922 N.W.2d 71
Wis.2019Background
- June 2008 rains caused sewer backups; suits named MMSD and its contractors United Water (earlier period) and Veolia (later period). MMSD was an additional insured under both contractors' liability policies.
- Greenwich insured United Water (policy July 24, 2007–July 24, 2008) with $20M limits; Steadfast insured Veolia (policy beginning July 1, 2008) with $30M limits.
- MMSD tendered defense to both insurers; Steadfast accepted and reimbursed MMSD $1.55M in defense costs. Greenwich initially denied and later maintained its policy was excess under its "other insurance" clause.
- Steadfast sued Greenwich to recover the $1.55M defense payment and its attorney fees incurred pursuing reimbursement. The circuit court granted summary judgment to Steadfast; the court of appeals affirmed in part.
- Wisconsin Supreme Court reviewed: key questions were whether policies were concurrent or successive, whether Greenwich breached duty to defend, timeliness of Steadfast's subrogation claim, how to allocate defense costs, and entitlement to attorney fees.
Issues
| Issue | Plaintiff's Argument (Steadfast) | Defendant's Argument (Greenwich) | Held |
|---|---|---|---|
| 1) Are the policies concurrent (triggering "other insurance") or successive/primary? | Policies each covered MMSD as additional insured for overlapping consequences of contractors' conduct; both have duties to defend MMSD — they are successive/primary with respect to MMSD, not concurrent. | Greenwich claimed its "other insurance" clause made its policy excess to Steadfast's, so it had no primary duty to defend MMSD's defense costs. | Court held the policies were primary and successive regarding MMSD (different insureds, different periods/risks). "Other insurance" clauses did not govern here. |
| 2) Did Greenwich breach its contractual duty to defend MMSD? | Greenwich wrongfully refused MMSD's tender and did not seek a bifurcated judicial determination; that unilateral denial breached the duty to defend. | Greenwich argued its denial was reasonable because United Water's services ended before the June 2008 events and its policy was excess. | Court held Greenwich breached its duty to defend because it unilaterally declined without pursuing judicial coverage resolution and its coverage position was erroneous. |
| 3) Is Steadfast's subrogation claim timely and of what nature (subrogation vs. contribution)? | Steadfast asserted express contractual subrogation under its policy upon paying MMSD's defense costs; the claim is a breach-of-contract subrogation claim subject to the six-year statute of limitations. | Greenwich argued any claim was contribution (with a different limitations period) and untimely. | Court held Steadfast has an express contractual subrogation claim (stepped into MMSD's shoes) for breach of contract and it was timely under the six-year statute. |
| 4) How should defense costs and attorney fees be allocated/recovered? | Steadfast sought full repayment of the $1.55M and its fees; court should either make Greenwich fully liable (due to breach) or allocate pro rata by limits. Steadfast also claimed attorney fees via subrogation. | Greenwich contended (per dissent) that its policy was excess (so no duty to contribute) and that insurers should not pay other insurers' fees; further, award of attorney fees to an insurer breaches the American Rule. | Majority held costs must be apportioned pro rata by policy limits (Steadfast $30M vs. Greenwich $20M → Steadfast recovers $620,000 from Greenwich) and that Steadfast may recover $325,000 in attorney fees as subrogee of MMSD. Separate concurring/dissenting opinions disputed both allocation and fee award. |
Key Cases Cited
- Dufour v. Progressive Classic Ins. Co., 370 Wis. 2d 313, 881 N.W.2d 678 (Wis. 2016) (standards for reviewing summary judgment and subrogation principles)
- Wadzinski v. Auto-Owners Ins. Co., 342 Wis. 2d 311, 818 N.W.2d 819 (Wis. 2012) (contract/policy interpretation principles)
- Newhouse v. Citizens Sec. Mut. Ins. Co., 176 Wis. 2d 824, 501 N.W.2d 1 (Wis. 1993) (insurer's duty to seek bifurcated coverage determination; consequences of wrongful denial to defend)
- Fireman's Fund Ins. Co. of Wis. v. Bradley Corp., 261 Wis. 2d 4, 660 N.W.2d 666 (Wis. 2003) (duty to defend the entire suit when policy potentially covers any claimed theory)
- Plastics Eng'g Co. v. Liberty Mut. Ins. Co., 315 Wis. 2d 556, 759 N.W.2d 613 (Wis. 2009) (analysis re: concurrent vs. successive insurance and limits of "other insurance" clauses)
- Elliott v. Donahue, 169 Wis. 2d 310, 485 N.W.2d 403 (Wis. 1992) (equitable recovery of attorney fees where insurer wrongfully denies defense)
- Marks v. Houston Cas. Co., 369 Wis. 2d 547, 881 N.W.2d 309 (Wis. 2016) (insurer liable for damages naturally flowing from wrongful denial of defense)