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Wisconsin Supreme Court Limits the Ability of Government Contractors to Qualify for Governmental Immunity

Real Estate Law Update David P. Muth, Jonathan W. Hackbarth

The Wisconsin Supreme Court recently limited immunity for contractors performing government work. The court also provided unique insight into how a government contractor can structure its pleadings to maximize its chances of qualifying for such immunity.

In Showers Appraisals, LLC, et al. v. Musson Bros., et. al., 2013 WI 79, Musson Brothers contracted with the Wisconsin Department of Transportation ("DOT") to carry out a sewer improvement project in Oshkosh, which required the removal of multiple storm sewers. At the outset of the project, Musson made the decision to remove all of the relevant storm sewers at once, as opposed to doing so block by block. The DOT determined that Musson was free to implement this strategy under the project's specifications, which provided, in pertinent part, that Musson "is solely responsible for the means, methods, techniques, sequences, and procedures of construction." Shortly after Musson removed the storm sewers, Oshkosh experienced heavy rains, which resulted in substantial water damage to Showers Appraisals, a nearby business.

Showers subsequently brought a negligence action seeking to hold Musson and the City of Oshkosh jointly and severally liable for the damage to its business. The Circuit and Appellate Courts concluded that Musson was entitled to governmental immunity, which barred Showers' lawsuit against Musson. On review, the Wisconsin Supreme Court clarified the standard a government contractor must meet to qualify for governmental immunity. First, the court, consistent with prior Wisconsin precedent, required Musson to establish that it was an "agent" under Wis. Stat. § 893.80(4). Central to this inquiry was whether Musson's work conformed to precise specifications approved by the governmental entity. The court concluded the project specifications at issue - specifically, the specification providing Musson with "sole responsibility for means, methods, techniques, sequences, and procedures of construction" - did not constitute precise specifications. Musson therefore did not qualify as an "agent" entitled to immunity under Wis. Stat. § 893.80(4).

However, the court did not stop there. Instead, it further clarified - and narrowed - the ability of a contractor to qualify for governmental immunity. Specifically, the court held that in addition to establishing agency, a government contractor must also prove that the allegedly negligent act(s) at issue were "done in the exercise of legislative, quasi-legislative, judicial or quasi-judicial functions." Because Musson's allegedly negligent acts - its excavation, construction, and drainage work - did not constitute such governmental functions, the court concluded that Musson was likewise barred from invoking governmental immunity on these grounds. The court cautioned that in order to invoke governmental immunity in the future, contractors must clearly allege in their pleadings why the allegedly negligent act(s) constitute governmental function(s).

Final Thoughts: Showers makes it more difficult for a government contractor to invoke immunity under Wis. Stat. § 893.80(4). To invoke governmental immunity, a contractor must still establish that it is an "agent" under Wis. Stat. § 893.80(4). However, under Showers, a contractor must now also establish that the allegedly negligent act(s) constituted the exercise of legislative, quasi-legislative, judicial or quasi-judicial functions. After Showers, courts will no longer accept general assertions of governmental immunity. Rather, in order to invoke such immunity, government contractors must now take special care to plead why the allegedly negligent act(s) constitute governmental function(s).

If you have any questions concerning contractor immunity for government contracts, please contact David Muth at (414) 277-5621 / david.muth@quarles.com, Jonathan Hackbarth at (414) 277-5603 / jon.hackbarth@quarles.com, or your Quarles & Brady attorney.