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April 24, 2024

Wisconsin Court Denies Insurer’s Motion to Dismiss – Miller Friel Client Can Proceed With Bad Faith Insurance Claim

Posted by Brian Friel

On April 5, 2024, Judge William Conley of the Western District of Wisconsin rejected State Auto Mutual Insurance Company’s motion to dismiss Miller Friel client Chroma Color Corporation’s cross-claim, holding that Chroma Color had sufficiently plead causes of action for breach of contract and bad faith.  In April 2023, plaintiff Ceme-Tube filed an amended products liability complaint against Chroma Color relating to Chroma Color’s ultraviolet light protection concentrate in finished products.  Ceme-Tube asserted claims for negligence, breach of implied warranty of merchantability and fitness, and breach of express warranty.

Because Wisconsin is a direct action state, plaintiff Ceme-Tube also filed suit against Chroma Color’s insurers, two of which subsequently filed cross-claims for declaratory judgment against Chroma Color, seeking an order that their policies do not cover Ceme-Tube’s claim.  In response, Chroma Color filed cross-claims against the two insurers for breach of contract and bad faith.    One of the insurers, State Auto, moved to dismiss, arguing that the underdeveloped facts did not support a claim of breach of contract or bad faith.

In denying State Auto’s motion to dismiss Chroma Color’s cross-claim for breach of contract, the Court stated:

Chroma Color has adequately alleged its claims, even if its breach of duty to indemnify claim may be premature to resolve right now.  Also, dismissing Chroma Color’s cross-claims would serve little purpose other than delay, as Chroma Color would presumably later raise its claims if the court concluded that State Auto’s policies covered Ceme-Tube’s claims.

As for Chroma Color’s cross-claim for bad faith, the Court noted:

[Chroma Color] alleges no reasonable justification exists for State Auto to provide a qualified defense or deny coverage.   Second, it asserts that State Auto knew or should have known that Ceme-Tube’s complaint alleges “property damage” resulting from an occurrence and that the policy exclusions did not apply.  Chroma Color further asserts that State Auto knew or should have known that its planned cross-claim against all defendants would create a conflict of interest, prohibiting a shared counsel arrangement with another defendant-insurer.

Miller Friel is proud to represent Chroma Color in its efforts to secure insurance coverage for both defense and indemnity under its insurance policies to cover the costs associated with the underlying litigation by Ceme-Tube, particularly our firm’s continued track record of success in prosecuting bad faith claims against insurance companies. The decision is Ceme-Tube LLC v. Chroma Color Corporation, W.D. Wisc. No. 3:22-cv-00703-wmc, April 5, 2024.

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