Bellile v. American Family Mut. Ins. Co., 03-0416.

• Citation: 679 N.W.2d 827,2004 WI App 72,272 Wis.2d 324
• Decision Date: 23 March 2004
• Docket Number: No. 03-0416.,03-0416.
• Parties: Susan L. Bellile, Plaintiff-Appellant, v. American Family Mutual Insurance Company, Defendant-Respondent.
• Court: Court of Appeals of Wisconsin

272 Wis.2d 324

2004 WI App 72

679 N.W.2d 827

Susan L. Bellile, Plaintiff-Appellant, v. American Family Mutual Insurance Company, Defendant-Respondent.

No. 03-0416.

Court of Appeals of Wisconsin.

Submitted on briefs September 29, 2003.

Decided March 23, 2004.

On behalf of the plaintiff-appellant, the cause was submitted on the briefs of Todd R. McEldowney of O'Melia, Schiek & McEldowney, S.C. of Rhinelander.

On behalf of the defendant-respondent, the cause was submitted on the brief of Richard W. Zalewski and Michael J. Roman of Zalewski, Klinner & Kramer, LLP of Wausau.

Before Cane, C.J., Hoover, P.J., and Peterson, J.

¶ 1. CANE, C.J.

This is another appeal in a recent line of cases that asks us to determine whether an underinsured motorist (UIM) reducing clause in an automobile insurance policy creates contextual ambiguity.¹ Susan Bellile appeals a declaratory judgment limiting American Family Mutual Insurance Company's liability for UIM coverage to $100,000 after applying the policy's UIM reducing clause. She argues the organization of the policy along with the limit of liability provisions when read in conjunction with the reducing clause creates contextual ambiguity. In light of the supreme court's recent decision in Folkman v. Quamme, 2003 WI 116, 264 Wis. 2d 617, 665 N.W.2d 857, we disagree and affirm the judgment.

BACKGROUND

¶ 2. On January 6, 2000, Bellile sustained bodily injuries when her vehicle was rear-ended by a vehicle driven by Dorothy Jossart. Jossart was insured by Safeco Insurance and had liability insurance with a per person limit of $50,000. Jossart was 100% causally negligent, and Safeco paid the policy limits.

¶ 3. American Family issued Bellile UIM coverage with a $150,000 "limit" as part of her "Wisconsin Family Car Policy." Bellile commenced an action against American Family for the UIM limit. American Family moved for a declaratory judgment arguing that, pursuant to a reducing clause, it was only required to pay $100,000 due to Bellile having already collected $50,000. Bellile also moved for a declaratory judgment entitling her to recover $150,000.

¶ 4. The trial court granted declaratory judgment to American Family. Shortly thereafter, the Wisconsin Supreme Court issued its decision in Badger Mutual Insurance Co. v. Schmitz, 2002 WI 98, 255 Wis. 2d 61, 647 N.W.2d 223. Schmitz set forth principles of insurance contract interpretation for UIM provisions and a contextual ambiguity framework. Bellile moved the court to reconsider and set aside the judgment, and the trial court granted the motion.

¶ 5. Bellile again moved for a declaratory judgment that she was entitled to $150,000, arguing the reducing clause in American Family's policy should be invalidated on contextual ambiguity grounds. The trial court once more granted declaratory judgment to American Family. It concluded the policy "clearly sets forth a clear and unambiguous limitation and reducing clause on the underinsured motorist coverage that is not ambiguous within the context of the entire policy." This appeal follows.²

DISCUSSION

[1-4]

¶ 6. The grant or denial of a declaratory judgment is addressed to the trial court's discretion. Jones v. Secura Ins. Co., 2002 WI 11, ¶ 19, 249 Wis. 2d 623, 638 N.W.2d 575. However, when the exercise of such discretion turns upon a question of law, we review the question de novo, benefiting from the trial court's analysis. Id. Here, the issue turns upon the construction of American Family's insurance contract, an exercise that presents a question of law we independently review. See Folkman, 264 Wis. 2d 617, ¶ 12. The goal in interpreting insurance contracts is to give effect to the parties' intent. Id., ¶ 16.

¶ 7. Before analyzing the policy, we first outline the policy's structure and content and trace the route the insured would have to take to get to the reducing clause. See Dowhower v. Marquez, 2004 WI App 3, ¶ 19, 268 Wis. 2d 823, 674 N.W.2d 906 (Dowhower III).

I. THE POLICY'S ORGANIZATION AND LANGUAGE

¶ 8. The "Wisconsin Family Car Policy" American Family issued to Bellile is relatively straightforward. By our count, it is thirteen pages long. The first and second pages comprise the declarations followed by a quick reference sheet on the third page. The fourth through eleventh pages constitute the original policy (numbered pages one through eight) and the underinsured motorist coverage is a two-page endorsement that appears at the end.

¶ 9. The first page of the declarations contains, among other things, lists for the policy's "COVERAGES AND LIMITS PROVIDED." The UIM coverage is the last listed coverage and appears as follows:

ENDORSEMENT—SEE BELOW

UNDERINSURED MOTORISTS COVERAGE — BODILY INJURY ONLY

$150,000 EACH PERSON $300,000 EACH ACCIDENT

While nowhere in the declarations does it state that the UIM coverage is subject to a reducing clause, the top of the page states "PLEASE READ YOUR POLICY." Further, the bottom of the page contains three sentences, and part of one reads, "These declarations form a part of this policy." On the second page of the declarations appears the following:

• AGREEMENT

We agree with you, in return for your premium payment, to insure you subject to all the terms of this policy. We will insure you for the coverages and the limits of liability as shown in the declarations of this policy.

¶ 10. After the declarations page is the policy's quick reference sheet. Near the top of the reference sheet are the following statements:

This policy is a legal contract between you (the policyholder) and the company. The following Quick Reference is only a brief outline of some important features in your policy and is not the insurance contract. The policy details the rights and duties of you and your insurance company. Read your policy carefully.

The quick reference sheet then lists three sections—"If You Have An Auto Accident or Loss," "Agreement," and "Definitions"—and then lists the policy's six formal parts: (1) "Liability Coverage," (2) "Medical Expense Coverage," (3) "Uninsured Motorists Coverage," (4) "Car Damage Coverages," (5) "Emergency Road Service Coverage," and (6) "General Provisions." Because UIM coverage is dealt with in an endorsement, the UIM coverage is not listed in the quick reference sheet, nor is it dealt with in the eight pages of the policy's body.

¶ 11. Following the policy's body is the two-page UIM endorsement. The endorsement is designated in large bold-faced typecast as, "UNDERINSURED MOTORISTS (UIM) COVERAGE ENDORSEMENT — KEEP WITH POLICY." On the first page, before laying out additional definitions, the endorsement states:

This endorsement forms a part of the policy to which it is attached and replaces any Underinsured Motorists Coverage previously issued as a part of this policy. You have this coverage if Underinsured Motorists Coverage is shown in the declarations.

We will pay compensatory damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an underinsured motor vehicle. The bodily injury must be sustained by an insured person and must be caused by accident and arise out of the use of the underinsured motor vehicle.

. . . .

We will pay under this coverage only after the limits of liability under any bodily injury liability bonds or policies have been exhausted by payment of judgements or settlements.

¶ 12. In the additional definitions section, "underinsured motor vehicle" is defined as "a motor vehicle which is insured by a liability bond or policy at the time of the accident which provides bodily injury liability limits less than the limits of liability of this Underinsured Motorist coverage." However, neither "underinsured motorist coverage" nor "reducing clause" is defined.

¶ 13. After the definitions come three exclusions, and then the "LIMITS OF LIABILITY" section. It states the UIM coverage limits of liability as shown in the declarations apply, subject to the following:

1. The limit for each person is the maximum for all person [sic] as the result of bodily injury to one person in any one accident.

2. Subject to the limit for each person, the limit for each accident is the maximum for bodily injury sustained by two or more persons in any one accident.

The section then states:

We will pay no more than these maximums no matter how many vehicles are described in the declarations, or insured persons, claims, claimants, policies, or vehicles are involved.

The limits of liability of this coverage may not be added to the limits of liability of any similar coverage under any other policy an insured persons or any member of an insured persons household may have.

We will pay only once for any damages or expenses payable under more than one coverage of this policy. Any damages or expenses paid under any other coverage of this policy are not eligible for payment under this coverage.

¶ 14. The reducing clause immediately follows this language and is located at the top of the endorsement's second page. It reads:

The limits of liability of this coverage will be reduced by:

1. A payment made or amount payable by or on behalf of any person or organization which may be legally liable, or under any collectible auto liability insurance, for loss caused by an accident with an underinsured motor vehicle.

2. A payment under the Liability coverage of this policy.

3. A payment made or amount payable because of bodily injury under any workers' compensation or disability benefits law or any similar law.

With this organization and language in hand, we now turn to Bellile's arguments.

II. THE UIM PROVISIONS ARE NOT CONTEXTUALLY AMBIGUOUS

¶ 15. Bellile agrees that the reducing clause conforms with WIS. STAT. § 632.32(5)(i).³ Thus, the clause itself is not ambiguous or contrary to public policy. See Schmitz, 255 Wis. 2d 61, ¶ 61. We now consider whether the reducing clause is ambiguous in context of the entire insurance contract. See id., ¶ 75; Folkman, 264 Wis. 2d...