Balboa Insurance Directly Liable for Defense Costs Under Assumption Agreement, Wis. Appeals Court Rules

WAUKESHA, Wis. — Balboa Insurance Co. is liable for a policyholder’s defense costs incurred in an underlying suit because its reinsurance arrangement with the issuer of the policy “was not a mere reinsurance agreement, but rather an assumption agreement,” a Wisconsin appeals court has ruled.

On Dec. 27, the Wisconsin Court of Appeals, 2nd District, found that under the arrangement, Balboa assumed direct liability for a book of policies issued by Atlantic Mutual Insurance Co., which included the plaintiff’s policy.

In June 2007, Daniel DeMarco sold his home to Richard Katz. A few months later, Katz sued DeMarco, accusing him …