Opinion ID: 4507103
Heading Depth: 3
Heading Rank: 2

Heading: Unreimbursed Liability Attorney Fees

Text: ¶39 The School District also argues the Insurer breached its duty to defend by failing to reimburse it for the full amount it expended in liability fees. It contends the Insurer's reimbursement fell short by approximately $50,000. We reject this contention for the same reasons we rejected the School District's argument regarding delayed reimbursement: (1) attorney fees must be reasonable, and (2) the record on unreimbursed liability attorney fees is sorely incomplete. While the record contains the specific amounts of liability fees in dispute as well as the amount the Insurer paid, we agree with the court of appeals that it is impossible to properly consider [the School District's] unpaid fees argument because [t]he District leaves us to guess as to 27 No. 2013CV52718AP116 the scope and details of the agreements between the parties.13 Additionally, the School District appealed from an order addressing only coverage fees, not unreimbursed liability fees. Furthermore, it is undisputed that neither the School District nor its liability attorney utilized the Insurer's process for appealing the Insurer's decision to pay less than the amount of the attorney fees invoice. 3. Four-Corners Rule ¶40 The School District also asserts the circuit court should examine only the four corners of the complaint to assess whether the Insurer breached its duty to defend and cannot consider any actions by the Insurer. The four-corners rule is the wellestablished standard used to assess whether a duty to defend exists. Water Well, 369 Wis. 2d 607, ¶¶19-20. No extrinsic evidence can be used to ascertain whether the Complaint alleges a covered claim. Id., ¶24. ¶41 The School District misunderstands this court's holding in Water Well. We never prohibited a circuit court from considering the actions an insurer took to obtain a judicial determination on coverage. Nor did we say the circuit court cannot take into account that the insurer followed a judicially preferred method to determine coverage. We held the circuit court cannot consider extrinsic evidence the insured, insurer, or anyone else might know about circumstances relating to the substance of the Complaint that are not within the four corners of the Complaint. 13 See Choinsky, 386 Wis. 2d 285, ¶¶13-14, 18, 34 n.10. 28 No. 2013CV52718AP116 In Water Well, the insured asked the court to consider extrinsic evidence about the product at issue, claiming the complaint's allegations about the product were factually incomplete or ambiguous. Id., ¶2. This court refused Water Well's request and reaffirmed that in assessing whether the duty to defend exists, a court cannot look beyond the four corners of the Complaint. Id., ¶¶23-24. Once the duty to defend has been established, the fourcorners rule no longer applies. See Sustache, 311 Wis. 2d 548, ¶¶27-29. ¶42 Water Well did not disturb Wisconsin coverage law: a court is bound by the four-corners rule when deciding whether the Complaint alleges a covered claim triggering the insurer's duty to defend. Once a court concludes a duty to defend exists, the insurer's actions——unilaterally denying coverage, opting for a judicially preferred procedure to determine coverage, or something else——will be examined to decide whether the insurer breached its duty to defend.