The trial court and the court of appeals agreed with Houston Casualty that a comparison of Mr. Marks' policy to the allegations in the complaints against him established that Houston Casualty had no duty to defend him.

The dispute reached the Wisconsin Supreme Court, where Mr. Marks argued among other things that, in determining whether an insurer had breached its duty to defend an insured, a court could not consider exclusions or limiting language in the insurance policy if the insurer had earlier rejected the insured's tender of defense without having coverage determined by a court.

The Wisconsin Supreme Court's Decision

The court affirmed.

In its decision, the court explained that it did not have to decide whether Mr. Marks' policy had provided an initial grant of coverage based on the allegations in the six lawsuits because the business enterprise exclusion “clearly” established that Houston Casualty could have no possible duty to indemnify Mr. Marks, even if the allegations in the complaints turned out to be true.

The court rejected Mr. Marks' argument that the business enterprise exclusion did not apply in this case because “an insurer that unilaterally disclaims coverage and its duty to defend [was] estopped from using policy exclusions or limiting language to litigate coverage if it [was] subsequently sued by its insured for breaching its duty to defend.”

The court declared that exclusions and exceptions to those exclusions may be considered in an analysis of whether an insurer had breached its duty to defend its insured where the insurer had declined to defend its insured. In this case, it concluded, the business enterprise exclusion had been “properly considered” and established that Houston Casualty had not breached its duty to defend Mr. Marks.

The case is Marks v. Houston Cas. Co., No. 2013AP2756 (Wisc. June 30, 2016). Attorneys involved include: For the plaintiff-appellant-cross-respondent-petitioner, there were briefs by Jon E. Fredrickson, Brian T. Fahl, Aaron H. Aizenberg, Stuart J. Check, and Kravit, Hovel & Krawczyk, S.C., Milwaukee, and oral argument by Jon E. Fredrickson; For the defendant-respondent-cross-appellant, there was a brief by John D. Finerty, Adam E. Witkov, and Michael Best & Friedrich LLP, Milwaukee and Aidan M. McCormack, Robert C. Santoro, and DLA Piper LLC (US), New York. Oral argument by Aidan M. McCormack; There was an amicus curiae brief by James A. Friedman, Todd G. Smith, Linda S. Schmidt, and Godfrey & Kahn, S.C., Madison on behalf of Wisconsin Insurance Alliance and American Insurance Association. Oral argument by James A. Friedman.