Haley v. Kolbe & Kolbe Millwork Co.
| Decision Date | 02 November 2015 |
| Docket Number | 14-cv-99-bbc |
| Court | U.S. District Court — Western District of Wisconsin |
| Parties | MARY HALEY and MICHAEL HALEY, LESLIE BANKS and JAMES HAL BANKS, ANNIE BUINEWICZ and BRIAN BUINEWICZ, TERRANCE McIVER AND JEAN ANN McIVER, SUSAN SENYK, CHRISTIAN SENYK, GARY SAMUELS, PATRICIA GROOME, MATTHEW DELLER, RENEE DELLER and MARIE LOHR, on behalf of themselves and all others similarly situated, Plaintiff, v. KOLBE & KOLBE MILLWORK CO., INC., Defendant, and FIREMAN'S FUND INSURANCE COMPANY and UNITED STATES FIRE INSURANCE COMPANY, Intervenor Defendants. |
This is a proposed class action in which plaintiffs allege that the windows they purchased from defendant Kolbe & Kolbe Millwork Co. are defective. This order will address three motions for summary judgment related to peripheral disputes between defendant and its insurers, Fireman's Fund Insurance Company and United States Fire Insurance Company. In particular, United States Fire seeks summary judgment on defendant's claims that United States Fire breached its duty to defend defendant and acted in bad faith. Dkt. #294. In addition, both insurers seek a declaration that they owe no duty to defend or indemnify defendant. Dkt. ##261 and 265.
I am granting United States Fire's motion with respect to defendant's claims because defendant has not shown that United States Fire's conduct violated defendant's rights. However, I am denying the insurers' motion regarding their duty to indemnify and their continuing duty to defend because there is still a possibility that defendant could be required to pay damages that are covered by the insurers' policies.
OPINIONUnited States Fire seeks summary judgment on defendant's claims for breaching the duty to defend and engaging in bad faith. Defendant argues that United States Fire committed both of these torts in various ways, some of which seem to overlap substantially:
Dkt. #338. These eight categories can be distilled to two: United States Fire's delay in making decisions regarding counsel and its attempt to impose its own choice of counsel on defendant rather than accept defendant's choice.
An initial problem is that defendant does not distinguish its claim for breaching the duty to defend from its bad faith claim and it does not develop an argument that the duty to defend or the duty to act in good faith even extends to the type of conduct at issue in this case. This is important because United States Fire did not simply refuse to defend defendant and then deny coverage without any reasonable basis, which is generally what triggers liability for these types of claims. E.g., Trinity Evangelical Lutheran Church and School-Freistadt v. Tower Insurance Co., 2003 WI 46, ¶ 33, 261 Wis. 2d 333, 661 N.W.2d 789; Newhouse by Skow v. Citizens Security Mutual Insurance Co., 176 Wis. 2d 824, 501 N.W.2d 1 (1993). Although United States Fire delayed its decision regarding its duty to defend, defendant was not left high and dry. Rather, defendant proceeded with counsel of its own choosing and United States Fire paid its share of the defense costs and has continuedto do so throughout the lawsuit. Dft.'s Resp. to U.S. Fire's PFOF ¶¶ 41-46, dkt. #342. Although United States Fire eventually attempted to replace defendant's choice of counsel with its own, that attempt was unsuccessful and defendant has been able to retain its own counsel without interruption. Id. at ¶ 38. Defendant does not identify any way in which United States Fire's conduct prejudiced defendant in litigating this case. Hamlin Inc. v. Hartford Accord & Indemnity Co., 86 F.3d 93, 95 (7th Cir. 1996) (). Rather, the only damages defendant identifies are its costs for litigating the disputes about counsel.
Although defendant's claims go well beyond a traditional claim for breach of the duty to defend and the duty to act in good faith, defendant simply assumes in its brief that United States Fire's conduct is the type that qualifies as a breach. Defendant devotes most of its brief to arguing that United States Fire's conduct was unreasonable without explaining why it believes it has a cause of action or even discussing the standard for proving either claim. That is reason alone to grant United States Fire's motion for summary judgment.
Instead of developing an argument, defendant cites several cases to support its claims, but none of them are helpful, at least not for defendant. First, defendant cites Grube v. Daun, 173 Wis. 2d 30, 496 N.W.2d 106 (Ct. App. 1992), for the proposition that an insurer violates the duty to defend if it does not "step up and immediately provide a defense." Dft.'s Br., dkt. #338. However, the question in Grube had nothing to do with timing; the insurer in that case had flatly refused to provide a defense. In summarizing theduty to defend, the court stated in dicta that insurers are required "either to provide a defense immediately or to use alternate methods to reduce the costs of providing a defense until the coverage issue is decided." Grube, 173 Wis. 2d at 76. However, even if I assume that this is an accurate statement of the law, it does not help defendant because United States Fire allowed defendant to keep its own choice of counsel while United States Fire investigated the claim and helped to pay for that counsel, so it opted for an "alternate method" for meeting its obligation to defendant.
The second case, American Design & Build, Inc. v. Houston Casualty Co., No. 11-C-293, 2012 WL 719061, at *10-11 (E.D. Wis. Mar. 5, 2012), supports United States Fire much more than it supports defendant. The court stated that it was "perplexed by the plaintiff's insistence that the defendant has breached its duty to defend" by delaying its decision regarding a defense for several months, reasoning that "the plaintiff actually ha[d] received money from the defendant to reimburse the plaintiff for the cost of the defense retroactive to the date the defendant received notice of the claim." Id. at 10. The court rejected the insured's argument that the insurer's response was "too little, too late," stating that "[a]n insurer may investigate a claim before accepting the defense, so long as it reimburses the insured for the defense retroactive to the date of the claim." Id. at 11. Because the situation in American Design & Build was similar to the situation in this case, that court's rulings support a decision in favor of United States Fire.
Like this case, the third case defendant cites, Lakeside Foods, Inc. v. Liberty Mutual Fire Insurance Co., 2010 WI App 120, ¶ 41, 329 Wis. 2d 270, 789 N.W.2d 754(unpublished), involved an insured contending that its insurer breached its duty to defend and acted in bad faith by delaying its decision to accept responsibility for providing a defense and by attempting to impose its own choice of counsel on the insured. The court concluded that the insurer had not breached its duty to defend because the insured was allowed to keep its own choice of counsel and the insurer paid for it while the insurer was investigating the clam. Id. at ¶ 43. By itself, the delay in deciding was not enough to breach the duty to defend. See also Carney v. Village of Darien, 60 F.3d 1273, 1277 (7th Cir. 1995) (). Although the court in Lakeside Foods concluded that the insured's claim for bad faith should be allowed to proceed, this was only because there were genuine disputes regarding whether the parties had an oral agreement on attorney fees. Id. at ¶ 49.
Lakeside Foods suggests that disputes about timing and choice of counsel do not qualify as a breach of the duty to defend when the insured proceeds with its own choice of counsel and the insured agrees to pay for it. Because that is what happened in this case, Lakeside Foods supports United States Fire's position more than it supports defendant's. Further, the court's ruling on bad faith is not instructive because this case does not involve any disputes about a possible oral agreement.
Defendant says that I found in the April 1, 2015 decision that American Design & Build and Lakeside Foods supported its position, but that is incorrect. The question in the April 1, 2015 decision was whether United States Fire and the other insurers should beestopped from requiring defendant to change counsel midway through the lawsuit in light of the insurers' delay in making their own choice for counsel and their delay in raising the issue with the court. I made it clear that there were important differences between that question and the question whether the insurers breached the duty to defend. In fact, when discussing American Design & Build and Lakeside Foods, I acknowledged that "a four-month delay in deciding whether to defend an insured may not cause prejudice so long as the insurer agrees to make its decision retroactive and pay the costs...
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