Opinion ID: 4361951
Heading Depth: 3
Heading Rank: 2

Heading: Greenwich Breached Its Duty To Defend

Text: ¶29 We have established a procedure for an insurance company to follow when it disputes coverage. Wis. Pharmacal Co., LLC v. Neb. Cultures of Cal., Inc., 2016 WI 14, ¶18, 367 12 No. 2016AP1631 Wis. 2d 221, 876 N.W.2d 72 (explaining that an insurer may avoid breaching its duty to defend by requesting a bifurcated trial on the issues of coverage and liability, with liability determined after coverage has been established); Newhouse, 176 Wis. 2d at 836 (stating that the insurer should request a bifurcated trial on the issues of coverage and liability when coverage is disputed). An insurer who fails to follow this procedure risks breaching its duty to defend if its coverage determination was wrong. Id. at 837. ¶30 Alternatively, an insurer may choose to reject the insured's tender of defense based on its determination that the claim is not covered under the policy. However, it does so at its own risk. Marks v. Houston Cas. Co., 2016 WI 53, ¶41 n.21, 369 Wis. 2d 547, 881 N.W.2d 309. If the insurer is wrong about its potential coverage obligation, it is guilty of a breach of contract which renders it liable to the insured for all damages that naturally flow from the breach. Id. (citing Newhouse, 176 Wis. 2d at 837). Finally, as mentioned earlier, an insurer has a duty to defend the entire lawsuit when an insurance policy provides [potential] coverage for even one claim made in a lawsuit. Fireman's Fund Ins. Co., 261 Wis. 2d 4, ¶21. ¶31 In this case, Greenwich did not seek a judicial determination of its coverage obligations, nor did it pay any amount toward MMSD's defense costs. Instead, it chose to rely on its own unilateral determination that its policy was excess to Steadfast's. As we have explained, Greenwich's unilateral determination was erroneous; Greenwich's policy provided 13 No. 2016AP1631 potential coverage for a claim made in lawsuits based on sewage backups. Therefore, Greenwich breached its duty to defend, and it is responsible for all damages that naturally flow from the breach. Marks, 369 Wis. 2d 547, ¶41 n.21.