DLA Piper secured a significant victory for long-standing client Houston Casualty before the Wisconsin Supreme Court on June 30, 2016. After nearly seven years of litigation in four different courts, the firm achieved final resolution to Marks v. Houston Casualty Co. et al in a landmark insurance ruling which establishes key precedent concerning an insurer’s duty to defend.
The case centered around whether a trustee of certain children's trusts could obtain coverage under his Errors & Omissions insurance policy for investment activities and roles as an officer and executive in various holding companies and other entities in which the trust assets were invested, which resulted in allegations of fraud and mismanagement in six litigations in five different states. The insured argued that since Houston Casualty denied to defend outright, in the suit that followed claiming Houston Casualty breached its duty to defend, Houston Casualty could not rely on policy exclusions to justify its decision not to defend. The Supreme Court resolved an appellate court debate going back more than 20 years regarding the use of policy exclusions in a duty to defend analysis, principles concerning timely reporting of claims, and the application of the business risks exclusion. The court affirmed the summary judgment victories won for Houston Casualty at both the trial court and the appellate court.
The decision is an important milestone benefiting both insurers and policyholders. It resolves an important issue debated in the lower courts bringing clarity to the rule of law, makes certain that in Wisconsin, like many states, one considers the entire insurance contract, including the exclusions when determining if there is a duty to defend, and resolves that it is the actual complaint -- and not extrinsic evidence -- that will determine whether there is coverage in Wisconsin.