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Other Insurance Case Analysis

Although the court affirmed the court of appeals decision, the remedy the court adopted does not sweep as broadly.

The court of appeals held that, because Progressive’s other insurance clause fails to provide uniform coverage to named insureds and occupants, the clause is void and unenforceable.

The Supreme Court, on the other hand, merely excised the offending language, but allowed the permissible parts of the clause to stand.

Had the court of appeals decision remained the law, unnecessary consequences would have resulted in other cases.

Suppose, for example, that it was General Casualty’s policy that contained the offending clause, instead of Progressive’s.

Under the court of appeals’ analysis, General Casualty would have been saddled with primary coverage, because its other insurance clause would be void in its entirety.

Under the Supreme Court’s analysis, Progressive would have primary coverage; the offending exception would be excised, leaving identical clauses, and the insurer for the owner of the vehicle in the crash would be the primary insurer.

An interesting question that the court does not address is whether the result would be the same, if the insurance involved was underinsured motorist (UIM) coverage, rather than uninsured motorist (UM) coverage.

UIM coverage, unlike UM coverage, is not mandated by statute.

Thus, the following reasoning of the court would not apply: “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.”

Absent this reasoning, the statute would likely be found ambiguous, and the result would turn on other considerations, such as policy and legislative history.

In such cases, it is likely that the parties and the courts will devote considerable attention to whether UIM coverage is liability insurance or indemnity insurance (in this case, the Supreme Court chose to avoid deciding whether UM coverage is for liability or indemnity).

However, the distinction is irrelevant; there are no public policy reasons to apply the provisions of sec. 632.32 to “other insurance” clauses, period.

Section 632.32 is unabashedly pro-injured third party and pro-insured; the whole purpose of the statute is to place restrictions on insurance companies, and increase coverage for insureds and injured third parties.

Consider some of the statements the Supreme Court has previously made when discussing the public policy of the statute, or its predecessors:

The legislative policy in enacting the omnibus coverage statute was to increase rather than narrow auto insurance coverage. Groth v. Farmers Mut. Auto. Ins. Co., 21 Wis.2d 655, 124 N.W.2d 606, 608 (1963).

Automobile liability policies are more than indemnity contracts between insurers and insureds and there is strong public policy favoring compensation of injured third parties. Simonds v. Bouton, 87 Wis.2d 302, 274 N.W.2d 666, 669 (1979).

The public has an interest in having automobiles covered by liability insurance. Luckett v. Cowser, 39 Wis.2d 224, 159 N.W.2d 94, 97 (1968).

We construe ambiguities in coverage in favor of the insured and narrowly construe exclusions in coverage against the insurer. Smith v. Atlantic Mut. Ins. Co., 155 Wis.2d 808, 811, 456 N.W.2d 597 (1990).

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Conspicuously absent from these statements of public policy is any suggestion that the Legislature has any interest whatsoever in which of two insurers provides primary coverage to an insured or injured third party, when it is undisputed that both are responsible.

The absence of any such intent is hardly surprising; there is no reason why the Legislature should have any interest in the subject, nor any reason why, even if it did, guidance should be found in sec. 632.32.

In the case at bar, as noted, the court found that the unambiguous language of the statute nevertheless does bring “other insurance” clauses within the statute’s ambit, inasmuch as they apply to UM coverage.

However, in cases involving “other insurance” clauses and UIM coverage, the proper holding would be that the statute is ambiguous, and because there is no public policy reason to apply the statute to “other insurance” clauses, such a clause is valid and enforceable as written.

– David Ziemer

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David Ziemer can be reached by email.

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