Marks v. Houston Casualty Co.
866 N.W.2d 393
Wis. Ct. App.2015Background
- David Marks, trustee of two named irrevocable trusts (ICT and ICT2), was sued six times in five jurisdictions for actions tied to his roles with Titan Global and related entities; he sought defense and coverage under a Houston Casualty professional liability E&O policy for Oct. 28, 2008–Oct. 28, 2009.
- Policy limited the Named Insured's profession to services solely as trustee of ICT and/or ICT2 and contained Exclusion IV(b)(1): no coverage for liability arising out of the insured's services as an officer, director, partner, trustee, or employee of a business enterprise not named in the Declarations (or specified charitable/pension/investment organizations).
- Houston Casualty refused to defend Marks in those suits; Marks sued Houston Casualty and its surplus-lines agent, Bedford, for breach of the duty to defend; cross-claims and summary judgment motions followed.
- The circuit court granted summary judgment for Houston Casualty and Bedford, concluding Houston Casualty had no duty to defend because complaints alleged claims based on Marks’s roles with entities other than ICT/ICT2 and thus fell within Exclusion IV(b)(1).
- On appeal, Marks argued insurer-estoppel/duty-to-defend analysis should ignore exclusions when the insurer unilaterally denies defense (relying on Grube/Kenefick/Radke), and alternatively that the exclusion is ambiguous or renders coverage illusory; the court rejected these contentions.
Issues
| Issue | Plaintiff's Argument (Marks) | Defendant's Argument (Houston Casualty) | Held |
|---|---|---|---|
| Whether an insurer that unilaterally refuses defense may rely on policy exclusions in a later breach-of-duty-to-defend suit | Grube/Kenefick/Radke require courts to ignore exclusions when evaluating duty to defend after a unilateral insurer refusal | The usual duty-to-defend method applies: compare complaint allegations to the full policy (insuring clause + exclusions); exclusions may be considered | Held: Exclusions may be considered; court follows Professional Office Bldgs. and supreme-court precedent, rejecting Grube/Kenefick/Radke modification |
| Whether Exclusion IV(b)(1) bars coverage for the six underlying complaints | Exclusion should not preclude coverage (Marks focused on other exclusions in briefing) | Complaints allege Marks acted as officer/director/member/chair of entities not named in Declarations; exclusion unambiguously bars coverage | Held: Exclusion IV(b)(1) unambiguously applies; no duty to defend |
| Whether the exclusion’s wording renders the policy illusory (i.e., no possible coverage) | The placement of "not named in the Declarations" modifies only business-enterprise language, so the phrase leaves "trust" unqualified, making coverage impossible even for named trusts | The exclusion reasonably reads to limit the exclusion to entities not named in the Declarations (including trusts); plain meaning supports coverage for trustee roles explicitly declared | Held: Marks's strained reading is unreasonable; policy is not illusory |
| Whether the exclusion is ambiguous such that it must be construed for coverage | The wording is fairly susceptible to multiple interpretations and should be resolved for coverage | Language is plain and unambiguous; no reasonable ambiguity shown | Held: No ambiguity; exclusion interpreted by its plain meaning in favor of no coverage here |
Key Cases Cited
- Professional Office Bldgs., Inc. v. Royal Indem. Co., 145 Wis. 2d 573 (Ct. App.) (estoppel rule: insurer that unilaterally denies defense may still be assessed against the full policy language to determine breach)
- Grube v. Daun, 173 Wis. 2d 30 (Ct. App.) (earlier appellate view that exclusions cannot be considered after unilateral denial of defense)
- Kenefick v. Hitchcock, 187 Wis. 2d 218 (Ct. App.) (reiterating Grube approach)
- Radke v. Fireman's Fund Ins. Co., 217 Wis. 2d 39 (Ct. App.) (same line reiterating limited inquiry)
- Grieb v. Citizens Cas. Co. of N.Y., 33 Wis. 2d 552 (Sup. Ct.) (application of intentional-acts exclusion in duty-to-defend context)
- Sola Basic Indus., Inc. v. U.S. Fidelity & Guar. Co., 90 Wis. 2d 641 (Sup. Ct.) (analysis of product/work exclusions in coverage determination)
- Preisler v. General Cas. Ins. Co., 360 Wis. 2d 129 (Sup. Ct.) (framework: compare complaint to insuring clause, then exclusions, then any exceptions)
- Cook v. Cook, 208 Wis. 2d 166 (Sup. Ct.) (court of appeals must follow and not overrule its prior published decisions or conflict with supreme court precedent)
- Continental Western Ins. Co. v. Paul Reid, LLP, GPS, Inc., 292 Wis. 2d 674 (Ct. App.) (illusory-coverage doctrine; reform when coverage can never be triggered)