Engstrom v. MSI Ins. Co.

• Decision Date: 21 November 1995
• Docket Number: No. 95-1415-FT,95-1415-FT
• Citation: 542 N.W.2d 481,198 Wis.2d 195
• Parties: Terri ENGSTROM, Allan Engstrom, and Carolyn Engstrom, Plaintiffs-Appellants, v. MSI INSURANCE COMPANY, d Defendant-Respondent.
• Court: Wisconsin Court of Appeals

Page 481

542 N.W.2d 481

198 Wis.2d 195

Terri ENGSTROM, Allan Engstrom, and Carolyn Engstrom Plaintiffs-Appellants, v. MSI INSURANCE COMPANY, ^d Defendant-Respondent.

No. 95-1415-FT.

Court of Appeals of Wisconsin.

Submitted on Briefs Sept. 13, 1995.

Opinion Released Nov. 21, 1995.

Opinion Filed Nov. 21, 1995.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Ardell W. Skow and Matthew A. Biegert of Doar, Drill and Skow, S.C. of New Richmond.

On behalf of the defendant-respondent, the cause was submitted on the brief of Theodore A. Franti of Thrasher, Doyle, Pelish & Franti, Ltd. of Rice Lake.

Before CANE, P.J., and LaROCQUE and MYSE, JJ.

CANE, Presiding Judge.

Terri, Allan and Carolyn Engstrom appeal a summary judgment in favor of MSI Insurance Company that dismissed their claim for underinsured motorist (UIM) benefits because the trial court concluded the vehicle that injured Terri was not an underinsured vehicle under the definition provided in the Engstroms' insurance policy. ¹ Because we conclude that the motor vehicle that injured Terri was underinsured with respect to one of the two liability policies covering it, we reverse the summary judgment and remand the case for further proceedings.

Terri was injured when the automobile she was driving was struck by an automobile driven by John Jeffrey. Terri and her parents sued Jeffrey and his insurer, Milwaukee Mutual Insurance Company, alleging negligence on Jeffrey's part. Jeffrey was driving his father's car at the time of the accident, which was covered by a Milwaukee Mutual policy with a $100,000 liability limit. A second Milwaukee Mutual policy had a liability limit of $25,000 and covered Jeffrey as the named insured on his own vehicle, which was not involved in the accident. The Engstroms ultimately settled their claims with Jeffrey and Milwaukee Mutual for the full amounts of the two liability policies, and those defendants were dismissed from the suit.

The Engstroms in an amended complaint sued their insurance carrier, MSI, alleging they were entitled to UIM benefits under their policy. MSI moved for summary judgment, arguing that Jeffrey's automobile was not an underinsured motor vehicle. The trial court granted MSI's motion, and the Engstroms now appeal.

The sole issue before this court is whether Jeffrey's vehicle was an underinsured motor vehicle under the definition provided in MSI's insurance policy. The interpretation of words or clauses in an insurance contract is a question of law this court decides independently of the trial court's decision. Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 810, 456 N.W.2d 597, 598 (1990). This construction is controlled by the same rules of construction as are applied to contracts generally. Kremers-Urban Co. v. American Employers Ins. Co., 119 Wis.2d 722, 735, 351 N.W.2d 156, 163 (1984). "[T]he test is ... what a reasonable person in the position of the insured would have understood the words to mean." Id.

The Engstroms' insurance policy provided in relevant part:

Underinsured motor vehicle means a land motor vehicle or trailer to which a bodily injury liability bond or policy applies at the time of the accident but the limits of that bond or policy are:

1. Less than the limit of liability for this coverage....

The Engstroms argue that Jeffrey's vehicle meets this definition because he had an applicable $25,000 liability insurance policy. They explain: "[A] liability policy that had limits of less than $50,000 applied to the Jeffrey vehicle. The fact that a different $100,000 liability insurance policy also applied, while relevant to the operation of the reducing clause, does not take the vehicle out from under the underinsured motor vehicle definition."

MSI points out that Jeffrey had liability coverage of $100,000 plus $25,000, equaling a total of $125,000, while the Engstroms had $50,000 in UIM coverage. MSI argues that because the total liability coverage was more than UIM coverage, "Jeffrey as a matter of definition and [as] a matter of law is not an underinsured motorist." MSI also argues that when comparing the amount of liability coverage to the amount of UIM coverage, this court should examine the $100,000 policy that insured the vehicle Jeffrey was driving, rather than the $25,000 policy which insured Jeffrey's vehicle parked at home, because the $100,000 was "primary" and the $25,000 policy was "excess." MSI explains:

This status of the primary versus excess coverages was the subject [of] a request for admissions (which plaintiffs admitted) and has never been disputed. As a result, the court is comparing the $50,000.00 UIM coverage on the MSI policy against the primary $100,000.00 of liability coverage or the $50,000.00 UIM policy versus the excess coverage (the first dollar in excess of $100,000.00 through $125,000.00).

We begin our analysis by examining the insurance policy's definition of an underinsured motor vehicle. According to the policy, an underinsured motor vehicle is "a land motor vehicle ... to which a bodily injury liability bond or policy applies at the time of the accident but the limits of that bond or policy " are less than the limit of liability for underinsured motor vehicle coverage. (Emphasis added.) In Smith, 155 Wis.2d at 811, 456 N.W.2d at 599, our supreme court examined a definition that was virtually identical to the Engstroms' policy definition and concluded that the policy terms regarding UIM insurance were unambiguous. ² The court concluded that coverage under the UIM provision only applies when the owner or driver of the other vehicle maintains a policy with a lower coverage than the insured. Id. ³

Just as our supreme court concluded the policy in Smith was unambiguous, we conclude that the Engstroms' policy is unambiguous. When the terms of an insurance policy are plain on their face, the policy must not be rewritten by construction. Limpert v. Smith, 56 Wis.2d 632, 640, 203 N.W.2d 29, 33 (1973). The definition's plain meaning is that the UIM coverage applies when the owner or driver of the other vehicle maintains a policy with a lower coverage than the insured. Applying this language to the instant case, the Engstroms can recover only if the car's owner, Jeffrey's father, or the car's driver, Jeffrey, maintained a policy with a lower coverage than the Engstroms' UIM covercoverage. Because Jeffrey had a liability policy for $25,000, which provides a lower coverage than the Engstroms' $50,000 UIM coverage, the definition applies and Jeffrey is an underinsured motorist.

MSI argues that the $25,000 policy should not be considered individually because it was excess coverage, rather than primary coverage. While there are reasons to differentiate primary and excess coverage when there is a dispute over which policy should contribute the first dollar of coverage, there is no such dispute in this case. Milwaukee Mutual has paid both policies in full. Moreover, while MSI argues that under Smith the distinction between primary and excess coverage is relevant, we read the Smith case as silent on the issue; Smith involved a single liability policy and does not even mention primary or excess policies. Finally, the underinsured motorist definition that controls MSI's...