Case Title: Jeffrey E. Marotz v. Arthur E. Hallman, Jr.

Citation: 2007 WI 89

Docket Number: 2005AP001579

State: wisconsin

Court: Wisconsin Supreme Court

Date: 2007-07-10T00:00:00Z

Document:
2007 WI 89 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2005AP1579 
 
 
COMPLETE TITLE: 
 
 
Jeffrey E. Marotz, 
          Plaintiff-Appellant-Petitioner, 
     v. 
Arthur E. Hallman, Jr., ACUITY, a mutual 
insurance company, The Mega Life and Health 
Insurance Company and IMT Insurance Company 
(Mutual), 
          Defendants, 
 
Rural Mutual Insurance Company, 
          Defendant-Respondent. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at: 290 Wis. 2d 512, 712 N.W.2d 87 
(Ct. App. 2005—Unpublished) 
 
 
OPINION FILED: 
July 10, 2007   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
January 5, 2007   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Waupaca   
 
JUDGE: 
John P. Hoffmann 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
BRADLEY, J., dissents (opinion filed). 
ABRAHAMSON, C.J., and BUTLER, Jr., J., join the 
dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiff-appellant-petitioner there were briefs by  
Virginia M. Antoine and Habush Habush & Rottier S.C., Milwaukee, 
and oral argument by Craig A. Christensen. 
 
For the defendant-respondent there was a brief by Thomas A. 
Maroney and Hansen, Shambeau, Maroney, Anderson & Parry, 
Waupaca, and oral argument by Thomas A. Maroney. 
 
An amicus curiae brief was filed by Lynn R. Laufenberg and 
Laufenberg & Hoefle, S.C., Milwaukee. 
 
2007 WI 89
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2005AP1579  
(L.C. No. 
2003CV447) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Jeffrey E. Marotz, 
 
          Plaintiff-Appellant-Petitioner, 
 
     v. 
 
Arthur E. Hallman, Jr., ACUITY, a mutual 
insurance company, The Mega Life and Health 
Insurance Company and IMT Insurance Company 
(Mutual), 
 
          Defendants, 
 
Rural Mutual Insurance Company, 
 
          Defendant-Respondent. 
 
 
 
FILED 
 
JUL 10, 2007 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
JON P. WILCOX, J.   This is a review of an unpublished 
court of appeals decision,1 which affirmed the judgment of 
Waupaca County Circuit Court, John P. Hoffmann, Judge.  Judge 
Hoffman denied the motion for declaratory judgment of Jeffery E. 
                                                 
1 Marotz v. Hallman, No. 2005AP1579, unpublished slip op. 
(Wis. Ct. App. December 22, 2005). 
No. 
2005AP1579   
 
2 
 
Marotz (Marotz) and dismissed his claim against Rural Mutual 
Insurance Company (Rural). 
¶2 
Two issues are before this court.2  First, does 
Wis. Stat. § 632.32(5)(i)1. (2005-06),3 which allows an insurer 
to reduce the limit of underinsured motorist (UIM) coverage by 
"[a]mounts paid [to an insured] by or on behalf of any person or 
organization that may be legally responsible for the bodily 
injury or death for which the payment is made," permit an 
insurer to reduce the UIM limit by the amount paid to an insured 
by a non-UIM tortfeasor?  We hold that § 632.32(5)(i)1. does 
allow an insurer to reduce the limit of UIM liability by the 
amount paid to an insured by a non-UIM tortfeasor.  Second, does 
                                                 
2 The issues presented and our respective holdings are the 
same in this case and Bailey v. State Farm Mutual Automobile 
Insurance Company, 2007 WI 90, ___ Wis. 2d ___, ___ N.W.2d ___, 
which has been released the same day. 
3 Wisconsin Stat. § 632.32(5)(i) (2005-06) states: 
A policy may provide that the limits under the 
policy for uninsured or underinsured motorist coverage 
for bodily injury or death resulting from any one 
accident shall be reduced by any of the following that 
apply: 
1.  Amounts paid by or on behalf of any person or 
organization that may be legally responsible for the 
bodily injury or death for which the payment is made. 
2.  Amounts paid or payable under any worker's 
compensation law. 
3.  Amounts paid or payable under any disability 
benefits laws. 
All subsequent references to the Wisconsin Statutes are to 
the 2005-06 version, unless otherwise stated. 
No. 
2005AP1579   
 
3 
 
the reducing clause in the policy issued by Rural unambiguously 
comply with § 632.32(5)(i)1.?  We hold that the language does 
unambiguously comply with § 632.32(5)(i)1.  Accordingly, we 
affirm the court of appeals.    
I 
¶3 
On December 21, 2002, Marotz rode as a passenger in 
the vehicle of Arthur E. Hallman, Jr. (Hallman) as Hallman drove 
southbound on County Highway J in Shawano County.  Hallman 
entered the intersection of County Highway J and State Highway 
29 without stopping at the posted stop sign.  Donald J. 
Hilgemann (Hilgemann), who was driving eastbound on State 
Highway 29, struck Hallman's vehicle.  As a result of the 
collision, Marotz sustained injuries.  The injuries resulted in 
more than $250,000 in medical bills. 
¶4 
Hallman's vehicle was insured by a liability insurance 
policy, which ACUITY, a mutual insurance company (ACUITY), 
issued with a limit of $25,000 per person.  Hilgemann's vehicle 
was also insured by a liability insurance policy, which IMT 
Insurance Company (Mutual) (IMT) issued with a limit of 
$250,000. 
¶5 
Marotz's parents, Joann K. and Orland O. Marotz, had a 
policy issued by Rural in effect at the time of the accident.  
Their policy provided UIM coverage for any "family member," such 
No. 
2005AP1579   
 
4 
 
as Marotz.4  The UIM coverage provided a limit of liability of 
$100,000 per person.   
¶6 
The personal auto policy declarations provided the 
limits of liability for the various coverages included in the 
policy, as well as the premium for each.  Before listing the 
limit of liability for the uninsured motorist (UM) coverage and 
UIM coverage, the following statement appeared: "THE LIMITS OF 
LIABILITY FOR THE FOLLOWING COVERAGES ARE PER POLICY LIMITS AND 
SHALL BE REDUCED AS A RESULT OF YOUR RECEIVING AMOUNTS FROM 
OTHER SOURCES BECAUSE OF YOUR 'BODILY INJURY.'"   
¶7 
The policy included an endorsement pertaining to UIM 
coverage in Wisconsin.  The endorsement began by noting that 
"[w]ith respect to the coverage provided by this endorsement, 
the provisions of the policy apply unless modified by the 
endorsement."  Under an "INSURING AGREEMENT" heading, the 
endorsement stated the following: 
We will pay compensatory damages which an "insured" is 
legally entitled to recover from the owner or operator 
of an "underinsured motor vehicle" because of "bodily 
injury": 
1.  Sustained by an "insured"; and  
2.  Caused by the accident. 
The owner's or operator's liability for these damages 
must arise out of the ownership, maintenance or use of 
the "underinsured motor vehicle." 
                                                 
4 In the definitions section of the personal auto policy, 
the following appears: "'Family member' means a person related 
to you by blood, marriage or adoption who is a resident of your 
household.  This includes a ward or foster child." 
No. 
2005AP1579   
 
5 
 
We will pay under this coverage only if 1. or 2. below 
applies: 
1. The limits of liability under any bodily injury 
liability bonds or policies applicable to the 
"underinsured motor vehicle" have been exhausted by 
payment of judgments or settlements; or  
2. A tentative settlement has been made between an 
"insured" and the insurer of the "underinsured 
motor vehicle" which would exhaust the limits of 
liability 
under 
any 
applicable 
bodily 
injury 
liability bonds or policies and we: 
a. Have been given prompt written notice of such  
tentative settlement; and  
b. Advance payment to the "insured" in an amount 
equal to the tentative settlement within 30 
days after the receipt of notification. 
The endorsement also stated that "'Underinsured motor vehicle' 
means a land motor vehicle or trailer of any type to which a 
bodily injury liability bond or policy applies at the time of 
the accident but its limit for bodily injury liability is less 
than the limit of liability for this coverage." Because 
Hallman's vehicle had a liability coverage limit less than 
$100,000 (i.e., the limit of UIM liability in Marotz's policy), 
it constituted an "underinsured motor vehicle." 
¶8 
Under a "LIMIT OF LIABILITY" heading, the endorsement 
included a reducing clause.  It stated the following: 
The limit of liability shall be reduced by all of 
sums: 
1. Paid because of the "bodily injury" by or on behalf 
of persons or organizations who may be legally 
responsible.  This includes all sums paid under 
Part A; and  
No. 
2005AP1579   
 
6 
 
2. Paid or payable because of the "bodily injury" 
under any of the following or similar law: 
a.  Workers' compensation law; or  
b.  Disability benefits law. 
Under the same "LIMIT OF LIABILITY" heading, the following 
appeared: "We will not make a duplicate payment under this 
coverage for any element of loss for which payment has been made 
by or on behalf of persons or organizations who may be legally 
responsible." 
¶9 
Marotz filed a UIM claim with Rural.  Rural denied the 
claim.  It asserted that the policy's reducing clause applied to 
the payments made by ACUITY (i.e., $25,000 on behalf of Hallman) 
and IMT (i.e., $90,000 on behalf of Hilgemann), and therefore 
the payments Marotz received exceeded the $100,000 limit of UIM 
liability.  Conversely, Marotz argued only ACUITY's payment on 
behalf of Hallman was subject to the reducing clause, meaning 
Rural needed to pay Marotz at least $75,000 in UIM benefits. 
¶10 Marotz commenced litigation and moved for declaratory 
judgment with regard to the insurance policy issued by Rural.  
He requested that the circuit court declare that (1) Rural was 
not entitled to reduce the limit of the UIM liability by the 
$90,000 that IMT paid on behalf of Hilgemann and (2) the 
policy's reducing clause was ambiguous when considered in the 
context of the entire policy and could not be enforced with 
regard to payments made by ACUITY and IMT. 
¶11 The circuit court ruled that the reducing clause 
complied with § 632.32(5)(i)1., that the reducing clause was not 
No. 
2005AP1579   
 
7 
 
ambiguous and was thus enforceable, and that Rural was entitled 
to reduce the $100,000 limit of UIM liability by ACUITY's 
$25,000 payment and IMT's $90,000 payment.  The court entered a 
judgment dismissing Marotz's complaint against Rural. 
¶12 Marotz appealed to the court of appeals, which 
affirmed the circuit court.  The court of appeals concluded that 
Marotz's 
policy 
had 
an 
unambiguous 
reducing 
clause 
that 
permitted Rural to reduce the amount it paid to Marotz by the 
amount 
Marotz 
received 
from 
both 
Hallman's 
insurer 
and 
Hilgemann's insurer.  It also concluded that no contextual 
ambiguity existed when viewing the reducing clause in the 
context of the entire policy.  Finally, it concluded that prior 
cases interpreting § 632.32(5)(i)1. did not prevent Rural from 
reducing its obligation by the payment Marotz received from a 
non-UIM tortfeasor.5   
¶13 Marotz filed a petition for review with this court, 
which was granted.   
                                                 
5 The court of appeals filed its decision in this case 
within a month of filing a decision in State Farm Mutual 
Automobile 
Insurance 
Company 
v. 
Bailey, 
No. 
2003AP2482, 
unpublished slip op. (Wis. Ct. App. December 1, 2005).  In 
Bailey, the court considered the same issues, but interpreted 
§ 632.32(5)(i)1. 
differently. 
 
The 
court 
held 
that 
§ 632.32(5)(i)1. does not permit an insurer to reduce the limits 
of UIM liability by amounts the insured received from non-UIM 
tortfeasors.  Additionally, the court held that the reducing 
clause in the policy issued by State Farm Mutual Automobile 
Insurance Company (State Farm) was unambiguous in the context of 
the entire policy, which allowed State Farm to reduce the limit 
of UIM liability by payments the insured received from a UIM 
tortfeasor.  Id., ¶1.  State Farm and Bailey both filed a 
petition for review with this court, which were granted. 
No. 
2005AP1579   
 
8 
 
II 
¶14 This 
review 
presents 
two 
issues. 
 
First, 
does 
Wis. Stat. § 632.32(5)(i)1. permit an insurer to reduce the UIM 
limit by the amount paid by a non-UIM tortfeasor?  Second, does 
the reducing clause in the policy issued by Rural unambiguously 
comply with § 632.32(5)(i)1.?  Because Rural's policy must 
conform with § 632.32(5)(i)1., we focus initially on the 
statute.  See Theis v. Midwest Sec. Ins. Co., 2000 WI 15, ¶13, 
232 Wis. 2d 749, 606 N.W.2d 162. 
A. Wisconsin Stat. § 632.32(5)(i)1. 
¶15 We first address whether Wis. Stat. § 632.32(5)(i)1. 
permits an insurer to reduce the limit of UIM liability by the 
amount paid to an insured by a non-UIM tortfeasor.  This issue 
involves statutory interpretation and the application of a 
statute to specific facts, which are questions of law that we 
review de novo.  Teschendorf v. State Farm Ins. Cos., 2006 WI 
89, ¶9, 293 Wis. 2d 123, 717 N.W.2d 258.    
¶16 As a preliminary matter, Rural contends that Marotz 
waived this issue.  Before the circuit court and the court of 
appeals, Marotz did not argue that § 632.32(5)(i)1. was 
ambiguous or that a literal reading of it would create an absurd 
result.  Marotz focused his argument on the validity of the 
reducing clause in Rural's policy.  As a general rule, "issues 
not raised in the circuit court will not be considered for the 
first time on appeal."  Apex Elecs. Corp. v. Gee, 217 Wis. 2d 
378, 384, 577 N.W.2d 23 (1998).  Because this rule does not 
relate to the jurisdiction of appellate courts, an appellate 
No. 
2005AP1579   
 
9 
 
court may use its discretion to hear an issue not raised in the 
circuit court.  Id.  Specifically, "[w]hen an issue involves a 
question of law rather than of fact, when the question of law 
has been briefed by both parties and when the question of law is 
of sufficient public interest to merit a decision, this court 
may exercise its discretion to address the issue."  Id. 
¶17 The 
issue 
of 
the 
proper 
interpretation 
of 
§ 632.32(5)(i)1. is one that satisfies the Apex criteria.  
First, the proper interpretation of § 632.32(5)(i)1. is a 
question of law.  Second, both parties fully briefed the issue.  
Finally, there is sufficient public interest in clarifying this 
court's interpretation of § 632.32(5)(i)1.  Accordingly, the 
court will exercise its discretion and address the issue. 
¶18 Whether § 632.32(5)(i)1. permits an insurer to reduce 
the limit of UIM liability by the amount paid to an insured by a 
non-UIM tortfeasor turns on our interpretation of the statute.  
To determine the proper interpretation of statutory language, 
the court begins with the language of the statute.  State ex 
rel. Kalal v. Cir. Ct. for Dane County, 2004 WI 58, ¶45, 271 
Wis. 2d 633, 681 N.W.2d 110.  In interpreting a statute, courts 
give effect to every word so that no portion of the statute is 
rendered superfluous.  Janssen v. State Farm Mut. Auto. Ins. 
Co., 2002 WI App 72, ¶13, 251 Wis. 2d 660, 643 N.W.2d 857.  
"[S]tatutory language is interpreted in the context in which it 
is used; not in isolation but as part of a whole; in relation to 
the language of surrounding or closely-related statutes; and 
reasonably, to avoid absurd or unreasonable results."  Kalal, 
No. 
2005AP1579   
 
10 
 
271 Wis. 2d 633, ¶46.  We assume that the statutory language 
expresses the legislature's intent.  Id., ¶44.  When statutory 
language manifests a clear meaning, it is unnecessary to consult 
extrinsic sources to ascertain the legislature's intent, such as 
legislative history.  Id., ¶46.   
¶19 When a statute is ambiguous, courts look to extrinsic 
sources 
to 
ascertain 
the 
legislature's 
intent, 
such 
as 
legislative history.  Kalal, 271 Wis. 2d 633, ¶51; Teschendorf, 
293 Wis. 2d 123, ¶13.  Ambiguity exists only when a statute 
reasonably gives rise to two or more interpretations.  Bruno v. 
Milwaukee County, 2003 WI 28, ¶25, 260 Wis. 2d 633, 660 
N.W.2d 656.  Mere disagreement about the meaning of the statute 
is not enough to constitute ambiguity.  Kalal, 271 Wis. 2d 633, 
¶47.  Although courts reaching contradictory interpretations of 
the same statute may be indicative of ambiguity, Teschendorf, 
293 
Wis. 2d 123, 
¶19, 
it 
does 
not 
necessarily 
evidence 
ambiguity.  See e.g., Milwaukee Metro. Sewerage Dist. v. DNR, 
126 Wis. 2d 63, 70-72, 375 N.W.2d 648 (1985) (concluding that a 
statute 
is 
unambiguous 
after 
noting 
the 
contradictory 
interpretations 
of 
the 
statute 
by 
two 
court 
of 
appeals 
decisions).  Differing interpretations of the same statute may 
be caused by one court's error, rather than ambiguity.  Id. 
¶20 The language of § 632.32(5)(i)1. has previously been 
found to be unambiguous.  Dowhower v. West Bend Mut. Ins. Co., 
2000 WI 73, ¶17, 236 Wis. 2d 113, 613 N.W.2d 557; Janssen, 251 
Wis. 
2d 
660, 
¶15.  In Dowhower, the court interpreted 
§ 632.32(5)(i)1. in the context of an accident involving an 
No. 
2005AP1579   
 
11 
 
underinsured motorist and an injured party with UIM coverage.  
The court noted that § 632.32(5)(i)1. "plainly allows a motor 
vehicle insurance contract to state that the maximum amount that 
the insurer will pay under the policy will be setoff by amounts 
paid by a tortfeasor."  Dowhower, 236 Wis. 2d 113, ¶17.     
¶21 Because every possible scenario cannot be anticipated 
by the words selected by the legislature, an unambiguous statute 
in one context may be ambiguous in another.  Teschendorf, 293 
Wis. 2d 123, ¶20.  In this case, the question is whether 
§ 632.32(5)(i)1. becomes ambiguous in the context of an accident 
involving an underinsured motorist (i.e., Hallman), an insured 
motorist (i.e., Hilgemann), and an injured party with UIM 
coverage (i.e., Marotz).  Marotz argues that in the context of 
this case, § 632.32(5)(i)1. is ambiguous.  Rural contends the 
context of this case does not change the court's previous 
conclusion that § 632.32(5)(i)1. is unambiguous.   
¶22 We agree with Rural: the context of this case does not 
render 
§ 632.32(5)(i)1. 
ambiguous.  
Wisconsin Stat. § 632.32(5)(i) reads as follows:  
(5) Permissible Provisions. . . .  
  
. . . . 
(i) A policy may provide that the limits under 
the policy for uninsured or underinsured motorist 
coverage for bodily injury or death resulting from any 
one accident shall be reduced by any of the following 
that apply: 
1. Amounts paid by or on behalf of any person or 
organization that may be legally responsible for the 
bodily injury or death for which the payment is made. 
No. 
2005AP1579   
 
12 
 
2. Amounts paid or payable under any worker's 
compensation law. 
3. Amounts paid or payable under any disability 
benefits laws. 
Our examination of the language of the statute, and the context 
in which it appears, leads us to conclude that § 632.32(5)(i)1. 
does not prohibit an insurer from reducing the limit of UIM 
liability by an amount paid to an insured by a non-UIM 
tortfeasor, as long as the payment otherwise falls within the 
scope of the subsection.  
¶23 The structure of § 632.32(5)(i) provides that only 
payments that fall within the scope of one of the three 
subsections will reduce the limit of UIM liability.  It states, 
"[a] policy may provide that the limits under the policy for 
uninsured or underinsured motorist coverage for bodily injury or 
death resulting from any one accident shall be reduced by any of 
the following that apply," followed by the list of types of 
payments 
that 
will 
reduce 
the 
limit 
of 
UIM 
liability.  
Wis. Stat. § 632.32(5)(i).  In Welin v. American Family Mutual 
Insurance Co., 2006 WI 81, ¶49, 292 Wis. 2d 73, 717 N.W.2d 690, 
the court noted that "[w]e have explained numerous times that 
the insured's purpose in purchasing a UIM policy is to purchase 
a predetermined, fixed level of UIM recovery that is arrived at 
by combining payments from all sources."  See also Van Erden v. 
Sobczak, 2004 WI App 40, ¶32, 271 Wis. 2d 163, 677 N.W.2d 718.  
As we noted in Teschendorf, "[t]he words 'that apply' are a 
protection against payments that do not apply and thus do not 
reduce 
coverage." 
 
Teschendorf, 
293 
Wis. 2d 123, 
¶53.  
No. 
2005AP1579   
 
13 
 
Accordingly, 
interpretations 
of 
the 
subsections 
determine 
whether a payment will reduce UIM limits.  In this case, our 
interpretation of § 632.32(5)(i)1. determines whether payments 
to an insured from non-UIM tortfeasors are ones "that apply." 
¶24 Wisconsin Stat. § 632.32(5)(i)1. limits the scope of 
payments that will reduce the limit of UIM liability to 
"[a]mounts paid by or on behalf of any person or organization 
that may be legally responsible for the bodily injury or death 
for 
which 
the 
payment 
is 
made." 
 
The 
phrase 
"legally 
responsible" means parties that caused the bodily injury or 
death at issue (i.e., tortfeasors).  Janssen, 251 Wis. 2d 660, 
¶17.  In this case, Hallman and Hilgemann were both tortfeasors, 
making them persons that may be legally responsible. 
¶25 The words "[a]mounts paid by or on behalf of any 
person or organization" restrict payments that will reduce the 
limit of UIM liability to those made by a tortfeasor, or by any 
other person or organization on the tortfeasor's behalf.  The 
legislature's decision to modify "person or organization" with 
the word "any" indicates broad application when it comes to the 
persons and organizations that fall within the scope of the 
provision.  It does not suggest that a "person or organization" 
need be a UIM tortfeasor for their payment to reduce the 
insured's UIM coverage.  In this case, ACUITY paid $25,000 on 
behalf of Hallman and IMT paid $90,000 on behalf of Hilgemann 
for Marotz's bodily injuries that he suffered in the accident at 
issue in this case. 
No. 
2005AP1579   
 
14 
 
¶26 The scope of § 632.32(5)(i)1. is limited by the phrase 
"for the bodily injury or death for which payment is made."  The 
legislature's inclusion of the phrase "for the bodily injury or 
death for which payment is made" resolves a potential ambiguity 
as to which "[a]mounts paid by or on behalf of any person or 
organization that may be legally responsible" may reduce the 
limit of UIM liability.  It ensures that coverage limits may not 
be reduced by amounts paid by a person who may be legally 
responsible in the accident, but whose payment is not made for a 
bodily injury arising from the accident.6  The phrase "for the 
bodily injury or death for which payment is made" limits the 
scope of § 632.32(5)(i)1. by establishing the requisite purpose 
of the payment made to the insured that must exist before the 
provision applies. 
¶27 The scope of § 632.32(5)(i)1. is also limited by the 
phrase "from any one accident" in § 632.32(5)(i).  This language 
limits payments that will reduce UIM limits to those that relate 
                                                 
6 The phrase "for the bodily injury or death for which the 
payment is made" prevents reductions in a number of different 
scenarios.  For instance, it would prevent a reduction where an 
accident occurs between persons who had previously entered into 
an unrelated purchase agreement, and where the subsequent 
payment from the buyer to the seller is attributable to that 
purchase agreement and not to injuries arising from the 
accident.  The phrase would also prevent reductions in a 
situation such as where the amounts paid by a person who may be 
legally responsible for an injury other than the one for which 
the payment is made.  Such a situation might arise where 
Tortfeasor 1 settles a prior claim with an injured insured by 
paying current hospital costs for injuries arising from an 
accident involving Tortfeasor 2 and which costs would be 
properly attributable to Tortfeasor 2. 
No. 
2005AP1579   
 
15 
 
to the injury or death from the one accident at issue in the 
case.7  The phrase "from any one accident" limits the scope of 
§ 632.32(5)(i)1. by establishing the requisite cause of the 
injury or death that must exist before the provisions of 
§ 632.32(5)(i) apply. 
¶28 This 
case 
does 
not 
present 
an 
example 
of 
an 
unambiguous statute being ambiguous in a different context.  
Based on our review of the language of § 632.32(5)(i)1., with 
the context of this case in mind, we conclude that excluding the 
payments of non-UIM tortfeasors from reducing clauses is not 
required by the statute.   
¶29 Our interpretation of § 632.32(5)(i)1. is consistent 
with 
other statutes addressing UIM coverage, specifically 
Wis. Stat. § 632.32(4m). 
 
Wisconsin 
Stat. 
§ 632.32(4m)(a)2. 
requires 
that 
insurers 
give 
the 
insured 
notice 
of 
the 
availability of UIM coverage.  Wisconsin Stat. § 632.32(4m)(d) 
provides that if an insured accepts UIM coverage, the insurer 
must include limits of at least $50,000 per person and $100,000 
per accident.  In Dowhower, we explained the interplay of the 
provisions of § 632.32(4m) and § 632.32(5)(i)1.: "In total, 
these statutes establish that the UIM coverage limit purchased 
by the insured is reached by the combination of contributions 
from all legally responsible sources. The type of reducing 
                                                 
7 For instance, if a tortfeasor pays the injured party 
$10,000 for an injury he caused to her left leg in an October 
accident, that amount could not be used to reduce the UIM 
insurer's liability for the injury she incurred to her right arm 
in a separate November accident. 
No. 
2005AP1579   
 
16 
 
clause authorized in § 632.32(5)(i)1. is neither ambiguous nor 
contrary to public policy."  Dowhower, 236 Wis. 2d 113, ¶20.  
There is no statutory language indicating that UIM status would 
alter 
the 
court's 
previous 
assessment 
that 
the 
statutes 
establish 
that 
contributions from all legally responsible 
sources are to be considered in reaching the insured's UIM 
coverage limit.   
¶30 We have previously discussed various theories that may 
underlie an insured's UIM coverage.  State Farm Mut. Auto. Ins. 
Co. v. Langridge, 2004 WI 113, ¶¶17-18, 275 Wis. 2d 35, 683 
N.W.2d 75; Badger Mut. Ins. Co. v. Schmitz, 2002 WI 98, ¶¶17-24, 
255 Wis. 2d 61, 647 N.W.2d 223; Dowhower, 236 Wis. 2d 113, ¶18.  
In Dowhower, the court quoted a treatise that stated "'the 
purpose of underinsured motorist coverage is solely to put the 
insured in the same position he [or she] would have occupied had 
the 
tortfeasor's 
liability 
limits 
been 
the 
same 
as 
the 
underinsured 
motorist 
limits 
purchased 
by 
the 
insured.'"  
Dowhower, 255 Wis. 2d 61, ¶18 (quoting 3 Irvin E. Schermer, 
Automobile Liability Insurance § 57.01, p. 57-2 (3d ed. 1995)).  
The 
court 
has also noted that "[i]n recent years, the 
legislature has authorized policies embodying [this] view, and 
courts have recognized the legitimacy of these policies."  
Langridge, 275 Wis. 2d 35, ¶18 (citing Schmitz, 255 Wis. 2d 61, 
¶73; Taylor v. Greatway Ins. Co., 2001 WI 93, ¶25, 245 Wis. 2d 
134, 628 N.W.2d 916; Dowhower, 236 Wis. 2d 113, ¶33.)   
¶31 We discussed the various theories of UIM coverage to 
highlight that there are different types of reducing clauses 
No. 
2005AP1579   
 
17 
 
that 
the 
legislature 
deemed 
permissible 
in 
enacting 
§ 632.32(5)(i)1.  We did not discuss the theories to articulate 
the legislative purpose of § 632.32(5)(i)1. in every context 
that may arise.  By taking our previous discussions out of 
context and failing to appreciate we were quoting a treatise, 
one may conclude that this court has already decided that the 
limit of UIM liability may be reduced only by payments from an 
UIM tortfeasor.  That would be a mistake.  This is the first 
case we have addressed whether § 632.32(5)(i)1. allows an 
insurer to reduce the limit of UIM liability by payments made to 
the insured by a non-UIM tortfeasor. 
¶32 Based on the plain language of the statute and the 
context in which it appears, we hold that § 632.32(5)(i)1. does 
allow an insurer to reduce the limit of UIM liability by the 
amount paid by a non-UIM tortfeasor.8   
B. Policy Language 
¶33 We now turn to whether the reducing clause in the 
policy 
issued 
by 
Rural 
unambiguously 
complies 
with 
§ 632.32(5)(i)1.  The interpretation of an insurance policy 
presents a question of law that we review de novo.  Folkman v. 
Quamme, 2003 WI 116, ¶12, 264 Wis. 2d 617, 665 N.W.2d 857.  
                                                 
8 The 
dissent 
finds 
the 
court's 
interpretation 
of 
Wis. Stat. § 632.32(5)(i)1. 
"surprising," 
dissent, 
¶49, 
and 
"problematic," id., ¶52.  It renders parts of the statute 
"superfluous."  Id., ¶¶52, 58-59.  It conjures up "peculiar" 
scenarios.  Id., ¶55.  It "ignores the precedent."  Id., ¶67.  
It "rests on a mistake." Id.  Obviously, the court disagrees 
with the dissent's assessment.  Others may ponder to which 
opinion those labels most aptly apply.      
No. 
2005AP1579   
 
18 
 
Construing the provisions of an insurance policy requires an 
examination 
of 
the 
specific 
provisions 
at 
issue 
and 
an 
assessment of whether contextual ambiguity exists.  Schmitz, 255 
Wis. 2d 61, ¶61.  
1. The reducing clause in the policy issued by Rural 
¶34 General principles of contract construction control 
the interpretation of an insurance contract.  Taylor, 245 Wis. 
2d 134, ¶10 (citing Kremers-Urban Co. v. Am. Employers Ins. Co., 
119 Wis. 2d 722, 735, 351 N.W.2d 156 (1984)).  Discerning and 
giving effect to the intent of the parties is the objective.  
Sprangers v. Greatway Ins. Co., 182 Wis. 2d 521, 536, 514 
N.W.2d 1 (1994).  Toward that end, courts give the common, 
ordinary meaning to the policy language (i.e., what the 
reasonable person in the insured's position would understand 
them to mean).  Folkman, 264 Wis. 2d 617, ¶17.  Any ambiguity 
that may exist is construed in favor of the insured, while 
exclusions in coverage are narrowly construed against the 
insurer.  Id., ¶16 (citing Smith v. Atlantic Mut. Ins. Co., 155 
Wis. 2d 808, 811, 456 N.W.2d 597 (1990)).  Ambiguity arises if 
the language of the policy is "susceptible to more than one 
reasonable construction."  Id.  The resulting interpretation of 
the policy's language "should advance the insured's reasonable 
expectations of coverage."  Taylor, 245 Wis. 2d 134, ¶10.   
¶35 The reducing clause in this case states that the limit 
of liability will be reduced by amounts "[p]aid because of the 
'bodily injury' by or on behalf of persons or organizations who 
may be legally responsible."  The common, ordinary language 
No. 
2005AP1579   
 
19 
 
establishes that the meaning of this language mimics the meaning 
of § 632.32(5)(i)1.  See Ruenger v. Soodsma, 2005 WI App 79, ¶1, 
281 Wis. 2d 228, 695 N.W.2d 840 (concluding that a Rural Mutual 
Insurance Company reducing clause identical to the one in this 
case complied with § 632.32(5)(i)1.).   
¶36 The phrasing of the reducing clause differs slightly 
from the language used in § 632.32(5)(i)1., but the difference 
does not affect the meaning.  While § 632.32(5)(i)1. uses the 
phrase "for the bodily injury or death for which the payment is 
made," the first subsection uses "because of the 'bodily 
injury.'"  Both phrases limit the scope of the provision to 
payments made for the injuries arising from the accident.  
Accordingly, like the statutory language, the scope of the 
reducing clause is set by whether a payor may be legally 
responsible, not the payor's UIM status.   
¶37 The 
reducing 
clause 
unambiguously 
complies 
with 
§ 632.32(5)(i).  Based on the common, ordinary language, a 
reasonable person in the insured's position would understand the 
clause to have the effect of reducing the UIM liability limit by 
payments made by or on behalf of those legally responsible for 
the accident at issue, regardless of their UIM status. 
2. The reducing clause in the context of the entire policy 
¶38 Our inquiry does not end because of our conclusion 
that the language of the reducing clause is unambiguous.  
Schmitz, 255 Wis. 2d 61, ¶42.  As the court noted in Folkman, 
"[s]ometimes it is necessary to look beyond a single clause or 
sentence to capture the essence of an insurance agreement."  
No. 
2005AP1579   
 
20 
 
Folkman, 264 Wis. 2d 617, ¶21.  The essence of the agreement may 
reveal that an unambiguous provision read in isolation is 
ambiguous in the context of other provisions of the policy.  
Schmitz, 255 Wis. 2d 61, ¶61.   
¶39 Contextual 
ambiguity exists when a provision is 
reasonably susceptible to more than one construction when read 
in the context of the policy's other language.  Folkman, 264 
Wis. 2d 617, ¶29.  "To prevent contextual ambiguity, a policy 
should avoid inconsistent provisions, provisions that build up 
false expectations, and provisions that produce reasonable 
alternative meanings."  Id., ¶31.  For inconsistencies to alter 
the construction of an otherwise unambiguous provision, the 
inconsistencies must be "material to the issue in dispute and be 
of such a nature that a reasonable insured would find an 
alternative meaning."  Id., ¶32.    
¶40 Other provisions of the policy in this case do not 
render the reducing clause reasonably susceptible to more than 
one construction.  The policy at issue is 34 pages.  It begins 
with declarations, which is "generally the portion of an 
insurance policy to which the insured looks first."  Schmitz, 
255 Wis. 2d 61, ¶62.  On the third page of the declarations, the 
limits of liability for the various coverages are listed, as 
well as the premium for each.  Before listing the limits of 
liability for UM and UIM coverage, the following statement 
appears: "THE LIMITS OF LIABILITY FOR THE FOLLOWING COVERAGES 
ARE PER POLICY LIMITS AND SHALL BE REDUCED AS A RESULT OF YOUR 
RECEIVING AMOUNTS FROM OTHER SOURCES BECAUSE OF YOUR 'BODILY 
No. 
2005AP1579   
 
21 
 
INJURY.'"  The "other sources" referred to in the statement are 
provided in more detail in the reducing clause.  As mentioned 
above, the reducing clause is provided in the endorsement 
related to UIM coverage in Wisconsin.   
¶41 Although the policy does not include an index or 
identify endorsements by their title, on the bottom of the first 
page of declarations, the forms and attachments are listed by 
their numbers.  For instance, the UIM coverage endorsement is 
listed as "PP0427(10-01)."  On the top right corner of the UIM 
coverage endorsement the following appears: "PP 04 27 10 01."  
The spacing is different, and there is a lack of parenthesis or 
a hyphen for (10-01), but a reasonable person in the insured's 
position would conclude that "PP0427(10-01)" and "PP 04 27 10 
01" refer to the same document. 
¶42 The 
endorsement 
pertaining 
to 
UIM 
coverage 
in 
Wisconsin begins by noting that "[w]ith respect to the coverage 
provided by this endorsement, the provisions of the policy apply 
unless modified by the endorsement."  Under the "INSURING 
AGREEMENT" heading, it states the following: 
We will pay compensatory damages which an "insured" is 
legally entitled to recover from the owner or operator 
of an "underinsured motor vehicle" because of "bodily 
injury": 
1.  Sustained by an "insured"; and  
2.  Caused by the accident. 
The owner's or operator's liability for these damages 
must arise out of the ownership, maintenance or use of 
the "underinsured motor vehicle." 
No. 
2005AP1579   
 
22 
 
We will pay under his coverage only if 1. or 2. below 
applies: 
1. The limits of liability under any bodily injury 
liability bonds or policies applicable to the 
"underinsured motor vehicle" have been exhausted by 
payment of judgments or settlements; or  
2. A tentative settlement has been made between an 
"insured" and the insurer of the "underinsured 
motor vehicle" which would exhaust the limits of 
liability 
under 
any 
applicable 
bodily 
injury 
liability bonds or policies and we: 
a. Have been given prompt written notice of such 
tentative settlement; and  
b. Advance payment to the "insured" in an amount 
equal to the tentative settlement within 30 
days after the receipt of notification. 
The endorsement also states that "'Underinsured motor vehicle' 
means a land motor vehicle or trailer of any type to which a 
bodily injury liability bond or policy applies at the time of 
the accident but its limit for bodily injury liability is less 
than the limit of liability for this coverage."  
¶43 Read in isolation, one may conclude that the language 
of the first provision under the "INSURING AGREEMENT" heading 
indicates that the UIM coverage relates to payments made from 
the UIM tortfeasor.  However, the point of contextual ambiguity 
is 
not to read 
provisions in isolation.  Folkman, 264 
Wis. 2d 617, ¶21 (stating that "[t]he language of a policy 
should not be made ambiguous by isolating a small part from the 
context of the whole").  Subsequent to the "LIMIT OF LIABILITY" 
heading, the policy provides exclusions.  The exclusions limit 
the scope of UIM coverage.  Similarly, the reducing clause 
No. 
2005AP1579   
 
23 
 
appears subsequent to the "INSURING AGREEMENT" heading.  A 
reasonable 
person 
in 
the 
position 
of 
the 
insured 
would 
understand that the reducing clause, after the provisions under 
"INSURING AGREEMENT," would affect the payments he or she may 
receive under the policy. 
¶44 After the reducing clause, the policy states the 
following: "We will not make a duplicate payment under this 
coverage for any element of loss for which payment has been made 
by or on behalf of persons or organizations who may be legally 
responsible." 
 
Like 
the 
reducing 
clause, 
this 
provision 
addresses limits on the payments the insured will receive.  A 
reasonable 
person 
in 
the 
position 
of 
the 
insured 
would 
appreciate that the provisions under the "INSURING AGREEMENT" 
address the broad terms of the coverage and then the subsequent 
provisions define the specifics of the coverage. 
¶45 Considering context, Rural's policy "clearly sets 
forth that the insured is purchasing a fixed level of UIM 
recovery that will be arrived at by combining payments made from 
all sources."  Dowhower, 236 Wis. 2d 113, ¶33.  In this case, 
the combination of the notification in the declarations and the 
reducing clause that complies with § 632.32(5)(i)1. create the 
requisite 
clarity 
for 
the 
reducing 
clause 
to 
be 
deemed 
enforceable.  Accordingly, we hold that the reducing clause in 
the 
policy 
issued 
by 
Rural 
unambiguously 
complies 
with 
§ 632.32(5)(i)1. 
No. 
2005AP1579   
 
24 
 
 
III 
¶46 Based on the plain language of § 632.32(5)(i)1., UIM 
insurers may reduce the limit of UIM liability by amounts an 
insured receives from or on behalf of tortfeasors, regardless of 
the payors' UIM status.  The reducing clause included in the 
policy issued by Rural unambiguously sets forth the coverage 
that Marotz's parents purchased, making it enforceable.  Because 
the payments Marotz received from ACUITY and IMT exceed the 
limit of UIM liability in the Rural policy, Rural need not pay 
any benefit to Marotz.   
By the Court.—The decision of the court of appeals is 
affirmed. 
No.  2005AP1579.awb 
 
1 
 
 
¶47 ANN WALSH BRADLEY, J.   (dissenting). Despite the 
conflicting interpretations of the court of appeals and without 
addressing the petitioner's interpretation of the statute, the 
majority 
declares 
Wis. Stat. 
§ 632.32(5)(i)1. 
(2005-06) 
unambiguous and its meaning "plain." No matter that the 
interpretation that the majority finds obvious renders statutory 
language superfluous, and no matter that it conflicts with this 
court's prior interpretation of the statute. 
¶48 I 
disagree 
with 
the 
majority's 
conclusion 
that 
Wis. Stat. § 632.32(5)(i)1. unambiguously permits insurers to 
reduce UIM limits by payments made from non-UIM tortfeasors. 
Because the majority's interpretation renders statutory language 
superfluous, and because it fails to follow this court's prior 
decisions interpreting the statute, I respectfully dissent.  
I 
¶49 It is surprising that the majority so readily claims 
that the meaning of § 632.32(5)(i) is unambiguous. The court of 
appeals has reached diametrically opposed conclusions as to 
whether that section allows insurers to reduce UIM limits by 
payments made to the insured by non-UIM tortfeasors. See 
majority op., ¶12 n.5. 
¶50 In State Farm Mut. Auto. Ins. Co. v. Bailey, the court 
of appeals concluded that § 632.32(5)(i)1. does not allow 
reduction of UIM limits by payments made by non-UIM tortfeasors. 
No. 2003AP2482, unpublished slip op., ¶1 (Wis. Ct. App. December 
1, 2005). Three weeks after Bailey was decided, the court of 
No.  2005AP1579.awb 
 
2 
 
appeals reversed course and concluded that the section does 
allow such reductions. Marotz v. Hallman, No. 2005AP1579, 
unpublished slip op., ¶16 (Wis. Ct. App. December 22, 2005). 
¶51  We have previously determined that when courts reach 
contradictory interpretations of a statute, it "is indicative of 
ambiguity." Teschendorf v. State Farm Ins. Cos., 2006 WI 89, 
¶19, 293 Wis. 2d 123, 717 N.W.2d 258 (citing Stockbridge Sch. 
Dist. v. Dep't of Public Instruction Sch. Dist. Boundary Appeal 
Bd., 202 Wis. 2d 214, 222, 550 N.W.2d 96 (1996)). The majority's 
determination that § 632.32(5)(i)1. is unambiguous cannot be 
squared with the fact that two well-reasoned court of appeals 
opinions have interpreted that section in two different and 
incompatible ways.  
II 
¶52 In 
addition 
to 
disregarding 
the 
opposing 
interpretations 
of 
the 
court 
of 
appeals, 
the 
majority's 
interpretation of § 632.32(5)(i)1. is problematic because it 
renders part of the statute superfluous. Section 632.32(5)(i) 
provides as follows: 
(i) A policy may provide that the limits under the 
policy for uninsured or underinsured motorist coverage 
for bodily injury or death resulting from any one 
accident shall be reduced by any of the following that 
apply: 
1. Amounts paid by or on behalf of any person or 
organization that may be legally responsible for the 
bodily injury or death for which the payment is made. 
2. 
Amounts 
paid 
or 
payable 
under 
any 
worker's 
compensation law. 
No.  2005AP1579.awb 
 
3 
 
3. Amounts paid or payable under any disability 
benefits laws. 
(Emphasis added.)  
¶53 The petitioner contends that the phrase "for which the 
payment is made" refers to payments made by an insurer under the 
applicable 
UM 
or 
UIM 
coverage. 
Without 
addressing 
the 
petitioner's interpretation, the majority asserts that the 
statute is unambiguous. Majority op., ¶22.  It implicitly adopts 
the view that "for which the payment is made" refers to 
"[a]mounts paid by or on behalf of any person or organization 
that may be legally responsible for the bodily injury or death." 
What it fails to explain is why the words "for which the payment 
is made" are in the statute in the first instance. 
¶54 The majority asserts that subsection 1. contains the 
words "for the bodily injury or death for which the payment is 
made" 
to 
"resolve[] 
a 
potential 
ambiguity." 
Id., 
¶26. 
Specifically, it precludes insurers from reducing UIM limits "by 
amounts paid by a person who may be legally responsible in the 
accident, but whose payment is not made for a bodily injury 
arising from the accident." Id. No one else advances this 
interpretation——and for good reason. 
¶55 The examples given to support the majority's novel 
interpretation are peculiar. First, the majority conjures a 
scenario in which "an accident occurs between persons who had 
previously entered into an unrelated purchase agreement, and 
where the subsequent payment from the buyer to the seller is 
attributable to that purchase agreement and not [attributable] 
No.  2005AP1579.awb 
 
4 
 
to injuries arising from the accident." Id., ¶26 n. 6 (emphasis 
added).  
¶56 Second, 
the 
majority 
maintains 
that 
the 
phrase 
prevents payments made to the insured by a tortfeasor in an 
entirely separate accident. It imagines a situation in which 
"Tortfeasor 1 settles a prior claim with an injured insured by 
paying current hospital costs for injuries arising from an 
accident involving Tortfeasor 2 and which costs would be 
properly attributable to Tortfeasor 2." Id.   
¶57 These scenarios are not only peculiar, but they are 
precluded by other language in the statute. Section 632.32(5)(i) 
is explicit that reductions of UM and UIM limits pertain to 
coverage "resulting from any one accident." There is therefore 
no "potential ambiguity" that UM or UIM limits could be reduced 
by payments resulting from an "unrelated purchase agreement" or 
arising out of another, unrelated accident as the majority 
maintains.  
¶58 The majority's view that § 632.32(5)(i)1. includes the 
phrase "for the bodily injury or death for which the payment is 
made" to prevent reductions for payments made pursuant to other 
accidents and to events unrelated to any accident therefore 
renders that phrase superfluous. In doing so the majority 
violates a fundamental principle of statutory construction: 
"When construing statutes, meaning should be given to every 
word, clause and sentence in the statute, and a construction 
which would make part of the statute superfluous should be 
avoided wherever possible." Hutson v. State Pers. Comm'n, 2003 
No.  2005AP1579.awb 
 
5 
 
WI 97, ¶49, 263 Wis. 2d 612, 665 N.W.2d 212 (quoting Kollasch v. 
Adamany, 104 Wis. 2d 552, 563, 313 N.W.2d 47 (1981)). 
¶59 The conclusion that the majority's interpretation 
renders the phrase "for the bodily injury or death for which the 
payment is made" superfluous is supported by the fact that the 
phrase is appended only to subsection 1. Subsections 2. and 3. 
permit reductions of UIM limits for worker's compensation and 
disability 
payments. 
However, 
those 
subsections 
do 
not 
explicitly 
limit reductions for worker's compensation and 
disability payments "for the bodily injury or death for which 
the payment is made." Such language is unnecessary precisely 
because § 632.32(5)(i) is restricted to payments "from any one 
accident."  
¶60 In 
contrast, 
the 
interpretation 
of 
the 
statute 
proffered 
by 
the 
petitioner 
avoids 
rendering 
part 
of 
§ 632.32(5)(i) 
superfluous. 
According 
to 
the 
petitioner's 
interpretation the first part of § 632.32(5)(i)1., "[a]mounts 
paid by or on behalf of any person or organization that may be 
legally responsible for the bodily injury or death . . . ," 
allows that UIM coverage may be reduced by payments made by or 
on behalf of tortfeasors. If subsection 1. ended there, it would 
be sufficient to support the majority's interpretation. 
¶61 Under the petitioner's interpretation, the addition of 
"for which the payment is made" refers to payments made by an 
insurer under the applicable UM or UIM coverage. It therefore 
serves to limit which payments by or on behalf of tortfeasors 
may reduce UM or UIM coverage. Specifically, it provides that 
No.  2005AP1579.awb 
 
6 
 
policies may reduce coverage limits only for payments made by or 
on behalf of tortfeasors whose actions require the insurer to 
make payments under § 632.32(5)(i)——UIM and UM motorists.  
¶62 Thus, the petitioner's interpretation also explains 
why § 632.32(5)(i) contains the phrase "from any one accident" 
while at the same time § 632.32(5)(i)1. contains the phrase "for 
which the payment is made." Further, it explains why subsections 
2. and 3. do not contain the phrase "for which the payment is 
made." The phrase is contained in subsection 1. as a way to 
restrict its application to payments made by or on behalf of UM 
or UIM tortfeasors. However, no such limitation is required with 
respect to worker's compensation and disability payments. 
¶63 The majority has provided no explanation as to why the 
petitioner's 
interpretation 
is 
unreasonable, 
despite 
the 
advantage it holds over the majority's view insofar as it does 
not render part of the statute superfluous. In light of this 
failure to explain an alternative interpretation, and in light 
of the contradictory court of appeals decisions, I simply cannot 
see why the majority maintains that § 632.32(5)(i) is "plain" 
and unambiguous where its interpretation of the section violates 
a fundamental principle of statutory construction. 
II 
¶64 The majority's view also conflicts with this court's 
established interpretation of § 632.32(5)(i). In Dowhower v. W. 
Bend Mut. Ins. Co., 2000 WI 73, ¶18, 236 Wis. 2d 113, 613 
N.W.2d 557, we concluded that "the purpose of underinsured 
motorist coverage is solely to put the insured in the same 
No.  2005AP1579.awb 
 
7 
 
position he (or she) would have occupied had the tortfeasor's 
liability limits been the same as the underinsured motorist 
limits purchased by the insured."  Two years later in Badger 
Mut. Ins. Co. v. Schmitz, 2002 WI 98, ¶18, 255 Wis. 2d 61, 647 
N.W.2d 223, we quoted this passage from Dowhower and again 
embraced the same interpretation of the legislative purpose of 
UIM coverage.  
¶65 More recently in State Farm Mut. Auto. Ins. Co. v. 
Langridge, 2004 WI 113, 275 Wis. 2d 35, 683 N.W.2d 75 (citations 
omitted), we reiterated our determination that "UIM coverage is 
designed to put the insured in the same position as he or she 
would have occupied had the tortfeasor's liability limits been 
the same as the underinsured motorist limits purchased by the 
insured." 
Id., 
¶17 
(internal 
quotations 
and 
brackets 
omitted)(citations omitted). The Langridge court explained that 
an insured "ought reasonably to expect that the insurer promises 
only to insure for the difference between the insured's higher 
UIM limit and the tortfeasor's lower liability limit." Id., ¶21. 
¶66 The consistent interpretation of Dowhower, Badger 
Mutual, and Langridge would entitle Marotz to coverage that pays 
the difference between the insured's higher UIM limit and the 
underinsured's lower liability limit. Under the Dowhower, Badger 
Mutual, and Langridge interpretation of UIM coverage, Marotz 
would be entitled to $75,000 of coverage under the Rural policy 
(that is, the $100,000 UIM limit minus the $25,000 he received 
from Hallman's insurer). Under the majority's new interpretation 
of UIM coverage, Marotz does not receive even a penny under the 
No.  2005AP1579.awb 
 
8 
 
Rural policy. Clearly, this does not put him in the same 
position he would have occupied had Hallman's liability limits 
been the same as Marotz's UIM limits. 
¶67 Without overruling or withdrawing any language from 
our prior cases, the majority simply ignores the precedent. It 
instead adopts a new interpretation. It now contends that "the 
statutes 
establish 
that 
contributions 
from 
all 
legally 
responsible sources are to be considered in reaching the 
insured's UIM coverage limit" and that this includes payments by 
non-UIM 
tortfeasors. 
Majority 
op. 
¶29.1 
The 
majority's 
contention, however, rests on a mistake.  
¶68 UIM coverage limits may be reduced by only those 
sources recognized under § 632.32(5)(i).2 Thus, whether Rural may 
reduce the amount of the petitioner's UIM coverage limits by 
payments from a non-UIM tortfeasor depends upon whether such 
payments are included under § 632.32(5)(i)1. That, however, is 
                                                 
1 The majority's contention that that this court discussed 
theories of UIM coverage in Dowhower, Badger Mutual, and 
Langridge merely to "highlight" different sorts of reducing 
clauses 
permissible 
under 
Wis. Stat. § 632.32(5)(i)1. 
is 
incorrect. Majority op., ¶31. In Badger Mutual, for example, we 
stated that insurers providing UIM policies that reduce UIM 
limits by payments from other sources "are required to make 
clear to purchasers of UIM coverage that they are purchasing 
coverage that will put them in the same position they would be 
in if the underinsured tortfeasor had liability limits equal to 
the amount of UIM coverage the insured purchased." Badger Mut. 
Ins. Co. v. Schmitz, 2002 WI 98, ¶38, 255 Wis. 2d 61, 647 
N.W.2d 223(emphasis added). The majority's view renders this 
requirement useless. 
2 For example, a policy could not reduce UIM coverage limits 
by amounts donated by others to aid one's recovery or given 
gratuitously by a benefactor. Wis. Stat. § 632.32(5)(i). 
No.  2005AP1579.awb 
 
9 
 
the very issue before the court. To support the conclusion that 
the amount of UIM coverage may be reduced by payments from non-
UIM tortfeasors with the proposition that UIM coverage is 
arrived at by combining payments from all sources (i.e., all 
sources recognized under the statute) merely begs the question.  
¶69 For the reasons stated above, I conclude that the 
language of the statute is ambiguous. Questions of ambiguity 
aside, we should follow our precedent in interpreting it. Doing 
so requires following the principle that UIM coverage serves "to 
put the insured in the same position as he [or she] would have 
occupied had the tortfeasor's liability limits been the same as 
the underinsured motorist limits purchased by the insured." 
Langridge, 
275 
Wis. 2d 35, 
¶17. 
Under 
this 
principle, 
§ 632.32(5)(i) does not permit an insurer to reduce the limit of 
UIM coverage by amounts paid to an insured by or on behalf of a 
non-UIM tortfeasor. 
¶70 Accordingly, I respectfully dissent. 
¶71 I am authorized to state that Chief Justice SHIRLEY S. 
ABRAHAMSON and Justice LOUIS B. BUTLER, JR. join this dissent. 
 
 
 
 
No.  2005AP1579.awb 
 
 
 
1