Veto v. Am. Family Mut. Ins. Co.

• Decision Date: 12 April 2012
• Docket Number: No. 2011AP557.,2011AP557.
• Citation: 815 N.W.2d 713,2012 WI App 56,341 Wis.2d 390
• Parties: Dale P. VETO and Becky S. Veto, Plaintiffs–Appellants, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant–Respondent.
• Court: Wisconsin Court of Appeals

341 Wis.2d 390

815 N.W.2d 713

2012 WI App 56

Dale P. VETO and Becky S. Veto, Plaintiffs–Appellants,

v.AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant–Respondent.^†

No. 2011AP557.

Court of Appeals of Wisconsin.

Submitted on Briefs Nov. 2, 2011.

Opinion Filed April 12, 2012.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Jamie Stock–Retzloff and Michael J. Luebke of Gingras, Cates & Luebke, S.C., Madison.

On behalf of the defendant-respondent, the cause was submitted on the brief of David J. Pliner of Corneille Law Group, LLC, Madison.

Before VERGERONT, HIGGINBOTHAM and SHERMAN, JJ.

SHERMAN, J.

[341 Wis.2d 392]¶ 1 Dale P. Veto and Becky S. Veto appeal from a judgment of the circuit court denying the Vetos' motion for declaratory judgment against American Family Mutual Insurance Company and dismissing the Vetos' complaint. The Vetos brought suit against American Family seeking declaratory relief from the court that American Family cannot reduce the amount paid to them under an endorsement to their umbrella insurance policy issued by American Family by the amount separately paid to Dale in workers' compensation benefits. The circuit court determined that a clause in the underlying automobile policy which allowed the company to reduce the coverage by the amount of the workers' compensation payment was incorporated into the umbrella policy endorsement and dismissed the Vetos' complaint. We reverse.

BACKGROUND

¶ 2 While acting within the scope of his employment as a Dane County deputy sheriff, Dale was seriously injured when he was struck by the uninsured driver of a stolen car. At the time of the accident, the Vetos were covered under two policies of insurance issued by American Family: a family car policy that included uninsured motorist coverage with policy limits of $100,000 each person and $300,000 each accident, and a personal liability umbrella policy with a policy limit of $1,000,000 for each occurrence. Because the accident occurred during the course of his employment, Dale was also covered under Dane County's workers' compensation insurance plan.

¶ 3 As a result of his injuries, Dale received a payment under the county's workers' compensation insurance policy of $344,870.90. However, the Vetos' total injuries exceeded $1,000,000, and they made demand upon American Family to pay them the policy limit under the umbrella policy. American Family made a payment to the Vetos of $655,129.10, which represented the $1,000,000 policy limit less the $344,870.90 workers' compensation payment Dale received. According to American Family, the following reducing clause in the Vetos' underlying automobile policy was incorporated into the umbrella policy and reduced the umbrella policy's limits of liability from $1,000,000 by the amount paid to Dale in workers' compensation benefits:

The limits of liability of this coverage will be reduced by:

....

3. A payment made or amount payable because of bodily injury under any workers' compensation or disability benefits law or any similar law.¹

American Family's assertion was based upon the following language in the endorsement to the umbrella policy: “However, Uninsured and Underinsured Motorists Coverage under this policy will be no broader than the underlying insurance.”

¶ 4 The Vetos brought the present action seeking a declaration that American Family cannot reduce the policy benefit owed to the Vetos under the umbrella policy by the amount received by Dale through his workers' compensation insurance and an order directing American Family to pay the Vetos the remaining benefits due under the umbrella policy.

¶ 5 The circuit court denied the Vetos declaratory judgment and dismissed their action. The court determined that, although the endorsement in the umbrella policy addressing uninsured motorists did not contain a reducing clause, language in the endorsement unambiguously incorporated the reducing clause in the Vetos' underlying automobile insurance policy. The Vetos appeal. Additional facts will be discussed below as necessary.

DISCUSSION

A. Standard of Review

¶ 6 We review a circuit court's decision on declaratory judgment for an exercise of discretion. Jones v. Secura Ins. Co., 2002 WI 11, ¶ 19, 249 Wis.2d 623, 638 N.W.2d 575. However, when the exercise of such discretion turns upon a question of law, we review the question of law independently of the circuit court's determination. See id. “Here, the circuit court's grant of declaratory judgment turned upon its interpretation of an insurance policy, which presents a question of law.” Olson v. Farrar, 2012 WI 3, ¶ 24, 338 Wis.2d 215, 809 N.W.2d 1.

¶ 7 When determining insurance coverage under a policy, we first consider whether the policy's insuring agreement makes an initial grant of coverage. Olson v. Farrar, 2010 WI App 165, ¶ 12, 330 Wis.2d 611, 794 N.W.2d 245. If “an initial grant of coverage in the insuring agreement is triggered by the claim, ‘we next examine the various exclusions to see whether any of them preclude coverage.’ Policy exclusions are narrowly or strictly construed and we resolve any ambiguities in favor of coverage.” Id. (citations omitted). “ ‘Our goal in interpreting insurance contracts is to discern and give effect to the intent of the parties.’ ” Id. (citation omitted). To that end, “the policy [is] construed as it would be understood by a reasonable person in the position of the insured.” St. John's Home of Milwaukee v. Continental Cas. Co., 147 Wis.2d 764, 781, 434 N.W.2d 112 (Ct.App.1988).

B. Uninsured Motorists Endorsement in Umbrella Policy Does Not Unambiguously Incorporate Reducing Clause From Auto Policy

¶ 8 Uninsured motorists liability coverage under the Vetos' personal liability umbrella policy is granted in an “Uninsured and Underinsured Motorists Coverage Following Form Endorsement.” ² While the terms of the endorsement contain a number of limitations and conditions, it contains neither a reducing clause nor any express incorporation by reference of the terms of the uninsured motorists coverage in the underlying auto policy.

¶ 9 The central issue before us is thus whether the reducing clause in the uninsured and underinsured motorists coverage of the underlying auto policy is unambiguously incorporated into the endorsement to the umbrella policy, ³ which provides in relevant part: “However, Uninsured and Underinsured Motorists Coverage under this policy will be no broader than the underlying insurance.”

¶ 10 American Family argues that the phrase “no broader than the underlying insurance” is a “catch-all” phrase intended to incorporate all of the terms of the uninsured motorists coverage from the automobile policy into the umbrella policy uninsured motorists endorsement.

¶ 11 The Vetos, on the other hand, argue that the phrase is ambiguous and that the reducing clause is therefore not incorporated into the endorsement. The circuit court agreed with American Family, concluding “that the ‘no broader than the underlying insurance’ policy language unambiguously incorporates all of the terms of the [uninsured motorists] coverage part from the underlying [automobile] policy, including the underlying policy's reduction clause.”

¶ 12 Language in an insurance policy is ambiguous if the words or phrases of the policy are susceptible to more than one reasonable interpretation. Stubbe v. Guidant Mut. Ins. Co., 2002 WI App 203, ¶ 8, 257 Wis.2d 401, 651 N.W.2d 318. Ambiguities are resolved in favor of coverage, advancing the insured's reasonable expectations of coverage. Id. To determine whether a policy provision is ambiguous, we read the provision in the context of the whole policy, rather than isolating a small part of the language from the whole. Folkman v. Quamme, 2003 WI 116, ¶ 21, 264 Wis.2d 617, 665 N.W.2d 857.

¶ 13 Accordingly, we interpret the language at issue here, “However, Uninsured and Underinsured Motorists Coverage under this policy will be no broader than the underlying insurance,” in the context of the entire endorsement. Doing so, we reject the interpretation that the phrase “no broader than” incorporates into the umbrella policy all of the terms of the uninsured motorists coverage in the underlying policy. We begin with the language itself.

¶ 14 The phrase “no broader than” is a vague term not defined in the umbrella policy. Black's Law Dictionary (9th ed. 2009) defines neither “no broader than” nor “broad” itself, although it does define both “broad-form policy” ⁴ and “broad-form insurance.” ⁵ These definitions do not help resolve the issue, since applying them simply tells us that “no broader than” means that the endorsement does not broaden the coverage that is available under the underlying policy, which is no more than a tautology and adds nothing to our understanding of whether or not the reducing clause is included within the concept of the breadth of coverage.

[341 Wis.2d 400]¶ 15 Standard dictionary definitions of “broad” also do not elucidate the meaning of “no broader than” in the umbrella policy endorsement. Merriam–Webster's On–Line Dictionary,http:// www. merriam- webster. com/ dictionary/ broad (last visited Apr. 9, 2012), provides eight different definitions for the term “broad.” The most applicable to our understanding of how this term is used in the endorsement at issue is the following definition: “widely applicable or applied: general broad rule>.” Likewise, Dictionary.com,http:// dictionary. reference. com/ browse/ broad (last visited Apr. 9, 2012), defines “broad” as “of great breadth” and “not limited or narrow; of extensive range or scope.” These definitions provide no insight into whether the phrase “no broader than” indicates that the reducing clause from the underlying automobile policy must be incorporated into the umbrella policy endorsement. Without the reducing clause, is the uninsured motorists coverage under the umbrella policy more “widely applicable or applied,” less “limited or narrow” or of...