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, 2015 WI 54 (2016), the Court rejected the use of extrinsic evidence to create a duty to defend. In doing so, the 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 in a shrinking minority of jurisdictions that continued to cling to a strict application if 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 form the duty to defend.
Steven Plitt is an accomplished author and expert witness, and has been a licensed attorney for 33 years. During his career, he has reviewed and analyzed more than 6,000 claim files from 100 different insurance companies. Based in Phoenix, Arizona, he serves as counselor and expert for insurance coverage and bad faith claims nationwide. For more information or to set up an appointment, please visit his website at insuranceexpertplitt.com.