Water Well Solutions Service Group Inc. v. Consolidated Insurance Company
881 N.W.2d 285
Wis.2016Background
- Waukesha Water Utility sued Water Well (subrogee Argonaut) alleging negligence and breach of contract after a Centrilift well pump unthreaded and fell in 2011 following install and multiple reinstallations by Water Well and subcontractors.
- Water Well tendered defense to its insurer, Consolidated, under a Commercial General Liability (CGL) policy that provided an initial grant of coverage for property damage from an "occurrence."
- Consolidated refused to defend, invoking the policy's "Your Product" and "Your Work" exclusions; Water Well retained counsel, settled the underlying claim, then sued Consolidated for breach of the duty to defend (and bad faith, later bifurcated).
- Circuit court and court of appeals granted summary judgment for Consolidated after applying Wisconsin’s four‑corners rule (comparing the complaint to the entire policy) and concluding exclusions barred coverage.
- The Wisconsin Supreme Court affirmed: it (1) rejected creating any exception to the four‑corners rule allowing extrinsic evidence when insurers unilaterally deny defense, (2) held courts must compare the complaint to the entire policy (granting clauses, exclusions, and exceptions), and (3) concluded the "Your Product" exclusion applied, so Consolidated had no duty to defend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Wisconsin should permit a limited exception to the four‑corners rule to consider extrinsic "known facts" when insurer unilaterally denies defense based on exclusions | Water Well: permit extrinsic evidence when complaint is ambiguous/incomplete and insurer denies defense without court determination | Consolidated: no exception; duty to defend is governed solely by the complaint vs. policy language | No exception. Court reaffirmed absolute four‑corners rule; extrinsic evidence not admissible in duty‑to‑defend analysis |
| Whether the comparison for duty to defend is limited to the policy’s initial grant of coverage or must include exclusions and exceptions | Water Well: comparison should be limited to grant clause if insurer refuses defense on exclusions | Consolidated: court must compare complaint to entire policy including exclusions/exceptions | Entire policy must be considered (grant, exclusions, exceptions). Marks confirmed this rule |
| Whether the "Your Product" exclusion bars coverage for the alleged damages in Argonaut’s complaint | Water Well: complaint ambiguous; reasonable inference that preexisting pipe (not insured’s product) also damaged, so exclusion should not apply | Consolidated: complaint alleges damage only to insured’s product (the pump and its components), so exclusion applies | "Your Product" exclusion applies; complaint alleges only damage to insured’s products, so no coverage and no duty to defend |
| Whether any exception to the applicable exclusions restores coverage (e.g., subcontractor exception to "Your Work") | Water Well: subcontractor evidence (and ambiguity) would trigger subcontractor exception and reinstate coverage | Consolidated: exclusion applies; court need not reach other exclusions once "Your Product" precludes coverage | Not reached for "Your Work" because "Your Product" exclusion resolved coverage against insured |
Key Cases Cited
- Doyle v. Engelke, 219 Wis. 2d 277 (1998) (articulates four‑corners rule for duty to defend)
- Grieb v. Citizens Cas. Co. of New York, 33 Wis. 2d 552 (1967) (original formulation requiring comparison of complaint to policy; discussed historical references to exceptions)
- Estate of Sustache v. Am. Family Mut. Ins. Co., 311 Wis. 2d 548 (2008) (explains three‑step duty‑to‑defend analysis and prohibition on extrinsic evidence)
- Fireman's Fund Ins. Co. of Wis. v. Bradley Corp., 261 Wis. 2d 4 (2003) (four‑corners rule and scope of duty to defend)
- Marks v. Houston Cas. Co., 369 Wis. 2d 547 (2016) (confirmed that the entire policy — grant, exclusions, exceptions — must be compared to the complaint)
- Newhouse v. Citizens Sec. Mut. Ins. Co., 176 Wis. 2d 824 (1993) (insurer may seek bifurcated coverage determination; insurer who declines to defend does so at its peril)