Peabody v. American Family Mut. Ins. Co.

• Decision Date: 28 May 1998
• Docket Number: No. 97-2842,97-2842
• Citation: 220 Wis.2d 340,582 N.W.2d 753
• Parties: Angela M. PEABODY, Plaintiff-Respondent, d v. AMERICAN FAMILY MUTUAL INSURANCE CO., Defendant-Appellant.
• Court: Wisconsin Court of Appeals

Page 753

582 N.W.2d 753

220 Wis.2d 340

Angela M. PEABODY, Plaintiff-Respondent, ^d v. AMERICAN FAMILY MUTUAL INSURANCE CO., Defendant-Appellant.

No. 97-2842.

Court of Appeals of Wisconsin.

Submitted on Briefs March 23, 1998.

Opinion Released May 28, 1998.

Opinion Filed May 28, 1998.

On behalf of the defendant-appellant, the cause was submitted on the briefs of Nancy J. Sixel of Tinglum & Sixel, S.C. of River Falls.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Michael A. Jacobson of Hammarback Law Offices, S.C. of River Falls.

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

CANE, Presiding Judge.

American Family Mutual Insurance Company appeals an order denying its motion for summary judgment and granting summary judgment in favor of Angela Peabody. ¹ American Family contends that Peabody is excluded from coverage under the plain meaning of the unambiguous language of the policy, and that the policy exclusion is supported by case law and public policy considerations. We agree and therefore reverse. ²

In 1994, Peabody ³ was injured while she was a passenger in a car owned by Michael Toenjes and driven by Timothy Owen. The Toenjes vehicle collided with a vehicle owned and driven by Matthew Quiding. Peabody shared Quiding's liability limits with the other injured parties.

At the time of the accident, Peabody owned her own vehicle, a 1986 Plymouth Duster. She insured the Plymouth through General Casualty; that policy, however, did not include underinsured motorist (UIM) coverage.

This suit arises from Peabody's attempt to obtain UIM benefits as a resident relative under her father, John Richmond's, policy on his own vehicle issued by American Family. ⁴ American Family moved for summary judgment because Richmond's policy and UIM endorsement excluded resident relatives who owned their own cars from receiving UIM benefits. The trial court denied American Family's motion and further found that Peabody was covered under her father's American Family policy and entered judgment in her favor.

We review a summary judgment de novo, applying the same standards as the trial court. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315, 401 N.W.2d 816, 820 (1987). The methodology is well-known and need not be repeated here. See State Bank v. Elsen, 128 Wis.2d 508, 511-12, 383 N.W.2d 916, 917-18 (Ct.App.1986). Summary judgment is appropriate when there is no genuine issue of material fact present and the moving party is entitled to judgment as a matter of law. Section 802.08(2), STATS.; Kersten, 136 Wis.2d at 315, 401 N.W.2d at 820.

The issue before us is whether Peabody is an insured entitled to receive UIM benefits under her father's policy. In the section of the policy entitled "Definitions Used Throughout This Policy," the policy defines relative as: "[A] person living in your household, related to you by blood, marriage or adoption. This includes a ward or foster child. It does not include any person who, or whose spouse, owns a motor vehicle other than an off-road motor vehicle." (Emphasis added.) The policy also included an "Underinsured Motorists (UIM) Coverage Endorsement." Immediately following the title of the endorsement are the words "Keep With Policy," and the first line of the UIM endorsement states: "This endorsement forms a part of the policy to which it is attached." The UIM endorsement goes on to state that: "As used in this endorsement: (1) Insured person means: a. You or a relative." If this exclusion is valid, then Peabody is not entitled to UIM benefits. First, we determine whether the policy clearly and unambiguously excludes Peabody from coverage. Then we examine whether the exclusion is valid under Wisconsin statutes, case law, and public policy considerations.

Resolution of this issue involves construction of an insurance policy, which is a question of law we decide without deference to the trial court. Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 810, 456 N.W.2d 597, 598 (1990). The rules applicable to statutory construction apply when evaluating an insurance contract as well. Id. In resolving this issue, we must first look to the language of the policy. Budget Rent-A-Car Sys. v. Shelby Ins. Group, 197 Wis.2d 663, 669, 541 N.W.2d 178, 180 (Ct.App.1995). If the terms of an insurance policy are plain and unambiguous, we must not rewrite the policy by construction. Smith, 155 Wis.2d at 811, 456 N.W.2d at 599. A term or phrase is ambiguous if it is susceptible to more than one reasonable construction. Id. at 811, 456 N.W.2d at 598-99. A term is not ambiguous, however, just because persons may reach different conclusions regarding the meaning or may interpret the term differently. In re Michael J.K., 209 Wis.2d 499, 504, 564 N.W.2d 350, 352 (Ct.App.1997). We must construe a term in a policy not from the standpoint of what the insurer intended but from what a reasonable person in the insured's place would believe the term means. See Garriguenc v. Love, 67 Wis.2d 130, 134-35, 226 N.W.2d 414, 417 (1975); Reserve Life Ins. Co. v. La Follette, 108 Wis.2d 637, 645, 323 N.W.2d 173, 177 (Ct.App.1982).

Peabody asserts that the trial court correctly found that the policy is ambiguous because the term "relative" as used in the UIM endorsement could be understood by a reasonable person in the insured's place to constitute a redefinition of the term "relative," and that it is reasonable for the insured to interpret "relative" according to its common, ordinary meaning and not the meaning defined in the body of the policy.

American Family, on the other hand, argues that the meaning of "relative" as used in the policy, including the attached UIM endorsement, clearly and unambiguously excludes residents who own their own vehicles from receiving UIM benefits. We agree with American Family that the policy clearly and unambiguously limits the UIM coverage to the named insured or a relative, provided the relative does not own his or her own vehicle. In the section of the policy entitled "Definitions Used Throughout This Policy," the term relative is defined, and contains a definitional exclusion commonly referred to as an "own other car" exclusion. The policy provides:

As used throughout this policy, except where redefined, and shown in bold type:

....

Relative means a person living in your household, related to you by blood, marriage or adoption. This includes a ward or foster child. It does not include any person who, or whose spouse, owns a motor vehicle other than an off-road motor vehicle. (Italics emphasis added; bold emphasis in original.)

Richmond's policy also includes an "Underinsured Motorists (UIM) Coverage Endorsement," which states:

This endorsement forms a part of the policy to which it is attached ....

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. (Italics emphasis added; bold emphasis in original.)

The UIM coverage endorsement goes on to provide in a section entitled, "Additional Definitions Used in This Endorsement Only," that, as used in the endorsement, an insured person means "you or a relative." (Emphasis in original.)

The policy definition of relative applies in the endorsement definition of insured. The endorsement is a part of the policy as a whole, "relative" appears in bold type in the endorsement definition of an insured, and the term "relative" is not redefined in the endorsement. According to the plain language of the policy, the definition of relative set forth in the definition section of the policy applies in the UIM endorsement as well. We do not conclude it is reasonable for Peabody to assert that the mentioning of a pre-defined term in a different part of the policy equals a redefinition of that term, especially where the term appears in bold type, and the portion of the policy where the disputed term is found is prefaced by language clearly incorporating the document into the policy as a whole.

The policy clearly and unambiguously excludes from coverage household residents related by blood, marriage or adoption who own their own vehicles. It is therefore our function to apply the clear and unambiguous language of the policy to the facts before us. Budget Rent-A-Car, 197 Wis.2d at 669, 541 N.W.2d at 180. The parties do not dispute that Peabody owned her own vehicle at the time of the accident. Peabody, therefore, does not fall within the definition of "relative" as set forth in Richmond's policy. Because she is not a relative according to the terms of the policy, it also follows that she is not an insured under the UIM coverage endorsement, which defines an insured person as "you" (the named insured) or "a relative."

Having determined that the policy clearly and unambiguously excludes Peabody from receiving UIM coverage because she is not an insured, we next determine whether this definitional exclusion comports with Wisconsin statutes, case law and public policy considerations. Peabody first contends that exclusion of a blood relative from UIM benefits is contrary to § 632.32(6)(b)1, STATS. Specifically, she argues that § 632.32, STATS., applies to all insurance policies and the American Family exclusion violates § 632.32(6)(b)1, STATS. That section provides: "No policy may exclude from the coverage afforded or benefits provided: (1) Persons related by blood or marriage to the insured." Peabody relies on Bindrim v. B. & J. Ins. Agency, 190 Wis.2d 525, 527 N.W.2d 320 (1995), for the proposition that § 632.32(6)(b)1, STATS., prohibits any exclusion of a relative by blood or marriage in all insurance policies. Peabody's arguments are unpersuasive because they ignore the scope of applicability of § 632.32(1), STATS., and because Bindrim is easily distinguishable from...