Lockwood International, B v. v. Volm Bag Co.

POSNER, Circuit Judge.

This diversity suit, based on Wisconsin law, presents a novel but potentially quite important issue of insurance law: whether a liability insurer, asked to defend (or pay the defense costs in) a suit against its insured that contains some claims that are covered by the insurance policy and others that are not, can limit its responsibility to defend by paying the plaintiff in the liability suit to replead the covered claims as uncovered claims.

For simplicity we treat the case as a three-cornered dispute among a single plaintiff, Lockwood; a single intervenor, North River,…