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‘Amounts payable’ not ambiguous term

Nettesheim

“While the ‘amount payable’ provision would arguably permit further reductions, it would not cause a reasonable insured to believe that reductions would not be made for actual payments already made from other sources.

Hon. Neal Nettesheim
Wisconsin Court of Appeals

A reducing clause in a UIM policy is enforceable, even though it states that coverage limits will be reduced by payments made “or amount[s] payable” by the tortfeasor, the Wisconsin Court of Appeals held on Aug. 4.

Amy Remiszewski suffered severe personal injuries as a result of an accident which occurred when she was a passenger in Doug Piotrowski’s vehicle. Remiszewski incurred approximately $300,000 in medical bills as a result of the accident.

Piotrowski was insured by American Standard Insurance Company, which paid Remiszewski its full policy limits of $100,000.

Remiszewski was an insured under three separate American Family policies issued to her father. Each policy contained an underinsured motorist (UIM) provision with limits of $250,000, reducing clauses, and anti-stacking clauses.

The reducing clauses provided, in relevant part, “The limits of liability of this coverage will be reduced by: 1. A payment made or amount payable by or on behalf of any person or organization which may be legally liable, or under any collectible auto liability insurance, for loss caused by an accident with an underinsured motor vehicle.”

Remiszewski sought full payment under all three policies. American Family rejected the demand and instead agreed to pay Remiszewski $150,000, representing the $250,000 limit of liability under one policy, reduced by the $100,000 paid by Piotrowski’s policy.

Remiszewski responded with a declaratory judgment action. Waukesha County Circuit Court Judge Donald R. Hassin held the anti-stacking clauses were enforceable, but the reducing clauses were illusory, contrary to statute, and unenforceable.

Both parties appealed, and the court of appeals reversed on the latter issue, in a decision by Judge Neal Nettesheim.

Section 632.32(5)(i)1 provides that an insurance policy “may provide that the limits under the policy for uninsured or underinsured motorist coverage for bodily injury or death resulting from any one accident shall be reduced by … [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.”

What the court held

Case: Amy Remiszewski v. American Family Insurance Co., No. 03-2653.

Issue: Is a UIM reducing clause unenforceable where it provides that coverage will be reduced by “a payment made or amount payable by” a tortfeasor?

Holding: No. Where the insurer does not try to invoke the language, it does not nullify application of the valid portion of the reducing clause.

Counsel: James T. Murray Jr., Milwaukee; Frederick J. Smith, Milwaukee, for appellant; Victor C. Harding, Milwaukee; Aaron J. Bernstein, Milwaukee, for respondent.

The reducing clause in the American Family policies does not strictly track the statute, but states instead that “[t]he limits of liability of this coverage will be reduced by: … [a] payment made or amount payable by or on behalf of any person or organization which may be legally liable, or under any collectible auto liability insurance, for loss caused by an accident with an underinsured motor vehicle.”

Remiszewski noted that the phrase “amount payable” is not contained in sec. 632.32(5)(i)1, and argued that the phrase renders the UIM coverage illusory because it could include Piotrowski, who has not yet been released from liability and who “may be legally liable.”

Because there may yet be an “amount payable” to her from Piotrowski, Remiszewski argued that she purchased nothing when she contracted and paid for UIM coverage, making the contract illusory.

American Family contended that Remiszewski’s argument under the “amount payable” language is a non-issue because American Family never invoked this provision as a basis for rejecting Remiszewski’s demand for full coverage. Instead, American Family only invoked the “payment made” provision to reduce Remiszewski’s UIM coverage — a permissible provision under the statute.

The court agreed with American Family. The court concluded, “While the ‘amount payable’ provision would arguably permit further reductions, it would not cause a reasonable insured to believe that reductions would not be made for actual payments already made from other sources. … The fact that an insurance policy may include arguably ambiguous language upon which the insurer has not relied is of no consequence and will not defeat the right of an insurer to reduce its limits of liability under a valid provision. See, e.g., Van Erden v. Sobczak, 2004 WI App 40, par. 25, ___ Wis. 2d ___, 677 N.W.2d 718 (holding that a catchall phrase in a reducing clause that contained language not found in Wis. Stat. Sec. 632.32(5)(i) did not render the clause ambiguous; noting that the language was not in dispute and did not apply to the facts at bar), review denied, ___ Wis. 2d ___, ___ N.W.2d ___ (Wis. May 12, 2004) (No. 02-1595)(emphasis in original).”

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Case Analysis

The court also found that the reducing clause was not contextually ambiguous, pursuant to Badger Mutual Insurance Co. v. Schmitz, 2002 WI 98, 255 Wis.2d 61, 647 N.W.2d 223, noting several factors: the policy is only 17 pages long; the declaration page specifically refers to the UIM endorsement; the reference page warns the insured to read the policy carefully in bold typeface; and neither the structure nor organization of the policy is confusing.

Finally, the court affirmed the trial court’s holding that the anti-stacking clause was enforceable, noting that identical language was upheld in Sugden v. Bock, 2002 WI App 49, par. 6, 251 Wis. 2d 344, 641 N.W.2d 693.

Accordingly, the court remanded the case to the trial court for further proceedings, with instructions to grant summary judgment to American Family.

Click here for Case Analysis.

David Ziemer can be reached by email.

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