David M. Marks v. Houston Casualty Company

2016 WI 53

SUPREME COURT OF WISCONSIN
CASE NO.: 2013AP2756
COMPLETE TITLE: David M. Marks,
Plaintiff-Appellant-Cross-Respondent-
Petitioner,
v.
Houston Casualty Company,
Defendant-Respondent-Cross-Appellant,
Bedford Underwriters, Ltd.,
Defendant-Respondent.

REVIEW OF A DECISION OF THE COURT OF APPEALS
(Reported at 363 Wis. 2d 505, 866 N.W.2d 393)
(Ct. App. 2015 – Published)
PDC No: 2015 WI App 44

OPINION FILED: June 30, 2016
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: March 16, 2016

SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Milwaukee
JUDGE: Richard J. Sankovitz

JUSTICES:
CONCURRED: BRADLEY, A. W., J. and ABRAHAMSON, J. concur
(Opinion filed).
BRADLEY, R. G., J. concurs (Opinion filed).
DISSENTED:
NOT PARTICIPATING:

ATTORNEYS:
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.

2
 2016 WI 53
NOTICE
This opinion is subject to further
editing and modification. The final
version will appear in the bound
volume of the official reports.
No. 2013AP2756
(L.C. No. 2009CV18145)

STATE OF WISCONSIN : IN SUPREME COURT

David M. Marks,

Plaintiff-Appellant-Cross-Respondent-
Petitioner,
FILED
v.
JUN 30,2016
Houston Casualty Company,
Diane M. Fremgen
Defendant-Respondent-Cross-Appellant, Clerk of Supreme Court

Bedford Underwriters, Ltd.,

Defendant-Respondent.

REVIEW of a decision of the Court of Appeals. Affirmed.

¶1 ANNETTE KINGSLAND ZIEGLER, J. This is a review of a

published decision of the court of appeals, Marks v. Houston

Casualty Co., 2015 WI App 44, 363 Wis. 2d 505, 866 N.W.2d 393,

which affirmed the Milwaukee County circuit court's1 grant of

1
The Honorable Richard J. Sankovitz presided.
 No. 2013AP2756

summary judgment in favor of Houston Casualty Company ("Houston

Casualty") and Bedford Underwriters, Ltd.2

¶2 In July of 2009, trustee David Marks ("Marks") asked

his professional liability insurer, Houston Casualty, to defend

him in six lawsuits filed in 2007, 2008, and 2009 in five

different states. Houston Casualty informed Marks that it had

no duty to defend him in any of those lawsuits, and Marks then

brought suit against Houston Casualty. Both the circuit court

and the court of appeals agreed with Houston Casualty that a

comparison of Marks' policy to the allegations in the complaints

against Marks established that Houston Casualty had no duty to

defend Marks.

¶3 We conclude that the complaints and counterclaim

against Marks do not allege facts which, if proven, would

constitute claims covered under the insurance policy Marks

obtained from Houston Casualty. Houston Casualty therefore did

not breach its duty to defend Marks when it declined to defend

him in the six lawsuits at issue. Consequently, we affirm the
decision of the court of appeals.

I. FACTUAL AND PROCEDURAL BACKGROUND

¶4 David Marks is the trustee of two trusts: the

Irrevocable Children's Trust ("ICT") and the Irrevocable

2
Although involved in these proceedings, Bedford
Underwriters did not file a separate brief in this case and
instead joins the positions taken by Houston Casualty. For
simplicity, Bedford Underwriters will generally not be mentioned
in this opinion.

2
 No. 2013AP2756

Children's Trust No. 2 ("ICT2"). At all times relevant to this

dispute, ICT and ICT2 owned a controlling interest in a company

known as Titan Global Holdings, Inc. ("Titan").3 From 2007 to

2009, a number of lawsuits involving Marks and Titan were filed

throughout the country. Because the outcome of this case turns

on the allegations contained in the five complaints and one set

of counterclaims filed against Marks, we will set forth the

contents of these documents in some detail.

¶5 On or about December 21, 2007, Oblio Telecom, Inc.

("Oblio") filed a lawsuit against Hawaii Global Exchange, Inc.

("Hawaii Global") in the United States District Court for the

Northern District of Texas (the "Hawaii Global action").4 On

April 7, 2008, Hawaii Global filed a counterclaim against Oblio,

Titan, Frank Crivello ("Crivello"), Marks, Bryan Chance

("Chance"), and Kurt Jensen ("Jensen"). The counterclaim

described Marks as a "citizen of the State of Wisconsin" and "a

principal shareholder and equitable owner of Titan" and asserted

one count of conspiracy to commit fraud against the counterclaim

3
One of the complaints filed against Titan (discussed
infra) describes Titan as a "high-growth diversified holding
company with a dynamic portfolio of companies engaged in
emerging telecommunications markets and advanced technologies."
A holding company is a "company formed to control other
companies, usu. confining its role to owning stock and
supervising management." Holding company, Black's Law
Dictionary 339 (10th ed. 2014).
4
Houston Casualty supplied this date, which is not in the
record. Marks does not dispute the fact and it is not relevant
to the disposition of this case.

3
 No. 2013AP2756

defendants.5 On October 24, 2008, Hawaii Global filed amended

counterclaims against Titan, Oblio, Marks, Chance, and Jensen.6

¶6 On October 28, 2008, the Professional Liability Errors

& Omissions Insurance Policy at issue in this case ("the policy"

or "Marks' policy"), issued by Houston Casualty to Marks, took

effect. The policy's expiration date was October 28, 2009. The

policy provided coverage for

any Loss and Claim Expenses in excess of the
Deductible amount and subject to the Limit of
Liability as the Insured acting in the profession
described in Item 3 of the Declarations shall become
legally obligated to pay for Claim or Claims first
made against the Insured during the Policy Period by
reason of any Wrongful Act by an Insured provided
always that the Insured has no knowledge of such
Wrongful Act prior to the Inception Date of this

5
The allegations in this lawsuit concern a business
relationship between Hawaii Global and the counterclaim
defendants apparently gone sour. According to the complaint,
Hawaii Global purchased prepaid phone cards from Oblio and Titan
and sold them to distributors, retailers, and individual users.
Hawaii Global alleges that the counterclaim defendants conspired
to defraud Hawaii Global, among others, by "inducing and
extorting" them to purchase phone cards with "no intention to
deliver the promised service." Further, the counterclaim
defendants allegedly

conspired to use Titan and Oblio and other corporate
shells to perpetrate a fraud upon Oblio's former
distributors, including [Hawaii Global], with the
intention of bankrupting them and eliminating them
from the marketplace so that it could usurp their
business for the benefit of a newly formed entity,
Planet Direct, Inc.
6
These counterclaims are not in the record. The parties do
not argue that these claims affect our analysis, so we do not
address them.

4
 No. 2013AP2756

Policy and further provided that such Wrongful Act
took place subsequent to the Retroactive Date set
forth in Item 8 of the Declarations.
¶7 "Loss" is defined in the policy to mean, in part, "a

monetary judgment, award or settlement for damages including an

award by a court of reasonable attorney's fees and costs to a

party making [a] Claim." "Claim" is defined in the policy to

mean "a demand received by the Insured for compensation of

damages, including the service of suit . . . against the

Insured." "Claim Expenses" is defined in the policy to mean, in
part:

(1) fees charged by an attorney designated by the
Company and (2) all other fees, costs or expenses
incurred in the investigation, adjustment, defense and
appeal of a Claim if incurred by the Company or an
attorney designated by the Company, or by the Insureds
with the written consent of the Company.
"Wrongful Act" is defined in the policy to mean "any actual or

alleged error or omission or breach of duty committed or alleged

to have been committed or for failure to render such

professional services as are customarily rendered in the

profession of the Insured as stated in Item 3 of the
Declarations."

¶8 "Item 3 of the Declarations" lists Marks' profession

as follows: "[s]olely in the performance of services as the

Trustee of the Irrevocable Children's Trust (ICT), and/or

Irrevocable Children's Trust No. 2 (ICT2), for a fee." Relevant

to this appeal, the policy contained the following exclusions:

This Policy does not apply either directly or
indirectly to any Claim and Claim Expenses:

5
 No. 2013AP2756

a) Based upon or arising out of any
dishonest, criminal, fraudulent, malicious or
intentional Wrongful Acts, errors or omissions
committed by or at the direction of the Insured.

b) For liability arising out of the
Insured's services and/or capacity as:

1) an officer, director, partner,
trustee, or employee of a business
enterprise not named in the Declarations or
a charitable organization or pension,
welfare, profit sharing, mutual or
investment fund or trust; . . . .
¶9 Finally, Endorsement Number 10 of the policy reads in

part as follows:

c) Defense, Investigation, and Settlement of
Claim

1) With respect to the insurance afforded by this
Policy, the Company shall have the right and duty to
defend any Claim brought against the Insured alleging
a covered Wrongful Act.
¶10 On December 23, 2008, ILDN West, LLC ("ILDN") filed a

lawsuit against Titan, Oblio, Titan Communications, Inc. ("Titan

Communications"), Planet Direct, Inc. ("Planet Direct"), Marks,

Crivello, and Does 1-50 in the Superior Court of the State of

California for the County of Los Angeles (the "ILDN action").

The complaint described Marks as "an individual residing at all

material times in or around Dallas, Texas," and stated that

"[a]t all times relevant hereto, Marks was a Chairman of Titan

and represented Oblio, Titan Communications and Planet Direct."

The complaint asserted seven causes of action: breach of

contract against Titan, Titan Communications, and Planet Direct;
breach of contract against Oblio, Titan Communications, and

6
 No. 2013AP2756

Planet Direct; breach of guaranty against Titan; fraud against

Titan, Marks, and Crivello; negligent misrepresentation against

Titan, Marks, and Crivello; quantum meruit/unjust enrichment

against Titan, Oblio, Titan Communications, and Planet Direct;

and "account stated"7 against Titan, Oblio, Titan Communications,

and Planet Direct.8

¶11 On February 2, 2009, George L. Miller, Chapter 7

Trustee of the Estate of USA Detergents, Inc. ("USAD"), filed a

lawsuit against Greystone Business Credit II, LLC.

("Greystone"), GBC Funding, L.L.C. ("GBC"), Titan, Frank Orlando

("Orlando"), Chance, R. Scott Hensell ("Hensell"), Marks, Titan

PCB West, Inc., n/k/a Titan Electronics, Inc. ("Titan PCB

West"), Titan PCB East, Inc., n/k/a Titan East, Inc. ("Titan PCB

East"), Oblio, Titan Wireless Communications, Inc. ("Titan

Wireless"), StartTalk Inc. ("StartTalk"), Pinless, Inc.

("Pinless"), Appalachian Oil Company ("Appalachian"), Appco-Ky,

Inc. ("Appco"), and Crivello in the United States Bankruptcy

Court for the District of Delaware (the "USAD action"). The

7
"Generally, an account stated is defined as an agreement
between parties who have had previous transactions of a monetary
character that all the items of the account representing those
transactions, and the balance struck, are correct, together with
a promise, express or implied, for the payment of that balance."
1A C.J.S. Account Stated § 1 (2016).
8
The ILDN action concerns debts allegedly due ILDN by the
defendants in that suit for telecommunications services provided
to the defendants by ILDN, and allegedly false representations
made by certain of the defendants to ILDN regarding payment of
those debts.

7
 No. 2013AP2756

complaint described Marks as "a citizen of Wisconsin," "Chairman

of the Board of Directors of USAD at some point after August 1,

2007," and, "[a]t all material times hereto," "Chairman of Titan

and a Member of Crivello Group[, LLC]."9

¶12 The complaint asserted nine counts: to avoid and

recover preferential transfers pursuant to 11 U.S.C. §§ 547 and

550 against Greystone and GBC; to avoid and recover preferential

transfers pursuant to 11 U.S.C. §§ 547 and 550 against

Greystone, GBC, Titan, Titan PCB West, Titan PCB East, Oblio,

Titan Wireless, StartTalk, Pinless, Appalachian, and Appco;

disallowance of all claims pursuant to 11 U.S.C. § 502(d)

against Greystone and GBC; objection to proof of claim pursuant

to 11 U.S.C. § 502 against Greystone and GBC; equitable

subordination pursuant to 11 U.S.C. § 510(c) against Greystone

and GBC; breach of fiduciary duty against Orlando, Chance,

Hensell, and Marks; aiding and abetting breach of fiduciary duty

against Greystone, GBC, Titan, and Crivello; civil conspiracy

9
The allegations in this lawsuit concern Titan's
acquisition of a controlling interest in USAD, "a manufacturer
and distributor of value priced and mid-priced laundry care
products, household cleaners, personal care items, candles and
air fresheners." The complaints allege that Titan's operation
of USAD enriched the defendants at the expense of USAD and its
creditors. More specifically, the complaint alleges that the
defendants should have either recapitalized or liquidated USAD
"for the benefit of all creditors," but "chose instead
wrongfully to perpetuate the USAD entity" for the defendants'
own benefit. Additionally, the complaint alleges that the
defendants "orchestrated and/or compelled the payment of
preferential transfers for their own benefit at the expense of
USAD and its creditors."

8
 No. 2013AP2756

against Greystone, GBC, Titan, Orlando, Chance, Hensell, Marks,

and Crivello; and for an accounting against Greystone and GBC.

¶13 On or about May 4, 2009, Phillip L. Near filed a

lawsuit against Titan, Crivello, Marks, Chance, Greystone, and

Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd.

("Goldberg Kohn") in the United States District Court for the

District of Kansas (the "Near action"). The complaint described

Marks as "a resident of Wisconsin," "the Chairman of Titan and,

through one or more of his business entities, a shareholder of

Titan." The complaint also stated that Marks "claims to be a

director of Crescent."10 The complaint asserted ten counts:

fraud against Titan, Crivello, Marks, and Chance; fraudulent

inducement against Titan, Crivello, Marks, and Chance; negligent

misrepresentation against Titan, Crivello, Marks, and Chance;

fraud by silence against Titan, Crivello, Marks, and Chance;

breach of contract against Titan; conversion against Titan,

Crivello, Marks, and Chance; conversion against Greystone;

conversion against Goldberg Kohn; civil conspiracy against all

10
"Crescent" refers to Crescent Fuels, Inc. and its
subsidiaries, including Crescent Oil Company, Inc., Crescent
Corporation, Crescent Stores Corporation, Crescent Holdings,
Inc., and Crescent Realty, Inc.

9
 No. 2013AP2756

the defendants; and breach of fiduciary duty against Goldberg

Kohn.11

¶14 On July 1, 2009, Lanny Houillion filed a lawsuit

against Chance, Hensell, Oblio, Titan, and Marks in the County

Court of Dallas (the "Houillion action"). The complaint

described Marks as "an individual and Chairman of the Board for

[Titan]."12 The complaint asserted three causes of action

against the defendants: breach of contract; negligence; and

fraud.13

¶15 On July 10, 2009, Appalachian filed a lawsuit against

Titan, Marks, Chance, and Hensell, "individually, and in their

capacities as directors of [Appalachian]," in the United States

Bankruptcy Court for the Eastern District of Tennessee (the

"Appalachian action"). The complaint described Marks as "an

individual residing in Milwaukee, Wisconsin," "a member of

[Appalachian's] Board of Directors at all times relevant to this

11
The Near action alleges that Near "lost his company, his
life savings, and his business reputation by the repugnant,
fraudulent, and unlawful conduct of the Defendants." Near
contends that Titan acquired an interest in Crescent, a company
involved in the fuel distribution industry, "looted" Crescent
for "millions of dollars," terminated Near, who was once
president and majority shareholder of Crescent Fuels, Inc., and
left him liable to other entities for millions of dollars in
personal guarantees.
12
The complaint is titled "Plaintiff's First Amended
Original Petition." No other petition is in the record.
13
The Houillion action involves an alleged breach of a
commercial lease agreement between the defendants in that case
and Houillion.

10
 No. 2013AP2756

Complaint," and "an 'Insider' of [Appalachian] as defined in

§ 101(31) of the Bankruptcy Code."

¶16 The complaint asserted six counts: to avoid fraudulent

transfers pursuant to 11 U.S.C. § 548(a)(1)(B) and recover

fraudulent transfers pursuant to 11 U.S.C. § 550 against Titan;

to avoid fraudulent transfers pursuant to 11 U.S.C.

§ 548(a)(1)(A) and recover fraudulent transfers pursuant to 11

U.S.C. § 550 against Titan; to avoid fraudulent conveyances

pursuant to 11 U.S.C. § 544 and applicable state law and to

recover fraudulent conveyances pursuant to 11 U.S.C. § 550

against Titan; to avoid preferential transfers pursuant to 11

U.S.C. § 547 and recover preferential transfers pursuant to 11

U.S.C. § 550 against Titan; to avoid wrongful distributions to

shareholders pursuant to T.C.A. § 48-16-401(C) [of the Tennessee

Code] against Titan; and to recover wrongful distributions to

shareholders pursuant to T.C.A. § 48-18-304 [of the Tennessee

Code] against the director defendants.14

¶17 Except as detailed below with regard to certain
supplemental counterclaims in the Hawaii Global action, the

parties do not point us to any language in the complaints that

14
The Appalachian action involves allegations that Titan
became the 100 percent shareholder of Appalachian, after which
Titan began "to cause [Appalachian] to transfer large amounts of
cash to Titan for its own use . . . with full knowledge that
[Appalachian] (i) was insolvent and (ii) did not have sufficient
capital to operate."

11
 No. 2013AP2756

reference ICT, ICT2, or Marks' position as trustee of ICT and

ICT2.

¶18 On July 28, 2009, Marks provided notice of each

lawsuit——the Hawaii Global action, the ILDN action, the USAD

action, the Near action, the Houillion action, and the

Appalachian action——to Houston Casualty. In letters to Marks

dated July 30, 2009, Professional Indemnity Agency, Inc.

("Professional Indemnity") acknowledged receipt of the six

claims on behalf of Houston Casualty and stated that it was

"presently in the process of establishing a claim file and

reviewing the information provided."

¶19 On October 23, 2009, Marks filed a complaint against

Houston Casualty in Milwaukee County circuit court alleging,

among other things, breach of Houston Casualty's duty to defend

Marks in each of the six lawsuits discussed and denial of Marks'

six claims in bad faith.15

¶20 On October 27, 2009, Hawaii Global and TransPac

Telecom, Inc. ("TransPac")——parties in the earliest of the
lawsuits discussed above, the Hawaii Global action——filed a

"Motion for Leave to File Supplemental and Amended

Counterclaims."

¶21 On October 28, 2009, Marks notified Houston Casualty

of Hawaii Global and TransPac's motion. The same day, Marks'

policy expired.

15
Neither party argues that it was improper to bring this
suit in Wisconsin.

12
 No. 2013AP2756

¶22 In letters dated November 4, 2009, Professional

Indemnity informed Marks on behalf of Houston Casualty that

Houston Casualty had "determined that it has no obligation under

the Policy either to defend or indemnify you . . . in connection

with" any of the six lawsuits. Although the letters provided

multiple reasons for Houston's refusal to defend or indemnify

Marks, two are most relevant to this appeal: (1) the alleged

conduct giving rise to the claims did "not arise out of the

performance of services by the Insured as the Trustee of the

Irrevocable Children's Trust and/or Irrevocable Children's Trust

No. 2, for a fee"; and (2) exclusion b)1) (the "business

enterprise exclusion") excluded any indemnity obligation for

liability arising out of Marks' services and/or capacity as an

officer, director, partner, trustee, or employee of a business

enterprise not named in the declarations of the policy.16

16
The policy at issue in this appeal is numbered H708-
15868. When Marks notified Houston Casualty of the lawsuits
against him, he listed the applicable policy as policy H708-
15868. Five out of the six letters sent from Houston Casualty
to Marks listed the applicable policy as policy H708-15868.
However, the letter tied to the Hawaii Global action lists the
applicable policy as policy H707-16515. This is the number of a
previous policy Marks had obtained from Houston Casualty and
which had a policy term of October 28, 2007, to October 28,
2008.

(continued)
13
 No. 2013AP2756

¶23 On November 16, 2009, Houston Casualty filed a notice

of removal to the United States District Court for the Eastern

District of Wisconsin.

¶24 On November 17, 2009, Marks voluntarily dismissed his

case and again filed a complaint against Houston Casualty in

Milwaukee County circuit court alleging, among other things,

breach of Houston Casualty's duty to defend Marks in each of the

six lawsuits discussed and denial of Marks' six claims in bad

faith. This second complaint, unlike the first, named Bedford

Underwriters as a defendant.

¶25 On December 18, 2009, Houston Casualty again removed

the case to federal court. On March 22, 2010, the case was

remanded to state court.

¶26 On January 21, 2010, the United States District Court

for the Northern District of Texas granted Hawaii Global and

TransPac's "Motion for Leave to File Supplemental and Amended

The reason for this discrepancy is likely because Hawaii
Global filed its counterclaim on April 7, 2008, a date within
the policy term of policy H707-16515, not policy H708-15868.
However, Marks' complaint against Houston Casualty discusses
policy No. H708-15868, arguing that "[t]here is at least one
claim within the four corners of each and every one of the
complaints in the six lawsuits that arguably and/or actually
triggers coverage under the Policy" (the "Policy" being policy
H708-15868). The complaint notes only in passing that "[t]he
Policy was a renewal of policy H707-16515." Unfortunately, the
parties do not discuss these seemingly significant facts.

We will address Marks' arguments as he has made them. We
note that the letter from Houston Casualty denying coverage for
the Hawaii Global action provides the same two reasons for the
denial as are set out above.

14
 No. 2013AP2756

Counterclaims." On January 25, 2010, Hawaii Global and TransPac

Telecom, Inc. filed supplemental counterclaims against

[Crivello], both individually and as settlor, de facto
trustee and de facto beneficiary of the Irrevocable
Children's Trust and Irrevocable Children's Trust 2,
[Marks], both individually and as trustee of the
Irrevocable Children's Trust and Irrevocable
Children's Trust 2, . . . the Irrevocable Children's
Trust[,] . . . the Irrevocable Children's Trust
2 [,] . . . Crivello Group LLC[,] . . . Phoenix
Investors LLC[,] . . . and Farwell Equity Partners
LLC.
The counterclaims collectively refer to these latter five

entities as the "Crivello Family Interests," and assert that

they are "a group of trusts, limited liability companies and/or

corporations owned or controlled by Crivello and managed by

Crivello and Marks."

¶27 The supplemental counterclaims described Marks as "a

citizen of the State of Wisconsin" and further stated:

According to Titan's 10-K for the fiscal year ending
August 31, 2008,

Mr. Marks has served as Trustee of
Irrevocable Children's Trust and Irrevocable
Children's Trust No. 2 since 1994.
Irrevocable Children's Trust and Irrevocable
Children's Trust No. 2 currently have an
ownership or investment interest in
commercial properties, private residences,
natural resources, telecommunications, and
technology companies, and other business and
investment ventures. Mr. Marks has the
responsibility in overseeing all investments
by Irrevocable Children's Trust and
Irrevocable Children's Trust No. 2 with
responsibilities beginning at acquisition
and continuing through ownership. Mr. Marks
generally acts in the capacity of officer or
director for all of the operating companies

15
 No. 2013AP2756

that are vehicles for investments by the
Trusts and is involved in strategic
planning, and major decision-making.

In addition to his individual capacity, Marks is being
added in a representative capacity as ostensible
trustee and chairman of Crivello-controlled alter ego
entities alleged herein.
¶28 Hawaii Global alleges, among other things, that "[i]n

their various capacities as settlor, de facto trustee, trustee,

de facto beneficiaries, shareholders, board members and/or

officers, Crivello and Marks have caused the Crivello Family

Interests to intentionally misappropriate and shield assets

obtained through fraud and artifice."

¶29 The counterclaims asserted three causes of action:

alter ego; RICO conspiracy against the Crivello Family

Interests; and fraudulent transfer against all counterclaim

defendants.17

¶30 On October 28, 2010, Marks filed an amended complaint.

¶31 On February 8, 2013, Houston Casualty and Marks filed

motions for summary judgment in Marks' lawsuit against Houston

Casualty in Milwaukee County circuit court. Marks made four

arguments relevant to this appeal. First, he argued that

although his policy covered only liability arising out of his

17
Although only one count had been asserted in Hawaii
Global's original counterclaim, the supplemental counterclaims
began at count three. The filing, does, however, refer to
"claims and allegations set forth in . . . the Complaint
transferred from Hawaii [Global] . . . and consolidated in this
action." The parties do not discuss any such transferred
complaint, so we do not address it. See also supra, ¶5 & n.6.

16
 No. 2013AP2756

"performance of services as the Trustee of the Irrevocable

Children's Trust (ICT), and/or Irrevocable Children's Trust No.

2 (ICT2), for a fee," the language in Marks' policy does not

"define the scope of services that are covered when performed by

the trustee." More specifically, "Marks was sued in all six

lawsuits because he was a director of Titan, and . . . Marks was

on the board of directors of Titan only by virtue of the trusts'

controlling investment position in Titan." Second, Marks

claimed he was sued in the Hawaii Global action "because of his

position as trustee of ICT and ICT2." Third, Marks argued that,

in determining whether an insurer has breached its duty to

defend an insured, a court may not consider exclusions or

limiting language in the insurance policy at issue if the

insurer had earlier rejected the insured's tender of defense

without having coverage determined by a court. Fourth, Marks

asserted that the business enterprise exclusion in the Houston

Casualty policy rendered the entire policy illusory, because it

excluded coverage for liability arising out of Marks' "services
and/or capacity as . . . an . . . trustee . . . of a

. . . trust."

¶32 On October 4, 2013, the circuit court issued an order

granting Houston Casualty's motion for summary judgment and

denying Marks' motion for summary judgment. The circuit court

determined that Marks' policy, "when construed

liberally, . . . can be read to cover the work of a trustee when

working as an officer or director of a corporation in which the
trust corpus is [invested]." Further, the court found that the
17
 No. 2013AP2756

"allegations of the six lawsuits against Mr. Marks as presented

within the four corners of the pleadings fall within the scope

of the insuring [clause]." However, the court also found that

the business enterprise exclusion did not render the insurance

policy illusory, "is enforceable[,] and does preclude coverage

for the claims in this case." Thus, the court concluded that

Houston Casualty had not breached any duty to defend Marks. On

October 31, 2013, the court dismissed the case.

¶33 On December 13, 2013, Marks filed a notice of appeal.

On January 10, 2014, Houston Casualty filed a notice of cross-

appeal. On May 7, 2015, the court of appeals "affirm[ed] the

circuit court's determination that Houston Casualty did not have

a duty to defend Marks." Marks, 363 Wis. 2d 505, ¶1. Like the

circuit court, the court of appeals concluded that the business

enterprise exclusion in the Houston Casualty policy precluded

coverage and did not render the policy illusory. Id., ¶¶17-27.18

The court thus found it unnecessary to consider Houston

Casualty's argument that its policy did not even provide an
initial grant of coverage. Id., ¶1.

¶34 On July 6, 2015, Marks filed a petition for review in

this court. On September 15, 2015, we granted the petition.

18
As we will discuss below, the court of appeals tussled
with some of its prior cases before arriving at its conclusion.
See, e.g., Marks v. Houston Cas. Co., 2015 WI App 44, ¶10, 363
Wis. 2d 505, 866 N.W.2d 393.

18
 No. 2013AP2756

II. STANDARD OF REVIEW

¶35 "We review summary judgment rulings independently,

applying the well-established standards set forth in Wis. Stat.

§ 802.08" (2013-14).19 Hirschhorn v. Auto-Owners Ins. Co., 2012

WI 20, ¶20, 338 Wis. 2d 761, 809 N.W.2d 529 (citations omitted).

Specifically, summary judgment is granted if "the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law." § 802.08(2);

Hirschhorn, 338 Wis. 2d 761, ¶20 (citation omitted).

¶36 In this case we interpret an insurance contract. "The

interpretation of an insurance contract is a question of law,

which this court reviews de novo." Plastics Eng'g Co. v.

Liberty Mut. Ins. Co., 2009 WI 13, ¶27, 315 Wis. 2d 556, 759

N.W.2d 613 (citation omitted). We also examine the "four-

corners rule," which is relevant in cases where an insured

argues that its insurer breached its duty to defend the insured.
See Olson v. Farrar, 2012 WI 3, ¶33, 338 Wis. 2d 215, 809

N.W.2d 1. "The proper application of the four-corners rule

presents a question of law, which we decide independently of the

determinations rendered by the circuit court and the court of

appeals." Id., ¶22 (determining whether four-corners rule

applies).

19
All subsequent references to the Wisconsin Statutes are
to the 2013-14 version unless otherwise indicated.

19
 No. 2013AP2756

III. ANALYSIS

A. General Principles Regarding an Insurer's
Contractual Duty to Defend Its Insured
¶37 Liability insurance policies often contractually

obligate an insurer both to defend and to indemnify its insured.

Maxwell v. Hartford Union High Sch. Dist., 2012 WI 58, ¶53, 341

Wis. 2d 238, 814 N.W.2d 484. Generally speaking, what is meant

when courts reference an insurer's "duty to defend" its insured

is the insurer's "responsibility to defend the insured from all
actions brought against the insured based on alleged facts or

circumstances falling within the purview of coverage under the

policy, regardless of the suit's validity or invalidity." 14

Steven Plitt et al., Couch on Insurance § 200:1 (3d ed. 2015)

(citations omitted). An insurer's duty to indemnify its

insured, in contrast, is the insurer's duty "to pay all covered

claims and judgments against [its] insured." Id. § 200:3

(citations omitted).

¶38 When an insurer receives a tender of defense from its

insured, it "makes an initial determination about whether it
will defend its insured." Olson, 338 Wis. 2d 215, ¶33. The

insurer must make this determination carefully, because if it

refuses to defend and is later found to have "breache[d] a duty

to defend its insured, [it] is on the hook for all damages that

result from that breach of its duty." Maxwell, 341 Wis. 2d 238,

¶54.20

20
See also infra, ¶63 n.29.

20
 No. 2013AP2756

¶39 Both insurers in making this initial determination and

courts in examining whether an insurer has breached its duty to

defend its insured use the same analytical framework, known in

Wisconsin as the "four-corners rule." See Olson, 338

Wis. 2d 215, ¶33. The name derives from the fact that "[t]he

duty to defend is triggered by the allegations contained within

the four corners of the complaint" against the insured. Estate

of Sustache v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶20, 311

Wis. 2d 548, 751 N.W.2d 845 (citations omitted). Put

differently, "[w]hen a complaint alleges facts that, if proven,

would constitute a covered claim, the insurer must appoint

defense counsel for its insured without looking beyond the

complaint's four corners." Id., ¶27. Thus, only two documents

are germane in any four-corners analysis: the insurance policy

and the complaint against the insured. No examination of

extrinsic facts or evidence takes place. Fireman's Fund Ins.

Co. of Wis. v. Bradley Corp., 2003 WI 33, ¶19, 261 Wis. 2d 4,

660 N.W.2d 666.
¶40 The four-corners rule is "well established" in

Wisconsin, Fireman's Fund, 261 Wis. 2d 4, ¶18, and is set out in

detail in Estate of Sustache:

An insurer's duty to defend its insured is
determined by comparing the allegations of the
complaint to the terms of the insurance policy. . . .
It is the nature of the alleged claim that is
controlling, even though the suit may be groundless,
false, or fraudulent. . . .

Courts liberally construe the allegations in the
complaint and assume all reasonable inferences. This

21
 No. 2013AP2756

rule tends to help an insured's demand for coverage.
As usual, ambiguity in the coverage terms will be
construed against the insurer. This familiar rule of
contract construction also helps the insured.

In determining whether there is a duty to defend,
the court first considers whether the insuring
agreement makes an initial grant of coverage——i.e.,
whether the insurer has a duty to indemnify its
insured——for the claims asserted. If the court
determines that the policy was not intended to cover
the claims asserted, the inquiry ends. . . .

Only after concluding that coverage exists does
the court examine the policy's exclusions to determine
whether they preclude coverage. In other words, when
a court determines that there is no coverage in the
policy for the allegations in the complaint, it is not
necessary to interpret the policy's exclusions.
Estate of Sustache, 311 Wis. 2d 548, ¶¶20-23 (citations

omitted). We add to this summary that a consideration of

exclusions in the insurance policy necessarily includes

consideration of any exceptions to those exclusions. See, e.g.,

Prof'l Office Bldgs., Inc. v. Royal Indem. Co., 145 Wis. 2d 573,

578-79, 580-84, 427 N.W.2d 427 (Ct. App. 1998).

¶41 Importantly, the four-corners rule generally protects

the insured: "[W]ithout the four-corners rule, 'the duty to

defend would often be empty. The insurance company could refuse

to defend in the hope that the facts as they emerged in the

litigation that its insured had asked it to defend would reveal

that there was no coverage.'" Olson, 338 Wis. 2d 215, ¶32

(citation omitted). Moreover, "an insurer may have a clear duty

to defend a claim that is utterly specious because, if it were

meritorious, it would be covered." Fireman's Fund, 261
Wis. 2d 4, ¶21. One commentator notes:

22
 No. 2013AP2756

The complaint test, literally applied, usually will
preclude insurers from rejecting tenders of defense
based on policy exclusions. The reason is that most
complaints simply allege that the insured was
negligent and that bodily injury or property damage
resulted. These kinds of allegations almost always
give rise to a duty to defend under the coverage
clauses of standard liability policies. The
applicability of an exclusion, however, is rarely
obvious from the allegations in the complaint.
Insurers often have to rely on investigation,
discovery and other information not stated in the
complaint to determine whether an exclusion applies.
The complaint test, rigidly enforced, forbids that.
If the allegations fall within the coverage clause and
are not on their face excluded, then the company must
defend or promptly take steps to resolve its duty to
defend in court.
Peter F. Mullaney, Liability Insurers' Duty to Defend, Wis.

Law., at 10-11 (July 1995).21

21
When an insurer receives a tender of defense from its
insured, it can proceed in several different ways. See
generally Sheila M. Sullivan et al., Anderson on Wisconsin
Insurance Law § 7.54 (7th ed. 2015). For instance, it can: (1)
"deny the tender of defense and state the grounds for deciding
that the complaint does not trigger any obligation to defend
under the policy," id.; see Liebovich v. Minnesota Ins. Co.,
2008 WI 75, ¶55, 310 Wis. 2d 751, 751 N.W.2d 764; (2) "request a
bifurcated trial on the issue of coverage while moving to stay
proceedings on the merits of the liability action until the
issue of coverage is resolved," Liebovich, 310 Wis. 2d 751, ¶55;
(3) "provide a defense to the insured on the merits, under a
reservation of rights, until the coverage issue is resolved,"
Estate of Sustache v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶25,
311 Wis. 2d 548, 751 N.W.2d 845; or (4) obtain a declaratory
ruling, see Liebovich, 310 Wis. 2d 751, ¶55.

(continued)
23
 No. 2013AP2756

¶42 A number of other legal principles beneficial to the

insured are built into any four-corners analysis, some of which

were noted above: (1) allegations in the complaint are construed

liberally and all reasonable inferences are assumed, Estate of

Sustache, 311 Wis. 2d 548, ¶21; (2) ambiguity in the insurance

policy is construed against the insurer, id.; and (3) "when an

insurance policy provides coverage for even one claim made in a

lawsuit, the insurer is obligated to defend the entire suit,"

Fireman's Fund, 261 Wis. 2d 4, ¶21 (citation omitted).

¶43 With this general framework before us, we now examine

whether the five complaints and one set of counterclaims against

In the current case, Houston Casualty decided on the first
of the approaches listed above: deny the tender of defense and
explain why it was doing so. When an "insurance company refuses
to defend, it does so at its own peril." Elliott v. Donahue,
169 Wis. 2d 310, 321, 485 N.W.2d 403 (1992); accord, e.g., Olson
v. Farrar, 2012 WI 3, ¶30, 338 Wis. 2d 215, 809 N.W.2d 1. As was
explained earlier, "[t]he general rule is that where an insurer
wrongfully refuses to defend on the grounds that the claim
against the insured is not within the coverage of the policy,
the insurer is guilty of a breach of contract which renders it
liable to the insured for all damages that naturally flow from
the breach." Newhouse v. Citizens Sec. Mut. Ins. Co., 176
Wis. 2d 824, 837, 501 N.W.2d 1 (1993) (emphasis added).

Certain of our past cases have "strongly encourage[d]"
insurers to avoid "unilateral[] refus[al]" to defend their
insureds. Liebovich, 310 Wis. 2d 751, ¶55. But we also
recognize that in some cases it may be obvious to insurers that
they have no duty to defend their insureds based on a comparison
of the insurance policy with the complaint at issue. Insurance
companies are in the business of risk. They are undoubtedly
cognizant of the risk that inheres in denial of an insured's
tender. Sheila M. Sullivan et al., supra, § 7:54 ("To be sure,
when an insurance company denies and does nothing, it takes a
risk. Insurance companies are aware of the risk . . . .").

24
 No. 2013AP2756

Marks allege facts that, if proven, would constitute a claim

covered under Marks' professional liability insurance policy.

If they do not, Houston Casualty did not breach its duty to

defend Marks when it denied Marks' tender of defense.

B. Whether Houston Casualty Breached Its
Duty to Defend Marks
1. Initial Coverage

¶44 The four-corners rule dictates that we first examine

whether Marks' policy provides an initial grant of coverage for
the claims against Marks in the six lawsuits at issue. See

Estate of Sustache, 311 Wis. 2d 548, ¶22.

¶45 As explained supra, Marks' policy provides coverage

for

any Loss and Claim Expenses . . . as the Insured
acting in the profession described in Item 3 of the
Declarations shall become legally obligated to pay for
Claim or Claims first made against the Insured during
the Policy Period by reason of any Wrongful Act by an
Insured . . . .
(Emphasis added.) "Item 3 of the Declarations" in turn lists

Marks' profession as follows: "[s]olely in the performance of
services as the Trustee of the Irrevocable Children's Trust

(ICT), and/or Irrevocable Children's Trust No. 2 (ICT2), for a

fee." And, finally, "Wrongful Act" is defined in the policy to

mean "any actual or alleged error or omission or breach of duty

committed or alleged to have been committed or for failure to

render such professional services as are customarily rendered in

the profession of the Insured as stated in Item 3 of the
Declarations."

25
 No. 2013AP2756

¶46 Taken as a whole, the policy essentially provides

coverage for liability arising out of mistakes Marks makes in

rendering services in his capacity as trustee of ICT and ICT2.

Though it does not affect our analysis, we note that such a

scope of coverage is consistent with the type of policy Marks

purchased: professional liability errors and omissions

insurance.

An errors-and-omissions policy is professional-
liability insurance providing a specialized and
limited type of coverage compared to general
comprehensive insurance. It is designed to insure
members of a particular professional group from
liability arising out of the special risk such as
negligence, omissions, mistakes and errors inherent in
the practice of the profession. . . . These
professional-liability policies differ in detail
depending upon the company which issues them and are
generally called malpractice insurance when issued to
members of the healing profession where the exposure
is largely bodily injury and errors-and-omissions
insurance where the risk is primarily that of damage
to intangible property such as coverage for attorneys,
insurance agents, and architects.
Grieb v. Citizens Cas. Co. of New York, 33 Wis. 2d 552, 556-57,
148 N.W.2d 103 (1967).

¶47 The circuit court below found that Marks' policy

provides an initial grant of coverage. The court of appeals

assumed without deciding that Marks' policy provides an initial

grant of coverage, then moved to step two: determining whether

any exclusions preclude coverage. Marks, 363 Wis. 2d 505, ¶9.

The court of appeals ultimately concluded that the business

enterprise exclusion "precludes coverage when measured against
the allegations in the complaints." Id., ¶22. We agree with

26
 No. 2013AP2756

the court of appeals on both counts: we need not and do not

decide whether Marks' policy provides an initial grant of

coverage based on the allegations in the six lawsuits, because,

as we will now explain, the business enterprise exclusion

clearly establishes that Houston Casualty could have no possible

duty to indemnify Marks, even if the allegations in the

complaints turned out to be true. See Fireman's Fund, 261

Wis. 2d 4, ¶21.22 Thus, Houston Casualty did not breach its duty

to defend Marks when it declined to defend him.

2. The Business Enterprise Exclusion

¶48 The business enterprise exclusion in Marks' policy

excludes coverage:

b) For liability arising out of the
Insured's services and/or capacity as:

1) an officer, director, partner,
trustee, or employee of a business
enterprise not named in the Declarations or
a charitable organization or pension,
welfare, profit sharing, mutual or
investment fund or trust . . . .
¶49 For purposes of this case, what is important is that

the exclusion unambiguously precludes coverage for Marks'

activities as an officer or director of any business enterprise

22
We have significant doubts that Marks' policy provides
even an initial grant of coverage in this case. Were we to
determine that Marks' policy does not provide an initial grant
of coverage, however, our analysis would end and we might not
reach the important issues set forth in Marks' petition for
review.

27
 No. 2013AP2756

not named in the declarations.23 The only entities even

mentioned in the declarations are ICT and ICT2.24

¶50 We now turn to the complaints. Except for the

supplemental counterclaims in the Hawaii Global actions, which

we will examine momentarily, the claims against Marks

characterize Marks as follows: a "citizen of the State of

Wisconsin" and "a principal shareholder and equitable owner of

Titan" (the Hawaii Global action); "an individual residing at

23
We refer to this exclusion as the "business enterprise
exclusion" because it bears a resemblance to "a standard [type
of] exclusion in lawyers' professional liability insurance
policies" sometimes referred to as a business enterprise
exclusion. See, e.g., Am. Guarantee & Liab. Ins. Co. v. Timothy
S. Keiter, P.A., 360 F.3d 13, 16-17 (1st Cir. 2004).

At least with respect to lawyers' professional liability
insurance policies,

Some courts have explained that standard business
enterprise exclusions have two purposes:

1) "to prevent collusive suits whereby
malpractice coverage could be used to shift a lawyer's
business loss onto the malpractice carrier" and 2) to
avoid the circumstance where an insured so
intermingles his business relationships with his law
practice that an insurance carrier incurs additional
risk of having to cover the insured for legal
malpractice claims relating to the conduct of
business, rather than solely out of the professional
practice.

Id. at 17 (citation omitted).
24
Marks points us to Black's Law Dictionary, which defines
a "business enterprise" as "[a] for-profit company, business, or
organization that provides financial, commercial, or industrial
goods and services." Business Enterprise, Black's Law
Dictionary 240 (10th ed. 2014).

28
 No. 2013AP2756

all material times in or around Dallas, Texas," and "[a]t all

times relevant hereto . . . a Chairman of Titan and

represent[ative] [of] Oblio, Titan Communications and Planet

Direct" (the ILDN action); "a citizen of Wisconsin," "Chairman

of the Board of Directors of USAD at some point after August 1,

2007," and, "at all material times hereto," "Chairman of Titan

and a Member of Crivello Group[, LLC]" (the USAD action); "a

resident of Wisconsin," "the Chairman of Titan," "through one or

more of his business entities, a shareholder of Titan," and "a

[putative] director of Crescent" (the Near action); "an

individual and Chairman of the Board for [Titan]" (the Houillion

action); and "an individual residing in Milwaukee, Wisconsin,"

"a member of [Appalachian's] Board of Directors at all

[relevant] times," and "an 'Insider' of [Appalachian] as defined

in § 101(31) of the Bankruptcy Code" (the Appalachian action).

¶51 Conspicuously absent from these characterizations is

any mention of Marks' position as trustee of ICT and ICT2. In

fact, the allegations in the complaints do not discuss ICT and
ICT2 at all. Instead, the various claims against Marks attack

him in his capacity as an officer or director of Titan, a

business enterprise not named in the declarations, as well as in

his capacity as an officer or director of other business

enterprises not named in the declarations. And, quite simply,

the business enterprise exclusion of Marks' policy makes clear

that the policy does not provide coverage for Marks' liability

as a director or officer of Titan or other business enterprises
not mentioned in the policy's declarations. The phrasing of the
29
 No. 2013AP2756

business enterprise exclusion itself suggests how Marks could

have obtained coverage for his work as director or officer of

Titan: he could have bargained for and obtained a policy that

"named" Titan "in [its] Declarations." He did not do so, and

may not now force Houston Casualty to participate in lawsuits

not contemplated by the contract between it and Marks.

¶52 We acknowledge that ICT and ICT2 owned a controlling

interest in Titan. Marks explains that "[i]n order to properly

and effectively manage the trusts' significant investment in

Titan, Marks accepted a seat on the Titan board of directors and

assumed the role of chairman," and that "Marks' professional

positions with Titan were solely by virtue of the trusts'

controlling investments in Titan." Even if true, these facts do

not change our conclusion. At most, Marks has merely identified

a causal relationship: his position as trustee of ICT and ICT2

led him to accept a role as officer or director of Titan.

However, that alleged connection is nonetheless deficient as

Marks is being sued for his alleged failures as officer or
director of Titan, not for any alleged failures as trustee of

ICT and ICT2.

¶53 The supplemental counterclaims against Marks in the

Hawaii Global action were filed almost six months after Marks

notified Houston Casualty of the lawsuits against him, almost

three months after Marks' policy expired and Houston Casualty

informed Marks it had no obligation to defend him, and over two

months after Marks initially filed this lawsuit against Houston
Casualty alleging breach of its duty to defend him. Those 2010
30
 No. 2013AP2756

counterclaims were not a part of Houston Casualty's 2009 duty to

defend analysis and are not a part of our duty to defend

analysis.25

25
Marks points out that on October 28, 2009, he notified
Houston Casualty that Hawaii Global and TransPac had filed a
"Motion for Leave to File Supplemental and Amended
Counterclaims." But "[t]he duty to defend is based solely on
the allegations 'contained within the four corners of the
complaint,' without resort to extrinsic facts or evidence,"
Fireman's Fund Ins. Co. v. Bradley Corp., 2003 WI 33, ¶19, 261
Wis. 2d 4, 660 N.W.2d 666 (emphasis added) (citation omitted),
which is what Hawaii Global and TransPac's motion amounts to,
despite its formal trappings. Marks suggests his October 28,
2009 letter to Houston Casualty was "proper notice of claim,"
but no such "claim" had yet been made. Those supplemental
claims would not be made until January 25, 2010. Cf. Amerisure
Mut. Ins. Co. v. Microplastics, Inc., 622 F.3d 806, 812 (7th
Cir. 2010) (Illinois law) ("[I]t is the actual complaint, not
some hypothetical version, that must be considered." (citation
omitted).); Travelers Prop. Cas. Co. of Am. v. Hillerich &
Bradsby Co., 598 F.3d 257, 273 (6th Cir. 2010) (Kentucky law)
(pursuant to duty to defend analysis, draft complaint attached
as an exhibit to a motion for reconsideration would not be
considered filed as a complaint on that day).

(continued)
31
 No. 2013AP2756

¶54 To summarize, Marks obtained a professional liability

policy from Houston Casualty for his work as trustee of two

trusts. He was sued multiple times for activities pertaining to

his performance as an officer or director of various businesses

affiliated with those trusts, but these lawsuits had nothing to

do with Marks' services as trustee of those trusts. When

Houston Casualty received Marks' request for a defense, it

examined Marks' policy and the complaints at issue, and

reasonably made the same conclusion that we do today: Houston

Casualty had no duty to defend Marks based on the claims

asserted against him.

¶55 Ordinarily, our analysis would end here. Perhaps

realizing the weakness of his position given the plain terms of

the business enterprise exclusion, however, Marks provides two

Although there was brief reference to it in the proceedings
below, we are not faced with a developed argument that Houston
Casualty separately breached a duty to defend on January 25,
2010, a date which is outside of the applicable policy period.
Such a claim would face its own hurdles, including: (1) the
question of whether these counterclaims survive the business
enterprise exclusion; (2) application of Marks' policy's
intentional acts exclusion (in fact, although the circuit court
concluded otherwise, Marks conceded before the circuit court
that "Hawaii Global alleged only intentional acts"); and (3) an
argument we have not otherwise addressed——the possibility that
the Hawaii Global counterclaims should be read to date back to
April 7, 2008, the original filing date of Hawaii Global's
counterclaim and a date which is also outside of the applicable
policy period. With regard to this last issue, we note that a
section of Marks' policy titled "Multiple Claims" reads: "One or
more Claims based upon or arising out of the Same Wrongful Act
or Interrelated Wrongful Acts by one or more of the Insureds
shall be considered a single claim." See also supra, n. 16.

32
 No. 2013AP2756

reasons why we should not give effect to the business enterprise

exclusion at all: (1) the exclusion renders the policy illusory,

so we must interpret the policy in favor of coverage; and (2)

because Houston Casualty "unilaterally disclaim[ed] coverage,"

it is "estopped from using policy exclusions to litigate

coverage if it is sued for breaching its duty to defend." Both

arguments are without merit.

C. Whether the Business Enterprise Exclusion Renders the
Houston Casualty Policy Illusory
¶56 "Insurance policies are contracts and are governed by

the same rules that govern interpretation of contracts in

general." Wisconsin Label Corp. v. Northbrook Prop. & Cas. Ins.

Co., 2000 WI 26, ¶23, 233 Wis. 2d 314, 607 N.W.2d 276 (citation

omitted). "In order that a contract may arise, three things

must concur: first, the offer; second, the acceptance; and,

third, the consideration." Briggs v. Miller, 176 Wis. 321, 325,

186 N.W. 163 (1922). "Where an illusory promise is made, that

is, a promise merely in form, but in actuality not promising

anything, it cannot serve as consideration." 3 Williston on
Contracts § 7:7 (4th ed.). In the insurance context,

"[i]llusory policy language defines coverage in a manner that

coverage will never actually be triggered." Continental Western

Ins. Co. v. Paul Reid, LLP, 2006 WI App 89, ¶7, 292 Wis. 2d 674,

715 N.W.2d 689 (citation omitted). "Where a policy's purported

coverage is illusory, the policy may be reformed to meet an

33
 No. 2013AP2756

insured's reasonable expectations of coverage." Id.26 We stress

that "reformation is an extraordinary remedy, and . . . courts

exercise it with great caution and restraint." 43 Am. Jur. 2d

Insurance § 358 (citing Haddad v. Elkhateeb, 46 So. 3d 244, 255

(La. Ct. App. 4th Cir. 2010)); see also, e.g., Kansas v.

Nebraska, 575 U.S. ___, 135 S. Ct. 1042, 1061 (2015) ("Of

course, courts generally hold parties to the deals they make;

and of course, courts should hesitate, and then hesitate some

more, before modifying a contract, even to remove an inadvertent

flaw."); 2 Steven Plitt et al., Couch on Insurance § 26:1

("Reformation is an extraordinary remedy . . . . Accordingly,

the courts exercise it with great caution" (citing Mutual of

Omaha Ins. Co. v. Russell, 402 F.2d 339 (10th Cir. 1968).).27

26
This statement of law is, in some sense, incomplete.
Generally, the insurer's understanding of the contract is also
of critical concern when reforming a policy. See infra, n.27;
Vandenberg v. Continental Ins. Co., 2001 WI 85, ¶53, 244
Wis. 2d 802, 628 N.W.2d 876 ("In the context of insurance
contracts, there are special considerations regarding
reformation. . . . [A] policy may not be rewritten to bind the
insurer to a risk that it did not contemplate and for which it
received no premium.").
27
"Reformation is an equitable remedy which emanates from
the maxim that equity treats that as done which ought to have
been done. . . . Reformation may be granted only in two narrow
circumstances: Mutual mistake, or unilateral mistake plus
fraudulent concealment." 27 Williston on Contracts § 70:19 (4th
ed.). With regard to the first of these circumstances,

[t]he purpose of reforming a contract on the basis of
mutual mistake is to make a defective writing conform
to the agreement of the parties upon which there was
mutual assent. While the erroneous instrument must be
made to correctly express the real agreement between
(continued)
34
 No. 2013AP2756

¶57 Marks argues that the business enterprise exclusion

"completely swallows the coverage granted in the insuring

agreement" of his policy because it excludes coverage "[f]or

liability arising out of the Insured's services and/or capacity

as: an . . . trustee . . . of . . . a . . . trust . . . ."

Thus, Mark concludes, this court must "reform the policy in

favor of coverage." This argument, though perhaps clever, does

not withstand scrutiny.

¶58 Marks essentially contends that because a portion of

the business enterprise exclusion not at issue (the

trustee/trust portion of the exclusion) renders the policy

the parties, no court can make a new contract for the
parties.

Id. (emphases added) (citations omitted); see also 2 Steven
Plitt et al., Couch on Insurance § 26:1 (3d ed. 2015) ("[A]n
insurance policy is subject to reformation precisely as any
other written instrument upon the same grounds and subject to
the same limitations. . . . Reformation is a proper remedy
where the parties have reached a definite and explicit
agreement. There must be an understanding that there is an
agreement, but whether by mutual or common mistake, or mistake
on one side and fraud or inequitable conduct on the other, the
written contract fails to express the agreement; in which case,
the policy will be corrected so as to make it conform to their
real intent, and the parties will be placed as they would have
stood if the mistake had not occurred." (citations omitted)).

Such are the general principles. Also present in Wisconsin
case law is the recognition that "[i]n insurance cases less is
required to make out a cause of action for reformation than in
ordinary contract disputes." Artmar, Inc. v. United Fire & Cas.
Co., 34 Wis. 2d 181, 186, 148 N.W.2d 641 (1967). This case does
not require us to delve into the niceties of insurance policy
reformation, but we raise these issues to emphasize that
reformation is not a tool to be applied casually.

35
 No. 2013AP2756

illusory, we should provide coverage otherwise eliminated by a

separate portion of the business enterprise exclusion (the

officer-director/business enterprise portion of the exclusion).

¶59 Even if Marks is correct in his interpretation of the

policy, our task would be to reform the policy so that it

"conform[s] to [the] real intent" of the parties; that is, to

reform the policy so that it represents the "definite and

explicit agreement" originally reached by the parties before any

mistake occurred. 2 Plitt et al., supra § 26:1; see also

Vandenberg v. Continental Ins. Co., 2001 WI 85, ¶50 & n.35, 244

Wis. 2d 802, 628 N.W.2d 876. If a clause in Marks' policy

renders the policy illusory, we consider whether to reform that

clause. We do not consider whether to reform other clauses,

simply because they too eliminate coverage.

¶60 The coverage provision of Marks' policy establishes

that Marks is covered for liability arising out of his

"performance of services as the Trustee of the Irrevocable

Children's Trust (ICT), and/or Irrevocable Children's Trust No.
2 (ICT2), for a fee." If Marks is correct in his interpretation

of the business enterprise exclusion, reformation might be

appropriate and we might excise the trustee/trust portion of

that exclusion. We would not, however, absent other argument,

excise other portions of the business enterprise exclusion not

in conflict with the coverage provision of the policy. Houston

Casualty is not arguing that the putative trustee/trust

36
 No. 2013AP2756

exclusion applies to exclude coverage, and we need not examine

it further.28

D. Whether this Court Should, in Conducting Its Four-Corners
Analysis, Consider the Exclusions in Marks' Policy
¶61 Marks also argues that the business enterprise

exclusion does not apply in this case because "an insurer that

unilaterally disclaims coverage and its duty to defend will be

estopped from using policy exclusions or limiting language to

litigate coverage if it is subsequently sued by its insured for
breaching its duty to defend." Marks principally relies on

three court of appeals cases for this proposition: Radke v.

Fireman's Fund Insurance Co., 217 Wis. 2d 39, 577 N.W.2d 366

(Ct. App. 1998); Kenefick v. Hitchcock, 187 Wis. 2d 218, 522

N.W.2d 261 (Ct. App. 1994); and Grube v. Daun, 173 Wis. 2d 30,

496 N.W.2d 106 (Ct. App. 1992). As will be shown, Grube, the

earliest of these cases, relied on an earlier case, Professional

Office Bldgs., Inc. v. Royal Indemnity Co., 145 Wis. 2d 573, 427

N.W.2d 427 (Ct. App. 1988). We thus begin with Professional

Office Buildings.

28
This reasoning applies with equal force to Marks'
contention that because the business enterprise exclusion is
supposedly ambiguous, Houston Casualty was obligated to defend
him. The fact that portions of Marks' policy not at issue (the
trustee/trust portion of the business enterprise exclusion) may
be ambiguous does not render the portion of the exclusion upon
which Houston Casualty relied in denying Marks a defense (the
officer-director/business enterprise portion of the business
enterprise exclusion) ambiguous.

37
 No. 2013AP2756

¶62 The facts in Professional Office Buildings stem from

an airplane crash near Tupelo, Mississippi. Prof'l Office

Bldgs., 145 Wis. 2d at 577. A passenger injured in the crash

sued the corporate owner of the plane, Professional Office

Buildings, Inc. ("POB"), which had leased the plane to another

corporation at the time of the crash. Id. at 577-78. POB's

insurer, Royal Indemnity Company ("Royal"), refused to defend it

under two potentially applicable policies; Royal pointed to the

coverage clause of one policy and an exclusion in the other

policy. Id. at 578-79. POB sued Royal Indemnity alleging,

among other things, breach of the duty to defend. Id. at 579.

¶63 After stating the four-corners rule, the court of

appeals determined that Royal had a duty to defend POB. Id. at

580-83. Importantly, the court relied for its conclusion on an

exception to the exclusion which had been cited by Royal to POB

when it had denied POB a defense. Id. at 578, 583. The court

then concluded that "an insurer, who has breached its duty to

defend an insured, may be estopped from later challenging
coverage." Id. at 584-85 (emphasis added). "Royal could have

tried coverage prior to undertaking the liability defense.

Where coverage is an issue, bifurcated trials are the

norm. . . . Royal, having breached its duty to defend the

Mississippi action, may not now challenge or otherwise litigate

the coverage issues." Id. at 585-86. Professional Office

38
 No. 2013AP2756

Buildings is consistent with our analysis in this case.29 We

proceed to examine Grube.

¶64 Grube involves many issues, and we recite only the

portions of that opinion relevant to this appeal. In Grube

Louis Achter ("Achter") sold property to John Daun ("Daun")

without mentioning a gasoline leak that had occurred on the

property. Grube, 173 Wis. 2d at 46-47. Daun sold the property

to Gordon and Julie Grube ("the Grubes"). Id. at 47. The

Grubes discovered that wells on the property had been

contaminated by the leak, and a flurry of litigation ensued.

Id. at 47-48. Relevant to this case, Achter sued his insurer,

Secura Insurance ("Secura"), demanding a defense and insurance

coverage. Id. at 48. The court of appeals concluded that

"[n]egligence causing property damage was alleged [against

Achter] and is covered under Achter's policy" and that Secura

29
Lest we inadvertently undo recent work of this court, we
observe our statement from a few years ago:

When an insurer breaches a duty to defend its
insured, the insurer is on the hook for all damages
that result from that breach of its duty. . . .

While these damage awards are sometimes framed as the
insurer being "estopped" from denying coverage, see,
e.g., Grube v. Daun, 173 Wis. 2d 30, 74, 496
N.W.2d 106 (Ct. App. 1992) . . . , they are the
measure of damages actually caused by an insurer's
breach of the contractual duty to defend, not an
estoppel based on some otherwise inequitable conduct
in the eyes of the insured.

Maxwell v. Hartford Union High Sch. Dist., 2012 WI 58, ¶¶54-55,
341 Wis. 2d 238, 814 N.W.2d 484.

39
 No. 2013AP2756

was therefore required to provide a defense. Id. at 73. Secura

"argue[d] that it did not have a duty to defend because the

claims alleged fall within exclusions of the policy." Id. at

74. The court of appeals rejected the argument, stating, "We

hold that under Professional Office Buildings, Secura is

estopped from raising any challenges to coverage; it must both

defend and indemnify Achter because Secura denied coverage

outright." Id. at 74 (citation omitted).

¶65 The Grube court misinterpreted Professional Office

Buildings. Important to the Professional Office Buildings.

court's holding that Royal could not contest coverage was the

fact that the court had already determined that Royal had

breached its duty to defend POB——a determination made, notably,

after the court analyzed an exclusion and an exception to that

exclusion in POB's policy. Prof'l Office Bldgs., 145 Wis. 2d at

584-85. The Grube decision is also internally inconsistent in

this regard; later in its analysis, the Grube court stated, "The

issue in the instant case——whether an insurer who breached its
duty to defend can later contest coverage——is identical to the

issue in Professional Office [Buildings]." Grube, 173 Wis. 2d

at 74-75 (emphasis added). The Grube court should have

addressed Secura's exclusions argument.30
30
It is not clear that examination of exclusions in the
Secura policy would have changed the result in that case. The
trial court in that case had concluded that an exclusion "for
damage to the insured's own property did not apply as the
property was no longer owned by Achter." Grube, 173 Wis. 2d at
49.

40
 No. 2013AP2756

¶66 In Kenefick David and Carolyn Hitchcock ("the

Hitchcocks") were sued by their neighbors, Emmett and Amelia

Kenefick ("the Keneficks"), who alleged that gasoline tanks on

the Hitchcock's property had leaked and contaminated the

groundwater. Kenefick, 187 Wis. 2d at 221. The Hitchcocks

eventually sued their insurer, Federated Mutual Insurance

Company ("Federated"), claiming that it had breached its duty to

defend them. Id. The details of the case are not particularly

germane to this case because Marks relies on a single statement

made by the Kenefick court at the beginning of its duty to

defend analysis:

The nature of [the Keneficks'] claim [against the
Hitchcocks] is such that——ignoring, as we must at this
stage of the inquiry, both the merits of the claim and
any exclusionary or limiting terms and conditions of
the policies and, further, resolving all doubts in
favor of the insured——we cannot say that there was no
duty on Federated's part to defend the action, at
least up to the point that its policy defenses to
coverage were resolved.
Id. at 232.

¶67 As noted in a treatise on Wisconsin insurance law,
"that statement . . . does not cite to any supporting authority.

This is probably because case after case in Wisconsin has held

that an insurance company's obligation to defend is based on the

entire contract." Sheila M. Sullivan et al., Anderson on

Wisconsin Insurance Law § 7.23 (7th ed. 2015); see also Menasha

Corp. v. Lumbermens Mut. Cas. Co., 361 F. Supp. 2d 887, 892-93

(E.D. Wis. 2005) ("Plaintiff also argues that in determining
whether defendants had duties to defend, I may not consider

41
 No. 2013AP2756

exclusions in their policies. Plaintiff bases this argument on

statements in [Kenefick and Radke]. However, when addressing

whether there is a duty to defend, Wisconsin courts frequently

consider exclusions. . . . [D]espite the language in Radke and

Kenefick, I will consider the exclusions in defendants'

policies." (citations omitted)).

¶68 Moreover, the Kenefick court did not even apply the

"estoppel" discussion in Grube; in fact, it recognized that

unlike in Professional Office Buildings, the coverage and

liability issues in Kenefick were bifurcated. Kenefick, 187

Wis. 2d at 233-34; see also id. at 235 n.7 ("There is no

indication in Grube, however, that the insurer obtained a

bifurcated trial as Federated did in this case. . . . Grube is

inapposite.").31

¶69 Radke is the last case for our consideration. We need

spend even less time with Radke because it simply quoted the

31
In Kenefick the court concluded that Federated did not
breach its duty to defend, although Federated did not,
apparently, request bifurcation until six months after the
complaint against the Keneficks was filed. Kenefick v.
Hitchcock, 187 Wis. 2d 218, 233 & n.6, 522 N.W.2d 261 (Ct. App.
1994). The court remanded the case on the "very limited ground"
that "if the Hitchcocks necessarily incurred expenses in defense
of the liability and damage portions of the case prior to the
time it was determined there was no coverage under the Federated
policies, they could seek reimbursement from Federated." Id. at
236. We do not discuss the merits of this aspect of the
Kenefick court's analysis, and our comment that Kenefick
distinguished itself from Grube and Professional Office
Buildings is not meant as an endorsement of that conclusion; we
merely point out that the Kenefick court did not purport to
apply the estoppel discussion in Grube.

42
 No. 2013AP2756

statement from Kenefick just discussed. Radke, 217 Wis. 2d at

44 ("However, our inquiry at this stage is limited; we are

required to ignore 'both the merits of the claim and any

exclusionary or limiting terms and conditions of the policies.'"

(quoting Kenefick, 187 Wis. 2d at 232)).

¶70 In sum, Marks' argument that we must ignore the

business enterprise exclusion because Houston Casualty refused

to defend him rests upon: (1) analysis in Grube based on a

faulty reading of Professional Office Buildings; and (2) a

statement in Kenefick that did not rely on any cases or other

sources for support. We decline to rely on these statements,

for multiple reasons.

¶71 First, as an original matter, a rule that an insurer

who declines to provide a defense may not rely on policy

exclusions to protect itself against allegations of breach of

the duty to defend makes no sense. If A demands that B perform

an action under a contract, B relies on a particular clause in

the contract in refusing to perform that action, and A sues B
for breach of contract, a court of necessity must interpret that

clause in order to determine whether B in fact breached the

contract. See Restatement (Second) of Contracts § 235 (1981)

("When performance of a duty under a contract is due any non-

performance is a breach." (emphasis added)). The fact that that

contract may sometimes be an insurance contract does not change

the analysis. See Wis. Label Corp., 233 Wis. 2d 314, ¶23

("Insurance policies are contracts and are governed by the same

43
 No. 2013AP2756

rules that govern interpretation of contracts in general"

(citation omitted).).

¶72 Insurers are not allowed to contest coverage after a

court has determined that the insurer has breached the duty to

defend its insured because, having breached a contractual

obligation, the insurer must pay damages flowing from that

breach. Maxwell, 341 Wis. 2d 238, ¶¶55-56 (citing Prof'l Office

Bldgs., 145 Wis. 2d at 585-86).32 But if the insurer has not

breached its duty to defend——something a court cannot determine

based simply on the fact that the insurer declined to defend an

action——then it is not obligated to pay out any damages. See

Sullivan et al., supra ¶67, at § 11.100 ("If there is, in fact,

no contract to defend an insured, an insurer should not have a

duty to defend. If no duty to defend exists, there should be no

waiver or estoppel for failure to respond to a tender of

defense."); Prod. Stamping Corp. v. Maryland Cas. Co., 199

Wis. 2d 322, 327, 544 N.W.2d 584 (Ct. App. 1996); cf. Sisson v.

Hansen Storage Co., 2008 WI App 111, ¶16, 313 Wis. 2d 411, 756
N.W.2d 667 ("Although it is risky for an insurance carrier to

reject a tender of defense by its insured, the justified

rejection of a tender does not create coverage where none

exists . . . ."). In the current case, we needed to examine the

business enterprise exclusion to determine whether Houston

Casualty had breached its duty to defend Marks.

32
See supra, ¶63 n.29.

44
 No. 2013AP2756

¶73 Second, as we have explained, Grube, Kenefick, and

Radke are inconsistent with a long line of Wisconsin case law.

See, e.g., Liebovich v. Minnesota Ins. Co., 2008 WI 75, ¶¶2, 13,

310 Wis. 2d 751, 751 N.W.2d 764; Last v. Am. Family Mut. Ins.

Co., 2000 WI App 169, ¶¶2-4, 9-10, 238 Wis. 2d 140, 617

N.W.2d 215; Bruner v. Heritage Companies, 225 Wis. 2d 728, 732-

33, 737-40, 593 N.W.2d 814 (Ct. App. 1999); Production Stamping

Corp., 199 Wis. 2d at 325-26, 329-31; Prof'l Office Bldgs., 145

Wis. 2d at 578-79, 580-83; Sola Basic Indus., Inc. v. U.S. Fid.

& Guar. Co., 90 Wis. 2d 641, 644-47, 653-54 280 N.W.2d 211

(1979); Grieb v. Citizens Cas. Co. of New York, 33 Wis. 2d 552,

556-57, 148 N.W.2d 103 (1967).

¶74 Grube, Kenefick, and Radke constitute a stunted strand

of law that conflicts with our four-corners jurisprudence; it

also has produced uncertainty. See Menasha Corp. v. Lumbermens

Mut. Cas. Co., 361 F. Supp. 2d 887, 893 (noting conflict and

declining to apply Radke and Kenefick); Sullivan et al., supra

¶67, at § 7.23 (discussing Radke and Kenefick and noting that
"case after case in Wisconsin has held that an insurance

company's obligation to defend is based on the entire

contract"). The court of appeals below recognized this. Marks,

363 Wis. 2d 505, ¶10 ("Marks accurately portrays the pertinent

parts of Grube, Kenefick, and Radke. However, . . . in this

respect the three cases impermissibly conflict with our earlier

decision in Professional Office Bldgs."). The circuit court

below recognized this ("[M]y first reaction was astonishment
when Mr. Marks argued that there is a rule in Wisconsin that
45
 No. 2013AP2756

forbids a court in coverage disputes from looking at the

exclusions. . . . [I]t appears that Grube changed the rules set

forth in Professional Office Bldgs. from a . . . process that

makes estoppel contingent on coverage to a . . . process that

makes estoppel automatic, regardless of coverage. And the dicta

we read in Radke and Kenefick reflects the same kind of

automatic rule . . . .").33

¶75 Grube, Kenefick, and Radke are "unsound in principle,"

and "detrimental to coherence and consistency in the law"

insofar as they suggest that exclusions may not be considered in

an analysis of whether an insurer has breached its duty to

defend its insured simply because the insurer declined to defend

its insured. Johnson Controls, Inc. v. Employers Ins. of

Wausau, 2003 WI 108, ¶¶98-99, 264 Wis. 2d 60, 665 N.W.2d 257;

see supra, ¶¶71-74. In order to resolve conflicting precedent

in Wisconsin case law, we explicitly overrule any statements in

these cases that suggest such an analysis is appropriate.

¶76 Accordingly, the business enterprise exclusion is
properly considered in this case and establishes that Houston

Casualty did not breach its duty to defend Marks.

33
Indeed, even Marks seemingly recognized this conflict in
his motion for summary judgment below, in which he noted
"apparent tension in the law" between Grube, Kenefick, and Radke
and "cases like Production Stamping [Corporation v. Maryland
Casualty Company, 199 Wis. 2d 322, 544 N.W.2d 584 (Ct. App.
1996)]," a case which "cites to various portions of
Kenefick . . . but . . . incorporated a policy exclusion into
its duty to defend analysis."

46
 No. 2013AP2756

E. Whether the Court of Appeals Complied with Cook v. Cook

¶77 We must address one final issue. As noted, the court

of appeals below acknowledged it had erred in Grube, Kenefick,

and Radke, stating, "Contrary to the approach that we applied in

Professional Office Bldgs., in Grube and more explicitly in

Kenefick and Radke, we imposed a different and illogical hurdle

for insurers." Marks, 363 Wis. 2d 505, ¶13. However, the court

of appeals then took a further step. It concluded:

To the extent. . . that in Grube, Kenefick and
Radke we modified Professional Office Bldgs. as we
have described, we agree with the circuit court that
we lacked the authority to do so under Cook v. Cook,
208 Wis. 2d 166, 189, 560 N.W.2d 246 (1997) (the court
of appeals "must speak with a unified voice" and may
not overrule, modify or withdraw language from its
prior published decisions[).] Likewise, court of
appeals cases may not conflict with supreme court
precedent. Id. (the supreme court is the only court
in the State of Wisconsin with the power to "overrule,
modify or withdraw language from a previous supreme
court case[").] Consequently, Grube, Kenefick and
Radke do not establish precedent for the modification
of how a claim of breach of duty to defend is
evaluated. See, e.g., State v. Bolden, 2003 WI App
155, ¶¶9-11, 265 Wis. 2d 853, 667 N.W.2d 364.

Id., ¶15.
¶78 The first of the two propositions cited by the court

of appeals——the idea that the court of appeals need not follow a

case that conflicts with an earlier case of that court——has been

stated elsewhere in Wisconsin law. See, e.g., State v. Swiams,

2004 WI App 217, ¶23, 277 Wis. 2d 400, 690 N.W.2d 452 (citing

Bolden for the proposition that "if two court of appeals
decisions conflict, the first governs"); Steiner v. Steiner,

47
 No. 2013AP2756

2004 WI App 169, ¶23 n.2, 276 Wis. 2d 290, 687 N.W.2d 740

(Dykman, J., dissenting) (explaining that Bolden holds that "if

a conflict exists between two published court of appeals cases,

the first in time governs"); Leo's Salons, Inc. v. Deonne's

Salon and Day Spa, LLC, No. 2006AP1563, unpublished slip op.,

¶13 & n.5 (Wis. Ct. App. 2007) (citing Bolden for the

proposition that the "first of two published conflicting court

of appeals opinions controls").

¶79 We need not express an opinion on the merits of the

theory that, because "the court of appeals may not overrule,

modify or withdraw language from a previously published decision

of the court of appeals," Cook v. Cook, 208 Wis. 2d 166, 190,

560 N.W.2d 246, 256 (1997), any court of appeals decision which

does so, whether explicitly or not, is essentially voidable by

the court of appeals in that respect. This is so because, even

if logically valid, application of that principle by the court

of appeals is problematic.34 Whether a later case misinterpreted
34
Determining the theoretical validity of this principle
would likely require interpretation of Article VII of the
Wisconsin Constitution ("Judiciary") and Wis. Stat. § 752.41
("Decisions"). See, e.g., Cook v. Cook, 208 Wis. 2d 166, 185-86,
560 N.W.2d 246. Neither of these sources receive attention in
the parties' briefing. Indeed, Houston Casualty did not address
the issue at all, instead contending that it was moot. "Courts
should think carefully before expending 'scarce judicial
resources' to resolve difficult and novel questions of
constitutional or statutory interpretation that will 'have no
effect on the outcome of the case.'" Ashcroft v. al-Kidd, 563
U.S. 731, 735 (2011) (citations omitted). Given that this issue
was not fully briefed, it would be dangerous to address an issue
as weighty as the constitutional authority of the court of
appeals. Therefore, we decline to do so.

48
 No. 2013AP2756

or "modif[ied]" an earlier case is not always apparent, and

judges might disagree on that question. Additionally, a

determination that a case impermissibly modified an earlier case

and is thus not binding is effectively the same as overruling

that case.

It is our goal that the court of appeals speak
with a unified voice . . . and it generally achieves
that goal exceedingly well. However, when a perceived
conflict arises, which is understandable given the
huge volume of cases the court of appeals so capably
handles, a certification to this court that points out
the perceived conflict will best serve the public
interest and will also aid this court in its law
developing and clarifying function. However,
overruling an earlier court of appeals decision is not
an option.
State v. Johnson, 2004 WI 94, ¶18, 273 Wis. 2d 626, 681

N.W.2d 901 (citations omitted).

¶80 The court of appeals below was faced with a complex

situation. However, we clarify that the court of appeals should

have certified this case rather than resolved for itself whether

Grube, Kenefick, and Radke misinterpreted Professional Office
Buildings, and we instruct it to certify cases presenting

similar types of conflicts in the future. Because we overrule

portions of Grube, Kenefick, and Radke ourselves today, there is

no reason to reverse the decision of the court of appeals.

IV. CONCLUSION

¶81 We conclude that the complaints and counterclaim

against Marks do not allege facts which, if proven, would

constitute claims covered under the insurance policy Marks
obtained from Houston Casualty. Houston Casualty therefore did

49
 No. 2013AP2756

not breach its duty to defend Marks when it declined to defend

him in the six lawsuits at issue. Consequently, we affirm the

decision of the court of appeals.

By the Court.— The decision of the court of appeals is

affirmed.

50
 No. 2013AP2756.awb

¶82 ANN WALSH BRADLEY, J. (concurring). I agree with the

majority's conclusion that the four-corners rule includes

consideration of exclusions as well as exceptions to those

exclusions in an insurance policy. Majority op., ¶40.

¶83 Additionally, I agree with its determination that "the

complaints and counterclaim against Marks do not allege facts

which, if proven, would constitute claims covered under the

insurance policy Marks obtained from Houston Casualty."

Majority op., ¶3.

¶84 I write separately, however, because I disagree with

the majority's determination that "only two documents are

germane in any four-corners analysis: the insurance policy and

the complaint against the insured. No examination of extrinsic

facts or evidence takes place." Majority op., ¶39 (citing

Fireman's Fund Ins. Co. of Wis. v. Bradley Corp., 2003 WI 33,

¶19, 261 Wis. 2d 4, 660 N.W.2d 666); see also majority op., ¶53

n. 25 ("[t]he duty to defend is based solely on the allegations

contained within the four corners of the complaint, without

resort to extrinsic facts or evidence . . . ") (citing Fireman's

1
 No. 2013AP2756.awb

Fund, 261 Wis. 2d 4, ¶19) (emphasis in original) (internal

quotations omitted).1

¶85 The issue of whether the four-corners rule allows for

an exception to consider the known facts extrinsic to the

complaint is not before the court in this case. Instead, it is

presented in Water Well Sols. Serv. Grp. Inc. v. Consol. Ins.

Co., 2016 WI 54, ___ Wis. 2d ___, ___ N.W.2d ___, which is being

released concurrently with this decision today.

¶86 My dissenting opinion in Water Well sets forth the

analysis in support of my conclusion that when the complaint is

factually incomplete or ambiguous, Wisconsin should adopt a

narrow known fact exception to the four-corners rule.

Consequently, I will not repeat the entirety of my dissent, but

instead incorporate that conclusion and its analysis here.

¶87 Accordingly, I respectfully concur.

¶88 I am authorized to state that Justice SHIRLEY S.

ABRAHAMSON joins this concurrence.

1
The majority opinion is internally inconsistent because on
one hand it says the duty to defend decision is based solely on
the four-corners of the complaint while on the other hand it
encourages insurers to investigate in order to inform its
decision, acknowledging that "the applicability of an exclusion
is rarely obvious from the allegations in the complaint."
Majority op., ¶41 (citing Peter F. Mullaney, Liability Insurers'
Duty to Defend, Wis. Law., at 10-11 (July 1995). See also Water
Well Sols. Serv. Grp. Inc. v. Consol. Ins. Co., 2016 WI 54, ¶58-
59, ___ Wis. 2d ___, ___ N.W.2d ___ (Ann Walsh Bradley, J.,
dissenting).

2
 No. 2013AP2756.rgb

¶89 REBECCA G. BRADLEY, J. (concurring). I join the

majority in affirming the court of appeals. I write separately,

however, to address two important issues. First, although the

majority reaffirms Cook v. Cook, 208 Wis. 2d 166, 560 N.W.2d 246

(1997), and holds the court of appeals should certify an appeal

when its disposition depends upon conflicting published court of

appeals cases, the majority does not explicitly overrule State

v. Swiams, 2004 WI App 217, 277 Wis. 2d 400, 690 N.W.2d 452, or

State v. Bolden, 2003 WI App 155, 265 Wis. 2d 853, 667 N.W.2d

364. This, in my opinion, may leave the courts and the bar with

uncertainty. I write to clarify that the principle implied in

Bolden and repeated as dicta in Swiams that "if two court of

appeals decisions conflict, the first governs" directly

conflicts with Cook and therefore is implicitly overruled by the

majority opinion. Second, I would clarify or withdraw

problematic language from Grube v. Daun, 173 Wis. 2d 30, 496

N.W.2d 106 (Ct. App. 1992), rather than overrule it.
I. COOK V. COOK

¶90 In Bolden, the court of appeals' disposition depended

upon two cases, State v. Jackson, 187 Wis. 2d 431, 523 N.W.2d

126 (Ct. App. 1994), and State v. Kuehl, 199 Wis. 2d 143, 545

N.W.2d 840 (Ct. App. 1995). The district II court of appeals

decided Kuehl one year after district I decided Jackson.

District II in Kuehl disagreed with district I's Jackson

opinion, held that Jackson had been wrongly decided, and
overruled it. See Kuehl, 199 Wis. 2d at 149. Although district

1
 No. 2013AP2756.rgb

II acknowledged it was obligated to abide by Jackson, district

II explained that it believed Jackson conflicted with an earlier

case, State v. Haseltine, 120 Wis. 2d 92, 352 N.W.2d 673 (Ct.

App. 1984); therefore, district II concluded it was "free to

follow the decision which we conclude is correct." Kuehl, 199

Wis. 2d at 149. Kuehl, which was decided before this court's

pronouncement in Cook, was not appealed. Cook made clear that

when the court of appeals believes a previously published court

of appeals case was wrongly decided, the court of appeals does

not have the power to overrule itself. Cook, 208 Wis. 2d at

189-90. If the court of appeals finds itself in a situation

where it wants to overrule an earlier decision, it has two

choices: (1) certify the appeal to this court; or (2) "decide

the appeal, adhering to a prior case but stating its belief that

the prior case was wrongly decided." Cook, 208 Wis. 2d at 190.

Cook did not, however, explicitly overrule Kuehl. As a result,

parties continued to ask the court of appeals to overrule its

published decisions, relying on Kuehl's mistaken proposition.
See Bolden, 265 Wis. 2d 853, ¶9.

¶91 Bolden, relying on Cook's statement prohibiting the

court of appeals from overruling itself, reasoned that district

II in Kuehl did not have the power to overrule district I's

Jackson decision, and therefore relied on Jackson to affirm

Bolden's conviction. Bolden, 265 Wis. 2d 853, ¶11. One year

after Bolden, this court specifically addressed Kuehl and

Jackson and reiterated the Cook rule that the court of appeals
cannot overrule an earlier court of appeals decision. State v.

2
 No. 2013AP2756.rgb

Johnson, 2004 WI 94, ¶¶16-18, 273 Wis. 2d 626, 681 N.W.2d 901.

Johnson overruled the language in Kuehl suggesting that

disregarding a published court of appeals opinion is a valid

option. Id., ¶17. Johnson reiterated that the court of appeals

does not have the option of disregarding its published opinions.

Despite Johnson's clear holding that the court of appeals cannot

overrule itself, the court of appeals has, on a few occasions

since Johnson, cited Bolden for the very proposition that was

overruled in Johnson. The majority cites the court of appeals

decisions that have done so, see majority op., ¶78, most notably

Swiams.

¶92 Swiams ignored this court's holding in Johnson and

cited Bolden for the erroneous proposition that the court of

appeals may decline to follow a case that conflicts with an

earlier case. See Swiams, 277 Wis. 2d 400, ¶23.1 This court has

repeatedly held that the court of appeals cannot overrule itself

and therefore does not have the option to disregard one

published decision so it can follow an earlier published
decision. The majority says so again here, thereby implicitly

overruling the language in Swiams and any decision supporting

the proposition that "if two court of appeals decisions

conflict, the first governs." I would expressly overrule such

language.

1
This language in State v. Swiams, 2004 WI App 217, 277
Wis. 2d 400, 690 N.W.2d 452, was dicta as it appears in the last
paragraph of that opinion, almost as an aside, and was not
necessary for disposition of the appeal. Id., ¶23.

3
 No. 2013AP2756.rgb

¶93 The majority emphasizes that Cook and Johnson hold

that the court of appeals does not have the power to overrule

itself. The majority explains why it is so important that the

court of appeals does not disregard one opinion and choose to

follow an earlier opinion: (1) the court of appeals does not

have the authority to do so; (2) choosing to follow an earlier

case is overruling the more recent case; and (3) courts'

interpretations of whether cases conflict can widely differ.

Majority op., ¶79. Also, as noted in Cook, allowing the court

of appeals to follow the first-decided case because it believes

a later case conflicts would interfere with "predictability,

certainty and finality relied upon by litigants" and encourage

forum shopping in the four districts of the court of appeals.

Cook, 208 Wis. 2d at 189. For these important reasons, the

court of appeals must abide by Cook, Johnson, and now this

opinion, and stop disregarding one court of appeals decision

because it believes an earlier decision should be followed.

¶94 In this case, both the circuit court and the court of
appeals decided that Grube, 173 Wis. 2d 30, and two other cases2

were not good law, disregarded those opinions, and applied the

law from an earlier court of appeals opinion, Professional

Office Buildings, Inc. v. Royal Indemnity Co., 145 Wis. 2d 573,

427 N.W.2d 427 (Ct. App. 1988). That should not have happened.

2
The other two cases were Kenefick v. Hitchcock, 187
Wis. 2d 218, 522 N.W.2d 261 (Ct. App. 1994), and Radke v.
Fireman's Fund Insurance Co., 217 Wis. 2d 39, 577 N.W.2d 366
(Ct. App. 1998).

4
 No. 2013AP2756.rgb

Such action creates dangerous precedent for our court system.

The circuit court should have followed the case law and the

court of appeals should have certified Marks to this court to

resolve any perceived conflict. See Cook, 208 Wis. 2d at 190;

Johnson, 273 Wis. 2d 626, ¶¶16-18.

II. GRUBE

¶95 The majority overrules Grube, 173 Wis. 2d 30, Kenefick

v. Hitchcock, 187 Wis. 2d 218, 522 N.W.2d 261 (Ct. App. 1994),

and Radke v. Fireman's Fund Ins. Co., 217 Wis. 2d 39, 577 N.W.2d

218, 522 N.W.2d 366 (Ct. App. 1998) as "inconsistent with a long

line of Wisconsin case law," and "unsound in principle."

Majority op., ¶¶73, 75. The majority explicitly overrules any

statements in these cases "that exclusions may not be considered

in an analysis of whether an insurer has breached its duty to

defend its insured" when the insurer unilaterally denies a

defense without seeking a coverage determination in court. Id.,

¶75.

¶96 I agree with the majority that Wisconsin duty-to-
defend law requires comparing the complaint to the entire

insurance policy, including exclusions. See Estate of Sustache

v. Am. Family Mut. Ins. Co., 2008 WI 87, ¶20, ¶¶22-23, 311

Wis. 2d 548, 751 N.W.2d 845. Instead of overruling Grube and

its line of cases, however, I would harmonize it with

Professional Office Buildings.

¶97 In determining whether a duty to defend exists under a

policy, the court compares the four corners of the complaint to
the entire policy, including exclusions. Estate of Sustache,

5
 No. 2013AP2756.rgb

311 Wis. 2d 548, ¶¶22-23. Typically, however, as the majority

notes at ¶41, an examination of policy exclusions at the duty-

to-defend stage will not operate to relieve an insurer of its

duty to defend. This is because whether an exclusion applies to

preclude coverage often depends on extrinsic evidence, which is

not considered in the duty-to-defend analysis. See Fireman's

Fund Ins. Co. of Wis. v. Bradley Corp., 2003 WI 33, ¶19, 261

Wis. 2d 4, 660 N.W.2d 666.

¶98 This basic principle, together with a lack of

consistency of language used in insurance cases, is what has

created confusion in the Grube line of cases. Grube, Kenefick,

and Radke are often cited to argue that a court, which is asked

to rule on a duty-to-defend question, cannot consider exclusions

if an insurer unilaterally denied a defense to its insured. Of

course, this is not the law. A duty-to-defend analysis always

requires a comparison of the complaint to the entire policy,

regardless of whether the insurer unilaterally denied a defense

or chose one of the preferred methods to determine if a duty to
defend was triggered by a complaint. It is only when a court

determines an insurer breached its duty to defend, after the

court compares the complaint to the entire policy, that an

insurer may no longer rely on exclusions to avoid its indemnity

obligations under the policy. See Professional Office Bldgs.,

Inc., 145 Wis. 2d at 585-86.

¶99 In Grube, the circuit court determined the insurer

breached its duty to defend after the court considered the
entire policy, including exclusions. Grube, 173 Wis. 2d at 49,

6
 No. 2013AP2756.rgb

Unlike this case, the policy exclusions in Grube, when compared

to the language in the complaint, did not preclude coverage. It

was the insurer's breach of its duty to defend, and not the

decision to unilaterally decline to defend its insured, which

later precluded the insurer in Grube from invoking coverage

defenses. The concluding paragraph in Grube makes this clear:

"[the insurer], by not contesting coverage in court and by

breaching its duty to defend [the insured], is estopped from

raising any challenges to coverage and must indemnify [the

insured] up to the limits of his policy." What the majority

interprets as a departure from Wisconsin insurance law was more

likely the court of appeals abbreviating its analysis in a case

where it agreed with the circuit court that an insurer breached

its duty to defend.3 When a court determines the insurer

breached the duty to defend, the insurer cannot use its

exclusions to avoid paying out on the policy. Professional

Office Bldgs., Inc., 145 Wis. 2d at 585-86. It is for this

reason that we repeatedly caution insurers to opt for one of the
preferred methods of determining coverage, see majority, ¶41 &

n.21, rather than unilaterally refusing to defend.

3
The language in Grube v. Daun, 173 Wis. 2d 30, 74, 496
N.W.2d 106 (Ct. App. 1992), triggering the confusion about
whether it is the breach of the duty to defend or the unilateral
decision of the insurer not to defend is as follows: "We hold
that under Professional Office Bldgs., [the insurer] is estopped
from raising any challenges to coverage; it must both defend and
indemnify [the insured] because [the insurer] denied coverage
outright."

7
 No. 2013AP2756.rgb

¶100 This case, and a companion insurance case heard the

same day, Water Well Solutions Service Group Inc. v.

Consolidated Insurance Co., 2016 WI 54, ___ Wis. 2d ___, ___

N.W.2d ___, presented the less typical scenario where exclusions

demonstrated the insurer did not have a duty to defend. In this

case, we hold that a comparison of the complaint to the business

enterprise exclusion confirms the insurer did not have a duty to

defend. Majority op., ¶¶47-55. In Water Well we hold that a

comparison of the complaint to the "your product" exclusion

confirms the insurer did not have a duty to defend. Water Well

Sols. Serv. Grp., ___ Wis. 2d ___, ¶3.

¶101 For these reasons, I respectfully concur.

8
 No. 2013AP2756.rgb

1