Pepsi-Cola Metropolitan Bottling Company, Inc. v. Employers Insurance Company of Wausau

2022 WI App 45
COURT OF APPEALS OF WISCONSIN
PUBLISHED OPINION

Case No.: 2021AP635

†Petition for Review filed

Complete Title of Case:

PEPSI-COLA METROPOLITAN BOTTLING COMPANY, INC.,

PLAINTIFF-APPELLANT,

V.

EMPLOYERS INSURANCE COMPANY OF WAUSAU,

DEFENDANT-RESPONDENT.†

Opinion Filed: July 8, 2022
Submitted on Briefs: April 14, 2022
Oral Argument:

JUDGES: Neubauer, Grogan and Kornblum, JJ.
Concurred:
Dissented: Grogan, J.

Appellant
ATTORNEYS: On behalf of the plaintiff-appellant, the cause was submitted on the
briefs of Lee M. Seese of Michael Best & Friedrich LLP, Milwaukee,
WI.

Respondent
ATTORNEYS: On behalf of the defendant-respondent, the cause was submitted on the
brief of Michael J. Cohen of Miesner Tierney Fisher & Nichols S.C.,
Milwaukee, WI.
A nonparty brief was filed by Robert Gilbert of Latham & Watkins, LLP
of Boston, Massachusetts, for Wisconsin Manufacturing & Commerce
and Emerson Electric Company.

A nonparty brief was filed by James A. Friedman of Godfrey & Kahn,
S.C. of Madison, Wisconsin, for Wisconsin Insurance Alliance.

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2022 WI App 45

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
July 8, 2022
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10 and
RULE 809.62.

Appeal No. 2021AP635 Cir. Ct. No. 2019CV1307

STATE OF WISCONSIN IN COURT OF APPEALS

PEPSI-COLA METROPOLITAN BOTTLING COMPANY, INC.,

PLAINTIFF-APPELLANT,

V.

EMPLOYERS INSURANCE COMPANY OF WAUSAU,

DEFENDANT-RESPONDENT.

APPEAL from an order of the circuit court for Waukesha County:
RALPH M. RAMIREZ, Judge. Reversed and cause remanded with directions.

Before Neubauer, Grogan and Kornblum, JJ.

¶1 KORNBLUM, J. Pepsi-Cola Metropolitan Bottling Company, Inc.
(Pepsi) appeals an order of the circuit court denying its motion for partial summary
judgment against Employers Insurance Company of Wausau (Wausau) and granting
Wausau’s cross-motion for summary judgment. Pepsi contends that it is the
No. 2021AP635

assignee of rights under several liability insurance policies Wausau issued from
1963 to 1971 to two Waukesha foundry companies, whose pump products are
alleged to have caused asbestos injuries. Pepsi contends that Wausau had a duty to
indemnify it and, at issue in its motion for partial summary judgment on appeal, to
defend it against asbestos exposure allegations raised by Roger Huff, a
mesothelioma claimant who identified the pump products as a source of his alleged
asbestos injury. Wausau refused to defend the suit, contending that the anti-
assignment clause in its policies precludes indemnity coverage for injuries sustained
during the coverage period for the insured corporations because the right to
insurance was assigned to successor companies without Wausau’s consent. Wausau
further contends that even if the anti-assignment provision is unenforceable, two
breaks in the assignment during the chain of corporate succession preclude
coverage. Finally, Wausau contends that the Huff complaint fails to allege facts
sufficient to trigger its duty to defend. We disagree with Wausau, as well-
established law compels an opposite conclusion. Accordingly, we reverse the
circuit court’s decision granting summary judgment to Wausau and denying
summary judgment to Pepsi. On remand, the circuit court should grant Pepsi’s
motion for summary judgment on its Declaratory Judgment-Duty to Defend claim
and conduct further proceedings as necessary and consistent with this opinion.

BACKGROUND

A. The Policies

¶2 This is an insurance dispute arising out of a history of assignments
and transfers going back more than half a century. The history begins in 1963, when
Wausau issued primary and umbrella liability insurance policies to Waukesha
Foundry Company (Old Waukesha). These policies were in effect from 1963 to

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1968. The Wausau policies generally provide that Wausau “will pay on behalf of
the insured all sums which the insured shall become legally obligated to pay as
damages because of … bodily injury or … property damage … caused by an
occurrence.” The policy defines “occurrence” as “an accident, including injurious
exposure to conditions, which results, during the policy period, in bodily injury or
property damage neither expected nor intended from the standpoint of the insured.”

¶3 The policies require Wausau to defend any suit against the insured
seeking damages on account of such bodily injury or property damage, “even if any
of the allegations of the suit are groundless, false or fraudulent.” The policies further
contained what is commonly referred to as an anti-assignment clause, stating in
relevant part that “[a]ssignment of interest under this policy shall not bind the
company until its consent is endorsed hereon[.]”

B. The Corporate Succession and Assignment History

¶4 In August 1968, Old Waukesha assigned and transferred all of its
assets and liabilities to Illinois Central Industries, Inc. (I.C.). The parties entered
into an “Agreement and Plan of Reorganization” (Reorganization Agreement) on
August 16, 1968, whereby I.C. acquired substantially all of the assets and liabilities
of Old Waukesha through a new wholly-owned subsidiary, to be called Waukesha
Foundry Company, Inc. (New Waukesha). New Waukesha was to take over the Old
Waukesha business, and Old Waukesha would dissolve. According to the
Reorganization Agreement, New Waukesha acquired “substantially all of the
property, assets and business” of Old Waukesha, as well as “all the liabilities …
other than those expressly excepted.” Regarding assumption of liabilities, the
agreement states as follows:

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At the Closing I.C. shall cause [New Waukesha] by
appropriate written instrument or instruments to assume and
agree to pay, perform and discharge when due all of the
debts, liabilities, obligations and contracts of [Old
Waukesha] existing on the Closing Date, except the
following:

(a) liabilities against which [Old Waukesha] is insured or
otherwise indemnified to the extent of such insurance or
indemnification.

The closing was set for August 30, 1968.

¶5 The reorganization was accomplished by closing on August 30, 1968.
At the closing, Old Waukesha and New Waukesha signed two documents
concerning the liabilities and assets transferred between the two companies. An
“Assumption and Liabilities” agreement required New Waukesha to “assume and
agree to pay, perform and discharge when due all of the debts, liabilities, obligations
and contracts of [Old Waukesha] existing” as of the closing date. Consistent with
the Reorganization Agreement, the Assumption and Liabilities agreement excepted
“liabilities against which [Old Waukesha] is insured or otherwise indemnified to the
extent of such insurance.” A separate agreement, a “Bill of Sale and General
Assignment,” conveyed, among other things, “all” of Old Waukesha’s “rights under
contracts, insurance policies … claims, rights, [and] choses in action” to New
Waukesha. Wausau issued new policies to New Waukesha which ran from 1968
through 1971. As to the provisions at issue here, the new policies contained the
same language as the policies issued to Old Waukesha.

¶6 In 1974, New Waukesha merged with Abex Corporation (Abex). The
merger left Abex as the surviving corporation, with Abex succeeding to all the assets
and liabilities of New Waukesha by operation of law, including rights as a successor
in interest to New Waukesha’s insurance policies.

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¶7 On August 23, 1990, Abex entered into an Assignment and
Assumption Agreement whereby it assigned all of its assets and rights to PA
Holdings Corporation, its sole stockholder. Abex then dissolved. Under the
agreement, Abex transferred “all of [Abex’s] right, title and interest in, to and under
all of the assets, properties and rights of [Abex] of every type and description, of
every kind and nature, owned or held by [Abex].” The agreement stated further that
the general assignment of Abex’s assets did not include those that were “not capable
of being Transferred … without the consent, approval or waiver of a third person or
entity.” On November 1, 1990, PA Holdings Corporation changed its name to
Pneumo Abex Corporation.

¶8 Pneumo Abex Corporation remained as the surviving corporate entity
from 1990 until 2004, when it merged with and into Pneumo Abex, LLC. Pneumo
Abex Corporation then ceased to exist. Pneumo Abex, LLC, is the successor in
interest to Abex, which in turn is the successor in interest to New Waukesha.

¶9 In 2019, Pneumo Abex, LLC and Pepsi entered into assignment
agreement, whereby Pneumo Abex, LLC stated that it was the successor in interest
to the Waukesha foundry companies, that Pepsi is the “net-of-insurance” indemnitor
of Pneumo Abex, LLC for numerous asbestos suits relating to the Waukesha
entities, and that Pneumo Abex, LLC assigned its rights under the Wausau policies
to Pepsi.1

1
“Net of insurance” indemnification means that, with respect to liability for qualifying
claims, including the Waukesha asbestos lawsuits, Pepsi is entitled to Pneumo Abex, LLC’s
insurance recoveries applicable to claims for which Pepsi indemnifies Pneumo Abex, LLC. It is
undisputed that Pepsi’s indemnification of Pneumo Abex, LLC would not bar recovery.

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C. The asbestos suits and summary judgment motions

¶10 Over 100 plaintiffs alleged injurious asbestos exposure attributed to a
pump manufactured by the Waukesha foundry companies (Waukesha asbestos
lawsuits). As relevant to this appeal, in 2017, Huff, a mesothelioma claimant, filed
a lawsuit in Missouri state court against “Pneumo Abex, LLC, as Successor in
Interest to Abex Corporation,” among other defendants. The complaint alleged that
Huff was exposed to asbestos during the Wausau policy periods and that the
defendants “manufactured, designed, labeled, distributed, supplied, or sold” the
asbestos products which caused his injury. The complaint alleged, among other
things, claims for negligence, strict liability, and conspiracy against the defendants.

¶11 Pepsi tendered defense to Wausau, asserting that Pneumo Abex, LLC
was entitled to coverage under the Old Waukesha and New Waukesha polices.
Wausau denied coverage, stating, as relevant to this appeal, that “it appears that
Pneumo Abex, LLC is being sued not for any liabilities related to Waukesha Pump,
but for the historical liabilities of Abex Corporation.”

¶12 Pepsi then paid defense and settlement costs relating to some of the
Waukesha asbestos lawsuits, including Huff’s action. In 2019, Pneumo Abex, LLC,
assigned to Pepsi the right to pursue and keep insurance proceeds for the Waukesha
asbestos lawsuits under the Wausau policies. Pepsi then commenced this action
seeking a determination of Wausau’s duties to defend the Waukesha asbestos
lawsuits and to indemnify Pepsi. As relevant to this appeal, Pepsi moved for partial
summary judgment as to the Huff complaint, arguing that Pneumo Abex, LLC, was
a successor to insurance rights under the Wausau policies, thus triggering Wausau’s
duty to defend the Huff complaint. Pepsi further alleged that Wausau previously
defended other asbestos-related lawsuits in which Pneumo Abex, LLC, was a named

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defendant. Wausau opposed the motion and filed a cross-motion for summary
judgment seeking to dismiss Pepsi’s claims not only with respect to the Huff
complaint, but to all of the Waukesha asbestos lawsuits on the grounds that Pneumo
Abex, LLC, was not a successor in interest to rights under either the Old Waukesha
or the New Waukesha policies and, accordingly, could not claim the rights of an
“insured.” Specifically, Wausau argued that in order for Pepsi to succeed on its
claims, it had to prove an unbroken chain of transferred policy rights from Old
Waukesha to New Waukesha and then through the transaction history to Pneumo
Abex, LLC, which it could not do pursuant to the policies’ anti-assignment
provision.

¶13 The circuit court, relying on our decision in Red Arrow Products Co.,
Inc. v. Employers Insurance of Wausau, 2000 WI App 36, 233 Wis. 2d 114, 607
N.W.2d 294, agreed with Wausau. Specifically, the court found that the anti-
assignment provisions in the Wausau policies prevented any transfer of insurance
rights without Wausau’s consent. The court also found that Pepsi had failed to
demonstrate a transfer of insurance rights from either Old Waukesha to New
Waukesha or from Abex to PA Holdings. Consequently, the court denied Pepsi’s
motion for partial summary judgment and granted Wausau’s motion for summary
judgment. Pepsi now appeals.

DISCUSSION

I. Standard of Review

¶14 “We review de novo a circuit court’s ruling on summary judgment,
and apply the same legal principles.” Chapman v. B.C. Ziegler & Co., 2013 WI
App 127, ¶2, 351 Wis. 2d 123, 839 N.W.2d 425. Summary judgment is appropriate
where “the pleadings, depositions, answers to interrogatories, and admissions on

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file, together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of law.”
WIS. STAT. § 802.08(2) (2019-20). The purpose of summary judgment is “to avoid
trials when there is nothing to try.” Tews v. NHI, LLC, 2010 WI 137, ¶42, 330 Wis.
2d 389, 793 N.W.2d 860.

II. The Anti-Assignment Clauses

¶15 We begin with the question at the center of this appeal: whether the
anti-assignment provisions in Wausau’s policies preclude coverage because those
rights could not be transferred from Old Waukesha to New Waukesha in 1968, and
again from Abex to PA Holdings in 1990. We conclude that consistent with long-
standing Wisconsin law, the anti-assignment provisions in Wausau’s policies are
not enforceable as to these assignments because the assignments are “post-loss.”
We hold that notwithstanding the language in the anti-assignment clauses requiring
insurer consent, such consent is not required for an assignment of insurance
recovery rights made after a “loss” has occurred under an occurrence-based policy.
Here, Huff’s alleged asbestos exposure was the “occurrence,” and because it took
place during the relevant coverage periods, the loss had already occurred prior to
any transfer. See, e.g., Plastics Eng’g Co. v. Liberty Mutual Ins. Co., 2009 WI 13,
¶31, 315 Wis. 2d 556, 759 N.W.2d 613. Accordingly, the anti-assignment
provisions did not relieve Wausau of the duty to defend Huff’s case.

¶16 Wausau’s policies at issue in this case were issued to Old Waukesha
from 1963-1968, and then to New Waukesha from 1968-1971. Huff alleges his
exposure occurred during the Wausau policy periods. The policies are substantially
the same, providing coverage for an “occurrence,” which is defined as “an accident,
including injurious exposure to conditions, which results, during the policy period,

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in bodily injury or property damage neither expected nor intended from the
standpoint of the insured.” Occurrence-based policies are “triggered” by the
occurrence of property damage or bodily injury during the policy period, even if the
damage or injury is not discovered until much later. See id., ¶53. As relevant to
this appeal, “exposure to asbestos falls within an exposure to conditions” as
referenced in the policies because “[w]ithout exposure, no bodily injury takes
place.” See id., ¶31.2

¶17 As noted above, the Waukesha foundry companies went through a
series of transfers that purported to assign the right to insurance with those transfers.
The occurrence-based policies at issue here contain an “anti-assignment” clause,
which provides as follows: “Assignment of interest under this policy shall not bind
the company until its consent is endorsed hereon[.]” The purpose of a non-
assignment clause is to protect the insurer from increased liability. After the loss
has occurred, assignment of the right to recover under the policy does not increase
the insurer’s risk. See 3 STEVEN PLITT ET AL., COUCH ON INSURANCE § 35:8 (3d ed.
1995). In this case, the assignment was after the loss already had occurred (post-
loss).

¶18 Wisconsin has been among the majority of states following the
general maxim that

policies prohibiting assignments of the policy, except with
the consent of the insurer, apply only to assignments before
loss, and do not prevent an assignment after loss, for the
obvious reason that the clause by its own terms ordinarily
prohibits merely the assignment of the policy, as
distinguished from a claim arising under the policy, and the
assignment before loss involves a transfer of a contractual
2
A claims-made-and-reported policy provides that the policy only provides coverage if
the policy holder makes the claim during the policy period. Anderson v. Aul, 2015 WI 19, ¶3, 361
Wis. 2d 63, 862 N.W.2d 304.

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relationship while the assignment after loss is the transfer of
a right to a money claim.

Id. (footnote omitted). Thus, an anti-assignment provision “prohibiting an
assignment after loss has occurred is generally regarded as void, in that it is against
public policy to restrict the relation of debtor and creditor by restricting or rendering,
subject to the control of the insurer, an absolute right in the nature of a chose in
action.” Id., § 35:9. The “loss” referred to in an occurrence-based policy is the
actual “occurrence”; here, the “loss” is the asbestos exposure that allegedly took
place during the Wausau policy periods. See Plastics Eng’g Co., 315 Wis. 2d 556,
¶31; COUCH ON INSURANCE § 35:8 (equating loss with “events giving rise to the
insurer’s liability”).

¶19 Since 1880, Wisconsin case law has applied this general rule. In a
case involving a post-loss assignment, the Wisconsin Supreme Court held that rights
under an insurance policy are freely assignable after a loss with or without insurer
consent:

[A]lthough the policy provides that an assignment thereof,
without the consent of the company, will avoid the contract,
yet the law is well settled that this only applies to an
assignment before a loss under it. After a loss, the claim,
like any other chose in action, may be assigned without
affecting the insurer’s liability.

Dogge v. Northwestern Nat’l Ins. Co., 49 Wis. 501, 503, 5 N.W. 889 (1880). The
supreme court revisited this issue a year later, in Alkan v. New Hampshire Ins. Co.,
53 Wis. 136, 147, 10 N.W. 91 (1881), another post-loss assignment case, when it
held that “the assignment of the policy to the plaintiff after the loss does not render
the policy void.” Similarly, the supreme court in Max L. Bloom Co. v. United States
Casualty Co., 191 Wis. 524, 210 N.W. 689 (1926), yet another post-loss assignment
case, drew upon its previous opinions in holding:

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[T]he language of the policies, prohibiting assignment of the
policies, refers only to assignments before loss, and does not
refer to assignments of the choses in action after loss. If such
be the construction, we should hold that the provision of the
policy would be contrary to public policy and void.

Id. at 535.3

¶20 Indeed Wisconsin has long been regarded as a jurisdiction that has
never applied anti-assignment clauses to bar post-loss assignment of rights. By
1926, Wisconsin was one of the states adhering to the “universally accepted rule”
that after a loss,

the claim to recover that loss may be effectively assigned by
the insured, so as to vest in the assignee the absolute right to
the insurance, provided, of course, the insured himself had
that right at the time when the loss was incurred, and that the
assignment itself was otherwise valid.

Annotation, Claim under contract of property insurance as assignable after loss, 56
A.L.R. 1391 (1928).

3
That these Wisconsin cases involved first-party liability claims by the insureds does not
change the analysis. As noted above, the purpose underlying an anti-assignment provision is to
protect the insurer from increased liability. In the case of a first-party claim, an assignment of a
claim for the right to recover after a loss does not increase the insurer’s liability, it merely changes
the identity of the person or entity to whom the insurer’s duty to indemnify is owed. So too in the
context of a third-party liability claim. If the facts giving rise to the claim place it within the scope
of the liability policy, then the insurer’s duties to defend and indemnify are triggered. An
assignment of rights to recover under the policy that occurs after the loss or “occurrence” that
exposes the insured to liability does not increase the insurer’s liability but instead changes the
identity of the person or entity entitled to assert claims for defense and indemnity under the policy.
As the supreme court has repeatedly held, “[a]fter a loss, the claim, like any other chose in action,
may be assigned without affecting the insurer’s liability.” Dogge v. Northwestern Nat’l Ins. Co.,
49 Wis. 501, 503, 5 N.W. 889 (1880). Thus, we see no legal support for distinguishing between
the assignment of claims for defense versus indemnity—both claims can be assigned post-loss.
Moreover, in this case, and as is well-established under Wisconsin law, the duty to defend is
dependent upon the duty to indemnify, which Wausau clearly recognizes with its arguments that
the anti-assignment provisions preclude indemnity coverage, and therefore, there is no duty to
defend. In short, a holding that an anti-assignment clause is not enforceable for purposes of an
indemnity claim, but is enforceable for purposes of duty to defend claim finds no support in
Wisconsin law.

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¶21 The Supreme Court of California aptly explained the purpose of anti-
assignment clauses and the policy implications of enforcing such clauses after a loss
has occurred:

The recognized rationale for enforcing a consent-to-
assignment clause is to protect an insurer from bearing a risk
or burden relating to a loss that is greater than what it agreed
to undertake when issuing a policy. It is undisputed that an
insured may not transfer the policy itself to another without
the insurer’s consent, and in this sense all parties agree. But
the “postloss exception” to the general rule restricting
assignability … is itself a venerable rule that arose from
experience in the world of commerce. The rule has been
acknowledged as contributing to the efficiency of business
by minimizing transaction costs and facilitating economic
activity and wealth enhancement.

Fluor Corp. v. Superior Ct., 354 P.3d 302, 329-30 (Cal. 2015) (citation omitted).
The court went on:

“[A] major rationale for commercial insurance is to facilitate
economic activity and growth by providing risk management
protection for economic actors .... In the modern American
economy, mergers, acquisitions, and sales are part of
corporate life. For the most part, economists approve of this
activity because it allows the marketplace to allocate
resources to their most profitable uses. To the extent that
insurance protection (for past but possibly unknown losses)
may be more freely assigned as part of corporate
recombinations, this lowers transaction costs and facilitates
economic activity and wealth enhancement. Consequently,
the general rule permitting post-loss assignment is a good
rule—which is why the courts have crafted it over the years
even though it appears to contradict the clear text of many
insurance policies and the courts’ expressed fidelity to
contract language. The post-loss exception to the general
rule of restricted insurance assignability is a venerable rule
borne of experience and practicality. That is why courts
have adopted it.” The post-loss rule prevents an insurer from
engaging in unfair or oppressive conduct—namely,
precluding assignment of an insured’s right to invoke
coverage under a policy attributable to past time periods for
which the insured had paid premiums.

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Id. at 330 (alteration in original, citation omitted); see also Ocean Accident & Guar.
Corp. v. Southwestern Bell Tel. Co., 100 F.2d 441, 446 (8th Cir. 1939) (a post-loss
assignment is not the assignment of the policy itself but rather “the assignment of a
claim, or debt, or chose in action”).4

¶22 Wausau argues that our decision in Red Arrow controls this case.
Based on Red Arrow, Wausau contends that without its consent, “there could be no
transfer of insurance rights in 1968 from Old Waukesha to New Waukesha, or in
1990 from Abex (New Waukesha’s successor by merger) to PA Holdings, even if
the applicable transactional documents attempted to transfer those rights.” In Red
Arrow, we wrote that the anti-assignment provision in Wausau’s policies “makes
clear that without Wausau’s permission, no assignee or transferee has any rights to
any benefits under the Wausau policies.” 233 Wis. 2d 114, ¶21. This is the
statement upon which Wausau hangs its hat.

4
We rest our holding firmly on long-established Wisconsin law. However, we are mindful
that Wisconsin has long been a leader in this area of insurance law. In Ocean Accident &
Guarantee Corp. v. Southwestern Bell Telephone Co., 100 F.2d 441 (8th Cir. 1939), the Eighth
Circuit Court of Appeals reviewed the law regarding enforceability of insurance clauses prohibiting
assignment without consent. The court cited our decision in Dogge as one of the cases in the “great
weight of authority” settling the law that once an insurer’s liability has become fixed, it, “like any
other chose in action was assignable regardless of the conditions of the policy in question.” Id. at
445. In Fluor Corp. v. Superior Court, 354 P.3d 302 (Cal. 2015), the California Supreme Court
followed Ocean Accident, and thoughtfully traced the precepts from that case to present day
supporting the general rule that an anti-assignment clause is not enforceable post-loss. Fluor, 354
P.3d at 325-328. The court then interpreted the California statute consistently with that general
rule. Id. at 329-330. We find the court’s analysis to be a useful reminder that routine business
transactions include the transfer of a predecessor’s historical liabilities accompanied by the transfer
of claims for the predecessor’s right to recover under its insurance policies for those historical
losses. The transfer of liabilities and the corresponding assets (the right to recover insurance for
those liabilities) has been firmly embedded in corporate law, and as applicable here, the black letter
law recognized in the above-cited three Wisconsin Supreme Court cases.

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¶23 We disagree that Red Arrow changed Wisconsin law regarding the
enforceability of anti-assignment clauses for post-loss assignments. That sentence
is extraneous to the holding based on the facts underlying Red Arrow. Unlike the
present case, we were not called upon to examine the enforceability of an anti-
assignment clause in Red Arrow because both parties in that case agreed that there
had been no transfer of the recovery rights under the insurance policies to begin
with. 233 Wis. 2d 114, ¶¶7, 14. As we noted, “New Red Arrow does not dispute
that the Wausau policies were not … included in the sale.” Id., ¶7. Thus, the court
did not need to decide whether there was as assignment of the rights to recover under
the policies—the parties stipulated to the fact that there was not. It follows that
whether the terms of the policies precluded an assignment was not at issue; the
provision was irrelevant. The only issue before the court was whether the successor
was entitled to coverage by operation of law, when it had no contractual right to
coverage. Id., ¶¶7, 20, 22. The Red Arrow court’s answer was no. Id., ¶35.

¶24 Because there was no assignment of rights under the insurance
policies in Red Arrow, our undeveloped comment about a hypothetical effect of the
anti-assignment provision in Wausau’s policies had no bearing on the issue actually
litigated in the case and certainly did not (and could not) overrule a century of
Wisconsin Supreme Court precedent, none of which it even mentioned.

¶25 Indeed, the only case we cited in Red Arrow on this point,
Loewenhagen v. Integrity Mutual Insurance Co., 164 Wis. 2d 82, 473 N.W.2d 574
(Ct. App. 1991), involved an alleged assignment of benefits that occurred before the
loss for which coverage was claimed. Red Arrow, 233 Wis. 2d 114, ¶21. In
Loewenhagen, 164 Wis. 2d at 86, the buyer of a used car had an accident with
Loewenhagen on the evening of the same day he purchased the car. The buyer had
obtained (but had not registered) title to the car and had not obtained his own

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insurance. Id. The seller’s policy was in effect at the time of the accident merely
because the seller had not called his insurance agent to cancel it. Id. Loewenhagen
sought coverage from the seller’s insurance company on several grounds, including
that the seller’s insurance agent had “agree[d] to an assignment of the policy” by
making cancellation of the seller’s policy effective several days after the sale, rather
than on the date of sale. Id. at 92. The court of appeals rejected Loewenhagen’s
argument based on the policy language prohibiting assignment “without [the
insurer’s] written consent.” Id. Thus, the passing reference to anti-assignment
clauses in Red Arrow is grounded in Loewenhagen’s analysis of a purported pre-
loss assignment, a situation that is materially distinguishable from the present case.

¶26 Notwithstanding the factual and legal distinctions between the present
case and Red Arrow, Wausau argues that we must follow it. We disagree that we
must interpret the language in Red Arrow as binding precedent that implicitly
overrules a century of Wisconsin law.

¶27 As our supreme court observed in Zarder v. Humana Insurance
Co., 2010 WI 35, ¶52 n.19, 324 Wis. 2d 325, 782 N.W.2d 682, Wisconsin courts
have formulated two definitions of dicta. Under one line of cases, dicta has been
defined as “a statement or language expressed in a court’s opinion which extends
beyond the facts in the case and is broader than necessary and not essential to the
determination of the issues before it.” State v. Sartin, 200 Wis. 2d 47, 60 n.7, 546
N.W.2d 449 (1996). The other definition holds that a court’s discussion of a
question that is germane to a controversy is not dictum even if it is “not necessarily
decisive of … the controversy” but rather is “a judicial act of the court which it will
thereafter recognize as a binding decision.” State v. Picotte, 2003 WI 42, ¶61, 261
Wis. 2d 249, 661 N.W.2d 381 (citation omitted).

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¶28 Under these standards, we conclude that the language in Red Arrow
regarding the effect of the anti-assignment clause is dicta. Under the definition set
forth in Sartin, the statement about the anti-assignment clause extended beyond the
facts in Red Arrow because it was undisputed that the rights to recover under the
insurance contracts were not assigned. Thus, the statement was “broader than
necessary and not essential to” determine whether there had been an assignment by
operation of law. Sartin, 200 Wis. 2d at 60 n.7. Under the definition set forth in
Picotte, the statement in Red Arrow was not “germane to … the controversy”
because there was no controversy with respect to the anti-assignment clause in that
case. Picotte, 261 Wis. 2d 249, ¶61. For these reasons, we conclude that Red Arrow
does not control the outcome in this case.5

¶29 Accordingly, we reaffirm Wisconsin’s longstanding rule that an anti-
assignment clause in an occurrence-based policy is unenforceable when the
assignment is made post-loss. Old Waukesha and New Waukesha already paid the
premiums for these policies to protect against the loss that is claimed here. The
assignment of Old Waukesha and New Waukesha’s rights to assert claims seeking
recovery under the policies did not increase Wausau’s coverage risks because the
alleged occurrences had already taken place. While the loss that took place during
the policy periods may not be known for many years, it allegedly occurred during
Wausau’s policy periods. In reliance on longstanding Wisconsin law, the right to

5
The dissent cites Judge Brown’s concurring opinion in State v. Sanders, 2007 WI App
174, ¶41, 304 Wis. 2d 159, 737 N.W.2d 44 (Brown, J., concurring) but that opinion supports our
determination that Paragraph 20 in Red Arrow is dicta. Dissent, ¶4. In Sanders, Judge Brown
separately expressed his view that lawyers too frequently attempt to avoid language unfavorable to
their positions by labelling it dicta, and that that term should apply only to “those situations where
a court notes, in passing, that a certain issue is lurking in the background, gives its off-the-cuff
opinion without analysis and leaves it at that.” Sanders, 304 Wis. 2d 159, ¶41 (Brown, J.,
concurring). In Red Arrow, the anti-assignment provision was not even lurking in the background,
and the off-the-cuff statement lacked supporting analysis, as evidenced by the citation to a pre-loss
case.

16
No. 2021AP635

make claims under the insurance was assigned post-loss to subsequent entities.
Such assets would prove illusory if post-loss assignments made in reliance on
longstanding Wisconsin law are retroactively disallowed.

¶30 Wausau raises an additional argument, that an assignment is not post-
loss unless the loss has actually been reported, and the insurance company knows
that it will have liability. Wisconsin law is clear under the “known loss doctrine”
that the loss arises at the time of the injury, not when a lawsuit is filed. The known
loss doctrine holds that insurers are not obligated under third-party liability policies
to provide coverage for injury or damage which was already occurring when the
coverage is written or which has already occurred, and about which the insured
knew. American Fam. Mut. Ins. Co. v. American Girl, Inc., 2004 WI 2, ¶86, 268
Wis. 2d 16, 673 N.W.2d 65; American Fam. Mut. Ins. Co. v. Bateman, 2006 WI
App 251, ¶26, 297 Wis. 2d 828, 726 N.W.2d 678. Wausau’s interpretation of an
“occurrence” under its policy also is contrary to the plain language of the policy.
An “occurrence” under the policy is “an accident, including injurious exposure to
conditions, which results, during the policy period, in bodily injury or property
damage neither expected nor intended from the standpoint of the insured.” Nothing
in the policy refers to an “occurrence” as requiring notice of potential legal liability.
In addition, the policy does not distinguish between bodily injury and property
damage. We reject this attempt to avoid coverage by redefining the terms of the
policy. The insurer’s liability is established by the occurrence of the actual injury,
not by the reporting of the injury prior to assignment.

¶31 We therefore affirm Wisconsin’s longstanding rule, agreeing with the
majority of jurisdictions, that post-loss assignments of insurance rights under an
occurrence policy do not require consent to assignment.

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No. 2021AP635

III. Corporate Succession

¶32 Wausau contends that even if the anti-assignment provision is
unenforceable, Pepsi still cannot succeed on its claims because Old Waukesha’s
rights under the Wausau policies were never assigned to New Waukesha, and
subsequently Pneumo Abex, LLC, via corporate transactional documents.
Specifically, Wausau argues that Pepsi failed to produce evidence showing a
specific list of insurance policies that were transferred from Old Waukesha to New
Waukesha as part of the 1968 Reorganization Agreement. Wausau also contends
that Pepsi failed to produce evidence that the Wausau policies, or any rights
thereunder, were transferred to PA Holdings as part of the 1990 dissolution of Abex.
We disagree.

A. 1968 Transfer of Rights from Old Waukesha to New Waukesha

¶33 As relevant to this appeal, the Reorganization Agreement stated the
following regarding Old Waukesha’s insurance policies:

[Old Waukesha] has delivered to I.C. a Schedule of
Contracts listing and summarizing the pertinent terms of all
of the ... insurance policies ... and any other material
contracts or proposals to which [Old Waukesha] is a party ...
and all material amendments thereof …. All of said
contracts, agreements and commitments are assignable to
[New Waukesha], except as specified in the Schedule, and
at the Closing Date [Old Waukesha] shall deliver to I.C. any
consents to assignment that may be required.

¶34 Wausau contends that because Pepsi did not produce a complete
Schedule containing the Old Waukesha policy, we cannot conclude that either the
policy or the rights to recovery transferred to New Waukesha. We disagree. The
language of the Reorganization Agreement, dated and signed on August 16, 1968,
expressly states that the transfer includes all liabilities unless they are expressly

18
No. 2021AP635

excepted. New Waukesha would also receive all assets, “tangible and intangible,
real, personal and mixed.” The agreement excepted “liabilities against which [Old
Waukesha] is insured or otherwise indemnified to the extent of such insurance or
indemnification.” Certain documents were required to be transferred at closing.

¶35 On the date of closing, August 30, 1968, Old Waukesha and New
Waukesha signed a Bill of Sale, which applies to the parties as well as their
respective successors and assigns. The Bill of Sale assigned “all the property and
assets, tangible and intangible, of every kind, nature and description and wherever
situated, owned, possessed or held by [Old Waukesha],” including its “rights under
contracts, insurance policies … claims, rights, [and] choses in action.” The Bill of
Sale transferred to New Waukesha “all of [Old Waukesha’s] right, title and interest
in, to and under each of said contracts, agreements, commitments and
arrangements,” including, but not limited to, “insurance policies” and “group
insurance policies.” New Waukesha expressly accepted this transfer.

¶36 Wausau argues that the Bill of Sale’s language is more general than
that of the Reorganization Agreement and therefore we should accept the
Reorganization Agreement as the operational document. We disagree. The contents
of the schedule referenced in the Reorganization Agreement would only be relevant
if the Bill of Sale stated that New Waukesha only acquired the contract rights
identified on the Schedule. The use of the term “all” in the Bill of Sale expressed
Old Waukesha’s intent to transfer all contract rights to New Waukesha. In short,
the Bill of Sale is the operative agreement that actually effectuated the transfer of
all of Old Waukesha’s rights—including its rights under the Wausau policies—to
New Waukesha. See Bank of America NA v. Neis, 2013 WI App 89, ¶48, 349 Wis.
2d 461, 835 N.W.2d 527 (citing McDonald v. Nat’l Enters., Inc., 547 S.E.2d 204,
210 (Va. 2001)) (noting that a bill of sale and assignment of loans was “an operative

19
No. 2021AP635

legal document that embodies and evidences [a] conveyance”) (alteration in
original).

B. 1990 Transfer of Rights from Abex to PA Holdings and Pneumo Abex LLC

¶37 Wausau also contends that another break in the chain of corporate
succession precluded the transfer of insurance rights to Pneumo Abex, LLC. 6 This
was the 1990 transfer of Abex’s assets to PA Holdings. We conclude that the right
to recovery under the Wausau policies was similarly assigned. The assignment
agreement notes that PA Holdings, prior to the assignment, was the sole shareholder
of Abex. As a result of the assignment, Abex dissolved and PA Holdings became
the surviving corporation. The assignment agreement between Abex and PA
Holdings transferred “all of [Abex’s] right, title and interest in, to and under all of
the assets, properties and rights of [Abex] of every type and description, of every
kind and nature, owned or held by [Abex] ….” The only limitation on this broad
assignment concerned assets that were “not capable of being Transferred … without
the consent, approval or waiver of a third person or entity.” Wausau argues that the
anti-assignment provisions of its policies preclude the transfer here. We already
have discussed that argument and reject Wausau’s position for the reasons stated
above.

¶38 Accordingly, we conclude that the insureds’ rights under the Wausau
policies were continuously assigned through each of the corporate transactions and
mergers, including the 1968 transition from Old Waukesha to New Waukesha, the

6
Wausau does not dispute that New Waukesha merged into Abex, nor does it challenge
the transfer of rights under the insurance policies from New Waukesha to Abex.

20
No. 2021AP635

1990 assignment of rights from Abex to PA Holdings, and later to Pneumo Abex,
LLC.

IV. The Huff Complaint

¶39 Finally, Wausau argues that even if the insurance rights transferred to
Pnuemo Abex, LLC—and subsequently, to Pepsi—it has no duty to defend the Huff
lawsuit. The crux of Wausau’s argument is that Huff’s complaint does not allege
claims that are covered by either the Old Waukesha or New Waukesha polices.
Wausau also contends that the complaint only names Pneumo Abex, LLC, rather
than either Old Waukesha or New Waukesha. Because Pneumo Abex, LLC, did
not obtain rights under the Wausau policies, Wausau contends, it has no duty to
defend Pneumo Abex. Again, we disagree.

¶40 When an insurance policy creates a duty to defend an insured, that
duty is broader than the insurer’s obligation to indemnify the insured. Fireman’s
Fund Ins. Co. v. Bradley Corp., 2003 WI 33, ¶20, 261 Wis. 2d 4, 660 N.W.2d 666.
The duty to defend hinges on the nature, not the merits, of the plaintiff’s claim.
Wausau Tile, Inc. v. County Concrete Corp., 226 Wis. 2d 235, 266, 593 N.W.2d
445 (1999). We determine whether an insurance company has a duty to defend by
comparing the allegations in the plaintiff’s complaint to the terms of the insurance
policy. See Fireman’s Fund, 261 Wis. 2d 4, ¶19. An insurer has a duty to defend
its insured if the allegations contained within the four corners of the complaint
would, if proved, result in a covered loss. Id. We “must liberally construe the
allegations contained in the underlying complaint, assume all reasonable inferences
from the allegations made in the complaint, and resolve any ambiguity in the policy
terms in favor of the insured.” Water Well Sols. Serv. Grp., Inc. v. Consolidated
Ins. Co., 2016 WI 54, ¶15, 369 Wis. 2d 607, 881 N.W.2d 285. “If the policy,

21
No. 2021AP635

considered in its entirety, provides coverage for at least one of the claims in the
underlying suit, the insurer has a duty to defend its insured on all the claims alleged
in the entire suit.” Id., ¶16.7

¶41 We start with the “four corners of the complaint and compare it to the
policy to see if there is any potential for coverage—any such potential would trigger
the duty and end further inquiry.” 5 Walworth, LLC v. Engerman Contracting,
Inc., 2021 WI App 51, ¶22, 399 Wis. 2d 240, 963 N.W.2d 779. We look to
determine whether the policy, in its entirety, provides coverage for at least one claim
in the underlying suit. See Water Well Sols., 369 Wis. 2d 607, ¶16. This is different
from a coverage analysis, where “the parties are not necessarily bound by the four
corners of the complaint in determining whether there is coverage.” 5 Walworth,
399 Wis. 2d 240, ¶22. The parties can “introduce evidence showing the true facts
(as opposed to those alleged in the complaint), and we can review such evidence in
determining whether coverage exists, or at least may exist, if the evidence results in
liability against the insured following a trial on the merits of the underlying claims.”
Id.

¶42 In looking at Huff’s complaint to determine whether any potential for
coverage exists, it is clear from the entirety of the complaint that Huff alleged facts
connecting his injury to asbestos exposure incurred during the Wausau policy
periods. Huff, a mesothelioma claimant, alleged that he was exposed to asbestos in
the 1950s through the 1980s in various capacities. One of the named defendants

7
If an insurer refuses to defend, and the claim succeeds and is later determined to be
covered by the policy, the insurer must not only indemnify the insured and pay the resulting
judgment, but is liable as well for the insured’s legal expenses, as well as “any additional costs that
the insured can show naturally resulted from the breach.” Maxwell v. Hartford Union High Sch.
Dist., 2012 WI 58, ¶54, 341 Wis. 2d 238, 814 N.W.2d 484. Thus, an insurer often brings a
declaratory judgment action to determine its duty to defend. See Liebovich v. Minnesota Ins. Co.,
2008 WI 75, ¶55, 310 Wis. 2d 751, 751 N.W.2d 764.

22
No. 2021AP635

was Pneumo-Abex, LLC, as successor in interest to Abex. Wausau admitted to
Pepsi in pre-suit correspondence that it issued policies to Old Waukesha and New
Waukesha, from 1963 to 1971, which covers time periods named in the complaint.
Wausau further admitted that New Waukesha effectively became Abex. Wausau
argues that by requiring it to defend this lawsuit, it will be required to defend claims
related to asbestos-containing pump products that were not manufactured by Old
Waukesha or New Waukesha, thus posing an increased liability risk. In addition,
Wausau objected to increased liability based on an allegation in the complaint that
Pneumo Abex, LLC, was part of a conspiracy. These concerns about potential
issues for which Wausau may or may not be required to indemnify are inappropriate
considerations at this point. When Wausau makes coverage determinations it can
evaluate each individual claim and determine what the policy does and does not
cover. However, when evaluating its duty to defend, it is clear that the allegations
in the Huff complaint are sufficient.

¶43 Wausau also contends that the Huff complaint “fails to implicate any
liability of Old or New Waukesha” because it “[m]erely name[s] ‘Pneumo Abex’ as
successor to ‘Abex’” without pointing to any actual liability. We have already
established that Abex was the direct successor of rights under the Old Waukesha
and New Waukesha insurance policies. Old Waukesha and New Waukesha were
the manufacturers of the pump products implicated in the complaint. Wausau points
to no Wisconsin authority requiring a plaintiff to name with specificity the entire
chain of corporate succession leading to a named defendant’s responsibility.8 In his

8
The only authority that Wausau cites for the proposition that the complaint must
specifically name the successor to the product is a federal case interpreting Minnesota law.
Continental Ins. Co. v. Daikin Applied Americas Inc., 998 F.3d 356, 360–61 (8th Cir. 2021). We
disagree with Wausau’s interpretation of the case, and find that it actually supports Pepsi’s position.
However, we do not rely on it.

23
No. 2021AP635

complaint, Huff named numerous defendants and various sources of injury. Our
task is to search the complaint for any possibility of coverage, not to exclude
coverage for a covered company when other companies are named who are not
insured. “An insurer’s duty to defend is broader than its duty to indemnify because
the duty to defend exists when it is merely arguable that the policy in question
provides coverage.” Red Arrow, 233 Wis. 2d 114, ¶17.

¶44 Because Wausau knew that the product was manufactured by Old or
New Waukesha, which merged into Abex, then into Pneumo Abex, LLC, it should
come as no surprise that it has a duty to defend the lawsuit which involves products
made by a company that it insured at the time the products were manufactured.

CONCLUSION

¶45 In conclusion, based on the reasoning above, we hold that: (1) the
anti-assignment clause in the Wausau policies did not prohibit the post-loss
assignment of insurance rights from the Waukesha companies through to Pneumo
Abex, LLC; (2) the chain of transfer of insurance rights, specifically the duty to
defend, was unbroken from Old Waukesha to New Waukesha and Abex to PA
Holdings; and (3) the Huff complaint is sufficient to invoke Wausau’s duty to
defend. Accordingly, we reverse the circuit court’s decision granting Wausau’s
cross-motion for summary judgment and denying Pepsi’s motion for partial
summary judgment. On remand, the circuit court should grant Pepsi’s motion for
summary judgment on the Declaratory Judgment-Duty to Defend claim and conduct
further proceedings consistent with this opinion.

By the Court.—Order reversed and cause remanded with directions.

24
No. 2021AP635(D)

¶46 GROGAN, J. (dissenting). The majority reverses the circuit court’s
duty-to-defend determination by disregarding the only duty-to-defend Wisconsin
case discussing an insurance policy’s consent-before-assignment clause in the
context of a third-party claim.1 Instead of applying that case, Red Arrow
Products Co., Inc. v. Employers Insurance of Wausau, 2000 WI App 36, 233
Wis. 2d 114, 607 N.W.2d 294, which is binding on us and dispositive, the majority
rests its reversal on three first-party insurance claim cases that did not involve an
insurer’s duty to defend, a California decision based on a California statute, and
nonbinding secondary authorities. Because this anti-assignment clause dispute
arises in the context of a third-party claim rather than a first-party claim, this court
is bound by Red Arrow—unless or until our supreme court changes it—and I would
therefore affirm the circuit court. I respectfully dissent.

¶47 The circuit court held that Employers Insurance Company of Wausau
(Wausau) had no duty to defend Pepsi-Cola Metropolitan Bottling Company, Inc.
(Pepsi) because Wausau’s policies contained a consent-before-assignment clause
requiring Wausau’s consent before the insureds—Old Waukesha and New
Waukesha—could assign the rights and obligations under the policies to another
entity. It did so based on Red Arrow, in which this court held insurance policies did
not transfer by operation of law when Old Red Arrow (the insured) sold “certain of
its assets and liabilities to New Red Arrow.” Id., ¶¶3, 20-21. Although the sale
gave New Red Arrow assets, it “did not include the [insurance] policies.” Id., ¶20.

1
This clause is often referred to as the “anti-assignment clause.”
No. 2021AP635(D)

This court also decided that even if Old Red Arrow had assigned rights under the
insurance policy to New Red Arrow, New Red Arrow was not entitled to any rights
or benefits under the policy because the policy had a consent-before-assignment
clause requiring the insurer’s consent before New Red Arrow would obtain benefits
under the policy. Id., ¶21.

¶48 The majority refuses to apply Red Arrow, concluding that: (1) this
court’s statement in ¶21 is not binding precedent; (2) Red Arrow is distinguishable
from the instant case; and (3) Red Arrow’s enforcement of the anti-assignment
clause in a duty-to-defend case is wrong because of a case Red Arrow itself relied
on. It maintains that three non-duty-to-defend, first-party claim cases—Dogge v.
Northwestern National Insurance Co., 49 Wis. 501, 5 N.W. 889 (1880), Alkan v.
New Hampshire Insurance Co., 53 Wis. 136, 10 N.W. 91 (1881), and Max L.
Bloom Co. v. United States Casualty Co., 191 Wis. 524, 210 N.W. 689 (1926)—
together with a California case, Fluor Corp. v. Superior Court, 354 P.3d 302
(Cal. 2015), and other secondary authorities render Wausau’s consent-before-
assignment clause unenforceable. I disagree.

¶49 First, this court is not free to disregard Red Arrow’s alternative
conclusion in ¶21 because the statement was germane and essential to the decision
and not dicta. See State v. Sanders, 2007 WI App 174, ¶40, 304 Wis. 2d 159, 737
N.W.2d 44 (Brown, J., concurring) (“[C]ourts can and often do give alternative
reasons for their decisions. Alternative rationales are not dicta.”); see also Tagatz v.
Township of Crystal Lake, 2001 WI App 80, ¶8, 243 Wis. 2d 108, 626 N.W.2d 23
(“Where a court’s statement is germane to the controversy though not necessarily
decisive of the primary issue, it is not dictum.”). It was germane and essential to
our decision because before addressing the “by operation of law” question, it was
necessary to first determine that there had been no assignment.

2
No. 2021AP635(D)

¶50 Second, Red Arrow is the only Wisconsin case addressing the duty-
to-defend issue in a similar factual circumstance to the one before us. The trio of
first-party claim Wisconsin cases the majority relies on—Dogge, Alkan, and
Max L. Bloom Co.—involved significantly different facts and a distinct legal issue.
All three were first-party property insurance claims, not third-party claims involving
a duty-to-defend dispute. Those first-party property insurance claims involved only
the payment of a fixed sum under the policy’s indemnity provision, which did not
increase the insured’s liability. None addressed the validity of a consent-before-
assignment clause with respect to the duty to defend against a third-party claim.
Further, in discussing pre-loss and post-loss assignments, this trio of cases involved
a post-loss assignment that involved property damage where the “‘liability actually
attache[d] under the policy’” before the insured changed. See Dogge, 49 Wis. at
503 (citation omitted); Alkan, 53 Wis. at 145 (“after the liability of the insurer has
become absolute”); Max L. Bloom Co., 191 Wis. at 535-536 (quoting Dogge and
Alkan). The term “post-loss” in a first-party claim may not mean the same thing in
a third-party duty-to-defend claim arising five decades after the alleged “loss”
occurred, a critical point which the majority relegates to a footnote. See Majority,
¶19 n.4.

3
No. 2021AP635(D)

¶51 The present case, like Red Arrow, involves more than a fixed sum—
it involves the duty to defend.2 Unlike in Dogge, Alkan, and Max L. Bloom Co.,
Wausau’s liability was not absolute when Old Waukesha sold its assets to New
Waukesha or when every subsequent transfer/sale/merger/acquisition occurred.
Unlike a first-party property loss under the indemnity obligation, in a third-party
claim, the duty-to-defend obligation under an insurance policy is triggered when a
complaint is filed against an insured, and the complaint makes allegations where the
insurer “‘could be held bound to indemnify the insured[.]’” See Water Well Sols.
Serv. Grp., Inc. v. Consolidated Ins. Co., 2016 WI 54, ¶17, 369 Wis. 2d 607, 881
N.W.2d 285 (citation omitted). The duty to defend is broader than the duty to
indemnify. Id. Unlike indemnity, which is absolute at the moment of the loss in a
first-party claim, the duty to defend depends on what a third party sets forth in his
complaint and the terms of the individual insurance policy, including its exclusions.
See id., ¶¶14-17.

¶52 Third, the majority errs in dismissing Red Arrow by criticizing its
reliance on Loewenhagen v. Integrity Mutual Insurance Co., 164 Wis. 2d 82, 473
N.W.2d 574 (Ct. App. 1991). In doing so, the majority opinion essentially argues
that we are not bound by any published court of appeals case we believe was
2
In its Response brief, Wausau says the Huff complaint at issue here involved a settlement
for only duty-to-defend costs, not indemnity: “It is undisputed that the Figueroa suit was the only
‘Asbestos Suit’ resulting in a paid settlement or judgment; the remainder involve defense costs
only.” Is this litigation simply about defense costs for Huff? If yes, that further emphasizes the
first-party versus third-party distinction. Both parties’ briefs contained information that raised
questions where I would have found oral argument to be beneficial to the court’s analysis of the
complex issues involved here. In fact, Pepsi specifically requested oral argument, stating it
“believes that oral argument is warranted to ‘fully develop the theories and legal authorities on each
side’” and that it “requests publication of the decision in this case to clarify whether [Red Arrow]
actually prohibits ‘post-loss’ assignments of insurance recovery rights under third-party liability
insurance policies as the Circuit Court held in granting the motion for summary judgment filed by
Employers Insurance Company of Wausau[.]” Wausau agreed that “oral argument may assist this
Court due to the complexity of the corporate history and the summary judgment record.” This
appeal, however, was decided on briefs without oral argument.

4
No. 2021AP635(D)

wrongly decided. That is not how it works. We do not get to decide whether Red
Arrow was rightly or wrongly decided. We are bound by Red Arrow unless or until
our supreme court decides otherwise. See Cook v. Cook, 208 Wis. 2d 166, 189-90,
560 N.W.2d 246 (1997) (“[O]nly the supreme court, the highest court in the state,
has the power to overrule, modify or withdraw language from a published opinion
of the court of appeals.”). If the majority believes Red Arrow was wrongly decided,
it has two choices: (1) it could certify this case to the supreme court; or (2) it could
decide this case by “adhering to [Red Arrow] but stating its belief that [Red Arrow]
was wrongly decided.” See Cook, 208 Wis. 2d at 190. Contrary to what the
majority opinion suggests, Red Arrow does not “implicitly overrule[] a century of
Wisconsin law.” Majority, ¶26. The “century of Wisconsin law”—the trio of cases
from 1880, 1881, and 1926—decided a different legal issue on different facts than
Red Arrow.

¶53 I agree with the majority that Wisconsin law is clear with respect to
the enforcement of anti-assignment clauses in first-party property damage cases.
Dogge, Alkan, and Max L. Bloom Co. clearly establish that consent-before-
assignment clauses cannot be enforced when an insured assigned the policy rights
to another after a property loss took place. The Wisconsin Supreme Court, however,
has not yet spoken about whether the same is true for a consent-before-assignment
clause in third-party duty-to-defend cases.

¶54 But, this court has. In Red Arrow, a similar case to the instant case,
this court said the consent-before-assignment clause is enforceable in a third-party
duty-to-defend case. The holding sentence in the first paragraph of Red Arrow
specifically says: “We conclude that because New Red Arrow was not a named
insured and was never assigned the policies, it does not have coverage under the
policies as a matter of contract law.” 233 Wis. 2d 114, ¶1 (emphasis added). Red

5
No. 2021AP635(D)

Arrow focused on the issue of “whether New Red Arrow is an insured under the
policies.” Id., ¶15. Because New Red Arrow was not a named insured, this court
first looked at whether Old Red Arrow assigned the policies to New Red Arrow.
Id., ¶20. This court concluded there was no assignment based on the absence of the
policies in the sale agreement and the policies’ provision requiring the insurer’s
consent before assignment, which had not occurred. Id., ¶¶20-21. Based on that,
this court then addressed the question of whether the policies were transferred by
operation of law and decided that the insurer in Red Arrow did not have a duty to
defend—both because the rights under the insurance policy did not transfer by
operation of law and because of the consent-before-assignment clause in the policy.
Id., ¶¶20-21, 35. Again, we are bound to apply Red Arrow unless or until our
supreme court says otherwise. See Cook, 208 Wis. 2d at 189-90.

¶55 The majority also erroneously relies on Fluor (although it insists that
it does not). Fluor should not be applied here at all and cannot trump Red Arrow.
Fluor is a California decision based on a California statute that says: “An agreement
not to transfer the claim of the insured against the insurer after a loss has happened,
is void if made before the loss except as otherwise provided in Article 2 of Chapter 1
of Part 2 of Division 2 of this code.” CAL. INS. CODE § 520 (West 2022); see also
Fluor, 354 P.3d at 303, 316. Wisconsin does not have a similar statute.3

¶56 In Wisconsin, we apply the plain text of a contract under our laws—
not California’s. See Midwest Neurosciences Assocs., LLC v. Great Lakes

3
If the majority felt confident that the trio of century-old, first-party cases controlled the
issue here, it would not need to turn to a foreign case and secondary, nonbinding sources to bolster
its position. By injecting—and indeed largely relying on—these nonbinding, foreign, and
secondary authorities, the majority opinion evokes the well-known Shakespearean maxim of
“protesting too much” in its refusal to simply apply Red Arrow as binding authority. See WILLIAM
SHAKESPEARE, HAMLET act 3, sc. 2 (“The lady doth protest too much, methinks.”). Methinks.

6
No. 2021AP635(D)

Neurosurgical Assocs., LLC, 2018 WI 112, ¶39, 384 Wis. 2d 669, 920 N.W.2d 767
(Public policy of liberty of contract requires courts to hold contracts “‘sacred’” by
enforcing them rather than “‘set[ting] them aside.’” (citations omitted)). Some
jurisdictions agree with California’s Fluor rule, and some disagree, and what side
of the line those jurisdictions have fallen on has been dependent upon the facts and
circumstances specific to each case and the laws of the jurisdiction. See Joseph
Thacker, Andrew Miller, Stephen Brown & Seymour Nayer, Transfer of Insurance
Rights Under Liability Policies as the Result of the Sale of a Business (Revisited),
52 TORT TRIAL & INS. PRAC. L.J. 103, 111-12 (Fall 2016) (collecting cases).

¶57 It is this court’s job to follow existing Wisconsin law in deciding
cases. This is what the circuit court did, and I would do so as well. The controlling
and dispositive law in deciding whether Wausau breached its duty to defend is Red
Arrow, and under Red Arrow, the circuit court’s determination that Wausau did not
have a duty to defend Pepsi was correct. I would affirm and therefore respectfully
dissent.4

4
The circuit court, based on the language in the 1968 “Agreement and Plan of
Reorganization” requiring Old Waukesha to “convey, transfer, assign and deliver” its property and
assets to New Waukesha, also found that Pepsi failed to establish that the rights under Wausau’s
policies were actually assigned under the 1968 Reorganization Plan. Likewise, the circuit court
found that insurance rights were not assigned during the 1990 Stock Purchase Agreement between
Abex and PA Holdings. If the rights under the policies were not properly assigned in either of
these transactions, this is another basis to conclude Wausau did not have a duty to defend in this
matter.

The circuit court did not need to examine the Huff complaint against Wausau’s policy
provisions because it applied Red Arrow and found breaks in the transfer chain so that even if the
anti-assignment clause was unenforceable, the Wausau policies did not transfer to the current
successor. Because the majority opinion reverses the circuit court, it purports to examine the Huff
complaint compared to the Wausau insurance policies. But, when this court examines the four
corners of a complaint to determine whether an insurer breached its duty to defend, it should
carefully and meticulously review the actual allegations in the complaint and the terms of the
insurance policy. The majority opinion’s review falls far short and provides virtually no analysis
of the Huff complaint at all.

7
No. 2021AP635(D)