Insurance Claim – Breach of Duty to Defend

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WI Court of Appeals – District I

Case Name: Steadfast Insurance Company v. Greenwich Insurance Company

Case No.: 2016AP1631

Officials: Brennan, P.J., Kessler and Dugan, JJ.

Focus: Insurance Claim – Breach of Duty to Defend

This case involves issues of insurance coverage and the duty to defend involving Milwaukee Metropolitan Sewerage District (MMSD) and insurance companies, Greenwich Insurance Company and Steadfast Insurance Company, relating to the defense of lawsuits against MMSD in the wake of a June 7 and 8, 2008 rain event (the “rain event lawsuits”). After the rain event lawsuits were filed, MMSD tendered its defense to Steadfast and Greenwich. Steadfast accepted the tender and defended MMSD. Greenwich declined the tender and did not defend MMSD. Eventually, the rain event lawsuits settled and, as a part of the settlement, Steadfast reimbursed MMSD $1.55 million for MMSD’s defense costs. Steadfast then brought the lawsuit (the “insurance lawsuit”) that is the subject of this appeal against Greenwich. Ultimately, the trial court determined that Greenwich breached its duty to defend and, therefore, had waived its rights to raise coverage defenses, and was responsible for paying the $1.55 million for MMSD’s defense and Steadfast’s $325,500 attorney fees incurred in bringing the insurance lawsuit.

On appeal, Greenwich argues that it did not breach its duty to defend the rain event lawsuits and did not waive its right to litigate the coverage issues. Greenwich further argues that it was entitled to summary judgment for the following reasons: (1) its policy with MMSD was excess coverage, with Steadfast’s coverage being primary; (2) its policy with MMSD had a $250,000 self-insured risk retention amount and MMSD did not establish that it had expended that amount in defending the rain event lawsuits; and (3) Steadfast’s claim is barred by the one-year statute of limitations in WIS. STAT. § 893.92 (2015-16), applicable to actions for contribution. Alternatively, Greenwich argues that it was entitled to an allocation of the costs as between Steadfast, Travelers and itself. In addition, Greenwich argues that Steadfast is not entitled to recover attorney fees in connection with the insurance lawsuit.

We conclude as follows: (1) Greenwich’s policy provided primary, not excess, coverage for claims against MMSD; (2) MMSD has established that it met the $250,000 risk retention amount by incurring $594,302.23 in defense costs; (3) Steadfast’s equitable subrogation claim is timely because the six-year statute of limitations in WIS. STAT. § 893.43 applicable to contract claims applies to Steadfast’s claim, which is premised on Greenwich’s breach of the duty to defend MMSD; (4) under the facts of this case, because Greenwich breached its duty to defend MMSD, Greenwich is not equitably entitled to an allocation of MMSD’s defense costs; and (5) under the facts of this case, Steadfast is equitably entitled to recover attorney fees in this lawsuit. Based on our conclusions, we affirm the trial court’s orders and judgments.

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.