2009AP2176 Maxwell v. Hartford Union High School District

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Insurance
Coverage; estoppel

When an insurer forgoes a reservation of rights and exclusively controls the defense of a lawsuit, obtaining a result to the detriment and prejudice of the insured, it is barred from denying coverage.

"CIC's position is that even after an insurer, without a reservation of rights, exercises full dominion and control over a lawsuit and a final judgment detrimental to the insured is entered, the insurer can avoid coverage by invoking the general rule from Shannon that coverage cannot be created by the doctrines of estoppel or waiver. See Shannon, 150 Wis. 2d at 450-51. Adopting this argument would make a mockery of Grube's recommendation that insurers issue reservation of rights letters when they wish to contest coverage. Grube, 173 Wis. 2d at 75. Absolving CIC from providing coverage after it 'lost' the District's case will destroy the purpose and effectiveness of the reservation of rights agreement. See Iowa Nat'l Mut. Ins. Co. v. Liberty Mut. Ins. Co., 43 Wis. 2d 280, 286, 168 N.W.2d 610 (1969). Reservation of rights agreements are in the public interest, id.; they must be encouraged by imposing consequences if an insurer puts the insured at risk by assuming dominion and control over a lawsuit without a reservation of rights and with knowledge of facts indicating noncoverage, and then seeks to avoid coverage after a final judgment is entered against its insured."

Reversed and Remanded.

Recommended for publication in the official reports.

2009AP2176 Maxwell v. Hartford Union High School District

Dist. II, Washington County, Muehlbauer, J., Anderson, J.

Attorneys: For Appellant: Mohr, James W., Jr., Hartford; Stadler, Ronald S., Milwaukee; For Respondent: Lubinsky, Lori M., Madison; Beachy, Sara K., Madison

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