Robert C. Newhouse, by His Guardian Ad Litem, Ardell W. Skow, Charles E. Newhouse and Bonnie Newhouse…

Summary

The Wisconsin Supreme Court held that Citizens Security Mutual Insurance Company breached its contractual duty to defend its insured, Floyd Omann, when it failed to defend him at the liability and damages trial while a no-coverage determination was pending on appeal. The court held that the proper measure of damages for breach of the duty to defend includes all damages naturally flowing from the breach, including an excess judgment against the insured if it was a natural and proximate result of the breach — bad faith need not be shown. The court affirmed dismissal of the Newhouses' tort claims (bad faith, negligence, intentional infliction of emotional distress) and affirmed the award of costs and attorney fees under sec. 814.025 for Citizens' frivolous third-party contribution claims against Omann and his attorney. Justice Steinmetz dissented, arguing the excess-judgment damages award was a 'deep pocket conclusion' unsupported by causation reasoning.