Title: Water Well Solutions Serv. Group Inc. v. Consolidated Ins. Co.
Citation: N/A
Docket Number: 2014AP002484, 2014AP002484
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: June 30, 2016

2016 WI 54 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2014AP2484 
COMPLETE TITLE: 
Water Well Solutions Service Group Inc., 
          Plaintiff-Appellant-Petitioner, 
     v. 
Consolidated Insurance Company, 
          Defendant-Respondent. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
(Reported at 365 Wis. 2d 223, 871 N.W.2d 276) 
(Ct. App. 2015 – Published) 
PDC No: 2015 WI App 78 
 
 
OPINION FILED: 
June 30, 2016 
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
March 16, 2016 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit 
 
COUNTY: 
Waukesha 
 
JUDGE: 
James R. Kieffer 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
      
 
DISSENTED: 
BRADLEY, A. W., J. and ABRAHAMSON, J. dissent 
(Opinion filed). 
 
NOT PARTICIPATING:          
 
 
 
ATTORNEYS: 
 
For the plaintiff-appellant-petitioner, there were briefs 
by Timothy M. Hansen, Charles J. Crueger, James B. Barton, and 
Hansen Reynolds Dickinson Crueger LL, and oral argument by 
Timothy M. Hansen.  
 
 
For the defendant-respondent, there was a brief by William 
J. Katt, Christina A. Katt, Corey J. Wright and Wilson Elser 
Moskowitz Edelman & Dicker, LLP, and oral argument by William J. 
Katt.  
 
 
 
 
2016 WI 54
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.   2014AP2484 
(L.C.  
2014CV254) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Water Well Solutions Service Group Inc., 
 
          Plaintiff-Appellant-Petitioner, 
 
     v. 
 
Consolidated Insurance Company, 
 
          Defendant-Respondent. 
FILED 
 
JUN 30, 2016 
 
Diane M. Fremgen 
Clerk of Supreme Court 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
REBECCA G. BRADLEY, J.   In this duty to defend case, 
Water Well Solutions Service Group Inc. (Water Well) asks us to 
reverse the court of appeals' decision1 affirming the Waukesha 
County Circuit Court's2 summary judgment decision in favor of 
Consolidated Insurance Company, Water Well's insurer.  Applying 
the longstanding four-corners rule used to determine whether a 
complaint triggers the duty to defend, see Doyle v. Engelke, 219 
Wis. 2d 277, 284, 580 N.W.2d 245 (1998), both the circuit court 
                                                 
1 Water Well Sols. Serv. Grp. Inc. v. Consol. Ins. Co., 2015 
WI App 78, 365 Wis. 2d 223, 871 N.W.2d 276. 
2 The Honorable James R. Kieffer presided. 
No. 
2014AP2484   
 
2 
 
and the court of appeals concluded that Consolidated did not 
breach its duty to defend Water Well.  In response, Water Well 
argues this court should craft an exception to the four-corners 
rule allowing courts to consider extrinsic evidence when an 
insurer has unilaterally decided that no duty to defend exists 
based on exclusions in the insurance policy.   
¶2 
Specifically, we are asked to decide whether this 
court should allow admission of extrinsic evidence under a 
limited exception to the four-corners rule in cases where (1) 
the policy provides an initial grant of coverage based on facts 
alleged in the complaint, (2) the insurer denies a duty to 
defend its insured based on the application of specific policy 
exclusions but without seeking a coverage determination from a 
court, and (3) the insured asserts that the underlying complaint 
is factually incomplete or ambiguous.  We are further asked to 
determine, absent an exception to the four-corners rule, whether 
a court should compare the four corners of the complaint to the 
entire insurance policy, including exclusions and exceptions, or 
if the court's review is limited to comparing the complaint to 
the terms of the policy governing the initial grant of coverage.  
We confirmed in Marks v. Houston Cas. Co., 2016 WI 53, ¶¶61-76, 
__ Wis. 2d __, __ N.W.2d __, that under the four-corners rule 
the entire policy must be examined, including the coverage-
granting clauses, exclusions, and exceptions to any applicable 
No. 
2014AP2484   
 
3 
 
exclusions.3  Thus, we also decide whether any exclusions in 
Consolidated's policy apply. 
¶3 
We 
affirm 
the 
court 
of 
appeals 
and 
hold 
that 
Consolidated did not breach its duty to defend Water Well.  
First, we reject Water Well's request to craft a limited 
exception to the four-corners rule, which has long endured to 
the benefit of Wisconsin insureds.  We are not persuaded that an 
exception to this rule is necessary.  Second, as we explain in 
Marks, __ Wis. 2d __, ¶¶61-76, released today in conjunction 
with this decision, the four-corners rule requires a court to 
compare the complaint to the terms of the entire insurance 
policy in determining whether the duty to defend is triggered.  
Thus, 
we 
reject 
Water 
Well's 
argument 
that 
the 
court's 
comparison is limited to reviewing the insurance policy's 
granting clause.  The longstanding four-corners comparison rule 
applies in all duty to defend cases, including cases such as 
this one where the policy provides an initial grant of coverage, 
the insurer made a unilateral decision to refuse to defend based 
on specific policy exclusions, and the insured asserts the 
underlying complaint is factually incomplete or ambiguous.  
Finally, after comparing the four corners of the underlying 
complaint to the terms of the insurance policy at issue, we 
conclude that the "Your Product" exclusion applies to preclude 
                                                 
3 The court heard oral arguments in this case and in Marks 
v. Houston Cas. Co., 2016 WI 53, __ Wis. 2d __, __ N.W.2d __ on 
the same day, March 16, 2016. 
No. 
2014AP2484   
 
4 
 
coverage.  As a result, Consolidated did not breach its duty to 
defend Water Well and is entitled to summary judgment as a 
matter of law; therefore, we affirm. 
I.  BACKGROUND 
¶4 
In 2009, Waukesha Water Utility (Waukesha) contracted 
with Water Well to perform work on Well #10, an existing well 
located in the City of Waukesha.  Waukesha hired Water Well to 
remove an existing pump, install a new pump, and complete 
reinstallations of the pump.  In February 2011, the well pump 
unthreaded from a pipe column and fell to the bottom of the 
well. 
¶5 
Argonaut Insurance Company,4 Waukesha's insurer, filed 
suit against Water Well in federal district court.  Argonaut's 
complaint alleged that "Water Well, its agents, employees and 
representatives" 
were 
negligent 
in 
the 
installation 
and 
reinstallations of the well pump and that "Water Well, its 
agents, 
employees 
and/or 
representatives" 
breached 
their 
contractual obligations.  Specifically, Argonaut's complaint 
alleged that the well pump "unthreaded and separated from the 
pipe column," which "caused the Well Pump, including the motor, 
to fall to the bottom of the approximately 1910-foot-deep well." 
Argonaut asserted that Water Well failed to install two 
setscrews, "which allowed operating torques and vibrations to 
                                                 
4 It is undisputed that the well pump at issue is covered 
under Waukesha's policy with Argonaut.  In the underlying 
federal suit, Argonaut acted as subrogee of Waukesha.  
No. 
2014AP2484   
 
5 
 
cause the Well Pump to rotate and unthread from the pipe column 
and caused the Well Pump to fall to the bottom of the well."  
Argonaut sought $300,465.48 in subrogated damages.  We set forth 
pertinent paragraphs of Argonaut's complaint in our analysis. 
¶6 
Water Well was insured under a Commercial General 
Liability Primary Policy (CGL policy) with Consolidated at the 
time the alleged damages occurred.5  Water Well tendered its 
defense to its insurer, Consolidated, in the action initiated by 
Argonaut.  The parties do not dispute that the CGL policy 
provides an initial grant of coverage.6  However, Consolidated 
denied Water Well's defense tender stating it had no duty to 
defend or indemnify Water Well under the CGL policy because the 
"Your Work" and the "Your Product" exclusions applied and 
removed 
coverage 
for 
the 
damages 
alleged 
in 
Argonaut's 
complaint.   
¶7 
After Consolidated refused to defend Water Well in the 
Argonaut 
action, 
Water 
Well 
obtained 
counsel, 
incurred 
attorney's fees and costs, and eventually settled with Argonaut 
for $87,500.  Water Well then filed suit against Consolidated, 
alleging that Consolidated breached its duty to defend Water 
Well in the underlying action initiated by Argonaut.  Water Well 
                                                 
5 The CGL policy at issue was in effect from November 1, 
2010 until November 1, 2011.   
6 The policy provides an initial grant of coverage for 
"property damage" that arises from an "occurrence," which is 
defined, in part, as "an accident."   
No. 
2014AP2484   
 
6 
 
also alleged that Consolidated acted in bad faith when it 
refused to provide a defense.7 
¶8 
The 
Waukesha 
County 
Circuit 
Court 
granted 
Consolidated's motion for summary judgment after considering 
cross-motions for summary judgment.  It determined that under 
applicable Wisconsin case law, a court must compare the four 
corners of the complaint to the terms of the entire insurance 
policy when deciding whether an insurer breached its duty to 
defend its insured.  The circuit court concluded that this 
comparison encompassed the policy's coverage provisions and 
exclusions, but not extrinsic evidence Water Well offered in 
support of its assertion that its subcontractor's work on 
preexisting pipes triggered coverage under the policy.8  Based on 
a comparison of the four corners of the complaint and the terms 
of the entire policy, the circuit court determined that the 
allegations in the Argonaut complaint fell under both the "Your 
Product" and the "Your Work" exclusions.  Therefore, it 
                                                 
7 Water Well's bad faith claim was bifurcated from its duty 
to defend claim by stipulation.  The circuit court stayed 
discovery and proceedings on the bad faith claim pending the 
resolution of the breach of the duty to defend claim.  
8 Along with its summary judgment motion, Water Well 
submitted an affidavit from its operations manager, Steve 
Judkins.  The Judkins affidavit contained extrinsic evidence 
that Water Well argues supports its position that the "Your 
Product" exclusion did not apply and the subcontractor exception 
to the "Your Work" exclusion restored coverage. 
No. 
2014AP2484   
 
7 
 
concluded that "there is no covered claim and therefore there 
was no duty to defend."9 
¶9 
The court of appeals affirmed in a published decision.  
Water Well Sols. Serv. Grp. Inc. v. Consol. Ins. Co., 2015 WI 
App 78, ¶1, 365 Wis. 2d 223, 871 N.W.2d 276.  The majority's 
reasoning mirrored the circuit court's: it reviewed the four 
corners of Argonaut's complaint, compared the complaint to the 
terms of the entire insurance policy, and concluded that both 
the "Your Work" and the "Your Product" exclusions eliminated 
coverage.  Id., ¶¶6-7, 10, 13, 16-18.  
¶10 We granted Water Well's petition for review. 
II.  STANDARD OF REVIEW 
¶11 We independently review a grant of summary judgment 
using the same methodology of the circuit court and the court of 
appeals.  Blasing v. Zurich Am. Ins. Co., 2014 WI 73, ¶21, 356 
Wis. 2d 63, 850 N.W.2d 138.  Summary judgment is appropriate 
when there is no genuine dispute of material fact and the moving 
party is entitled to judgment as a matter of law.  Wis. Stat. 
§ 802.08(2) (2013-14);10 Blasing, 356 Wis. 2d 63, ¶21.   
                                                 
9 The circuit court also determined that since Consolidated 
did not breach its duty to defend, Water Well could not 
"establish a 'fundamental prerequisite' to its bad faith claim."  
Therefore, the circuit court dismissed the bad faith claim with 
prejudice.  Water Well does not assert a bad faith claim in this 
court. 
10 All subsequent references to the Wisconsin Statutes are 
to the 2013-14 version unless otherwise indicated. 
No. 
2014AP2484   
 
8 
 
¶12 This case requires the court to interpret an insurance 
policy to determine whether an insurer breached its duty to 
defend its insured.  Interpretation of an insurance contract 
presents a question of law that we review de novo.  Estate of 
Sustache v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶18, 311 
Wis. 2d 548, 751 N.W.2d 845.       
III.  ANALYSIS 
A.  Typical Process used in Duty to Defend Determinations 
¶13 Before reaching the dispositive issue in this case, we 
first set forth general principles governing interpretation of 
insurance policies as well as the process typically used by 
courts in duty to defend cases. 
1.  General principles: Insurance contracts 
¶14 Insurance 
policies 
are 
contracts 
that 
generally 
establish an insurer's "duty to indemnify the insured against 
damages or losses, and the duty to defend against claims for 
damages."  Olson v. Farrar, 2012 WI 3, ¶27, 338 Wis. 2d 215, 809 
N.W.2d 1.  We interpret insurance policies in the same manner as 
other contracts——to give effect to the intent of the contracting 
parties.  Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 2004 WI 2, 
¶23, 268 Wis. 2d 16, 673 N.W.2d 65.  We construe policy language 
as a reasonable person in the position of the insured would 
understand such language.  Estate of Sustache, 311 Wis. 2d 548, 
¶19.   
¶15 Longstanding case law requires a court considering an 
insurer's duty to defend its insured to compare the four corners 
of the underlying complaint to the terms of the entire insurance 
No. 
2014AP2484   
 
9 
 
policy.  See, e.g., id., ¶20; Doyle, 219 Wis. 2d at 284 & n.3; 
Grieb v. Citizens Cas. Co. of New York, 33 Wis. 2d 552, 558, 148 
N.W.2d 103 (1967).  The four-corners rule prohibits a court from 
considering extrinsic evidence when determining whether an 
insurer breached its duty to defend.  Estate of Sustache, 311 
Wis. 2d 548, ¶27; Fireman's Fund Ins. Co. of Wis. v. Bradley 
Corp., 2003 WI 33, ¶19, 261 Wis. 2d 4, 660 N.W.2d 666.  We have, 
however, consistently explained that a court must liberally 
construe the allegations contained in the underlying complaint, 
assume all reasonable inferences from the allegations made in 
the complaint, and resolve any ambiguity in the policy terms in 
favor of the insured.  Estate of Sustache, 311 Wis. 2d 548, ¶21.   
¶16 We use a three-step process when comparing the 
underlying complaint to the terms of the policy in duty to 
defend cases.11  Id., ¶¶22-23.  First, a reviewing court 
                                                 
11 To an extent, the three steps used in analyzing an 
insurance contract are the same whether a court is determining 
an insurer's duty to defend or its duty to indemnify.  Compare 
Estate of Sustache v. Am. Fam. Mut. Ins. Co., 2008 WI 87, ¶¶22-
23, 311 Wis. 2d 548, 751 N.W.2d 845 (detailing the three steps 
in the duty to defend context) with Am. Fam. Mut. Ins. Co. v. 
Am. Girl, Inc., 2004 WI 2, ¶24, 268 Wis. 2d 16, 673 N.W.2d 65 
(explaining the three steps in the indemnity context).  This is 
because a determination of whether an insurer breached its duty 
to defend depends on whether it could be found to have a duty to 
indemnify, if the plaintiff proves the allegations in the 
complaint.  Olson v. Farrar, 2012 WI 3, ¶29, 338 Wis. 2d 215, 
809 N.W.2d 1.   
(continued) 
No. 
2014AP2484   
 
10 
 
determines whether the policy language grants initial coverage 
for the allegations set forth in the complaint.  Id., ¶22.  If 
the allegations set forth in the complaint do not fall within an 
initial grant of coverage, the inquiry ends.  Id.  However, if 
the allegations fall within an initial grant of coverage, the 
court next considers whether any coverage exclusions in the 
policy apply.  Id., ¶23.  If any exclusion applies, the court 
next considers whether an exception to the exclusion applies to 
restore coverage.  Id.  If coverage is not restored by an 
exception to an exclusion, then there is no duty to defend.  See 
Am. Girl, Inc., 268 Wis. 2d 16, ¶24.  If the policy, considered 
in its entirety, provides coverage for at least one of the 
claims in the underlying suit, the insurer has a duty to defend 
its insured on all the claims alleged in the entire suit.  
Fireman's Fund Ins. Co., 261 Wis. 2d 4, ¶21.     
                                                                                                                                                             
This, however, does not mean that a court's duty to defend 
analysis is the same as its consideration of indemnification.  
For example, unlike duty to defend determinations, extrinsic 
evidence is admissible in coverage disputes to prove (or 
disprove) the allegations set forth in the complaint.  Id., 
¶¶33-34.  In addition, in indemnification disputes the insured 
has the initial burden to show the policy provides an initial 
grant of coverage "and if that burden is met the burden shifts 
to the insurer to show that an exclusion nevertheless precludes 
coverage."  Day v. Allstate Indem. Co., 2011 WI 24, ¶26, 332 
Wis. 2d 571, 798 N.W.2d 199.  Logically, this same burden 
shifting is not implicated in duty to defend determinations 
because a court is comparing documents it has before it——the 
underlying complaint and the insurance policy——without resort to 
extrinsic evidence.  
No. 
2014AP2484   
 
11 
 
¶17 It is also well-established that an insurer's duty to 
defend its insured is broader than its duty to indemnify.  
Olson, 338 Wis. 2d 215, ¶29.  This is because the four-corners 
rule dictates that the duty to defend is determined by "the 
nature of the claim alleged against the insured . . . even 
though the suit may be groundless, false or fraudulent."  Grieb, 
33 Wis. 2d at 558.  "'[T]he insurer is under an obligation to 
defend only if it could be held bound to indemnify the insured, 
assuming that the injured person proved the allegations of the 
complaint, regardless of the actual outcome of the case.'"  Id. 
(quoting 29A Am. Jur., Insurance § 1452, at 565 (1960)(emphasis 
added). 
2.  The four-corners rule 
¶18 Water Well urges this court to establish a limited 
exception to the four-corners rule that would allow it to submit 
extrinsic evidence to dispute Consolidated's unilateral decision 
to refuse to defend Water Well in the Argonaut suit based on 
Consolidated's position that exclusions in the policy precluded 
coverage.  Ultimately, Water Well asks this court to create an 
exception to the four-corners rule in duty to defend cases when 
(1) the policy provides an initial grant of coverage based on 
facts alleged in the complaint, (2) the insurer declines to 
defend its insured based on the application of specific policy 
exclusions but without seeking a coverage determination from the 
circuit court, and (3) the insured asserts that the underlying 
complaint is factually incomplete or ambiguous.  We reject Water 
Well's request to create an exception to the four-corners rule. 
No. 
2014AP2484   
 
12 
 
¶19 In 1967, in Grieb, this court set forth the general 
rule that courts use to determine whether an insurer breached 
its duty to defend its insured.  Grieb, 33 Wis. 2d at 558-59.  
Essentially, we rejected Grieb's argument that when an implied 
duty to defend arises from a policy's indemnity clause, the 
four-corners rule does not apply.  Id.  We held that an 
insurer's duty to defend, regardless of its origin, depends on a 
comparison of the four corners of the underlying complaint to 
the terms of the policy, reasoning:  
Whether a third-party suit comes within the 
coverage of this clause [the defense-coverage clause] 
or an implied duty to defend under an indemnity clause 
depends upon its allegations which are referred to as 
a general rule as the measure in the first instance.  
These allegations must state or claim a cause of 
action for the liability insured against or for which 
indemnity is paid in order for the suit to come within 
any defense coverage of the policy unless the express 
defense coverage is broader. 
Id. at 557-58.  After setting forth the four-corners rule, we 
stated "[t]here are at least four exceptions to the general rule 
determining the extent of the insurer's duty to defend and 
generally the insurer who declines to defend does so at his 
peril.  These and allied problems are extensively covered in 
Anno., Liability Insurer——Duty to Defend, 50 A.L.R.2d 458."  
Grieb, 33 Wis. 2d at 558.  These two sentences are the only 
discussion in Grieb regarding exceptions to the four-corners 
rule; we did not actually adopt or apply any of the exceptions 
No. 
2014AP2484   
 
13 
 
to the four-corners rule by this reference.12  Instead, we held 
that Grieb's insurer had no duty to defend Grieb because the 
allegations in the complaint "could not be considered as stating 
a cause of action for liability for negligence, omissions, 
mistakes or errors."  Id. at 559.  In other words, we limited 
our determination of whether Grieb's insurer breached its duty 
to defend Grieb to the allegations in the four corners of the  
complaint: "It is not sufficient under [the insurance] policy 
that the facts alleged might under other circumstances be 
characterized as acts of unintentional negligence, error, 
mistake or omission."  Id. 
 
¶20 Since Grieb, Wisconsin courts, with one deviation in 
Berg v. Fall, 138 Wis. 2d 115, 405 N.W.2d 701 (Ct. App. 1987), 
have consistently stated that an insurer's duty to defend its 
insured depends on the allegations contained in the four corners 
                                                 
12 The court of appeals later set forth the exceptions from 
the A.L.R. that Grieb referenced:  
[T]here are also a number of cases involving special 
situations 
not 
covered 
directly 
by 
the 
general 
rules. . . . These 
special 
situations 
exist 
particularly where there is a conflict of allegations 
and known facts, where the allegations are ambiguous 
or incomplete, where the allegations state facts 
partly within and partly outside the coverage of the 
policy, and finally where the allegations contain 
conclusions instead of statements of facts. 
Sustache v. Am. Fam. Mut. Ins. Co., 2007 WI App 144, ¶11, 303 
Wis. 2d 714, 735 N.W.2d 186, aff'd sub nom. Estate of Sustache 
v. Am. Family Mut. Ins. Co., 2008 WI 87, 311 Wis. 2d 548, 751 
N.W.2d 845.  
No. 
2014AP2484   
 
14 
 
of the complaint.  E.g., Olson, 338 Wis. 2d 215, ¶30 ("Wisconsin 
policy is clear.  If the allegations in the complaint, construed 
liberally, appear to give rise to coverage, insurers are 
required to provide a defense until the final resolution of the 
coverage question by a court."); Estate of Sustache, 311 
Wis. 2d 548, ¶20 ("The duty to defend is triggered by the 
allegations 
contained 
within 
the 
four 
corners 
of 
the 
complaint."); Doyle, 219 Wis. 2d at 284 ("In determining an 
insurer's duty to defend, we apply the factual allegations 
present in the complaint to the terms of the disputed insurance 
policy."); Newhouse v. Citizens Sec. Mut. Ins. Co., 176 
Wis. 2d 824, 835, 501 N.W.2d 1 (1993) ("The duty to defend is 
triggered by the allegations contained within the four corners 
of the complaint."); Prof'l Office Bldgs., Inc. v. Royal Indem. 
Co., 145 Wis. 2d 573, 580-81, 427 N.W.2d 427 (Ct. App. 1998) 
("[W]e believe the rule of Grieb v. Citizens Casualty Co., 33 
Wis. 2d 552, 148 N.W.2d 103 (1967), and similar cases, is 
controlling and compels the determination that the duty to 
defend is dependent solely on the allegations of the complaint 
. . . ."). 
 
¶21 Despite this consistent application of the four-
corners rule, the court of appeals in Berg considered extrinsic 
evidence to determine that an insurer had a duty to defend its 
insured.  Berg, 138 Wis. 2d at 123.  In Berg, Robin Berg alleged 
that James Fall punched him in the face.  Id. at 117.  Fall's 
insurer, State Farm Insurance Company, was joined as a defendant 
in the suit.  Id. at 116.  The central issue before the court of 
No. 
2014AP2484   
 
15 
 
appeals was whether the State Farm policy, which excluded 
coverage for "bodily injury 'expected or intended by the 
insured,'" applied where Fall claimed he acted in self-defense 
when he punched Berg.  Id. at 117.  The court of appeals held 
that (1) summary judgment was improper because a material fact——
whether Fall acted in self-defense——was disputed and (2) "that a 
privileged act of self-defense is not excluded from coverage by 
State Farm's policy language."  Id. at 119-20.  The court of 
appeals concluded that State Farm had a duty to defend Fall even 
though Berg's complaint did not allege that Fall acted in self-
defense.  Id. at 122.  While the court of appeals cited Grieb 
and the general rule——that the duty to defend is determined by 
reference to the four corners of the underlying complaint——it 
held that "[b]ecause the record shows facts sufficient to 
support an inference that Fall acted reasonably in self-defense, 
summary judgment was inappropriate and State Farm owes him a 
duty of defense."  Id. at 123 (footnote omitted).  By relying on 
extrinsic evidence, the court of appeals in Berg departed from 
the well-established four-corners rule.   
¶22 We recognized this in Doyle when we soundly rejected 
an assertion, based on Berg, suggesting a court should look 
beyond the four corners of the complaint to determine whether an 
insurer had breached its duty to defend.  Doyle, 219 Wis. 2d at 
284 n.3.  A year later, citing our footnote in Doyle, we again 
declined to recognize an exception to the four-corners duty to 
defend rule.  Smith v. Katz, 226 Wis. 2d 798, 815-16, 595 
N.W.2d 345 (1999).   
No. 
2014AP2484   
 
16 
 
¶23 In Sustache v. Am. Family Mut. Ins. Co., the court of 
appeals considered whether any exception to the four-corners 
rule existed in Wisconsin given that (1) Grieb referenced "at 
least four exceptions" to the four corners rule, id., 33 
Wis. 2d at 558, (2) the court of appeals in Berg relied on 
extrinsic evidence to determine an insurer's duty to defend its 
insured, and (3) this court rejected an invitation to rely on 
Berg in Doyle and Smith, but did not explicitly overrule Berg's 
reliance on extrinsic evidence.  Sustache v. Am. Family Mut. 
Ins. Co., 2007 WI App 144, ¶¶11-13, 15-16, 303 Wis. 2d 714, 735 
N.W.2d 186 aff'd sub nom. Estate of Sustache v. Am. Family Mut. 
Ins. Co., 2008 WI 87, 311 Wis. 2d 548, 751 N.W.2d 845.13  The 
court of appeals explained "the dilemma in this case goes beyond 
the tension between Doyle/Smith and Berg.  If we should hold 
that the supreme court has tacitly overruled Berg, it remains 
that Grieb, a supreme court opinion, is still on the books, and 
no court of appeals or supreme court opinion has ever called 
Grieb into question."  Sustache, 303 Wis. 2d 714, ¶17.  The 
court of appeals concluded that it was required to follow this 
court's most recent decisions regarding the application of the 
four-corners rule in duty to defend cases.  Id., ¶19.  It 
                                                 
13 This court affirmed the court of appeals decision in 
Sustache on different grounds and did not specifically address 
whether Wisconsin law recognizes any exception to the four-
corners rule.  Estate of Sustache, 311 Wis. 2d 548, ¶¶28-29 
(determining that because the insurer provided an initial 
defense and the case had moved to a determination of coverage, 
the purpose of the four-corners rule had been served). 
No. 
2014AP2484   
 
17 
 
concluded that our opinions in Doyle and Smith "tacitly 
overruled . . . [our] recognition of the exceptions to the four-
corners rule in Grieb.  From that it logically follows that 
Doyle and Smith have also tacitly overruled Berg."  Sustache, 
303 Wis. 2d 714, ¶19.  It concluded: "In sum, the four-corners 
rule is the law in Wisconsin when measuring an insurer's duty to 
defend, and the rule knows no exceptions until the supreme court 
unequivocally holds otherwise."  Id. 
¶24 We now unequivocally hold that there is no exception 
to the four-corners rule in duty to defend cases in Wisconsin.  
This position is consistent with long-standing precedent, 
including Grieb.  Our passing reference in Grieb to "at least 
four exceptions to the general rule," 33 Wis. 2d at 558, should 
not be read as an adoption of any exception to the four corners 
rule.  Rather, by citation to the American Law Reports, this 
passage in Grieb merely recognized that exceptions exist in 
other jurisdictions.  That Grieb did not adopt any exceptions to 
the four-corners rule is further supported by the fact that 
Grieb never specifically enumerated or described any exception 
to the four-corners rule.  Furthermore, our analysis in Grieb 
plainly reveals that we did not consider extrinsic evidence; 
rather, we applied the four-corners rule to conclude that the 
allegations against Grieb in the taxpayer's suit did not fall 
within the coverage provided by the insurance policy at issue.  
Id. at 559.  We overrule any language in Berg suggesting that 
evidence may be considered beyond the four corners of the 
No. 
2014AP2484   
 
18 
 
complaint in determining an insurer's duty to defend its 
insured.14 
¶25 We 
have 
applied 
the 
four-corners 
rule, 
without 
exceptions, in duty to defend cases for so long because it 
                                                 
14 Appeals to fairness in factual scenarios similar to Berg, 
where the plaintiff's complaint alleges intentional conduct but 
the defendant argues self-defense, entreat courts to create an 
exception to the four-corners rule.  Considerations of fairness 
cannot override the contractual terms of the insurance policy on 
which the duty to defend is based: 
In these cases, if negligence is not alleged, the 
plaintiff is only seeking damages because of an 
intentional act.  If self-defense is proved, there is 
no recovery for intentional acts.  Often a plaintiff 
will file a complaint that alleges both negligence and 
intentional 
conduct. 
 
With 
this 
allegation 
of 
negligence, the insurance company will have a duty to 
defend. . . .  If the plaintiff stands fast on an 
intentional-act-or-nothing 
position, 
there 
is 
no 
coverage, nor is there a duty to defend or indemnify. 
 . . .  There is no compelling need to carve out an 
exception to the complaint test for defendant-insureds 
who end up in fistfights with plaintiffs who do not 
allege the insured was negligent. 
Sheila M. Sullivan et al., Anderson on Wisconsin Insurance 
Law § 7.27 at 29-30 (7th ed. 2015).  In this case, the CGL 
Policy relieves Consolidated of its duty to defend Water Well 
when the suit seeks damages for property damage to which the 
policy does not apply.  Because the "Your Product" exclusion 
negates coverage, the policy does not apply to the claims made 
in Argonaut's complaint. 
No. 
2014AP2484   
 
19 
 
generally favors Wisconsin insureds.15  The rule ensures that 
courts are able to efficiently determine an insurer's duty to 
defend, which results in less distraction from the merits of the 
underlying suit.  Also, the four-corners rule supports the 
policy that an insurer's duty to defend is broader than its duty 
to indemnify.  Estate of Sustache, 311 Wis. 2d 548, ¶20.  That 
is because "[i]t is the nature of the claim alleged against the 
insured which is controlling even though the suit may be 
groundless, false or fraudulent."  Grieb, 33 Wis. 2d at 558.  
Adherence to "[t]he four-corners rule 'ensure[s] that insurers 
do 
not 
frustrate 
the 
expectations 
of 
their 
insureds 
by 
[prematurely] 
resolving 
the 
coverage 
issue 
in 
their 
own 
favor[.]'"  Olson, 338 Wis. 2d 215, ¶32 (quoting Baumann v. 
Elliot, 2005 WI App 186, ¶10, 286 Wis. 2d 667, 704 N.W.2d 361) 
(brackets in original).  Without the four-corners rule, insurers 
                                                 
15 We acknowledge that the four-corners rule benefits the 
insurer as well because it does "not require an insurer to 
speculate beyond the written words of the complaint in order to 
imagine a claim that a plaintiff might be making or to determine 
all potential issues that could be sought when the insurer is 
evaluating its duty to defend."  State Farm Fire & Cas. Co. v. 
Easy PC Sols., LLC, 2016 WI App 9, ¶8, 366 Wis. 2d 629, 874 
N.W.2d 585.  The duty to defend is grounded in the insurance 
contract 
entered 
between 
the 
insurer 
and 
its 
insured.  
Recognizing exceptions to the four-corners rule would require 
the insurer to not only draw reasonable inferences from the 
language of the complaint in evaluating its contractual duty to 
defend, but to imagine claims the plaintiff might have made.  
Imposing this judicially-created burden on insurers would, in 
practical application, rewrite the contractual duty to defend to 
be triggered whenever any claim is made rather than only those 
claims covered under the actual policy terms.   
No. 
2014AP2484   
 
20 
 
would be incentivized to outright refuse to defend their 
insureds and hope that the facts later revealed that no coverage 
existed.  Olson, 338 Wis. 2d 215, ¶32.  The end result of strict 
adherence to the four-corners rule is that "the insurer may have 
no duty to defend a claim that ultimately proves meritorious 
against the insured because there is no coverage for that claim.  
Conversely, the insurer may have a clear duty to defend a claim 
that is utterly specious because, if it were meritorious, it 
would be covered."  Smith, 226 Wis. 2d 798, ¶20. 
¶26 The four-corners rule ultimately favors insureds in 
another way.  Even if a plaintiff's first complaint does not 
contain allegations that trigger the duty of a defendant's 
insurer to defend, a plaintiff has both the opportunity and the 
incentive to file an amended complaint when discovery results in 
additional facts that, if alleged in an amended complaint, would 
trigger a duty to defend: "[I]f a complaint does not allege a 
covered claim, the true facts will come out in discovery.  
Sooner or later those facts will be alleged in an amended 
complaint because the plaintiff will want coverage for the 
defendant-insured.  When that happens, the duty to defend is 
triggered."  Sheila M. Sullivan et al., Anderson on Wisconsin 
Insurance Law § 7.27 at 29 (7th ed. 2015).  
¶27 Water Well asserts that strictly applying the four-
corners rule encourages insurers to refuse to defend insureds in 
close cases.  We disagree.  We continue to strongly encourage 
insurers to follow one of the judicially-preferred approaches 
rather than make a unilateral determination to refuse to defend 
No. 
2014AP2484   
 
21 
 
an insured.  See Liebovich v. Minnesota Ins. Co., 2008 WI 75, 
¶55, 310 Wis. 2d 751, 751 N.W.2d 764.  For example:  
(1) 
An insurer may request a bifurcated trial on the issue 
of coverage and move to stay all proceedings on 
liability until a coverage determination is made.  
Id.; Elliot v. Donahue, 169 Wis. 2d 310,  318, 485 
N.W.2d 403 (1992).  Under this approach, "the 
insurance company runs no risk of breaching its 
duty to defend."  Newhouse, 176 Wis. 2d at 836.    
(2) 
An insurer may enter into "a nonwaiver agreement in 
which the insurer would agree to defend, and the 
insured would acknowledge the right of the insurer 
to 
contest 
coverage." 
 
Grube 
v. 
Daun, 
173 
Wis. 2d 30, 75, 496 N.W.2d 106 (Ct. App. 1992), 
overruled on other grounds, Marks, __ Wis. 2d __, 
¶75.  An insurer may also proceed under a 
reservation of rights under which the insured 
provides and controls its own defense, but the 
insurer remains liable for incurred legal costs.  
Id.   
(3) 
Finally, an insurer may choose to provide an initial 
defense 
and 
seek 
a 
declaratory 
judgment 
on 
coverage.16  Liebovich, 310 Wis. 2d 751, ¶55.   
                                                 
16 We note that:  
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 
(continued) 
No. 
2014AP2484   
 
22 
 
We reiterate:  
While 
these 
procedures 
are 
not 
absolute 
requirements, 
we 
strongly 
encourage 
insurers 
wishing to contest liability coverage to avail 
themselves of one of these procedures rather than 
unilaterally 
refuse 
to 
defend. 
A 
unilateral 
refusal to defend without first attempting to 
seek judicial support for that refusal can result 
in otherwise avoidable expenses and efforts to 
litigants and courts, deprive insureds of their 
contracted-for protections, and estop insurers 
from being able to further challenge coverage. 
Id. 
¶28 An insurer also has the option to "[d]eny the tender 
of defense and state the grounds for deciding that the complaint 
does not trigger any obligation to defend under the policy."  
Sheila M. Sullivan et al., Anderson on Wisconsin Insurance Law 
§ 7.54 at 51 (7th ed. 2015).  If, however, an insurer chooses 
this option "it does so at its own peril."  Elliot, 169 
Wis. 2d at 321.  By declining to defend an insured, an insurer 
opens itself up to a myriad of adverse consequences if its 
unilateral duty to defend determination turns out to be wrong.  
For example, an insurer that breaches its duty to defend is 
liable for all costs naturally flowing from the breach.  
Newhouse, 176 Wis. 2d at 837; Maxwell v. Hartford Union High 
                                                                                                                                                             
insurance company does not defend its insured at the 
liability trial. 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. 
Newhouse v. Citizens Sec. Mut. Ins. Co., 176 Wis. 2d 824, 836, 
501 N.W.2d 1 (1993). 
No. 
2014AP2484   
 
23 
 
Sch. Dist., 2012 WI 58, ¶¶55-56, 341 Wis. 2d 238, 814 N.W.2d 484 
(explaining that a breach of the duty to defend results in 
damages naturally flowing from that breach, but does not expand 
coverage).  This liability is not limited to policy limits: 
Damages which naturally flow from an insurer's breach 
of its duty to defend include: (1) the amount of the 
judgment or settlement against the insured 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.   
Newhouse, 176 Wis. 2d at 838.  Liability for costs and attorneys 
fees may potentially be greater than what the insurer would have 
paid had it defended its insured in the first instance because 
an insurer that refuses to defend its insured cedes control of 
the defense to its insured and is liable for all reasonable 
expenses.  Patrick v. Head of the Lakes Co-op Elec. Ass'n, 98 
Wis. 2d 66, 72-23, 295 N.W.2d 205 (1980) ("As long as [the] 
defense is reasonable and coverage is found, the insurer must 
pay for the defense.").  
¶29 In addition, an insurer that breaches its duty to 
defend its insured places itself at risk that its insured will 
pursue a successful first-party bad faith action against it.  
See Anderson v. Cont'l Ins. Co., 85 Wis. 2d 675, 687, 271 
N.W.2d 368 (1978) (recognizing the intentional tort of bad 
faith); Brethorst v. Allstate Prop. & Cas. Ins. Co., 2011 WI 41, 
¶5, 334 Wis. 2d 23, 798 N.W.2d 467 (holding that a breach of 
contract is a prerequisite for a first-party bad faith claim 
levied against an insurer).  In a successful first-party bad 
No. 
2014AP2484   
 
24 
 
faith action against an insurer, an insured may recover punitive 
damages.  See Weiss v. United Fire & Cas. Co., 197 Wis. 2d 365, 
393, 541 N.W.2d 753 (1995). 
¶30 In sum, we follow our long-standing precedent that 
duty-to-defend cases are governed by the four-corners rule, with 
no exceptions.17     
3.  The policy terms 
¶31 Consolidated's duty to defend Water Well originates 
from the CGL Policy, under which Consolidated "will have the 
right and duty to defend the insured against any 'suit' seeking 
[bodily injury or property] damages.  However, [Consolidated] 
will have no duty to defend the insured against any 'suit' 
seeking damages for 'bodily injury' or 'property damage' to 
which this insurance does not apply."  Wisconsin courts 
determine whether an insurer breached its duty to defend its 
insured by comparing the four corners of the underlying 
complaint to the terms of the insurance policy.  See Doyle, 219 
Wis. 2d at 284.  Water Well argues that if this court does not 
recognize any exception to the four-corners rule, then it should 
                                                 
17 Although 
the 
four-corners 
rule 
supports 
the 
well-
established principle that an insurer's duty to defend its 
insured is broader than its duty to indemnify, Olson, 338 
Wis. 2d 215, ¶29, we recognize there may be isolated instances 
in which an insurer has no duty to defend based on the 
complaint's allegations, but nevertheless owes a duty to 
indemnify based on extrinsic evidence considered later during a 
coverage determination.  Our decision in this case is not 
influenced by hypothetical possibilities.  Regardless, in such 
situations the insured will obtain its bargained-for coverage.   
No. 
2014AP2484   
 
25 
 
limit consideration of the policy to only those terms governing 
an initial grant of coverage. Consistent with Marks, we reject 
this argument.  In Marks, we held that in duty to defend cases a 
court must compare the four corners of the complaint to the 
terms of the entire policy, including exclusions.  See Marks, __ 
Wis. 2d __, ¶76.  We therefore analyze next whether Consolidated 
breached its duty to defend Water Well by comparing the four 
corners of the Argonaut complaint to the entire insurance 
policy.      
B.  Duty to Defend Comparison: Complaint to the Policy Terms 
1.  The Argonaut complaint 
¶32 Argonaut, Waukesha's insurer, filed suit against Water 
Well alleging negligence and breach of contract.  The complaint, 
in pertinent part, provides: 
10. Upon information and belief, from on or about 
May to September of 2009, Water Well installed the 
Well Pump, including but not limited to performing 
inspections and repairs of the well, providing a new 
Centrilift pump, seal, and motor, providing new heavy 
wall column pipe, providing new pump cable, providing 
flow sleeve if required, providing check valves as 
needed, 
providing 
pipe 
couplings 
as 
needed, 
rethreading pipe as needed, providing two new air 
lines, reassembling pipe work, performing a video log, 
and setting-up and testing the pumping equipment and 
testing the pump ("Original Installation"). 
11. Upon information and belief, in or about 
September to December of 2009, Water Well reinstalled 
the Well Pump, including but not limited to, cutting 
and rethreading twelve-inch heavy wall pipe, replacing 
couplings, replacing the seal, and replacing the 
motor. 
12. On or about January of 2010, Water Well also 
reinstalled the Well Pump, including but not limited 
No. 
2014AP2484   
 
26 
 
to, 
cutting 
and 
rethreading 
at 
least 
17 
ends, 
installing at least 7 new couplings, and installing at 
least 
1 
new 
fourteen-foot 
section 
of 
pipe 
(collectively, the "Reinstallations"). 
. . .  
14. Upon information and belief, while performing 
the Reinstallations, Water Well failed to install two 
setscrews, where locations for two setscrews were 
located to secure the pipe joint at each end, which 
allowed operating torques and vibrations to cause the 
Well Pump to rotate and unthread from the pipe column 
and caused the Well Pump to fall to the bottom of the 
well. 
15. As a direct and proximate result of the 
foregoing, on or about February 6, 2011, the Well Pump 
unthreaded and separated from the pipe column and 
caused the Well Pump, including the motor, to fall to 
the bottom of the approximately 1910–foot–deep well. 
. . .  
18. Upon information and belief, Water Well, its 
agents, employees and representatives, had a duty to 
reasonably and prudently install, configure, inspect, 
test, and/or perform the Reinstallations in such a 
manner as to prevent operating torques and vibrations 
from causing the Well Pump to rotate and unthread from 
the pipe column and cause the Well Pump to fall to the 
bottom of the well. 
19. Upon information and belief, Water Well, its 
agents, employees and representatives breached that 
duty by failing to reasonably and prudently install, 
configure, 
inspect, 
test, 
and/or 
perform 
the 
Reinstallations in such a manner as to prevent 
operating torques and vibrations from causing the Well 
Pump to rotate and unthread from the pipe column and 
cause the Well Pump to fall to the bottom of the well. 
20. Specifically, Water Well breached that duty 
by failing to install two setscrews, where locations 
for two setscrews were located to secure the pipe 
joint at each end, which allowed operating torques and 
vibrations to cause the Well Pump to rotate and 
No. 
2014AP2484   
 
27 
 
unthread from the pipe column and caused the Well Pump 
to fall to the bottom of the well. 
21. Upon information and belief, Water Well, its 
agents, employees and representatives also breached 
that duty by failing to reasonably and prudently 
perform the Reinstallations so as to discover the 
hazardous condition that the Well Pump's operation was 
causing the pipe threads to become excessively worn, 
was indicating that the pipe threads were possibly out 
of round, was causing marks from a part dragging 
axially over the pipe thread tips, and/or that the 
pump was pulling out of collar; and, this hazardous 
condition 
of 
the 
Well 
Pump's 
operation 
allowed 
operating torques and vibrations to cause the Well 
Pump to rotate and unthread from the pipe column and 
caused the Well Pump to fall to the bottom of the 
well. 
2.  The CGL policy 
¶33 The parties agree that Consolidated's policy with 
Water Well provides an initial grant of coverage for the 
allegations contained in Argonaut's complaint. We therefore move 
to step two and compare pertinent paragraphs of the Argonaut 
complaint, described above, to the "Your Product" exclusion 
found in the policy and invoked by Consolidated to deny 
coverage.  Because we conclude that the "Your Product" exclusion 
applies, we do not consider whether another exclusion upon which 
Consolidated relies——the "Your Work" exclusion——also applies.    
When 
one 
exclusion 
applies 
to 
preclude 
coverage, 
the 
inapplicability of another exclusion does not restore coverage. 
See Am. Girl, Inc., 268 Wis. 2d 16, ¶24 ("We analyze each 
exclusion separately; the inapplicability of one exclusion will 
No. 
2014AP2484   
 
28 
 
not reinstate coverage where another exclusion has precluded 
it.").18   
a.  "Your Product" exclusion 
¶34 The CGL policy contains an exclusion for "Damage To 
Your Product."  The "Your Product" exclusion precludes coverage 
for: "'Property damage' to 'your product' arising out of it or 
any part of it."  "Property damage" is defined by the CGL policy 
to include "[p]hysical injury to tangible property" as well as 
"[l]oss of use of tangible property that is not physically 
injured."  In addition, the policy defines "Your Product" to 
include 
"goods 
or 
products, 
other 
than 
real 
property, 
manufactured, sold, handled, distributed or disposed of by" the 
insured, Water Well.   
¶35 Water Well argues that the "Your Product" exclusion 
does not apply because the Argonaut complaint is ambiguous as to 
what property was actually damaged when the well pump unthreaded 
from the pipe column and fell to the bottom of the well, that it 
is reasonable to infer existing pipes were also damaged, and 
that any uncertainty must be resolved in Water Well's favor.  
Contrary to Water Well's position, we conclude that the 
complaint does not contain any ambiguity as to what property was 
damaged.   
¶36 The Argonaut complaint contains no allegation that any 
damage occurred to anything other than Water Well's products.  
                                                 
18 We decide cases on the narrowest grounds possible.  
Maryland Arms Ltd. P'ship v. Connell, 2010 WI 64, ¶48, 326 
Wis. 2d 300, 786 N.W.2d 15.    
No. 
2014AP2484   
 
29 
 
The complaint alleges that Water Well's failure to install two 
setscrews resulted in the well pump unthreading from the pipe 
column, which caused the well pump to fall to the bottom of the 
well.  The Argonaut complaint defines the well pump as "[A] 
Baker Hughes Centrilift Model WME2700 5-stage submersible 
vertical turbine pump, and the pumping system, including but not 
limited to, a column of pipes, screws, couplings, a pump, a 
seal, a motor, and pump cable . . . ."  Paragraph 10 of the 
complaint details the products Water Well allegedly provided, 
which included each of the components specifically detailed in 
the definition of the well pump: the pump, seal, motor, heavy 
wall column pipe, and pump cable.  In sum, the complaint alleges 
that the well pump fell to the bottom of the well, the well pump 
is comprised of various components, and Water Well provided each 
of the well pump components.  We see no ambiguity in these 
allegations.   
¶37 Further, there is absolutely no indication in the 
complaint that any damage occurred to anything other than the 
well pump.  Water Well argues that an inference can be made from 
the allegations in the complaint that damage occurred to 
preexisting pipes that would not fall within the "Your Product" 
exclusion.  Water Well points to allegations in the complaint 
that it performed rethreading of pipes and argues that these 
allegations establish doubt about whether the "Your Product" 
exclusion applies.  We disagree and see nothing in the Argonaut 
complaint suggesting that any preexisting products, including 
preexisting 
pipes, 
were 
damaged. 
 
Instead, 
the 
Argonaut 
No. 
2014AP2484   
 
30 
 
complaint alleges damages to the well pump alone and nothing in 
the definition of the well pump suggests that it was comprised 
of any preexisting products.   
¶38 The inference Water Well urges us to draw would 
require the type of guess-work and supposition repeatedly 
rejected in Wisconsin's duty-to-defend jurisprudence.  See, 
e.g., Sch. Dist. of Shorewood v. Wausau Ins. Cos., 170 
Wis. 2d 347, 374, 488 N.W.2d 82, 92 (1992), abrogated on other 
grounds by Johnson Controls, Inc. v. Emp'rs Ins., 2003 WI 108, 
264 Wis. 2d 60, 665 N.W.2d 257; State Farm Fire & Cas. Co. v. 
Easy PC Sols., LLC, 2016 WI App 9, ¶8, 366 Wis. 2d 629, 874 
N.W.2d 585.  Again we reject the notion "that insurers must 
speculate beyond the written words of the complaint and imagine 
what kinds of claims for damages the plaintiffs are actually 
making."  Midway Motor Lodge v. Hartford Ins. Grp., 226 
Wis. 2d 23, 36, 593 N.W.2d 852 (Ct. App. 1999).  "Insurers are 
not mind readers; they are not able to determine all the 
potential issues that a plaintiff could have sought for every 
complaint filed against them."  Id.  A liberal construction of 
the complaint does not mean the court should imagine facts not 
even loosely pled by the plaintiff.  Instead, a reasonable 
inference is a conclusion reached on the basis of evidence and 
reasoning, not imagination or speculation.  See Inference The 
American Heritage Dictionary of the English Language 899 (5th 
ed. 2011) (defining "inference" as "[t]he act or process of 
deriving logical conclusions from premises known or assumed to 
be true[]" and "[t]he act of reasoning from factual knowledge or 
No. 
2014AP2484   
 
31 
 
evidence.").  We cannot reasonably infer from the language of 
the complaint any damage to property other then the well pump. 
¶39 In comparing the four corners of the complaint to the 
policy terms, we determine that the "Your Product" exclusion 
applies.  There are no exceptions to the "Your Product" 
exclusion.  Therefore, coverage is barred, Consolidated did not 
breach its duty to defend Water Well in the Argonaut action, and 
Consolidated is entitled to summary judgment as a matter of law.  
IV.  CONCLUSION 
¶40 We conclude that the longstanding four-corners rule in 
duty to defend cases requires the court to compare the language 
in the complaint to the terms of the entire insurance policy, 
without considering extrinsic evidence, even when an insurer 
unilaterally declines to defend its insured.  We also conclude 
that the "Your Product" exclusion in the CGL policy applies and 
no exceptions to this exclusion restore coverage; therefore, 
based on the allegations set forth in the four corners of the 
complaint, no coverage exists under the policy.  Accordingly, 
Consolidated did not breach its duty to defend Water Well in the 
Argonaut 
action 
and 
Consolidated 
is 
entitled 
to 
summary 
judgement as a matter of law. 
By the Court.—The decision of the court of appeals is 
affirmed.   
 
 
No.  2014AP2484.awb 
 
1 
 
 
¶41 ANN WALSH BRADLEY, J.   (dissenting).  I agree with 
the majority that the four-corners rule includes consideration 
of exclusions as well as exceptions to those exclusions in an 
insurance policy.  I write separately because I disagree with 
the majority's conclusion to foreclose a narrow exception to the 
four-corners rule.   Majority op., ¶24.  
¶42 The majority's decision today is at loggerheads with 
the national trend.  It puts Wisconsin among the 14 and ever 
dwindling number of jurisdictions that have clearly declined to 
recognize any exceptions to the four-corners rule.  
¶43 In contrast, a majority of states allow for exceptions 
to the rule.  The proposed exception here is narrower in scope 
and more modest in comparison to the exceptions adopted by many 
other jurisdictions.  
¶44 But it is more than merely being out of step with a 
national trend that compels the conclusion that the majority 
opinion is infirm.  It turns a blind eye to basic and heretofore 
well-recognized principles of insurance law:  the duty to 
investigate, privity, and the broad application of the duty to 
defend. 
¶45 Most egregious, however, is that the majority’s 
approach is offensive to our system of justice.  In a different 
context, when a court gives the jury its charge at the close of 
the trial, the court states:  "let your verdict speak the truth, 
No.  2014AP2484.awb 
 
2 
 
whatever the truth may be."1  The majority opinion advises to the 
contrary.   
¶46 According to the majority, facts known to the insurer 
that could support a duty to defend cannot be considered.  
Rather, the insurer has license to deny its duty to defend 
unless those known facts appear within the four corners of the 
complaint.  A system of justice cannot countenance a rule that 
encourages insurers to defy reality by ignoring known facts 
beneficial to its insured.  Such a rule distorts rather than 
promotes the concepts of fairness and justice.   
¶47 Contrary to the majority, I conclude that when a 
complaint is factually incomplete or ambiguous, Wisconsin should 
adopt the narrow known fact exception to the four-corners rule 
as presented by Water Well.   
¶48 I also conclude that the "Your Product" exclusion does 
not bar coverage. In reaching an opposite conclusion, the 
majority pays lip service to, but does not follow the 
longstanding rule that courts must liberally construe the 
allegations 
of 
the 
complaint 
and 
assume 
all 
reasonable 
inferences in favor of the insured.   
¶49 Finally, I conclude that the "Your Work" exclusion 
likewise does not preclude coverage because the subcontractor 
exception to the "Your Work" exclusion applies.  Accordingly, I 
respectfully dissent. 
                                                 
1 Wis JI——Civil 191 at 3 (2016). 
No.  2014AP2484.awb 
 
3 
 
I 
¶50 In reaching its "unequivocal" conclusion that there 
are no exceptions to the four-corners rule, the majority fails 
to account for the limited circumstances in which refusing to 
consider known facts extrinsic to the complaint would unfairly 
deny an insured the benefit of a defense to which it is 
entitled.  Majority op., ¶24. 
¶51 Water Well seeks a limited exception to the four-
corners rule in cases where:  (1) the policy provides an initial 
grant of coverage based on facts alleged in the complaint; (2) 
the insurer denies a duty to defend its insured based on the 
application of specific policy exclusions but without seeking a 
coverage determination from a court; and (3) the insured asserts 
that the underlying complaint is factually incomplete or 
ambiguous.  See majority op., ¶2. 
¶52 The limited exception at issue here is consistent with 
the national trend to allow for exceptions to the four-corners 
rule.  See 14 Steven Plitt et al., Couch on Insurance § 200:17 
at 200-30 (3d ed. 2015) ("A modern trend is for insurers to 
conduct a reasonable investigation of the claims prior to making 
a determination on the duty to defend a particular lawsuit.  
Consequently, some jurisdictions look to actual knowledge of 
facts or extrinsic facts, in addition to the allegations of the 
complaint, when determining an insurer's duty.").   
No.  2014AP2484.awb 
 
4 
 
¶53 A majority of states allow for exceptions to the four-
corners rule.2  Water Well seeks an exception that is narrower in 
                                                 
2 Currently, thirty-one states allow for exceptions to the 
four-corners rule in determining whether a duty to defend 
exists.  Chandler v. Alabama Mun. Ins. Co., 585 So. 2d 1365, 
1367 (Ala. 1991); Williams v. GEICO Cas. Co., 301 P.3d 1220, 
1225 (Alaska 2013); Regal Homes, Inc. v. CNA Ins., 217 P.3d 610, 
¶19 (Ariz. Ct. App. 2007); Safeco Ins. Co. of America v. 
Fireman’s Fund Ins. Co., 55 Cal. Rptr. 3d 844, 850 (Ct. App. 
2007); Hartford Cas. Ins. Co. v. Litchfield Mut. Fire Ins. Co., 
876 A.2d 1139, 1145-1146 (Conn. 2005); Shafe v. Am. States Ins. 
Co., 653 S.E.2d 870, 874 (Ga. 2007); Sentinel Ins. Co. v. First 
Ins. Co. of Haw., 875 P.2d 894, 905 (Haw. 1994); Shriver Ins. 
Agency v. Utica Mut. Ins. Co., 750 N.E.2d 1253, 1259 (Ill. 
2001); Talen v. Emp’rs Mut. Cas. Co., 703 N.W.2d 395, 406 (Iowa 
2005); Miller v. Westport Ins. Corp., 200 P.3d 419, 424 (Kan. 
2009); Aetna Cas. & Sur. Co. v. Cochran, 651 A.2d 859, 864 (Md. 
1995); Herbert A. Sullivan, Inc. v. Utica Mut. Ins. Co., 788 
N.E.2d 522, 530 (Mass. 2003); Am. Bumper & Mfg. Co. v. Hartford 
Fire Ins. Co., 550 N.W.2d 475, 452 (Mich. 1996); Pedro Cos. v. 
Sentry Ins., 518 N.W.2d 49, 51 (Minn. Ct. App. 1994); Auto. Ins. 
Co. of Hartford v. Lipscomb, 75 So.3d 557, 559 (Miss. 2011); 
Allen v. Cont'l W. Ins. Co., 436 S.W.3d 548, 552-53 (Mo. 2014); 
Revelation Industries, Inc. v. St. Paul Fire & Marine Ins. Co., 
206 P.3d 919, 926 (Mont. 2009); Peterson v. Ohio Cas. Group, 724 
N.W.2d 765, 773-774 (Neb. 2006); Ross v. Home Ins. Co., 773 A.2d 
654, 657 (N.H. 2001); Abouzaid v. Mansard Gardens Assocs., LLC, 
23 A.3d 338, 347 (N.J. 2011); Sw. Steel Coil, Inc. v. Redwood 
Fire & Casualty Ins. Co., 148 P.3d 806, 812 (N.M. 2006); 
Cumberland Farms, Inc. v. Tower Grp., Inc., 28 N.Y.S.3d 119, 122 
(N.Y. App. Div. 2016); Duke University v. St. Paul Fire & Marine 
Ins. Co., 386 S.E.2d 762, 764 (N.C. 1990); Great Am. Ins. Co. v. 
Hartford Ins. Co., 621 N.E.2d 796, 798 (Ohio 1993); First Bank 
of Turley v. Fid. & Deposit Ins. Co., 928 P.2d 298, 303 (Okla. 
1996); City of Hartsville v. S.C. Mun. Ins. & Risk Fin. Fund, 
677 S.E.2d 574, 578-79 (S.C. 2009); State Farm Fire & Cas. Co. 
v. Harbert, 741 N.W.2d 228, 234 (S.D. 2007); Fire Ins. Exchange 
v. Estate of Therkelsen, 27 P.3d 555, ¶¶24-25 (Utah 2001); R.L. 
Vallee, Inc. v. Am. Intern. Specialty Lines Ins. Co., 431 F. 
Supp. 2d 428, 438 (D. Vt. 2006); Campbell v. Ticor Title Ins. 
Co., 166 Wash. 2d 466, 471 (Wash. 2009); Farmer & Mechs. Mut. 
Ins. Co. of W. Va. v. Cook, 557 S.E.2d 801, 806 (W. Va. 2001). 
(continued) 
No.  2014AP2484.awb 
 
5 
 
scope and more modest in comparison to the exceptions adopted in 
many other jurisdictions.  For example, in Washington, there are 
two exceptions to the four-corners rule.  Woo v. Fireman's Fund 
Ins. Co., 164 P.3d 454, 459 (Wash. 2007).  First, if it is not 
clear from the complaint that the policy provides coverage, the 
insurer must investigate and give the insured the benefit of the 
doubt that there is a duty to defend.  Id. 
¶54 Second, as is the case here, if the allegations in the 
complaint conflict with facts known or readily ascertainable by 
the insurer, or if the allegations in the complaint are 
ambiguous or inadequate, facts outside the complaint may be 
considered.  Id.  Additionally, although extrinsic facts may 
trigger the duty to defend, an insurer may not rely on extrinsic 
facts to deny the duty to defend.  Id. 
¶55 Kansas provides another example.  In Miller v. 
Westport Ins. Corp., 200 P.3d 419, 424 (Kan. 2009), the court 
explained that an insurer "must look beyond the effect of the 
                                                                                                                                                             
In four states, because of conflicting cases, it is unclear 
whether they allow for exceptions to the four-corners rule.  
Compare Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., 90 
P.3d 814, 829 (Colo. 2004), with United Fire & Cas. Co. v. 
Boulder Plaza Residential, LLC, 633 F.3d 951, 960-61 (10th Cir. 
2011); compare Transamerica Ins. Services v. Kopko, 570 N.E.2d 
1283, 1285 (Ind. 1991), with Ind. Farmers Mut. Ins. Co. v. N. 
Vernon Drop Forge, Inc., 917 N.E.2d 1258, 1268 (Ind. Ct. App. 
2009) (citing Auto-Owners Ins. Co. v. Harvey, 842 N.E.2d 1279, 
1291 (Ind. 2006); compare James Graham Brown Found., Inc. v. St. 
Paul Fire & Marine Ins. Co., 814 S.W.2d 273, 279 (Ky. 1991), 
with Lenning v. Commer. Union Ins. Co., 260 F.3d 574, 581 (6th 
Cir. 2001); compare GuideOne Elite Ins. Co. v. Fielder Road 
Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006), with Weingarten 
Realty Mgmt Co. v. Liberty Mut. Fire Ins. Co., 343 S.W.3d 859 
(Tex. Ct. App. 2011). 
No.  2014AP2484.awb 
 
6 
 
pleadings and must consider any facts brought to its attention 
or any facts which it could reasonably discover in determining 
whether it has a duty to defend."  Under this approach, "the 
universe 
of 
information 
from 
which 
th[e] 
potential 
[for 
coverage] must be ascertained is much greater than the universe 
used in an approach limited to the . . . pleading and the 
applicable insurance policy."  Id. (internal citations and 
quotation omitted).   
II 
¶56 Not only is the majority opinion out of step with the 
national trend and at odds with the majority of states, it also 
contravenes basic principles of insurance law.   
A 
¶57 A basic principle of insurance law is that the insurer 
is to investigate the facts when a claim is made.  Trinity 
Evangelical Lutheran Church and Sch.-Freistadt v. Tower Ins. 
Co., 2003 WI 46, ¶54, 261 Wis. 2d 333, 661 N.W.2d 789.   
¶58 This principle is supported by Marks v. Houston Cas. 
Co., 2016 WI 53, ¶41, __ Wis. 2d __, __ N.W.2d __, which is 
being released concurrently with this decision today.  In Marks, 
we explain that "'[t]he applicability of an exclusion, however, 
is rarely obvious from the allegations in the complaint.  
Insurers often have to rely on investigation, discovery and 
other information not stated in the complaint to determine 
whether an exclusion applies.'"  Id. (citing Peter F. Mullaney, 
Liability Insurers' Duty to Defend, Wis. Law., at 10-11 (July 
1995)).   
No.  2014AP2484.awb 
 
7 
 
¶59 The two opinions released concurrently today appear 
facially inconsistent in regards to the duty to investigate.  
Marks supports the duty to investigate, and the majority here 
discards it.  In contravening this basic principle of insurance 
law, the majority incentivizes an insurer to disregard its 
factual investigation and to pretend that it cannot see a known 
fact which would give rise to a duty to defend.    
¶60 The exceptions to the four-corners rule in other 
jurisdictions recognize this basic principle.  For example, in 
Washington, if it is not clear from the complaint that the 
policy provides coverage, the insurer "must investigate" and 
give the insured the benefit of the doubt that there is a duty 
to defend.  Woo, 164 P.3d at 459. 
¶61 Likewise, in Oklahoma an insurer has a duty to defend 
"whenever it ascertains the presence of facts that give rise to 
the potential of liability under the policy."  First Bank of 
Turley v. Fid. and Deposit Ins. Co. of Md., 928 P.2d 298, 303 
(1996).  An insurer's duty to defend is determined on the basis 
of information provided to the insurer from the pleadings, the 
insured, and other sources available to the insurer.  Id.  
B 
¶62 Also integral to insurance law, and contract law in 
general, is the concept of privity.  As Judge Riley aptly 
explains in his dissent below, the approach taken by the 
majority negates the concept of privity.  Water Well Sols. Serv. 
Grp. Inc. v. Consol. Ins. Co., 2015 WI App 78, ¶24, 365 
Wis. 2d 223, 871 N.W.2d 276 (Reilly, P.J. dissenting).  He 
No.  2014AP2484.awb 
 
8 
 
admonishes that "[i]t is absurd to allow an entity that has no 
privity of contract to dictate whether the contract provides 
defense and coverage."  Id.  Emphasizing the problem with the 
unilateral control of a third-party, he observes that the 
majority’s approach "allows a litigant who is not a party to a 
contract of insurance to unilaterally control whether . . . the 
[] policy provides coverage when that litigant has no privity in 
the contract."  Id., ¶21.  
¶63 Yet again, other jurisdictions allow for an exception 
to the four-corners rule when a third-party not in privity to an 
insurance contract fails to allege facts relevant to the duty to 
defend in its complaint.  As the Supreme Court of Montana 
explained, an insurer cannot ignore knowledge of facts because a 
complaint drafted by a third-party does not allege facts of 
which the insurer has knowledge.  Revelation Indus. Inc. v. St. 
Paul Fire & Marine Ins. Co., 206 P.3d 919, 928 (Mont. 2009).  
Under 
these 
circumstances, 
an 
insurer 
may 
not 
"ignore 
information in its possession that may give rise to coverage 
simply because the complaint fails to recite it, and thereupon 
refuse to defend."  Id.   
C 
¶64 A third basic principle of insurance law is that the 
duty to defend is broader than the duty to indemnify.  Fireman's 
Fund Ins. Co. of Wis. v. Bradley Corp., 2003 WI 33, ¶20, 261 
Wis. 2d 4, 660 N.W.2d 666.  Nevertheless, the majority opinion 
does just the opposite and circumscribes the duty to defend.   
No.  2014AP2484.awb 
 
9 
 
¶65 The Connecticut Supreme Court eschewed the absolutist 
approach that the majority now embraces and determined that such 
an approach would narrow the duty to defend.  It explained that 
a "wooden application" of the four-corners rule would "render 
the duty to defend narrower than the duty to indemnify."  
Hartford Cas. Ins. Co. v. Litchfield Mut. Fire Ins. Co., 876 
A.2d 1139, 1146 (Conn. 2005); see also Fitzpatrick v. Am. Honda 
Motor Co., 575 N.E.2d 90, 92 (N.Y. 1991) ("where the insurer is 
attempting to shield itself from the responsibility to defend 
despite its actual knowledge that the lawsuit involves a covered 
event, wooden application of the 'four corners of the complaint' 
rule would render the duty to defend narrower than the duty to 
indemnify——clearly 
an 
unacceptable 
result."). 
 
Thus, 
the 
Hartford court reasoned that "the sounder approach is to require 
the insurer to provide a defense when it has actual knowledge of 
facts establishing a reasonable possibility of coverage."  Id. 
III 
¶66 Prior Wisconsin decisions have likewise considered an 
exception to the four-corners rule when the allegations of the 
complaint conflict with the known facts of the case or where the 
allegations are ambiguous or incomplete: 
[T]here are also a number of cases involving special 
situations 
not 
covered 
directly 
by 
the 
general 
rules . . . These 
special 
situations 
exist 
particularly where there is a conflict of allegations 
and known facts [and] where the allegations are 
ambiguous or incomplete . . . .   
Estate of Sustache, 2007 WI App 144, ¶11, 303 Wis. 2d 714, 735 
N.W.2d 186, aff'd sub nom. Estate of Sustache v. Am. Family Mut. 
No.  2014AP2484.awb 
 
10 
 
Ins. Co., 2008 WI 87, 311 Wis. 2d 548, 751 N.W.2d 845 (citation 
omitted); see also Grieb v. Citizens Cas. Co. of New York, 33 
Wis. 2d 552, 148 N.W.2d 103 (1967).  
¶67 As the court of appeals explained in Sustache, it is 
reasonable to consider a situation where the facts of a case 
merit a defense, but the third-party complaint fails to allege 
those facts.  303 Wis. 2d 714, ¶20.  In that situation "it would 
seem that the insured should be entitled to a defense for which 
the insurer has been paid a premium.  The four-corners rule 
shuts down that entitlement."  Id. 
¶68 Furthermore, Wisconsin has already allowed known facts 
extrinsic 
to 
the 
complaint 
to 
be 
considered 
in 
limited 
exceptions to the four-corners rule.  In Berg v. Fall, 138 
Wis. 2d 115, 122 405 N.W.2d 701 (Ct. App. 1987), the court of 
appeals considered extrinsic facts because there was a conflict 
between the allegations in the complaint and the actual facts of 
the case.  The Berg court emphasized that an insurer's duty to 
defend may require consideration of extrinsic facts when "the 
pleadings allege facts that are within an exception to a policy 
but the true facts are within, or potentially within, policy 
coverage and are known or are reasonably ascertainable by the 
insurer."  Id. at 122-123 (citing 7C Appleman, Insurance Law and 
Practice, sec. 4683 at 56 (1979)).   
¶69 Admittedly, this court has previously declined to 
follow Berg.  In a footnote in Doyle v. Engelke, we explained 
that Berg is contrary to a "long line of cases in this state 
which indicate that courts are to make conclusions on coverage 
No.  2014AP2484.awb 
 
11 
 
issues based solely on the allegations within the complaint." 
219 Wis. 2d 277, 284 n.3, 580 N.W.2d 245 (1998); see also Smith 
v. Katz, 226 Wis. 2d 798, 815-16, 595 N.W.2d 345 (1999). 
However, none of these decisions foreclosed the possibility of 
allowing for a know fact exception in cases such as this when 
the allegations in the complaint are incomplete or ambiguous.3   
IV 
¶70 Rather 
than 
acknowledge 
that 
there 
are 
limited 
circumstances in which a duty to defend analysis may allow for 
consideration of known facts extrinsic to the complaint, the 
majority asserts that its rigid four-corners analysis benefits 
an insured even after its insurer unilaterally denies coverage.  
Majority op., ¶26.  According to the majority, under the four-
corners rule "a plaintiff has both the opportunity and the 
incentive to file an amended complaint" if discovery results in 
additional facts that would trigger a duty to defend.  Id.  
Thus, the majority reasons that because a plaintiff will want 
coverage for the defendant-insured, it will amend its complaint 
to trigger the duty to defend.  Id. (citing Sheila M. Sullivan 
                                                 
3 In Estate of Sustache, the court of appeals examined 
whether the exceptions to the four-corners rule acknowledged in 
Griebe had been foreclosed by Doyle and Smith, but ultimately 
concluded only that "this issue warrants supreme court comment 
at some point in the future."  Estate of Sustache, 2007 WI App 
144, ¶20, 303 Wis. 2d 714, 735 N.W.2d 186.  
No.  2014AP2484.awb 
 
12 
 
et al., Anderson on Wisconsin Insurance Law § 7.27 at 29 (7th 
ed. 2015)).4 
¶71 The majority's hypothetical solution to an unfair 
denial of the duty to defend fails to take into account the 
realities of litigation.  An assumption that a plaintiff will 
seek insurance coverage does not apply in every case, such as 
when a plaintiff wishes to apply pressure to a defendant who has 
the capacity to satisfy a judgment without insurance.  Even if a 
plaintiff is inclined to amend the complaint, a defendant whose 
insurer has unilaterally denied the duty to defend will have to 
provide for the costs of its own defense until some unknown date 
when the plaintiff may amend the complaint.  Not every insured 
can bear the costs of its own defense during prolonged 
litigation and may be forced to settle a meritless claim out of 
necessity.   
¶72 In this case, the majority's repeated refrain that the 
four-corners rule benefits the insured rings hollow.  See 
majority op., ¶3 ("we reject Water Well's request to craft a 
limited exception to the four-corners rule, which has long 
endured to the benefit of Wisconsin insureds"); see also 
majority op., ¶25 ("We have applied the four-corners rule, 
                                                 
4 The assumption that a plaintiff will amend a complaint to 
trigger insurance coverage for a defendant after new facts arise 
in discovery is undermined by Atlantic Mut. Ins. Co. v. Badger 
Medical Supply Co., 191 Wis. 2d 229, 241, 528 N.W.2d 486 (1995), 
in which the defendant arguing in favor of coverage alleged that 
facts discovered in depositions triggered insurance coverage.  
However, the Atlantic court determined that no allegations in 
the amended complaint supported the insured's argument.  Id.   
No.  2014AP2484.awb 
 
13 
 
without exceptions, in duty to defend cases for so long because 
it generally favors Wisconsin insureds."); majority op., ¶26 
("The four-corners rule ultimately favors insureds in another 
way.").   
¶73 One has to wonder if the majority's absolutist 
application of the four-corners rule is as beneficial to 
insureds as the majority proclaims, then why is the insured 
losing here? 
¶74 Its proffered concerns regarding the consideration of 
extrinsic facts are equally unpersuasive.  According to the 
majority, recognizing exceptions to the four-corners rule would 
require insurers to "imagine claims the plaintiff might have 
made."  Majority op., ¶25 n. 15.  The majority conjures a 
scenario 
in 
which 
"this 
judicially-created 
burden" 
would 
"rewrite the contractual duty to defend to be triggered whenever 
any claim is made rather than only those claims covered under 
the actual policy terms."  Id. 
¶75 The majority's reasoning is misguided because allowing 
consideration of extrinsic facts in this case would not require 
Consolidated to imagine any claims other than those the 
plaintiff has already alleged.  As the majority acknowledges, 
Consolidated does not dispute that there is an initial grant of 
coverage based on the claims alleged in the complaint.  Majority 
op., ¶35.  Instead, Water Well seeks to introduce facts 
extrinsic to the complaint in order to support its argument that 
the "Your Product" exclusion, invoked by Consolidated in its 
unilateral denial of its duty to defend, does not apply. 
No.  2014AP2484.awb 
 
14 
 
¶76 A rule that would create a presumption in favor of an 
insured's duty to defend is consistent with an insurer's broad 
duty to defend.  See, e.g., Olson v. Farrar, 2012 WI 3, ¶2, 338 
Wis. 2d 215, 809 N.W.2d 1.  As this court has repeatedly 
declared, "[i]f there is any doubt about the duty to defend, it 
must be resolved in favor of the insured."  Elliot v. Donahue, 
169 Wis. 2d 310, 321, 485 N.W.2d 403 (1992).   
¶77 The majority recites the law regarding an insurer's 
broad duty to defend, and acknowledges that its decision may 
circumscribe that duty.  See majority op., ¶30 n.17.  Given that 
even the majority recognizes that an insurer's unilateral 
refusal to defend is disfavored, I fail to understand how a rule 
that encourages insurers to refuse, rather than provide, a 
defense 
is 
consistent 
with 
this 
court's 
well-established 
precedent.5  Majority op., ¶27 (citing Liebovich v. Minn. Ins. 
Co., 2008 WI 75, ¶55, 310 Wis. 2d 751, 751 N.W.2d 764). 
¶78 At the heart of its analysis, the majority protests 
the efficacy of the known fact exception and predicts dire 
consequences if it is adopted.  Such protests and predictions 
are out of step with the national trend and prove unpersuasive.  
The majority of states that have adopted exceptions have not 
reported the hypothetical quagmires forewarned by the majority.  
Indeed, the sky above those states has not fallen. 
                                                 
5 Although the majority sets forth the judicially-preferred 
approaches to determining coverage, its absolutist approach to 
the four-corners rule may incentive insurers to unilaterally 
deny coverage instead. 
No.  2014AP2484.awb 
 
15 
 
V 
¶79 The majority pays lip service to its obligation to 
liberally construe the allegations contained in the complaint, 
assume all reasonable inferences from the allegations made in 
the complaint, and resolve any ambiguity in favor of the 
insured.  Majority op., ¶15 (citing Estate of Sustache, 311 
Wis. 2d 548, ¶21).  However, it fails to follow this directive 
in 
its 
analysis 
of 
the 
"Your 
Product" 
exclusion 
in 
Consolidated's policy. 
¶80 Consolidated's policy excludes coverage for "'Property 
damage' to 'your product' arising out of it or any part of it."  
It defines "Your product" as "[a]ny goods or products, other 
than real property, manufactured, sold, handled, distributed or 
disposed of by [] you." 
¶81 Water Well argues that that the "Your Product" 
exclusion does not apply because the complaint is ambiguous as 
to what property was damaged when the well pump fell to the 
bottom of the well.  According to the majority, "[t]he Argonaut 
complaint contains no allegation that any damage occurred to 
anything other than Water Well's products."  Majority op., ¶36; 
see also Majority op., ¶37 ("there is absolutely no indication 
in the complaint that any damage occurred to anything other than 
the well pump.").  Thus, the majority concludes that that "Your 
Product" exclusion applies and that Consolidated had no duty to 
defend Water Well.   
¶82 Contrary to the majority, I would draw all reasonable 
inferences in favor of the insured.  Although there is no 
No.  2014AP2484.awb 
 
16 
 
allegation of damage to any pre-existing product, there is also 
no allegation that when the pump fell to the bottom of the well 
the damage was exclusively to Water Well's products.  It is just 
as reasonable to infer that other products were damaged as it is 
to infer that only Water Well's products were damaged.   
¶83 In particular, the complaint alleges that the damaged 
well pump included a "column of pipes."  Based on the 
allegations in the complaint, it is reasonable to infer that the 
column of pipes consisted of pipe that was not Water Well's 
product. For example, the complaint alleges that Water Well 
"install[ed] at least 1 new fourteen-foot section of pipe."  It 
also alleges that Water Well "rethread[ed] pipe as needed."   
¶84 Thus, it is also reasonable to infer that Water Well 
installed only one new section of pipe and that it only repaired 
some of the other existing pipe as needed.  After resolving all 
ambiguity in favor of the insured, I conclude that the "Your 
Product" exclusion does not apply and Consolidated had a duty to 
defend Water Well. 
¶85 Alternatively, if the known facts extrinsic to the 
complaint are considered, it is undeniable that the "Your 
Product" exclusion does not apply.  In its motion for summary 
judgment before the circuit court, Water Well introduced 
uncontested evidence that that the alleged damage to the city 
well included damage to product that was not Water Well's 
product.  Water Well's operations manager averred in an 
affidavit that although the pipe column in the well did contain 
new pipe provided by Water Well, it also contained pre-existing 
No.  2014AP2484.awb 
 
17 
 
pipe.  The affidavit further stated that Water Well reused most 
of the pre-existing pipe sections and only cut and rethreaded 
(through the work of a subcontractor) those sections of the pre-
existing pipe that needed repairing.   
¶86 Considering Water Well's affidavit, it appears that 
products other than Water Well's, such as the pre-exiting pipe, 
were damaged when the pump fell to the bottom of the well.  
These are known facts that are not explicitly included in the 
allegations in the complaint.  However, if we consider these 
extrinsic facts, the "Your Product" exception does not apply and 
Consolidated would have a duty to defend Water Well.  
VI 
¶87 Because I conclude that the "Your Product" exclusion 
does not apply, I must examine whether the "Your Work" exclusion 
applies.6  Consolidated's policy excludes "'Property damage'" to 
'your work' arising out of it or any part of it . . ."  However, 
there is an exception to the exclusion.  The "Your Work" 
exclusion does not apply "if the damaged work or the work out of 
which the damage arises was performed on your behalf by a 
subcontractor." 
¶88 Water Well argues that the "Your Work" exclusion does 
not apply because the subcontractor exception restores coverage.  
Although the complaint does not specifically allege that a 
                                                 
6 The majority does not address the "Your Work" exclusion 
because it determines that the "Your Product" exclusion applies.  
Majority op., ¶33 (citing Am. Family Mut. Ins. Co. v. Am. Girl, 
Inc., 2004 WI 2, ¶24, 268 Wis. 2d 16, 673 N.W.2d 65).   
No.  2014AP2484.awb 
 
18 
 
subcontractor performed the work out of which the damage arose, 
the allegations in the complaint repeatedly refer to "Water 
Well, its agents, employees and representatives."   
¶89 The term "agent" is very broad and can be understood 
to 
include 
a 
subcontractor 
when 
assuming 
all 
reasonable 
inferences in favor of the insured.  See, e.g., Black's Law 
Dictionary 75 (10th ed. 2014) (defining "agent" as "[s]omeone 
who is authorized to act for or in place of another; a 
representative"); see also Restatement (Third) of Agency, § 1.01 
(Am. Law Inst. 2006) ("Agency is the fiduciary relationship that 
arises when one person (a 'principle') manifests asset to 
another person (an 'agent') that the agent shall act on the 
principal's behalf and subject to the principal's control, and 
the agent manifests assert or otherwise consents so to act.").  
Thus, the subcontractor exception to the "Your Work" exclusion 
ought to apply to reinstate coverage.   
¶90 Alternatively, 
if 
we 
consider 
the 
known 
facts 
extrinsic to the complaint, there is no doubt that the 
subcontractor exception applies to restore coverage under the 
"Your Product" exclusion. At summary judgment, Water Well 
introduced evidence that a subcontractor performed work on the 
well, including cutting and rethreading pipe and drilling and 
tapping screw holes.  Attached to Water Well's affidavit is an 
invoice from a subcontractor detailing its work on the well 
pump.   
¶91 Considering 
Water 
Well's 
affidavit, 
the 
attached 
receipt substantiates that a subcontractor performed work on the 
No.  2014AP2484.awb 
 
19 
 
well pump.  Thus, the known facts extrinsic to the complaint 
demonstrate that the subcontractor exception to the "Your Work" 
exclusion restores coverage. 
VII 
¶92 In sum, I conclude that when the complaint is 
factually incomplete or ambiguous, Wisconsin should adopt the 
narrow known fact exception to the four-corners rule as 
presented by Water Well.  To do otherwise unfairly denies an 
insured the benefit of a defense to which it is entitled. 
¶93 I also conclude that neither the "Your Product" 
exclusion 
nor 
the 
"Your 
Work" 
exclusion 
bars 
coverage.   
Accordingly, I respectfully dissent. 
¶94 I am authorized to state that Justice SHIRLEY S. 
ABRAHAMSON joins this dissent. 
 
   
No.  2014AP2484.awb 
 
 
 
1