Welch by Richards v. State Farm Mut. Auto. Ins. Co.

Citation122 Wis.2d 172,361 N.W.2d 680
Decision Date31 January 1985
Docket NumberNo. 83-1188,83-1188
PartiesWilliam WELCH and Valerie Welch by Charles J. RICHARDS, their Guardian ad Litem, Debra Welch and Clarence Welch, Plaintiffs-Respondents-Petitioners, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.
CourtUnited States State Supreme Court of Wisconsin

Charles J. Richards, Kenosha, argued, for plaintiffs-respondents-petitioners; Phillips, Richards, Lepp, Mayew & Kluka, S.C., Kenosha, on brief.

Virginia M. Antoine, Racine, argued, for defendant-appellant; Russell M. Ware, and Schoone, McManus, Hankel, Ware & Fortune, S.C., Racine, on brief.

William C. Gleisner III, David L. Nichols and Weiss, Steuer, Berzowski, Brady & Donahue, Milwaukee, for amicus curiae Wisconsin Academy of Trial Lawyers.

WILLIAM A. BABLITCH, Justice.

Petitioners seek review of a decision of the court of appeals which held that State Farm Mutual Automobile Insurance Company (State Farm) can lawfully exclude coverage in the uninsured motorist provision of its policy for accidents involving motor vehicles owned by the insured but not included in the policy. In reaching this result, the court of appeals sanctioned the use of a "drive other car" exclusionary clause, which had the effect of validating State Farm's attempt to prevent the insured's stacking of policy coverages. We hold, consistent with Tahtinen v. MSI Insurance Company, 122 Wis.2d 158, 361 N.W.2d 673 (1984), that the legislature, in enacting Wisconsin's stacking statute, voided reducing clauses which attempt to prohibit the stacking of multiple policy coverages of uninsured motorist protection issued by the same insurer to the same insured. The "drive other car" exclusionary clause is such an attempt, and accordingly, we reverse.

This action arises out of an automobile accident which occurred on May 10, 1981. Clarence Welch, his wife Debra Welch, and their two minor children William Welch and Valerie Welch were seriously injured in a head-on collision with William Logan, an uninsured motorist.

At the time of the accident, Mr. Welch was insured under two separate policies issued by State Farm. The first policy, covering Mr. Welch's 1968 Rambler, the automobile involved in the accident, provided standard uninsured motorist coverage with limitations of $50,000 for each person injured and $100,000 for all injuries arising out of one accident. The second policy, covering Mr. Welch's 1978 Chevrolet truck provided identical uninsured motorist coverage.

State Farm paid its policy limits of $100,000 under the uninsured motorist coverage of the policy covering the 1968 Rambler. Fifty thousand dollars was paid to Debra Welch, $20,000 was paid to Valerie Welch and $15,000 was paid to both Clarence and William Welch. The Welches contended that the damages they sustained exceeded this amount, and that these excess damages should be covered by the uninsured motorist provisions contained in the policy covering the 1978 Chevrolet truck. State Farm refused to provide additional payments under this policy.

The Welches brought suit for declaratory judgment asking the trial court to determine that the uninsured motorist coverage in the policy covering the Chevrolet truck be applied to the injuries they sustained in the collision. State Farm answered, alleging that the policy terms covering the truck excluded from uninsured motorist coverage any bodily injury an insured sustains while occupying a motor vehicle owned by the insured or a resident of the same household if such vehicle was not the motor vehicle set forth in the policy. The policy exclusion, which has been termed a "drive other car" exclusion, provides in pertinent part:

"EXCLUSIONS--SECTION III

"This insurance does to apply:

"....

"(b) To bodily injury to an insured while occupying or through being struck by a land motor vehicle owned by the named insured or any resident of the same household, if such vehicle is not an owned motor vehicle: ...."

The policy also provides that an "owned motor vehicle means the motor vehicle ... described in the declarations ...."

On May 12, 1983, the circuit court for Kenosha county granted the Welches' motion for declaratory judgment. The court held that the "drive other car" exclusion violated public policy and was inequitable.

State Farm appealed this decision to the court of appeals. In an unpublished opinion, the court of appeals held that because the language in State Farm's policy covering the Chevrolet truck clearly excluded uninsured motorist coverage when Mr. Welch or his family were riding in their 1968 Rambler, the circuit court's declaratory judgment must be reversed. 117 Wis.2d 785, 345 N.W.2d 80. The court of appeals relied on this court's decision in Roe v. Larson, 99 Wis.2d 332, 298 N.W.2d 580 (1980), and Vidmar v. American Family Mut. Ins. Co., 104 Wis.2d 360, 312 N.W.2d 129 (1981), in order to conclude that exclusionary clauses, similar to the one presently before this court, provide a valid means for insurers to preclude recovery. The Welches subsequently filed a petition for review which was granted by this court.

The sole issue for review is whether an insurance company which issues two or more insurance policies to the same insured may lawfully include a policy provision in the uninsured motorist section of its policy which excludes coverage for accidents involving motor vehicles owned by the insured but not included in the policy. We hold that they can not. This "drive other car" exclusion serves to prohibit stacking of uninsured motorist benefits against the same insurer, and is therefore prohibited by sec. 631.43(1), Stats. As we stated in Tahtinen v. MSI Insurance Company, released on this date, this statute clearly and unambiguously voids reducing clauses which attempt to prevent stacking of uninsured motorist benefits.

In Tahtinen, the insured was insured under three separate automobile policies issued by MSI Insurance Company at the time he was struck by an uninsured motorist. Tahtinen made a claim for benefits under each of the policy's uninsured motorist coverage provisions. MSI limited its compensation for uninsured motorist benefits to the policy which had insured the automobile Tahtinen had been driving immediately prior to the accident. It maintained that its liability was limited to the policy limit of one policy because each of the policies contained the following provision, which MSI claimed prohibited stacking of coverage:

"3. Other Automobile Insurance in the Company: With respect to any occurrence, accident, or loss to which this and any other automobile insurance policy issued to the named insured by the Company also applies, the total limit of the Company's liability under all such policies shall not exceed the highest applicable limit of liability under any one such policy." Tahtinen v. MSI Insurance Company, 122 Wis.2d 158, 361 N.W.2d 673, 675.

We held that the legislature, in enacting sec. 631.43(1), Stats., clearly and unambiguously voided reducing clauses which attempt to prevent stacking of uninsured motorist protection. Tahtinen v. MSI Insurance Company, supra, p. 675. Section 631.43(1) provides:

"Other insurance provisions. (1) General. When 2 or more policies promise to indemnify an insured against the same loss, no 'other insurance' provisions of the policy may reduce the aggregate protection of the insured below the lesser of the actual insured loss suffered by the insured or the total indemnification promised by the policies if there were no 'other insurance' provisions. The policies may by their terms define the extent to which each is primary and each excess, but if the policies contain inconsistent terms on that point, the insurers shall be jointly and severally liable to the insured on any coverage where the terms are inconsistent, each to the full amount of coverage it provided. Settlement among the insurers shall not alter any rights of the insured."

Thus, the legislature mandated that insurers were not permitted to relieve themselves of liability in a situation where an insured had other uninsured motorist coverage available to him or her when that coverage by itself was insufficient to indemnify the insured to the full extent of his or her loss up to the available policy limits. Thus, we held in Tahtinen that "other automobile insurance in the company" reducing clauses were violative of the legislative directive contained in sec. 631.43(1), Stats., which was to provide the insured indemnification to the full extent of his or her loss up to the aggregated policy limits of his or her coverage. Tahtinen v. MSI Insurance Company, supra, pp. 678, 679.

Upon examination, we perceive no difference in principle or application between the "other automobile insurance in the company" reducing clause, invalidated in Tahtinen, and the "drive other car" exclusion presently before this court. Accord Grange Mut. Cas. Co. v. Volkmann, 374 N.E.2d 1258, 1261 (Ohio 1978); Bradley v. Mid-Century Ins. Co., 409 Mich. 1, 294 N.W.2d 141, 147 (1980) (citing Boettner v. State Farm Mutual Ins. Co., 388 Mich. 482, 201 N.W.2d 795, 798 (1972)). Both the "drive other car" reducing clause and the "other automobile insurance in the company" reducing clause serve the same purpose: both clauses are an attempt to avoid the statutory prohibition of reducing clauses. Bradley, 294 N.W.2d at 147. The legislature clearly indicated its intent to invalidate attempts by insurers to avoid their statutory obligations to compensate the insured up to the aggregated policy limits of the insured's coverage by enacting the stacking doctrine. Tahtinen v. MSI Insurance Company, supra, p. 676; Landvatter v. Globe Security Ins. Co., 100 Wis.2d 21, 26, 300 N.W.2d 875 (Ct.App.1980). State Farm's inclusion of a "drive other car" exclusionary clause is such an attempt, and must therefore be invalidated.

We conclude that State Farm is liable to the Welch family under both...

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