Wisconsin Top Court Limits “Knowing Violation” Exclusion By Looking Beyond Facts Alleged in Complaint

In a decision that could expand the scope of the duty to defend, the Wisconsin Supreme Court recently held that a “knowing violation of the rights of another” exclusion did not apply even though the facts alleged suggested that it should. The court looked beyond the four corners of the complaint, which alleged willful and intentional conduct, and held that the insurer owed a duty to defend because some causes of action asserted in the complaint could potentially be satisfied by non-intentional conduct.  In West Bend Mut. Ins. Co. v. Ixthus Medical Supply, Inc., an insurer brought a declaratory judgment action to determine that it had no duty to defend or indemnify a medical supply company in a lawsuit related to the insured’s sale of blood glucose test strips to a customer. The insured’s customer alleged that the insured willfully and fraudulently misrepresented that the strips were intended for use in the United States and that the strips…

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