Henry Radke settled a suit filed against him by his former student, Laura H. Laura alleged that Radke molested her sexually during a school district sponsored field trip. The molestation resulted in both intentionally and negligently inflicted emotional distress; as well, it constituted assault and battery. Radke's insurance company, Fireman's Fund, refused to defend Radke. The insurer believed that denial was in order because the alleged damages stemmed from an intentional act and was excluded under the homeowner's policy they wrote for him.

After Radke settled his suit with Laura H., he filed a declaratory motion against Fireman's fund to establish that it breached its contract by denying a defense. Radke sought to recover the costs of the settlement as well as his legal fees. Fireman's Fund filed an opposing motion. The trial court granted Radke's motion and denied the motion filed by the insurer.

In the opinion of the lower court, Fireman's Fund's decision to deny a defense to Radke constituted a breach of contract. It ruled that Radke should be reimbursed for both his settlement and legal fees. Further, the breach barred the company from asserting any coverage defenses. Fireman's Fund appealed the decision.

The appeals court reviewed the lower court decision and applied the standards pertaining to the case under specific state law as well as reviewing several other cases that, in its opinion, were pertinent to analysis of the situation. The higher court examined two different issues: first , whether the insurer's actions could be considered a breach of its duty and second, could the insurer claim any coverage defenses. However, the higher court considered the two issues as sequential, NOT as separate, issues.

After reviewing the pertinent issues, the higher court concluded that Fireman's Fund, in deciding against defending Radke, did breach the insurance contract. The key to their decision was based on Laura H.'s original allegations including a claim for negligently caused emotional injury. Such claims are debatable and so are due at least a defense under a homeowner insurance policy. The appeals court further agreed that, once the breach occurred, the insurer waived any right it had to claiming any other coverage defense. In its review, the court pointed out an appropriate action the insurer could have taken that would have recognize its duty to the insured while it preserved the right to determine whether defense and/or coverage were due. The higher court affirmed the lower court's decision in favor of the insured-plaintiff.

(RADKE, Plaintiff-Respondent v. FIREMAN'S FUND INSURANCE COMPANY, Defendant-Appellant. WisCtApp. No. 97-004497-0044. February 4, 1998. CCH 1998 Fire and Casualty Cases, Paragraph 6516.)