Bad Faith Blog

Summary: Burgraff was injured when a Menard employee was loading Burgraff’s vehicle with materials purchased from Menard. Burgraff’s vehicle and trailer were insured by Millers First Insurance Company (Millers First). Menard was self-insured up to $500,000 and had an excess layer of $500,000 with CNA. During mediation Millers First agreed to settle Burgraff’s claim for $40,000. In exchange for the payment of $40,000, Millers First would be fully discharged as would “one-sixth of any liability that Menard, Inc. may have to [ ] Burgraff.” Millers First then stopped defending Menard. Menard did not settle so the tort case proceeded to trial. The circuit court, thereafter, ruled Millers First had no further defense obligation to Menard, the court of appeals reversed, and the Supreme Court of Wisconsin agreed Millers First had a duty to defend Menard through trial.

Summary: A Wisconsin high school discharged an employee who then sued. The school district’s insurer defended the case through an adverse summary judgment, but refused to indemnify the school district for an adverse judgment even though it had never sent a reservation of rights letter. The majority ruled that the doctrines of waiver or estoppel were insufficient “to defeat… a coverage clause in an insurance contract that would otherwise justify the insurer’s denial of coverage.” The Maxwell case is primarily a coverage opinion which declares how and when the estoppel and waiver doctrines apply in state courts in Wisconsin. Because of its brief discussion of Wisconsin bad faith law it merits attention in our blog.