Uninsured vehicle is not legally 'uninsured'

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When is an uninsured motor (UM) vehicle not an "uninsured motor vehicle" for purposes of automobile insurance?

When even though the automobile is not insured, the negligent driver is insured under his own policy.

Writing for the Wisconsin Court of Appeals on Dec. 4, Judge Margaret J. Vergeront concluded, "Section 632.32(4)(a) does not require coverage where, as here, the alleged tortfeasor is the operator of the vehicle and is covered by liability insurance. … [A] reasonable insured would understand that 'uninsured motorist' coverage under the policy has the same meaning as that term in sec. 632.32(4)(a), the statute that mandates this coverage in the policy."

But Axley & Brynelson attorney Michael Riley, who represents the insured, said he would be filing a petition for certiorari with the Supreme Court, arguing in part that it is unreasonable to impute knowledge of statutes, and prior court interpretations of them, to an insured who likely has no idea what the statute provides.

Kevin Blum, Jr., was injured when, after jumping on the hood of a vehicle driven by Nicholas Burch in a high school parking lot. Burch accelerated and then applied the brakes, throwing Blum to the curb.

Blum was insured through his parents' 1st Auto & Casualty Insurance Company policy, which provided coverage for damages the insured is "entitled to recover from the owner or operator of an uninsured motor vehicle."

The policy adds, "The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the uninsured motor vehicle."

Burch was insured through American Standard Insurance Company, but the vehicle he was driving at the time was owned by his father, who had no insurance.

Blum settled with American Standard for Burch's policy limits, and then sued 1st Auto, seeking UM coverage.

The circuit court granted summary judgment to 1st Auto, and the Court of Appeals affirmed.

Statute

The court first held that sec. 632.32(4)(a)1 does not require coverage in this scenario, relying on the Supreme Court opinion in Hull v. State Farm Mutual Automobile Ins. Co., 222 Wis.2d 627, 586 N.W.2d 863 (1998).

In Hull, the court held that the statute requires UM coverage "whenever either the owner or the operator of a motor vehicle is allegedly negligent and is not covered by liability insurance." Hull, 222 Wis.2d at 646.

Applying the holding in Hull, the Court of Appeals held coverage was not required: the negligent driver had liability insurance; and the owner, who had none, was not allegedly negligent.

Policy Language

The court then held that the policy language did not provide coverage either.

In Hull, the Supreme Court overruled what was then governing law, the Court of Appeals' opinion in Hemerley v. American Family Mutual Ins. Co., 127 Wis.2d 304, 379 N.W.2d 860 (Ct.App.1985).

Hemerley had held that sec. 632.32(4)(a)1 requires coverage whenever either the vehicle's owner or the operator is uninsured. Hull reversed that holding.

However, Hemerley also held that a reasonable insured would interpret the UM provision in the policy to provide coverage that is coextensive and mandated by the statute.

Because the Supreme Court in Hull did not address this section of the Hemerley opinion, the Court of Appeals held the section remains valid law.

Having concluded that sec. 632.32(4)(a)1 does not require coverage, the court held therefore, the policy language does not require coverage either.

Because the only party alleged to be negligent — the operator — had insurance, while the owner was not allegedly negligent, the court affirmed the grant of summary judgment in favor of 1st Auto.

Attorney Riley said in an interview that he had no disagreement with the court's analysis of the statute, but considered it irrelevant, given the language in the policy, and rules of construction.

Riley said, "The language of the insurance policy is the first place you look. If the meaning can be determined from that, there is no need to look at public policy or the statutory language."

"What is problematic is how the court said the policy was ambiguous, and then construed it in favor of the insurer. That seems fundamentally at odds with basic principles of construction of insurance policies," Riley added.

Analysis

The court's discussion of sec. 632.32(4)(a)1 is plainly dictated by the Supreme Court opinion in Hull, but its analysis of the policy ignores its plain language.

The UM provision states as follows:

"We will pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury:

1. Sustained by any insured; and

2. Caused by an accident.

The owner's or operator's liability for these damages must arise out of the
ownership, maintenance or use of the uninsured motor vehicle."

The policy defined "uninsured motor vehicle" as a vehicle "to which no bodily injury … policy applies at the same time of the accident."

Burch was indisputably the "operator of an uninsured motor vehicle," as a layperson would understand that term. In addition, Burch's liability indisputably "ar[o]se out of the … use of the uninsured motor vehicle." The vehicle he drove was indisputably not covered by any automobile policy.

Thus, a reasonable person reading this policy would clearly be led to believe that the policy provided UM coverage under the facts in this case.

Furthermore, the Court of Appeals' analysis ignores Hull. In Hull, the court did not merely discuss sec. 632.32(4)(a)1, but also considered the UM policy language.

The policy in Hull defined "uninsured motor vehicle" as "a vehicle, the ownership, maintenance or use of which is not insured." Hull, 586 N.W.2d at 867.

The Supreme Court held this language unambiguously provided coverage whenever either the owner was not insured, the maintenance of the vehicle was not insured, or the use of the vehicle was not insured.

In the case at bar, as in Hull, but contrary to the Court of Appeals' view, the definition is also unambiguous.

No insurance policy applied to the vehicle Burch drove at the time of the accident.

Thus, a reasonable insured would believe that the unambiguous policy language provided UM coverage under the facts in this case, regardless of whether the statute requires UM coverage or not.

As noted, the Supreme Court in Hull examined both the policy language, and the language of the statute. If the Court of Appeals' conclusion in the case at bar — that a UM policy provides no more coverage than the statute requires — was correct, then there would have been no reason for the bifurcated analysis in Hull.

Admittedly, given the purpose of UM coverage, the court's holding effectuates the intent of the coverage. The purpose of UM coverage is to put an insured in the same position he would be in, if other parties involved in an accident had insurance.

Here, even if the owner of the vehicle had insurance, Blum would not recover anything from the owner's insurer, because the owner was not alleged to be negligent in any way.

Nevertheless, the plain language of the policy provides UM coverage under these facts. If an insurance company can't draft a UM provision that limits its liability to what the statutes require, it should pay what it agreed to pay, notwithstanding whether the statutes would require coverage.