Case Title: Bethke v. Auto-Owners Ins. Co.

Citation: 2013 WI 16

Docket Number: 2010AP003153

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2013-02-01T00:00:00Z

Document:
2013 WI 16 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2010AP3153 
COMPLETE TITLE: 
 
Lynn Bethke, individually and as Personal 
Representative  
of the Estate of Kathryn A. Bethke and Andrew 
Bethke, 
          Plaintiffs-Appellants-Petitioners, 
     v. 
Auto-Owners Insurance Company, 
          Defendant-Respondent. 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at 338 Wis. 2d 212, 808 N.W.2d 175 
(Ct. App. 2011 - Unpublished) 
 
 
OPINION FILED: 
February 1, 2013 
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
October 9, 2012 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Sheboygan 
 
JUDGE: 
L. Edward Stengel 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
ABRAHAMSON, C.J., CROOKS and GABLEMAN, JJ., 
dissent. (Opinion filed.)  
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For 
the 
plaintiffs-appellants-petitioners, 
there 
were 
briefs filed by William P. Te Winkle and Stephanie E. Waldon, 
and Rohde Dales, LLP, Sheboygan, and oral argument by William P. 
Te Winkle. 
For the defendant-respondent, there were briefs filed by 
Richard E. Schmidt, Allen M. Ratkowski and Thomas T. Calkins, 
and Piper & Schmidt, Milwaukee, and oral argument by Allen M. 
Ratkowski.  
 
An amicus curiae brief was filed by William C. Gleisner, 
III, Hartland, on behalf of the Wisconsin Association for 
Justice, and oral argument by William C. Gleisner, III. 
 
 
2
 
 
 
2013 WI 16
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.   2010AP3153 
(L.C. No. 
2009CV630) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Lynn Bethke, Individually and as Personal 
Representative of the Estate of Kathryn A. 
Bethke and Andrew Bethke, 
 
          Plaintiffs-Appellants-Petitioners, 
 
     v. 
 
Auto-Owners Insurance Company, 
 
          Defendant-Respondent. 
 
 
 
FILED 
 
FEB 1, 2013 
 
Diane M. Fremgen 
Clerk of Supreme Court 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed and 
cause remanded.   
 
¶1 
ANN WALSH BRADLEY, J.  The petitioners, Lynn and 
Andrew Bethke (collectively, the Bethkes), seek review of an 
unpublished decision of the court of appeals affirming the 
circuit court's grant of a declaratory judgment to Auto-Owners 
Insurance Company.1  The Bethkes seek underinsured motorist 
                                                 
1 Bethke 
v. 
Auto-Owners 
Ins. 
Co., 
No. 
2010AP3153, 
unpublished slip op. (Ct. App. Nov. 2, 2011), affirming the 
circuit court for Sheboygan County, L. Edward Stengel, J., 
presiding. 
No. 
2010AP3153   
 
2 
 
coverage (UIM) under a policy issued by Owners as a result of an 
automobile accident caused by an allegedly negligent driver of a 
rental vehicle owned by Avis Rent-a-Car (Avis).  The Bethkes' 
mother, Kathryn Bethke, suffered fatal injuries in the accident 
and Andrew was seriously injured.  Avis, as a car rental 
company, was statutorily required to pay $50,000 as a result of 
the accident.   
¶2 
Owners denied the Bethkes' UIM claim and asserted that 
because Avis is a self-insurer, the rental vehicle is not an 
"underinsured automobile" under the terms of the policy.  In 
response, the Bethkes argue that the term "self-insurer" in the 
policy is ambiguous as applied to the facts of this case and 
must be construed in favor of coverage.  Moreover, the Bethkes 
argue that excluding UIM coverage under the facts of this case 
leads to an absurd result. 
 
¶3 
We conclude that as applied, the policy term "self-
insurer" is ambiguous because it is unclear whether a reasonable 
insured would understand that a car rental company which is 
statutorily liable under Wis. Stat. § 344.51 is a "self-insurer" 
under the policy.  Consistent with the canons of construction 
and case law, when the policy language relates to coverage and 
is ambiguous, we interpret the policy in favor of the insured to 
afford coverage.  We further conclude that even if the term 
                                                                                                                                                             
Although the court caption indicates that "Auto-Owners 
Insurance Company" is the name of the defendant-respondent, the 
briefs submitted in this matter indicate that its correct name 
is "Owners Insurance Company."   Throughout this opinion, we 
will refer to the defendant-respondent merely as "Owners." 
No. 
2010AP3153   
 
3 
 
"self-insurer" appears to be unambiguous, interpreting it to 
exclude self-insured rental vehicles from coverage leads to an 
absurd result here.    Accordingly, we reverse the court of 
appeals and remand to the circuit court for further proceedings. 
I 
 
¶4 
The facts of this case are undisputed.   
¶5 
On July 19, 2007, Kathryn was operating a motor 
vehicle in an eastbound direction on County Highway C in the 
Town of Sheboygan Falls and Andrew, her son, was a passenger in 
the vehicle.  Frederick Goddard, a resident of the United 
Kingdom, was driving an Avis rental vehicle in the opposite 
direction and crossed the center line, striking Kathryn's 
vehicle in a head-on collision.  Both Kathryn and Goddard died 
and Andrew suffered serious injuries.2    
¶6 
Goddard did not possess any insurance that provided 
coverage for the accident.  Avis, however, paid the Bethkes a 
limited amount because it is a car rental company, which is 
statutorily liable under Wis. Stat. § 344.51(1m) (2005-06)3 for 
                                                 
2 Lynn Bethke was not involved in the accident.  She appears 
in this case individually and as representative of Kathryn's 
estate.  Andrew Bethke and Lynn Bethke are Kathryn's only 
children and her sole surviving heirs. 
3 All subsequent references to the Wisconsin Statutes refer 
to the 2005-06 version unless otherwise indicated.  Wisconsin 
Stat. § 344.51(1m) states the following: 
 Financial 
responsibility 
for 
domestic 
rented 
or 
leased vehicles. . . .(1m) No lessor or rental company 
may for compensation rent or lease any motor vehicle 
unless there is filed with the department on a form 
prescribed by the department a certificate for a good 
No. 
2010AP3153   
 
4 
 
$25,000 each to Kathryn's estate and to Andrew.  Accordingly, 
Avis tendered to the Bethkes a payment of $50,000.  
  
¶7 
After receiving the $50,000 payment from Avis, the 
Bethkes claimed underinsured motorist (UIM) benefits under an 
automobile insurance policy issued to Kathryn by Owners.  The 
declaration page of the policy states that Kathryn purchased UIM 
coverage in excess of the statutory minimum that was in effect 
at the time.4  She purchased coverage in the amount of $500,000 
per person and $500,000 per accident.  The declaration page of 
the policy describes the UIM coverage as follows: 
Underinsured 
Motorist 
$500,000 
person/$500,000 
occurrence 
The 
Underinsured 
Motorist 
limit 
is 
subject 
to 
allowable offsets. 
Please refer to form 79326. 
                                                                                                                                                             
and sufficient bond or policy of insurance issued by 
an insurer authorized to do an automobile liability 
insurance or surety business in this state. The 
certificate shall provide that the insurer which 
issued it will be liable for damages caused by the 
negligent operation of the motor vehicle in the 
amounts set forth in s. 344.01(2)(d). No lessor or 
rental company complying with this subsection, and no 
lessor or rental company entering into or acquiring an 
interest in any contract for the rental or leasing of 
a motor vehicle for which any other lessor or rental 
company has complied with this subsection, is liable 
for damages caused by the negligent operation of the 
motor vehicle by another person.  
 
 
4 If an individual elected to buy UIM coverage, the minimum 
amount of coverage required by statute was $50,000 per person 
and $100,000 per accident.  Wis. Stat. § 632.32(4m)(d). 
No. 
2010AP3153   
 
5 
 
 
¶8 
The UIM endorsement (Form 79326) in the policy states 
that Owners will cover "compensatory damages [the Bethkes are] 
entitled 
to 
recover 
from 
the 
owner 
or 
operator 
of 
an 
underinsured automobile for bodily injury."  The endorsement 
defines an "underinsured automobile" as: 
an automobile to which a bodily injury liability bond 
or liability insurance policy applies at the time of 
the occurrence:  
(1) in at least the minimum amounts required by the 
Financial Responsibility Law in the state where your 
automobile is normally garaged; and 
(2) the limits of liability provided are less than the 
amount of compensatory damages the injured person is 
legally entitled to recover for bodily injury. 
¶9 Immediately below that definition, the policy lists 
certain types of vehicles that do not fall within the definition 
of "underinsured automobile."  They are listed as follows: 
Underinsured 
automobile 
does 
not 
include 
an 
automobile: 
(1) owned or leased by, furnished to or available for 
the regular use of you or any relative; 
(2) owned or operated by a self-insurer under any 
automobile law; 
(3) owned by any governmental unit or agency; 
(4) located for use as a residence or premises; 
(5) that is designed for use primarily off public 
roads except while actually on public roads; or 
(6) that is an uninsured automobile. . . . 
(Emphasis added.) 
No. 
2010AP3153   
 
6 
 
¶10 Owners rejected the Bethkes' claim for UIM benefits 
because it determined that the Avis rental vehicle was not an 
"underinsured automobile" as that term is defined in the policy.  
Prior to the accident, Avis obtained a Wisconsin Safety 
Responsibility Self-Insurance Certificate (a "certificate of 
self-insurance") from the Wisconsin Department of Transportation 
in order to be qualified to self-insure Goddard's rental 
vehicle.  The certificate states that Avis "has qualified as a 
self-insurer 
under 
the 
Wisconsin 
'Motor 
Vehicle 
Safety 
Responsibility Act' chapter 344 Wisconsin Statutes."  Owners 
argued that because Avis self-insured the rental vehicle, there 
was no coverage under the policy.   
¶11 When Owners refused to provide UIM coverage, the 
Bethkes commenced an action alleging a survivor's action and 
claims of wrongful death, bad faith, and personal injuries to 
Andrew.  In its answer, Owners denied that the policy provided 
any UIM coverage and alleged a counterclaim requesting a 
declaratory judgment on the question of UIM coverage.    
¶12 Following the pleadings, the Bethkes and Owners each 
filed 
separate 
motions 
requesting 
a 
declaratory 
judgment 
regarding Kathryn's UIM coverage.  The Bethkes requested in 
their motion a payment of $450,000 after the payment from Avis 
was applied.  Conversely, Owners asked the circuit court to 
determine that there was no UIM coverage.    
¶13 In a written decision, the circuit court granted 
Owners' motion for a declaratory judgment and denied the 
Bethkes' competing motion.  The circuit court determined that 
No. 
2010AP3153   
 
7 
 
Avis was unambiguously a "self-insurer."  Therefore, because the 
Avis vehicle did not fall within the policy definition of 
"underinsured automobile," the circuit court concluded that the 
policy provided no UIM coverage. 
¶14 The Bethkes appealed, arguing that the term "self-
insurer" 
was 
ambiguous 
because 
it 
is 
unclear 
whether 
a 
statutorily liable car rental company is considered a self-
insurer under the policy.  The court of appeals rejected the 
Bethkes' ambiguity argument and instead adopted Owners' argument 
that the policy "excludes a self-insured vehicle defined under 
any automobile law."5   
                                                 
5 The court of appeals did not directly identify which law 
it meant.  However, earlier in the opinion, the court of appeals 
cited Wis. Stat. § 344.16, which governs who may be qualified as 
self-insurers.   Wisconsin Stat. § 344.16 states the following: 
Requirements as to self-insurers. (1) Any person in 
whose name more than 25 motor vehicles are registered 
may 
qualify 
as 
a 
self-insurer 
by 
obtaining 
a 
certificate of self-insurance issued by the secretary 
as provided in sub. (2).  
 
(2) The secretary may, upon the application of such a 
person, issue a certificate of self-insurance when 
satisfied that such person is possessed and will 
continue to be possessed of ability to pay judgments 
obtained against such person.  
 
(3) Upon not less than 5 days' notice and a hearing 
pursuant to such notice, the secretary may upon 
reasonable grounds cancel a certificate of self-
insurance. Failure to pay any judgment within 30 days 
after such judgment has become final constitutes a 
reasonable ground for cancellation of a certificate of 
self-insurance. 
No. 
2010AP3153   
 
8 
 
II 
¶15 In this case, we are called upon to review the circuit 
court's decision to grant a declaratory judgment to Owners.  The 
grant or denial of a declaratory judgment is addressed to the 
circuit court's discretion.  Olson v. Farrar, 2012 WI 3, ¶24, 
338 Wis. 2d 215, 809 N.W.2d 1.   
¶16 Our task is to determine whether the circuit court 
erroneously exercised its discretion when it concluded that 
under the facts of this case the terms of the policy 
unambiguously excluded UIM coverage.  Hull v. State Farm Mut. 
Auto. Ins. Co., 222 Wis. 2d 627, ¶11, 586 N.W.2d 863 (1998).  A 
circuit court erroneously exercises its discretion if it makes 
an error of law or neglects to base its decision upon the facts 
of the record.  Ash Park, LLC v. Alexander & Bishop, Ltd., 2010 
WI 44, ¶32, 324 Wis. 2d 703, 783 N.W.2d 294. 
¶17 An interpretation of an insurance policy presents a 
question of law that we review independent of the determinations 
rendered by the circuit court and court of appeals.  Folkman v. 
Quamme, 2003 WI 116, ¶12, 264 Wis. 2d 617, 665 N.W.2d 857. 
III 
¶18 The Bethkes argue that the term "self-insurer" in the 
policy is ambiguous as applied to the facts of this case because 
it is unclear whether a reasonable insured would understand that 
a car rental company which is statutorily liable under Wis. 
No. 
2010AP3153   
 
9 
 
Stat. § 344.51 is a "self-insurer" under the policy.6  Moreover, 
the Bethkes argue that interpreting the policy to exclude UIM 
coverage under the facts of this case leads to an absurd result.  
To evaluate the Bethkes' arguments, we begin by considering both 
the type of coverage that Kathryn bought when she purchased the 
insurance policy and the rules of construction established by 
our precedent that are to guide an ambiguity analysis.   
¶19 Kathryn elected to purchase a UIM endorsement with her 
insurance policy.  UIM coverage provides additional coverage to 
insured automobile accident victims when a liable party has 
inadequate means of payment.  24 Eric Mills Holmes, Appleman on 
Insurance 2d § 147.1 (2004).  As this court has repeatedly 
stated, 
"underinsured 
motorist 
coverage 
provides 
a 
predetermined, fixed level of coverage."  Teschendorf v. State 
Farm Ins. Cos., 2006 WI 89, ¶42, 293 Wis. 2d 123, 717 N.W.2d 258 
(citing Welin v. American Family Mut. Ins. Co., 2006 WI 81, 292 
Wis. 2d 73, ¶¶46, 49-53, 717 N.W.2d 690).  It puts the insureds 
in the same position they would have occupied had the liable 
party's insurance limits been the same as the underinsured 
motorist limits purchased by the insureds.  State Farm Mut. Ins. 
Co. v. Gillette, 2002 WI 31, ¶44, 251 Wis. 2d 561, 641 N.W.2d 
                                                 
6 In addition to their argument that the term "self-insurer" 
is ambiguous, the Bethkes argue that the self-insured provision 
operates as an impermissible reducing clause under Welin v. 
American Family Mut. Ins. Co., 2006 WI 81, 292 Wis. 2d 73, 717 
N.W.2d 690 and that the self-insured provision is contrary to 
public policy.  Because we determine that the term "self-
insurer" is ambiguous when applied to the facts of this case, we 
need not reach the Bethkes' other arguments.   
No. 
2010AP3153   
 
10 
 
662 (citation omitted).  UIM coverage seeks to "compensate the 
victim of an underinsured motorist's negligence where the third 
party's liability limits are not adequate to fully compensate 
the victim for his or her injuries."  Id., ¶45. (citation 
omitted).   
¶20 Having examined the type of insurance that Kathryn 
purchased, 
we 
consider 
next 
the 
rules 
of 
construction 
established by our precedent to guide an ambiguity analysis.  If 
the policy language is unambiguous, we interpret the policy 
language to accord with the plain meaning of its provisions.  
Acuity v. Bagadia, 2008 WI 62, ¶13, 310 Wis. 2d 197, 750 N.W.2d 
817.  We must give the words used in the policy their common and 
ordinary meaning, which is "what the reasonable person in the 
position of the insured would have understood the words to 
mean."  Arnold P. Anderson, Wisconsin Insurance Law § 1.1(C) 
(4th ed. 1998) (citations omitted); see also State Farm Mut. 
Auto. Ins. Co. v. Langridge, 2004 WI 113, ¶14, 275 Wis. 2d 35, 
683 N.W.2d 75.   
¶21  Ambiguity may exist in the language of an insurance 
policy either on its face or as applied to the extrinsic facts 
to which it refers.7  Washington v. Washington, 2000 WI 47, ¶18, 
234 Wis. 2d 689, 611 N.W.2d 261; see also Froedtert Memorial 
Lutheran Hosp., Inc. v. National States Ins. Co., 2009 WI 33, 
                                                 
7 Owners concedes in its response to an amicus brief 
submitted 
by 
the 
Wisconsin 
Association 
for 
Justice 
that 
"statutes and policy provisions could potentially be ambiguous 
given a certain set of circumstances," but denies that the self-
insured provision is ambiguous when applied to these facts. 
No. 
2010AP3153   
 
11 
 
¶34, 317 Wis. 2d 54, 765 N.W.2d 251 ("the language of a[n 
insurance] policy may not be entirely clear as applied to a 
given set of facts").  Words in a policy that are clear in most 
contexts may become ambiguous when applied to specific facts 
because "words cannot anticipate every possible fact situation."  
Teschendorf, 
293 
Wis. 
2d 
123, 
¶20 
(describing 
statutory 
ambiguity).   
¶22 We interpret undefined words and phrases of an 
insurance policy as they would be understood by a reasonable 
insured.  Acuity, 310 Wis. 2d 197, ¶13.  If the undefined 
language is ambiguous, we will construe it in favor of the 
insured to afford coverage.  Id.; Folkman, 264 Wis. 2d 617, ¶13.   
 
¶23 With the above explanations in mind, we turn now to 
evaluate the Bethkes' arguments.  The Bethkes contend that the 
term "self-insurer" in Kathryn's UIM coverage is ambiguous 
because it is unclear what constitutes a "self-insurer" under 
the policy.  The Bethkes further argue that a reasonable insured 
would not understand that a statutorily liable car rental 
company is a "self-insurer" under the policy.   
¶24 The 
term 
"self-insurance" 
often 
gives 
rise 
to 
interpretation issues.  As one popular treatise on insurance law 
No. 
2010AP3153   
 
12 
 
puts it, "[t]he term 'self-insurance' is somewhat ambiguous."8  
1A Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 10:1 
(3d ed. 2011).  It explains that the term is one "of colloquial 
currency rather than of precise legal meaning."  Id.  We 
therefore examine next what the term "self-insurer" means in 
this policy. 
 
¶25 Sometimes a statutory definition of a term provides 
the meaning of the use of that term in a policy.  Thus, we look 
to 
the 
statutes 
governing 
automobile 
insurance 
coverage.  
However, the term "self-insurer" is not defined in Wisconsin's 
statutes.    
¶26 In examining the policy, the term "self-insurer" is 
likewise undefined there.  An examination of the declarations 
page of the policy that provides the insured $500,000 of UIM 
coverage sheds no light on our quest.  Although the policy in 
total makes four references to a "self-insurer," none of those 
references defines the term.   
¶27 The only qualifying phrase in the policy that arguably 
lends any assistance in defining the term "self-insurer" is the 
phrase that appears to direct the reader to search for self-
                                                 
8 Broadly stated, a self-insurer generally elects to take on 
the risk of paying claims by itself rather than purchasing a 
separate policy from an insurance company.  Robert E. Keeton & 
Alan 
I. 
Widiss, 
Insurance 
Law: 
A 
Guide 
to 
Fundamental 
Principles, Legal Doctrines and Commercial Practices 13 (1988).  
An 
entity 
of 
sufficient size such as a corporation or 
governmental agency might elect to handle the risk of becoming 
liable to an injured party by setting aside assets.  Id.  The 
entity then uses its own assets to pay claims.  Id.   
No. 
2010AP3153   
 
13 
 
insurers "under any automobile law."  The term "law" in "any 
automobile law" arguably directs the reader to laws related to 
automobiles that govern a "self-insurer."  However, even 
assuming that the phrase "under any automobile law" modifies the 
term "self-insurer," it is unclear whether a car rental company 
that is statutorily liable under Wis. Stat. § 344.51 is a "self-
insurer" under the policy.   
¶28 We identify two statutes that potentially inform what 
a "self-insurer" under any "automobile law" means, Wis. Stat. 
§§ 344.51 and 344.16.  Both of those statutes are part of 
Wisconsin's financial responsibility law.9  We turn to examine 
whether they provide any assistance in our search for a 
definition of a "self-insurer."  
 
¶29 Avis is a liable party to this accident not because it 
is self-insured, but because it is a car rental company.  Avis 
is statutorily liable under Wis. Stat. § 344.51(1m) for damages 
caused by the negligent operation of its rented motor vehicle by 
another person.  Wisconsin Stat. § 344.51(1m) requires Avis to 
file with the Department of Transportation "a certificate for a 
good and sufficient bond or policy of insurance."10  The 
certificate must provide that Avis' insurer will be liable for 
certain minimal amounts that arise from accidents caused by the 
                                                 
9 The financial responsibility law is codified at Chapter 
344 of the Wisconsin statutes. 
10 Although the statute refers to a "policy of insurance," a 
certificate 
of 
self-insurance 
is 
sufficient 
to 
meet 
the 
insurance requirement of Wis. Stat. § 344.51.  Boatright v. 
Spiewak, 214 Wis. 2d 507, 515, 570 N.W.2d 897 (Ct. App. 1997). 
No. 
2010AP3153   
 
14 
 
negligent operation of a rented motor vehicle by another person.  
Id.  The minimum amount of insurance coverage that Avis must 
maintain under Wis. Stat. § 344.51(1m) is $25,000 per person and 
$50,000 per occurrence.11  Wis. Stat. § 344.01(2)(d).   
¶30 Wisconsin Stat. § 344.51(1m) further provides that if 
a car rental company complies with the insurance requirement in 
the statute, it is not liable beyond the insurance liability 
limits for damages caused by the negligent operation of a rented 
motor vehicle by another person.  Even if a car rental company 
fails to comply with the insurance requirement, the statute 
makes it directly liable for only $25,000 per person and $50,000 
per accident.  Wis. Stat. §§ 344.51(2); 344.01(2)(d).  Although 
Wis. Stat. § 344.51 makes a car rental company liable for 
damages caused by the negligent operation of its rented motor 
vehicle by another person, it also expressly limits its exposure 
for that liability.  
¶31 The legislature's purpose in enacting Wis. Stat. 
§ 344.51 is therefore expressed in the operation of the statute.  
Wisconsin Stat. § 344.51 represents a trade-off for car rental 
companies.  On one hand, the statute requires a minimal payment 
to accident victims for damages caused by the negligent 
                                                 
11 Neither Wis. Stat. § 344.51 nor Wis. Stat. § 344.01(2)(d) 
prohibit car rental companies from acquiring liability insurance 
beyond the minimum amounts and providing additional compensation 
to injured accident victims.  However, as the court of appeals 
has noted, there is little incentive in the statutory scheme for 
any car rental company to insure for more than the minimum 
amount.  See Boatright, 214 Wis. 2d 507, 519-20. 
No. 
2010AP3153   
 
15 
 
operation of a rented motor vehicle by another person.  On the 
other hand, Wis. Stat. § 344.51 shields car rental companies 
from liability for those damages above the minimal statutory 
requirements.  Because it is subject to Wis. Stat. § 344.51, 
Avis was statutorily liable in the amount of $50,000 to the 
Bethkes regardless of whether it was insured or self-insured. 
¶32 Here, Avis possessed a certificate of self-insurance 
under Wis. Stat. § 344.16.  That statute allows "any person in 
whose name more than 25 motor vehicles are registered" to 
qualify as a self-insurer by obtaining a certificate of self-
insurance. 
 
Wis. 
Stat. 
§ 344.16(1). 
 
The 
Department 
of 
Transportation is charged with the responsibility to determine 
who is qualified to self-insure their vehicles and to issue 
certificates of self-insurance.  Wis. Stat. § 344.16(2).   
¶33 Wisconsin 
Stat. 
§ 344.16(2) 
provides 
that 
the 
Department of Transportation may qualify an individual to self-
insure their vehicles only when it is "satisfied that such 
person is possessed and will continue to be possessed of ability 
to pay judgments obtained against such person."  Pursuant to 
Department 
of 
Transportation regulations, an applicant is 
considered to be "possessed of the ability to pay judgments" 
under Wis. Stat. § 344.16(2) if the applicant has abundant 
financial resources at their disposal: 
...the [applicant must have] unencumbered assets of at 
least $60,000 times the square root of the total 
number of motor vehicles owned by the [applicant] and 
operated on Wisconsin highways, [must be] paying 
creditors as the [applicant's] debts become due, and 
No. 
2010AP3153   
 
16 
 
[must] not have any judgment, fine or forfeiture that 
has remained unpaid more than 30 days.  
Wis. Admin. Code § Trans 100.16(4)(c) (Oct., 2005).12    
 
¶34 Evidence of the ability to pay judgments must be 
provided in the form of audited financial statements or on a 
United States securities and exchange commission form 10K 
filing.  Id. at § Trans 100.16(4)(c).  Applicants may obtain a 
certificate of self-insurance if they have financial resources 
sufficient to prove to the Department of Transportation that 
they can pay judgments.  Wis. Stat. § 344.16(1).  Because self-
insurance certificates must be renewed every year, applicants 
must annually submit a new application and financial statement.  
Wis. Admin. Code § Trans 100.16(3). 
 
¶35 By enacting Wis. Stat. § 344.16 and charging the 
Department 
of 
Transportation 
with 
the 
responsibility 
to 
determine that applicants for a certificate of self-insurance 
are financially capable of paying judgments, the legislature 
sought to ensure that self-insurers can fully satisfy judgments 
against them by injured accident victims.  The financial 
requirements imposed by the Department of Transportation give 
effect to that purpose by ensuring that anyone who chooses to 
self-insure has a significant amount of financial resources 
available to pay judgments to accident victims. 
                                                 
12 All regulations cited in this opinion are the regulations 
that were in effect at the time Avis possessed the certificate 
of self-insurance at issue in this case, unless otherwise 
indicated. 
No. 
2010AP3153   
 
17 
 
 
¶36 The Department of Transportation's administration of 
Wis. Stat. §§ 344.16 further indicates that the statute's 
purpose is to ensure that self-insurers can fully satisfy 
judgments.  Department of Transportation regulations require a 
self-insurer under Wis. Stat. § 344.16 to use a specific 
application form when seeking approval to self-insure vehicles.  
The regulations identify that form as form "MV3069."  Wis. 
Admin. Code § Trans 100.16(1) (Oct., 2005).  The instructions on 
form MV3069 state that it is "specifically not valid for the 
requirements of s.344.51 and s.344.52 Wis. Stats."13  The 
Department of Transportation treats car rental companies whose 
liability is limited under Wis. Stat. § 344.51 differently than 
self-insurers whose liability is not limited by the statute. 
 
¶37 By enacting both Wis. Stat. §§ 344.16 and 344.51, the 
legislature has set forth two statutes whose purposes collide.  
A self-insured car rental company cannot at the same time enjoy 
limited liability and be expected to fully satisfy judgments.  
There is a disconnect because one statute makes Avis statutorily 
liable for a minimal amount of $25,000 per person and $50,000 
per accident while the other statute seeks to ensure that Avis 
has the financial resources to fully satisfy judgments against 
it.  The purposes of the statutes do not add up when they are 
combined in a self-insured car rental company like Avis. 
                                                 
13 Although form MV3069 is not in the record, we take 
judicial notice of the form because it is an easily accessible 
form authored by a state agency.  See Wis. Stat. § 902.01; 
Wisconsin Med. Soc'y v. Morgan, 2010 WI 94, ¶18 n.7, 328 Wis. 2d 
469, 787 N.W.2d 22. 
No. 
2010AP3153   
 
18 
 
 
¶38 The disconnect between the two statutes is further 
illustrated by the circumstances giving rise to Avis' liability 
under Wis. Stat. § 344.51(1m).  Avis is statutorily liable for a 
minimal amount in order to pay damages caused by the negligent 
operation of a rented motor vehicle by another person.  Wis. 
Stat. § 344.51(1m).  However, Avis would be expected to fully 
pay a judgment if Avis' negligence caused the damages. 
 
¶39 It is unclear whether a reasonable insured would 
understand that a car rental company whose liability is limited 
by Wis. Stat. § 344.51 is a "self-insurer" under the policy.  
The generalized requirements to obtain a certificate of self-
insurance 
are 
quite 
different 
from 
the 
protection 
of 
underinsured motorist coverage.  Wisconsin Stat. § 344.51 places 
liability on the shoulders of a car rental company regardless of 
whether it is self-insured.     
 
¶40 A reasonable insured would understand their UIM 
coverage generally provides additional coverage to insured 
automobile accident victims when a liable party has inadequate 
means of payment.  24 Eric Mills Holmes, Appleman on Insurance 
2d § 147.1 (2004).  Here, Avis made an inadequate payment yet 
Owners failed to provide additional coverage.     
 
¶41 A reasonable insured would understand their UIM 
coverage should provide "a predetermined, fixed level of 
coverage" when all sources of payment have been combined.  See 
Teschendorf, 293 Wis. 2d 123, ¶42 (citing Welin, 292 Wis. 2d 73, 
¶¶46, 49-53).  When all sources of payment are combined, the 
Bethkes have not received the predetermined, fixed level of 
No. 
2010AP3153   
 
19 
 
coverage that Kathryn purchased, which is $500,000.  Avis is the 
only source of payment and it is statutorily liable for only 
$50,000. 
 
¶42 A reasonable insured would expect that the UIM 
insurance she purchased would put her in the same position she 
would have occupied had the liable party's insurance limits been 
the same as the underinsured motorist limits purchased by her.  
Gillette, 251 Wis. 2d 561, ¶44.  Here, Avis' payment does not 
put the Bethkes in that same position.  The liability limits 
were only $50,000 even though Kathryn purchased $500,000 of UIM 
coverage.    
 
¶43 A reasonable insured would expect UIM coverage when 
"the third party's liability limits are not adequate to fully 
compensate the victim for his or her injuries."  Id., ¶45.  
Here, Avis has statutory liability limits that are inadequate to 
compensate the Bethkes for their injuries yet Owners has 
provided no additional coverage.    
 
¶44 UIM coverage is meant to provide coverage up to the 
policy limit where those who are liable cannot fully compensate 
the insured.  A car rental company that is statutorily liable is 
not meant to provide compensation to injured accident victims 
beyond a minimal amount.  In light of those purposes, a 
reasonable insured would expect their UIM coverage to fill in 
the gap between the statutory liability of a car rental company 
and their coverage limit absent a clear exclusion limiting 
coverage.  For the reasons we discuss above, the exclusion on 
which Owners relies is unclear.  Therefore, because it is 
No. 
2010AP3153   
 
20 
 
unclear whether a reasonable insured would understand that a car 
rental company who is statutorily liable under Wis. Stat. 
§ 344.51 is a "self-insurer," we conclude that the term "self-
insurer" is ambiguous under these facts.  
 
¶45 Even if we concluded that the policy appeared to 
clearly and unambiguously exclude the Avis rental vehicle from 
coverage, we would still be unable to interpret it to exclude 
UIM coverage under these facts because such a construction leads 
to an absurd result.  Its application to these unique facts 
simply makes no sense.  
 
¶46 Kathryn took every reasonable action that could be 
expected of her to protect herself under these facts.  She 
elected to purchase $500,000 in UIM coverage when she could have 
chosen not to buy any.  However, if the term "self-insurer" is 
interpreted to encompass the Avis rental vehicle, it would not 
matter whether Kathryn bought $1,000,000 or even $5,000,000 in 
coverage.  Her prudent planning against a catastrophic loss like 
the one suffered by the Bethkes would be nullified.   
 
¶47 The absurdity that results from including Avis as a 
"self-insurer" 
here 
is 
illustrated 
by 
Owners' 
statements 
regarding why the policy  excludes a "self-insurer" in the first 
place.  At oral argument Owners agreed that the main purpose of 
excluding a "self-insurer" is because "the self-insurer entity 
has been certified as having plenty of resources."  Self-
insurers are not covered because Owners expects that the Bethkes 
will collect a judgment from a self-insurer that fully addresses 
their damages.  Generally that makes sense when applied to an 
No. 
2010AP3153   
 
21 
 
entity that possesses a self-insurance certificate under Wis. 
Stat. § 344.16 because the statute ensures that it has the 
financial capacity to pay judgments. 
 
¶48 However, that purpose makes no sense when applied to 
the Avis rental vehicle.  Wisconsin Stat. § 344.51(1m) expressly 
limits the liability of rental car companies whether or not they 
are self-insured.  Owners cannot reasonably expect the Bethkes 
to collect a judgment that fully addresses their damages from a 
company whose liability is limited to a minimal amount by 
statute.  The unique circumstances of this case produce a result 
that is at odds with the purpose for excluding a "self-insurer." 
 
¶49 The absurd result that occurs when the term "self-
insured" is applied to the Avis rental vehicle is further 
illustrated by Murray v. American Family Mut. Ins. Co., 429 F.3d 
757 (8th Cir. 2005).  Although Murray arose under Missouri law, 
the Eighth Circuit interpreted similar policy language under 
facts similar to the case before us.  Id. at 760-62. 
 
¶50 In Murray, Monte and Jane Murray were riding in a 
vehicle driven by a third party.  Id. at 759.  At the time of 
the accident, the Murrays were insured by American Family 
through six automobile policies, one for each vehicle that they 
owned.  Id.  Four of the six policies contained UIM coverage in 
the amount of $100,000 per person and $300,000 per occurrence.  
Id. 
 
¶51 The Murrays were riding in a vehicle owned by a car 
rental company at the time of the accident.  Id. at 760.  The 
driver of the rental vehicle was insured for $10,000 of 
No. 
2010AP3153   
 
22 
 
liability coverage through her own policy.  Id.  After the 
accident, the Murrays filed an action against the driver.  Id.  
Following a bench trial, the court found the driver 100% liable 
for the accident and awarded damages of $1,606,889.54 to Monte 
Murray and $160,690.11 to Jane Murray.  Id.  The driver's 
insurer paid its $10,000 limit to the Murrays.  Id. 
 
¶52 The Murrays looked to the self-insured rental vehicle 
company for compensation.  Id.  After some negotiations and a 
bankruptcy filing by the rental vehicle company, the company 
paid the Murrays an additional $15,000.  Id. at 760-61.   
 
¶53 The Murrays then filed suit against American Family 
seeking payment of uninsured and UIM benefits.  Id. at 761.  The 
Murrays' UIM coverage in all relevant policies provided that an 
"underinsured motor vehicle" did not include vehicles "[o]wned 
or operated by a self-insurer as considered by any financial 
responsibility law, motor carrier law, or similar law."  Id. at 
761-62.   
 
¶54 The Eighth Circuit determined that "interpreting the 
contract to nullify coverage in this situation would be an 
unreasonable interpretation."  Id. at 765.  The Murray court 
approvingly quoted a lower court's statement that the Murrays 
presented a "compelling argument in favor of a fatal ambiguity."  
Id. at 764.  The Murray court agreed that "it simply makes no 
sense to sell insureds insurance that provides protection in the 
event that they are involved in an accident with an individual 
with less than $100,000 insurance and then turn around and 
No. 
2010AP3153   
 
23 
 
nullify that underinsurance protection simply because the other 
individual is a qualified self-insurer."  Id. at 764-65.   
 
¶55 To apply the policy term "self-insurer" to the Avis 
rental vehicle is similarly an unreasonable interpretation.  It 
makes no sense for Owners to sell Kathryn $500,000 of UIM 
coverage excluding a "self-insurer" and to then turn around and 
apply that policy term to a car rental company who is 
statutorily liable for a minimal amount not because it is a 
self-insurer, but because it is a car rental company.   
 
¶56 We decline to adopt an interpretation of the policy 
that leads to such an absurd result.  Just as in Murray, the 
ambiguity in Owners' policy is fatal to its arguments that the 
policy does not extend coverage to the Avis rental vehicle.  Id. 
at 764.  To avoid an absurd result, we interpret the policy in 
favor of the insured.  See Olguin v. Allstate Ins. Co., 71 Wis. 
2d 160, 165, 237 N.W.2d 694 (1976).   
V 
 
¶57  In sum, we conclude that as applied, the policy term 
"self-insurer" is ambiguous because it is unclear whether a 
reasonable insured would understand that a car rental company 
which is statutorily liable under Wis. Stat. § 344.51 is a 
"self-insurer" under the policy.  Consistent with the canons of 
construction and case law, when the policy language relates to 
coverage and is ambiguous, we interpret the policy in favor of 
the insured to afford coverage.  We further conclude that even 
if 
the 
term 
"self-insurer" 
appears 
to 
be 
unambiguous, 
interpreting it to exclude self-insured rental vehicles from 
No. 
2010AP3153   
 
24 
 
coverage leads to an absurd result here.    Accordingly, we 
reverse the court of appeals and remand to the circuit court for 
further proceedings. 
By the Court.—The decision of the court of appeals is 
reversed and the cause is remanded. 
No.  2010AP3153.ssa 
 
1 
 
¶58 SHIRLEY 
S. 
ABRAHAMSON, 
C.J.   (dissenting). 
 
The 
majority opinion struggles mightily, but unsuccessfully, in my 
opinion, to justify awarding funds to the sympathetic innocent 
victims of an auto accident.  Tragically, Kathryn Bethke died.  
Andrew Bethke was seriously injured.  I agree with the majority 
that a fairer result, and perhaps one more in line with the 
theoretical goals of Underinsured Motorist Coverage (UIM), is 
for Ms. Bethke's insurance company to compensate the Bethkes.  
But that result is not consistent with the policy that Ms. 
Bethke purchased and that the insurance company issued.  As much 
as my sympathies pull me to the result the majority reaches, I 
cannot join the majority opinion in rewriting the insurance 
policy to create coverage where none exists under the plain text 
of the policy.   
¶59 Kathryn 
Bethke 
bought 
$500,000 
of 
underinsured 
motorist coverage for a premium of $7.17 per year.  The majority 
opinion explains (without any basis in the record) that Ms. 
Bethke took every reasonable action that could be expected of 
her to protect herself from an underinsured motorist.  Majority 
op., ¶46.   
¶60 The Bethke policy has high coverage limits for 
underinsured motorist coverage and a low premium.  As might be 
expected under these circumstances, the underinsured motorist 
provision in this insurance policy contains numerous exceptions 
and 
exclusions 
limiting 
coverage 
and 
recovery 
under 
the 
underinsured motorist provision.   
No.  2010AP3153.ssa 
 
2 
 
¶61 Indeed, the vehicle at issue is an underinsured 
automobile as defined in the policy.1  The Bethke policy also 
includes a lengthy list of automobiles excluded from the 
definition of an underinsured automobile and thus excluded from 
underinsured motorist coverage.  One exclusion in the Bethke 
policy provides that an "underinsured automobile does not 
include an automobile owned or operated by a self-insurer under 
any automobile law" 2 (emphasis added).          
¶62 Other underinsured motorist policies may be available 
for purchase in Wisconsin, may cost more, and may have fewer 
exclusions than the Bethke policy.  Nothing in the record shows 
that all automobile liability policies available in Wisconsin 
exclude self-insurers from underinsured motorist coverage.   
¶63 As fate would have it, however, the Bethke policy does 
not cover the eventuality that occurred.  Ms. Bethke collided 
                                                 
1 The Bethke policy provides that "underinsured automobile" 
means "an automobile to which a bodily injury liability bond or 
liability insurance policy applies at the time of the occurrence 
in at least the minimum amounts required by the Financial 
Responsibility Law in the state where your automobile is 
normally 
garaged . . . . 
Underinsured 
automobile 
does 
not 
include an automobile . . . owned or operated by a self-insurer 
under any automobile law . . . ." 
The vehicle at issue does not fall within the policy's 
definition of "uninsured automobile." 
2 This policy exclusion from underinsured coverage is found 
in the standard personal auto policy.  See 1 Susan J. Miller, 
Miller's Standard Insurance Policies Annotated 12 (Form PAP) 
(6th ed. 2012). 
Wisconsin Stat. § 632.32(6) includes a list of exclusions 
that are prohibited in motor vehicle insurance policies.  The 
self-insurance exclusion is not prohibited by Wis. Stat. 
§ 632.32(6) or any other law. 
No.  2010AP3153.ssa 
 
3 
 
with a rental car owned by Avis Rent-A-Car, a self-insurer under 
a Wisconsin automobile law, and operated by an uninsured driver 
who was unable to compensate the Bethkes for the damages 
inflicted.    
¶64 The majority opinion characterizes as ambiguous the 
policy language declaring that an "underinsured automobile does 
not include an automobile owned or operated by a self-insurer 
under any automobile law." 
¶65 I agree with the circuit court and court of appeals.  
Both concluded that the exclusion of self-insured vehicles does 
not function as an impermissible reducing clause and that the 
policy language excluding "a self-insurer under any automobile 
law" is not ambiguous.   
¶66 The 
policy 
refers 
to 
a 
self-insurer 
under 
any 
automobile law.  Wisconsin Stat. § 344.16 is just such an 
automobile law.  It unambiguously grants Avis the opportunity to 
be a self-insurer under Wisconsin law.  Avis has qualified as a 
self-insurer and has received a Wisconsin certificate of self-
insurance.  Majority op., ¶10.  If there is an ambiguity, I have 
not found it.  As I read the plain words of the policy (and 
these plain words are not prohibited by the Wis. Stat. 
§ 632.32(6), the Bethkes cannot recover from their insurance 
company under the underinsured motorist coverage for damages 
arising from this auto accident because the vehicle at fault was 
owned by Avis, a self-insurer under an automobile law.  Even 
though the Bethkes were not fully compensated by the at-fault 
driver, the underinsured motorist coverage will not provide 
No.  2010AP3153.ssa 
 
4 
 
coverage because the auto accident involved a self-insured 
vehicle. 
¶67 Rather than looking at the plain language of the 
policy, the majority opinion turns to analyzing the purpose of 
the statutes governing car rental companies and self-insurers.  
The statutes do not establish the scope of UIM coverage or 
impose a definition of a UIM vehicle.  Nevertheless, the 
majority opinion ominously declares that the statutes regarding 
limited liability, self-insurers, and underinsured motorists are 
on a collision course:  "A self-insured car rental company 
cannot at the same time enjoy limited liability and be expected 
to fully satisfy judgments.  There is a disconnect because one 
statute [§ 344.51] makes Avis statutorily liable for a minimum 
amount . . . while the other statute [§ 344.16] seeks to ensure 
that Avis has the financial resources to fully satisfy judgments 
against it."  Majority op., ¶37.     
¶68 There is no collision course.  There is no disconnect.  
The fatal flaw in the majority opinion is that it seems to 
assume that Avis would be fully liable to Ms. Bethke but for the 
statutory "limit on liability."  This is simply not so.  
Wisconsin Stat. § 344.51 does not act as a "limit on liability," 
but rather expands Avis's obligation to compensate an innocent 
victim; Avis is liable without any proof that it (rather than 
the driver who rented the vehicle) is at fault. 
¶69 At common law, a car rental company was not liable to 
an innocent third party for the negligent operation of the 
No.  2010AP3153.ssa 
 
5 
 
driver of its rented car.3  The statute, Wis. Stat. § 344.51(1m), 
that imposes liability on the car rental company partially 
abrogates the common law.  The statute requires the car rental 
company to provide the specified compensation to the victim of a 
driver who rents its car, causes an injury, and is unable to pay 
the damages on his or her own.4  But for the existence of the 
statute mandating Avis to compensate the injured person in the 
specified amounts, Ms. Bethke likely would not have recovered a 
single dollar from Avis in the present case.  Avis is a "source 
of payment" for victims only because the statute requires it to 
pay compensation, not because Avis is liable under common law 
principles of tort liability.    
¶70 The statutory liability applies only to cars that Avis 
rents to drivers who are negligent, cause injury, and are unable 
to pay damages.   
¶71 A car rental company like Avis is nonetheless fully 
liable for damages that are caused by its own wrongdoing.  Thus, 
Avis may incur liability if, for example, its negligent 
maintenance of a rented car is a cause of injury.  Avis may 
incur liability if its negligence in renting a car to a 
negligent driver is a cause of injury.  Avis may incur liability 
                                                 
3 City of Milwaukee v. Froelich, 196 Wis. 444, 445, 219 
N.W. 954 (1928); Boatright v. Spiewak, 214 Wis. 2d 507, 520-21, 
570 N.W.2d 897 (Ct. App. 1997); Am. Family Mut. Ins. Co. v. 
Reciprocal Ins. Serv. Exch. Mgmt. Co., 111 Wis. 2d 308, 310, 330 
N.W.2d 223 (Ct. App. 1983).  
4 Wis. Stat. § 344.51(1m).  See also Am. Family Mut. Ins. 
Co., 111 Wis. 2d at 311. 
No.  2010AP3153.ssa 
 
6 
 
if an Avis-owned car is negligently operated by an Avis 
employee. 
¶72 The majority opinion complains that Avis's "limited 
liability" 
contravenes 
the 
purpose 
of 
the 
self-insurer 
exclusion——to enable the self-insured to pay damages against it 
in full——and asserts that therefore Avis does not fit the 
definition of a self-insurer.5  This assertion is wrong.  Avis is 
a self-insurer under the law, whether it is required to provide 
compensation to an innocent victim for another's wrongdoing or 
whether it must pay damages when it is liable for its own 
wrongdoing.   
¶73 There is no collision course or disconnect in the 
statutes.  The statutes demonstrate a consistent legislative 
purpose:  Car rental companies have statutory liability for 
negligent motorists who rent their cars, cause an injury, and 
are unable to pay the damages on their own.  In the event that 
the car rental company is liable for its own wrongdoing, the 
State of Wisconsin is satisfied that it has the financial 
resources to pay any judgments against it.  Whether Avis has 
statutory liability for the negligent operation of one of its 
vehicles by a driver who rented the vehicle or liability for its 
own 
wrongdoing, 
it 
is 
a 
self-insurer 
under 
a 
Wisconsin 
automobile law.   
¶74 The majority, in my opinion, should stick to reading 
the insurance policy and the statutes.  The result the majority 
                                                 
5 Majority op., ¶38. 
No.  2010AP3153.ssa 
 
7 
 
reaches is not consistent with the policy that Ms. Bethke 
purchased and that the insurance company issued. 
¶75 The majority reads the insurance policy based on its 
theoretical expectation of UIM coverage, and not the expectation 
of an insured who has read the self-insurer exclusion or the 
insurance company that issued the policy.  The majority reads 
words into the insurance policy that are not there.  It reads 
the policy as if it includes the following underlined language:  
"Underinsured automobile does not include an automobile owned or 
operated by a self-insurer under any automobile law except an 
automobile law providing that when the self-insurer is a car 
rental company it has limited statutory liability for a driver's 
negligent operation of a rental car."  
¶76 The law simply does not allow us to alter policy 
language to create coverage where none exists.6 
¶77 For the reasons set forth, I dissent. 
¶78 I am authorized to state that Justice N. PATRICK 
CROOKS and Justice MICHAEL J. GABLEMAN join this dissent.  
                                                 
6 Bruchert v. Tokio Marine & Nichido Fire Ins. Co., Ltd., 
2007 WI App 156, ¶12, 303 Wis. 2d 671, 736 N.W.2d 234. 
No.  2010AP3153.ssa 
 
1