turba,
J&J’s owner and corporate representative, testified at deposition that J&J did not
have any communications with Cincinnati about policy limits. In fact, Turba did
not recall any instance when J&J had ever communicated directly with anyone at
Cincinnati before the fire. Instead, all of J&J’s communications were with Ansay.
Turba also testified that there was “no written agreement[]” between Cincinnati
and J&J other than the policies. In addition, J&J admits on appeal that it did not
pay Cincinnati any separate fee to provide advice to J&J beyond its policy
premiums. Based on these undisputed facts, we agree with the circuit court’s
determination that, as a matter of law, the relationship between Cincinnati and J&J
was a standard insured-insurer relationship that did not give rise to a duty on
Cincinnati’s part to advise J&J about the adequacy of its coverage. See Nelson,
155 Wis. 2d at 683.

¶13 Our supreme court’s decision in Sprangers v. Greatway Insurance
Co., 182 Wis. 2d 521, 547, 514 N.W.2d 1 (1994), further supports this conclusion.
In Sprangers, the plaintiffs were injured by an intoxicated driver who had been
drinking at a VFW clubhouse. Id. at 528. The plaintiffs brought claims against

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No. 2022AP1120

the VFW for their injuries, and they sought to enforce coverage from the VFW’s
insurer, notwithstanding the fact that the insurance policy had an exclusion for
insureds that were “in the business of … selling, serving or furnishing alcoholic
beverages.” Id. at 527. The circuit court declined to grant summary judgment to
the insurer, but we reversed, and our supreme court affirmed our decision that the
insurer was entitled to summary judgment. Id. at 548.

¶14 The supreme court explained that the policy language was clear
regarding the exclusion. Id. at 527. In addition, the VFW “spoke solely with
representatives of [the insurance agency] and had no direct contact with [the
insurer].” Id. at 548. The court concluded that these facts established, as a matter
of law, that the insurer “had no duty in this case to anticipate what liabilities the
VFW expected a policy to cover or to identify which exclusions in the policy the
VFW may have deemed important.” Id.

¶15 Like the defendant’s insurer in Sprangers, the facts demonstrate that
Cincinnati never had any direct contact with J&J. Similarly, we see no argument
from J&J that the policy language setting forth the replacement cost coverage limit
was unclear. Thus, the circuit court concluded, and we agree, that Cincinnati was
“entitled to infer” that J&J did not want to increase its coverage.

¶16 J&J argues that the circuit court’s conclusion demonstrates that the
court was drawing an inference in favor of the moving party, which is
impermissible on summary judgment. See Correa v. Woodman’s Food Mkt.,
2020 WI 43, ¶22, 391 Wis. 2d 651, 943 N.W.2d 535 (a jury has the
“unquestionable prerogative to draw inferences from the evidence presented”).
J&J, however, misconstrues the court’s statement as a usurpation of the jury’s
fact-finding function. Instead, the court was correctly applying the holding of

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Sprangers to the undisputed facts of this case. Because the policy limit was clear
and Cincinnati never communicated directly with J&J, Cincinnati was entitled as a
matter of law to conclude that J&J did not wish to increase its coverage. See
Sprangers, 182 Wis. 2d at 547-48 (“[A]bsent special circumstances, an insurer has
no duty to anticipate what liabilities an insured may expect a policy to cover.”).

¶17 J&J nonetheless argues that there are genuine issues of fact for trial
regarding whether there was a special relationship between J&J and Cincinnati
beyond the standard insured-insurer relationship. Specifically, Wisconsin’s
pattern jury instructions identify five factors for a jury to consider in determining
whether a special relationship exists such that the insurer would have a duty to
advise the insured about coverage limits. See WIS JI—CIVIL 1023.6 (2021).
These five factors are:

1. Whether (defendant) held (himself)(herself) out to the
public as a skilled insurance advisor or consultant;

2. Whether (defendant) took it upon (himself)(herself) to
actually advise (plaintiff) on the coverages (plaintiff)
should have beyond the usual relationship of agent and
policy holder;

3. Whether the policy holder relied on the agent’s
expertise;

4. Whether an additional fee was paid to the agent for
special consultation and advice; and

5. Whether there was a long established relationship of
entrustment between the agent and the insured.

Id. J&J argues that the circuit court erred by granting summary judgment on the
issue of a special relationship because J&J created genuine issues of material fact
regarding several of these factors.

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¶18 The first factor is whether Cincinnati held itself out to the public as a
skilled insurance advisor or consultant. Id. J&J points to the following statement
on Cincinnati’s website:

Together with your local independent insurance agent,
we’ll customize an insurance program to help protect the
business you’ve built. Your agent gets to know you and
your business, matching your needs with an insurance
program.

¶19 J&J argues that this statement creates “a classic dispute of fact”
about whether Cincinnati held itself out as a skilled insurance advisor or
consultant. We disagree with J&J’s assertion that this statement helps establish a
special relationship between Cincinnati and J&J. Instead, this statement makes
clear that Ansay, J&J’s local independent insurance agent, would be responsible
for determining J&J’s needs and matching those needs with one of the insurance
programs offered by Cincinnati. No reasonable jury could conclude that this
statement evidences anything more than a standard insured-insurer relationship
between Cincinnati and J&J.

¶20 J&J further argues that the fact that Cincinnati worked through
Ansay should not affect our analysis of whether a special relationship existed
between Cincinnati and J&J. J&J does not, however, offer any authority to
support this assertion. Cincinnati directs our attention to Meyer v. Norgaard, 160
Wis. 2d 794, 467 N.W.2d 141 (Ct. App. 1991), in which we concluded that an
agent did not hold himself out as a specialist by “recommend[ing] coverage based
on his individual assessment of his client’s needs and periodically review[ing]
those needs.” Id. at 801. Accordingly, we concluded that the agent was entitled to
summary judgment. Id. at 802. Cincinnati’s statement on its website regarding
customized insurance programs is consistent with the agent’s statement in Meyer,

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which was not sufficient to create a genuine issue of material fact regarding the
existence of a special relationship. We therefore reject J&J’s argument that it has
created a genuine issue of material fact regarding this first factor.

¶21 The second factor potentially giving rise to a special relationship is
whether Cincinnati “took it upon [it]self to actually advise [J&J] on the coverages
[J&J] should have beyond the usual relationship of agent and policy holder.” See
WIS JI—CIVIL 1023.6 (2021). J&J argues that by creating the 2017 report and
directing Ansay to discuss it with J&J, Cincinnati took it upon itself to actually
advise J&J on the coverages that J&J should have. The problem with this
argument is that the undisputed facts establish that Cincinnati never “actually
advise[d]” J&J about coverages. Indeed, Turba testified that he did not recall
Cincinnati ever communicating with J&J about coverage amounts or anything
else.

¶22 J&J asserts that Cincinnati’s act of instructing Ansay to review the
2017 report with J&J is sufficient to establish this second factor and that
Cincinnati should have followed up with Ansay it determined that J&J was still
underinsured in 2018. Once again, J&J offers no legal authority to support its
assertion that by asking Ansay to review the 2017 report with J&J, Cincinnati was,
in fact, taking it upon itself to “actually advise” J&J. Nor is this a reasonable
inference from the facts.

¶23 The third factor that a jury considers in determining whether a
special relationship exists is whether J&J relied on Cincinnati’s expertise. See
WIS JI—CIVIL 1023.6 (2021). J&J points to Turba’s testimony that he relied on
Ansay’s expertise regarding replacement cost coverage limits and always
increased coverage based on Ansay’s recommendation. J&J does not, however,

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point to any evidence that J&J relied specifically on Cincinnati’s expertise
regarding cost coverage limits. Accordingly, J&J has not satisfied its burden to
come forward with facts to create a genuine dispute regarding this factor. See
Kaufman, 187 Wis. 2d at 58 (at summary judgment, the party that has the burden
of proof on an issue has the “burden of demonstrating that there is sufficient
evidence … to go to trial at all” (alteration in original; citation omitted)).

¶24 J&J argues that Cincinnati’s public representation that it works
“together” with independent local agents is sufficient to create a genuine dispute
on this third factor. We disagree that a statement on Cincinnati’s website,
standing alone, is sufficient to create a genuine issue of fact regarding whether J&J
relied on Cincinnati’s expertise.

¶25 The fourth factor in evaluating the existence of a special relationship
is whether J&J paid an additional fee “for special consultation and advice.” See
WIS JI—CIVIL 1023.6 (2021). J&J admits that there is “no direct evidence
show[ing] J&J separately paid for advising services.” Instead, J&J argues that it
assumed that it was paying for advice “in some form” by paying its insurance
bills. Paying insurance bills is part of the standard insured-insurer relationship and
therefore does not help J&J create a genuine issue of fact regarding whether
Cincinnati had a special relationship with J&J. See Nelson, 155 Wis. 2d at 683
(“[S]omething more than the standard insured-insurer relationship is required in
order to create a special relationship obligating the insurer to advise the
policyholder concerning his or her insurance coverage.”).

¶26 The fifth and final factor in evaluating whether a special relationship
existed is whether there was “a long-established relationship of entrustment”
between Cincinnati and J&J. See WIS JI—CIVIL 1023.6 (2021). J&J argues that

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its long relationship with Ansay is sufficient to satisfy this factor, given the
statement on Cincinnati’s website that it works “together” with its independent
local agents. As with the third factor, we disagree that a statement on Cincinnati’s
website, standing alone, is sufficient to demonstrate that J&J had a relationship of
entrustment with Cincinnati—especially given the undisputed fact that J&J never
communicated with Cincinnati directly about any issue.

¶27 J&J also points to the fact that Cincinnati “directly inspected J&J’s
commercial property and then directed its valuation estimates created with its
expertise and industry tools to be provided to J&J.” We disagree that a reasonable
jury could find a relationship of entrustment based on Cincinnati’s unilateral
actions. Moreover, the fact that Cincinnati instructed Ansay to relay the 2017
report to J&J further evidences the lack of a relationship of entrustment between
J&J and Cincinnati. If Cincinnati had a relationship of entrustment with J&J, it
would not make sense for Cincinnati to relay all information and communication
through an independent agent. Finally, Cincinnati’s inspections in the years
immediately preceding the fire do not help J&J establish that any relationship it
had with Cincinnati was “long-standing.”4 Thus, we conclude that J&J has failed

4
In addition to the 2017 and 2018 reports, J&J also points to the fact that “[i]n 2015,
Cincinnati worked through its agent to arrange and physically visit, inspect and report on J&J’s
property.” We see no developed argument in J&J’s opening brief regarding the significance of
this 2015 visit, inspection, and report.

In its reply brief, J&J quotes from the 2015 report for the first time, pointing to a
statement in the report that it was prepared at Cincinnati’s request “as a value added tool for your
organization, to help protect your business and your insurance investment.” (Formatting
altered.)“It is a well-established rule that we do not consider arguments raised for the first time in
a reply brief.” Bilda v. County of Milwaukee, 2006 WI App 57, ¶20 n.7, 292 Wis. 2d 212, 713
N.W.2d 661.

Moreover, we note that the quoted section of the 2015 report further states that “[i]f you
have questions about these recommendations or need assistance to properly address them, please
contact your insurance agent. Your agent may enlist the help of your local Cincinnati Insurance
(continued)

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to create a genuine issue of material fact regarding any of the five factors that a
jury could consider in determining whether a special relationship existed between
J&J and Cincinnati.

¶28 J&J’s last argument regarding its negligence claim is that the circuit
court ignored expert testimony from James Leatzow regarding the standard of care
in the insurance industry. According to J&J, Leatzow’s testimony established that
“Cincinnati’s own actions created a duty of care to advise and duty to reform the
policy after discovering its errors.” This argument goes nowhere because the
questions of whether a duty exists and the scope of that duty are both questions of
law for a court’s determination. See Hoida, 291 Wis. 2d 283, ¶23 n.12.
Moreover, the law is clear that, unless an exception exists, Cincinnati did “not
have an affirmative duty to advise [J&J] regarding the availability or adequacy of
coverage.” See Nelson, 155 Wis. 2d at 682. The exceptions to this general rule
are “when a statutory obligation or a special relationship arises between agent and
buyer.” Id. We see nothing in J&J’s appellate briefs to indicate that Leatzow’s
testimony addressed any statutory obligation or any factors that suggest the
existence of a special relationship between Cincinnati and J&J. See Hoida, 291
Wis. 2d 283, ¶23 n.12. Because J&J does not develop any argument that
Leatzow’s testimony bears on the relevant legal issues, we reject J&J’s argument
that the court erred by granting summary judgment without addressing this

Companies Loss Control Representative, if needed.” Thus, the 2015 report does not change our
determination that there was no special relationship between J&J and Cincinnati giving rise to a
duty to advise J&J about coverage levels. Instead, the report makes clear that any discussion of
coverage levels was expected to occur between Ansay and J&J. Cincinnati did not commit to any
further involvement in J&J’s determination of an appropriate coverage level, and any further
involvement by Cincinnati was dependent on J&J initiating these discussions with Ansay. These
facts are consistent with the circuit court’s conclusion that Cincinnati did not have any duty to
follow up on these issues with J&J.

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testimony. See Estate of Hegarty v. Beauchaine, 2006 WI App 248, ¶203 n.41,
297 Wis. 2d 70, 727 N.W.2d 857 (declining to address undeveloped arguments).

II. J&J’s Breach of Contract Claim

¶29 J&J also argues that the circuit court erred by not addressing the
breach of contract claim in J&J’s amended complaint. Specifically, J&J alleged
that it was a third-party beneficiary of the agency agreement between Cincinnati
and Ansay and that Cincinnati breached the agency agreement by failing to
forward the 2018 report to Ansay, thereby harming J&J.

¶30 J&J relies on Schell v. Knickelbein, 77 Wis. 2d 344, 252 N.W.2d
921 (1977), in which our supreme court held that “[t]o maintain an action as a
third[-]party beneficiary, a plaintiff must show that the parties to the contract
intentionally entered their agreement ‘directly and primarily for his [or her]
benefit.’” See id. at 348 (citation omitted). Moreover, “[i]n order to entitle a
stranger to a contract to recover thereon, the contract must indicate an intention to
secure some benefit to such third party.” Id. at 349 (citation omitted). [T]he
generally accepted rule is that a third[]party need not demonstrate that he [or she],

individually, was intended to benefit from the contract; rather, it is sufficient if the
third[]party demonstrates that he [or she] was a member of a class of beneficiaries

intended by the parties to benefit from it. Pappas v. Jack O. A. Nelsen Agency, Inc.,

81 Wis. 2d 363, 371, 260 N.W.2d 721 (1978).

¶31 J&J argues that the intent to benefit J&J is established by
Cincinnati’s “public promotion of expert guidance of insurance and past practice
of actually doing what it promised for the benefit of J&J.” In turn, the agency
agreement between Ansay and Cincinnati was intended to “coordinate this
promised service for the benefit of the insured,” by requiring that “Ansay perform

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as it directed” and by “hold[ing] Ansay harmless against damages Cincinnati
caused servicing policies or engaging in ‘inspection services or surveys or those of
our subcontractors.’” For these reasons, J&J asserts that Cincinnati should be
liable to J&J for breaching its “apportioned duties under the Agency Agreement.”

¶32 Cincinnati concedes that the circuit court did not “separately
address” J&J’s breach of contract claim. However, Cincinnati argues that J&J’s
claim “is based entirely on the same faulty premises as its” negligence claim. In
particular, “[a] party proves its third-party beneficiary status by pointing to
specific language in the contract establishing intent.” Becker v. Crispell-Snyder,
Inc., 2009 WI App 24, ¶11, 316 Wis. 2d 359, 763 N.W.2d 192. In addition, “[t]he
benefit proven must be direct; an indirect benefit incidental to the primary
contractual purpose is insufficient.” Id. Here, J&J has not pointed to any specific
language in the contract between Ansay and Cincinnati that establishes an intent to
directly benefit J&J or a class of beneficiaries that includes J&J. Cincinnati’s
promotional materials are not part of the agency agreement, nor do arguments
about Cincinnati’s past practices satisfy J&J’s burden to identify specific
contractual language establishing the parties’ intent to directly benefit J&J.

¶33 We agree with Cincinnati that J&J has failed to satisfy its burden of
pointing to specific language in the agency agreement to establish the parties’
intent to benefit J&J. Although J&J’s brief makes several arguments that rely on
its characterization of the purpose and intent of the agency agreement, the only
direct quote that J&J references from the agreement is “inspection services or
surveys or those of our subcontractors.” These nine words, included within a hold

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harmless clause, are not sufficient to establish the parties’ intent to directly benefit
J&J or other insureds.5

¶34 Moreover, we agree with Cincinnati that J&J’s claim to third-party
beneficiary status fails for the reasons set forth in Schilling by Foy v. Employer’s
Mutual Casualty Co., 212 Wis. 2d 878, 569 N.W.2d 776 (Ct. App. 1997). In
Schilling, the plaintiff argued that, as a student, he “was a third[-]party beneficiary
of the employment contract between [his teacher] and the school district.” Id. at
881. We squarely rejected the plaintiff’s argument that it was “sufficient to point
out that provisions regarding teachers’ responsibilities for supervision of students
benefit students.” Id. at 890. We explained that

students are incidental beneficiaries of all teachers’
employment contracts, and, indeed, all contracts the school
district enters into for services to the students. However,
this does not satisfy the burden of showing that this teacher
and this school board entered into this contract primarily
and directly for the benefit of students. No case cited by
Schilling, and none we have been able to discover, suggest
that the test for a third[-]party beneficiary can be so easily
satisfied.

5
In a footnote, J&J cites two additional cases to support its argument that it was a
third-party beneficiary of the agency agreement between Ansay and Cincinnati. See State ex rel.
Journal/Sentinel, Inc. v. Pleva, 151 Wis. 2d 608, 616-17, 445 N.W.2d 689 (Ct. App. 1989), and
Mercado v. Mitchell, 83 Wis. 2d 17, 28, 264 N.W.2d 532 (1978). Neither case is helpful to J&J.

In State ex rel. Journal/Sentinel, Inc., the plaintiff pointed to specific language in a lease
to support its argument that the lease was intended to benefit third parties. See State ex rel.
Journal/Sentinel, Inc., 151 Wis. 2d at 611. As explained above, J&J has failed to identify
specific language in the agency agreement showing that Ansay and Cincinnati intended to benefit
any third party.

In Mercado, our supreme court concluded that a local ordinance requiring insurance
“primarily [for] the protection of third parties” should be “read into the [insurance] policy.”
Mercado, 83 Wis. 2d at 29. J&J does not point to any similar statute or ordinance that we should
read into the agency agreement.

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Id. We can similarly reject J&J’s argument here. While insureds are incidental
beneficiaries of agency agreements, this conclusion does not establish that Ansay
and Cincinnati “entered into this contract primarily and directly for the benefit of”
J&J or other insureds. See id.

III. J&J’s Reformation Claim

¶35 J&J further contends that the circuit court should have addressed its
claim that Cincinnati acted in bad faith by refusing to reform the insurance policy
to provide coverage at full replacement cost. “A cause of action for reformation of
an insurance policy is allowed when the one seeking reformation shows that
because of fraud or mutual mistake the policy does not contain provisions desired
and intended to be included.” Trible v. Tower Ins. Co., 43 Wis. 2d 172, 182, 168
N.W.2d 148 (1969) (citation omitted). Here, J&J contends that it was entitled to
reformation “based on mutual mistake where a mistake cause[d] a policy to be
issued that does not contain requested coverage.” J&J further argues that
Cincinnati acted in bad faith by hiding facts that supported reformation. See
Trinity Ev. Luth. Church & Sch. – Freistadt v. Tower Ins. Co., 2003 WI 46,
¶¶1-4, 7-8, 261 Wis. 2d 333, 661 N.W.2d 789.

¶36 “Mutual mistake is proven when the party applying for insurance
proves that he or she made certain statements to the agent concerning the coverage
desired, but the policy issued does not provide the desired coverage.” Lenz Sales
& Serv., Inc. v. Wilson Mut. Ins. Co., 175 Wis. 2d 249, 257-58, 499 N.W.2d 229
(Ct. App. 1993). J&J points to “evidence showing it consistently requested full
replacement cost coverage and … was relying on expert advice and direction for
setting the necessary dollar level accordingly.” J&J further argues that “Ansay’s
knowledge of the policy holder’s instructions and the agent’s errors in

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No. 2022AP1120

communicating are imputed to Cincinnati as a matter of law.” See Artmar, Inc. v.
United Fire & Cas. Co., 34 Wis. 2d 181, 187, 148 N.W.2d 641 (1967);
Vandenburg v. Continental Ins. Co., 2001 WI 85, ¶54, 244 Wis. 2d 802, 628
N.W.2d 876; Scheideler v. Smith & Assocs., Inc., 206 Wis. 2d 480, 486, 557
N.W.2d 445 (Ct. App. 1996).

¶37 Cincinnati argues that J&J’s claim for reformation based on mutual
mistake fails for three reasons. First, there was no mistake here because “the
undisputed facts show that Cincinnati issued the Policy with the limits requested
by J&J and Ansay[.]” See Lenz, 175 Wis. 2d at 257-58 (plaintiff’s argument for
reformation fails when the insurer did in fact issue a policy with the coverage
requested by the insured). Second, any mistake by Ansay cannot be imputed to
Cincinnati because the circuit court found that Ansay was an independent
contractor. Third, under agency law, “an agent’s knowledge of the agent’s own
conduct is not imputed to the principal when the conduct contravenes an
unequivocal instruction furnished by the principal.” RESTATEMENT (THIRD) OF
AGENCY § 5.03 (AM. L. INST. 2006). Here, Cincinnati specifically directed Ansay
to review the 2017 report with J&J.

¶38 J&J’s reply brief fails to address Cincinnati’s second and third
arguments. Failing to address a respondent’s argument in a reply brief “may be
taken as a concession.” United Coop. v. Frontier FS Coop., 2007 WI App 197,
¶39, 304 Wis. 2d 750, 738 N.W.2d 578 (citing Schlieper v. DNR, 188 Wis. 2d
318, 322, 525 N.W.2d 99 (Ct. App. 1994)). Thus, we could reject J&J’s
reformation claim on that basis alone.

¶39 However, we also agree with Cincinnati that J&J’s claim fails under
Lenz. In Lenz, the insured requested full replacement cost coverage, and the

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No. 2022AP1120

insurer issued a policy that provided replacement cost coverage in the amount of
$18,500. See Lenz, 175 Wis. 2d at 256. There was no dispute that, at the time the
policy was issued, $18,500 would provide full replacement cost coverage. See id.
Several years later, however, the insured’s property was destroyed by a fire and
the replacement costs were greater than the $18,500 policy limit. See id. The
insured sought reformation, arguing that there was a mutual mistake based on its
stated intent to have full replacement cost coverage. See id. at 257-58. We
rejected the argument that there was any mutual mistake, given that the policy that
was issued gave the insured what it had requested. See id. at 258. Here, J&J
makes no argument that the replacement cost coverage of $2,086,000 was
inadequate at the time the policy was first issued almost a decade before the fire.
We therefore see no basis for distinguishing the present case from Lenz, in the
absence of any evidence to indicate that J&J did in fact request higher replacement
cost coverage prior to the fire.

¶40 In contrast, none of the reformation cases on which J&J relies
involve the failure to implement a higher coverage amount. Instead, the
reformation cases cited by J&J involve an agent’s failure to implement a specific
type of coverage into the policy. See Artmar, 34 Wis. 2d at 190 (agent “knew that
[insured] desired some insurance coverage on the outbuilding” but failed to write
that coverage into the policy); Vandenberg, 244 Wis. 2d 802, ¶¶56-57 (finding a
genuine issue of fact for trial based on evidence that the agent knew that the
insured was a day care provider and had previously purchased a policy that
included coverage for the day care business); Scheideler, 206 Wis. 2d at 482

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(insured “had underinsured motorist (UIM) coverage under their policy … until
their agent … mistakenly deleted that coverage”).6

¶41 In addition, none of the reformation cases on which J&J relies
involve an agent’s failure to initiate a conversation about coverages or coverage
limits in the first instance. We therefore decline to apply the holdings of these
cases beyond their immediate context because extending the remedy of
reformation in this manner would eviscerate our supreme court’s conclusion that
insurers do not, as a general matter, have a duty to advise about the type or
amounts of coverage that an insured should purchase. See Nelson, 155 Wis. 2d at
683-84. We therefore conclude that J&J was not entitled to reformation and reject
J&J’s arguments that Cincinnati acted in bad faith.

¶42 For these reasons, we conclude that the circuit court properly granted
summary judgment to Cincinnati.

IV. Failure to Award Costs to Cincinnati

¶43 Cincinnati cross-appeals the circuit court’s decision not to award
costs to Cincinnati as the prevailing party on summary judgment. The question of
whether a defendant is entitled to costs is governed by WIS. STAT. § 814.03.

6
J&J also cites Welch v. Fire Association of Philadelphia, 120 Wis. 456, 98 N.W. 227
(1904). However, that decision addresses estoppel, not reformation. J&J does not develop any
argument about how Welch should affect our analysis of J&J’s reformation claim. We decline to
consider undeveloped arguments. See SEIU, Local 1 v. Vos, 2020 WI 67, ¶24, 393 Wis. 2d 38,
946 N.W.2d 35 (“We do not step out of our neutral role to develop or construct arguments for
parties; it is up to them to make their case.”).

We further note that J&J has cited several authorities for the first time in its reply brief to
provide additional support for various arguments. As noted above, generally “we do not consider
arguments raised for the first time in a reply brief.” See Bilda, 292 Wis. 2d 212, ¶20 n.7.

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No. 2022AP1120

Specifically, subsec. (1) provides that “[i]f the plaintiff is not entitled to costs
under [WIS. STAT. §] 814.01(1) … the defendant shall be allowed costs to be
computed on the basis of the demands of the complaint.” Sec. 814.03(1).
Subsection (2) provides that “[w]here there are several defendants who are not
united in interest and who make separate defenses by separate answers, if the
plaintiff recovers against some but not all of such defendants, the court may award
costs to any defendant who has judgment in the defendant’s favor.” Sec.
814.03(2).

¶44 The circuit court determined that it would be inequitable to award
Cincinnati costs against J&J because “at the time of the motion, [Cincinnati] did
not ask for costs nor did [Cincinnati] put [J&J] on notice or [Ansay] on notice that
that would be an issue.” The court also indicated that it believed that an award of
costs was discretionary under WIS. STAT. § 814.03(2), because J&J and Ansay had
reached a settlement before the court ruled on the merits of J&J’s claims against
Ansay.

¶45 Cincinnati argues that the circuit court was incorrect regarding
whether J&J and Ansay were on notice that Cincinnati was seeking costs. In
making its summary judgment motion, Cincinnati concluded by asking “that it be
awarded all costs and fees allowed by law.” In addition, J&J advised the court
that it did not object to Cincinnati’s bill of costs. Cincinnati further argues that
notice “is irrelevant” because under the applicable statutes, “the prevailing party
on summary judgment is automatically entitled to recover costs,” subject to
specified exceptions that do not apply here. See Aul v. Golden Rule Ins. Co.,
2007 WI App 165, ¶44, 304 Wis. 2d 227, 737 N.W.2d 24 (unless the plaintiff has
“a judicial recovery” from another defendant, costs must be awarded under WIS.
STAT. § 814.03(1)).

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¶46 J&J argues that an award of costs is discretionary under WIS. STAT.
§ 814.03(2), which states that the circuit court “may award costs” in cases where
“the plaintiff recovers against some but not all … defendants.” See id. J&J argues
that, at the time it granted summary judgment to Cincinnati, it recognized that J&J
was likely to prevail in its action against Ansay. Thus, the court had discretion to
decline to award fees to Cincinnati.

¶47 We agree with Cincinnati that J&J’s argument is foreclosed by our
decision in Aul. In Aul, the plaintiffs sought to recover medical expenses
associated with breast cancer treatment, notwithstanding a rider in their health
insurance policy that disclaimed coverage for “any loss resulting from any disease
or disorder of the breasts.” Aul, 304 Wis. 2d 227, ¶¶6-11. When the insurer
declined to provide coverage, the plaintiffs filed a complaint against several
defendants, including their insurance carrier and agent, alleging several theories of
liability. Id., ¶12. The plaintiffs settled their claims against the agent, and the
circuit court granted summary judgment to the other defendants. Id., ¶¶12-13, n.2.
The court also awarded costs to the defendants who prevailed at summary
judgment. Id., ¶42. The plaintiffs appealed the award of costs, arguing that the
court’s decision was discretionary under WIS. STAT. § 814.03(2), because the
plaintiffs had “recovered” from the agent. Aul, 304 Wis. 2d 227, ¶42. We
disagreed, explaining that a settlement is “not a judicial recovery” for the purposes
of sub. (2). Aul, 304 Wis. 2d 227, ¶44. Therefore, an award of costs was
mandatory under § 814.03(1). Aul, 304 Wis. 2d 227, ¶44.

¶48 J&J contends that Aul is distinguishable based on the timing of the
circuit court’s summary judgment decision in that case. In Aul, the court granted
summary judgment after the plaintiffs had settled with the insurance agent. Id. In
contrast, at the time the court granted summary judgment to Cincinnati in the

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No. 2022AP1120

present case, the court believed that J&J had “very strong evidence to support [its]
claim” against Ansay. We disagree that the timing of summary judgment is a
basis for distinguishing our conclusion in Aul that a settlement “is not a judicial
recovery” for the purposes of WIS. STAT. § 814.03(2).

¶49 An award of costs is mandatory under WIS. STAT. § 814.03(1). See,
e.g., Sampson v. Logue, 184 Wis. 2d 20, 27, 515 N.W.2d 917 (Ct. App. 1994) (the
statutory phrase “‘the defendant shall be allowed costs’ is plain on its face”
(citation omitted)). We therefore agree with Cincinnati that the circuit court erred
in declining to award costs. Accordingly, we remand for the limited purpose of
awarding costs to Cincinnati.

¶50 Costs on appeal and cross-appeal to Cincinnati.

By the Court.—Order affirmed in part; reversed in part and cause
remanded with directions.

This opinion will not be published. See WIS. STAT.
RULE 809.23(1)(b)5.

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