Judge grants insurance companies’ motion to intervene in Bangstad defamation

In a court hearing December 4, Forest County circuit court judge Leon Stenz granted a motion by two insurance companies to intervene in the ongoing defamation case against Minocqua Brewing Company owner Kirk Bangstad.

The companies are seeking to drop him from coverage in his lawsuit based principally on what they allege was Bangstad’s noncooperation in his defense at trial. The companies also say the jury’s finding of express malice on one of Bangstad’s posts is outside the scope of indemnity.

In a trial that concluded October 27, a jury of nine women and four men found that Bangstad had defamed Lakeland Times publisher Gregg Walker and awarded him $750,000, the largest defamation award in state history.

Specifically, the insurance companies, Society Insurance Company and West Bend Insurance Company, have been paying for Bangstad’s defense but say he violated coverage provisions by being noncooperative at trial and that coverage does not extend to a finding of “knowing defamation.” 

For his part, Bangstad’s attorney, Frederick Melms, has asserted that the motion to intervene was not made in timely fashion. Motions to intervene post-judgment are rarely granted and must include a good reason for not doing so earlier.

However, while this case is post-verdict, it is not post-judgment — the judgment has yet to be entered pending disposition of various motions. In addition, according to online court records, the insurance companies’ attorney, Jeffrey Leavell, reiterated that the motion is based on events occurring at trial that the companies could not anticipate.

One issue in play at this week’s hearing was whether a separate jury trial needed to be held over the insurance companies’ claims. Melms argued that scenario, the online records indicate, saying that he “feels insurance issues should be disputed in it’s own case/different venue.”

Leavell disagreed, saying the judge could look at the “undisputed facts” in the trial transcript, make a decision, and render a summary judgment.

Subsequently, after Stenz granted the motion to intervene, Bangstad sued the two insurance companies in Dane County, where Bangstad resides. It’s anticipated that the insurance companies will file a motion to dismiss, given they were granted their motion to intervene.

The allegations

The two allegations that will proceed from the insurance companies’ complaint are those of noncooperation and knowing defamation. 

The insurance policies — covering different time frames but similar in language — required that any insured cooperate in the defense of the action, the companies asserted in their complaint, and expressly exclude coverage for knowing defamation, and knowing that it would injure someone.

“[T]he jury’s verdict of October 27, 2023, found Mr. Bangstad or Minocqua Brewery to have committed defamation in a post on August 8, 2022, during the West Bend policy period and that Mr. Bangstad made the post with express malice and warranting punitive damages, …” the complaint states.

What’s more, the complaint continued, during the trial Minocqua Brewing Company and Bangstad refused to cooperate in the defense of the lawsuit, to the prejudice of the companies.

“Specifically, and for example, Mr. Bangstad who attended the trial purportedly in aid of his own defense as well as the defense of Minocqua Brewing Company, committed acts of misconduct some of which were found to be contemptuous by the court and resulted in a finding of contempt, and this misconduct and contemptuous conduct occurred in the presence of the jury and within juror’s eye shot and earshot,” the complaint alleged.

What’s more, the complaint further alleged, Society and West Bend told Bangstad during the trial that his conduct was noncooperative and prejudicial to the insurers, and that his conduct put his liability coverage in danger. 

For example, on October 24, the second day of the trial, Joseph Sarmiento, senior counsel for West Bend Mutual Insurance Company, emailed Bangstad that his conduct could jeopardize his coverage.

“West Bend has learned that you have been held in contempt of court (for which there is no coverage),” Sarmiento wrote. “Please be advised that you have a duty to cooperate in the defense of this case. If you choose not to cooperate, you will be in breach of your insurance policy and there may be no coverage as a result. Please cooperate with defense counsel and obey the direction of the court.”

Sarmiento wrote that West Bend was not in the business of curtailing or directing an insured’s speech. 

“But, it is our role to protect an insured against liability (and creating an environment in which the court and/or the jury become hostile toward you jeopardizes that),” he wrote. “While those two may intersect here, we are simply advising you of the potential coverage issues you may face if you do not cooperate in the defense of this case.”

In the complaint, the insurance companies said his ongoing conduct did in fact preclude coverage.

“Neither Society nor West Bend have a duty to indemnify Mr. Bangstad or Minocqua Brewery for the verdict findings and the eventual judgment that will be entered as a result of the prejudicial noncooperation, and therefore no direct action liability to the plaintiffs,” the complaint states.

In a brief opposing the motion to intervene, Melms argued that the insurance companies had been aware of and familiar with the issues in the case for well over a year.

“They cannot point to any new facts that came out at trial or any new information they have recently received to demonstrate that defendant was not insured against losses from a defamation claim,” Melms argued. “Instead, movants simply argue that the jury finding for plaintiffs proves their insurance policies did not cover defendants. But the movants are merely looking to elude their responsibilities under their insurance contracts with the defendants because the counsel they selected to defend this case lost at trial.”

They could have intervened sooner on the issues of coverage presented in their motion, Melms argued. 

“They failed to do so and offer no credible justification for their belated request to intervene, and the court should not entertain the motion now,” he asserted.

In court, Stenz rejected that argument, granting the motion to intervene with respect to the issues of noncooperation and malice. 

The determination is not a final judgment on the coverage, only a decision to allow the insurance companies to contest the coverage. Likely Stenz, once he receives the trial transcript, will determine the undisputed facts from the transcript and make a summary judgment.

Richard Moore is the author of “Dark State” and may be reached at richardd3d.substack.com.