Title: Darryn Reid v. Leanna R. Benz
Citation: 2001 WI 106
Docket Number: 2000AP000003
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: July 11, 2001

2001 WI 106 
 
SUPREME COURT OF WISCONSIN 
 
 
Case No.: 
00-0003 
 
 
Complete Title 
of Case: 
 
Darryn Reid,  
 
Plaintiff, 
 
v. 
Leanna R. Benz,  
 
Defendant-Respondent-Cross-Appellant, 
American Family Mutual Insurance Company,  
 
Defendant-Appellant-Cross-Respondent, 
Transportation Insurance Company,  
 
Defendant.  
 
 
ON CERTIFICATION FROM THE COURT OF APPEALS 
 
 
Opinion Filed: 
July 11, 2001 
Submitted on Briefs: 
      
Oral Argument: 
May 29, 2001 
 
 
Source of APPEAL 
 
COURT: 
Circuit 
 
COUNTY: 
Ozaukee 
 
JUDGE: 
Walter J. Swietlik 
 
 
JUSTICES: 
 
Concurred: 
      
 
Dissented: 
BABLITCH, J., dissents (opinion filed). 
 
 
ABRAHAMSON, C.J., joins dissent. 
 
Not Participating:       
 
 
ATTORNEYS: 
For the defendant-appellant-cross respondent 
there were briefs by Frederick J. Smith and Peterson, Johnson & 
Murray, S.C., Milwaukee, and oral argument by Frederick J. Smith. 
 
 
For the defendant-respondent-cross appellant 
there was a brief by Tamara Hayes O’Brien and Whyte Hirschboeck 
Dudek S.C., Milwaukee, and oral argument by Tamara Hayes O’Brien. 
 
2 
 
 
An amicus curiae brief was filed by Matthew A. 
Biegert, Brian H. Sande and Doar, Drill & Skow, S.C., New 
Richmond, on behalf of the Wisconsin Academy of Trial Lawyers. 
 
 
An amicus curiae brief was filed by Arnold P. 
Anderson and Mohr & Anderson, S.C., Madison, on behalf of the 
Wisconsin Insurance Alliance. 
 
 
An amicus curiae brief was filed by Arnold P. 
Anderson and Mohr & Anderson, S.C., Madison, on behalf of Civil 
Trial Counsel of Wisconsin. 
 
2001 WI 106 
 
NOTICE 
This opinion is subject to further editing and 
modification.  The final version will appear 
in the bound volume of the official reports. 
 
 
No. 00-0003 
 
STATE OF WISCONSIN                    :  
  IN SUPREME COURT 
 
 
Darryn Reid,  
 
          Plaintiff, 
 
     v. 
 
Leanna R. Benz,  
 
          Defendant-Respondent-Cross- 
          Appellant, 
 
American Family Mutual Insurance Company,  
 
          Defendant-Appellant-Cross- 
          Respondent, 
 
Transportation Insurance Company,  
 
          Defendant. 
 
 
 
APPEAL from an order for judgment of the Circuit Court for 
Ozaukee County, Honorable Walter J. Swietlik, Circuit Court 
Judge.  Reversed. 
 
¶1 
N. PATRICK CROOKS, J.   This case is before the court 
on certification by the court of appeals, pursuant to Wis. Stat. 
§ (Rule) 809.61 (1999-2000).  The court of appeals certified the 
following issue:  Was the supreme court's award of attorney fees 
to an insured in Elliott v. Donahue, 169 Wis. 2d 310, 485 N.W.2d 
FILED 
 
      
 
Cornelia G. Clark 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
FILED 
 
JUL 11, 2001 
 
Cornelia G. Clark 
Clerk of Supreme Court 
Madison, WI 
 
 
 
 
 
No. 
00-0003 
 
 
2 
403 (1992), premised upon the insurer's contractual breach of 
the duty to provide coverage or the duty to defend or both?   
¶2 
Before answering the court of appeals certified issue, 
we point out that Elliott made it clear that "[u]nder the well-
established American Rule, parties to litigation are generally 
responsible for their own attorney fees incurred with respect to 
the litigation.  Attorney fees are generally not awarded to the 
prevailing party in the absence of a statute or enforceable 
contract providing therefor."  169 Wis. 2d at 323.  This case is 
not about consumer protection, contrary to the suggestion by the 
dissent.  See dissenting op. at ¶39.  The issue before us 
pertains to the basis of our award of attorney fees in Elliott, 
and the reasons for diverging from the deeply-rooted dictates of 
the American Rule in that case.  
¶3 
Our attorney fees award was premised on the equities 
of the situation in Elliott, which related to the insurer's 
contractual breach of the duty to defend.  The award was 
inextricably connected to the facts and circumstances of that 
case; namely, that the insurer failed to comply with the 
dictates of Mowry v. Badger State Mutual Casualty Co., 129 
Wis. 2d 496, 385 N.W.2d 171 (1986).  In Mowry, we indicated that 
an insurer can avoid the risk of breaching the duty to defend by 
seeking bifurcation of the coverage and liability issues, and a 
stay of the liability phase until coverage has been decided.  
Id. at 528-29.  Where an insurer fails to follow that procedure, 
as the insurer did in Elliott, the insurer does indirectly what 
it cannot do directly.  The insurer breaches the duty to defend 
No. 
00-0003 
 
 
3 
by requiring the insured to incur attorney fees to defend him or 
herself on the issue of liability and to litigate coverage 
simultaneously. 
¶4 
In this case, American Family Mutual Insurance Company 
(American Family) appealed that part of an order for judgment of 
the Ozaukee County Circuit Court, the Honorable Walter J. 
Swietlik presiding, which, based upon Elliott, awarded attorney 
fees to Leanna R. Benz (Benz), an insured of American Family.  
There is no dispute that American Family followed the procedure 
established in Mowry.  Consequently, the basis for the attorney 
fees award in Elliott is absent here.  Accordingly, that part of 
the circuit court's order for judgment that awarded attorney 
fees to Benz is reversed.   
I 
¶5 
The pertinent facts are not in dispute.  In October, 
1998, Darryn Reid (Reid) brought the instant action against 
Benz, American Family, and Transportation Insurance Company.1  
Reid alleged that he slipped, fell, and injured himself on the 
driveway at Benz's home.  Benz tendered her defense to American 
Family, which had issued a homeowner's policy to Benz, and which 
was in effect at the time of Reid's accident.  American Family 
assigned counsel to defend Benz, subject to a reservation of 
rights.   
                     
1 Transportation Insurance Company is not involved in this 
appeal.  
No. 
00-0003 
 
 
4 
¶6 
In January, 1999, American Family moved to bifurcate 
the issue of liability from the issue of whether Benz was 
covered by its policy, claiming that the business pursuits 
exclusion in the policy applied and, on that basis, Benz was not 
covered.  American Family also requested a stay of any liability 
proceedings until the coverage issue had been resolved.  At the 
initial pretrial conference, Benz was represented by counsel 
retained by American Family on the merits, and by separate 
counsel on the coverage issue.  There, the parties, and the 
circuit court judge, agreed that the coverage issue would be 
bifurcated and that a motion regarding coverage would be heard 
in April, 1999. 
¶7 
In March, 1999, American Family moved for summary 
judgment dismissing Reid's complaint against it, and moved for a 
declaration that American Family had no further duty to defend 
or indemnify Benz.  In response, Benz filed a brief in 
opposition to American Family's motion for summary judgment, and 
a motion for a declaration that American Family was obligated to 
continue to defend and indemnify her.  Benz also sought a 
declaration that American Family was "obligated to reimburse her 
for all costs and attorney fees incurred in defending and 
establishing 
American 
Family's 
duties 
of 
defense 
and 
indemnification."  (R. at 22:1.)  This motion was set to be 
heard at the same time as American Family's motion for summary 
judgment.  
¶8 
On April 23, 1999, the circuit court heard American 
Family's summary judgment motion and Benz's declaratory judgment 
No. 
00-0003 
 
 
5 
motion.  The circuit court found that an exception to the 
business exclusion applied, and, correspondingly, that American 
Family had a duty to defend and indemnify Benz.  The court also 
found that Benz was entitled to recover the reasonable costs and 
attorney fees incurred, with respect to American Family's motion 
for summary judgment and her motion for declaratory judgment.   
¶9 
American Family moved for reconsideration of the 
circuit court's order regarding attorney fees and costs.  In 
response, Benz requested an additional award of fees incurred in 
connection with American Family's motion for reconsideration.  
While these motions were pending, American Family petitioned the 
court of appeals for leave to appeal the circuit court's order 
denying American Family's motion for summary judgment.  The 
court of appeals denied the petition for interlocutory appeal, 
and Benz moved the circuit court for an additional award of 
attorney fees incurred in responding to American Family's 
petition for leave to appeal. 
¶10 The circuit court denied American Family's motion for 
reconsideration, and found that Benz was entitled to recover 
attorney fees incurred in responding to American Family's motion 
for reconsideration.  The court also denied Benz's motion for 
attorney fees for opposing American Family's petition for leave 
to appeal.   
¶11 Reid, American Family, and Benz settled the underlying 
action, and judgment was entered in favor of Benz and against 
No. 
00-0003 
 
 
6 
American Family for attorney fees and costs.2  American Family 
appealed the judgment, and Benz cross-appealed the circuit 
court's denial of her request for attorney fees and costs, 
incurred in opposing American Family's petition for leave to 
appeal.  The court of appeals certified the issue of attorney 
fees 
in 
American 
Family's 
appeal 
for 
our 
review 
and 
determination, and we accepted the appeal.3 
II 
¶12 We review the circuit court's decision to award Benz 
attorney fees de novo.  "Whether an insured can recover 
attorney's fees as damages is a question of law which this court 
decides independently and without deference to the lower 
courts."  DeChant v. Monarch Life Ins. Co., 200 Wis. 2d 559, 
                     
2 In addition to an award for attorney fees incurred in 
connection with American Family's motion for summary judgment, 
Benz's motion for declaratory judgment, and American Family's 
motion for reconsideration, the judgment included an award of 
statutory costs and disbursements.  Neither the court of appeals 
certification nor the parties' briefs indicate that there is a 
dispute regarding the award of costs.  We thus do not address 
this part of the judgment. 
3 The court of appeals did not certify the issue raised by 
Benz's cross-appeal.  However, in granting certification here, 
this court "accepted for consideration . . . all issues raised 
before the court of appeals."  The parties did not specifically 
address Benz's entitlement to attorney fees in opposing American 
Family's petition for leave to appeal the circuit court's order 
in their 
briefs or their 
oral argument 
to 
this 
court.  
Nonetheless, because we have determined that Benz is not 
entitled to recover attorney fees under Elliott v. Donahue, 169 
Wis. 2d 310, 485 N.W.2d 403 (1992), Benz's cross-appeal, as the 
court of appeals suggested in its certification might occur, has 
become moot.     
 
No. 
00-0003 
 
 
7 
568, 547 N.W.2d 592 (1996) (citing Newhouse v. Citizens Security 
Mut. Ins. Co., 176 Wis. 2d 824, 501 N.W.2d 1 (1993)).  In 
addition, the question before us concerns our rationale for the 
award of attorney fees in Elliott, 169 Wis. 2d 310.  This 
necessarily involves a question of law that we review, or 
determine, independently of a lower court's decision, but 
benefiting from the analysis of the court.  See Mowry, 129 
Wis. 2d at 527; see also Smith v. General Cas. Ins. Co., 2000 WI 
127, ¶7, 239 Wis. 2d 646, 619 N.W.2d 882.  
¶13 We begin, as we must, with Elliott.  The facts and 
circumstances that gave rise to our decision in Elliott are 
particularly significant, because our reasoning therein is 
inextricably connected to those facts and circumstances.  Karen 
Elliott had brought an action against Michael Donahue, among 
others, to recover for her injuries caused by an automobile 
accident in which Donahue was involved.  Donahue had been 
driving an uninsured car owned by David Mikrut.  Donahue 
tendered his defense to Heritage Mutual Insurance Company 
(Heritage), based upon an insurance policy his stepmother had 
from Heritage which covered Donahue while he was operating 
another's car, so long as he had the reasonable belief that he 
had permission to do so.  Heritage responded that it was denying 
coverage, based upon a non-permissive use exclusion in the 
policy, because Donahue did not have Mikrut's permission to be 
driving the car.  Heritage advised Donahue to retain counsel at 
his own expense, which he did.  Heritage then requested a 
bifurcated trial to determine the coverage issue separate from 
No. 
00-0003 
 
 
8 
the issues of liability and damages, and bifurcation was 
subsequently ordered.  "However, proceedings on the claim for 
damages were not suspended pending resolution of the coverage 
issue.  Donahue's counsel represented him on both the claims for 
damages as well as in the coverage dispute."  Elliott, 169 
Wis. 2d at 315. 
¶14 At the bifurcated trial on coverage, the jury found 
that Donahue did have permission to drive Mikrut's vehicle.  The 
circuit court entered judgment that Donahue was covered by the 
Heritage policy.  Heritage assumed Donahue's defense and settled 
the claims against him.  Donahue then sought to recover costs 
and reasonable attorney fees incurred, which motion the circuit 
court denied.  On appeal, the court of appeals affirmed the 
determination that Donahue could not recover attorney fees and 
costs with respect to the coverage issue, but reversed the 
circuit court and held that Donahue could recover attorney fees 
and costs incurred in defending himself on the merits.  Id.  
This court reversed the court of appeals, insofar as it 
concluded that Donahue was not entitled to recover attorney fees 
incurred in defending coverage.  Id. at 314. 
¶15 Before this court, Donahue contended that he was 
entitled to an award of attorney fees incurred in defending 
coverage, because Heritage breached its duty to defend by 
denying coverage.  Heritage responded that it had not breached 
its duty to defend, because coverage was fairly debatable, and 
No. 
00-0003 
 
 
9 
it had acted consistent with the requirements of Mowry.4  
Elliott, 169 Wis. 2d at 316.  
¶16 We agreed that Heritage had not breached its duty to 
defend when it contested coverage.  "An insurer does not breach 
its contractual duty to defend by denying coverage where the 
issue of coverage is fairly debatable as long as the insurer 
provides coverage and defense once coverage is established."  
Id. at 317.  However, we disagreed that Heritage had complied 
with the dictates of Mowry. 
 
While a bifurcated trial was ordered in this case, the 
coverage 
and 
liability 
issues 
were 
litigated 
simultaneously, forcing Donahue to retain counsel to 
simultaneously defend him in both aspects of the case. 
 To 
be 
entirely 
consistent 
with 
Mowry, 
the insurer should not 
only request a bifurcated trial on the issues of 
coverage and liability, but it should also move to 
stay any proceedings on liability until the issue of 
coverage is resolved.  Heritage failed to do so.  The 
                     
4 Notably, no one contended that Heritage's initial denial 
of coverage was in bad faith or unreasonable.  Elliott, 169 
Wis. 2d at 317 n.1.  
No. 
00-0003 
 
 
10
Mowry court advised that an "insurer may need to 
provide a defense to its insured when the separate 
trial on coverage does not precede the trial on 
liability and damages."  [129 Wis. 2d at 528]  Because 
Heritage did not provide such needed defense, it is 
liable to Donahue for the attorney fees incurred by 
Donahue with respect to the liability issue.  See 
Meiser v. Aetna Casualty & Surety Co., 8 Wis. 2d 233, 
240-41, 98 N.W.2d 919 (1959).  
Elliott, 169 Wis. 2d at 318.  
¶17 In Meiser, as in Elliott, we concluded that, under the 
circumstances, the insured was entitled to recover attorney fees 
incurred not only with regard to liability, but also in regard 
to coverage.  There, the insurer wrongfully refused to defend 
the insured against the claim.  Meiser v. Aetna Cas. & Sur. Co., 
8 Wis. 2d 233, 240, 98 N.W.2d 919 (1959).  The insured retained 
counsel, who negotiated a settlement with the claimant for the 
loss, and who then filed a lawsuit to establish coverage.  We 
affirmed the circuit court's decision that the loss was covered, 
and further affirmed the court's award of reasonable attorney 
fees incurred in defending against the loss and establishing 
coverage.  The fee award was tied to the insurer's refusal to 
defend.  
 
[The insurer] denied the claim.  Thus, [the insured] 
was obliged to engage the services of attorneys to 
protect his interests, and the trial court found that 
negotiations 
for 
settlement 
of 
the 
loss 
were 
undertaken by said attorneys and this action was 
commenced to recover damages of the [insurer] by 
reason of its breach of contract in failing to 
investigate, adjust, and defend the [insured] against 
the loss.   
Id.  
No. 
00-0003 
 
 
11
¶18 Meiser, however, was decided long before Mowry.  In 
Mowry, we held that an insurer has not breached its contractual 
duty to defend when it "initially denied coverage because it 
believed that coverage under the policy was fairly debatable."  
129 Wis. 2d at 528.  Also, the insurer not only had requested 
bifurcation of coverage and liability, and that a trial on 
coverage would precede a trial on liability, but also had 
stipulated that "the issues of liability and damages were to be 
held in abeyance until the resolution of the coverage issue."  
Id. at 506.  In contrast, in Elliott, Heritage had requested 
bifurcation, but "proceedings on the claim for damages were not 
suspended pending resolution of the coverage issue."  169 
Wis. 2d at 315.  Donahue thus needed a defense on the merits, 
but Heritage did not provide him such a defense.  As we pointed 
out in Mowry, and repeated in Elliott, "[a]n insurer may need to 
provide a defense to its insured when the separate trial on 
coverage does not precede the trial on liability and damages."  
Mowry, 129 Wis. 2d at 528.  Heritage failed to move for a stay 
of proceedings on the merits, which resulted in Donahue needing 
a defense——a defense Heritage failed to provide. 
¶19 Even though our conclusion to award attorney fees in 
Elliott was premised upon Heritage's failure to follow the 
dictates of Mowry, that conclusion is intertwined with the 
equitable considerations that arise where an insurer refuses to 
defend the insured and the coverage and liability phases proceed 
simultaneously.  See Elliott, 169 Wis. 2d at 322-23.  Those 
equitable considerations arise from the scope of the insurer's 
No. 
00-0003 
 
 
12
duty to defend, as compared to its duty to indemnify.  We 
reiterated in Elliott that the duty to defend is broader than 
the duty to indemnify.  "The duty of defense depends on the 
nature of the claim and has nothing to do with the merits of the 
claim."  Id. at 321.  The duty to indemnify, in contrast, arises 
when a claim is shown to be within the parameters of the terms 
of the policy, that is the claim is within the parameters of the 
policy and the insured is adjudged liable.  Id. at 320-21; see 
also Smith v. Katz, 218 Wis. 2d 442, 448 n.3, 578 N.W.2d 202 
(1998) (an insurance policy imposes a duty to indemnify the 
insured if the insured is found liable); General Cas. Co. of 
Wisconsin v. Hills, 209 Wis. 2d 167, 176, 561 N.W.2d 718 (1997) 
(the duty to indemnify is dependent upon whether the claim is 
resolved in favor of, or against, the insured).  Although 
coverage was disputed, the duty to indemnify did not arise in 
Elliott because once there was a determination that Donahue was 
covered, Heritage settled the pending claims against him.  169 
Wis. 2d at 315. 
¶20 In particular, it was the equities related to the duty 
to defend that prompted us to award attorney fees to the insured 
in Elliott. 
 
Where an insurer failed to defend until after an 
adverse decision in a declaratory judgment action 
instituted by it, such insurer was held not liable to 
pay the attorneys' fees and expenses incurred by the 
insured in the declaratory judgment action, in the 
absence of fraud, bad faith, or stubborn litigiousness 
on the part of the insurer.  Some courts have 
qualified this rule on the assumption that the 
expenses were incurred at "the request of the insurer" 
No. 
00-0003 
 
 
13
and therefore came within the policy provision for 
reimbursement of the insured for reasonable expenses, 
or on the theory that since suit was brought by a 
third party, the insurer owes a duty to defend.  But, 
despite the qualifications placed upon this rule by 
the court, it still appears to be unfair to the 
insured.  After all, the insurer had contracted to 
defend the insured, and it failed to do so.  It 
guessed wrong as to its duty, and should be compelled 
to bear the consequences thereof.  If the rule laid 
down by these courts should be followed by other 
authorities, it would actually amount to permitting 
the insurer to do by indirection that which it could 
not do directly.  That is, the insured has a contract 
right to have actions against him defended by the 
insurer, at its expense.  If the insurer can force him 
into a declaratory judgment proceeding and, even 
though it loses in such action, compel him to bear the 
expense of such litigation, the insured is actually no 
better off financially than if he had never had the 
contract right mentioned above.  Other courts have 
refused to impose such a burden upon the insured. 
Id. at 322-23 (quoting Appleman, Insurance Law and Practice, 
sec. 4691, at 281-83 (Berdal ed. 1979) (emphasis added)).5   
¶21 It was the inequity of the circumstances facing us in 
Elliott——that the insurer was attempting to avoid its duty to 
defend indirectly by adjudicating coverage without seeking a 
stay of liability——that prompted us to award the attorney fees 
                     
5 Contrary to the dissent, this court's decision to award 
attorney fees in Elliott did "relate[] back," to the insurer's 
breach of the duty to defend.  See dissenting op. at ¶52.  As 
evident in the quote from Appleman's Insurance Law and Practice, 
which pointed out the duty to defend no less than four times, 
this court's rationale was inseparable from the breach of that 
duty.  Moreover, as this court noted twice since Elliott, the 
award of attorney fees was tied to the breach of the duty to 
defend, and we "decline[d] to extend Elliott beyond its 
particular facts and circumstances."  DeChant v. Monarch Life 
Ins. Co., 200 Wis. 2d 559, 569, 547 N.W.2d 592 (1996); see also 
Gorton v. Hostak, Henzl & Bichler, S.C., 217 Wis. 2d 493, 512, 
577 N.W.2d 617 (1998).  
No. 
00-0003 
 
 
14
the insured incurred.  We reasoned that it was only fair that 
the insurer be held liable for the attorney fees that the 
insured incurred, when the insurer denied coverage in such a way 
that forced the insured to incur fees to defend himself.  That 
was contrary to the dictates of Mowry.   
¶22 We have directed insurers to follow Mowry to avoid 
such exposure. 
 
In 
Elliott, 
we 
clearly 
stated 
that 
the 
proper 
procedure for an insurance company to follow when 
coverage is disputed is to 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.  [169 Wis. 2d at 318.]  When 
this procedure is followed, the insurance company runs 
no risk of breaching its duty to defend. 
Newhouse, 176 Wis. 2d at 836.  Newhouse aptly illustrates that 
an insurer breaches the duty to defend when it fails to follow 
the procedure laid out in Mowry and Elliott.  In Newhouse, the 
insurer "did not follow the proper procedure.  [The insurer] 
refused to accept the circuit court's offer to stay the 
liability trial until the appeal on the coverage issue was 
final."  176 Wis. 2d at 836.  The insurer also refused to 
provide a defense to the insured at the liability trial, and 
thereby breached the duty to defend.  Id. at 837. 
¶23 Newhouse and other cases concern an insurer's direct 
breach of the duty to defend, that is, the insurer wrongfully 
refuses to provide the insured with a defense.  See Newhouse, 
176 Wis. 2d at 836; see also Towne Realty, Inc. v. Zurich Ins. 
Co., 201 Wis. 2d 260, 269-70, 548 N.W.2d 64 (1996).  Elliott, in 
No. 
00-0003 
 
 
15
contrast, involves an insurer's indirect breach.  Heritage did 
not comply with the procedure approved in Mowry.  Consequently, 
even though Heritage had legitimately contested coverage, it 
forced Donahue to defend himself, at his expense, by refusing to 
seek an order staying the liability phase, while the coverage 
phase was being tried.  Heritage did "by indirection that which 
it could not do directly,"——avoid its duty to defend.  Elliott, 
169 Wis. 2d at 323 (quoting Appleman, Insurance Law and 
Practice, sec. 4691, at 281-83 (Berdal ed. 1979)).  Hence, it 
was 
the 
inherent 
unfairness 
of 
Heritage's 
tactic, 
which 
justified our award of attorney fees. 
¶24 The "necessary and proper" provision (Wis. Stat. 
§ 806.04(8)) (1999-2000) of the Uniform Declaratory Judgments 
Act provided the means by which we awarded Donahue attorney 
fees.6  "[Section] 806.04(8), Stats., permits a recovery of 
attorney fees in this case because the recovery is proper under 
the principles of equity."  Elliott, 169 Wis. 2d at 324.  
                     
6 At the time we decided Elliott, Wis. Stat. § 806.04(8) 
provided in pertinent part:  
Supplemental 
relief. 
Further 
relief 
based 
on 
a 
declaratory judgment or decree may be granted whenever 
necessary or proper.  The application therefor shall 
be by petition to a court having jurisdiction to grant 
the relief.  If the application be deemed sufficient, 
the court shall, on reasonable notice, require any 
adverse party whose rights have been adjudicated by 
the declaratory judgment or decree, to show cause why 
further relief should not be granted forthwith. 
 
Elliott, 169 Wis. 2d at 324.  This provision of §  806.04(8) has 
not changed to date.  See Wis. Stat. § 806.04(8) (1999-2000). 
No. 
00-0003 
 
 
16
Because § 806.04(8) allowed the court to award such supplemental 
relief, the court did not have to "fashion an exception to the 
American Rule . . . ." Id. at 325. 
¶25 In addition to contending that he was entitled to an 
attorney 
fees 
award, 
because 
Heritage 
had 
breached 
its 
contractual duty to defend, and that the principles of equity 
demanded the award, Donahue also argued that Heritage was 
required to reimburse him because he had, in effect, incurred 
the fees at Heritage's request.  Id. at 318-19.  We considered 
that "[c]ourts in several other jurisdictions have held that 
attorney fees are recoverable by the insured in defending 
against an insurer's declaratory judgment action where the 
insurance policy provides reimbursement for all reasonable 
expenses incurred at the request of the insurance company."  Id. 
at 319.  However, we expressly declined to adopt this approach 
because Wis. Stat. § 806.04(8) provided the court the means to 
recognize the equities of the situation, and, according to those 
equities, allow for a recovery of attorney fees.  Id. at 323-24 
(citing and quoting Kremers-Urban Co. v. American Employers Ins. 
Co., 119 Wis. 2d 722, 351 N.W.2d 156 (1984)).  
¶26 Since Elliott, we have emphasized that the insurer 
there, Heritage, had failed to fulfill its contractual duty to 
defend. Gorton v. Hostak, Henzl & Bichler, S.C., 217 Wis. 2d 
493, 511, 577 N.W.2d 617 (1998); DeChant, 200 Wis. 2d at 569; 
see also Ledman v. State Farm Mut. Auto. Ins. Co., 230 Wis. 2d 
No. 
00-0003 
 
 
17
56, 70, 601 N.W.2d 312 (Ct. App. 1999).7  We also have emphasized 
that it was the "limited circumstances" presented in Elliott 
that prompted the court to exercise its equitable power to award 
attorney fees to the insured.  DeChant, 200 Wis. 2d at 569 
(emphasis added); see also Gorton, 217 Wis. 2d at 512; Ledman, 
230 Wis. 2d at 70. 
¶27 Awarding attorney fees, as we did in Elliott, should 
not be the usual result.  The circumstances in Elliott——that 
coverage was not decided before liability, and that the 
liability proceeding was not held in abeyance while coverage was 
being considered——is atypical.  Over thirty years ago, we noted 
that "in many cases policy defenses are now tried before the 
liability issue . . . ."  Iowa Nat'l Mut. Ins. Co. v. Liberty 
Mut. Ins. Co., 43 Wis. 2d 280, 288, 168 N.W.2d 610 (1969).  In 
Mowry, we observed that "once an order to bifurcate has been 
                     
7 Ledman v. State Farm Mutual Automobile Insurance Co., 230 
Wis. 2d 56, 601 N.W.2d 312 (Ct. App. 1999) correctly applied 
Elliott.  Arguably, another recent court of appeals decision, 
Sauk County v. Employers Insurance of Wausau, 2001 WI App 22, 
240 Wis. 2d 608, 623 N.W.2d 174 (Ct. App. 2000) (Sauk County 
II), did not, insofar as it awarded attorney fees to the insured 
to establish coverage where there was no indication that there 
was also, directly or indirectly, a breach of the duty to 
defend.  See Sauk County v. Employers Ins. of Wausau, 202 
Wis. 2d 433, 437, 550 N.W.2d 439 (Ct. App. 1996) (Sauk County 
I).  However, we declined to review Sauk County II, 2001 WI App 
22, and accordingly, decline to express an opinion as to the 
attorney fees awarded there, because it appears that the award 
was premised upon the duty to indemnify, rather than upon a 
breach of the duty to defend, as in Elliott.  See Sauk County 
II, 2001 WI App 22, ¶14.  Our decision here, interpreting and 
applying Elliott, hopefully clears up any misunderstandings or 
misapplications of the legal principles in Elliott.   
No. 
00-0003 
 
 
18
made, a trial on a coverage issue should be a relatively simple 
matter."  129 Wis. 2d at 529 n.4.  We also encouraged a court 
which has ordered bifurcation to expedite resolution of the 
coverage issue.  Id.  
¶28 It is because of the unusual situation presented in 
Elliott, that "we have expressly declined 'to extend Elliott 
beyond its particular facts and circumstances.'"  Gorton, 217 
Wis. 2d at 512 (quoting DeChant, 200 Wis. 2d at 569).  And yet, 
this is exactly what is asked of us here. 
III 
¶29 Benz contends that she is entitled to recover attorney 
fees expended in establishing that American Family's policy 
covers Reid's claim against her.  She does not contend that she 
incurred attorney fees in defending against Reid's claim.  The 
issue is whether Elliott permits recovery of attorney fees 
expended solely in establishing coverage, where there has been 
no breach of the duty to defend. 
¶30 During oral argument, Benz 
and American Family, 
through respective counsel, agreed that an insured's entitlement 
to attorney fees should not stand or fall based upon the 
procedural device used to present the coverage issue in a case. 
 We agree.  It makes no difference whether the parties seek to 
resolve a coverage dispute via a declaratory judgment action or 
a summary judgment motion.8  In Elliott, we awarded attorney fees 
                     
8 It also makes no difference whether the cases involve 
first-party or third-party claims, contrary to Benz's attempts 
to distinguish Ledman, 230 Wis. 2d 56, and DeChant, 200 Wis. 2d 
559, because they involve first-party claims.  
No. 
00-0003 
 
 
19
under Wis. Stat. § 806.04(8), the Uniform Declaratory Judgments 
Act, even though there apparently was no declaratory judgment 
action there.  A jury decided the driving-with-permission issue 
and the judge entered judgment finding coverage.  Elliott, 169 
Wis. 2d at 315.  In Scottish Guarantee Insurance Co. v. Dwyer, 
19 F.3d 307, 308, 312 (7th Cir. 1994), coverage was determined 
via a declaratory judgment action and an award of attorney fees 
was made, based upon our decision in Elliott.9 
¶31 Benz makes three basic contentions as to why she is 
entitled to recover attorney fees here: (1) Benz was deprived of 
a benefit she bargained for by paying premiums, namely, 
indemnity, by having to incur attorney fees to establish 
coverage; (2) the same equitable principles that supported the 
award of attorney fees in Elliott exist in this case; and, (3) 
Benz 
essentially 
incurred 
expenses——attorney 
fees——at 
the 
request of American Family, when American Family contested 
coverage.  We address each in turn.  
¶32 Benz's first contention is based upon a misreading of 
Elliott.  We said in Elliott that "[i]ndemnification and defense 
for claims falling within the parameters of the insurance policy 
are the two primary benefits received by the insured from a 
contract of insurance."  169 Wis. 2d at 321 (emphasis added).  
                     
9 In Scottish Guarantee Insurance Co. v. Dwyer, 19 F.3d 307, 
308, 312 (7th Cir. 1994), the insurer refused to provide a 
defense for the insured in two state court actions and brought 
the declaratory action in federal court; there is no indication 
whether the state court actions were stayed pending the final 
determination of coverage.  19 F.3d at 308-09. 
No. 
00-0003 
 
 
20
We made it clear that, in return for premiums paid, the insurer 
provides indemnification of those claims found to be valid and 
to be covered by the policy.  Elliott did not, as Benz suggests, 
fashion a rule that the duty to indemnify requires the insurer 
to pay the insured's attorney fees, when it loses a contest over 
coverage.10  Notably, Benz has provided no authority that 
reasonably disputing coverage is a breach of the duty to 
indemnify.  Nor are we aware of any such authority.  Also, Benz 
has failed to point us to a provision in her policy, or language 
in Elliott, that requires the insurer to underwrite not only any 
claims falling within the parameters of the insurance policy, 
but also any contest regarding whether the claims are actually 
within the parameters of the policy. 
¶33 In essence, Benz is arguing that if she had to incur 
attorney fees to establish coverage, she was denied the benefit 
of indemnity.  How can this be?  The benefit of indemnity is to 
pay for claims "falling within the parameters of the insurance 
policy."  Elliott, 169 Wis. 2d at 321.  Here, American Family 
has apparently made a payment to settle the claim against Benz, 
so she has not been denied the benefit of indemnity.   
¶34 Benz, joined by amicus Wisconsin Academy of Trial 
Lawyers, makes a related argument that insurance companies 
should pay the insured's attorney fees when they do not prevail 
                     
10 Benz claims that this would not be an absolute rule, but 
would depend upon the terms of the policy.  However, the rule 
Benz suggests is tied to a breach of the duty to indemnify, not 
to a breach of the duty to defend.   
No. 
00-0003 
 
 
21
in a coverage contest, because they are better situated to 
assume, and spread, the risk of contesting coverage.  The 
relative abilities of the parties to assume the risk of the cost 
of litigation is not a valid reason for extending Elliott by 
permitting fee-shifting for coverage contests.  To shift the 
established allocation of attorney fees to the party who is 
better able to assume the cost of that litigation is well beyond 
the limited exception to the American Rule adopted in Elliott.11 
More importantly, such an approach is antithetical to the 
American Rule, that, regardless of the relative situation of the 
parties, "parties to litigation are generally responsible for 
their 
own 
attorney 
fees 
incurred 
with 
respect 
to 
the 
litigation."  Id. at 323.  We acknowledge that there are 
exceptions to the American Rule, but only where statutes or 
contracts provide for fee-shifting, or this court has found that 
special circumstances warrant recognizing an exception.  See, 
e.g., Elliott. 
¶35 Benz's second argument, that the equitable principles 
in Elliott are also present in this case, is not persuasive.  In 
Elliott, it was the indirect breach of the duty to defend——by 
not following the dictates of Mowry——which gave rise to the 
equities compelling an award of attorney's fees.  See Elliott, 
                     
11 We indicated in Elliott, 169 Wis. 2d at 325 n.3, that the 
supplemental 
relief 
provision 
of 
Wis. 
Stat. 
§ 806.04(8) 
permitted the court to award attorney fees without fashioning an 
exception to the American Rule.  However, the resulting effect 
of Elliott was to create an exception to the tenet that parties 
to litigation are responsible for their own attorney fees.  
No. 
00-0003 
 
 
22
169 Wis. 2d at 318, 322-23.  This is not the case here.  The 
equities that Benz relies upon——that she spent at least as much, 
if not more, litigating coverage, than American Family paid to 
settle the case——do not compel extending Elliott.  The equitable 
principles in Elliott related to the duty to defend.  Id. at 
322-32.  There is no contention that American Family has 
breached its duty to defend here, nor is there any argument that 
American 
Family's 
challenge 
to 
coverage 
was 
unfair 
or 
unreasonable, or in bad faith.  American Family did not attempt 
to avoid its duty to defend Benz by refusing to defend Benz, and 
then, simultaneously, litigating coverage and liability.  
¶36 Finally, Benz contends that the attorney fees she 
incurred to establish coverage were essentially incurred at the 
request of American Family, and that the provision of her policy 
which requires American Family to reimburse her for expenses 
incurred at its request, provides a basis for the attorney fees 
award.  We expressly declined to adopt this approach in Elliott, 
as Benz concedes.  169 Wis. 2d at 319.  Instead of relying upon 
a provision of the insurance contract, we relied upon the 
supplemental 
relief 
provision 
of 
the 
Uniform 
Declaratory 
No. 
00-0003 
 
 
23
Judgments Act and the insurer's failure to follow Mowry.12  Id. 
at 318, 322-24.  The instant case presents even less compelling 
circumstances than Elliott to induce us to adopt an approach 
based upon a provision in the policy now.13  Unlike the situation 
                     
12 The 
dissent 
here 
also 
attempts 
to 
rely 
upon the 
"reasonable expenses" language of the insurance policy, an 
approach we explicitly rejected in Elliott, 169 Wis. 2d at 319. 
 See dissenting op. at ¶¶46-49.  The dissent also claims that 
the language of the policy is ambiguous and that a reasonable 
insured would not expect to pay attorney fees to establish 
coverage.  Id.  The dissent's reliance upon the language of the 
policy is misplaced.  The language in the policy at issue here 
is substantially the same as the language of the policy in 
Elliott.  Compare dissenting op. at ¶46 with Elliott, 169 
Wis. 2d at 319-320.  Yet, the rationale for the award of 
attorney fees in Elliott was in no way dependent upon any 
ambiguity in the language of the policy.  Moreover, since we did 
not find that language to be ambiguous in Elliott, we will not 
search for ambiguity here where it does not exist.  See Kremers-
Urban Co. v. American Employers Ins. Co., 119 Wis. 2d 722, 736, 
351 N.W.2d 156 (1984).  Nonetheless, for this court to conclude 
that the language of the insurance policy, as a contract, would 
support an award of attorney fees, solely for establishing 
coverage, runs afoul of the American Rule, which allows for an 
award only where the contract so specifies.  Elliott, 169 
Wis. 2d at 323.  Here, the insurance policy has no such fee-
shifting provision. 
13 The dissent claims that, by tying the award of attorney 
fees in Elliott to a breach of the duty to defend, we have 
created a "no-lose situation" for insurance companies.  See 
dissenting op. at ¶40.  This is hardly the case.  The insurance 
company loses not only the amount it must pay to cover the claim 
if it challenges coverage and fails, the company also loses 
attorney fees expended in challenging coverage.  The dissent 
also glosses over the real risk facing insurance companies from 
bad faith.  See Anderson v. Continental Ins. Co., 85 Wis. 2d 
675, 691-92, 271 N.W.2d 368 (1978). 
No. 
00-0003 
 
 
24
in Elliott, there was no attempt on the part of American Family 
to avoid its duty to defend.14 
IV 
¶37 Elliott presented circumstances that prompted us to 
award attorney fees to the insured as a matter of equity.  The 
insurer failed to follow the dictates of Mowry, and the insured 
was forced, therefore, to litigate the coverage issue and defend 
on liability simultaneously.  Here, unlike the situation in 
Elliott, the insurer, American Family, followed the dictates of 
Mowry.  American Family sought to have the fairly debatable 
question of coverage determined before the liability phase of 
the case proceeded, and obtained a stay of the liability phase. 
We thus do not have the inequitable circumstances before us here 
that were before us in Elliott.  Accordingly, Elliott does not 
support the circuit court's award of attorney fees to Benz.  We 
thus reverse the order for judgment of the circuit court 
awarding such fees. 
By the Court.—The order for judgment of the circuit court 
awarding attorney fees is reversed. 
 
                     
14 Moreover, even though we seemed to cite with approval the 
reasoning of some extra-jurisdictional decisions in considering 
the "reasonable expenses incurred" provision of the policy 
approach (Elliott, 169 Wis. 2d at 319), it is unclear whether 
those cases involved the key circumstance in Elliott that 
prompted us to award fees, namely, the failure of the insurer to 
request a stay of the liability phase.  See Occidental Fire & 
Cas. Co. v. Cook, 435 P.2d 364 (Idaho 1967); Upland Mut. Ins. v. 
Noel, 519 P.2d 737 (Kan. 1974); Nordby v. Atlantic Mut. Ins. 
Co., 329 N.W.2d 820 (Minn. 1983).  
No. 
00-0003 
 
 
25
 
 
 
 
 
 
No. 00-0003.wab 
 
1 
¶38 WILLIAM A. BABLITCH, J. (dissenting).  Insurance 
companies have more than enough incentive to deny coverage for 
claims made against their insured.  They are, after all, in the 
business to make a profit.  Unfortunately, the majority opinion 
provides further incentive for them to refuse coverage in close 
claims against their insured.  In cases not involving bad faith, 
the insurance company can now deny coverage, and it wins under 
any scenario; in contrast, the insured loses under any scenario. 
 The majority opinion is not only anti-consumer, it is also bad 
law.  Accordingly, I respectfully dissent.   
¶39 First, the opinion is anti-consumer.  As a matter of 
public policy, denying insureds recovery of attorney fees in 
successfully contesting a denial of coverage leads to highly 
beneficial 
results 
for 
the 
insurance 
company 
and 
highly 
inequitable results for insureds.  
¶40 Under the majority's result, a denial of coverage 
leads to a no-lose situation for insurance companies in every 
likely scenario.  If the insured does not contest the denial of 
coverage, the insurance company wins because it pays nothing.  
If the insured contests, but loses, the insurance company wins 
again because it pays nothing.  Finally, if the insured contests 
and wins, the insurance company wins yet again because it is 
forced to pay out no more than what it would have paid under the 
claim initiallyan amount, in retrospect, they were obligated to 
pay under the policy.   
¶41 In contrast, the insured is faced with a no-win 
situation from a denial of coverage under any likely scenario.  
No. 00-0003.wab 
 
2 
If the insured does not contest the denial, the insured loses 
because it has to pay the value of the claim.  If the insured 
contests, but loses, the insured loses because it must then pay 
both the value of the claim and the attorney fees paid in 
contesting the denial of coverage.  Lastly, if the insured 
contests and wins, the insured also loses because the insured 
will have to pay attorney fees to get the coverage that in 
retrospect it had paid for.  This was exactly the outcome in 
Benz's case.  She incurred almost $7,000 in attorney fees in her 
declaratory judgment action against American Family that, in 
retrospect, she had paid for.   
¶42 In sum, it is a win-win-win for the insurance company 
and a lose-lose-lose for the insured.  Insurance companies will 
be motivated to deny all claims in close cases involving 
coverage, knowing that under the worst case scenario they stand 
to lose nothing but their attorney costs, if any, in defending 
their denial.  On the other hand, the denial of coverage will 
require insureds to either pursue the costly alternative of 
contesting coverage or to pay the claim themselves because it 
will cost less than undertaking litigation against their own 
insurance company. 
¶43 The above is particularly true in cases involving 
claims that involve an amount closely approaching the amount 
that it would cost the insured in attorney fees to contest the 
denial.  It would be foolish, except perhaps as a matter of 
principle, for an insured to contest a denial that would end up 
costing the insured more in attorney fees than the claim was 
No. 00-0003.wab 
 
3 
worth.  And it is undeniable that claims managers will be aware 
of that fact as well.   
¶44 As a further matter of public policy, denying attorney 
fees to insureds fails to recognize that an insurance policy 
represents a unique type of legally enforceable contract.  See 
Elliott v. Donahue, 169 Wis. 2d 310, 320, 485 N.W.2d 403 (1992). 
 Its unique nature is illustrated when an insurance company 
refuses to perform on the contract.  When this occurs, the 
insured cannot merely turn to another supplier of insurance for 
coverage.  The insured is locked into this relationship with his 
or her insurance company and must seek a declaratory judgment to 
obtain coverage, despite the cost.  In light of this fact, it is 
fair to assign the costs of refusing to perform on the contract 
to the insurance company when it is later determined that 
coverage exists under the policy. 
¶45 In addition to the bad public policy that results from 
the majority opinion, it is also bad law:  it ignores the 
ambiguities in the insurance contract; it fails to honor the 
reasonable expectations of the insured; and it errs in its 
interpretation of relevant case law.   
¶46 To begin, I find that ambiguity exists in the 
insurance contract on whether Benz is entitled to such attorney 
fees.  In reaching this result, an examination must first be 
undertaken of American Family's duties and obligations under the 
terms of its policy issued to Benz.  The policy reveals that, in 
exchange for premiums paid by Benz, American Family assumed the 
contractual duties of indemnification and defense for claims 
No. 00-0003.wab 
 
4 
described in the policy.  Specifically, with respect to its duty 
to defend, the policy defines the limits of this duty as 
follows:   
 
Defense Provision. 
If a suit is brought against any insured for damages 
because of bodily injury or property damage caused by 
an occurrence to which this policy applies, we will 
provide a defense at our expense by counsel of our 
choice.  We will defend any suit or settle any claim 
for damages payable under this policy as we think 
proper. 
Associated with this duty to defend, the policy provides that 
American Family will cover certain expenses for claims and suits 
that it is "obligated to defend," stating:   
 
Claim and Defense Expenses.  We will pay the expenses 
described below for a claim or suit we are obligated 
to defend under the Personal Liability Coverage: 
a. all expenses we incur and costs taxed against any 
insured; 
. . . . 
c. reasonable expenses (other than loss of earnings) 
any insured incurs at our request; 
We have noted that an insurer's duty to defend is broad, 
extending beyond its duty of indemnification.  Elliott, 169 
Wis. 2d at 320-21. 
¶47 The question then becomes whether the policy language 
provides coverage for attorney fees incurred by the insured when 
the insured successfully contests the insurance company's denial 
of coverage.  This question requires an interpretation of the 
insurance contract.   
¶48 Any language in the policy must be interpreted 
according to "what a reasonable person in the position of an 
No. 00-0003.wab 
 
5 
insured would have understood the words to mean."  Elliott, 169 
Wis. 2d at 322.  "Words or phrases in a contract are ambiguous 
when they are fairly susceptible to more than one construction." 
 Kremers-Urban Co. v. Am. Employers Ins., 119 Wis. 2d 722, 735, 
351 N.W.2d 156 (1984).  Any ambiguity in the insurance contract 
must be construed directly against the insurance company.  
Leatherman v. Am. Family Mut. Ins. Co., 52 Wis. 2d 644, 649-50, 
190 N.W.2d 904 (1971). 
¶49 An interpretation of the policy language leads to one 
conclusion:  it is unclear as to whether the policy requires 
payment for such attorney fees.  A reasonable insured could 
understand the policy language to mean that he or she will be 
made whole if there is coverage.  See Elliott, 169 Wis. 2d at 
318-19.  I recognize, however, that the language may be 
susceptible to other reasonable interpretations.  In light of 
this ambiguity, the insurance policy is still appropriately 
construed against American Family, and accordingly, Benz must be 
paid her attorney fees under the policy.  
¶50 This 
interpretation 
is also 
consistent 
with the 
expectations of an insured under the contract.  "The public 
policy purpose of honoring the reasonable expectations of the 
insured is applied when the language of an insurance contract is 
interpreted and construed."  Smith v. Gen. Cas. Ins. Co., 2000 
WI 127, ¶27, 239 Wis. 2d 646, 619 N.W.2d 882.  An insured who is 
entitled to coverage under a policy expects that the insurance 
company will provide coverage in full, including costs for any 
litigation which leads to the determination that coverage exists 
No. 00-0003.wab 
 
6 
under the policy.  Insureds do not expect that, if their policy 
provides coverage, they will receive such coverage less any 
attorney fees required to establish coverage.  In particular, in 
this case, Benz, as a reasonable insured, could not have 
expected to incur almost $7,000 in attorney fees in order to 
receive coverage that she was entitled to in the first place.  
¶51 Finally, the majority errs in their interpretation of 
Elliott.  We made two separate holdings in Elliott on whether 
the insured in that case was entitled to attorney fees after 
successfully defending coverage.  First, we determined that the 
insurer had not breached its duty to defend by denying coverage 
to the insured because the issue of coverage was fairly 
debatable.  Therefore, the insured could not recover attorney 
fees based on any such breach.  We concluded, however, that the 
insurer did breach its duty to defend by failing to follow the 
mandate of Mowry v. Badger State Mut. Cas. Co., 129 Wis. 2d 496, 
385 N.W.2d 171 (1986), which required the insurer to stay any 
proceedings on liability until coverage was resolved.  In light 
of this breach, we held that the insurer was liable for the 
attorney fees incurred by the insured in defending the issue of 
liability.  
¶52 Our second determination was that, pursuant to Wis. 
Stat. § 806.04(8), the insured was entitled to attorney fees 
incurred in successfully establishing coverage.  This decision, 
however, in no way related back, as the majority states, to the 
insurer's breach of its duty to defend.  Instead, we determined 
that under the principles of equitynone of which related to the 
No. 00-0003.wab 
 
7 
defendant's breachan insured may recover attorney fees under 
§ 806.04(8) when successfully defending coverage.  Indeed, 
although our holding in Elliott was limited in the sense that we 
granted recovery under § 806.04(8) instead of finding an 
exception to the American Rule, we in no way limited our award 
of attorney fees for defending coverage based on the insured's 
breach of its duty to defend.  In turn, under a plain reading, 
Elliott could apply in this case to allow Benz to recover her 
attorney fees. 
¶53 On the whole, the rule laid down by the majority 
permits insurance companies to do by indirection that which it 
cannot do directly.  See Elliott, 169 Wis. 2d at 323.  An 
insurance 
company 
cannot 
directly 
refuse 
to 
follow 
its 
contractual duty to defend.  However, under the majority's 
conclusion, insurance companies can now achieve this same result 
indirectly, by denying coverage and effectively leaving some 
insureds without coverage because the insureds cannot afford to 
contest it, especially in close cases.  In turn, the same result 
is achieved, that is, a refusal to follow their contractual duty 
to defend.  Because the majority's opinion leads to this 
undesirable outcome, I respectfully dissent.  
¶54 I am authorized to state that Chief Justice SHIRLEY S. 
ABRAHAMSON joins this dissent. 
 
No. 00-0003.wab 
 
1