Title: Burgraff  v. Menard, Inc.
Citation: N/A
Docket Number: 2013AP000907
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: February 24, 2016

2016 WI 11 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2013AP907 
COMPLETE TITLE: 
Kenneth C. Burgraff, Sr. and Linda Burgraff, 
          Plaintiffs-Respondents, 
     v. 
Menard, Inc., 
          Defendant-Appellant-Cross Petitioner, 
Millers First Insurance Company, 
          Defendant-Respondent-Petitioner, 
Walmart Stores, Inc. Associates Health and 
Welfare Plan, 
          Defendant. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
(Reported at 356 Wis. 2d 282, 853 N.W.2d 574) 
(Ct. App. 2014 – Published) 
PDC No. 2014 WI App 85 
 
 
OPINION FILED: 
February 24, 2016 
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
September 17, 2015 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit 
 
COUNTY: 
Eau Claire 
 
JUDGE: 
Michael A. Schumacher 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
      
 
CONCUR & DISSENT: 
ROGGENSACK, C.J., ZIEGLER, J., concur and 
dissent. (Opinion Filed) 
 
NOT PARTICIPATING: GABLEMAN, R.G.BRADLEY, J.J., did not 
participate.    
 
 
 
ATTORNEYS: 
 
For the defendant-respondent-petitioner, there were briefs 
by John C. Possi and Mueller, Goss & Possi, S.C., Milwaukee, and 
oral argument by John C. Possi. 
 
 
For the defendant-appellant-cross-petitioner, there were 
briefs by Jeffrey S. Fertl,  and Hinshaw & Culbertson LLP, 
Milwaukee, and oral argument by Jeffrey S. Fertl. 
 
 
 
2 
 
 
 
 
 
 
 
2016 WI 11
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.    2013AP907 
(L.C. No. 
2011CV270) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Kenneth C. Burgraff, Sr. and Linda Burgraff,   
 
 
Plaintiffs-Respondents,   
 
 
v. 
 
Menard, Inc.,   
 
 
Defendant-Appellant-Cross Petitioner, 
 
Millers First Insurance Company,   
 
 
Defendant-Respondent-Petitioner, 
 
Walmart Stores, Inc., Associates Health and 
Welfare Plan,   
 
 
Defendant. 
   
FILED 
 
FEB 24, 2016 
 
Diane M. Fremgen 
Clerk of Supreme Court 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed and 
cause remanded to the circuit court for a determination of 
damages. 
 
¶1 
ANN WALSH BRADLEY, J. Petitioner, Millers First 
Insurance Company ("Millers First"), seeks review of a published 
decision of the court of appeals that reversed the circuit 
No. 2013AP907   
 
2 
 
court's order for summary judgment.1  The circuit court 
determined that Millers First no longer had a continuing duty to 
defend 
Menard 
after 
the 
plaintiff, 
Kenneth 
Burgraff 
("Burgraff"), reached a settlement with Millers First for its 
proportionate share of the plaintiff's claim.  In reversing, the 
court of appeals concluded that Millers First had a continuing 
duty to defend and that it breached the duty when it withdrew 
its defense of Menard following the Burgraff settlement.  
¶2 
Millers First argues that its "limits of liability for 
this coverage" were exhausted when it settled with Burgraff for 
$40,000 because that amount represented its maximum proportional 
liability 
for 
Burgraff's 
claim. 
 
Once 
it 
satisfied 
its 
proportionate share of Burgraff's claim, Millers First contends 
it had no further duty to defend Menard even though it had not 
paid its full $100,000 limit of liability. 
¶3 
We conclude, under the terms of the policy, Millers 
First was required to provide a defense for Menard until it paid 
its $100,000 limit of liability.  Like the court of appeals, we 
determine that Millers First breached its duty to defend when it 
withdrew its defense of Menard following the settlement with 
Burgraff. 
¶4 
Cross-petitioner, Menard, Inc., seeks review of that 
part of the court of appeals opinion that affirmed a judgment of 
                                                 
1 Burgraff v. Menard, Inc., 2014 WI App 85, 356 Wis. 2d 282, 
853 N.W.2d 574 (affirming and reversing orders of summary 
judgment entered by the circuit court for Eau Claire County, 
Michael A. Schumacher, J., presiding).  
No. 2013AP907   
 
3 
 
the circuit court determining that Menard's $500,000 self-
insured retention qualified as "other applicable liability 
insurance" under the Millers First policy's "other insurance" 
clause.  The court of appeals concluded that Menard's self-
insured retention was "other insurance" pursuant to this court's 
decision in Hillegass v. Landwehr, 176 Wis. 2d 76, 499 N.W.2d 
652 (1993). 
¶5 
Menard argues that its self-insured retention does not 
constitute "other insurance" under the Millers First policy's 
"other applicable liability insurance" clause.  It contends that 
because it is a permissive user of Burgraff's vehicle, this case 
involves a dispute between a self-insured party and its own 
insurer and is governed by Brown County v. OHIC Ins. Co., 2007 
WI App 46, 300 Wis. 2d 547, 730 N.W.2d 446.¶5 
We agree with 
the court of appeals that Hillegass, and not Brown County, 
controls the outcome of this case.  Like the court of appeals, 
we determine that Menard's self-insured retention is "other 
applicable liability insurance" under the Millers First policy's 
"other insurance clause."   
¶6 
Accordingly, we affirm the Court of Appeals and remand 
to the circuit court for a determination of damages. 
I. 
¶7 
The relevant facts of this case are not in dispute.  
Kenneth Burgraff was injured when a Menard employee loaded 
materials onto Burgraff's trailer using a forklift.  Burgraff 
sued Menard for damages.   
No. 2013AP907   
 
4 
 
¶8 
Burgraff's vehicle and trailer were insured under an 
automobile insurance policy issued by Millers First.  The 
declaration page provides for a $100,000 per person bodily 
injury liability limit.  Its insuring agreement states: 
We will pay damages for "bodily injury" or "property 
damage" for which any "insured" becomes legally 
responsible because of an auto accident.  Damages 
include 
prejudgment 
interest 
awarded 
against 
the 
"insured."  We will settle or defend, as we consider 
appropriate, any claim or suit asking for these 
damages.   
 
¶9 
The insuring agreement also addresses Millers 
First's duty to defend: 
In addition to our limit of liability, we will pay all 
defense costs we incur.  Our duty to settle or defend 
ends when our limit of liability for this coverage has 
been exhausted.  We are not obligated to provide 
defense after we have paid our limits of liability in 
settlement of claims or suits.  We have no duty to 
defend any suit or settle any claim for "bodily 
injury" or "property damage" not covered under this 
policy. 
 
¶10 Further, 
the 
Millers 
First 
policy 
contains 
the 
following "other insurance" clause: 
If there is other applicable liability insurance, we 
will pay only our share of the loss.  Our share is the 
proportion that our limit of liability bears to the 
total 
of 
all 
applicable 
limits. 
 
However, 
any 
insurance we provide for a vehicle you do not own 
shall be excess over any other collectible insurance. 
¶11 Menard contended that it was entitled to coverage 
under the Millers First policy as a permissive user of 
Burgraff's vehicle and tendered defense of Burgraff's claim to 
Millers First.  See Blasing v. Zurich Am. Ins. Co., 2014 WI 73, 
No. 2013AP907   
 
5 
 
356 Wis. 2d 63, 850 N.W.2d 138.  Millers First agreed to defend 
Menard subject to a reservation of rights, but later conceded 
that it had a duty to defend, agreeing that Menard was entitled 
to coverage under Burgraff's automobile policy. 
¶12 Menard was also insured for excess coverage under a 
commercial general liability policy issued by CNA.  The excess 
policy had a liability limit of $500,000.  CNA's policy 
contained an "other insurance" clause that provides: 
4. Other Insurance 
If other valid and collectible insurance is 
available to the insured for a loss we cover 
under Coverages A or B of this Coverage Part, our 
obligations are limited as follows: 
. . .  
b. Excess Insurance 
(1) 
This insurance is excess over: 
(a) 
Any of the other insurance, whether 
primary, excess, contingent or on any 
other basis: 
. . .  
(iv) If the loss arises out of the 
maintenance or use of aircraft, "autos" 
or watercraft  . . .  
(3) When this insurance is excess over other 
insurance, we will pay only our share of the 
amount of the loss, if any, that exceeds the 
sum of: 
(a) 
The 
total 
amount 
that 
such 
other 
insurance would pay for the loss in the 
absence of this insurance; and 
No. 2013AP907   
 
6 
 
(b) 
The total of all deductible and self-
insured amounts under all that other 
insurance. 
. . .  
c. Method of Sharing 
If 
all 
of 
the 
other 
insurance 
permits 
contribution by equal shares, we will follow this 
method also.  Under this approach each insurer 
contributes equal amounts until it has paid its 
applicable limit of insurance or none of the loss 
remains, whichever comes first. 
If any of the other insurance does not permit 
contribution by equal shares, we will contribute 
by limits.  Under this method, each insurer's 
share is based on the ratio of its applicable 
limit of insurance to the total applicable limits 
of insurance of all insurers. 
 
¶13 CNA's policy also includes a self-insured retention 
endorsement as follows: 
In consideration of the premium charged, it is 
agreed that the limits of insurance for [] the 
coverages provided by this policy . . . will 
apply 
excess 
of 
a 
self-insured 
retention 
(hereinafter 
referred 
to 
as 
the 
Retention 
Amount)[.] 
 
¶14 The "retention amount" is $500,000 per occurrence.  
Under the self-insured retention endorsement, Menard is required 
to pay the first $500,000 worth of damages and defense costs 
arising from an occurrence.  
¶15  Millers First moved for partial summary judgment on 
the grounds that Menard's $500,000 self-insured retention 
qualified as "other applicable liability insurance" under the 
Millers First policy's "other insurance" clause.  It asked the 
No. 2013AP907   
 
7 
 
circuit court to declare that under the "other insurance" 
clause, Millers First's share of any verdict or settlement would 
be one-sixth of the total $600,000 liability limits of the two 
policies combined.2  This amount represents the Millers First 
policy's $100,000 limit of liability added to Menard's $500,000 
self-insured retention amount.  The circuit court granted 
Millers First's motion. 
¶16 During mediation, Millers First settled Burgraff's 
claim for $40,000.  The settlement agreement between Burgraff 
and Millers First agreed to "fully discharge Miller First 
Insurance Company and one-sixth of any liability that Menard, 
Inc. may have to [] Burgraff."  Menard did not settle with 
Burgraff at mediation. 
¶17 Subsequently, Millers First moved for summary judgment 
on the grounds that it no longer had a duty to defend Menard 
because it had fully satisfied its duty to pay one-sixth of any 
verdict or settlement.  Again, the circuit court granted Millers 
First's motion. 
¶18 Menard moved to bifurcate and stay the trial on the 
merits of Burgraff's claim pending resolution of the coverage 
                                                 
2 Apparently the parties agreed that Burgraff's damages 
would not exceed $600,000.  The jury ultimately awarded the 
plaintiffs damages in the amount of $345,396.07, which was 
further reduced due to the jury's finding of contributory 
negligence.   
No. 2013AP907   
 
8 
 
issues on appeal.  Millers First took no position on Menard's 
motion to bifurcate and stay.  The circuit court denied Menard's 
motion and the case proceeded to trial.3  
¶19 On 
appeal, 
Menard 
argued: 
(1) 
its 
self-insured 
retention was not "other insurance," and (2) Millers First had a 
continuing duty to defend Menard because Millers First settled 
with the plaintiff for less than its $100,000 limit of 
liability.  The court of appeals affirmed the circuit court's 
determination that Menard's self-insured retention was "other 
insurance" and reversed the circuit court's determination that 
Menard no longer had a duty to defend.  Burgraff v. Menard, 
Inc., 2014 WI App 85, ¶¶2-3, 356 Wis. 2d 282, 853 N.W.2d 574.    
II. 
¶20 In this case we are asked to review the circuit 
court's grant of summary judgment.  We review grants of summary 
judgment independently, applying the same methodology employed 
by the circuit court.  Belding v. Demoulin, 2014 WI 8, ¶13, 352 
Wis. 2d 359, 843 N.W.2d 373.  Summary judgment is appropriate if 
"there is no genuine issue as to any material fact and [] the 
                                                 
3 The circuit court's decision on Menard's motion to 
bifurcate and stay was affirmed by the court of appeals.  That 
issue is not before us. 
 
No. 2013AP907   
 
9 
 
moving party is entitled to judgment as a matter of law."  Wis. 
Stat. § 802.08(2) (2013-2014).4   
¶21 Here there is no genuine issue of material fact.  
Therefore, we focus on the terms of the parties' insurance 
policies, which are contracts for insurance.  Construction of an 
insurance policy presents a question of law, which we review 
independently of the determinations rendered by the circuit 
court and the court of appeals.  Folkman v. Quamme, 2003 WI 116, 
¶12, 264 Wis. 2d 617, 665 N.W.2d 857.   
¶22 This court follows the well-established rules of 
insurance contract interpretation.  Insurance policies are 
interpreted as they would be by a reasonable person in the 
position of the insured.  State Farm Mut. Auto. Ins. Co. v. 
Gillette, 2002 WI 31, ¶28, 251 Wis. 2d 561, 641 N.W.2d 662.  
"[B]ecause the insurer is in a position to write its insurance 
contracts with the exact language it chooses——so long as the 
language conforms to statutory and administrative law——ambiguity 
in that language is construed in favor of an insured seeking 
coverage."  Froedtert Mem'l Lutheran Hosp. v. Nat'l States Ins., 
2009 WI 33, ¶43, 317 Wis. 2d 54, 765 N.W.2d 251; see also First 
Am. Title Ins. Co. v. Dahlmann, 2006 WI 65, ¶41, 291 Wis. 2d 
156, 715 N.W.2d 609.    
III. 
                                                 
4 All subsequent references to the Wisconsin Statutes are to 
the 2013-14 version unless otherwise indicated. 
No. 2013AP907   
 
10 
 
¶23 We address first the argument raised by Menard's 
cross-petition because it is foundational to our subsequent 
discussion.  Menard contends that the court of appeals erred 
when 
it 
determined 
that 
Menard's 
self-insured 
retention 
qualifies as "other applicable liability insurance" under the 
Millers First policy's "other insurance" clause. 
¶24 A self-insured retention obligates the insured to pay 
the first level of loss before excess insurance coverage is 
applied to the claim.  Menard's CNA insurance policy consisted 
of a self-insured retention of $500,000, with an additional 
$500,000 in excess coverage provided by CNA. 
 ¶25 If Menard's self-insured retention is not "other 
applicable liability insurance," then it would be treated as 
excess coverage——not primary coverage.  Thus, Menard asserts 
that Millers First's $100,000 limit of liability would have to 
be exhausted before Menard had any responsibility to pay 
Burgraff's claim.  
¶26 As is the case here, an insured may have more than one 
insurance policy that provides coverage for the same risk.  
Coverage is either primary or excess.  Primary insurance 
coverage provides "first-dollar" coverage up to the policy's 
limit of liability.  See Arnold P. Anderson, Wisconsin Insurance 
Law § 11.12 (7th Ed. 2015).  Excess insurance coverage attaches 
only after a predetermined amount of primary insurance coverage 
has been exhausted.  Id. at § 11.14. 
 ¶27 "Whenever two policies apply to the same insured at 
the same time, the issue of which policy must pay first——or 
No. 2013AP907   
 
11 
 
which is primary and which is excess——is dealt with by 'other 
insurance' clauses."  Id. at § 11.3.  Wis. Stat. § 631.43(1) 
governs other insurance provisions:  
When 2 or more policies promise to indemnify an 
insured against the same loss . . . .  The policies 
may by their terms define the extent to which each is 
primary and each excess, but if the policies contain 
inconsistent terms on that point, the insurers shall 
be jointly and severally liable to the insured on any 
coverage where the terms are inconsistent, each to the 
full amount of coverage it provided.  
Millers First's other insurance clause states: "If there is 
other applicable liability insurance, we will pay only our share 
of the loss.  Our share is the proportion that our limit of 
liability bears to the total of all applicable limits."   
¶28 The circuit court determined that Menard's self-
insured retention was "other applicable liability insurance" 
under the terms of the Millers First "other insurance" clause.  
In applying the terms of the Millers First "other insurance" 
clause, the circuit court divided responsibility for paying any 
settlement or verdict between Millers First and Menard in 
proportion to their limits of liability.5  Its interpretation was 
impelled by this court's determination in Hillegass when we 
                                                 
5 Like the court of appeals, we decline to apply the "other 
insurance" clause from the CNA policy.  See Burgraff v. Menard, 
Inc., 2014 WI App 85, ¶¶15-17, 356 Wis. 2d 282, 853 N.W.2d 574.  
We agree that the CNA policy's "other insurance" clause does not 
apply to Menard's self-insured retention because it only applies 
to 
CNA's 
obligations 
once 
the 
self-insured 
retention 
is 
exhausted.  See id.  
No. 2013AP907   
 
12 
 
concluded that self-insurance constitutes "other collectible 
insurance."  176 Wis. 2d at 85.  
¶29 The plaintiff in Hillegass was injured in a motor 
vehicle collision involving a vehicle owned by Burlington Air 
Express.  Id. at 78.  Burlington was self-insured at the time of 
the collision for up to $1 million with an additional $2 million 
umbrella policy.  Id.   
¶30 The defendant driver had his own insurance policy with 
Farmers Insurance Exchange that contained an "other insurance" 
clause.  Id.  Farmer's policy provided that it was "excess over 
any other collectible insurance."  Id.  Burlington asserted on 
summary judgment that because it was self-insured there was no 
"other collectible insurance" within the meaning of the Farmers' 
policy and therefore Farmers, not Burlington, was the primary 
insurer.  Id. at 78-79.   
¶31 The Hillegass court concluded that "self-insurance 
constitutes 'other collectible insurance'," explaining that 
self-insurers retain their own risk in exchange for not paying 
premiums:  
Whereas 
contractual 
insurance 
policies 
involve 
a 
third-party insurer underwriting the insured's risk in 
exchange for premium payments, self-insurers retain 
their own risk in exchange for not paying premiums.  
The parties implicated in the risk-shifting may change 
depending on the particular arrangement, but the 
essence 
of 
the 
transaction 
remains 
the 
same:   
exchanging future liability for premium payments.   
Id. at 81-82.  It emphasized "the fact that the legislature 
permits companies to formulate the most efficient insurance 
No. 2013AP907   
 
13 
 
coverage should not be misconstrued as a device to avoid 
liability by the self-retention of risk."  Id. at 83. 
¶32 We agree that Menard's responsibility under its self-
insured retention ought to be analyzed in terms of how it 
shifted risk in exchange for premium payments.  Menard, like 
Burlington Air in Hillegass, chose to retain its own risk for 
the first $500,000 of liability coverage.  In doing so, Menard 
avoided paying premiums to a third-party insurer for that 
coverage.  Menard gained the benefit of lower premiums with the 
risk of the self-insured retention.  In addition, Menard's CNA 
insurance policy explicitly states that its excess coverage with 
CNA attaches only after Menard's self-insured retention has been 
exhausted.  Thus, Menard understood that it had an obligation as 
a primary insurer up to the limits of its $500,000 self-insured 
retention.     
¶33 Menard argues that Brown County, not 
Hillegass, 
controls the outcome because the dispute between Menard and 
Millers First is between an insured and its own insurer.  It 
contends that because it is a permissive user of Burgraff's 
vehicle under Blasing, Menard has the same rights under the 
Millers First policy as if it were the named insured.  See 
Blasing, 356 Wis. 2d 63, ¶¶41, 52.  Menard's argument is based 
on this Court's statement in Blasing that "[o]ur case law makes 
no distinction between injured parties who are named insured and 
other insureds."  Id., ¶74. 
¶34 We disagree with Menard that Brown County controls the 
outcome of this case.  In Brown County, the County was sued when 
No. 2013AP907   
 
14 
 
a patient died at a county facility.  300 Wis. 2d 547, ¶1.  The 
County's liability was covered by two insurance policies.  Id. 
Both policies provided primary coverage, but one policy required 
the County to pay the first $100,000 as a "self-insured 
retention."  Id.  
¶35 The court of appeals determined that the insurance 
policy in Brown County was ambiguous as to whether the self-
insurance agreement with Wisconsin Municipal Mutual Insurance 
Company was "other insurance."  Id., ¶10.  It further concluded 
that the self-insured retention at issue operated more like a 
deductible than insurance coverage.  Id., ¶16.  Significantly, 
Brown County explained that the public policy relied on in 
Hillegass did not apply in a dispute between a self-insured 
party and its own insurer.  Id., ¶18. 
¶36 Brown County created a narrow exception to Hillegass 
when an "other insurance" clause is ambiguous, operates in 
exactly the same way as a deductible, and involves a dispute 
between a self-insured party and its own insurer.  Menard 
contends that because it is a permissive user of Burgraff's 
vehicle, this case involves a dispute between a self-insured 
party 
and 
its 
own 
insurer. 
 
However, 
this 
case 
is 
distinguishable from Brown County.   
¶37 Menard's self-insured retention operates differently 
than a deductible.  Menard's policy with CNA states:  "The 
S.I.R. [self-insured retention] shall be eroded by allocated 
claim costs including defense . . . ."  Self-insured retentions 
are distinct from deductibles when the insured is obligated to 
No. 2013AP907   
 
15 
 
retain its own defense counsel.  See Anderson, Wisconsin 
Insurance Law, § 11.12.  That is exactly the case here. 
¶38 More importantly, this is not a dispute between an 
insured and its own insurer. In Brown County, the court 
explained that "when both a self-insured party and its insurer 
are liable for a loss, requiring the insurer to cover the loss 
does not allow the self-insured party to avoid both paying 
premiums and making payouts."  Id., ¶25. The fact that the 
County purchased both policies led the Brown County Court to 
conclude that this "was not a windfall for the County; the 
County bargained for coverage in this situation."  Id., ¶26.   
¶39 In 
Brown 
County, 
both 
insurance 
policies 
were 
purchased by the County.  Although Menard may benefit from 
coverage as a permissive user, that does not place Menard in the 
same shoes as the insured in Brown County.  Menard's argument is 
unpersuasive because it ignores the fact that it did not bargain 
or pay for the $100,000 in liability coverage available under 
the Millers First policy.  
¶40 Unlike in Brown County, this argument would result in 
a windfall for Menard because it could both avoid paying 
premiums and making payments under its self-insured retention. 
Here, as in Hillegass, it would be "fundamentally unfair and 
contrary to legislative intent" to permit companies such as 
Menard to self-insure and thereby escape the expense of premium 
payments as well as the possibility of being held liable as a 
primary insurer.  176 Wis. 2d at 83.   
No. 2013AP907   
 
16 
 
¶41  Brown 
County 
did 
not 
analyze 
the 
self-insured 
retention in terms of how it shifted risk in exchange for 
payment of premiums.  The County argued that "'insurance' could 
refer only to agreements where third parties agreed to insure 
the County against risk, not agreements whereby the County 
agreed to pay its losses itself."  Brown County, 300 Wis. 2d 
547, ¶14.  Agreeing with the County, the court of appeals 
explained that "the only question that matters is who is liable:  
the County or someone else."  Id., ¶15. 
¶42 If the court of appeals in Brown County had analyzed 
whether the County's self-insured retention shifted risk in 
exchange for premiums, the court would still have concluded that 
the County's self-insured retention was not "other insurance" in 
that case.  As Hillegass explained, Burlington "chose to retain 
its own risk for the first $1 million rather than pay premiums 
to a third-party insurer."  176 Wis. 2d at 82.  In contrast, the 
County chose to avoid that risk by purchasing a second primary 
insurance policy without a deductible.  Thus, the Hillegass risk 
analysis still allows for an exception to the general rule in 
cases where a self-insured party chooses to purchase additional 
liability 
insurance 
without 
a 
deductible 
or 
self-insured 
retention.   
¶43 In sum, we agree with both the circuit court and the 
court of appeals that Hillegass, and not Brown County, controls 
the outcome of this case.  Accordingly, we conclude that 
Menard's self-insured retention is "other applicable liability 
No. 2013AP907   
 
17 
 
insurance" under the Millers First policy's "other insurance 
clause."  
IV. 
¶44 We address next the issue raised in Millers First's 
petition for review.  It contends that the court of appeals 
erred when it concluded that Millers First breached its duty to 
defend Menards.   
¶45 Millers First's duty to defend stems from Menard’s 
status as a permissive user of the plaintiff's vehicle. In 
Blasing, this Court concluded that a Menard employee was a 
permissive user under a customer's automobile insurance policy.  
356 Wis. 2d 63, ¶41.  Blasing also determined that the 
automobile insurer has a duty to defend and indemnify a 
permissive user.  Id., ¶42-44.  However, Blasing did not address 
the issues we now face. 
¶46 In addressing its duty to defend, Millers First's 
policy states that Millers First "will settle or defend, as we 
consider appropriate, any claim or suit asking for [covered] 
damages."  It further states:  "Our duty to settle or defend 
ends when our limit of liability for this coverage has been 
exhausted.  We are not obligated to provide defense after we 
have paid our limits of liability in settlement of claims or 
suits."  
¶47 The 
declaration 
page 
of 
Millers 
First's 
policy 
provides a limit of liability of $100,000:  "DESCRIPTION OF 
COVERED VEHICLES, LIMITS OF LIABILITY AND PREMIUMS CHARGED. 
COVERAGE IS PROVIDED WHERE A PREMIUM AND LIMIT OF LIABIITY IS 
No. 2013AP907   
 
18 
 
SHOWN."  The "PER PERSON LIMIT [FOR] BODILY INJURY" is 
"100,000."  It also sets forth the premium paid for this 
coverage.  
¶48 Nevertheless, Millers First contends that its limits 
of liability should be $40,000, rather than the $100,000 set 
forth in its declaration page.  Referring to the terms of its 
policy, Millers First argues that it was required to provide a 
defense only until its "limit of liability for this coverage has 
been exhausted."6  Millers First contends that its liability "for 
this coverage" was exhausted by its $40,000 payment of its 
proportionate share of Burgraff's claim.  Additionally, Millers 
First advances that because Menard is a permissive user, it 
would be a windfall for Menard if Millers First is obligated to 
defend Menard after Millers First settled its obligation with 
the plaintiff. 
¶49 The general rule regarding an insurer's duty to defend 
until its policy limits are exhausted is set forth in St. John's 
Home of Milwaukee v. Continental Cas. Co., 147 Wis. 2d 764, 434 
N.W.2d 112 (Ct. App. 1988).  In St. John's, Aetna Casualty 
Insurance Company ("Aetna") and American National Fire Insurance 
Company ("American"), moved for partial summary judgment to 
limit the scope of St. John's covered damages.  147 Wis. 2d at 
769.  The circuit court determined that the maximum amount of 
                                                 
6 Millers First agreed to defend Menard subject to a 
reservation of rights, but later conceded that it had a duty to 
defend, agreeing that Menard was entitled to coverage under 
Burgraff's automobile policy. 
 
No. 2013AP907   
 
19 
 
claimed damages for which there was coverage under the Aetna and 
American insurance policies was $11,400.  Id. at 778-79.  
American deposited $11,400 with the circuit court as tender to 
St. John's to cover the insurers' maximum potential liability 
for the claims.  Id. at 779.  According to the circuit court, 
Aetna and American had no duty to defend after the $11,400 was 
tendered 
as 
payment 
of 
the 
insurers' 
maximum 
potential 
liability.  Id. at 779.   
¶50 Reversing the circuit court's ruling, the court of 
appeals explained that the circuit court was "incorrect in 
holding that if the insurers paid the sum of $11,400, they owed 
no duty to defend."  Id. at 787.  St. John's  explicitly held 
that "maximum potential liability" cannot be equated with 
"maximum policy limits."  Id.  The St. John's court explained 
that "[i]f an insurer owes any money at all under its insurance 
policy, it must defend, because Wisconsin is one of those states 
which requires an insurer to exhaust its total policy limits 
before it is freed from the duty to defend."  Id.  Thus, even 
though Aetna and American tendered payment of their maximum 
potential liability of $11,400, they continued to have a duty to 
defend because they had not paid their full policy limits. 
¶51 Here, as in St. John's, Millers First's $40,000 
payment to the plaintiffs was less than its $100,000 policy 
limits.  Although Millers First's $40,000 payment may represent 
its maximum potential liability for Burgraff's claim, the policy 
language does not limit the duty to defend based on maximum 
potential liability.  Thus, under St. John's, Millers First has 
No. 2013AP907   
 
20 
 
a duty to defend Menard until it pays its full $100,000 policy 
limits. 
¶52 Any alteration in an insured's duty to defend must be 
explicitly stated in the policy.  "Because any limitation on the 
insurer's duty to defend is in the nature of an exclusion, the 
defense coverage clause must clearly express the limitation."  
Gross v. Lloyds of London Ins. Co., 121 Wis. 2d 78, 88, 358 
N.W.2d 266 (1984).  There is no clause in Millers First's policy 
that alters its duty to defend if it shares responsibility for 
providing primary liability coverage with another insurer. 
¶53 Although the Millers First policy was in effect before 
Blasing and thus did not contemplate Menard as a permissive 
user, the relationship between two primary insurers is not new 
or unique.  Millers First included an "other insurance" clause 
in its policy which set forth the responsibilities of two 
primary insurers with respect liability coverage.  The "other 
insurance" clause was applied by the circuit court and the 
parties' responsibilities were pro-rated according to terms of 
the policy.  
¶54 Millers First's policy specifically provides for a 
pro-rata share of liability payments, but does not contain a 
similar pro-rata clause for defense costs.  Certainly Millers 
First could have included a similar clause with respect to 
concurrent insurers' duty to defend, but did not write its 
policy to include a pro-rated duty to defend.  It is now asking 
us to read such a clause into the policy.  We decline to do so 
here.  We will not re-write Millers Firsts' policy language. 
No. 2013AP907   
 
21 
 
¶55  Instead, we will follow the well-established rules of 
insurance contract interpretation.  Insurance policies are 
interpreted as they would be by a reasonable person in the 
position of the insured.  State Farm, 251 Wis. 2d 561, ¶28.  
"[B]ecause the insurer is in a position to write its insurance 
contracts with the exact language it chooses–so long as the 
language conforms to statutory and administrative law——ambiguity 
in that language is construed in favor of an insured seeking 
coverage."  Froedtert, 317 Wis. 2d 54, ¶43.  This court will not 
now create an exclusion with respect to Millers First's duty to 
defend that it did not write into its own policy. 
¶56 We also reject Millers First argument that Teigen and 
Loy stand for the proposition that Millers First can settle for 
less than its limits of liability and be released from its duty 
to defend.  In Teigen v. Jelco of Wis. Inc., an insurer was 
relieved of its duty to defend after it used a Loy release to 
settle with the plaintiffs.  124 Wis. 2d 1, 367 N.W.2d 806 
(1985).  A Loy release allows the plaintiff to settle for less 
than the primary insurer's policy limits by giving the secondary 
or excess insurance carrier credit for the full amount of the 
policy limits.  Loy v. Bunderson, 107 Wis. 2d 400, 417, 320 
N.W.2d 175 (1982).  The parties, however, did not enter into a 
Loy Release here.  They instead settled for a proportionate 
amount of the verdict without giving credit up to the policy 
limits. 
¶57 We agree with the court of appeals that the only 
reasonable interpretation of the term "limit of liability" is 
No. 2013AP907   
 
22 
 
the $100,000 limit of liability listed on the insurance policy's 
declarations page.  Under the unambiguous policy language, 
Millers First was required to provide a defense for Menard until 
it paid its $100,000 limit of liability.  Like the court of 
appeals, we determine that Millers First breached its duty to 
defend when it withdrew its defense of Menard following the 
settlement. 
V. 
¶58 Having concluded that Menard's self-insured retention 
is "other applicable liability insurance" and that Millers First 
breached its duty to defend Menard, this case is remanded to the 
circuit court.  Upon remand, the circuit court must make a 
determination of damages.  We discuss next the nature of 
available damages to provide guidance to the circuit court.7   
¶59 Menard relies on Newhouse by Skow v. Citizens Sec. 
Mut. Ins. Co. for the proposition that Millers First must pay 
damages including:  (1) the amount of the judgment or settlement 
plus interest; (2) costs and attorney fees incurred by the 
insured in defending the suit; and (3) any additional costs that 
the insured can show naturally resulted from the breach.  176 
Wis. 2d 824, 838, 501 N.W.2d 1 (1993).  It reads Newhouse too 
                                                 
7 After oral argument, we ordered the parties to file letter 
briefs addressing the following issues:  (1) What type of 
damages can be claimed if Millers First is found to have 
breached its duty to defend?; and (2) Are the damages available 
affected by the fact that Millers First defended until the 
circuit court approved Millers First's settlement with the 
plaintiff? 
 
No. 2013AP907   
 
23 
 
broadly.  Just as the damages awarded in Newhouse were based on 
the facts of that case, the damages here depend on the unique 
facts of this case.  The test, however, remains the same. 
¶60 Newhouse sets forth the test as follows:  "The 
insurance company must pay damages necessary to put the insured 
in the same position he would have been in had the insurance 
company fulfilled the insurance contract."  Id. at 838.  "[A] 
party aggrieved by an insurer's breach of its duty to defend is 
entitled to recover all damages naturally flowing from the 
breach."  Id. at 830. 
¶61 In Newhouse, neither the insurer nor its insured 
participated in the trial.  Id. at 832.  During the course of 
the trial, each of the other defendants settled separately with 
the plaintiffs.  Id.  Judgment was entered against the insured 
in the amount of $588,003.70, which was in excess of the $50,000 
policy limits.  Id.  The Newhouse court concluded that "an 
excess judgment is properly included in the damages for breach 
of an insurer's duty to defend, if the excess judgment was a 
natural or proximate result of the breach."  Id. at 838. 
¶62 As the Seventh Circuit explained in Hamlin Inc. v. 
Hartford Accident and Indem. Co., 86 F.3d 93, 95 (7th Cir. 
1996), Newhouse "is explicit that the insured must show that he 
was made worse off by the breach than he would have been had the 
breach not occurred."  The Hamlin court considered whether the 
defendant had as good of a defense as he would have had if the 
insurer provided counsel.  Id. at 95.  It observed that, "[t]his 
insurer did not pay the entire bill for Hamlin's defense.  But 
No. 2013AP907   
 
24 
 
neither is Hamlin some hapless individual who could not afford a 
good defense unless his insurer or insurers picked up the full 
tab."  Id.  In this case, Menard is analogous to the defendant 
in Hamlin, not the insured in Newhouse.   
¶63 The court in Hamlin was concerned about a windfall.  
It explained that to award the entire $2.6 million verdict to 
Hamlin would result in a windfall, which would be punitive in 
nature to the insurer.  Id.  Punitive damages are not awarded 
unless an insurance company acts in bad faith.  Id. (citing 
Weiss v. United Fire & Casualty Co., 197 Wis. 2d 365, 397, 541 
N.W.2d 753 (1995)).  Here there is no allegation that Millers 
First acted in bad faith when it withdrew its defense of Menard.  
Likewise, it would be a windfall for Menard if Millers First 
were ordered to pay the entire verdict in this case. 
¶64 Just as in Hamlin, Menard cannot demonstrate that the 
amount of the jury verdict was a result of the breach.  Menard 
chose its own counsel and there is no assertion that it would 
have achieved a better result at trial had Millers First chosen 
Menard's counsel.  See 86 F.3d at 95.  Unlike the excess 
judgment against the defendant in Newhouse, the jury verdict 
against Menard was for less than the policy limits.  Thus, 
Menard is not entitled to damages in the amount of the jury 
verdict because the verdict amount does not flow naturally from 
the breach.  
¶65 Menard relies on Radke v. Fireman's Fund Ins. Co., for 
the proposition that Wisconsin courts have not adopted Hamlin's 
analysis.  217 Wis. 2d 39, 48, 577 N.W.2d 366 (Ct. App. 1998).    
No. 2013AP907   
 
25 
 
However, the Radtke court simply distinguished Hamlin on the 
grounds that Hamlin involved multiple insurers.  Id. at 48.  
According to Radtke, "[t]he key difference to the Hamlin court 
was that Hamlin involved multiple insurers, one which accepted 
the tender of defense and paid for a portion of Hamlin's legal 
defense bill."  Id. at 48.  The fact that Hamlin had multiple 
insurers, one of which accepted the tender of defense and paid 
for a portion of the legal bill, relates to the issue of whether 
the insured was worse off after the breach.  It is from this 
standpoint that we analyze the present case. 
¶66 The facts in Radtke are also distinguishable from the 
present case.  The insurer denied coverage and refused to defend 
Radtke.  Id. at 42.  Radtke settled with the plaintiff and filed 
suit against the insurer seeking reimbursement of attorney fees 
and his settlement payment.  Id.  The issue in Radtke was 
whether the insurer could raise its coverage defenses after it 
breached its duty to defend.  The court held that because the 
insurer had breached its duty to defend, "it may not now 
challenge or otherwise litigate the coverage issues."  Id. at 
49.  It concluded that the insurer "is liable to Radtke for the 
costs of defending the suit, the amount recovered from Radtke by 
settlement and any additional damages caused by Fireman's Fund's 
breach of its contract."  Id. 
No. 2013AP907   
 
26 
 
¶67 Unlike in Radtke, Millers First accepted Menard's 
tender of defense.8  Millers First defended Menard until it 
settled its proportionate share of the claim.  Due to its self-
insured retention, Menard had responsibility for five-sixths of 
the verdict.  The plaintiffs in Radtke and Newhouse would not 
have been responsible for the verdict except for the insurers' 
refusal to indemnify and defend.  In contrast, Menard would have 
had responsibility for the verdict regardless of whether Millers 
First breached its duty to defend.  Here, Menard has concurrent 
liability because of its $500,000 self-insured retention. 
¶68 In order to satisfy its duty to defend, Millers First 
had various options including:  (1) pay its $100,000 limit of 
liability and be relieved of its duty to defend; (2) settle with 
the plaintiffs for its proportionate share of the claim and use 
a Loy release to give Menard credit for the full amount of the 
$100,000 policy limits; or (3) settle with the plaintiff for its 
proportionate share of the claim and continue to defend Menard.  
Instead, Millers First settled with the plaintiff for its 
proportionate share of the claim, but withdrew defense of Menard 
following settlement.   
¶69 To put Menard in the position it would have been in 
prior to the breach, Millers First must pay damages to Menard in 
the amount of costs and attorney fees.  Menard is not claiming 
                                                 
8 During oral argument, Millers First twice stated that it 
was not challenging its initial duty to defend, explaining "we 
have not appealed that issue" and "we at the circuit court level 
did accept coverage." 
No. 2013AP907   
 
27 
 
attorney fees and costs incurred prior to the breach of the duty 
to defend.  Millers First suggests that defense costs should be 
pro-rated between it and Menard.  Had Millers First put a pro-
rated clause in its policy for defense costs as it did for its 
liability for loss, then defense costs could be pro-rated.  
However, for the reasons stated above, we decline now to rewrite 
its policy.  See majority op., ¶¶55-56. 
¶70 Although the dissent asserts that we ought to apply 
equitable contribution under the facts in this case, we find 
little support for this approach under Wisconsin law.  In 
Plastics Eng'g Co. v. Liberty Mut. Ins. Co., we expressly 
determined that we would not pro rate liability among insurers 
when the policy language did not provide for it.  See 2009 WI 
13, ¶¶51-60, 315 Wis. 2d 556, 759 N.W.2d 613.  The majority 
opinion in Plastics Eng'g Co., authored by Justice Ziegler, 
explained:  "In our analysis, we are again driven by the policy 
language.  Liberty Mutual's policy contains no language that 
limits its obligation to a pro rata share."  Id., ¶55.  "Thus, 
to insert the pro rata language, we would have to rewrite the 
insurance policy."  Id., ¶59. 
¶71 In asserting that equitable contribution of attorney 
fees should be applied here, the dissent leaps over a necessary 
threshold determination.  It fails to address whether an insurer 
that breached its duty to defend should be entitled to equitable 
contribution of attorney fees. 
¶72 The Wisconsin court of appeals previously has refused 
to apply equitable contribution when there has been a breach of 
No. 2013AP907   
 
28 
 
the duty to defend.  See Se. Wis. Prof'l Baseball Park Dist. v. 
Mitsubishi Heavy Indus. Am., Inc., 2007 WI App 185, ¶64, 304 
Wis. 2d 637, 738 N.W.2d 87.   Although the dispute in Mitsubishi 
involved a primary and excess carrier, the policy that a primary 
insurer should not be rewarded for a refusal to honor its duty 
to defend applies here as well: 
We 
perceive 
no 
good 
policy 
reason 
to 
reward 
Travelers . . . for its repeated refusal to defend——
even after being repeatedly told it had a contractual 
duty to do so——by reducing the amount the trial court 
has determined it owed.  Such a reduction would reward 
a primary carrier for a wrongful refusal to defend and 
create something akin to a litigation expense game of 
"chicken"——with offsets going to the obligated primary 
insurer who breached its duty.   
Id., ¶64.  The Mitsubishi court further explained:  "We decline 
Travelers' invitation to thrust the trial court into this new, 
and in this case unnecessary, sea of litigation."  Id. 
¶73 In other jurisdictions as well, a breach of a duty to 
defend precludes application of equitable contribution.  For 
example, the dissent relies on Cargill Inc. v. Ace Am. Ins. Co., 
784 N.W.2d 341, 354 (Minn. 2010), which states that a "breach of 
a duty to defend precludes application of an equitable right to 
contribution."  See also Nat'l Indem. Co. v. St. Paul Ins. 
Companies, 724 P.2d 544, 545 (Ariz. 1986) ("When an insurer has 
a duty to defend the insured, there should be no reward to the 
insurer for breaching that duty . . . .  Under the principle of 
equitable subrogation, the insurer which has performed the duty 
to provide a defense to its insured should be able to compel 
No. 2013AP907   
 
29 
 
contribution for a share of the cost of defense from another 
insurer . . . .").    
¶74 Likewise, in Cont'l W. Ins. Co. v. Colony Ins. Co., 69 
F. Supp. 3d 1075, 1086 (D. Colo. 2014), which the dissent also 
cites, the court found that "a participating insurer is entitled 
to equitable contribution from a non-participating insurer, both 
having a duty to defend, when the former provides a complete 
defense to an insured against a common risk . . . ." (emphasis 
added).  Here, Millers First did not provide a complete defense 
because it withdrew its defense after settlement with the 
plaintiffs in breach of its obligation to provide a defense 
until its limits of liability were exhausted. 
¶75 The dissent argues that Millers First's breach of its 
duty to defend should not preclude equitable contribution.  It 
relies on an Arizona court of appeals decision, Nucor Corp. v. 
Emp'rs Ins. Co. of Wausau, 296 P.3d 74 (Ariz. Ct. App. 2012), 
that is readily distinguishable.   
¶76 Nucor involved a class action lawsuit in which every 
insurer breached its duty to defend.  As the Nucor court 
explained, equitable contribution was allowed because all the 
insurers breached their duty to defend:   
Nucor's argument also fails to acknowledge that all of 
its insurers refused to defend Nucor at some time.  
All refused to defend Nucor in the ADEQ proceeding, 
not just Wausau.  Hartford had to be sued twice by 
Nucor for bad faith before it acknowledged coverage.  
Travelers did not defend Nucor in the class action 
litigation until Nucor sued it for bad faith. 
No. 2013AP907   
 
30 
 
Id., ¶44.  That is not the case here.  Only Millers First 
breached its duty to defend.  There is no allegation that Menard 
failed in its duty to defend.  It was Menard, not Millers First, 
that shouldered the cost of litigation after Millers First 
settled with Burgraff.   
¶77 Millers First could have followed the procedure set 
forth under well-established Wisconsin law.  When coverage is 
disputed, an insurer should request a bifurcated trial on the 
issues of coverage and liability and move to stay any 
proceedings on liability until the issue of coverage is 
resolved.  Newhouse, 176 Wis. 2d at 836; see also Elliot v. 
Donahue, 169 Wis. 2d 310, 318, 485 N.W.2d 403 (1992).  Had it 
done so, Millers First would not have breached its duty to 
defend.  Instead, Millers First relied on the circuit court's 
summary judgment order and withdrew its defense of Menard.   
¶78 "An insurance company breaches its duty to defend if a 
liability trial goes forward during the time a no coverage 
determination is pending on appeal and the insurance company 
does not defend its insured at the liability trial."  Newhouse, 
176 Wis. 2d at 836.  "When an insurer relies on a lower court 
ruling that it has no duty to defend, it takes the risk that the 
ruling will be reversed on appeal."  Id.     
¶79 In sum, we are in accord with the court of appeals' 
determination that Menard's self-insured retention is "other 
applicable liability insurance" under the Millers First policy's 
"other insurance clause."  We also agree with the court of 
appeals conclusion that Millers First breached its duty to 
No. 2013AP907   
 
31 
 
defend when it withdrew its defense of Menard following the 
settlement. 
¶80 Accordingly, we affirm the court of appeals and remand 
to the circuit court for a determination of the amount of costs 
and attorney fees Menard incurred after Millers First breached 
its duty to defend. 
By the Court. – The decision of the court of appeals is 
affirmed and the cause is remanded to the circuit court for a 
determination of damages. 
¶81 MICHAEL J. GABLEMAN and REBECCA G. BRADLEY, J.J., did 
not participate. 
 
 
No.  2013AP907.pdr 
 
1 
 
¶82 PATIENCE DRAKE ROGGENSACK, C.J. (concurring in part, 
dissenting in part).   I concur in the majority opinion's 
conclusion that Millers First breached its duty to defend by 
withdrawing its defense prior to exhausting its $100,000 limit 
of liability.1  I also concur in the majority opinion's 
conclusion that Menard's self-insured retention constitutes 
"other applicable liability insurance" under Millers First's 
"other insurance clause."2   
¶83 However, I write in dissent because, contrary to the 
majority 
opinion, 
I 
conclude 
that 
Wisconsin 
has 
applied 
equitable contribution to other shared obligations and should 
apply it to defense costs between two primary insurers, Millers 
First and Menard.  Millers First and Menard insured the same 
entity, Menard; they had the same primary obligation to defend 
Menard against Burgraff's claims; and Millers First contends 
that it paid more than its fair share of defense costs.  
Therefore, I conclude that the matter should be remanded to the 
circuit court to apply equitable contribution principles to 
determine how best to allocate the total defense costs incurred 
by Millers First and Menard.  Accordingly, I respectfully concur 
in part and dissent in part from the majority opinion.   
I.  BACKGROUND 
¶84 For the most part, the majority opinion sets forth 
facts that underlie the dispute before us.  Therefore, I will 
                                                 
1 Majority op., ¶3.   
2 Id., ¶5.   
No.  2013AP907.pdr 
 
2 
 
not repeat them in full.  However, I do relate a few additional, 
relevant facts.   
¶85 Millers First provides automobile liability insurance 
to Kenneth Burgraff, who was injured when a Menard employee 
attempted to load items purchased from Menard into Burgraff's 
vehicle.  Burgraff brought suit against Menard for personal 
injuries.  Millers First accepted Menard's tender of defense, 
subject to a reservation of rights, because in Blasing v. Zurich 
Am. Ins. Co., 2014 WI 73, ¶41, 356 Wis. 2d 63, 850 N.W.2d 138, 
we concluded that one who loads property into a vehicle is a 
"permissive user" of the vehicle and, accordingly, is entitled 
to a defense under the automobile liability policy for injuries 
alleged to have been caused by the loading.  
¶86 Millers First hired attorney Edmund Manydeeds to 
defend both itself and Menard on the merits of Burgraff's 
claims.  Millers First paid the entire cost of that defense 
until Millers First settled Burgraff's liability claim against 
it and was granted summary judgment dismissing it from the suit.3   
¶87 Prior to withdrawing its defense, Millers First moved 
for pro rata apportionment of defense costs, asserting that 
Menard had a duty to defend itself under its self-insured 
retention.  The circuit court denied the motion.  The case 
proceeded to trial where Burgraff was awarded damages in excess 
                                                 
3 Prior to Millers First's acceptance of Menard's tender of 
defense, Menard's in-house counsel appeared for Menard on the 
merits, as well as with respect to coverage issues.   
No.  2013AP907.pdr 
 
3 
 
of the amount that Millers First paid for its share of 
liability.  Menard provided its own defense at trial. 
¶88 Menard appealed the circuit court's summary judgment 
decision.  The court of appeals affirmed the circuit court's 
conclusion 
that 
Menard's 
self-insurance 
constitutes 
"other 
applicable liability insurance," it reversed the decision 
regarding Millers First's duty to defend, and we granted review.  
¶89 Subsequent to oral argument, we ordered the parties to 
brief the following issues:  "(1) What types of damages can be 
claimed if Millers First is found to have breached its duty to 
defend?[;] (2) Are the damages available affected by the fact 
that Millers First defended until the circuit court approved 
Millers First's settlement with the plaintiff?"   
¶90 Millers First responded as follows:  
If 
this 
court 
were 
inclined 
to 
adopt 
the 
position, advanced by Menard, that it was entitled to 
a continued defense, notwithstanding that Millers 
First completely satisfied its complete covered claims 
duties, then the damages to be awarded should clearly 
reflect and take account of the concurrent coverage 
obligations of the respective parties.  By virtue of 
the circuit court ruling, affirmed by the Court of 
Appeals, Millers First [owed] only one-sixth of the 
total damages.  While the trial court did not 
specifically address the issue of proration of defense 
costs, the logical corollary to that finding is that 
Millers First would have owed only one-sixth of the 
total defense costs involving fees and costs as well.  
The most Menard could hope to recover, therefore, 
would be reimbursement of one-sixth of the total 
defense costs generated in this matter.  Since Millers 
First paid for 100% of the total defense costs until 
it was allowed to withdraw, Millers First should be 
given credit for those costs which it bore up to that 
point.  
(Millers First Supp. Br. 7 (emphasis omitted).)  
No.  2013AP907.pdr 
 
4 
 
¶91 Not surprisingly, Menard holds the opposite view, 
contending that pro rata apportionment of defense costs is not 
appropriate and that it is "entitled to all of its defense costs 
incurred in the defense of the underlying liability claim from 
the date Millers First withdrew its defense."  (Menard Supp. Br. 
3.)  Menard cites Plastics Eng'g Co. v. Liberty Mut. Ins. Co., 
2009 WI 13, ¶60, 315 Wis. 2d 556, 759 Wis. 2d 613, for the 
proposition that Wisconsin law does not allow for pro rata 
allocation of defense costs.  (Menard Supp. Br. 3-4.)   
II.  DISCUSSION 
A.  Majority Opinion 
¶92 The majority opinion apparently agrees with Menard, 
stating that, "[h]ad Millers First put a pro-rated clause in its 
policy for defense costs as it did for its liability for loss, 
then defense costs could be pro-rated.  However, . . . we 
decline now to rewrite its policy."4  Without express contractual 
language, the majority opinion refuses to allow the circuit 
court, on remand, to consider apportioning defense costs between 
Millers First and Menard.5  Instead, the majority opinion remands 
the matter to the circuit court to determine the amount of 
defense costs that Menard has incurred since Millers First's 
withdrawal and, apparently, intends Millers First to bear 100% 
of this burden, just as it did prior to the circuit court's 
                                                 
4 Id., ¶69.   
5 Id.   
No.  2013AP907.pdr 
 
5 
 
grant of summary judgment that dismissed Millers First from 
Burgraff's lawsuit.6  
¶93 As I explain below, this conclusion is inconsistent 
with the majority opinion's holding that Menard's self-insured 
retention constitutes "other applicable liability insurance," 
thereby rendering it a concurrent primary insurer with Millers 
First, with the same duty to defend Menard that Millers First 
had.7  The majority opinion explicitly recognizes Menard's duty 
to provide a defense against Burgraff's claims and states, 
"Menard is required to pay the first $500,000 worth of damages 
and defense costs arising from an occurrence."8  Notwithstanding 
this 
acknowledgement, 
the 
majority 
opinion 
simultaneously 
overlooks Menard's duty to contribute to the costs of the 
defense that it was obligated to provide as a primary insurer.    
B.  General Equitable Principles 
¶94 We have not directly addressed pro rata apportionment 
of defense costs between concurrent primary insurers.  However, 
other jurisdictions have done so and have apportioned those fees 
based on equitable contribution principles.  "Generally, where 
two or more insurers' policies potentially provide coverage and 
one of them bears the defense burden alone, the insurer bearing 
that burden is entitled to equitable contribution from the non-
defending carriers."  Lee R. Russ & Thomas F. Segalla, 14 Couch 
                                                 
6 Id.  
7 See id., ¶¶32, 43, 79.   
8 Id., ¶14 (emphasis added). 
No.  2013AP907.pdr 
 
6 
 
on Insurance § 200:35 (3d ed. 2007).9  "[T]he aim of equitable 
contribution is to apportion a loss between two or more insurers 
who cover the same risk, so that each pays its fair share and 
one does not profit at the expense of the others."  Lee R. Russ 
& Thomas F. Segalla, 16 Couch on Insurance § 222:98 (3d ed. 
2000).10   
¶95 Although Millers First's contract does not direct that 
defense costs are to be shared with other primary insurers, 
apportioning defense costs through equitable contribution is 
appropriate.  Id. (explaining that "equitable contribution 
applies only between insurers, and only in the absence of 
contract, and therefore it has no place between insurer and 
insured, which have contracted the one with the other").  This 
is because "all contractual duties or obligations flow only to 
the insured."  Douglas R. Richmond, Issues and Problems in 
"Other Insurance," Multiple Insurance, and Self-Insurance, 22 
Pepp. L. Rev. 1373, 1426 (1995).  These duties and obligations 
do not flow "between or among the insurers."  Id.   
¶96 In the instant case, Millers First is a fortuitous 
insurer with respect to Menard.  However, Menard also wears 
                                                 
9 I recognize that a minority of jurisdictions have rejected 
the equitable contribution theory as a basis for apportioning 
defense costs.  Scott M. Seaman & Jason R. Schulze, Allocation 
of Losses in Complex Insurance Coverage Claims § 16:6 (database 
updated Dec. 2015); Lee R. Russ & Thomas F. Segalla, 14 Couch on 
Insurance § 200:35 (3d ed. 2007).   
10 As indicated in this writing's citations, hard copies of 
the Third Edition of Couch on Insurance that are available to 
the court exhibit varying dates of publication.    
No.  2013AP907.pdr 
 
7 
 
another hat.  Menard is also an insurer with a duty to defend 
itself.11  Millers First's obligations arising out of its policy 
language run to Menard as an insured rather than to Menard as an 
insurer.  Millers First does not seek to allocate defense costs 
between itself and Menard as an insured but, rather, between 
itself and Menard as another insurer.  Therefore, it is of no 
consequence that Millers First's policy language does not 
provide for pro rata apportionment of defense costs between 
itself and another primary insurer.  Stated otherwise, the 
Millers First policy is a contract between Millers First and 
those who are insureds, not a contract between Millers First and 
other primary insurers.    
¶97 Apportioning 
costs 
between 
concurrent 
primary 
insurers, who insure the same person for the same risk, is the 
context in which courts apply equitable contribution principles 
out of fairness rather than out of contract.  See, e.g., Cont'l 
W. Ins. Co. v. Colony Ins. Co., 69 F. Supp. 3d 1075, 1087 (D. 
Colo. 2014) (applying equitable contribution to require both 
primary insurers to bear defense costs); Cargill, Inc. v. Ace 
Am. Ins. Co., 784 N.W.2d 341, 353-54 (Minn. 2010) (concluding 
that primary insurer has a right to seek equitable contribution 
from other primary insurer for defense costs); Am. Simmental 
Ass'n v. Coregis Ins. Co., 282 F.3d 582, 589 (8th Cir. 2002) 
(apportioning total defense costs in same ratio as each 
insurer's policy provided for total liability); Md. Cas. Co. v. 
                                                 
11 Majority op., ¶¶14, 32, 43, 79.   
No.  2013AP907.pdr 
 
8 
 
Nationwide Mut. Ins. Co., 81 Cal. App. 4th 1082, 1089 (Cal. Ct. 
App. 2000) (explaining that equitable contribution of defense 
costs equalizes a common burden shared by primary insurers).   
¶98 As mentioned above, it does not appear that Wisconsin 
courts have considered whether equitable contribution may be 
applied to apportion defense costs between concurrent primary 
insurers.  The court of appeals refused to apply equitable 
contribution, at the request of a primary insurer, to apportion 
defense costs incurred by the excess insurer, who defended the 
amended complaint that the primary insurer repeatedly refused to 
defend.  Se. Wis. Prof'l Baseball Park Dist. v. Mitsubishi Heavy 
Indus. Am., Inc., 2007 WI App 185, ¶¶62-64, 304 Wis. 2d 637, 738 
N.W.2d 87.  The court of appeals noted that equitable 
contribution was inapplicable because the excess insurer sought 
reimbursement for defense costs it incurred while shouldering a 
defense that rightly should have been met by the primary 
insurer.  Id.    
¶99 The 
majority 
opinion 
cites 
Southeast 
Wisconsin 
Professional Baseball, asserting that it precludes equitable 
contribution because Millers First did not provide a defense 
until its limit of liability was exhausted.12  However, Menard 
also did not provide a complete defense, which the majority 
opinion recognizes that it was obligated to do.13  The majority 
opinion gives no reason for treating two primary insurers so 
differently.   
                                                 
12 Id., ¶72. 
13 Id., ¶14. 
No.  2013AP907.pdr 
 
9 
 
¶100 We previously have explained that "what gives rise to 
the right of contribution is that one co-obligor has discharged 
more than his [or her] fair equitable share of a common debt."  
Kafka v. Pope, 194 Wis. 2d 234, 243, 533 N.W.2d 491 (1995) 
(explaining that the right to seek equitable contribution "is 
premised on two conditions:  (1) the parties must be liable for 
the same obligation; and (2) the party seeking contribution must 
have paid more than a fair share of the obligation").   
¶101 The court of appeals has applied the foregoing two-
part test for equitable apportionment of losses between two 
insurance companies.  In McGee v. Bates, 2005 WI App 19, ¶1, 278 
Wis. 2d 588, 691 N.W.2d 920, one insurance company sought 
contribution from another insurance company for a portion of the 
losses that it incurred by settling with plaintiffs.  The court 
of appeals concluded that the two insurance companies shared 
liability for the same obligation because they both provided 
coverage to the same person for the same loss.  Id., ¶9.  The 
court of appeals then remanded the matter to determine whether 
the insurer seeking contribution bore more than its fair share 
of the losses.  Id., ¶11.   
C.  Equitable Contribution 
¶102 Given the foregoing equitable principles, I would 
remand the issue of equitable contribution to the circuit court 
to apportion defense costs between the two primary insurers, 
Millers First and Menard, who insured the same entity, Menard, 
and who had primary obligations to defend against Burgraff's 
No.  2013AP907.pdr 
 
10 
 
claims.  See Nucor Corp. v. Emp'rs Ins. Co. of Wausau, 296 P.3d 
74, 84 (Ariz. Ct. App. 2012).   
1.  Standard of review 
¶103 Whether equitable contribution may be applied in a 
given factual context is a question of law for our independent 
review.  McGee, 278 Wis. 2d 588, ¶4; Am. Simmental, 282 F.3d at 
586.   
2.  Kafka/McGee test 
¶104 To be entitled to equitable contribution of defense 
costs in the case before us, Millers First must prove two 
conditions:  (1) both Menard and Millers First are liable as 
primary insurers for Menard's defense of Burgraff's claims; and 
(2) Millers First has paid more than its fair share of defending 
against Burgraff's claims.   
a.  liability for same obligation 
¶105 In order to establish a shared liability for defense 
of Burgraff's claims, Millers First must establish that Menard, 
which was self-insured up to $500,000, had a duty to defend 
itself when Burgraff was injured through the negligence of 
Menard's employee.  In this regard, Menard's self-insured 
retention provides that it "shall be eroded by allocated claim 
costs including defense . . . costs."  This demonstrates that 
Menard, as an insurer, has a duty to defend itself, as an 
insured.  The majority opinion recognizes that Menard's self-
insured retention gives Menard a duty "to pay . . . defense 
costs arising from an occurrence."14 
                                                 
14 Id., ¶14. 
No.  2013AP907.pdr 
 
11 
 
¶106 This reasoning is supported by Hillegass v. Landwehr, 
176 Wis. 2d 76, 85, 499 N.W.2d 652 (1993), where we concluded 
that self-insurance is other collectible insurance and should be 
treated the same as if it were contracted with a third-party 
insurer.  The majority opinion also concludes that Menard's 
self-insured retention constitutes "other applicable liability 
insurance," thereby rendering Menard a concurrent primary 
insurer, as is Millers First.15  Millers First and Menard each 
provides coverage for third-party liability as concurrent 
primary insurers, with Millers First being responsible for one-
sixth of third-party liability and Menard being responsible for 
five-sixths of such obligation.16  As the majority opinion notes, 
but for the fortuitousness of Millers First's policy providing 
one-sixth coverage, Menard would have been obligated "to pay the 
first $500,000 worth of damages and defense costs arising from 
an occurrence."17  I agree. 
¶107 Furthermore, "[i]n the context of liability insurance, 
a primary insurer generally has the primary duty to defend the 
insured . . . ."  14 Couch on Insurance § 200:35.  I see nothing 
in Menard's self-insured retention that removes Menard's duty to 
defend itself.  Furthermore, I fail to see the basis for the 
majority opinion's implicit assumption that, by Millers First 
                                                 
15 Id., ¶¶32, 43, 79.   
16 Millers 
First 
and 
Menard 
do 
not 
dispute 
this 
apportionment of coverage for third-party liability. 
17 Id., ¶14.   
No.  2013AP907.pdr 
 
12 
 
accepting its defense obligations, Menard's defense obligations 
are somehow eliminated.  Accordingly, I conclude that Menard and 
Millers First share the obligation to defend Menard from 
Burgraff's claims.   
b.  inequitable payment 
¶108 When two persons share the same obligation and one 
obligor claims to have paid more than its fair share, a claim 
for equitable contribution may be made.  Kafka, 194 Wis. 2d at 
243.  Many courts recognize equitable contribution to satisfy 
such a claim; however, courts employ differing methods to 
apportion defense costs between concurrent primary insurers.  
See Scott M. Seaman & Jason R. Schulze, Allocation of Losses in 
Complex Insurance Coverage Claims § 5:8 (database updated Dec. 
2015) ("[M]ethods include pro rata allocation based upon 
contract limits, equal apportionment, and time on the risk."). 
¶109 The majority of jurisdictions allocate defense costs 
based on the policies' apportionment of liability limits.  See 
Lee R. Russ & Thomas F. Segalla, 15 Couch on Insurance § 217:9 
(3d ed. 1999).  "The courts using this method find that each 
insurer should bear the costs of defense in proportion to its 
contract limits."  Seaman & Schulze, § 5:8.   
¶110 As between Millers First and Menard, there is $600,000 
of combined coverage for liability awards, with one-sixth of the 
total liability exposure being Millers First's and five-sixths 
of the liability exposure Menard's.  Using the one-sixth/five-
sixths ratio, Millers First would be liable for one-sixth of the 
No.  2013AP907.pdr 
 
13 
 
total defense costs paid by Millers First and Menard, and Menard 
would be responsible for the balance.  
¶111 Alternatively, based upon each insurer's separate duty 
to defend the insured, some courts allocate defense costs 
equally.  Id.  As noted, there are various other methods by 
which courts apportion defense costs between insurers.  Id.  
However, choosing how to allocate the total defense costs 
between Millers First and Menard may require fact-finding that 
is not appropriate in this review.  Md. Cas., 81 Cal. App. 4th 
at 1094 (explaining that circuit court has "broad discretion" in 
determining how to properly allocate defense costs).  Therefore, 
were I writing for a majority of the court, I would remand to 
the circuit court to make the findings necessary to determine 
how, based on equitable contribution, the total defense costs 
should be allocated between Millers First and Menard.   
¶112 Contrary to the majority opinion, I would not preclude 
Millers First from seeking equitable contribution because it 
breached its duty to defend by withdrawing prior to the 
exhaustion of its $100,000 limit of liability.18  Of course, in 
some instances, it may be inequitable to permit an insurer to 
benefit from pro rata allocation of defense costs where that 
insurer has refused to defend the insured at all.  See Cargill, 
784 N.W.2d at 354; Cont'l Cas. Co. v. Nat'l Union Fire Ins. Co. 
of Pittsburgh, Pa., 940 F. Supp. 2d 898, 929-30 (D. Minn. 2013).  
However, that did not occur here, as Millers First fully 
                                                 
18 Id., ¶¶71-74. 
No.  2013AP907.pdr 
 
14 
 
defended Menard until it was dismissed from the lawsuit by the 
circuit court.   
¶113 The effect of the majority opinion is to remove 
Menard's duty as a primary insurer to defend itself.  In so 
doing, the majority opinion treats two primary insurers very 
differently and by its directions on remand, inequitably imposes 
100% of defense costs on the fortuitous insurer, Millers First.  
Even in instances where an insurer has breached its duty to 
defend, courts apportion defense costs between insurers where it 
is equitable to do so.  See, e.g., Cont'l Cas. Co., 940 F. Supp. 
2d at 929-30 (explaining that barring an insurer from seeking 
pro rata allocation, where that insurer has significantly 
contributed to defense, does not "comport with the equitable 
nature of contribution").  
¶114 In Nucor, 296 P.3d at 84-85, the court permitted an 
insurer, which previously had breached its duty to defend, to 
seek equitable contribution from other, concurrent primary 
insurers that had likewise refused to defend the insured at 
various points in time.  In rejecting the argument that an 
insurer was not entitled to pro rata apportionment after 
breaching 
its 
duty 
to 
defend, 
the 
court 
reiterated 
the 
overarching purpose of equitable contribution, which is "to 
accomplish substantial justice by equalizing the common burden 
shared by coinsurers, and to prevent one insurer from profiting 
at the expense of others."  Id. at 85 (internal quotation marks 
omitted) (quoting Fireman's Fund Ins. Co. v. Md. Cas. Co., 77 
Cal. Rptr. 2d 296, 303-04 (Cal. Ct. App. 1998)).   
No.  2013AP907.pdr 
 
15 
 
¶115 Similar to the court in Nucor, I would not preclude 
Millers First from seeking equitable contribution simply because 
Millers First did not continue to defend until its limit of 
liability was reached.  Menard had a concurrent obligation to 
defend that should not be overlooked.  Precluding pro rata 
allocation here permits Menard to foist a mutual obligation 
wholly onto Millers First, thereby profiting at the expense of 
Millers First.  See Cont'l Cas., 940 F. Supp. 2d at 929 
(explaining 
that 
such 
a 
holding 
"would 
not 
accomplish 
substantial justice").  
¶116 Additionally, I recognize that "[a] breach of the 
obligation to defend should not be encouraged, but the rule 
which allows an insurer to avoid the costs of defense tends to 
encourage an avoidance of the insurer's responsibilities."  
Nat'l Indem. Co. v. St. Paul Ins. Cos., 724 P.2d 544, 545 (Ariz. 
1986).  While erroneously asserting that "[o]nly Millers First 
breached its duty to defend,"19 the majority opinion precludes 
pro rata allocation of defense costs between concurrent primary 
insurers who have the same obligation to defend against 
Burgraff's claims.20  The majority opinion offers few insights 
for future insurers who may find themselves in a similar 
situation.   
                                                 
19 Id., ¶76.  Menard had the same duty to defend as Millers 
first.  However, Menard provided no defense until after Millers 
First was dismissed from the lawsuit, and the majority opinion 
allows Menard to ignore the obligation to contribute to its own 
defense.  
20 Id., ¶¶54, 69.   
No.  2013AP907.pdr 
 
16 
 
¶117 Finally, I note that Menard relies on our statements 
in Plastics Engineering for the proposition that Wisconsin law 
does not allow pro rata allocation of defense costs.  In 
Plastics Engineering, the sole insurer sought to pay only those 
costs that were incurred in defending claims that were covered 
under the insurer's policy, while excluding defense costs for 
uncovered claims.  Plastics Eng'g, 315 Wis. 2d 556, ¶51.  "Under 
Wisconsin law, if coverage exists, an insurer must defend the 
entire suit even though some of the allegations fall outside the 
scope of coverage."  Id. at ¶60.  However, our statements in 
Plastics 
Engineering 
have 
nothing 
to 
do 
with 
equitable 
contribution of defense costs for Burgraff's litigation because 
here there are two primary insurers, both with a duty to defend.    
III.  CONCLUSION 
¶118 I concur in the majority opinion's conclusion that 
Millers First breached its duty to defend by withdrawing its 
defense prior to exhausting its $100,000 limit of liability.  I 
also concur in the majority opinion's conclusion that Menard's 
self-insured retention constitutes "other applicable liability 
insurance" under Millers First's "other insurance clause."   
¶119 However, I write in dissent because, contrary to the 
majority 
opinion, 
I 
conclude 
that 
Wisconsin 
has 
applied 
equitable contribution to other shared obligations and should 
apply it to defense costs between two primary insurers, Millers 
First and Menard.  Millers First and Menard insured the same 
entity, Menard; they had the same primary obligation to defend 
Menard against Burgraff's claims; and Millers First contends 
No.  2013AP907.pdr 
 
17 
 
that it paid more than its fair share of defense costs.  
Therefore, I conclude that the matter should be remanded to the 
circuit court to determine how best to allocate the total 
defense 
costs 
incurred 
by 
Millers 
First 
and 
Menard.  
Accordingly, I respectfully concur in part and dissent in part 
from the majority opinion.  
¶120 I 
am 
authorized 
to 
state 
that 
Justice 
ANNETTE 
KINGSLAND ZIEGLER joins this opinion. 
 
 
No.  2013AP907.pdr 
 
1