Dowhower v. West Bend Mut. Ins. Co.

• Decision Date: 30 June 2000
• Docket Number: No. 98-2762.,98-2762.
• Citation: 613 N.W.2d 557,236 Wis.2d 113,2000 WI 73
• Parties: Dustin DOWHOWER, a minor, by his Guardian and Litem, Susan Rosenberg, Tamara Dowhower and Larry Dowhower, Plaintiffs-Respondents, v. WEST BEND MUTUAL INSURANCE COMPANY, Defendant-Appellant, Simon MARQUEZ, Viking Insurance Company of Wisconsin and Aetna Life Insurance Company—Aetna Health Plan, Defendants.
• Court: Wisconsin Supreme Court

236 Wis.2d 113

2000 WI 73

613 N.W.2d 557

Dustin DOWHOWER, a minor, by his Guardian and Litem, Susan Rosenberg, Tamara Dowhower and Larry Dowhower, Plaintiffs-Respondents, v. WEST BEND MUTUAL INSURANCE COMPANY, Defendant-Appellant, Simon MARQUEZ, Viking Insurance Company of Wisconsin and Aetna Life Insurance Company—Aetna Health Plan, Defendants.

No. 98-2762.

Supreme Court of Wisconsin.

Oral argument April 25, 2000.

Decided June 30, 2000.

On behalf of defendant-appellant there were briefs (in the court of appeals and in the supreme court) by Rollin E. Krafft, West Bend, and oral argument by Rollin E. Krafft.

For plaintiffs-respondents there were briefs by Robert L. Jaskulski and Domnitz, Mawicke & Goisman, S.C., Milwaukee, and oral argument by Robert L. Jaskulski.

An amicus curiae brief was filed by Noreen J. Parrett, James A. Friedman and La Follette Godfrey & Kahn, Madison, on behalf of the Wisconsin Insurance Alliance. An amicus curiae brief was filed by Mark L. Thomsen and Cannon & Dunphy, S.C., Brookfield, on behalf of the Wisconsin Academy of Trial Lawyers.

¶ 1. WILLIAM A. BABLITCH, J.

West Bend Mutual Insurance Company (West Bend) appeals the circuit court's judgment declaring that Wis. Stat. § 632.32(5)(i)1 (1995-96)¹ violates the substantive due process clause in Wis. Const. art. I, § 1,² and U.S. Const. amend. XIV, § 1.³ Section 632.32(5)(i) authorizes the use of a type of reducing clause as a permissible provision in uninsured or underinsured motor vehicle insurance (UIM). A reducing clause permits a setoff from the insured's UIM coverage the amount paid to the insured by the underinsured tortfeasor. The statute provides, in relevant part,

(i) A policy may provide that the limits under the policy for uninsured or underinsured motorist coverage for bodily injury or death resulting from any one accident shall be reduced by any of the following that apply:

1. Amounts paid by or on behalf of any person or organization that may be legally responsible for the bodily injury or death for which the payment is made.

Wis. Stat. § 632.32(5)(i)1.

¶ 2. We conclude that the plaintiffs (the Dowhowers) have not established that Wis. Stat. § 632.32(5)(i)1 deprives them of a constitutionally protected right. As a result, they have not met the predicate threshold for bringing a substantive due process claim. Accordingly, we reverse the judgment of the circuit court.

Facts

¶ 3. The Dowhowers purchased automobile insurance, including UIM coverage, from West Bend. The policy's declaration page set forth the coverage and limits of liability. For UIM coverage, the declaration stated "UNDERINSURED MOTORIST BODILY INJURY $50,000 EACH PERSON $100,000 EACH ACCIDENT."

¶ 4. The policy also contained an endorsement relating to the UIM coverage. At the top, the endorsement stated "THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY." On page two of the endorsement, the policy set forth, in relevant part, the following:

LIMIT OF LIABILITY

A. The limit of liability shown in the Schedule or in the Declarations for this coverage is our maximum limit of liability for all damages resulting from any one accident. This is the most we will pay regardless of the number of:

1. "Insureds";

2. Claims made 3. Vehicles or premiums shown in the Schedule or in the Declarations; or

4. Vehicles involved in the accident.

B. The limit of liability shall be reduced by all sums:

1. Paid because of the "bodily injury" by or on behalf of persons or organizations who may be legally responsible.

¶ 5. While crossing the street in April 1997 Dustin Dowhower was injured as a result of the negligence of a motorist. Viking Insurance Company (Viking) insured the vehicle that struck Dowhower. Viking's policy carried a limit of $25,000 per person, or $50,000 per accident.

¶ 6. Viking paid its $25,000 policy limit to the Dowhowers. Pursuant to Wis. Stat. § 632.32(5)(i) and the reducing clause in its policy, West Bend paid the Dowhowers $25,000, which was the $50,000 UIM bodily injury limit under the UIM policy, less the $25,000 paid by Viking.

¶ 7. The Dowhowers sought a judgment from the circuit court declaring unenforceable the reducing clause provision in the UIM policy and contending that Wis. Stat. § 632.32(5)(i) violated the United States and Wisconsin constitutions. West Bend filed a motion to dismiss the action and counterclaimed for a declaration that it had paid all that it owed pursuant to § 632.32(5)(i) and the policy language.

¶ 8. The Racine County Circuit Court, the Honorable Wayne J. Marik presiding, declared that Wis. Stat. § 632.32(5)(i)1 violated the substantive due process provisions in the state and federal constitutions and that West Bend was obligated to provide $50,000 in UIM benefits to the Dowhowers. West Bend appealed. ¶ 9. We accepted certification of the following question from the court of appeals: Does the statute allowing reducing clauses for underinsured motorist coverage, Wis. Stat. § 632.32(5)(i) violate substantive due process under the state and federal constitutions?

Standard of Review

[1,2]

¶ 10. The constitutionality of a statute presents a question of law that we review de novo. Riccitelli v. Broekhuizen, 227 Wis. 2d 100, 119, 595 N.W.2d 397 (1999). A statute is presumed to be constitutional, and, every presumption will be used to sustain the law if at all possible. Gottlieb v. Milwaukee, 33 Wis. 2d 408, 147 N.W.2d 655 (1967). The challenger bears the heavy burden of overcoming that presumption. Riccitelli, 227 Wis. 2d at 119.

[3]

¶ 11. In addition, this constitutional question arises from a declaratory judgment action. "In a declaratory judgment action, the granting or denying of relief is a matter within the discretion of the circuit court." Hull v. State Farm Mut. Auto. Ins. Co., 222 Wis. 2d 627, 635, 586 N.W.2d 863 (1998). A discretionary decision will be sustained if it is not founded upon an error of law. Id. at 635-36.

Analysis

¶ 12. The sole issue on review is whether Wis. Stat. § 632.32(5)(i)1 violates substantive due process. The Dowhowers challenged § 632.32(5)(i) as contrary to both the substantive due process components of the Fourteenth Amendment to the United States Constitution and of art. I, § 1, of the Wisconsin Constitution. Our cases interpreting these constitutional provisions find no substantial difference between the due process protections provided in each document. Reginald D. v. State, 193 Wis. 2d 299, 307, 533 N.W.2d 181 (1995).

¶ 13. The due process clause in the Fourteenth Amendment to the United States Constitution is a guarantee of "`more than fair process.'" County of Sacramento v. Lewis, 523 U.S. 833, 840 (1998) (quoting Washington v. Glucksberg, 521 U.S. 702, 719 (1997)). The due process clause contains "a substantive sphere as well, `barring certain government actions regardless of the fairness of the procedures used to implement them.'" Id. (quoting Daniels v. Williams, 474 U.S. 327, 331 (1986)).

¶ 14. The threshold inquiry when analyzing an alleged violation of substantive due process is whether the challenger has established a deprivation of a liberty or property interest protected by the Constitution. Penterman v. Wisconsin Elec. Power Co., 211 Wis. 2d 458, 480, 565 N.W.2d 521 (1997).

¶ 15. Relying upon Wipperfurth v. U-Haul Co. of Western Wisconsin, Inc., 101 Wis. 2d 586, 297 N.W.2d 65 (1981) and the authority cited therein, the Dowhowers contend the freedom to contract without fraud or deception is both a liberty and property right arising from the due process clause. They allege that Wis. Stat. § 632.32(5)(i)1 unconstitutionally deprives them of this right. For the purposes of this case we will assume, without deciding, that the Dowhowers have identified and set forth a liberty or property interest that is constitutionally protected. However, the Dowhowers have not established that the statute has deprived them of that right. Therefore, we conclude that the state has not inflicted a palpable injury on the Dowhowers. As a result, substantive due process is not triggered.⁴

¶ 16. The Dowhowers' argument, as we understand it, is that Wis. Stat. § 632.32(5)(i)1 authorizes fraudulent insurance coverage because it permits the insurer to set forth within the policy that its UIM limit of liability is $50,000, even though the maximum amount of coverage that the insurance company will expend on a single claim will be less than $50,000.⁵ The Dowhowers contend that the statute permits the insurance policy to omit an explanation that the UIM liability limit is reached by combining all sources of payment. As a result, the Dowhowers assert that the UIM coverage in the policy is rendered illusory by the reducing clause. Based upon rulings by the courts that declared illusory UIM coverage to be void as contrary to public policy, the Dowhowers assert that the statute is unconstitutional because it authorizes illusory UIM coverage. As a result, the Dowhowers contend that the statute deprives them of their right to contract free of fraud and is a violation of substantive due process.

[5]

¶ 17. To evaluate this contention we consider the language of Wis. Stat. § 632.32(5)(i)1. "The court must interpret a statute, if at all possible, in a manner that will preserve the statute as a constitutional enactment." Demmith v. Wisconsin Judicial Conference, 166 Wis. 2d 649, 666 n.13, 480 N.W.2d 502 (1992). The language of § 632.32(5)(i) is unambiguous. Wisconsin Stat. ch. 632 regulates specific lines of insurance contracts. Section 632.32 specifically addresses provisions of motor vehicle insurance policies. Subsection (5) is titled "PERMISSIBLE PROVISIONS." Pursuant to § 632.32(5)(i), "[a] policy may provide that the limits under the policy. . .shall be reduced by. . .[a]mounts paid by or on behalf of any person. . .that may be legally responsible" for causing death or injury. The statute plainly allows a motor vehicle insurance contract to state that the maximum...