As I am licensed in Florida and Vermont, I cannot comment specifically on Wisconsin law. However, generally, an auto liability policy provides a defense and coverage for both personal injury and property damage should you be sued. I would suggest that you review your insurance policy to see exactly what they have agreed to defend and pay for. If you are not able to understand your policy, I suggest that you contact a local attorney who can help you interpret the policy.Generally, I would expect an automobile liability insurance company to provide a defense in the circumstance you describe.
Have you formerly "tendered" the defense the of claim to your insurance company? It sounds like your insurance company is acting in bad faith.
I suggest reading the policy and meeting with your adjuster. Be sure to follow up all correspondence with your insurance company in writing.
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