In Anderson v. Kayser Ford, Inc. (2017AP2018), the Court of Appeals District IV held that insurers have a duty to defend insureds in lawsuits where the only indemnifiable claim is dismissed (leaving only noncovered claims to be litigated at the trial level) because the indemnifiable claim could recur on appeal.

Jody Anderson filed this lawsuit against Kayser Ford, making four claims. A circuit court ruled that Kayser’s insurer, Regent Insurance Co., had an obligation to indemnify Kayser only on Anderson’s first claim. The partial summary judgment decision left a trial only on Anderson’s fourth claim, on which Regent had no duty to indemnify Kayser if Anderson prevailed.

Regent argued that, since the only indemnifiable claim had been dismissed, it had no duty to defend Kayser in the litigation on the fourth claim. The appeals court rejected Regent’s argument, stating that the indemnifiable first claim could recur in an appeal.

The “four-corners test” requires courts to uphold insurers’ duty to defend so long as there is a possibility the insurer might be obligated to indemnify the insured under the “four corners” of the complaint. Wisconsin courts also follow the “entire suit rule,” which requires insurers to defend the insured in an entire lawsuit, even if the insurer only has an obligation to indemnify in one of the claims in the lawsuit.

Based on the four-corners test and the entire suit rule, the appeals court determined Regent had a duty to defend Kayser in this case. Although the indemnifiable claim had been dismissed, the partial summary judgment was not a final decision, leaving the possibility that Anderson could bring the indemnifiable first claim back on appeal. Whether or not an indemnifiable claim remains after the circuit court level, the court said the insurer’s duty to defend only ends when a final settlement is reached or the litigation has come to a final conclusion, with no more appeals available.