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‘Other insurance’ clause unenforceable

What the court held

Case: Progressive Northern Ins. Co. v. Hall, No. 2004AP688.

Issue: Can the "other insurance" clause in an automobile policy provide primary uninsured motorist coverage for the named insured, but only excess coverage for occupants?

Holdings: No. Section 632.32(3)(a) requires that the coverage be the same.

Counsel: Rick E. Hills, Michelle M. Stoeck, Waukesha, for appellant; Stuart B. Eiche, Milwaukee, for respondent.

The Wisconsin Supreme Court held on Feb. 7 that sec. 632.32(3)(a), which requires that an insurance policy provide uninsured motorist (UM) coverage for an occupant in the same manner as the named insured, applies to “other insurance” clauses.

Edward Hall was a passenger in a vehicle operated by his brother, Richard Hall, when they had an accident with an uninsured tortfeasor, and Edward sustained injuries.

Edward was insured under a policy issued by General Casualty, and Richard was insured under a policy issued by Progressive. Each policy provided UM coverage, and contained an “other insurance” clause describing when UM coverage would be primary and when it would be excess.

The “other insurance” clause in Edward’s General Casualty policy stated, “Any insurance we provide with respect to a vehicle you do not own shall be excess over any collectible insurance providing such coverage on a primary basis.”

The “other insurance” clause in Richard’s Progressive policy stated, “Any insurance we provide shall be excess over any other uninsured or underinsured motorist coverage, except for bodily injury to you or a relative when occupying a covered vehicle.” (Although Edward and Richard are brothers, Edward is not a “relative” under the policy).

Progressive sought declaratory judgment that General Casualty was the primary UM insurer, but Milwaukee County Circuit Court Judge Clare L. Fiorenza held Progressive’s “other insurance” clause unenforceable.

Progressive appealed, but the court of appeals affirmed in a published decision, Progressive N. Ins. Co. v. Hall, 2005 WI App 17, 278 Wis.2d 499, 692 N.W.2d 355.

The Supreme Court granted review, but also affirmed, in a decision by Justice Ann Walsh Bradley.

The UM policy limits under Richard’s Progressive policy are $100,000. Under Edward’s General Casualty policy, the UM limits are $500,000. The only dispute was over who pays the first $100,000 in coverage for Edward.

The dispute turned on the validity of the emphasized language in Progressive’s other insurance clause, “Any insurance we provide shall be excess over any other insured or underinsured motorist coverage, except for bodily injury to you or a relative when occupying a covered vehicle.”

The Court held that Progressive’s “other insurance” clause violates sec. 632.32(3)(a) because it fails to provide that occupancy insureds are covered in the same manner as the named insured and because Progressive cannot cast its other insurance clause as an “exclusion” under subsection (5)(e) of the statute in order to save the clause from the requirements of subsection (3)(a).

Section 632.32(3)(a) provides: “Except as provided in sub. (5), every policy subject to this section issued to an owner shall provide that: (a) Coverage provided to the named insured applies in the same manner and under the same provisions to any person using any motor vehicle described in the policy when the use is for purposes and in the manner described in the policy.”

Progressive argued that the subsection does not apply because UM coverage is indemnity insurance, and the subsection only governs liability insurance.

The court rejected the argument be-cause state law requires that every policy of automobile liability insurance include UM coverage.

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Case Analysis

The court concluded, “every policy insuring against liability under sec. 632.32 must include uninsured motorist coverage. Section 632.32(3)(a) plainly applies to every policy subject to sec. 632.32. Thus, we conclude that sec. 632.32(3)(a) applies to uninsured motorist coverage, regardless of whether such coverage is categorized as liability or indemnity insurance.”

The court also rejected Progressive’s argument that its other insurance clause is a permissible exclusion under sec. 632.32(5)(e).

The court held, “Contrary to what sec. 632.32(3)(a) requires, Progressive’s ‘other insurance’ clause operates so that Progres-sive’s policy provides primary coverage for a named insured while provid
ing only excess coverage for an occupancy insured who is not also a ‘relative’ as defined in the policy. The clause states that ‘[a]ny insurance we provide shall be excess over any other uninsured or underinsured motorist coverage, except for bodily injury to you or a relative when occupying a covered vehicle.’ Thus, the policy does not provide uninsured motorist coverage for ‘any person using’ a vehicle in the same manner as such coverage is provided for the named insured. Accordingly, we conclude that Progressive’s ‘other insurance’ clause violates sec. 632.32(3)(a).”

The court thus affirmed that Progres-sive must pay the first $100,000 in damages.

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David Ziemer can be reached by email.

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