David M. Marks, Plaintiff-Appellant-Cross-Respondent-Petitioner,
Houston Casualty Company, Defendant-Respondent-Cross-Appellant, Bedford Underwriters, Ltd., Defendant-Respondent.
ARGUMENT: March 16, 2016
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
Court, Milwaukee County (L.C. No. 2009CV18145) Richard J.
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.
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.
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.
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's grant of summary judgment in
favor of Houston Casualty Company ("Houston
Casualty") and Bedford Underwriters, Ltd.
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.
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.
FACTUAL AND PROCEDURAL BACKGROUND
David Marks is the trustee of two trusts: the Irrevocable
Children's Trust ("ICT") and the Irrevocable
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"). 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.
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"). 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
defendants. On October 24, 2008, Hawaii Global filed
amended counterclaims against Titan, Oblio, Marks, Chance,
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
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 Policy and further
provided that such Wrongful Act took place subsequent to the
Retroactive Date set forth in Item 8 of the Declarations.
"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
"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."
"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:
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; . . . .
Finally, Endorsement Number 10 of the policy reads in part as
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.
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 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" against Titan, Oblio, Titan
Communications, and Planet Direct.
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 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[,
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 against
Greystone, GBC, Titan, Orlando, Chance, Hensell, Marks, and
Crivello; and for an accounting against Greystone and GBC.
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." 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 the defendants; and breach of
fiduciary duty against Goldberg Kohn
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]." The complaint asserted three causes
of action against the defendants: breach of contract;
negligence; and fraud. 
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 Complaint, "
and "an 'Insider' of [Appalachian] as defined in
§ 101(31) of the Bankruptcy Code."
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
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 reference
ICT, ICT2, or Marks' position as trustee of ICT and ICT2.
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."
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.
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
On October 28, 2009, Marks notified Houston Casualty of
Hawaii Global and TransPac's motion. The same day,
Marks' policy expired.
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.
On November 16, 2009, Houston Casualty filed a notice of
removal to the United States District Court for the Eastern
District of Wisconsin.
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.
On December 18, 2009, Houston Casualty again removed the case
to federal court. On March 22, 2010, the case was remanded to
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 Counterclaims." On January 25, 2010, Hawaii
Global and TransPac Telecom, Inc. filed supplemental
[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.
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."
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 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
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."
The counterclaims asserted three causes of action: alter ego;
RICO conspiracy against the Crivello Family Interests; and
fraudulent transfer against all counterclaim
On October 28, 2010, Marks filed an amended complaint.
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
"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."
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 "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.
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.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.,
On July 6, 2015, Marks filed a petition for review in this
court. On September 15, 2015, we granted the petition.
STANDARD OF REVIEW
"We review summary judgment rulings independently,
applying the well-established standards set forth in
Wis.Stat. § 802.08" (2013-14).
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).
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).
General Principles Regarding an Insurer's Contractual
Duty to Defend Its Insured
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).
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,
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
The four-corners rule is "well established" in
Wisconsin, Fireman's Fund, 261 Wis.2d 4, ¶18, and is