Insurance Claim – Breach of Duty to Defend

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WI Supreme Court

Case Name: Steadfast Insurance Company v. Greenwich Insurance Company

Case No.: 2019 WI 6

Focus: Insurance Claim – Breach of Duty to Defend

We review a decision of the court of appeals affirming the circuit court’s grant of summary judgment to Steadfast Insurance Company (Steadfast). Summary judgment granted Steadfast the right to recover from Greenwich Insurance Company (Greenwich) based on Steadfast’s and Greenwich’s relationships with Milwaukee Metropolitan Sewerage District (MMSD), who was sued for alleged negligent inspection, maintenance, repair, and operation of Milwaukee’s sewerage system.

MMSD tendered its defense to both Steadfast and Greenwich. Steadfast accepted the tender; Greenwich did not, claiming that its policy was excess to Steadfast’s based on its “other insurance” clause. Steadfast disagreed and sued Greenwich to recover the defense costs it paid to MMSD and the attorney fees incurred in suing Greenwich to reimburse it for those defense costs.

First, we conclude that Greenwich, who insured the risk that United Water Services Milwaukee, LLC (United Water) would negligently perform services for MMSD, thereby causing damage, and Steadfast, who for a different period of time insured the risk that Veolia Water Milwaukee, LLC (Veolia) would negligently perform services for MMSD, thereby causing damage, were both primary and successive insurers in regard to MMSD, their common additional insured.  Second, we conclude that Greenwich breached its contractual duty to defend MMSD. Third, we conclude that Steadfast’s contractual subrogation claim against Greenwich was timely filed as it comes within the six-year statute of limitations for contract actions.

Fourth, we conclude Steadfast had a contractual duty to defend MMSD that was not abrogated by Greenwich’s breach of its contractual duty to defend MMSD. Therefore, we apply a prorata allocation of defense costs Steadfast paid to MMSD based on Steadfast’s and Greenwich’s respective policy limits of $30 million and $20 million. Fifth, and finally, we conclude that Steadfast is entitled to recover attorney fees from Greenwich due to Steadfast’s stepping into the shoes of MMSD through contractual subrogation to force Greenwich to pay defense costs.

Accordingly, we affirm the decision of the court of appeals in part and reverse it in part.

Affirmed in part, reversed in part.

Concur: A.W. BRADLEY, J. concurs and dissents, joined by DALLET, J. (opinion filed). R.G. BRADLEY, J. concurs and dissents (opinion filed).

Dissent:

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Derek A Hawkins is trademark corporate counsel for Harley-Davidson. Hawkins oversees the prosecution and maintenance of the Harley-Davidson’s international trademark portfolio in emerging markets.