Court of Appeals rules insurer not liable in underinsured motorist case

The Court of Appeals overturned a decision by an Eau Claire County Circuit Court holding West Bend Insurance Co. liable for underinsured motorist (UIM) benefits in an accident involving an Eau Claire County snowplow.

According to court records, an Eau Claire County snowplow was clearing snow on Interstate 94 when it pushed snow off an overpass and onto Donald M. Miller’s vehicle as he was driving below on County Highway F. The snow landed on his van’s windshield, causing it to crash inward and injure Miller. At the time, Miller was driving an employer-owned van.

Donald M. and his wife, Christy, sued the county and its liability insurer, asserting the snowplow driver was negligent. In an amended complaint, the Millers filed a claim against West Bend Insurance for UIM coverage under an insurance policy issued to Miller’s employer.

The insurer moved for summary judgement on the issue of UIM coverage, asserting the policy specified that an underinsured motor vehicle does not include any vehicle that is “owned by a governmental unit or agency.” Since the snowplow was owned by the county, West Bend claimed there was no UIM coverage for the accident.

The Millers responded to West Bend’s claim by citing Brey v. State Farm Mutual Automobile Insurance Co. and arguing the scope of UIM coverage was defined by Wisconsin State Statute 632.32(2)(d).

West Bend replied that the Wisconsin Supreme Court reversed the decision in Brey v. State Farm Mutual Automobile Insurance Co. three days before the plaintiff responded to West Bend’s motion, allowing insurers to define the scope of UIM coverage in its contracts.

The Eau Claire County Circuit Court then asked both sides to file supplemental briefs. The court denied West Bend’s motion for summary judgement. While the court agreed with West Bend on the plain language of the policy, it was also persuaded by the Millers’ claim that excluding a government-owned vehicle from the definition of UIM was void and unenforceable.

As the case progressed, the Millers reached a settlement with the county for $250,000 — the full amount of liability under state statues. The county and its insurer were dismissed from the case.

West Bend then filed a second motion for summary judgment. The insurer argued that pursuant to the policy, the Millers were required to prove they are “legally entitled to recover” from the county or its driver for UIM coverage to exist. By signing the settlement with the county, the action against West Bend “must” be dismissed, the insurer argued.

The circuit court again denied West Bend’s motion and entered a final judgment awarding the Millers $225,000 in UIM benefits. West Bend appealed the case.

In reviewing the case, the Court of Appeals said the circuit court wrong when it determined the policy’s definition of the term “underinsured motor vehicle” was void and unenforceable under State Statute 632.32. The statue contains a 2011 amendment stating UIM coverage is no longer mandatory in Wisconsin and the Wisconsin Supreme Court’s decision in Brey approved an insurer’s ability to define “underinsured motor vehicle” when setting the scope of UIM coverage within an insurance policy.

Under the plain language of the insurance policy, the Court of Appeals said a government-owned vehicle cannot be an “underinsured motor vehicle;” therefore, no UIM coverage exists for damages resulting from Miller’s accident.

“Accordingly, Brey signaled our Supreme Court’s approval of West Bend’s freedom to contractually define the scope of UIM coverage within its insurance policies” without violating state statues, the Appeals Court wrote.

As part of their argument, the Millers said the policy’s definition of an UIM is “arbitrary and creates an absurd result,” according to court records. They reasoned that “the policy’s exclusion does not hinge on governmental immunity; it applies arbitrarily based solely on who owns the vehicle.”

The Court of Appeals disagreed, siding with West Bend’s argument that excluding government-owned vehicles “has a rational purpose as it dovetails with municipal liability limits.” The Court of Appeals added Wisconsin law no longer prohibits insurers from contractually defining the scope of UIM coverage.

The Court of Appeals said the Circuit Court erred by refusing the apply the plain language of West Bend’s policy, so there was no initial grant of UIM coverage for the Millers’ damages of the policy. The Court of Appeals reversed the decision and granted West Bend’s summary judgment motion to dismiss it from the case.