State Farm Mut. Auto. Ins. Co. v. Gillette
| Decision Date | 29 March 2002 |
| Docket Number | No. 00-0637.,00-0637. |
| Citation | 641 N.W.2d 662,251 Wis.2d 561,2002 WI 31 |
| Parties | STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Respondent-Petitioner, v. Franklin GILLETTE and V. Thomas Ostlund, Defendants-Appellants. |
| Court | Wisconsin Supreme Court |
For the plaintiff-respondent-petitioner there were briefs by Claude J. Covelli and Boardman, Suhr, Curry & Field LLP, Madison, and oral argument by Claude J. Covelli.
For the defendants-appellants there was a brief by Gregory J. Egan and Parke O'Flaherty, Ltd., La Crosse, and oral argument by Gregory J. Egan.
¶ 1.
This is a review of a published decision of the court of appeals1 affirming in part and reversing in part a judgment of the Circuit Court for La Crosse County, Dennis G. Montabon, Judge.
¶ 2. The question presented in this case is complex: Is an insured who is a Wisconsin resident and who has underinsured motorist coverage in a policy issued in Wisconsin (which policy promises to pay "damages for bodily injury an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle") entitled to recover noneconomic damages for pain and suffering from that Wisconsin insurance company for bodily injury arising from an automobile accident that occurred in Manitoba, Canada, between the insured and a Manitoba driver, when Manitoba law precludes the recovery of noneconomic damages? The circuit court answered the question no; the court of appeals answered the question yes. We affirm the court of appeals and answer the question yes, although we reach this result by a different path.
¶ 3. The circuit court granted summary judgment to State Farm Mutual Automobile Insurance Company, declaring that Franklin Gillette and V. Thomas Ostlund were not legally entitled to underinsured motorist coverage from State Farm because their claimed non-economic damages for pain and suffering were precluded by the automobile liability law of Manitoba, Canada, where the accident occurred.2 ¶ 4. The court of appeals reversed this portion of the circuit court's judgment, concluding that Gillette and Ostlund were entitled to underinsured motorist coverage from State Farm. According to the court of appeals, only two requirements must be met to trigger the underinsured motorist benefits: (1) causal negligence on the part of an underinsured motorist, and (2) damages that result from the accident but are not covered by the at-fault motorist's insurance. Because the parties agree that these two requirements are met in the present case, the court of appeals ruled that Gillette and Ostlund were legally entitled to the non-economic damages they sought from State Farm.3 The court of appeals reasoned that these two factors triggered the State Farm underinsured motorist coverage independent of any restrictions on recovery of damages from the underinsured motorist that were imposed by the law of the jurisdiction in which the accident occurred.4 The court of appeals concluded that the phrase "legally entitled to collect" did not preserve for State Farm all of the Manitoba tortfeasor's rights or immunities.5
¶ 5. We interpret the phrase "legally entitled to collect from the owner or driver of an underinsured motor vehicle" under Wisconsin contract choice of law rules. The interpretation of the phrase "legally entitled to collect" from an underinsured motorist arises in a variety of issues, including statutes of limitations; a tortfeasor's immunity from liability, such as governmental immunity; comparative negligence; and a limitation on the amount or type of damages. Each issue must be analyzed separately to determine whether an insurance company should be treated the same as or different than an underinsured motorist. Different considerations may apply to each issue presented in a particular case.6
¶ 6. We conclude that the only reasonable interpretation of the policy for purposes of calculating damages in the present case is that "damages for bodily injury an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle" means that an insurance company will compensate an insured for damages for bodily injury that the insured actually incurs for which an underinsured motorist is liable to the insured under the applicable law up to the policy liability limits.
¶ 7. We further conclude that Wisconsin tort choice of law rules govern which jurisdiction's law determines the damages an insured is legally entitled to collect from an underinsured motorist. Applying Wisconsin choice of law rules in the present case instructs us to look to Wisconsin law, the law of the forum. Wisconsin has the most significant contacts to the present case. Wisconsin is the jurisdiction where the injured persons reside and where the insurance policy was issued by a Wisconsin insurance company to Wisconsin insureds. Applying Wisconsin law comports with Wisconsin's public policy of compensating victims of tortfeasors. Under Wisconsin law, Gillette and Ostlund are legally entitled to collect noneconomic damages that arise from an automobile accident, and consequently, Gillette and Ostlund are legally entitled to collect noneconomic damages from State Farm on the basis of the underinsured motorist coverage. ¶ 8. We caution, however, that neither the law of the forum nor the law of the place of the accident is the choice of law rule applicable to every fact situation or to every issue that might arise regarding the "legally entitled to collect" language. The law of one jurisdiction could be invoked with respect to some issues and in some fact situations and the law of another jurisdiction invoked in respect to other issues and other fact situations.
¶ 9. We further conclude that the State Farm policy exhaustion requirement is satisfied, because the amount of recovery for noneconomic damages from the Manitoba underinsured motorist is zero. Therefore in the present case the limits of liability of all bodily injury policies that apply for noneconomic damages have been used up.
¶ 10. We shall first state the relevant facts (Part I) and then set forth the State Farm policy and a summary of the parties' arguments (Part II). We discuss the following three questions that are necessary to resolve the question of law presented: Which jurisdiction's law governs the interpretation of the insurance policy (Part III)? How is the policy language "legally entitled to collect" from an underinsured motorist to be interpreted (Part IV)? Which jurisdiction's law governs the amount of damages Gillette and Ostlund are legally entitled to collect from an underinsured motorist (Part V)? Finally, we consider the effect of the policy exhaustion provision that precludes the payment of underinsured motorist benefits until the limits of liability of all bodily injury policies have been used up by payment, judgments, or settlements (Part VI).
¶ 11. The relevant facts in the present case are undisputed. V. Thomas Ostlund, a Wisconsin resident, was driving his mother's pickup truck in Manitoba, Canada, on October 11, 1995. Franklin Gillette was a passenger in the pickup truck.
¶ 12. While stopped, the pickup truck was struck by another truck driven by Norman Unrau, a resident of Manitoba. The parties agree that Unrau, the underinsured motorist, was negligent and that the accident caused physical injuries to both Gillette and Ostlund.
¶ 13. Unrau's vehicle was registered in Manitoba and insured by the Manitoba Public Insurance Corporation (MPIC) as required by Manitoba law. The parties agree that Manitoba law governing motor vehicle accidents between a Manitoba insured and a non-Manitoba claimant provides at-fault liability coverage that pays compensable damages, including medical care, income replacement, and permanent impairment damages.7 MPIC does not, however, permit the recovery of non-economic damages from the driver that are now sought by Gillette and Ostlund from State Farm.8
¶ 14. At the time of the accident, State Farm insured the pickup truck driven by Ostlund, but the policy on this truck did not include underinsured motorist coverage. Ostlund had, however, two State Farm policies in force on motor vehicles he owned but that were not involved in the accident. Each policy included identical underinsured motorist coverage with $100,000 per person and $300,000 per accident limits of liability.9
¶ 15. At the time of the circuit court's decision to grant State Farm's motion for summary judgment, MPIC had paid Ostlund and his subrogated health insurance carrier $26,833.51. MPIC had not yet paid Gillette for his filed claim.
¶ 16. The key language in the State Farm policy in issue provides that State Farm will pay "damages for bodily injury an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle."10 An "underinsured motor vehicle" is defined in the policy as a motor vehicle the use of which is insured for bodily injury liability and whose liability limits are less than the amount of the insured's damages or have been reduced by payments to other than the insured to less than the amount of the insured's damages. The policy also provides that the most State Farm will pay is the lesser of (1) the difference between the amount of the insured's damages for bodily injury and the amount paid to the insured by or for the person who is or may be held legally liable for the bodily injury, or (2) the liability limits set forth in the policy. The policy provides that the insurance company and the insured must agree whether the insured is legally entitled to collect damages from the driver of an underinsured motor vehicle and if so in what amount. The policy is in effect in the United States and Canada.
¶ 17. The State Farm underinsured motor vehicle policy states in relevant part as follows:
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