UIM Limits Case Analysis

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The court’s conclusion — that amounts received from other tortfeasors who are not underinsured motorists cannot be used to reduce the UIM limits — is plainly contradictory to sec. 632.32(5)(i).

This is apparent merely by posing the following hypothetical: all the facts in this case are identical save one — Bailey received $37,500 from a workers’ compensation insurer or a disability insurer, instead of a second tortfeasor.

Applying the statutory language, State Farm is not liable for anything; its limit is $50,000, and its insured has recovered more than that from the tortfeasor and the workers’ compensation insurer.

Applying the majority’s reasoning, however, State Farm would be liable for up to $25,000 in UIM coverage.

If the sole object of UIM insurance is, as the majority asked in this case, “to put the insured in the same position he [or she] would have occupied had the tortfeasor’s liability limits been the same as the underinsured motorist limits purchased by the insured,” State Farm would still be liable.

To paraphrase the court in this case, “If Levy’s liability policy had a limit of $50,000, then Bailey would have had that sum available to him in addition to [the workers’ compensation]. If only the $25,000 payment on behalf of levy reduces Bailey’s UIM limit of $50,000, then Bailey is in the same position he would have been if Levy had had a liability policy of $50,000: Bailey has $25,000 from Levy, another $25,000 available to him under his reduced UIM policy limits, and whatever he receives [from workers’ compensation]. How-ever, if the payment from [workers’ compensation] may also reduce the UIM liability limits, then Bailey is entitled to no UIM coverage. Thus, Bailey is worse off than if Levy had a $50,000 liability policy by whatever amount his damages exceed $62,500, up to $87,500.”

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The paraphrased version clearly would be an incorrect statement of the law, inasmuch as the statute plainly says that UIM coverage may be reduced by payments from workers’ compensation.

The statute plainly equates payments from workers’ compensation with payments “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”; thus, the majority’s reasoning must be equally incorrect when applied to a second tortfeasor who is not underinsured.

The court’s reasoning could only be correct if sec. 632.32(5)(i)1 read, “Amounts paid by or on behalf of an underinsured motorist.”

Because the actual statutory language explicitly permits reduction for payments made by any responsible tortfeasor, insurers should continue to preserve this issue for potential review in the Supreme Court.

– David Ziemer

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David Ziemer can be reached by email.