Home Page The Publication The Editor Contact Information Insurance Key issues Book Subscribe
Vol. 6, Iss. 8
October 11, 2017

Patrick Brennan:
Practicing Insurance Coverage Law In Wisconsin

When I think of Wisconsin I am often reminded of the first week of law school in 1988 in Philadelphia. A bunch of us, getting to know each other, went to iconic Jim’s Steaks on South Street on a Friday night. I got a ride with a woman named Nancy from Wisconsin. Wisconsin, as in, she grew up on a farm, Wisconsin. Like, she milked cows and stuff like that. I’d never met anyone from Wisconsin – or who had milked a cow -- and she had never had a cheesesteak.

Anyway, it is impossible to get a parking spot on South Street on a weekend night. I told Nnacy we were crazy to even try and pointed to a lot and said let’s pull in there. But she insisted that we try. She milked cows. How hard can it be to get a parking spot?, she must have been thinking. Lo and behold, not only did Nancy find a spot, but it was directly in front of Jim’s. The only way we could have parked closer to Jim’s would be if she drove into the restaurant. Nancy just looked at me and smiled. Beginner’s luck, I groused. So Nancy is who I often think of when I hear Wisconsin.


But when I think of Wisconsin coverage law, it is Patrick Brennan, of Milwaukee’s Crivello Carlson, who comes to mind. Pat is one of its foremost practitioners. He is Wisconsin’s man to see for coverage. So it is no surprise that Pat put together such an excellent summary of Wisconsin’s treatment of numerous important coverage issues. But more than just what the courts said, Pat also provides his own commentary, which makes this such a useful “My Hometown” column. Thank you Pat for this excellent article. And I bet he’s great at finding parking spots.

Pat Brennan is a graduate of Marquette University Law School and a board member of Crivello Carlson, S.C. in Milwaukee. He is a past recipient of the Milwaukee Bar association Lawyer of the Year – Legal Scholar, past President of the Civil Trial Counsel of Wisconsin and former Chair of the State Bar Association Litigation Section. His practice involves commercial litigation including insurance coverage, products, environmental and construction liability. Currently he speaks and writes about trial, insurance and tort related topics, and continues his litigation practice throughout Wisconsin and Illinois where he is also licensed. Pat is a member of the Federation of Defense & Corporate Counsel.


Wisconsin was home of the progressive “Fighting Bob LaFollette,” and birthplace of the Republican Party. It was the first state to institute workers compensation, yet it always had a strong manufacturing base. We have small, mutual insurers and fine regional carriers, a large rural population, and a strong agribusiness economic base, so it is not surprising to find coverage cases “arising out of” claims involving those interests. However, with its large, urban centers in Milwaukee, Madison, and Green Bay and as home of several Fortune 500 companies, Wisconsin is a study in contrasts. The state is more than Laverne and Shirley, supper clubs, and brandy old fashioneds. It has also produced its fair share of both interesting and nuanced insurance coverage decisions applicable to its varied cultural, business and political background.

Direct Action

Wisconsin is unique because it is a direct-action state, which is anathema to many insurers but quite manageable in practice. Authorized by statute -- Wis. Stat. §632.24 and 803.04 -- this procedure allows a liability insurer to be named in the case. To those of us who practice here, we see nothing unusual about this. There’s a certain balance struck in that subrogated insurers must also be named. Thus, jurors will know that a Plaintiff’s medical expenses were paid and the defendant is covered by liability insurance. Defense attorneys still get favorable verdicts all the time even though juries are well aware of the existence of the liability insurer. Upon request, the jury may be advised that insurance should not affect any liability or damages determination. Wis. JI Civil 125.

Duty to Defend

In Wisconsin, the duty to defend is decided at the pleading stage by the “four corners” rule. Any insurer that refuses to defend does so at its peril: it may lose all policy defenses if its decision is ultimately the wrong one. See Fleet and Farm of Green Bay, Inc. v. United Fire and Casualty Co., (E.D. Wis. 10-7-15); Water Well Solutions Service Group, Inc. v. Consolidated Ins. Co., 2016 WI 54, 369 Wis.2d 607, 881 N.W. 2d 285.

Under the four corners rule, the complaint must be compared to the entire policy—including exclusions. Marks v. Houston Casualty, 2016 WI 53, 369 Wis.2d 547, 881 N.W. 2d 309. No surprise here, since practitioners have always addressed exclusions. Thankfully, Marks provides a roadmap of options available to an insurer when coverage is contested. Even if the complaint is ambiguous or incomplete and no defense has been provided by the carrier, extrinsic evidence cannot be considered as part of the duty to defend analysis. See Water Well Solutions Service Group, Inc. v. Consolidated Ins. Co., 2016 WI 54, 369 Wis.2d 607, 881 N.W. 2d 285.

The recent decision of Oddsen v. Henry, 2016 WI App 30, 368 Wis. 2d 318, 878 N.W.2d 720 held that once an insurer provides a defense under a reservation of rights, the court may go beyond the four corners rule to determine coverage. The Oddsen court determined that disputed issues of fact that affected the duty to indemnify may not necessarily be resolved on summary judgment. Consequently, coverage attorneys could stay in the case through trial to conform the verdict to their liking. See Oddsen, 2016 WI App 30.

Policyholders chafe at the four corners rule. Many seemingly reasonable attacks on the rule have been made but to no avail. See Water Well Sols. Serv. Grp., Inc. v. Consol. Ins. Co., 2016 WI 54, 369 Wis. 2d 607, 881 N.W.2d 285. Appeals court judge Paul Reilly said it best in his dissent in Water Well when he commented on the unfairness of an insured with probable coverage being deprived of it simply because of an adversary’s pleading. See Water Well Sols. Serv. Grp., Inc. v. Consol. Ins. Co, 2015 WI App 78, ¶¶ 19-24, 365 Wis. 2d 223, 871 N.W.2d 276, review granted, 2016 WI 2, 365 Wis. 2d 741, 872 N.W.2d 668, and aff'd, 2016 WI 54, 369 Wis. 2d 607, 881 N.W.2d 285

While the duty to defend is broad, the harsh effect of the rule is tempered by a respected counterpart: the motion to stay and bifurcate. In most, but not all situations, courts will grant an insurer’s request to put a hold on merits discovery in order to have the coverage issue resolved, usually on an expedited schedule. When coverage issues are intertwined with liability and damages, a judge will be inclined to craft a ruling that permits broader discovery to continue during the lull. Overall, it is a workable process that does a pretty good job of protecting all parties’ interests.

Construction and Products

The American Girl case set the pace for what constitutes an “occurrence” in faulty workmanship cases. See Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, 268 Wis. 2d 16, 673 N.W.2d 65. Contract breaches can be an occurrence, which forces the application of exclusions that may be determinative of coverage and generates extensive motion practice in countless commercial and construction cases. Litigants with insurance interests hoped that a solution would result from Acuity v. Society Insurance, 2012 WI App 13, 339 Wis. 2d 217, 810 N.W.2d 812, a case that ended up before the Supreme Court. As coverage attorneys eagerly awaited guidance on the oft-contested “business risk” issue (and between two local companies to boot), the parties’ mid-appeal settlement left the competing factions to slug it out in one trial court venue after another on the issue of comparing the scope of the contract with the damages allegedly sustained. To date, the supreme court has not yet been asked—or given the opportunity—to have the final say. Nevertheless, the Gillen case helped by providing a limited reading of the “your work” exclusion. See Edward E. Gillen Co. v. Insurance Co. of Pennsylvania, 874 F. Supp.2d 755 (E.D. Wis. 2012). Similarly, Water Well plumbed the depths of the insured’s product exclusions, finding that a newly installed water well pump damaged only itself, and thus there was no coverage. See Water Well, 2016 WI 2.

A major win for carriers recently came from Wisconsin Pharmacal v. Nebraska Cultures, 2016 WI 14, 367 Wis. 2d 221, 876 N.W.2d 72 (2016), which held that there was no coverage for supplying the wrong ingredient that was blended into a probiotic tablet. Why? Because the “integrated product rule” would classify the component sale as one inseparable whole, and so the “impaired property” exclusion applied. Thus, Wisconsin coverage cases recently came to overlap with the economic loss doctrine in a pronounced and explicit way. The Wisconsin approach to “other property damage” and its relationship to the economic loss doctrine are two sides of the same coin. An insurer does not warrant an insured’s goods or services, and breaches of contract are not typically covered under a general liability policy. See Great Lakes Beverages, LLC v. Wochinski, 2017 WI App 13, 373 Wis.2d 649, 892 N.W.2d 333.

Supposedly, we are to accept the dicta that these two are unrelated; in fact, they are not. If a merits attorney attempts to prove that the economic loss doctrine applies in an effort to get one or more tort claims (like negligence and strict liability) dismissed, this may create a conflict because the policyholder-client could then be stripped of coverage for the claims. Real or apparent conflicts may be waived, or the insurer’s attorney could take on both the coverage and the economic loss doctrine argument because they share common attributes.

Pollution Exclusion

Only in a state where some counties have more cows than people would a court inevitably face the legal question: “Is manure a pollutant?” The answer depends on the situation. The Wisconsin Supreme Court recently recognized manure as “liquid gold” because of its value when applied as fertilizer to farm fields. But when that application fouls nearby water wells, it is indeed a pollutant subject to a policy’s exclusions. See Wilson Mut. Ins. Co. v. Falk, 2014 WI 136, 360 Wis. 2d 67, 857 N.W.2d 156.

The Badger State was also a path breaker in the seminal case that decided whether bat guano in an infested apartment is a pollutant (it was not). See Hirschorn v. Auto-Owners Ins. Co., 2012 WI 20, 338 Wis. 2d 761, 809 N.W.2d 529. In a rare split coverage decision, Acuity v. Chartis the Wisconsin Supreme Court recently held that both a general liability insurer and a pollution liability insurer had a duty to cover a loss resulting from a damaged natural gas pipe. See Acuity v. Chartis, 2015 WI 28, 361 Wis.2d 396, 861 N.W.2d 109.


Insurance agents and brokers have it pretty good in Wisconsin. Not many circumstances result in a finding of the “special duty” that must be proven for a successful E&O claim against an agent or broker. The statutory climate favors pushing liability, contribution, indemnity or reformation onto insurers. See Wis. Stats. §§ 631.08 -631.011 and Boehm v. Scheels All Sports, Inc., 202 F.Supp.3d 1030 (W.D. Wis. 2016). It is well established that a policy may be reformed because of a mutual mistake when the policy does not contain the provisions intended by the parties to be included. See Maxwell v. Hartford Union High School Dist., 2012 WI 58, ¶ 48, 341 Wis.2d 238, 814 N.W.2d 484. However, a frequently cited case holding that reformation may be allowed even when the mistake was unilateral is Artmar, Inc. v. United Fire & Cas. Co., 34 Wis. 2d 181, 148 N.W.2d 641 (1967). The decision has probably upended many motions for summary judgment that would otherwise be warranted under a “mutual mistake” regime.


The late notice policy defense has a prejudice element under Wis. Stat. §631.81. Case law has rendered this a weak defense in many cases, although courts’ leeway towards insureds is not limitless. See, e.g., Old Republic Ins. Co. v. Liberty Mutual, 138 F.Supp.3d 1013 (E.D. Wis. 2015) (20-month delay was unreasonable). Recently, the Wisconsin Supreme Court held that E&O policies are not subject to the notice-prejudice statutes, much to the chagrin of a sued attorney who tendered a malpractice claim to his insurer “too late.” See Anderson v. Aul, 2015 WI 19, 361 Wis. 2d 63, 862 N.W.2d 304.

Intentional Acts

Everyone knows that insurance policies do not cover intentional acts. Wisconsin law is strictest regarding matters of sexual assault, but it is also firm in other contexts. See, e.g., Jones v. Baecker, 2017 WI App 3, 373 Wis.2d 235, 891 N.W.2d 823 (intentional housing discrimination in renting) and Oddsen v. Henry, 2016 WI App 30, 368 Wis.2d 318, 878 N.W.2d 720 (intentional handling of drug overdose). Business coverage cases also often turn on the nature of the transaction being volitional in nature. The Everson Court denied coverage for misrepresentation, although a “wrongful act” under an E&O policy has been extended to include contract breach in rendering professional services. Compare Everson v. Lorenz, 2005 WI 51, 280 Wis.2d 1, 695 N.W.2d 298 and 1325 N. Van Buren, LLC v. T-3 Grp., Ltd., 2006 WI 94, 293 Wis. 2d 410, , 716 N.W. 2d 822.


One peculiarity of Wisconsin law is the strong reluctance of the courts to estop an insurer from, or find that it waived, coverage rights. See Shannon v. Shannon, 150 Wis.2d 434, 442 N.W.2d 25 (1989). In Maxwell, the supreme court did not even require a timely reservation of rights letter. See Maxwell v. Hartford Union High School Dist., 2012 WI 58, ¶ 48, 341 Wis.2d 238, 814 N.W.2d 484.

Wisconsin case law has occasionally found courts indulging in fictions that enhance coverage. See, e.g., Hip Hop Beverages Corp. v. Krier Foods, 2014 WL 280387 (E.D. Wis. 1-24-14). In Krier Foods, the court allowed coverage for a claim of defective or unusable product – faulty work that is usually excluded –due to the loss of use of the buyer’s warehouse needed for storing and repackaging the defective containers.


Wisconsin courts handle coverage matters in an overall appropriate manner. While there are anomalies, policies are generally interpreted in accordance with the intent of the parties. While many decisions are pro-insurer, policyholders in commercial cases can get valuable protection from a paid-for asset – the general liability policy.

Website by Balderrama Design Copyright Randy Maniloff All Rights Reserved