Steven Plitt, Expert Witness Steven Plitt, Expert Witness
Insurance Bad Faith Claim Handling Expert Serving Clients Nationwide

THE WISCONSIN SUPREME COURT, IN A SPLIT DECISION, REAFFIRMED THE "FOUR-CORNERS" RULE GOVERNING A LIABILITY INSURANCE COMPANY'S DUTY TO DEFEND

The High Court confirmed that under Wisconsin Law there were no exceptions to the rule that extrinsic evidence cannot create a duty to defend.

In Water Well Solutions Service Group, Inc. v. Consolidated Ins. Co., 369 Wis.2d 607, 881 N.W.2d 285 (Wis. 2016), the Wisconsin Supreme Court rejected the use of extrinsic evidence to create a duty to defend. In doing so, the High Court noted that the Wisconsin Supreme Court adopted the four-corners rule in 1967 and since that time all appellate decisions in Wisconsin, save one, had adhered to the four-corners rule. Because of this, the Wisconsin Supreme Court rejected the insured's invitation to have the Court create a limited exception where (1) the underlying suit fell within the insuring clause, (2) the insurer denied coverage based on an exclusion without first seeking declaratory judgment relief, and (3) the factual allegations were incomplete or ambiguous. The Court rejected the proposed exception finding that it lacked both precedent and a compelling rationale.

There was a vigorous dissent by two justices who disagree with the majority opinion. According to the dissent, Wisconsin was a in shrinking minority of jurisdictions that continue to cling to a strict application of the four-corners rule. The dissent posited the idea that Wisconsin would be better served by a rule that recognized substance over form in allowing extrinsic evidence to inform the duty to defend.

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