Water Well Solutions Service Group Inc. v. Consolidated Insurance
871 N.W.2d 276
Wis. Ct. App.2015Background
- City of Waukesha hired Water Well Solutions to install and later re-install a submersible well pump and related column pipe; the pump later unthreaded and fell to the bottom of the 1910-foot well.
- Argonaut (the water utility’s insurer, subrogor) sued Water Well for negligence and breach of contract seeking damages; Water Well tendered defense to its insurer Consolidated, which denied coverage citing policy exclusions.
- Water Well settled the underlying suit for $87,500, then sued Consolidated claiming breach of the duty to defend and bad faith.
- The consolidated policy provided coverage for property damage caused by an occurrence but contained "your product" and "your work" exclusions (with a subcontractor exception to the latter).
- The circuit court granted summary judgment for Consolidated, applying the four-corners rule and concluding the exclusions barred coverage; Water Well appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Consolidated had a duty to defend under the policy | Water Well: some damaged pipe was pre-existing (not its product) and some work was done by a subcontractor, so exclusions don’t apply and duty to defend was triggered | Consolidated: four-corners of the complaint allege damage to Water Well’s product and work; "your product" and "your work" exclusions apply, so no duty to defend | Held: No duty to defend — court applied four-corners rule and found exclusions barred coverage |
| Whether court may consider extrinsic evidence to decide duty to defend | Water Well: court should consider undisputed extrinsic facts (affidavit) showing subcontractor and preexisting pipe | Consolidated: duty to defend is determined solely by the complaint’s allegations; extrinsic evidence not considered when insurer denies defense | Held: Court refused to consider extrinsic evidence; four-corners rule controls |
| Whether exclusions may be considered when assessing duty to defend | Water Well: argued exclusions shouldn’t be considered in deciding duty to defend | Consolidated: exclusions are part of the policy and must be applied when comparing complaint allegations to coverage | Held: Court may and must consider policy exclusions and exceptions in duty-to-defend analysis |
| Whether subcontractor exception to "your work" exclusion applies | Water Well: plausible to infer a subcontractor was used; exception would restore coverage | Consolidated: complaint contains no allegation of subcontractor use; exception does not apply | Held: Exception does not apply because complaint contains no subcontractor allegation |
Key Cases Cited
- Green Spring Farms v. Kersten, 136 Wis. 2d 304 (Wis. 1987) (summary-judgment standard and review)
- Sustache II v. American Family Mutual Insurance Co., 311 Wis. 2d 548 (Wis. 2008) (four-corners rule and duty-to-defend framework)
- Preisler v. General Casualty Insurance Co., 360 Wis. 2d 129 (Wis. 2014) (compare complaint to policy as whole, including exclusions)
- American Family Mut. Ins. Co. v. American Girl, Inc., 268 Wis. 2d 16 (Wis. 2004) (apply exclusions/exceptions in duty-to-defend analysis)
- Elliott v. Donahue, 169 Wis. 2d 310 (Wis. 1992) (insurer duty to defend only if complaint alleges facts that would arguably be covered)
- Fireman's Fund Ins. Co. of Wisconsin v. Bradley Corp., 261 Wis. 2d 4 (Wis. 2003) (extrinsic evidence not considered for duty to defend)
- Bulen v. West Bend Mut. Ins. Co., 125 Wis. 2d 259 (Wis. Ct. App. 1985) ("your product" exclusion bars coverage for insured’s faulty product)
- Stuart v. Weisflog's Showroom Gallery, Inc., 311 Wis. 2d 492 (Wis. 2008) ("your work"/products-completed-operations hazard principles)
- Professional Office Buildings, Inc. v. Royal Indemnity Co., 145 Wis. 2d 573 (Wis. Ct. App. 1988) (longstanding application of four-corners rule)
- Doyle v. Engelke, 219 Wis. 2d 277 (Wis. 1998) (historical precedent describing four-corners approach)