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00-0003 Reid v. Benz

By: dmc-admin//July 16, 2001//

00-0003 Reid v. Benz

By: dmc-admin//July 16, 2001//

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“In Elliott [v. Donahue, 169 Wis.2d 310 (1992)] we clearly stated that the proper procedure for an insurance company to follow when coverage is disputed is to request a bifurcated trial on the issues of coverage and liability and move to stay any proceedings on liability until the issue of coverage is resolved. [169 Wis.2d at 318.] When this procedure is followed, the insurance company runs no risk of breaching its duty to defend. …

“Awarding attorney fees, as we did in Elliott, should not be the usual result. The circumstances in Elliott – that coverage was not decided before liability, and that the liability proceeding was not held in abeyance while coverage was being considered – is atypical. … There is no contention that American Family has breached its duty to defend here, nor is there any argument that American Family’s challenge to coverage was unfair or unreasonable, or in bad faith. American Family did not attempt to avoid its duty to defend Benz by refusing to defend Benz, and then, simultaneously, litigating coverage and liability. …

“Here, unlike the situation in Elliott, the insurer, American Family, followed the dictates of Mowry. American Family sought to have the fairly debatable question of coverage determined before the liability phase of the case proceeded, and obtained a stay of the liability phase. We thus do not have the inequitable circumstances before us here that were before us in Elliott. Accordingly, Elliott does not support the circuit court’s award of attorney fees to Benz. We thus reverse the order for judgment of the circuit court awarding such fees.”

The order for judgment of the circuit court awarding attorney fees is reversed.

DISSENTING OPINION: Bablitch, J., with whom Abrahamson, Ch., J., joins. “Insurance companies have more than enough incentive to deny coverage for claims made against their insured. They are, after all, in the business to make a profit. Unfortunately, the majority opinion provides further incentive for them to refuse coverage in close claims against their insured. In cases not involving bad faith, the insurance company can now deny coverage, and it wins under any scenario; in contrast, the insured loses under any scenario. The majority opinion is not only anti-consumer, it is also bad law. Accordingly, I respectfully dissent.”

Ozaukee County, Swietlik, J., On certification from the Court of Appeals; Crooks, J.

Attorneys:

For Appellant: Frederick J. Smith, Milwaukee

For Respondent: Tamara Hayes O’Brien, Milwaukee

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