Stone v. Acuity, 2005AP001629.

CourtUnited States State Supreme Court of Wisconsin
Citation747 N.W.2d 149,2008 WI 30
Docket NumberNo. 2005AP001629.,2005AP001629.
PartiesG. Vaughn STONE and Christine Stone, Plaintiffs-Respondents, Humana Wisconsin Health Organization Insurance Corporation, Involuntary-Plaintiff-Respondent, v. ACUITY, a mutual insurance company, Defendant-Appellant-Petitioner.
Decision Date11 April 2008
747 N.W.2d 149
2008 WI 30
G. Vaughn STONE and Christine Stone, Plaintiffs-Respondents,
Humana Wisconsin Health Organization Insurance Corporation, Involuntary-Plaintiff-Respondent,
ACUITY, a mutual insurance company, Defendant-Appellant-Petitioner.
No. 2005AP001629.
Supreme Court of Wisconsin.
Argued October 4, 2007.
Decided April 11, 2008.

[747 N.W.2d 151]

For the defendant-appellant-petitioner there were briefs by Arthur P. Simpson, Michelle D. Johnson, and Simpson & Deardorff, S.C., Milwaukee, and oral argument by Arthur P. Simpson.

For the plaintiffs-respondents there were briefs by William A. Jennaro, Thomas J. Lonzo, and Cook & Franke S.C., Milwaukee, and oral argument by Thomas J. Lonzo.

Amicus curiae briefs were filed by Michael R. Vescio, Mark K. Longua, and SmithAmundsen LLC, Milwaukee, on behalf of Wisconsin Insurance Alliance and Continental Insurance Company.

Amicus curiae briefs were filed by Lora A. Kaebler and End, Hierseman & Crain LLC, Milwaukee; Charles D. Smith and Cannon & Dunphy, S.C., Brookfield; and Charles C. Gleisner, III and the Law Offices of William C. Gleisner, Milwaukee; on behalf of the Wisconsin Academy of Trial Lawyers.

Amicus curiae briefs were filed by Lynn R. Laufenberg and Laufenberg & Hoefle, S.C., Milwaukee, on behalf of Karen Korb.


The petitioner, Acuity, seeks review of a published court of appeals decision affirming orders of the circuit court for Milwaukee County that denied Acuity's motions for summary judgment and reconsideration and that awarded G. Vaughn Stone and Christine Stone $500,000 pursuant to the parties' stipulation.1 Acuity contends that the court of appeals erred in its conclusions. (1) that Acuity violated Wis. Stat. § 632.32(4m)(2005-06)2 by failing to provide the Stones with notice of the availability of underinsured motorist (UIM) coverage, and (2) that as a remedy, the Stones are entitled to have their umbrella insurance policy reformed to provide retroactive UIM coverage. It further asserts that the circuit court erred in its determination that the policy was contextually ambiguous.

¶ 2 Relying on precedent, we conclude that by failing to provide the Stones with notice of the availability of UIM coverage as part of their umbrella insurance, Acuity violated the notice provision of § 632.32(4m). We further determine that where an insurer fails to provide notice of the availability of UIM coverage as part of an insurance policy, the appropriate remedy

747 N.W.2d 152

is to read in the level of coverage necessary for the policy to conform to § 632.32(4m)(d) — $50,000 per person and $100,000 per accident.

¶ 3 In the present case, however, the Stones' recovery is set by a stipulation between the parties, and we honor their agreement. Because we determine that insurance coverage exists from Acuity, under the plain language of the stipulation $500,000 is the amount Acuity must pay for the injuries and damages sustained by the Stones. Having decided the case on the basis of the statute and stipulation, we need not reach the question of whether the Stones' policy is contextually ambiguous. Accordingly, we affirm the court of appeals, but with different rationale.


¶ 4 This case arises out of an automobile-bicycle accident. G. Vaughn Stone was riding his bicycle when he was hit by a van driven by Alyce Lange. Stone sustained multiple fractures and dislocations and a collapsed lung. He underwent multiple surgical procedures and was hospitalized for approximately three weeks. Shortly after being released from the hospital, he suffered a stroke as a result of complications from his injuries. He then entered a rehabilitation hospital, where he was an inpatient for over a month. He continued to receive therapy and care after his release.

¶ 5 The Stones had automobile liability insurance with Acuity, including underinsured motorist (UIM) coverage. Both had limits of $300,000. They also had umbrella insurance with Acuity. The declaration section of the Stones' insurance policy lists "Personal Umbrella Liability Insurance" with a limit of $1 million. The declaration section also contains an entry for "Wisconsin Personal Umbrella" in a subsection labeled "Forms."

¶ 6 Later in the policy, the coverage provided by "Wisconsin Personal Umbrella" is described in a section labeled "Endorsements." It states that "[w]e will pay sums in excess of the primary limit that an insured is legally obligated to pay as damages because of personal injury or property damage caused by an occurrence to which this insurance applies." As "Primary Insurance for Umbrella," the policy lists two items; "Personal Liability Exposure" and "Auto Liability Exposure."

¶ 7 Acuity originally issued the Stones' auto insurance and personal umbrella endorsement in April 1993. Beginning in 1996, Acuity sent out notices of availability of UIM coverage on auto renewal policies in order to comply with revisions to Wis. Stat. § 632.32(4m). However, at that time Acuity did not offer UIM coverage for personal umbrella policies similar to the Stones'.

¶ 8 In 1999 Acuity began offering UIM coverage for its personal umbrella policies. It then provided notice of the availability of such coverage to new applicants. However, it did not provide notice of the availability of the coverage to existing personal umbrella policyholders such as the Stones. Thus, the Stones never received notice that UIM coverage was available as part of their umbrella insurance.

¶ 9 The Stones brought this action to recover from Lange and her insurer and under their Acuity insurance policy. Acuity filed a motion for summary judgment with the circuit court. It asserted that it did not provide UIM coverage to the Stones because, first, Lange was not an underinsured motorist, and second, the Stones' umbrella insurance extended only to personal liability and auto liability exposure. The Stones countered by arguing that their umbrella insurance with Acuity

747 N.W.2d 153

was contextually ambiguous with respect to whether it provided UIM coverage.

¶ 10 The circuit court denied Acuity's summary judgment motion. It determined that the Stones' insurance policy was contextually ambiguous as to whether it provided UIM coverage. The umbrella coverage was listed under the "forms" heading rather than under an "endorsement" heading in the policy declarations, the policy contained no specific exclusion of UIM coverage, and the policy left the impression that the umbrella policy is "excess over all other available insurance ...."

¶ 11 Acuity filed a motion for reconsideration. Prior to the circuit court's hearing on Acuity's motion, the court of appeals ordered to be published its opinion in Rebernick v. Wausau Gen. Ins. Co., 2005 WI App 15, 278 Wis.2d 461, 692 N.W.2d 348.3 In that case, the court of appeals determined that the requirement under Wis. Stat. § 632.32(4m) that insurers provide notice of the availability of UIM insurance can apply to personal umbrella insurance.

¶ 12 The Stones submitted a letter alerting the circuit court and Acuity of the Rebernick decision and asserting that they had not received notice of the availability of UIM umbrella coverage as required under § 632.32(4m) and Rebernick. Acuity responded by letter, arguing that the notice provision of § 632.32(4m) does not provide a "basis for creating a million dollars in further coverage."

¶ 13 At the reconsideration hearing, the parties argued the import of the court of appeals decision in Rebernick. The Stones discussed the court of appeals' holding and argued that Acuity failed to provide the required notice. The Stones noted that the majority of the court of appeals had left open the question of the appropriate remedy for failure to provide adequate notice under the statute.

¶ 14 The court referenced Rebernick in its discussion at the motion for reconsideration hearing. However, it denied the motion without altering the original decision, which was based on contextual ambiguity.

¶ 15 The Stones then reached a settlement agreement with. Lange and her insurer. Pursuant to the agreement, they entered into a stipulation dismissing all claims with respect to Lange and her insurer. In exchange, the Stones received $500,000 from Lange's insurer and $10,000 from Lange.

¶ 16 Before going to trial, the Stones and Acuity also reached a stipulation. It provided that a judgment be entered in favor of the Stones for $500,000 against Acuity and reserved Acuity's right to appeal the denial of its motion for summary judgment and motion for reconsideration of that denial. The stipulation and final order provide in relevant part:

WHEREAS, defendant ACUITY as an alleged insurer for plaintiffs and plaintiffs having negotiated an agreement as to the amount plaintiffs G. Vaughn Stone and Christine Stone, would be entitled to receive from ACUITY with the understanding that such agreement does not waive any rights of appeal of ACUITY with respect to the decisions on ACUITY'S Motion for Summary Judgment and Motion to Reconsider; and

WHEREAS, ACUITY and plaintiffs having agreed that the amount in addition to the $510,000 previously paid [by Lange and Lange's insurer] would be the sum of $500,000; and

747 N.W.2d 154

WHEREAS, the parties having agreed that the $500,000 figure would be the amount that ACUITY would pay for the injuries and damages sustained by G. Vaughn Stone and Christine Stone in the event insurance coverage is found on appeal to exist from ACUITY;

WHEREAS, the parties understand that this payment by ACUITY would include payment with respect to any subrogation claims that might exist, with G. Vaughan Stone and Christine Stone as well as any subrogated entities all reserving their rights to litigate any entitlement of the subrogated parties to recover damages from the $500,000 if that money is ultimately paid. Specifically, but without limitation, plaintiffs reserve the right to argue that they have not been made whole.


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