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Court considers when UIM policy takes effect

A 27-year-old Fall Creek woman, who was injured when an oncoming vehicle crossed the center line and struck her car, is attempting to collect under her underinsured motorist policy. Her insurer says the UIM coverage never took effect because the woman who caused the accident had liability insurance coverage equal to the UIM policy.

Alison Welin maintains that she should collect under the UIM portion of her American Family Insurance policy because she did not receive the full amount of the liability policy limits. The $300,000 limits of Elizabeth Pyrzynski’s insurance policy were split between Welin and a passenger in Pyrzynski’s car. Welin received $250,000 and Joshua Opichka, who rode with Pyrzynski, received $50,000.

The Wisconsin Supreme Court, which heard oral arguments in the case Jan. 10, will have to decide whether the UIM definition was adequate and whether the policy took effect.

Dennis M. Sullivan, of Herrick & Hart S.C. in Eau Claire, represented Welin during oral arguments. Sullivan described the issue as whether the American Family policy definition of an underinsured motor vehicle may validly preclude full UIM recovery for Welin. The definition compares the limits of Welin’s UIM policy to the limits of Pyrzynski’s policy without considering the fact that Pyrzynski is liable to more than one person or the amount of the payment actually received under Pyrzynski’s policy.

“It’s our position that under these facts, the definition is inconsistent with the recognized purpose of UIM insurance because it deprives Alison Welin of a fixed level of UIM recovery arrived at by combining payments from all sources as this court has required for UIM insurance,” Sullivan told the court.

Representing American Family Insurance, John Kramer, of Zalewski Klinner & Kramer LLP in Wausau, told justices that the policy is consistent with the court’s prior holdings and that the court actually upheld a similar underinsured motor vehicle definition in Taylor v. Greatway Ins. Co., 245 Wis. 2d 134 (2001). Kramer described the approach as a straight limit-to-limit comparison of the two policies.

“All we are asking is that that definition be applied as written. When the definition is applied as written, Elizabeth Pyrzynski’s automobile has liability limits that are not less, but are equal to Alison Welin’s UIM limits. Therefore, by definition, there is no underinsured motor vehicle in this case and as a result, there is no underinsured motorist coverage available to Alison Welin,” Kramer said.

Crossing the Line

Pyrzynski fell asleep at the wheel of her vehicle and crossed the centerline, crashing into Welin’s car. Welin suffered serious and permanent injuries. Opichka, a passenger in Pyrzynski’s car, also suffered serious injuries. Welin’s total damages are expected to exceed $300,000.

Pyrzynski’s policy through Secura Insurance had payment limits of $300,000 per person and $300,000 per occurrence. Secura paid out the policy limit and the court divided it between Welin and Opichka. Because there were two victims, neither received the policy limit even though the maximum was paid.

Both Welin and Opichka have sought to collect under the UIM provisions of their policies. Opichka was covered by a policy from Hastings Mutual Insurance Co.

Both policies contained standard language providing underinsured motorist benefits of up to $300,000 per person and $300,000 per occurrence only if the other motor vehicle met the definition of ‘underinsured motor vehicle’ — a motor vehicle with lower insurance limits than the underinsured motorist limits. In both cases, the insurers denied UIM coverage.

Both Welin and Opichka sued, and in both cases, the lower court dismissed their claims after concluding that there was no underinsured motorist coverage available to them. The Wisconsin Court of Appeals affirmed those decisions. The Supreme Court will now decide the issue.

During the Jan. 10 oral arguments, Justice N. Patrick Crooks referenced the Taylor decision when questioning Sullivan. Simply stated, Crooks said, that decision seemed to support American Family’s contention that if the tortfeasor’s policy and the UIM policy are equal, you don’t have an uninsured motorist.

“How do you get around Taylor v. Greatway,” Crooks asked. “That case, it seems, would lead to exactly the opposite conclusion of the one you are arguing before us?”

Sullivan noted that Taylor did not have the same fact pattern as the Welin case, where two different claimants were drawing from the same pool of funds. He also noted that prior Supreme Court decisions in Dowhower v. West Bend Mut. Ins. Co., 236 Wis. 2d 113 (2000), and Badger Mutual Ins. Co. v. Schmitz, 255 Wis. 2d 61 (2002), indicated that a person purchasing UIM insurance is purchasing a predetermined level of coverage for injuries and that Wis. Stat.
632.32(5)(i) established that the limit of coverage was reached by contributions from all responsible parties.

A Question of Equity

During Kramer’s presentation, several justices questioned the equity of dividing the original policy amount between two claimants, but using the whole policy amount as the basis for denying UIM coverage.

Justice Patience Drake Roggensack asked whether the American Family UIM policy indicated that the comparison between policies did not take into account how many people made claims against the liability limits. Kramer indicated it was silent on the subject.

Roggensack went on to observe that as a result someone purchasing a UIM policy might not know that the full amount would not be available if there are multiple claimants.

“How does the average insured know that that is a factor they should take into account when deciding how much UIM coverage to purchase?” Roggensack asked.

Kramer responded by observing that there are always a variety of factors that can come into play when purchasing insurance coverage.

“There is always going to be a degree of uncertainty as to how much of a particular limit that is being considered is going to be recovered based perhaps on the number of vehicles, the number of tortfeasors, the number of claimants under a particular coverage,” he said.

Justice Ann Walsh Bradley referenced Irvin and William Shermer’s Automobile Liability Insurance, 4th edition, which addressed the issue of equity in this type of situation.

Referencing statement 40.11, she said, “As a general rule, where the tortfeasor’s liability limits have been split between two or more underinsured motorist claimants, the underinsured motorist carrier is not then permitted to reduce each underinsured motorist’s claim by the full amount of other payments made under the liability coverage. The underinsured motorist carrier can deduct only the amount received by each tort claimant. It would be inequitable to permit the insurer to deduct for a tort recovery not made by the particular complainant.”

“Your general rule seems to be at odds with this general treatise’s rule,” she observed.

Kramer responded by referencing the Supreme Court’s 2004 decision in State Farm Mut. Auto. Ins. Co. v. Nancy G. Langridge. In Langridge, the Supreme Court noted that “when a UIM policy defines an ‘underinsured motor vehicle’ by comparing the tortfeasor’s limits of liability to the insured’s limits of UIM coverage,” … “the insured ought reasonably to expect that the insurer promises only to insure for the difference between the insured’s higher UIM limit and the tortfeasor’s lower liability limit.”

The justices are expected to release a decision in this case by the end of the court’s 2005-06 session in July.

Tony Anderson can be reached by email.

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