13-page auto policy unambiguous

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“As each policy’s length including the endorsement is only thirteen pages, a policy holder can easily flip through the policy and find the clearly-labeled endorsement page at the end.” Hon. Patricia Curley Wisconsin Court of Appeals

An automobile insurance policy that is only 13 pages long, and contains no confusing language, is not so organizationally complex that the reducing clause to the underinsured motorist (UIM) coverage could be considered ambiguous, the Wisconsin Court of Appeals held on Feb. 17.

The court also held that UIM benefits may be reduced by payments from sources other than those enumerated in sec. 632.32(5)(i).

In 1998, Milwaukee Police Officer Steven Van Erden’s squad car was struck broadside by a vehicle driven by Joseph Sobczak. Van Erden suffered serious injuries.

Sobczak was insured by Badger Mutual Insurance Company with a liability limit of $25,000. Badger Mutual paid the full limits of the policy to Van Erden. Van Erden was also paid $159,496 in worker’s compensation coverage by the City.

Van Erden then filed claims for UIM coverage with his own insurance carrier, American Family Mutual Insurance Company. Both his policies contained identical reducing and anti-stacking provisions. Based on the terms of the policies, American Family paid Van Erden $65,503 — the difference between the largest amount of UIM coverage under either policy ($250,000) and the aggregate payments made by Badger Mutual on behalf of Sobczak and the City as Officer Van Erden’s worker’s compensation carrier ($184,496).

Van Erden filed a declaratory judgment action against the City and American Family, and all parties moved for summary judgment. Milwaukee County Circuit Court Judge David A. Hansher granted summary judgment in favor of the City and American Family.

Van Erden appealed, but the court of appeals affirmed in a published decision. Van Erden v. Sobczak, 2003 WI App 57, 260 Wis.2d 881, 659 N.W.2d 896. The Wisconsin Supreme Court vacated the decision for reconsideration in light of Folkman v. Quamme, 2003 WI 116, 264 Wis.2d 617, 665 N.W.2d 857.

On remand from the Supreme Court, the court of appeals once again affirmed the trial court’s holding in a decision written by Judge Patricia Curley, and joined by Judge Ralph Adam Fine. Judge Charles B. Schudson concurred in part, and dissented in part.

Self-insured City

The court first held that the City of Milwaukee, as a self-insured entity, was not required to offer UIM coverage to its employees.

Section 632.32(4m)(a)1 requires any “insurer writing policies” to offer UIM coverage to its insureds.

Section 62.67 requires first class cities (Milwaukee) to provide uninsured motorist (UM) coverage for motor vehicles owned by the city and operated by city employees in the course of employment.

Because the statutes require cities to provide UM coverage, but not UIM coverage, the court concluded they evince legislative intent that cities need not provide UIM coverage.

The court added that prior precedent also holds that a self-insured entity is not “an insurance entity capable of issuing an insurance policy on behalf of the operators of its vehicles.” Classified Ins. Co. v. Budget Rent-A-Car of Wisconsin, Inc., 186 Wis.2d 478, 483-484, 521 N.W.2d 177 (Ct.App.1994).

Unambiguous Clause

The court then held that the policy was neither illusory nor ambiguous. Van Erden argued that the lack of a definition of the term “endorsement” and the failure to identify the location of the UIM reducing clause, on the declarations page, renders the UIM coverage illusory.

The court concluded that the definition of “endorsement” in an insurance policy is well-known, and noted that no case law requires that the declarations page must alert the insured to a reducing clause.

The court stated, “While the location of an endorsement is a factor to consider in determining whether the policy is ‘user-friendly,’ location on the declarations page is not mandatory. Here, the UIM coverage limit is listed under the word ‘endorsement’ on the declarations page. As each policy’s length including the endorsement is only 13 pages, a policy holder can easily flip through the policy and find the clearly-labeled endorsement page at the end. We also note that following the declarations pages is a helpful index entitled ‘Quick Reference’ that, with the exception of the endorsements, assists the reader in locating particular clauses in the policy.”

Statutory Compliance

The court also rejected Van Erden’s argument that the reducing clause failed to comply with sec. 632.32(5)(i).

The statute permits reducing clauses for “[a]mounts paid by or on behalf of any person or organization that may be legally responsible for the bodily injury or death for which the payment is made … any worker’s compensation law … [and] any disability benefits law.”

The policy, however, included a reduction for payments pursuant to worker’s compensation law, disability benefits law, “or any similar law.”

The court found that the policy complied with the statute, notwithstanding the addition, because the Wisconsin Supreme Court approved, in dicta, a provision permitting reduction for “payments from all sources” in Taylor v. Greatway Ins. Co., 2001 WI 93, 245 Wis.2d 134, 628 N.W.2d 916.

The court concluded, “the policy language found here is … altogether different than that found in Schmitz, in which the court deemed the American Merchant’s policy ‘a maze that is organizationally complex and plainly contradictory.’ 255 Wis. 2d 61, par. 72. The effect of the reducing clause was made clear in the endorsement. The policy made reference to UIM coverage in the declarations page. Further, the endorsement contained no disingenuous or confusing language. Here, there is no contextual ambiguity as there are no inconsistent provisions, provisions that build false expectations, or provisions that produce reasonable alternative meanings.

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Therefore, we conclude the UIM policy coverage was neither ambiguous nor illusory.”

Accordingly, the court affirmed.

Partial Dissent

Judge Schudson wrote separately, concurring in the dismissal of the action against American Family, but dissenting from the dismissal of the action against the City.

Schudson concluded that, pursuant to the holding by the Wisconsin Supreme
Court in Milers National Insurance Co. v. City of Milwaukee, the city was, as a self-insurer, an “insurer writing policies,” subject to the same laws as any other insurer, and thus, required to offer underinsured motorist coverage to Van Erden.

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David Ziemer can be reached by email.