Steadfast Ins. Co. v. Greenwich Ins. Co.

Citation908 N.W.2d 502,2018 WI App 11,380 Wis.2d 184
Decision Date17 January 2018
Docket NumberAppeal No. 2016AP1631
Parties STEADFAST INSURANCE COMPANY, Plaintiff-Respondent, v. GREENWICH INSURANCE COMPANY, Defendant-Appellant.
CourtCourt of Appeals of Wisconsin

On behalf of the defendant-appellant, the cause was submitted on the briefs of Thomas G. Drennan of Dinsmore & Shohl LLP and Pamela J. Tillman of Meissner Tierney Fisher & Nichols S.C.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Charles W. Kramer of Weiss Law Office, S.C.

Before Brennan, P.J., Kessler and Dugan, JJ.


¶ 1 This case involves issues of insurance coverage and the duty to defend involving Milwaukee Metropolitan Sewerage District (MMSD) and insurance companies, Greenwich Insurance Company and Steadfast Insurance Company, relating to the defense of lawsuits against MMSD in the wake of a June 7 and 8, 2008 rain event (the "rain event lawsuits").1 After the rain event lawsuits were filed, MMSD tendered its defense to Steadfast and Greenwich.

Steadfast accepted the tender and defended MMSD. Greenwich declined the tender and did not defend MMSD. Eventually, the rain event lawsuits settled and, as a part of the settlement, Steadfast reimbursed MMSD $1.55 million for MMSD's defense costs. Steadfast then brought the lawsuit (the "insurance lawsuit") that is the subject of this appeal against Greenwich.2

¶ 2 Ultimately, the trial court determined that Greenwich breached its duty to defend and, therefore, had waived its rights to raise coverage defenses, and was responsible for paying the $1.55 million for MMSD's defense and Steadfast's $325,500 attorney fees incurred in bringing the insurance lawsuit.

¶ 3 On appeal, Greenwich argues that it did not breach its duty to defend the rain event lawsuits and did not waive its right to litigate the coverage issues. Greenwich further argues that it was entitled to summary judgment for the following reasons: (1) its policy with MMSD was excess coverage, with Steadfast's coverage being primary; (2) its policy with MMSD had a $250,000 self-insured risk retention amount and MMSD did not establish that it had expended that amount in defending the rain event lawsuits; and (3) Steadfast's claim is barred by the one-year statute of limitations in WIS. STAT. § 893.92 (2015-16),3 applicable to actions for contribution. Alternatively, Greenwich argues that it was entitled to an allocation of the costs as between Steadfast, Travelers and itself. In addition, Greenwich argues that Steadfast is not entitled to recover attorney fees in connection with the insurance lawsuit.

¶ 4 We conclude as follows: (1) Greenwich's policy provided primary, not excess, coverage for claims against MMSD; (2) MMSD has established that it met the $250,000 risk retention amount by incurring $594,302.23 in defense costs; (3) Steadfast's equitable subrogation claim is timely because the six-year statute of limitations in WIS. STAT. § 893.43 applicable to contract claims applies to Steadfast's claim, which is premised on Greenwich's breach of the duty to defend MMSD; (4) under the facts of this case, because Greenwich breached its duty to defend MMSD, Greenwich is not equitably entitled to an allocation of MMSD's defense costs; and (5) under the facts of this case, Steadfast is equitably entitled to recover attorney fees in this lawsuit. Based on our conclusions, we affirm the trial court's orders and judgments.


¶ 5 MMSD is a regional government agency that provides water reclamation and flood management services to the Greater Milwaukee area. Since 1998, MMSD has contracted with private parties to operate and maintain its sewerage system. From March 1, 1998, through February 29, 2008, MMSD contracted with United Water Services Milwaukee LLC to operate the system. From March 1, 2008, through all times relevant to this action, MMSD contracted with Veolia Water North America-Central, LLC to operate the system.

¶ 6 MMSD's agreements with United Water and Veolia, respectively, obligated each company to fully indemnify MMSD for claims arising out of the operation and maintenance of the system and to obtain insurance to cover its indemnity obligations. The agreements required that the insurance policies obtained by each company list MMSD as an additional insured. Both companies complied with those requirements.

¶ 7 The June 2008 rain event overwhelmed MMSD's sewer system and more than 8,000 homeowners reported basement sewage backups. Between February 2009 and May 2009, four rain event lawsuits were filed against MMSD. The rain event lawsuits included allegations that MMSD and Veolia were negligent in the inspection, maintenance, repair, and operation of the sewer system and diversion gates prior to and during the rain event.

¶ 8 Subsequently, the rain event lawsuits were consolidated into two separate actions. Later, United Water was named as a defendant in one of the rain event lawsuits and negligence claims, like those against MMSD and Veolia, were alleged against it.

¶ 9 On June 9, 2009, after MMSD had been sued in the rain event lawsuits, it sent a letter to both Steadfast and Greenwich tendering the defense. As noted, Steadfast, the insurer for Veolia, which had named MMSD as an additional insured, accepted the tender and defended MMSD.

¶ 10 As will be further detailed below, Greenwich, United Water's insurer, did not accept the tender, did not defend MMSD, and did not pay any amounts for defense costs, despite the fact that MMSD was named as an additional insured on the policy. In a September 23, 2009 letter, Greenwich denied coverage, stating in part, as follows:

Initially, we fail to see how [United Water] could be liable for causing a sewage backup in June 2008 when its services for MMSD terminated in February 2008.
From a professional and contracting services standpoint, there is ample evidence that when [United Water] turned over operational responsibilities to Veolia and MMSD in February 2008, all systems, equipment, and machinery at the subject sewage overflow diversion chamber were functioning according to operational protocols. Thus, we can only conclude that [United Water]'s work met all professional and contracting standards of care.

The letter also raises MMSD's satisfaction of the risk retention amounts and "other insurance" provisions as reasons for denying coverage.

¶ 11 On October 14, 2010, MMSD renewed its tender of defense. In its letter to Greenwich, MMSD noted as a basis for coverage that the plaintiffs in the rain event lawsuits had made specific allegations concerning United Water's negligence. On March 9, 2011, Greenwich responded to MMSD's renewed tender of defense, stating that there was a potential for coverage, but it reserved its rights, noting that under its "other insurance" clause, Greenwich was excess to the $250,000 risk retention amount and any other valid insurance available to MMSD, including that through Veolia's policy.

¶ 12 On May 31, 2011, Greenwich's attorney sent another letter, acknowledging that there might be potential coverage and asking for information to determine if MMSD had satisfied the $250,000 risk retention amount. On June 16, 2011, MMSD's attorney responded, stating that MMSD had paid its legal counsel a total of $823,602.75 and that, clearly, MMSD had "surpassed the risk retention amount and [was] well into the liability portion of the policy." Greenwich then responded stating, "the coverage potentially provided to MMSD under the Greenwich Policy is excess of the $250,000 deductible and the $30,000,000 limits provided under the Steadfast Pollution Policy." Greenwich did not provide MMSD with any defense during the rain event lawsuits.

¶ 13 The rain event lawsuits settled without MMSD or Steadfast making any payments towards the parties' claimed damages. However, Steadfast reimbursed MMSD $1.55 million towards the defense costs that MMSD paid for those lawsuits. After the rain event lawsuits settled, Steadfast filed this action against Greenwich and Travelers, seeking to recoup the monies that it had paid to MMSD for the defense costs. MMSD intervened to recoup unpaid defense costs from all the other parties.

¶ 14 As this action proceeded, the parties filed and briefed motions and cross-motions for summary judgment. Before the trial court issued any decision on those motions, Steadfast and all parties, except Greenwich, settled the case. Thus, as mentioned, the sole remaining parties to this action are Steadfast and Greenwich.

¶ 15 On May 15, 2015, the trial court issued a written decision denying Greenwich's summary judgment motion based on its determination that Greenwich had breached its duty to defend MMSD and, thereby, waived its rights to raise any coverage defense.

¶ 16 On November 13, 2015, Steadfast and Greenwich filed a stipulation stating that Steadfast had reasonably and necessarily incurred $1.55 million for MMSD's defense in the rain event lawsuits. However, they reserved their respective rights to argue what portion of the $1.55 million, if any, Steadfast should recover from Greenwich. The trial court entered an order approving the stipulation.

¶ 17 Thereafter, the parties filed additional summary judgment motions. On June 29, 2016, the trial court granted Steadfast's summary judgment motion, awarding judgment against Greenwich in the amounts of $1.55 million dollars as damages, and $325,500 as attorney fees for the insurance lawsuit. This appeal followed.


¶ 18 We review a grant of summary judgment using the same standards the trial court applied in making its determination, and "accordingly, we benefit from, but need not give deference to, the analys[is] of the [trial] court[ ]." See State Farm Mut. Auto. Ins. Co. v. Langridge , 2004 WI 113, ¶ 12, 275 Wis. 2d 35, 683 N.W.2d 75. When we review a grant of summary judgment, our review is de novo . See id.

¶ 19 The issues presented involve multiple questions of law, which are...

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