Wood v. American Family Mut. Ins. Co.

• Decision Date: 09 March 1989
• Docket Number: No. 87-2051,87-2051
• Citation: 148 Wis.2d 639,436 N.W.2d 594
• Parties: Ronald H. WOOD, Plaintiff-Respondent, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant-Appellant.*
• Court: Wisconsin Supreme Court

Page 594

436 N.W.2d 594

148 Wis.2d 639

Ronald H. WOOD, Plaintiff-Respondent, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant-Appellant.*

No. 87-2051.

Supreme Court of Wisconsin.

Submitted on Briefs Oct. 5, 1988.

Decided March 9, 1989.

Carroll Metzner, Jean M. Wiencek, and Bell, Metzner & Gierhart, S.C., Madison, on briefs, for defendant-appellant.

Daniel G. Sandell, Madison, on brief, for plaintiff-respondent.

Eric Englund, Madison, on brief, amicus curiae for Wisconsin Ins. Alliance.

D.J. Weis and Johnson, Weis, Paulson & Priebe, S.C., Rhinelander, on brief, amicus curiae for Wisconsin Academy of Trial Lawyers.

CECI, Justice.

This is an appeal from a judgment of the circuit court for Dane county, Moria Krueger, circuit judge, granting Ronald H. Wood's motion for summary judgment in the amount of $133,753.42, plus costs. This court granted a petition to bypass the court of appeals, pursuant to section (Rule) 809.60, Stats. There are two issues raised in this appeal. The first issue is whether a drive-other-car exclusion in an underinsured motorist (UIM) provision of an insurance policy is valid and enforceable under Wisconsin law so as to prevent stacking of UIM benefits. The second issue is whether the reducing clause in the UIM provision of each insurance policy at issue in this case is valid and enforceable under Wisconsin law so as to reduce UIM benefits recoverable under the policy's limit by the amount received by the insured from the underinsured driver's liability policy. We conclude that the drive-other-car exclusion involved in this case is invalid and unenforceable under section 631.43(1), Stats. In addition, we conclude that the reducing clause in the UIM provision of each insurance policy at issue does not reduce UIM benefits recoverable under the policy's limit by the amount received by the insured from the underinsured driver's liability policy. Rather, the "amounts payable" from each UIM provision at issue in this case are measured against the insured's total damages, and the reducing clauses reduce UIM benefits by subtracting from the total damages sustained by the insured the amount received by the insured from the underinsured driver's liability policy.

The facts in this case are undisputed. On October 31, 1986, Donna Wood, the wife of Ronald H. Wood (respondent), was killed when a car, negligently driven by Daniel Nicholson, collided head-on with the 1984 Dodge Aries she was driving. The accident occurred in her lane of traffic. The car driven by Nicholson was owned by Virginia Trapino and was insured by the appellant, American Family Mutual Insurance Company (appellant). The policy provided for $25,000 per person liability coverage for injury or death caused by negligent operation of the car. The respondent's two automobiles, the 1984 Dodge Aries and a 1978 Dodge B200, were also insured by the appellant. Each policy contained UIM coverage of $100,000 per person and medical expense coverage of $2,000 per person. Each policy also had two clauses which are at issue in this appeal. First, each UIM provision contained a drive-other-car exclusion stating:

This coverage does not apply for bodily injury to a person:

1. While occupying, or when struck by, a motor vehicle that is not insured under this policy, if it is owned by you or any resident of your household.

Second, each UIM provision contained a reducing clause stating:

Any amounts payable will be reduced by:

1. A payment made by the owner or operator of the underinsured motor vehicle or organization which may be legally liable.

In his complaint, the respondent alleged that he suffered damages of more than $225,000 due to the wrongful death of his wife, and he incurred at least $4,000 in medical expenses. He alleged that the appellant had paid $25,000 from the Trapino liability policy, $75,000 from the UIM provision of the Dodge Aries policy, and $2,000 from the medical expense provision of the Dodge Aries policy. He also claimed that he was entitled to receive an additional $25,000 from the Dodge Aries UIM provision, $100,000 from the UIM provision of the Dodge B200 policy, and $2,000 from the Dodge B200 policy's medical expense provision. He sought a judgment of $127,000.

In its answer, the appellant admitted that it had paid $25,000 from the Trapino liability policy, $75,000 from the Dodge Aries policy's UIM provision, and $2,000 from the Dodge Aries policy's medical expense provision. It refused to pay more, contending that it had paid the full limits of the coverage available to the respondent for this accident.

On April 20, 1987, the appellant filed a motion for summary judgment. On September 2, 1987, the respondent filed a motion for declaratory judgment. In a memorandum decision dated September 2, 1987, the circuit court awarded summary judgment to the respondent and granted his motion for declaratory judgment. The court held that the drive-other-car exclusion and the reducing clause were prohibited by section 631.43(1) Stats. On October 6, 1987, in response to the respondent's motion for summary judgment in the amount of $125,000, the court entered judgment in the amount of $133,753.42, plus costs. This figure included the requested $125,000, plus interest (calculated at 12 percent) of $8,753.42.

On November 23, 1987, the appellant filed a notice of appeal challenging the decision of the circuit court. On February 16, 1988, we granted the respondent's petition to bypass the court of appeals. For the purposes of this appeal, the appellant agrees that it will pay an additional $2,000 from the medical expense provision of the Dodge B200 policy. However, it challenges the circuit court's holding that both the drive-other-car exclusion and the reducing clause are prohibited by section 631.43(1), Stats.

We first turn to the validity of the drive-other-car exclusion. Section 631.43, Stats., provides:

631.43 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.

(2) FRAUD AS A DEFENSE. Subsection (1) does not affect the right of an insurer to defend against a claim under the policy on the ground of fraudulent misrepresentation.

(3) EXCEPTION. Subsection (1) does not affect the rights of insurers to exclude coverages under s. 632.32(5)(b) and (c).

In ascertaining the proper scope to be given section 631.43(1), Stats., the language of the statute itself must first be considered. State ex rel. Melentowich v. Klink, 108 Wis.2d 374, 379, 321 N.W.2d 272 (1982). The aim of all statutory construction is to discern the intent of the legislature in enacting the statute. City of Waukesha v. Salbashian, 128 Wis.2d 334, 351, 382 N.W.2d 52 (1986); Shands v. Castrovinci, 115 Wis.2d 352, 356, 340 N.W.2d 506 (1983). Moreover, when the legislature enacts a statute, it is presumed to act with full knowledge of existing laws, including statutes. Mack v. Joint School District No. 3, 92 Wis.2d 476, 489, 285 N.W.2d 604 (1979); In Interest of G. & L.P., 119 Wis.2d 349, 354, 349 N.W.2d 743 (Ct.App.1984).

Section 631.43(1), by its terms, applies when two policies promise to indemnify an insured against the same loss. Yet, the appellant maintains that section 631.43(1) does not apply unless the policies at issue promise to indemnify the insured against the same loss and the coverage is statutorily mandated. Section 631.43(1) has no reference, explicit or inferential, which limits the application of the statute, as the appellant suggests, to cases involving statutorily mandated insurance coverage. Nothing in section 631.43(1) indicates that section 631.43 is to be applied only in connection with section 632.32(4), Stats. ¹ Furthermore, nothing in the drafting record of section 631.43 sustains the position that the insurance coverage at issue must be mandatory before section 631.43 applies.

In Welch v. State Farm Mutual Automobile Ins. Co., 122 Wis.2d 172, 173, 361 N.W.2d 680 (1985), an uninsured motorist (UM) case, this court held that the legislature, in enacting section 631.43, Stats., voided reducing clauses which attempt to prohibit the stacking of multiple policy coverage of UM protection issued by the same insurer to the same insured.

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.... 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.... State Farm's inclusion of a 'drive other car' exclusionary clause is such an attempt, and must therefore be invalidated.... The extent of the insurance company's liability and payment is governed by the damages sustained, consistent with the provisions of sec. 631.43(1), Stats., up to the aggregated policy limits of the insured's coverage. Pursuant to this statute, the Welches are entitled to stack coverage under each of the policies, to the full amount of their damages, to the extent their damages do not exceed the aggregated policy limits of their uninsured motorist coverage.

Id. at 177-78, 361 N.W.2d 680 (citations...