May/June 2017 Issue

Also in this issue: Supreme Court Reaffirms Vested Rights Rule     |     Wisconsin Supreme Court Clarifies Substantial Fault Standard for Unemployment Benefits

Supreme Court Finds Private Contractor Immune from Liability as Agent of Governmental Entity

05.01.17

In its recent decision in Melchert v. Pro Electric Contractors, 2017 WI 30 (April 7, 2017), the Wisconsin Supreme Court held that a privately owned construction company was not liable for severing a sewer line because of its immunity as a government contractor.

During its work as a contractor on a government construction project, Pro Electric Contractors (“Pro Electric”) severed a sewer lateral line which caused flooding damage to commercial property. Several of the commercial property owners sued Pro Electric for negligence. While Pro Electric admitted that it had severed the sewer lateral, it argued that the damage occurred because of construction design decisions made by the Wisconsin Department of Transportation (“DOT”) that it was merely implementing. Therefore, Pro Electric asserted that it had immunity as a government contractor pursuant to Wis. Stat. § 893.80(4). Pro Electric moved for summary judgment. The circuit court granted the motion and dismissed the case. The court of appeals confirmed.

The Melchert case required the Wisconsin Supreme Court to address the extent to which governmental immunity protects a private contractor implementing a construction design chosen by a governmental entity. The Court noted that it is well established that a governmental entity’s immunity may extend to private contractors acting as ​“agents” of the governmental entity.

A contractor asserting governmental immunity must prove two elements. First, the contractor must show that it was an agent of the governmental entity under ​“the Lyons test”, i.e. whether the governmental entity approved reasonably precise specifications that the governmental contractor adhered to when engaging in the conduct that caused the injury. Second, the contractor must be able to demonstrate that the conduct for which immunity is sought was the implementation of a governmental entity’s decision made during the exercise of the entity’s legislative, quasi-legislative, judicial, or quasi-judicial functions. The Court noted that for a private entity contracting with a governmental entity, this is where immunity ends.

The Court held that Pro Electric was in fact immune because it ​“acted in accordance with reasonably precise design specifications adopted by a governmental entity in the exercise of its legislative, quasi-legislative, judicial, or quasi-judicial functions.” Pro Electric had complied with DOT’s specifications as to the activities that severed the sewer lateral.

The Court also considered and applied certain provisions of the Digger’s Hotline statute, codified at Wis. Stat. § 182.0175. The property owners alleged that Pro Electric caused damages not only by severing the sewer lateral, but also by backfilling the excavation without inspecting the sewer lateral for damage and allowing repairs to be made as the Digger’s Hotline statute requires. The Court ruled that Pro Electric is not immune from liability with respect to that allegation, because DOT did not provide it with reasonably precise specifications for inspection of the lateral. As such, Pro Electric was not DOT’s agent with regard to those duties. However, ultimately the Court found that the facts did not support a finding that Pro Electric failed to comply with its duties found in Wis. Stat. § 182.0175(2)(am).

The decision granting summary judgment for Pro Electric was reached by a four justice majority.

— Ashley Rouse