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Elliott v. Donahue

Elliott v. Donahue

Supreme Court of Wisconsin

April 29, 1992, Oral argument ; June 25, 1992, Decided ; June 25, 1992, Filed

No. 90-2618

Opinion

 [**404]   [*313]  CALLOW, WILLIAM G., J. This is a review under sec. (Rule) 809.62, Stats., of a published decision of the court of appeals, Elliott v. Donahue, 163 Wis. 2d 1059, 473 N.W.2d 155 (Ct. App. 1991). The court of appeals affirmed in part and reversed in part a decision of the circuit court for Walworth County, Judge James L. Carlson, and held among other things that petitioner Michael Donahue [***2]  was not entitled to recover attorney fees incurred in successfully defending coverage under an insurance policy issued by respondent Heritage Mutual  [*314]  Insurance Company. We reverse this portion of the decision of the court of appeals and hold that the insured is entitled to recover attorney fees incurred in successfully defending coverage under the insurance policy.

The nature and language of the insurance contract contemplate that the insurer will provide indemnification and defense for claims described in the policy in exchange for periodic premium payments. Under the terms of the policy, the insured's liability to the insurer is limited to the payment of the premium. When the insurer declines to provide insurance coverage thereby forcing the insured to litigate the issue of coverage for a claim that is alleged to fall under the insurance policy, the insured is deprived of the benefit that was bargained for and paid for with the periodic premium payments. We hold that sec. 806.04(8), Stats., which recognizes the principles of equity, permits the recovery of reasonable attorney fees incurred by the insured in successfully establishing coverage.

The relevant facts are [***3]  not in dispute. On January 16, 1988, Karen Elliott was involved in an automobile accident with several vehicles, one of which was operated by Michael Donahue and owned by David Mikrut. Mikrut's vehicle was uninsured. However, Donahue's stepmother held an insurance policy from Heritage Mutual Insurance Company that covered Donahue while operating another's car "with the reasonable belief of having permission to do so."

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169 Wis. 2d 310 *; 485 N.W.2d 403 **; 1992 Wisc. LEXIS 324 ***

Karen Elliott, Plaintiff, v. Michael G. Donahue, Defendant-Appellant-Petitioner

Prior History:  [***1]  Review of a decision of the Court of Appeals, 163 Wis. 2d 1059, 473 N.W.2d 155 (Ct. App. 1991).

Disposition: By the Court. -- The decision of the court of appeals is reversed and the case is remanded.

CORE TERMS

insured, coverage, attorney's fees, insurance policy, insurance company, coverage issue, defending, damages, insurance contract, declaratory judgment, premium payment, circuit court, deny coverage, costs, bifurcated trial, American Rule, indemnification, reasonable expenses, court of appeals, argues, declaratory judgment action, recovery of attorney's fees, award of attorney's fees, issue of liability, contractual duty, reimbursement, preceded, courts

Civil Procedure, Appeals, Standards of Review, De Novo Review, Contracts Law, Breach, Breach of Contract Actions, General Overview, Insurance Law, Liability & Performance Standards, Good Faith & Fair Dealing, Duty to Defend, Bad Faith & Extracontractual Liability, Refusals to Defend, Motor Vehicle Insurance, Obligations, Trials, Separate Trials, Remedies, Declaratory Judgments, Procedure, Evidence & Trial, Stays of Proceedings, State Declaratory Judgments, Costs & Attorney Fees, Declaratory Judgments, Indemnification, Settlements, Claim, Contract & Practice Issues, Policy Interpretation, Plain Language, Reasonable Expectations, Reasonable Person, Attorney Fees & Expenses, Basis of Recovery, American Rule