from an order of the circuit court for Dane County No.
2015CV493: PETER C. ANDERSON, Judge. Reversed.
Sherman, Blanchard, and Fitzpatrick, JJ.
Jody Ann Anderson initiated this lawsuit against Kayser Ford,
Inc. Kayser's insurer, Regent Insurance Company,
intervened, in part to try to establish that Regent has no
duty to defend Kayser. Kayser appeals an order of the circuit
court dismissing Regent from the suit and declaring that
Regent has no duty to defend Kayser at this time. We reverse
the order because we conclude that Regent has a continuing
duty to defend Kayser. The duty continues because Regent
cannot establish as a matter of law that no theory of
liability in Anderson's complaint may yet obligate Regent
to indemnify Kayser, and the circuit court did not determine
that Regent has no arguable indemnification liability on any
claim in the complaint.
Anderson commenced this lawsuit based on allegations arising
from her purchase of a used car from Kayser. Details
regarding Anderson's allegations against Kayser do not
matter to the arguments presented on appeal. It is important,
however, to differentiate among the four claims made by
Anderson in the operative complaint, in particular between
Count One and Count Four:
• Count One: Fraudulent representations in violation of
Wis.Stat. § 100.18 (2017-18);
• Count Two: Statutory and code violations based on
various provisions in Wis.Stat. § 218.0116;
• Count Three: Violations of the Magnuson-Moss Warranty
Act, 15 U.S.C. § 2301, and Wis.Stat. §§
402.314, 402.315; and
• Count Four: Willful violation of purchase contract and
disclosure requirements under various provisions of Wis.Stat.
§ 218.0116 and state administrative code
At all pertinent times, Kayser was a named insured on a
policy of insurance with Regent. Called a Garage Policy, it
includes a Garage Coverage Form as modified by a Select Auto
Dealers Additional Coverages Endorsement. We summarize
applicable policy language in the Discussion section below.
It is sufficient for background purposes to understand that
the policy contains an express contractual right and duty of
Regent to defend Kayser in any suit for identified
After Kayser alerted Regent regarding Anderson's claims,
Regent initially defended Kayser. Regent then successfully
moved to intervene in this suit. Regent requested an order
stating that it has no obligation to indemnify Kayser on any
claim and therefore has no duty to defend Kayser. The court
bifurcated the suit. The first stage would resolve whether
Regent has an arguable obligation to indemnify Kayser on any
claim. The second stage would resolve the merits of
In the first stage of litigation, the court ruled on summary
judgment that, assuming that Anderson were to prevail on the
merits, Regent would have an arguable obligation to indemnify
Kayser on one of the four claims, Count One, but not on the
other three claims. This set of summary judgment decisions
regarding Regent's arguable obligations to indemnify
Kayser did not result in a final judgment that could be
appealed as of right, and no party filed a petition with this
court seeking leave to appeal. See Wis. Stat. §
808.03(1)-(2) ("Appeals as of right")
("Appeals by permission.").
In the second stage of litigation, the court made a separate
set of summary judgment decisions, this time on the merits of
Anderson's claims. The court ruled that trial is needed
on only Count Four, dismissing the other three claims on the
merits. As with the ruling on the duty to indemnify, the
court's partial summary judgment decisions on the merits
did not result in a final judgment that could be appealed as
of right, and again no party filed a petition seeking leave
to appeal the partial summary judgment rulings on the merits.
To summarize, the court determined that the Garage Policy
created an arguable obligation of Regent to indemnify Kayser
for the allegations in Count One, but only Count One, and
separately dismissed Count One in a merits summary judgment
decision. This left only a trial on the merits of Count Four,
for which the court ruled there was no arguable obligation to
Shortly before the scheduled trial, Regent filed a
"pre-trial motion" in which it argued that it
should be dismissed from this suit. The basis for dismissal
would be that the court had determined that Regent has no
arguable obligation to indemnify Kayser on Count Four, the
only claim to survive the court's summary judgment
decisions on the merits, and therefore "Regent can have
no duty to defend or duty to pay legal defense costs in this
case." To clarify, Regent's motion did not ask the
circuit court to revisit its coverage ruling on Count One.
Instead, Regent asked the court to dismiss Regent from this
suit, based on the court's prior rulings referenced
above, because they established that Regent has no duty to
defend Kayser at the trial on Count Four.
Kayser did not dispute for purposes of resolving the motion
that Regent could have no obligation to indemnify Kayser on
Count Four if Anderson were to prevail at trial on Count
Four. However, Kayser argued, Regent has "the duty to
defend the entire suit," which "continues until the
final termination of the litigation, including the appellate
process." This is so, Kayser contended, because the
circuit court's summary judgment ruling dismissing Count
One "is not a final appealable judgment and Regent has
not settled" the claim in Count One.
The circuit court granted Regent's motion on the ground
that "there is no coverage for" the claim in Count
Four and therefore Regent has "no duty to defend [Count
Four] at this time." On this basis, the court entered an
order dismissing Regent from the lawsuit "on the merits
and with prejudice," ruling that Regent "has no
duty to indemnify, no ongoing duty to defend, and no duty to
pay legal defense costs incurred by Kayser … in this
Kayser appeals only this order dismissing Regent from the
suit based on the absence of a duty to defend. The order is
final as to Regent, and therefore appealable as of right,
because it dismisses the entire matter in litigation as to
Regent. Neither party has appealed, cross appealed, or
petitioned for leave to appeal any other ruling of the
circuit court, notably the court's rulings that Regent
has an arguable obligation to indemnify for Count One and its
dismissal on summary judgment of all claims in Count Four.
This appeal involves interpretation of an insurance policy to
determine the scope of an insurer's duty to defend its
insured, which presents questions of law that we review de
novo. See Water Well Sol. Serv. Group, Inc. v.
Consolidated Ins. Co., 2016 WI 54, ¶12, 369 Wis.2d
607, 881 N.W.2d 285. We also interpret case law addressing
the duty to defend, which presents further questions of law
that we review de novo. See State v. Walker, 2008 WI
34, ¶¶12-13, 308 Wis.2d 666, 747 N.W.2d 673.
We first briefly address pertinent policy language. As part
of that discussion, we explain that we reject as undeveloped
one argument that Regent makes in support of the circuit
court's challenged order, purportedly based on policy
language. We then turn to the primary issue, whether
Regent's duty to defend continues or has ended under the
circumstances here. We explain why we conclude that Regent
has a continuing duty to defend Kayser in this suit until it
can be concluded as a matter of law that Regent could have no
obligation to indemnify Kayser.
We construe policy terms as they would be understood by a
reasonable insured. Sustache v. American Family Mut. Ins.
Co., 2008 WI 87, ¶19, 311 Wis.2d 548, 751 N.W.2d
The following is pertinent policy language that addresses
claims of the type made in Count Four:
PRIOR DAMAGE DISCLOSURE LIABILITY
SECTION II - LIABILITY COVERAGE is changed
by adding the following:
We [Regent] will pay all sums you [Kayser] legally must pay
as "damages" caused by an "Insured"
solely because of an error or omission in complying or
failing to comply with any federal, state or local statute,
code or ordinance pertaining to disclosure of prior damage to
"autos" you sold.
1. We have the right and duty to defend any "suit"
asking for these damages. However, we have no duty to defend
"suits" on account of an error or omission not