When a business is sued, it should report the action to its insurance company, as soon as possible. Sometimes, an insurer will deny coverage of the claim, asserting that a certain exclusion in its policy is applicable, or other policy defenses.
In Wisconsin, however, this is not necessarily the end of the story. If there is any possibility that coverage may exist given the terms of the claim made against its insured, the insurer is required to provide its insured with a defense attorney at its cost, and seek a stay of the action while the court determines whether it owes coverage under its policy. It’s failure to do so may result in it being held liable for the claim and its insured’s defense costs, regardless of whether coverage actually exists under the policy.