Reducing Clause Case Analysis

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There is merit in both the majority opinion and the dissent.

As the dissent notes, the statements from Dowhower v. West Bend Mut. Ins. Co., 2000 WI 73, 236 Wis.2d 113, 613 N.W.2d 557, and Badger Mut. Ins. Co v. Schmitz, 2002 WI 98, 255 Wis.2d 61, 647 N.W.2d 223, on which the majority rests its holding are nothing more than "fleeting short-hand references" that were not even germane to the issues at hand.

Nevertheless, the result reached by the majority is the more reasonable. In all likelihood, the legislature never even contemplated whether a payment to the Work Injury Supplemental Benefit Fund under sec. 102.49 constitutes a payment pursuant to sec. 632.32(5)(i).

It is just as likely that the insurer did not contemplate the question either.

However, it cannot plausibly be contended that any reasonable insured would consider a payment to the State’s worker’s compensation fund to be a payment that should count against his estate when he purchases uninsured motorist insurance.

Thus, the majority opinion is the only one that even arguably would comply with the expectations of the insured, and is therefore, the correct opinion.

There may be a silver lining for the insurance industry, however, in that it is arguable, where the insured’s estate recovers UM benefits after the insured dies in a work-related accident due to the negligence of an uninsured tortfeasor, that the worker’s compensation insurer should be exempt from payment to the Fund.

In this case, the worker’s compensation insurer paid the Fund the $159,900 death benefit, minus negligible funeral and medical expenses.

As the court noted, however, "The provisions of sec. 102.49 essentially require worker’s compensation insurance to pay the State the benefits it would otherwise ‘save’ when a worker dies and, therefore, cannot personally receive the benefits."

Here, however, the worker’s compensation insurer arguably did not "save" anything.

Suppose that Scott had died on duty, either as a result of his own negligence, or the negligence of his employer or a co-worker, or through no one’s negligence. In such an instance, the worker’s compensation insurer would indeed "save" money, solely because Scott was unmarried and childless.

The payment to the State is merely what the insurer would have paid anyway, but for Scott’s fortuitous marital status. It is for this situation that sec. 102.49 was enacted.

Here, however, Scott was killed because of the negligence of a third party. Normally, in such an instance, the worker’s compensation insurer would pay nothing at all, net. Even if the worker’s compensation insurer were to make a payment to Scott’s estate, its subrogation rights would entitle it to recover that sum from the tortfeasor, or the tortfeasor’s insurer. Martinez v. Ashland Oil, Inc., 132 Wis.2d 11, 390 N.W.2d 72 (Ct.App.1986).

Thus, the worker’s compensation insurer does not "save" anything when the employee is killed by a third-party’s negligence, in the way it does when an employee is killed in the first scenario described above — no third-party negligence. Requiring the insurer to pay the death benefit to the Fund in this instance effectively requires it to expend money that it normally would not pay under the circumstances (or at least would recover in subrogation).

	Related Links Wisconsin Court System Related Article Only payments to the insured reduce UM benefits

The purpose of sec. 102.49 is to require the worker’s compensation insurer to pay the Fund money that it would have to pay, but for the fortuitous circumstance that the employee is unmarried and childless.

Thus, it is arguable that requiring a worker’s compensation insurer to pay the Fund in a case such as the one at bar expands the statute so that the fortuitous, triggering event is not the marital status of the employee, but the insurance status of the third party tortfeasor.

Ultimately, however, had Scott been married, the worker’s compensation insurer would have paid the death benefit to the widow, Scott’s UM insurer would have denied coverage, pursuant to its reducing clause, and the worker’s compensation insurer would likely never recover a penny from the uninsured tortfeasor, resulting in a net payment from the worker’s compensation insurer.

Thus, the fund still has a strong argument that it is, in fact, making liability to it contingent on the worker’s compensation insurer saving money because of the employee’s marital status, rather than because of the tortfeasor’s lack of insurance.

– David Ziemer

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David Ziemer can be reached by email.