Applied Underwriters can recover a $75,000 surety bond premium it paid to defend itself in Wisconsin, a state appeals court ruled on July 8.
The dispute goes back to a workers’ compensation case filed by Francis G. Graef. After a workplace injury in 2012, Graef received benefits but later sued Continental Indemnity Company in 2017 for refusing to cover his depression medication. He claimed that denial led to worsening mental health and a nonfatal self-inflicted gunshot wound in 2015.
That lawsuit was eventually thrown out. The courts said his claim belonged under Wisconsin’s worker’s comp system - not in civil court. But Graef wasn’t finished. He filed a new case against Applied Underwriters, claiming it was tied to Continental and doing insurance business in Wisconsin without a license. That’s where the bond comes in.
Graef asked the court to block Applied from defending itself unless it posted a $5 million surety bond. He cited Wisconsin law that requires unauthorized insurers to show financial responsibility before participating in court proceedings. Applied disagreed with his reading of the law but chose to post a $2.5 million bond anyway, just to move the case along. The bond cost the company $75,000.
Once the case was dismissed and Applied came out on top, it asked the court to include the bond premium in the bill of costs—basically, to have Graef reimburse it. Graef pushed back, arguing the bond was only needed because of Applied’s alleged misconduct.
But the circuit court didn’t see it that way, and neither did the Wisconsin Court of Appeals. In its July 8 decision, the appeals court said Wisconsin law (specifically, sections 814.04 and 814.05) allows prevailing parties to recover costs they can prove were necessary - including lawful premiums for surety bonds.
What tipped the decision in Applied’s favor was a stipulation between both sides. The company agreed to post the bond, and the court said that without it, Applied wouldn’t have been able to continue defending the case. A default judgment was a real possibility. That made the bond cost “necessary,” and under Wisconsin law, necessary costs get reimbursed.
The takeaway for insurers? Even when operating in gray areas like licensing disputes, the door isn’t closed on recovering litigation expenses - if the court sees those expenses as essential to getting your day in court.
