City of Cedarburg Light and Water Commission v. Glens Falls Ins. Co., s. 167

CourtUnited States State Supreme Court of Wisconsin
Writing for the CourtCONNOR T. HANSEN
Citation42 Wis.2d 120,166 N.W.2d 165
Decision Date01 April 1969
Docket NumberNos. 167,168,s. 167
PartiesCITY OF CEDARBURG LIGHT & WATER COMMISSION, a municipal corporation, Respondent, v. GLENS FALLS INSURANCE CO., a foreign corporation, et al., Appellants (two cases).

Kenneth M. Kenney, Wolfe, O'Leary, Kenney & Wolfe, Milwaukee, for appellants.

Kivett & Kasdorf, Milwaukee, A. W. Kivett and John M. Swietlik, Milwaukee, of counsel, for respondent.


The rules under which this court approaches questions on summary judgment are well established and no useful purpose will be served by again restating them. 1

The pleadings reflect that the case is predicated upon breach of contract--the breach being the defendants' failure to indemnify under the terms of the fire insurance contracts.

This case is not directed to recovery of litigation expenses in the present action, but to recovery of litigation expenses incurred by the plaintiff in a collateral suit against third party wrongdoers.

As we consider this case on motion for summary judgment, the issue of primary concern is: Does plaintiff's recovery against the third party wrongdoers, after plaintiff's fire insures have denied plaintiff's claim of indemnity, preclude plaintiff from thereafter maintaining an action for breach of contract against such indemnity insurers for alleged unrecoverable litigation expenses incurred by the plaintiff in the successful third party action?

The plaintiff asserts that defendant-insurers, having rejected its proof of loss and denied liability under the policy, forced plaintiff to bring suit against the third party wrongdoers. That in so doing plaintiff was damaged because it incurred certain litigation expenses which caused plaintiff's net recovery to be less than its actual damages. Thus, plaintiff argues, since defendants breached their insurance contracts by refusing to pay on the policies, they should pay damages in the amount of plaintiff's litigation expenses incurred in prosecuting the third party action.

The defendants contend that regardless of whether the policies did in fact indemnify the plaintiff for its loss (whether the policies did cover the plaintiff's loss has not been determined, and the policies are not part of the record), indemnity insurers are not liable for litigation expenses incurred by their insured in obtaining full recovery from third parties.

Once the insurers deny liability, as was done in this case, the decision as to the manner of proceeding moves to the insured. The insured must either accept the denial of indemnification; or commence suit against the insurer or the third party, or both the insurer and the third party. In the instant case the insured elected to sue the third party.

The question resolves to whether the insured or the insurer should bear the third party litigation expenses in the event it is ultimately determined that there is liability under the fire insurance contract.

If an insured may recover third party litigation expenses, then when an insurer denies liability and the insured elects to prosecute the third party instead of the insurer, the insurer is forced into a position of taking the risk that its policy in fact covers the loss. We recognize that questions of coverage are sometimes difficult.

On the other hand, if the insured cannot recover his third party litigation expenses, should it ultimately develop that the insurer should have paid under the policy provisions, then the insured has not been made whole.

This situation appears to present a question of first impression in this state. An examination of authorities reflects that several states have statutory provisions which resolve this question. This state does not. Also, there is a substantial quantity of authority which considers the responsibility of a liability insurer to its insured's defense of third party litigation. However, there is an obvious distinction between the responsibilities of a liability insurer under the terms of its contract as contrasted with those of a nonliability insurer, as in the instant case.

As a general rule, in the absence of any contractual or statutory liability therefore, attorney's fees and expenses incurred by the plaintiff in litigation of his claim against the defendant, aside from statutory court costs and fees, are not recoverable as an item of damages. Nor are attorney's fees and other expenses incurred in former litigation between the same parties recoverable in a subsequent action. 22 Am.Jur.2d Damages, sec. 165 (1965). Baker v. Northwestern Nat. Casualty Co. (1965), 26 Wis.2d 306, 132 N.W.2d 493.

However, there are various exceptions to and modifications of this rule.

'If a breach of contract is the cause of litigation between the plaintiff and third parties that the defendant had reason to foresee when the contract was made, the plaintiff's reasonable expenditures in such litigation are included in...

To continue reading

Request your trial
33 cases
  • Kremers-Urban Co. v. American Employers Ins. Co., KREMERS-URBAN
    • United States
    • United States State Supreme Court of Wisconsin
    • 29 Junio 1984
    ...act which has caused the plaintiff to become involved in litigation with third parties. Cedarburg Light & Water Comm. v. Glens Falls Insurance Co., 42 Wis.2d 120, 125, 166 N.W.2d 165 (1969). This rule does not deal with the cost of litigation vis-a-vis the defendant. Id., quoting 5 Corbin, ......
  • Jacob's Meadow Owners Ass'n v. Plateau 44, 57543-1-I.
    • United States
    • Court of Appeals of Washington
    • 23 Julio 2007
    ...P.2d 546, 549 (Okla.1966); Lesikar v. Rappeport, 33 S.W.3d 282, 306 (Tex.2000); Cedarburg Light & Water Comm'n v. Glens Falls Ins. Co., 42 Wis.2d 120, 124-25, 166 N.W.2d 165 7. The court in American Medical based its determination, in part, on a Georgia statute which provides that "the jury......
  • Yanta v. Montgomery Ward & Co., Inc., 314
    • United States
    • United States State Supreme Court of Wisconsin
    • 20 Diciembre 1974
    ...State v. Michels Pipeline Construction, Inc. (1974), 63 Wis.2d 278, 217 N.W.2d 339.14 In Cedarburg Light & Water Comm. v. Glens Falls Ins. Co. (1969), 42 Wis.2d 120, 124, 125, 166 N.W.2d 165, 167, the court said: 'As a general rule, in the absence of any contractual or statutory liability t......
  • Murray v. Holiday Rambler, Inc., 75-565
    • United States
    • United States State Supreme Court of Wisconsin
    • 2 Mayo 1978
    ...unless such liability arises from specific statutory provisions or the contract of the parties. Cedarburg L. & W. Comm. v. Glens Falls Ins. Co., 42 Wis.2d 120, 124, 125, 166 N.W.2d 165 (1969). No case has come to our attention in which this court had addressed the question whether attorney'......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT