Insurer Is Not Required To "Drop Down" And Provide Coverage Within Insolvent Insured's Retention

In a case where Troutman Sanders represents the insurer, the Wisconsin Circuit Court for Dane County has held that the insurer of a dissolved and insolvent company is only responsible for covered liabilities in excess of the retention applicable under its policy. The insurer cannot be forced to "drop down" and provide dollar-one coverage. The court further held that this result is consistent with the requirements of Wisconsin Statute § 632.22, which provides that the bankruptcy or insolvency of an insured shall not diminish any liability of the insurer to third parties.

In 2015, a construction company brought a lawsuit against the insured, a structural engineering firm, which it had hired in connection with the construction of a parking ramp. The insured formally dissolved and had become insolvent. The lawsuit also named the insured's professional liability insurer as a defendant pursuant to Wisconsin's direct action statute. The insured's insolvency notwithstanding,