Welin v. American Family Mut. Ins. Co., 2004AP1513.

Decision Date30 June 2006
Docket NumberNo. 2004AP1513.,2004AP1513.
Citation717 N.W.2d 690,2006 WI 81
PartiesAlison M. WELIN, Plaintiff-Appellant-Petitioner, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant-Respondent, Elizabeth A. Pyrzynski, Honeywell International and Acuity, Defendants, Secura Insurance, Defendant-Third-Party Plaintiff, v. Joshua J. Opichka, Wausau Benefits and Hastings Mutual Insurance Company, Third-Party Defendants.
CourtWisconsin Supreme Court

For the plaintiff-appellant-petitioner there were briefs by Stephanie L. Finn, Webster A. Hart, and Herrick & Hart, S.C., Eau Claire, and oral argument by Dennis M. Sullivan.

For the defendant-respondent there was a brief by John A. Kramer, Michael J. Roman, and Zalewski, Klinner & Kramer, L.L.P., Wausau, and oral argument by John A. Kramer.

An amicus curiae brief was filed by Matthew A. Biegert and Doar, Drill & Skow, S.C., New Richmond, on behalf of the Wisconsin Academy of Trial Lawyers.

¶ 1 SHIRLEY S. ABRAHAMSON, Chief Justice

This is a review of an unpublished decision of the court of appeals affirming a summary judgment by the circuit court for Chippewa County, Benjamin D. Proctor, Judge.1 The summary judgment was in favor of American Family Mutual Insurance Company. We reverse the decision of the court of appeals and remand the cause to the circuit court for further proceedings consistent with this opinion.

¶ 2 This case arises from an automobile accident. The liability insurance policy covering Elizabeth A. Pyrzynski, the tortfeasor, provided for a $300,000 policy limit; American Family's underinsured motorist (UIM) coverage of Alison M. Welin, the plaintiff, had limits of $300,000 per person and $300,000 per occurrence. The plaintiff's UIM coverage defined an underinsured motor vehicle as a motor vehicle that is insured with bodily injury liability limits less than the limits of liability of the UIM coverage.

¶ 3 The tortfeasor has insufficient liability coverage to pay for the damages to two people injured as a result of her negligence: the plaintiff, the driver of the other car involved in the accident; and Joshua Opichka, the tortfeasor's passenger at the time of the accident.

¶ 4 The plaintiff received $250,000 of the tortfeasor's $300,000 motor vehicle policy limit; the other person injured in the occurrence (not covered by the same UIM policy as the plaintiff) received $50,000 from the tortfeasor's insurer. The plaintiff's damages exceeded $250,000, and she is seeking $50,000 from American Family, the difference between what she was paid by the tortfeasor's insurer and the limit of liability under her UIM coverage.

¶ 5 The issue presented is whether a UIM insurance policy's definition of an underinsured motor vehicle as a motor vehicle that is insured with bodily injury liability limits less than the limits of liability of the UIM policy without regard for the amount the injured person actually receives from the tortfeasor's insurer is a reducing clause prohibited by Wis. Stat. § 632.32(4m) and (5)(i).

¶ 6 The circuit court dismissed the plaintiff's claim for her UIM coverage against American Family on the ground that the tortfeasor's vehicle did not meet the definition of an underinsured motor vehicle in the plaintiff's UIM policy; the limits in the plaintiff's UIM policy were equal to the limits in the tortfeasor's liability policy (both $300,000 per person). The circuit court therefore granted summary judgment to American Family, concluding that the plaintiff's UIM policy did not cover the plaintiff under the facts of the instant case. The court of appeals affirmed the judgment of the circuit court.

¶ 7 We conclude that prior cases upholding definitions of an underinsured motor vehicle similar to the one in the instant case remain good law for the issues they reached, but they do not resolve the issue presented by the instant case. The prior cases, unlike the instant case, involved only one injured person who was paid the full amount of the tortfeasor's liability policy.

¶ 8 We further conclude that when a tortfeasor injures more than one person in a single occurrence and the injured persons are not insured under the same UIM policy, a definition of an underinsured motor vehicle that compares the injured person's UIM limits to the limits of a tortfeasor's liability policy without regard to the amount the injured person actually receives from the tortfeasor's insurer is invalid under Wis. Stat. § 632.32(4m) and (5)(i). The definition contravenes the purpose of UIM coverage under Wis. Stat. § 632.32(4m) and functions as an impermissible reducing clause when a tortfeasor injures more than one person in a single occurrence and the injured persons are not insured under the same UIM policy.2

I

¶ 9 The following material facts about the automobile accident and the relevant insurance policies are undisputed.

¶ 10 The tortfeasor fell asleep while driving. Her car collided with a car driven by the plaintiff, who suffered serious injuries. Joshua Opichka, a passenger in the tortfeasor's car, was also seriously injured in the accident.

¶ 11 The tortfeasor is totally responsible for all damages. Her liability insurance policy issued by Secura Insurance provides for bodily injury liability limits of $300,000 per person and $300,000 per accident.

¶ 12 The plaintiff is insured under her father's insurance policy issued by American Family. The policy includes an endorsement providing for UIM coverage with limits of $300,000 per person and $300,000 per occurrence. The UIM endorsement defines an underinsured motor vehicle in relevant part as follows:

Underinsured motor vehicle means a motor vehicle which is insured by a liability bond or policy at the time of the accident which provides bodily injury liability limits less than the limits of liability of this Underinsured Motorists coverage.

¶ 13 The plaintiff filed suit against the tortfeasor and the tortfeasor's insurance company. She also filed suit against American Family, her UIM insurer, for the difference between any amount she was paid by the tortfeasor's insurer and the $300,000 provided by her UIM policy with American Family.

¶ 14 The parties stipulated that the plaintiff's damages were greater than $250,000 and that the tortfeasor's $300,000 limits of liability would be shared between the two injured persons; the plaintiff received $250,000, and Opichka, $50,000.3

¶ 15 Following the stipulation, American Family moved for summary judgment on the ground that its UIM endorsement was not triggered because the tortfeasor's vehicle did not meet the definition of an underinsured motor vehicle under the plaintiff's policy. The plaintiff contends that the definition of underinsured motor vehicle in American Family's UIM endorsement, under the circumstances of the instant case, is an impermissible reducing clause.

II

¶ 16 This case requires us to interpret and apply prior case law, Wis. Stat. § 632.32(4m) and (5)(i), and the insurance policy to undisputed facts. The interpretation and application of case law and statutes to undisputed facts are ordinarily questions of law that this court decides independently of the circuit court and court of appeals but benefiting from their analyses. An interpretation of an insurance policy is ordinarily a question of law.4 Finally, because this case was decided on summary judgment and the material facts are not in dispute, we follow the standard of review set forth in Wis. Stat. § 802.08; we determine whether the circuit court correctly decided an issue of law in its decision on the summary judgment motion.5

III

¶ 17 We now consider whether American Family's definition of an underinsured motor vehicle is, under the facts of the instant case, an impermissible reducing clause. We begin by summarizing the parties' arguments.

¶ 18 The plaintiff asserts that because the definition of an underinsured motor vehicle denies her all UIM coverage regardless of the sum paid her by the tortfeasor's liability policy, the policy definition is in effect a reducing clause prohibited by Wis. Stat. § 632.32(4m)(d) and (5)(i).6 The plaintiff urges that the amount of UIM coverage available to her should be the difference between what she has received from the tortfeasor's insurer and the $300,000 limit of liability in American Family's UIM endorsement.

¶ 19 American Family, on the other hand, argues that the definition of an underinsured motor vehicle is just that, a definition serving as a threshold inquiry as to whether the UIM endorsement applies. American Family asserts that its definition of an underinsured motor vehicle has been upheld in prior cases and that the plaintiff's actual recovery from the tortfeasor's insurer is irrelevant. If the tortfeasor's vehicle does not meet the definition of an underinsured motor vehicle in American Family's UIM endorsement, American Family reasons, UIM coverage does not apply and there can be no impermissible reducing clause.

¶ 20 We agree with the plaintiff. We first set forth an overview of UIM coverage. Next we examine our prior UIM cases upon which the parties rely. We then turn to Wis. Stat. § 632.32(4m), governing UIM coverage, and § 632.32(5)(i), governing reducing clauses in UIM policies. We conclude that American Family's definition of an underinsured motor vehicle is an invalid reducing clause under the facts of the instant case.

A

¶ 21 To put the present case in perspective we must examine the theory of UIM coverage adopted in Wisconsin and the validity of American Family's definition of an underinsured motor vehicle.

¶ 22 The statutes do not require or define UIM coverage. Section 632.32(4m)(d) provides that if an insured accepts UIM coverage, the insurer shall include coverage in limits of at least $50,000 per person and $100,000 per accident. In other words, once the insured buys a UIM policy the statute sets the minimum amount of coverage. Wisconsin Stat. § 632.32(4m)(d) provides in relevant...

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