Insurance – coverage — estoppel

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Wisconsin Supreme Court

Civil

Insurance – coverage — estoppel

An insurer’s failure to issue a reservation of rights letter is insufficient to defeat, by waiver or estoppel, a coverage clause in an insurance contract that would otherwise justify the insurer’s denial of coverage.

“Bad faith and breach of the duty to defend are not situations in which an insurer becomes liable for insurance coverage not included in the insurance contract; in these cases insurers are liable for the damages they cause by breach of contract or by tortious breach of duties arising from the contract. While at times these cases have been explained in terms of ‘estoppel,’ the cases do not refer to estoppel in the traditional sense and the estoppel referred to does not expand or create coverage.”

“In this case, CIC provided a defense—fulfilling its duty to defend the District. While the District raised several claims in its third-party complaint against CIC, the issue before this court is whether CIC’s failure to send a reservation of rights letter while defending the District is enough, under waiver or estoppel, to prevent CIC from invoking its defense of noncoverage. CIC’s failure to issue a reservation of rights letter in this case did not constitute a breach of the duty to defend or bad faith. Thus, CIC did not breach its duties to the District. The exclusion clause relates to the scope of coverage contracted for and is thus not waived by the collateral conduct of the insurer.”

Reversed.

2009AP2176 Maxwell v. Hartford Union High School. District

Prosser, J.

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