Savings clause saves UM policy exclusion

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A woman injured in an accident while driving her mother-in-law's car cannot collect on her own insurance despite the fact that the policy's exclusion does not comply with Wisconsin law.

In a Nov. 4 decision, the Wisconsin Court of Appeals determined that the policy's savings clause cured its flaws.

Lois Nischke was injured in a traffic accident with an uninsured motorist (UM), while driving a vehicle owned by her mother-in-law, who lived with Nischke and her husband. Nischke was insured by Partners Mutual Insurance Company, but her mother-in-law's car was not listed in the policy.

Nischke sought UM coverage from Partners, but Partners moved for a declaratory judgment that there was no coverage based on the policy's "drive other car" exclusion.

That exclusion provided, in relevant part, that Partners would not cover bodily injury to her, "While occupying … a motor vehicle that is not insured under this Part if it is owned by you or any resident of your household."

The exclusion fails to comply with sec. 632.32(5)(j), which only authorizes drive other car exclusions (as relevant to this case) if the insured is injured while occupying a vehicle owned by a fellow resident who is also the insured's "spouse or relative."

Nevertheless, Oconto County Circuit Court Judge Richard Delforge granted judgment in favor of Partners, and Nischke appealed.

The Court of Appeals affirmed, in a decision by Judge Michael W. Hoover.

Nischke argued that the drive other car exclusion is overbroad, and therefore, invalid, but the court disagreed.

The policy contained a savings clause, which provided, "Terms of this policy which are in conflict with the Wisconsin Statutes are changed to conform to those statutes."

Here, a properly drafted exclusion would have been effective, because Nischke's mother-in-law was both a relative and a resident of Nischke's household.

Accordingly, the court narrowed the exclusion, and enforced it against Nischke.

Analysis

The opinion is a good candidate for review and possible reversal in the Wisconsin Supreme Court.

The exclusion in this case is facially overbroad invalid, as it excludes UM coverage if the insured drives a vehicle owned by a resident of the same household, without regard for whether the resident is a relative or not.

Case law is clear that an exclusion to an automobile policy's UM coverage need not exactly track the authorizing language. Hanson v. Prudential Prop. & Cas. Ins. Co., 224 Wis.2d 356, 370, 591 N.W.2d 619 (Ct.App.1999).

Furthermore, in Remiszewski v. American Family Ins. Co., 2004 WI App 175, par. 17, 687 N.W.2d 809, the Court of Appeals said, "The fact that an insurance policy may include arguably ambiguous language upon which the insurer has not relied is of no consequence and will not defeat the right of an insurer to reduce its limits of liability under a valid provision."

Remiszewski involved a reducing clause that was, as the quote notes, "arguably ambiguous."

In the case at bar, however, the exclusion is not "arguably ambiguous"; it is patently overbroad.

Also, the court in Remiszewski said that language irrelevant to the dispute will not affect a "valid provision."

Here, however, the provision is not valid as written.

The case thus poses the question whether a generic savings clause in an automobile policy is effective, not just to cure an arguable ambiguity, but an indisputably invalid provision.