The policyholder's attempt to extend the duty to defend analysis beyond the complaint's allegations and the four-corners of the policy failed before the Wisconsin Supreme Court. Water Well Solutions Service Group Inc. v. Consolidated Ins. Co., 2016 Wisc. LEXIS 163 (Wis. Sup. Ct. June 30, 2016).
Waukesha Water Utility contracted with Water Well Solutions to remove an existing pump, install a new pump, and complete reinstallation of the pump. After the job was completed, the well pump unthreaded from a pipe column and fell to the bottom of the well.
Waukesha's insurer, Argonaut Insurance Company, sued Water Well, seeking $300,465.48 in subrogated damages. Water Well tendered its defense to its insurer, Consolidated. The tender was denied based upon the "Your Product" exclusion in the policy.
Water Well settled with Argonaut for $87,500 and then filed suit against Consolidated. The complaint alleged that Consolidated acted in bad faith by refusing to defend. The trial court granted Consolidated's motion for summary judgment. Comparing the allegations in Argonaut's complaint with the policy provisions convinced the trial court there was no duty to defend. The trial court refused to consider Water Well's extrinsic evidence to show that its subcontractor's work on the preexisting pipes triggered coverage under the policy. The court of appeals affirmed.
On appeal, the Wisconsin Supreme Court rejected Water Well's request to create an exception to the four-corners rule by considering extrinsic evidence. Wisconsin applied the four-corners rule, without exceptions, in duty to defend cases because it generally favored insureds.
The court also determined that the "Your Product" exclusion applied to bar coverage. The Argonaut complaint contained no allegation that any damage occurred to anything other than Water Well's product. Water Well argued an inference could be made from the allegations in the complaint that damage occurred to pre-existing pipes that would not fall within the "Your Product" exclusion. The court, however, saw nothing in the Argonaut complaint suggesting that any pre-existing products, including pre-existing pipes, were damaged.
Consequently, coverage was barred and Consolidated did not breach its duty to defend.
The Hawaii case law on duty to defend is more liberal that that of Wisconsin because extrinsic evidence in the insured's favor is considered when determining whether there is a duty to defend. See Dairy Roads Partners v. Island Ins .Co., Ltd., 92 Haw. 398, 422, 992 P. 2d 93, 117 (2000).
