Title: Kenneth A. Folkman, Sr. v. Sheri A. Quamme

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2003 WI 116 
 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
02-0261 
 
 
COMPLETE TITLE: 
 
 
Kenneth A. Folkman, Sr., Debra J. Folkman and 
Kenneth A. Folkman, Jr.,  
 
Plaintiffs-Appellants, 
 
v. 
Sheri A. Quamme, State Farm Mutual Automobile 
Insurance Company and Keith A. Folkman,  
 
Defendants, 
Society Insurance,  
 
Defendant-Respondent-Petitioner. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2002 WI App 237 
Reported at:  257 Wis. 2d 864, 652 N.W.2d 406 
(Ct. App. 2002-Published) 
 
 
OPINION FILED: 
July 16, 2003   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
March 4, 2003   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Brown   
 
JUDGE: 
Mark A. Warpinski   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING: CROOKS, J., did not participate.   
 
 
 
ATTORNEYS: 
 
For the defendant-respondent-petitioner there were briefs 
by James W. Mohr, Jr. and Mohr & Anderson, LLC, Hartford, and 
oral argument by James W. Mohr, Jr.. 
 
For the plaintiffs-appellants there was a brief by George 
Burnett and Liebmann, Conway, Olejniczak & Jerry, S.C., Green 
Bay, and oral argument by R. George Burnett. 
 
 
2003 WI 116 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  02-0261   
(L.C. No. 
01 CV 517) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Kenneth A. Folkman, Sr., Debra J. Folkman  
and Kenneth A. Folkman, Jr.,  
 
          Plaintiffs-Appellants, 
 
     v. 
 
Sheri A. Quamme, State Farm Mutual  
Automobile Insurance Company and Keith A.  
Folkman,  
 
          Defendants, 
 
Society Insurance,  
 
          Defendant-Respondent-Petitioner. 
 
FILED 
 
JUL 16, 2003 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed.   
 
¶1 
DAVID T. PROSSER, J.   This is a review of a published 
decision of the court of appeals1 that reversed a judgment of the 
Circuit Court for Brown County, Mark A. Warpinski, Judge.  The 
circuit court dismissed Society Insurance (Society) from this 
action after determining that the automobile insurance policy 
                                                 
1 Folkman v. Quamme, 2002 WI App 237, 257 Wis. 2d 864, 652 
N.W.2d 406. 
No. 
02-0261   
 
2 
 
that Society issued to Debra Folkman (Debra) limited the 
insurer's liability for bodily injury to $50,000 per accident, 
regardless of the number of insureds.  The court of appeals 
reversed, finding that the "split liability limits" endorsement 
for bodily injury in Debra's policy was ambiguous when read in 
context with another portion of the endorsement.  Given this 
perceived ambiguity, the court concluded that the policy's 
limits of liability should be read to apply separately to each 
insured's liability for bodily injury arising from a single 
accident, 
including 
vicarious 
liability 
from 
parental 
sponsorship.  As a result, Society was required to tender 
$125,000 in fulfillment of its coverage obligations to the three 
members of the Folkman family who incurred liability for bodily 
injuries from an accident caused by the family's 17-year-old 
son. 
¶2 
We conclude that the insurance policy at issue in this 
case unambiguously limited Society's liability to $50,000 for 
bodily injury arising from this accident.  The limits of 
liability provisions in the policy cannot reasonably be read, 
either alone or in the context of the entire policy, to grant 
liability coverage in an amount greater than $50,000 for a 
single 
accident 
in 
which 
only 
one 
insured 
was 
actively 
negligent.  Accordingly, we reverse the court of appeals and 
reinstate the circuit court's judgment dismissing Society from 
this action. 
¶3 
We are also asked to determine whether the insurance 
policy at issue violated a variety of Wisconsin statutes 
No. 
02-0261   
 
3 
 
governing automobile insurance policies and whether the policy, 
as written, was illusory.  We conclude that the limits of 
liability 
clause 
in 
Society's 
policy 
does 
not 
violate 
Wis. Stat. §§ 632.32(3)(b), 632.32(5)(f), or 641.43(1), is not 
illusory, and is enforceable.2 
I 
¶4 
On the morning of April 11, 1998, 17-year-old Keith 
Folkman was driving a vehicle owned by his parents, Debra and 
Kenneth Folkman, Sr., when it collided with another vehicle.  
Debra and another son, Kenneth Folkman, Jr., were passengers in 
the car.  The accident caused Debra to suffer severe injuries to 
both of her legs, her right shoulder, and her tailbone, and to 
lose hearing in her left ear.  For these injuries, Debra 
incurred approximately $76,000 in medical expenses.  Meanwhile, 
Kenneth Jr. became permanently paralyzed as a result of the 
accident.3  Both Keith Folkman and Sheri Quamme, the driver of 
the other vehicle, were at fault for the accident, since Keith 
was speeding and Quamme failed to yield the right of way. 
                                                 
2 All references to the Wisconsin Statutes are to the 2001-
02 version unless otherwise noted. 
3 The amount of Kenneth Jr.'s bodily injury expenses, 
whether past, present, or future, is unclear from the record.  
However, because this action involves competing motions to 
establish the outer limits of Society's liability for this 
accident, it is not necessary, at this time, for a value to be 
attributed to these expenses.  The Folkmans' attorney averred 
that the value of Debra and Kenneth Sr.'s claims exceeds 
Society's policy limits, whether such limits are $50,000 or 
$125,000. 
No. 
02-0261   
 
4 
 
¶5 
The car driven by Keith was insured under a Society 
Insurance "personal auto policy" issued to the policy's named 
insured, Debra Folkman.  The policy also covered Kenneth Folkman 
Sr., Keith Folkman, and a third son, who was age 16, as drivers.  
Both of Keith's parents had sponsored Keith's license to drive.  
As a result, Society insured both Debra and Kenneth Sr. for 
sponsorship liability imputed to them by Keith's negligence.4 
¶6 
According 
to 
its 
declarations 
page, 
the 
policy 
included a "split limit of liability" for bodily injury of 
$25,000 for "each person" and $50,000 for "each occurrence."5  
The effect of the policy's limits of liability is explained in a 
section of the main policy labeled "Part A——LIABILITY COVERAGE."  
This 
section 
begins 
with 
Paragraph 
A 
of 
the 
"Insuring 
Agreement," which provides: 
We will pay damages for "bodily injury" or "property 
damage" for which any 
"insured" 
becomes 
legally 
responsible because of an auto accident.  Damages 
include 
prejudgment 
interest 
awarded 
against 
the 
"insured."  We will settle or defend, as we consider 
appropriate, any claim or suit asking for these 
damages.  In addition to our limit of liability, we 
will pay all defense costs we incur.  Our duty to 
settle or defend ends when our limit of liability for 
                                                 
4 Under Wis. Stat. § 343.15(1), when a person under age 
eighteen applies for a license, the application must be signed 
and verified by an adult sponsor.  Under § 343.15(2)(b), any 
negligence of a person under eighteen in operating a motor 
vehicle is imputed to the person's parents, where both have 
custody and either signed as a sponsor. 
5 The declarations page also specifies that there is a 
$25,000 limit of liability for property damage for each 
occurrence.  There is no issue regarding property damage 
liability in this appeal. 
No. 
02-0261   
 
5 
 
this coverage has been exhausted.  We have no duty to 
defend any suit or settle any claim for "bodily 
injury" or "property damage" not covered under this 
policy. 
An endorsement changed the fifth sentence of this paragraph to 
read: "However, our duty to settle or defend any suit ends after 
our limit of liability has been offered or paid."   
¶7 
Part A of the policy also includes a "Limit of 
Liability" section.  Paragraph A of this section provides, in 
full: 
LIMIT OF LIABILITY 
The limit of liability shown in the Declarations for 
this coverage is our maximum limit of liability for 
all damages resulting from any one auto accident.  
This is the most we will pay regardless of the number 
of:  
1. "Insureds;"6 
2. Claims made; 
3. Vehicles or premiums shown in the Declarations; or 
4. Vehicles involved in the auto accident. 
This language in the policy's printed form was written to 
reflect 
a 
single 
limit 
of 
liability. 
 
Wisconsin 
Stat. § 344.33(2) 
requires 
that 
an 
automobile 
liability 
insurance policy issued in Wisconsin provide a minimum of 
$25,000 per person and $50,000 per accident in coverage for 
bodily injury.  This statute usually produces "split limits of 
liability."  These split limits of liability were noted on the 
                                                 
6 There is no dispute that Debra, Kenneth Sr., and Keith 
were "insureds" for purposes of liability coverage from the 
April 11, 1998, accident at issue in this case. 
No. 
02-0261   
 
6 
 
declarations page and printed as a separate endorsement entitled 
"Split Liability Limits" that was added to replace Paragraph A 
and to explain the difference between the "per person" and "per 
occurrence" amounts.  This endorsement, the language of which is 
at the heart of the case, is replicated as it appears in the 
policy as follows. 
 
¶8 
After Society made several attempts to resolve its 
coverage obligations for the accident, Kenneth Sr., Debra, and 
No. 
02-0261   
 
7 
 
Kenneth Jr. (the Folkmans)7 jointly brought suit against Keith 
and Society, in addition to Quamme and her automobile insurer, 
to collect damages related to bodily injuries stemming from the 
accident.  Society acknowledged Keith's responsibility for the 
accident and its resultant obligation to provide coverage.  
Accordingly, it filed a motion seeking to deposit $50,000 with 
the circuit court and then be dismissed from the action.  
Society reasoned that the $50,000 amount represented its full 
liability limit for the accident. 
¶9 
The Folkmans opposed the motion, contending that 
Debra's policy required Society to pay $125,000.  They arrived 
at this figure as follows:  
(1) Keith had liability to Debra and Kenneth Jr., 
for a maximum of $25,000 to each of them; 
(2) Debra was liable to Kenneth Jr. as Keith's 
sponsor for a maximum of $25,000; and 
(3) Kenneth Sr. was liable to both Debra and 
Kenneth Jr. as Keith's sponsor, for a maximum of 
$25,000 to each of them. 
The Folkmans argued that Society's $25,000 "per person" and 
$50,000 
"per 
occurrence" 
limits 
of 
liability 
must 
apply 
separately to each of the three insureds.  They sought a 
declaratory ruling that the foregoing were the correct limits of 
Society's obligation for liability coverage. 
                                                 
7 Kenneth Sr., Debra, and Kenneth Jr. are the plaintiffs in 
this action and will be collectively referred to as "the 
Folkmans," 
unless 
it 
is 
necessary 
to 
identify 
them 
as 
individuals. 
No. 
02-0261   
 
8 
 
¶10 After the parties presented arguments, the circuit 
court 
construed 
the 
Folkmans' 
policy 
to 
limit 
Society's 
liability to $50,000 per accident, regardless of the number of 
insureds liable for that accident.  In doing so, the court 
disposed of the Folkmans' various statutory arguments seeking to 
void the policy's limit of liability clause.  Accordingly, the 
court denied the Folkmans' motion for a declaratory ruling and 
ordered that Society be dismissed from the action upon deposit 
of $50,000 with the Clerk of the Circuit Court.  Shortly 
thereafter, Society deposited $50,000 with the court and was 
formally dismissed.8 
¶11 The Folkmans appealed.  The court of appeals addressed 
only the issue of whether Society's policy was ambiguous as to 
whether multiple insureds share a single limit of liability 
under the policy.  Folkman v. Quamme, 2002 WI App 237, ¶1, 257 
Wis. 2d 864, 652 N.W.2d 406.  The court of appeals held that 
Society's limits of liability for bodily injury were ambiguous 
when read in conjunction with another portion of the policy's 
split 
liability 
limits 
endorsement 
and, 
because 
of 
this 
ambiguity, the policy should be construed against the drafter, 
Society.  Id., ¶17.  Consequently, the court determined that the 
policy's limits of liability should be read to apply separately 
to each insured's liability in a single accident and that 
                                                 
8 Two months later, by stipulation of the parties, Keith 
Folkman was dismissed, with prejudice, from the action.  The 
record indicates that Quamme's automobile insurer had previously 
agreed to pay its policy limits of $150,000 to Debra and Kenneth 
Jr. in exchange for a Pierringer release from the action. 
No. 
02-0261   
 
9 
 
Society was obligated to pay up to its limits of liability for 
each of the three insureds under the policy.  Id.  Society 
petitioned this court for review, which we granted. 
II 
¶12 Insurance contract interpretation presents a question 
of law that is reviewed de novo.  Danbeck v. Am. Family Mut. 
Ins. Co., 2001 WI 91, ¶10, 245 Wis. 2d 186, 629 N.W.2d 150; 
Smith v. Atl. Mut. Ins. Co., 155 Wis. 2d 808, 810, 456 
N.W.2d 597 (1990).  The same rules of construction that govern 
general contracts are applied to the language in insurance 
polices.  Kremers-Urban Co. v. Am. Employers Ins. Co., 119 
Wis. 2d 722, 735, 351 N.W.2d 156 (1984).  An insurance policy is 
construed to give effect to the intent of the parties as 
expressed in the language of the policy.  Danbeck, 245 
Wis. 2d 186, ¶10. 
¶13 Therefore, the first issue in construing an insurance 
policy is to determine whether an ambiguity exists regarding the 
disputed coverage issue.  Badger Mut. Ins. Co. v. Schmitz, 2002 
WI 98, ¶51, 255 Wis. 2d 61, 647 N.W.2d 223.  Insurance policy 
language is ambiguous "if it is susceptible to more than one 
reasonable interpretation."  Danbeck, 245 Wis. 2d 186, ¶10.  If 
there is no ambiguity in the language of an insurance policy, it 
is enforced as written, without resort to rules of construction 
or applicable principles of case law.  Id.; Hull v. State Farm 
Mut. Auto. Ins. Co., 222 Wis. 2d 627, 637, 586 N.W.2d 863 
(1998).  If there is an ambiguous clause in an insurance policy, 
No. 
02-0261   
 
10 
 
we will construe that clause in favor of the insured.  See 
Smith, 155 Wis. 2d at 811. 
III 
¶14 In one sense, this case concerns the amount that 
Society must pay the Folkmans in satisfaction of its liability 
insurance coverage for the bodily injuries suffered in Keith's 
automobile accident.  The parties present varying amounts for 
Society's coverage obligations based on radically different 
interpretations of the policy.  In particular, the parties 
contest the effect of the policy's "limits of liability" 
provisions, with Society arguing that the most it agreed to pay 
for liability arising out of any one accident is $50,000 and the 
Folkmans contending that each insured is governed by his or her 
own $25,000/$50,0000 "limits of liability," for a total of 
$125,000.  The resolution of this specific dispute will have 
ramifications on insurance coverage well beyond these litigants. 
¶15 In another sense, this case is about the way courts 
interpret insurance policies.  The case provides an opportunity 
to discuss ambiguity and the effect it has on insurance policy 
construction.  We begin our discussion with a recitation of 
general principles. 
¶16 Our goal in interpreting insurance contracts is to 
discern and give effect to the intent of the parties.  Sprangers 
v. Greatway Ins. Co., 182 Wis. 2d 521, 536, 514 N.W.2d 1 (1994).  
Insurers have the advantage over insureds because they draft the 
contracts.  Thus, courts construe ambiguities in coverage in 
No. 
02-0261   
 
11 
 
favor of the insureds and narrowly construe exclusions against 
insurers.  See Smith, 155 Wis. 2d at 811. 
¶17 As a general rule, the language in an insurance 
contract "is given its common, ordinary meaning," that 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) (citing Kremers-
Urban, 119 Wis. 2d at 735; Richie v. Am. Fam. Mut. Ins., 140 
Wis. 2d 51, 54, 409 N.W.2d 146 (1987)). 
¶18 Some ambiguity is unavoidable because words are unable 
to anticipate every eventuality.  But other ambiguity is the 
result of the insurer's imperfect preparation of the policy.  A 
clearly written policy promotes a good relationship between the 
insurer and the insured and protects the insured from future 
misunderstandings.  The insurer's best defense against an 
unwarranted but appealing claim is an unambiguous policy. 
¶19 Occasionally a clear and unambiguous provision may be 
found ambiguous in the context of the entire policy.  Dowhower 
v. West Bend Mut. Ins. Co., 2000 WI 73, ¶35, 236 Wis. 2d 113, 
613 N.W.2d 557; see also Frost v. Whitbeck, 2002 WI 129, ¶18, 
257 Wis. 2d 80, 654 N.W.2d 225; Badger Mut. v. Schmitz, 2002 WI 
98, ¶37, 255 Wis. 2d 61, 647 N.W.2d 223; Taylor v. Greatway Ins. 
Co., 2001 WI 93, ¶26, 245 Wis. 2d 134, 628 N.W.2d 916.  Insurers 
dislike this principle.  Yet, the opposite principle——that 
courts must mechanically apply a clear provision regardless of 
the 
ambiguity 
created 
by 
the 
organization, 
labeling, 
No. 
02-0261   
 
12 
 
explanation, inconsistency, omission, and text of the other 
provisions in the policy——is not acceptable. 
¶20 Courts will interpret the words of an insurance 
contract against the insured when the interpretation conforms to 
what a reasonable person in the position of the insured would 
have understood the words to mean.  McPhee v. Am. Motorists Ins. 
Co., 57 Wis. 2d 669, 676, 205 N.W.2d 152 (1973).  But courts 
will not surrender the authority to construe insurance contracts 
in favor of the insured when a policy is so "ambiguous or 
obscure," Maas v. Ziegler, 172 Wis. 2d 70, 79, 492 N.W.2d 621 
(1992), or deceptive that it befuddles the understanding and 
expectations of a reasonable insured. 
¶21 There is a complementary principle to contextual 
ambiguity.  Sometimes it is necessary to look beyond a single 
clause or sentence to capture the essence of an insurance 
agreement.  The language of a policy should not be made 
ambiguous by isolating a small part from the context of the 
whole.  2 Lee R. Russ & Thomas S. Segalla, Couch on Insurance 3d 
§ 21:14 (3d ed. 1999 & Supp. 2002).  Applying this principle, we 
conclude that the limits of liability in the Folkman policy 
regarding Society's coverage obligations are not ambiguous. 
IV 
¶22 Last term, this court held in Badger Mutual Insurance 
Co. v. Schmitz, 2002 WI 98, 255 Wis. 2d 61, 647 N.W.2d 223, that 
a reducing clause in an automobile insurance policy affecting an 
insured's underinsured motorist (UIM) coverage became ambiguous 
when it was read in the context of the entire policy.  Id., 
No. 
02-0261   
 
13 
 
¶¶72, 75.  We reached this conclusion even though the reducing 
clause itself was unambiguous when read in isolation and even 
though 
the 
clause 
was 
written 
in 
conformity 
with 
Wis. Stat. § 632.32(5)(i).  Id., ¶61. 
¶23 In deciding the Schmitz case, three members of this 
court disagreed with the conclusion that the reducing clause at 
issue was ambiguous in relation to the operation of UIM 
coverage.  Id., ¶¶76-85 (Crooks, J., dissenting) (joined by 
Justices Wilcox and Sykes).  However, the principle of ambiguity 
in context was not assailed by the dissent; it was embraced.  
Id., ¶79 (Crooks, J., dissenting) ("I agree with the majority 
that Dowhower and Taylor recognized that language in an 
insurance policy can be ambiguous within the context of the 
whole policy."). 
¶24 The principle of contextual ambiguity is established 
precedent.  As a general matter, it has long been a rule of 
contract 
construction 
in 
Wisconsin 
that 
"the 
meaning 
of 
particular provisions in the contract is to be ascertained with 
reference to the contract as a whole."  Tempelis v. Aetna Cas. & 
No. 
02-0261   
 
14 
 
Sur. Co., 169 Wis. 2d 1, 9, 485 N.W.2d 217 (1992).9  In Dowhower, 
decided in 2000, all seven members of this court applied this 
principle and agreed that "a reducing clause may be ambiguous 
within the context of the insurance contract."  Dowhower, 236 
Wis. 2d 113, ¶35.  In that case, five members of our court voted 
to remand the action for consideration of whether the particular 
reducing clause was ambiguous within the context of the 
insurance contract, while two members of the court found the 
contract unambiguous and opposed remand.  Id., ¶35.10 
¶25 The 
principle of 
contextual 
ambiguity 
was 
again 
recognized a year later in Taylor v. Greatway Insurance Co., 
2001 WI 93, ¶26, 245 Wis. 2d 134, 628 N.W.2d 916, another case 
involving UIM coverage.  The majority, in holding that the 
insured was not entitled to UIM coverage under the circumstances 
of that case, stated: 
                                                 
9 See also Crown Life Ins. Co. v. LaBonte, 111 Wis. 2d 26, 
36, 330 N.W.2d 201 (1983) ("It is a cardinal rule of contract 
construction that the meaning of a particular provision in a 
contract is to be ascertained with reference to the contract as 
a whole."); Kraemer Bros., Inc. v. U.S. Fire Ins. Co., 89 
Wis. 2d 555, 562, 278 N.W.2d 857 (1979); Ketay v. Gorenstein, 
261 Wis. 332, 333-334, 53 N.W.2d 6 (1952); Hampton Plains Realty 
Co. v. Cohen, 214 Wis. 128, 130, 252 N.W. 572 (1934) ("It is 
well established that in construing a particular provision of a 
written instrument the entire agreement must be looked to as a 
whole for the purpose of giving to each provision of the 
contract its intended meaning.") (citing cases). 
10 Although Justice Bradley ultimately joined in the mandate 
to remand, she wrote separately to explain her conclusion that 
the policy was ambiguous.  Dowhower v. West Bend Mut. Ins. Co., 
2000 WI 73, ¶37, 236 Wis. 2d 113, 613 N.W.2d 557 (Bradley, J., 
concurring).  Justice Bradley was joined in her concurring 
opinion by Chief Justice Abrahamson.  Id., ¶55. 
No. 
02-0261   
 
15 
 
The 
definition 
of 
underinsured 
vehicle 
in 
American Family's policy is unambiguous within the 
context of the entire policy.  We find nothing in the 
rest of American Family's policy that obscures the 
unambiguous 
definition 
of 
underinsured 
vehicle. 
 . . .  Because the definition of underinsured vehicle 
in each of American Family's policies is unambiguous 
standing on its own and in the context of the whole 
policy, we do not need to engage in construction to 
determine 
Taylor's 
reasonable 
expectations 
of 
coverage.   
Id., 
¶27 
(citing 
Kremers-Urban, 
119 
Wis. 2d at 
735, 
351 
N.W.2d 156) (emphasis added).   
¶26 Dowhower, 
Taylor, 
and Schmitz 
each 
involved UIM 
coverage in automobile insurance policies.  The principle of 
contextual ambiguity may apply to other insurance contract 
provisions, but it came to the forefront in UIM cases because 
few areas of automobile insurance law have been so hotly 
contested 
and 
so 
vexing 
to 
courts. 
 
See 
Dowhower, 236 
Wis. 2d 113, ¶¶22-31; Schmitz, 255 Wis. 2d 61, ¶¶25-34. 
¶27 Society expresses 
concern 
that the 
principle of 
contextual ambiguity creates a slippery slope, opening up every 
insurance clause in a contract to reinterpretation in context.  
Society claims that it can never be certain where courts will 
"strike next" in finding contextual ambiguity and maintains that 
it will be faced with the impossible task of drafting perfect 
documents 
to 
avoid 
disruption 
of 
its 
intended 
insurance 
coverage.  Society argues emphatically that clear language 
should be construed as it stands and that other portions of the 
policy should not be considered, unless the contested portion 
refers the insured to another part of the policy. 
No. 
02-0261   
 
16 
 
¶28 Society asserts that other states have not adopted the 
methodology this court followed in Schmitz.  It presents the 
following language from the Supreme Court of North Dakota in 
support of this proposition:  
Generally, we attempt to ascertain the parties' 
intent through the language of the insurance contract 
itself.  We look first to the language of the 
insurance policy, and if the policy is clear on its 
face, our inquiry is at an end.  . . .  
An ambiguity in an insurance policy exists when 
good arguments can be made for two contrary positions 
about the meaning of a policy term. 
Dundee Mut. Ins. Co. v. Marifjeren, 587 N.W.2d 191, 193-94 (N.D. 
1998) (emphasis added).  This language does not mean that a 
clear phrase within a policy can never be rendered ambiguous by 
contradictory language elsewhere in the policy.  We think the 
North Dakota high court is discussing how a policy that, as a 
whole, is clear on its face should not be rummaged through to 
unearth some type of latent ambiguity.  Society has not cited 
any authority for the proposition that an otherwise clear 
insurance policy provision that is directly contradicted in 
another portion of 
the 
same policy 
will 
not 
be 
deemed 
No. 
02-0261   
 
17 
 
ambiguous.11  We would point to Couch on Insurance, which notes 
that 
"where 
a 
provision 
is 
subject 
to 
more 
than 
one 
interpretation, illogically located and labeled within the 
policy, and inconsistent with other provisions, it will be found 
to be ambiguous."  Russ & Segalla, supra, § 21:14. 
¶29 We agree with Society that any contextual ambiguity in 
an insurance policy must be genuine and apparent on the face of 
                                                 
11 To the contrary, courts from other states commonly, if 
not uniformly, recognize the possibility of contextual ambiguity 
for insurance policy provisions.  See, e.g., Lumbermens Mut. 
Cas. Co. v. Offices Unlimited, Inc., 645 N.E.2d 1165, 1166-67 
(Mass. 1995) ("we recognize that words, which are clear by 
themselves, may become ambiguous when read in the context of an 
insurance policy"); Parker-Bigback v. St. Labre Sch., 7 P.3d 
361, 368 (Mont. 2000) (finding contextual ambiguity in a 
contract); State Farm Mut. Ins. Co. v. Pitman, 809 A.2d 1280, 
1282 (N.H. 2002) ("we address whether the application of the 
term ['accident'] in the context of uninsured motorist insurance 
is susceptible to more than one reasonable interpretation"); Am. 
Family Mut. Ins. Co. v. Elliot, 523 N.W.2d 100, 102 (S.D. 1994) 
("Ambiguity in an insurance policy is determined with reference 
to the policy as a whole and the plain meaning and effect of its 
words."); N. Sec. Ins. Co. v. Hatch, 683 A.2d 392, 396-97 (Vt. 
1996) ("It is common for ambiguity to arise in the context of 
different, but related, parts of an insurance policy."); 
Panorama Vill. Condo. Owners Ass'n Bd. of Dirs. v. Allstate Ins. 
Co., 26 P.3d 910, 924 (Wash. 2001) ("The reasonableness of the 
interpretations [to establish ambiguity in an insurance policy] 
is determined with regard to the contract as a whole."). 
Of course, occasionally the principle of reading a policy 
in its entire context helps to alleviate any ambiguity that may 
exist in a provision when it is read standing alone.  See, e.g., 
Palmer v. Truck Ins. Exch., 988 P.2d 568, 575 (Cal. 1999) 
("Where, as here, the meaning of the policy term is clear from 
the context of the policy as a whole, no ambiguity exists."); 
Towns v. Vermont Mut. Ins. Co., 726 A.2d 65, 67 (Vt. 1999) 
("ambiguity does not arise by isolating a word or phrase from 
the overall context of a contract"). 
No. 
02-0261   
 
18 
 
the policy, if it is to upset the intentions of an insurer 
embodied in otherwise clear language.  The test for determining 
whether contextual ambiguity exists is the same as the test for 
ambiguity in any disputed term of a policy.  That is, are words 
or phrases of an insurance contract, when read in the context of 
the policy's other language, reasonably or fairly susceptible to 
more than one construction?12  The standard for determining a 
reasonable and fair construction is measured by the objective 
understanding of an ordinary insured.  See Gen. Cas. Co. of Wis. 
v. Hills, 209 Wis. 2d 167, 175, 561 N.W.2d 718 (1997) (citing 
Sprangers, 182 Wis. 2d at 536).13 
¶30 The issue then is, what degree of contextual ambiguity 
is sufficient to engender an objectively reasonable alternative 
meaning and, thereby, disrupt an insurer's otherwise clear 
policy language?  On this matter we acknowledge an unintended 
                                                 
12 See, e.g., Dowhower, 236 Wis. 2d 113, ¶34; Sprangers v. 
Greatway Ins. Co., 182 Wis. 2d 521, 536-37, 514 N.W.2d 1 (1994); 
Garriguenc v. Love, 67 Wis. 2d 130, 135, 226 N.W.2d 414 (1975); 
Wheelwright v. Pure Milk Ass'n, 208 Wis. 40, 46, 240 N.W. 769 
(1932) ("It is probably accurate to say that the language of a 
contract is ambiguous . . . when it may reasonably be taken in 
more than one sense."). 
13 We reject Society's argument that, in order for claims of 
ambiguity to go forward, there must be some credible evidence 
that an insured read the policy at issue and was reasonably 
confused about the policy language in question.  We have long 
held that the test for ambiguity in an insurance contract is 
what a reasonable person in the position of the insured would 
have understood the words to mean.  See, e.g., Mau v. N.D. Ins. 
Reserve Fund, 2001 WI 134, ¶13, 248 Wis. 2d 1031, 637 N.W.2d 45.  
This test is objective and one of law, not subjective and 
requiring a case-by-case factual finding of an insured's actual 
understanding. 
No. 
02-0261   
 
19 
 
effect of some language we used in Schmitz.  In that decision, 
we summed up Dowhower as saying "that reducing clauses must be 
crystal clear in the context of the whole policy" for insureds 
to 
understand 
what 
they 
are 
purchasing. 
 
Schmitz, 
255 
Wis. 2d 61, ¶46.  A series of court of appeals decisions decided 
post-Schmitz reveals that our admonition of "crystal clarity" 
has been used to alter the analytical focus.14  Rather than 
assessing whether a policy, as written, is ambiguous in context, 
insurers 
are 
being 
required 
to 
undertake 
affirmative, 
explanatory responsibilities in drafting policies.  Aspirational 
goals and admonitions on how to avoid ambiguity are admittedly 
different from minimum legal standards. 
¶31 Schmitz and its predecessors do not demand perfection 
in policy draftsmanship.  These decisions advise insurers to 
draft policies in a clear manner if they upset the reasonable 
expectations of insureds.  To prevent contextual ambiguity, a 
                                                 
14 See Gohde v. MSI Ins. Co., 2003 WI App 69, ¶¶6, 8, ___ 
Wis. 2d ___, 661 N.W.2d 470 ("Although a reducing clause may 
comply with the statute's language, the clause may still be 
unenforceable if its effect is not 'crystal clear in the context 
of the whole policy.'") (citing Schmitz, 255 Wis. 2d 61, ¶46); 
Dowhower ex rel. Rosenberg v. Marquez, 2003 WI App 23, ¶¶22-23, 
260 Wis. 2d 192, 659 N.W.2d 57 ("Schmitz teaches us that in 
order for the policy to explain the effects of the reducing 
clause with crystal clarity, all of the provisions helping the 
insured navigate his or her way through the policy must be 
consistent with one another and with the reducing clause."); 
Hanson v. Prudential Prop. & Cas. Ins. Co., 2002 WI App 275, 
¶18, 258 Wis. 2d 709, 653 N.W.2d 915 ("Even if the reducing 
clause 
conformed 
to 
Wis. Stat. § 632.32(5)(i), 
it 
is 
not 
'crystal clear' within the context of the whole policy.") 
(quoting Schmitz, 255 Wis. 2d 61, ¶46). 
No. 
02-0261   
 
20 
 
policy should avoid inconsistent provisions, provisions that 
build up false expectations, and provisions that produce 
reasonable alternative meanings.  These standards for clarity 
are consonant with Wisconsin law on ambiguity in insurance 
contracts.  See, e.g., Smith, 155 Wis. 2d at 811; see also Hause 
v. Bresina, 2002 WI App 188, ¶8, 256 Wis. 2d 664, 649 N.W.2d 736 
("a policy is not ambiguous simply because the insured has 
offered a 'remotely possible second interpretation'") (quoting 
United States Fire Ins. Co. v. Ace Baking Co., 164 Wis. 2d 499, 
503, 476 N.W.2d 280 (Ct. App. 1991)). 
¶32 Ferreting through a policy to dig up ambiguity should 
not be judicially rewarded because this sort of ambiguity is 
insufficient.  Rather, inconsistencies in the context of a 
policy must be material to the issue in dispute and be of such a 
nature that a reasonable insured would find an alternative 
meaning. 
¶33 In analyzing contextual ambiguity, the policy must be 
taken as it is written.  Society argues that the ambiguity-
producing sentence attached to the paragraph addressing property 
damage in the policy's "split liability limits" endorsement 
could have been eliminated in its entirety, and the absolute 
$50,000 
liability 
limit 
for 
each 
accident 
would 
remain 
abundantly clear.  It argues that, since this case has nothing 
to do with property damage, this sentence should be ignored if 
it is construed to apply only to the property damage paragraph. 
¶34 The problem is that the ambiguity-producing sentence 
is in the policy.  Courts cannot engage in a fiction that 
No. 
02-0261   
 
21 
 
conflicting language in the policy does not exist.  Courts 
interpret insurance policies that do exist, not those that could 
have or should have existed.  It is well understood that "[n]o 
contract of insurance should be rewritten by construction to 
bind an insurer to a risk which it did not contemplate and for 
which it was not paid."  Maas v. Ziegler, 172 Wis. 2d 70, 79, 
492 N.W.2d 621 (1992) (citing Inter-Ins. Exch. v. Westchester 
Fire Ins. Co., 25 Wis. 2d 100, 104, 130 N.W.2d 185 (1964)).  The 
corollary of this rule is that ambiguity-producing language 
cannot be deleted to cure ambiguity.  After all, an insured 
attempting to make a reasoned interpretation of his or her 
policy may not ignore language that is seemingly relevant to a 
provision whose meaning is being ascertained. 
¶35 In the present case, the theory of interpretation 
advanced by the court of appeals and the Folkmans is that the 
location of the ambiguity-producing sentence in the paragraph on 
property damage liability means, by negative implication, that 
its absence in the bodily injury liability paragraph changes the 
limitations 
in 
that 
paragraph. 
 
While 
we 
reject 
this 
interpretation as being unreasonable for an ordinary insured, we 
cannot do so by simply erasing the actual language from the 
policy.  Whatever ambiguity is created by the location of the 
"This is the most we will pay" sentence, it should be evaluated 
in the context of the whole policy. 
V 
¶36 Our rejection of Society's proposals to reconstruct 
the rules of insurance contract interpretation does not resolve 
No. 
02-0261   
 
22 
 
the central question to this case: Is the operation of the 
bodily injury limits of liability in the Folkmans' policy 
ambiguous to a reasonable insured, even when those provisions 
are read in the context of the entire policy? 
¶37 To answer this question we must look to the language 
of the policy.  We start with the declarations page, which is 
"generally the portion of an insurance policy to which the 
insured looks first," Schmitz, 255 Wis. 2d 61, ¶62, and "is the 
most crucial section of the policy for the typical insured."  
Dowhower, 236 Wis. 2d 113, ¶40 (Bradley, J., concurring). 
¶38 The declarations page provides that Society's limits 
of liability for bodily injury are split limits, with $25,000 
for each 
person and $50,000 for 
each occurrence. 
 The 
juxtaposition of "each person" with "each occurrence" under the 
limits of liability heading implies that the $25,000 limit is 
for each injured person, not each insured, capped at $50,000 per 
occurrence.  This has been the interpretation of this standard 
provision for many years.  The page also makes clear that the 
named insured has paid the premium for bodily injury liability 
coverage for two vehicles, one of which Keith was driving at the 
time of the accident.  We see no ambiguity on the declarations 
page that could imply more extensive coverage. 
¶39 The next critical portion of the policy is the "Split 
Liability Limits" endorsement.  The first paragraph of the 
endorsement 
discusses 
only 
bodily 
injury 
liability. 
 
It 
unambiguously specifies the maximum amount that will be paid out 
by and on behalf of all insureds is "our maximum limit of 
No. 
02-0261   
 
23 
 
liability for all damages . . . from any one accident."  Again, 
this language states: 
The limit of liability shown in the Schedule or in the 
Declarations 
for 
each 
person 
for 
Bodily 
Injury 
Liability is our maximum limit of liability for all 
damages, including damages for care, loss of services 
or death, arising out of "bodily injury" sustained by 
any one person in any one auto accident.  Subject to 
this limit for each person, the limit of liability 
shown in the Schedule or in the Declarations for each 
accident for Bodily Injury Liability is our maximum 
limit of liability for all damages for "bodily injury" 
resulting from any one auto accident. 
(Emphasis added.) 
¶40 According to this language, the $25,000 limit is the 
maximum Society is liable for when one person is injured in an 
accident and the $50,000 limit is Society's maximum exposure, 
regardless of the number of people injured in one automobile 
accident.  As the court of appeals recognized, "It is plain from 
a reading of this entire section, in conjunction with the 
declaration page, that Society is not agreeing to pay for all 
damages for which 'any "insured" becomes legally responsible,' 
but only for those damages within the 'limit of liability.'"  
Folkman, 257 Wis. 2d 864, ¶10. 
¶41 Nonetheless, the Folkmans argue, first, that Debra, 
Kenneth Sr., and Keith were each separately insured under the 
policy, which Society concedes.  They note next that the "Limits 
of Liability" on the declarations page does not explain how 
these limits apply when more than one insured is liable for 
bodily injury resulting from a single accident.  The Folkmans 
then assert that this same "ambiguity" exists with respect to 
No. 
02-0261   
 
24 
 
the paragraph on bodily injury in the split liability limit 
endorsement.  They contend that this paragraph does not inform 
an insured whether the limit of liability is the "maximum" it 
will pay for each insured or whether the limit of liability is 
the "maximum" Society will pay regardless of the number of 
people it insures. 
¶42 We do not perceive any latent ambiguity in these 
portions of the policy.  Instead, the Folkmans must add the 
words "for each insured" to the endorsement for it to acquire 
the meaning they offer.  We may not judicially revise policy 
language in this manner.  See Frost, 257 Wis. 2d 80, ¶17 ("If 
the language of an insurance policy is unambiguous, a court will 
not rewrite the policy by construction and will interpret the 
policy according to its plain and ordinary meaning to avoid 
imposing 
contract 
obligations 
that 
the 
parties 
did 
not 
undertake."). 
¶43 We must keep in mind that the Folkman policy is not 
novel.  It is a standard policy comparable to hundreds of 
thousands of automobile insurance policies in Wisconsin.  The 
basic provisions have been interpreted countless times.  If we 
were the first court to see this policy, we might be more 
amenable to the statements by the court of appeals that "it is 
still not clear how the 'limit of liability' on the declaration 
page is to apply when more than one insured is liable for bodily 
injury 
caused 
by 
an 
accident," 
Folkman 
v. 
Quamme, 
257 
Wis. 2d 864, ¶10, and "it is reasonable to read the phrase 
'maximum limit of liability' to mean the maximum limit of 
No. 
02-0261   
 
25 
 
liability for all insureds, rather than for each insured," id., 
¶12.  But we are not the first court to see this policy. 
¶44 Given the policy's long history of interpretation, the 
insurer would have relied on the language at issue to limit its 
total liability for personal injury to $50,000 per occurrence or 
accident.  If the insurer were not relying on this language to 
limit its liability, it could never be certain what its total 
liability would be.  To illustrate this point using the Folkman 
theory, suppose that the Folkman car hit another vehicle and 
four people in the other car were badly injured.  If Mrs. 
Folkman were driving alone, the insurer's total liability for 
one "insured" would be $50,000.  If one of the Folkman children 
were driving, the liability would be $150,000 because of the 
vicarious liability of the two parental sponsors.  If the other 
Folkman insured were in the car and found to be contributorily 
negligent, the liability would be $200,000.  If the policy 
limits had been $200,000 per occurrence instead of $50,000, the 
potential liability would have climbed to $800,000.  The 
Folkmans' interpretation is not a reasonable interpretation of 
the policy because it eviscerates any limit of liability. 
¶45 A policy is normally interpreted objectively according 
to its terms.  Thus, the subjective interpretation of terms by 
the insured is not relevant.  However, the extent of the 
insurer's coverage is one of the few terms of the policy that 
requires discussion between the parties.  When Debra Folkman 
purchased the policy, she must have instructed her agent how 
much insurance she wanted to purchase, what vehicles she wanted 
No. 
02-0261   
 
26 
 
to cover, and which drivers she wanted to cover, because this 
information is reflected on the declarations page.  We observe 
that all coverage to protect other parties was purchased at the 
minimum level as required by law.  Moreover, the policy provides 
no underinsured motorist coverage to protect the drivers in the 
Folkman family from the negligence of others.  There is no 
indication that either party actually considered deviating from 
standard contract terms. 
¶46 There is no dispute that Society had a clear limit of 
liability on "page 3 of 11" of the original policy before the 
"split liability limits" endorsement.  There is no dispute that 
the limit of liability is equally clear in medical payments 
coverage on page "4 of 11."  It is clear again in the uninsured 
motorist coverage on page "5 of 11."  Why would the insurer 
change its position in the endorsement so that the limit of 
liability, "regardless of the number of 'insureds,'" applied 
only to property damage? 
¶47 Moving 
on, 
the 
Folkmans 
find 
ambiguity 
in 
the 
placement of the disputed sentence within the endorsement of 
"Split Liability Limits."  The Folkmans observe that the 
endorsement is split into two paragraphs, one relating to bodily 
injury and the other to property damage.  Id.  As alluded to 
above, the Folkmans contend that the paragraph relating to 
bodily injury liability does not clearly indicate that Society 
will pay but one limit of liability regardless of the number of 
insureds liable for any accident.  Meanwhile, the paragraph 
discussing property damage liability concludes with a sentence 
No. 
02-0261   
 
27 
 
that reads: "This is the most we will pay regardless of the 
number of: (1) Insureds; (2) Claims made; (3) Vehicles or 
premiums shown in the Declarations; or (4) Vehicles involved in 
the auto accident."  The Folkmans contend the preceding sentence 
applies only to property damage, not bodily injuries, because 
the sentence is placed in the paragraph on property damage 
liability and because the use of the pronoun "this" suggests 
that the sentence only applies to its most immediate antecedent, 
which is the property damage limits. 
¶48 To bolster their view, the Folkmans compare the old 
Paragraph A of the "limit of liability" section with the change 
made to the paragraph as a result of the endorsement.  The 
Folkmans acknowledge that old Paragraph A of the "Limit of 
Liability" section clearly stated that Society would pay but one 
limit of liability even if more than one insured was responsible 
for the accident.  Unlike this original paragraph, the new 
paragraph does not suggest the same relationship between policy 
limits and the number of insureds.  On this reasoning, the 
Folkmans conclude that Society eliminated the "regardless of the 
number insured" exception to bodily injury liability and 
confined the passage to property damage. 
¶49 For its part, Society concedes that the placement of 
the "[T]his is the most we will pay" sentence in the paragraph 
discussing property damage liability was a typographical error.  
The sentence should be and, according to Society, usually is in 
a separate paragraph that follows the property damage paragraph.  
As such, it would complete the language of the endorsement and 
No. 
02-0261   
 
28 
 
apply to the entirety of the endorsement.  Written in this way, 
it would also mirror the language of the limits of liability 
paragraph it had replaced. 
¶50 Whatever error there may be in the placement or 
grammatical structure of the "This is the most we will pay" 
sentence in Society's split liability limits endorsement, the 
policy remains unambiguous regarding Society's obligation to 
indemnify its insureds for no more than $50,000 for bodily 
injuries from any one accident.  After examining the whole 
policy, we find it unreasonable for an insured to infer from 
this one errant sentence that the insured was greatly expanding 
the policy's coverage and confining its liability limit to 
property damage.  The function of the endorsement is to limit 
Society's 
liability 
obligations 
to 
$50,000 
per 
accident, 
regardless of the number of "insureds."  A reasonable insured 
would not find the endorsement language, combined with other 
portions of the policy, to be ambiguous, nor would a reasonable 
insured expect to receive any greater amount in compensation. 
No. 
02-0261   
 
29 
 
¶51 The Society policy at issue in this case is not akin 
to the insurance policy in Schmitz.15  In Schmitz, ambiguity was 
based on a confluence of factors.  First, a reasonable insured 
would likely believe that the purchase of, say, $200,000 in 
underinsured motorist coverage would lead to a $200,000 payment 
from the insurer depending on the insured's level of damages.  
In fact, however, because the policy contained a reducing 
clause, the insurer would never pay $200,000 to the insured, and 
if the other party paid $200,000, the insurer would pay nothing.  
We had stated in Dowhower that the effect of the reducing clause 
should be made clear.  Dowhower, 236 Wis. 2d 113, ¶33. 
¶52 Second, the effect of the reducing clause was made 
clear but only in the reducing clause itself.  There was no 
explanation of it.  The policy made no reference to underinsured 
motorist coverage on its declarations page or in its index, so 
that the insured would have had some difficulty finding the UIM 
coverage and real difficulty finding the reducing clause on the 
                                                 
15 Schmitz involved a person who was rendered a quadriplegic 
while a passenger in the vehicle of a driver whose insurance 
policy had a liability limit of $100,000.  Badger Mut. Ins. Co. 
v. Schmitz, 2002 WI 98, ¶¶8-9, 255 Wis. 2d 61, 647 N.W.2d 223.  
The insured made a claim under his own policy's UIM coverage, 
which had a limit set at $250,000.  Id., ¶9-10.  The insurer 
applied the policy's UIM reducing clause to reduce its UIM 
payments by the $100,000 paid by the driver's insurer.  Id., 
¶11.  We found that a reasonable insured would not expect that 
his recovery, under the UIM provisions of the policy, would be 
reduced by the payments received from the underinsured motorist.  
Id., ¶7.  Thus, in the context of the entire policy, the 
reducing clause was ambiguous and rendered the UIM coverage 
illusory.  Id. 
No. 
02-0261   
 
30 
 
twentieth page of the policy, where it was buried among other 
provisions. 
¶53 Third, if the insured found the UIM page, a typical 
limits of liability provision followed immediately after the 
schedule for underinsured motorist coverage.  It stated, among 
other things, "This is the most we will pay,  implying that it 
would pay the policy limits, although it never would.   
¶54 Fourth, one of the endorsements to the policy was 
entitled 
"Availability 
of 
Underinsured 
Motorists 
Coverage-
Wisconsin."  It read, in part, "The coverage will pay the 
remainder of the bodily injury damages up to the limit of 
liability you select for underinsured motorists coverage."  That 
sentence implied more than the policy delivered. 
¶55 After examining these factors, we said that "the 
American Merchants policy is a maze that is organizationally 
complex and plainly contradictory.  It sends several false 
signals to the insured.  It is not user-friendly."  Schmitz, 255 
Wis. 2d 61, ¶72.  We said the policy was confusing, ambiguous, 
and provided illusory coverage in the context of the entire 
policy.  Id. 
¶56 In the Folkmans' policy, there is an informative 
declarations page that lays out the limits of liability.  Courts 
cannot ask for an informative declarations page and then fault 
the insurer for failing to address every nuance and speculative 
interpretation of coverage that an insured might raise.  The 
Society policy is clearly organized with a good index that, in 
four different places, refers to limits of liability.  The index 
No. 
02-0261   
 
31 
 
page states: "Please Note: There may be State Amendatory 
Endorsements."  These endorsements are then listed on the 
declarations page. 
¶57 An insured would have to go to the nineteenth page in 
the policy, which contains the endorsement for "Split Liability 
Limits," to notice that the sentence "This is the most we will 
pay regardless of the number of 'Insureds,'" is contained in the 
paragraph on property damage.  The insured would then have to 
draw the inference that the placement of this sentence had 
magically increased coverage for personal injury because the 
insurer had eliminated its limit of liability from the bodily 
injury portion of the policy. 
¶58 Here, 
an 
unreasonable 
negative 
implication 
must 
compete against clear text.  The alleged ambiguity is not 
founded on contradictory language.  We conclude that the limits 
of liability provision is unambiguous, particularly when it is 
examined in the context of the whole policy. 
VI 
¶59 In addition to their arguments on ambiguity, the 
Folkmans present an assortment of statutory violations allegedly 
caused by the policy's limit of liability clause.  The Folkmans 
argue that the clause, if it is interpreted to deny multiple 
liability limits to each Folkman facing liability for Keith's 
accident, is void, because it is illusory and because it 
contravenes 
three 
statutes: 
Wis. Stat. §§ 632.32(3)(b); 
632.32(5)(f); and 631.43(1).  The application of these statutes 
to undisputed facts is a question of law that we review de novo.  
No. 
02-0261   
 
32 
 
For the reasons discussed below, we conclude that the policy's 
limits of liability clause is valid and must be enforced. 
¶60 Before beginning our analysis of each statute, we 
observe that the Folkmans' arguments are rooted, to some degree, 
in an erroneous premise.  The Folkmans contend that Society 
failed to extend coverage to all insureds who were liable for 
the accident, namely, Keith Folkman (as driver), as well as 
Debra Folkman and Kenneth Folkman, Sr. (as sponsors of Keith 
Folkman).  This overarching premise is false.  Society did 
extend coverage to all three insureds.  The problem the insureds 
face is not that one or more of them were not covered under the 
policy.  The problem is that the named insured did not purchase 
a greater amount of per occurrence liability. 
A. 
The Omnibus Statute, Wis. Stat. § 632.32(3) 
¶61 Wisconsin Stat. § 632.32(3), known colloquially as the 
omnibus coverage statute, states the following: 
Required provisions.  Except as provided in sub. 
(5), every policy subject to this section issued to an 
owner shall provide that: 
(a) 
Coverage provided to 
the named 
insured 
applies in the same manner and under the same 
provisions to any person using any motor vehicle 
described in the policy when the use is for purposes 
and in the manner described in the policy.   
(b) 
Coverage extends 
to 
any person 
legally 
responsible for the use of the motor vehicle. 
These required provisions are intended "to make sure when a 
policy insures a vehicle listed in the policy, the policy 
follows the vehicle to provide coverage for individuals that use 
No. 
02-0261   
 
33 
 
it with permission and are responsible for using it.  Insurance 
companies are prohibited from insuring only certain drivers."  
Anderson, supra, § 2.2[A] (citation omitted). 
¶62 The Folkmans draw upon the language in Wis. Stat. 
§ 632.32(3)(b) to claim that Society violated the omnibus 
statute by relying on the limits of liability in the policy in 
this case.  The violation occurred, according to the Folkmans, 
because each dollar Society pays on behalf of one insured (Keith 
Folkman) subtracts from coverage owed to another (Debra or 
Kenneth Sr.) and, therefore, coverage has not been extended as 
required by § 632.32(3)(b). 
¶63 The Folkmans' argument regarding the applicability of 
the omnibus statute fails.  In two cases, Miller v. Amundson, 
117 Wis. 2d 425, 345 N.W.2d 494 (Ct. App. 1984), and Iaquinta v. 
Allstate Ins. Co., 180 Wis. 2d 661, 510 N.W.2d 715 (Ct. App. 
1993), the court of appeals interpreted the omnibus statute to 
double 
liability 
coverage, 
notwithstanding 
the 
limits 
of 
liability in the policies, because the negligence of two 
insureds in each case was viewed as a separate occurrence.  
Miller, 117 Wis. 2d at 430; Iaquinta, 180 Wis. 2d at 669.  Under 
the rule in Miller and Iaquinta, limitation on liability 
conflicts with § 632.32(3)(b) when both the named insured and an 
additional insured that is "legally responsible for the use of 
the motor vehicle" are each actively negligent. 
¶64 However, 
in 
cases 
of 
vicarious 
liability, 
§ 632.32(3)(b) does not extend policy-limits protection to both 
the tortfeasor and the person or persons vicariously liable for 
No. 
02-0261   
 
34 
 
the tortfeasor's wrongdoing.  See Mills v. Wis. Mut. Ins. Co., 
145 Wis. 2d 472, 427 N.W.2d 397 (Ct. App. 1988) overruled on 
other grounds by West Bend Mut. Ins. Co. v. Playman, 171 
Wis. 2d 37, 489 N.W.2d 915 (1992);16 Landsinger v. Am. Family 
Mut. Ins. Co., 142 Wis. 2d 138, 417 N.W.2d 899 (Ct. App. 1987).17  
In Landsinger, the court of appeals held that a person to whom 
the negligence of another is imputed is not entitled to separate 
liability coverage under Wis. Stat. § 632.32(3)(b).  Landsinger, 
142 Wis. 2d at 142-43.  In Mills the court specifically held 
that additional or increased policy limits are not available to 
a sponsor of a minor driver, since the sponsor's liability is 
based solely on imputed negligence of the driver.  Mills, 145 
Wis. 2d at 479.  In instances where someone is "legally 
responsible for the use of a motor vehicle" but where he or she 
has no liability independent of the negligence of another, a 
single liability is shared by the tortfeasor and the sponsor.18  
                                                 
16 Playman overruled Mills only with respect to the issue of 
whether Wis. Stat. § 631.43 applies to insurance coverage that 
is not mandated by statute.  West Bend Mut. Ins. Co. v. Playman, 
171 Wis. 2d 37, 43 & n.2, 489 N.W.2d 915 (1992). 
17 See also Iaquinta v. Allstate Ins. Co., 180 Wis. 2d 661, 
666, 510 N.W.2d 715 (Ct. App. 1993) ("where the negligence of 
the additional insured is merely imputed to the named insured, 
or where the named insured is vicariously liable, the holding of 
Miller is inapplicable and the policy limits expressed in the 
policy are unaffected by the omnibus statute"). 
18 See Arnold P. Anderson, Wisconsin Insurance Law § 2.17[B] 
(4th ed. 1998) ("Mills is consistent with the theories of 
parental liability.  Whether the claim against parents is based 
on the sponsorship statute, negligent entrustment or negligence 
in supervision, there is only one occurrence."). 
No. 
02-0261   
 
35 
 
The distinction between Miller and Landsinger-Mills reflects 
this sharing of a single liability. 
¶65 We 
conclude 
that 
there 
is 
no 
conflict 
between 
Society's limit of liability clause and § 632.32(3)(b), because 
only Keith Folkman was actively negligent.  Debra and Kenneth 
Sr. are merely vicariously liable.  Following Mills and 
Landsinger, the plaintiffs are entitled to receive collectively 
from Society only the $50,000 per-occurrence liability limit.  
As in Landsinger, Debra and Kenneth Sr. each "received the same 
dollar-for-dollar 
protection" 
as 
Keith 
did 
for 
his 
own 
negligence.  Landsinger, 142 Wis. 2d at 142-43.  Therefore, 
liability coverage was extended to all those legally responsible 
for the use of the vehicle and Society's obligations were 
satisfied to the extent of a $50,000 payment.  Id. at 143. 
B. 
Anti-Stacking and Wis. Stat. § 632.32(5)(f) 
¶66 Wisconsin Stat. § 632.32 allows insurers to provide 
exclusions to their automobile policies so long as these 
exclusions are not expressly prohibited under § 632.32(6) or by 
other applicable law.  Clark v. Am. Family Mut. Ins. Co., 218 
Wis. 2d 169, 175, 577 N.W.2d 790 (1998).  Wisconsin Stat. 
§ 632.32(5)(f) was created in 1995 to permit insurance companies 
to 
prohibit 
insureds 
from 
stacking19 
insurance 
coverage 
                                                 
19 The concept of stacking has been previously explained by 
this court: 
"Stacking" 
is 
just 
another 
word 
to 
denote 
the 
availability 
of 
more 
than 
one 
policy 
in 
the 
reimbursement of the losses of the insured.  The 
second insurer's liability does not arise until the 
No. 
02-0261   
 
36 
 
protection from multiple policies or multiple premiums.  Id. at 
177 n.3; Anderson, supra, § 2.15[B].  This provision reads: 
A policy may provide that regardless of the 
number 
of 
policies 
involved, 
vehicles 
involved, 
persons covered, claims made, vehicles or premiums 
shown on the policy or premiums paid the limits for 
any coverage under the policy may not be added to the 
limits for similar coverage applying to other motor 
vehicles to determine the limit of insurance coverage 
available for bodily injury or death suffered by a 
person in any one accident. 
Since 1995, cases involving this subsection have been confined 
to the stacking of uninsured motorist (UM) and underinsured 
motorist (UIM) coverage.20 
¶67 The Folkmans contend that Wis. Stat. § 632.32(5)(f) 
authorizes only the inclusion of a limit of liability clause 
that limits coverage based on the number of vehicles covered 
under the policy.  They insist that Society's limit of liability 
clause effectively limits liability based on the number of 
insureds and does not fit within this narrow category of limits 
                                                                                                                                                             
policy limits of the first are exhausted; nor does the 
third's arise until the combined limits of the first 
and second carriers are exhausted. 
West Bend Mut. Ins. Co. v. Playman, 171 Wis. 2d 37, 40 n.1, 489 
N.W.2d 915 (1992) (quoting P. Pretzel, Uninsured Motorists 
§ 25.5(B)(1972)); see also Carrington v. St. Paul Fire & Marine 
Ins. Co., 169 Wis. 2d 211, 223, 485 N.W.2d 267 (1992) ("Stacking 
refers to a situation where an insured attempts to collect 
reimbursements for the same loss under multiple policies."). 
20 See, e.g., Clark v. Am. Family Mut. Ins. Co., 218 
Wis. 2d 169, 176 n.3, 577 N.W.2d 790 (1998); Dorschner v. State 
Farm Mut. Auto. Ins. Co., 2001 WI App 117, ¶12, 244 Wis. 2d 261, 
628 N.W.2d 414; Hanson v. Prudential Prop. & Cas. Ins. Co., 224 
Wis. 2d 356, 370, 591 N.W.2d 619 (Ct. App. 1999). 
No. 
02-0261   
 
37 
 
of liability permitted in § 632.32(5)(f).  Therefore, the 
Folkmans assert, the clause is inconsistent with the statute and 
is void. 
¶68 To 
support 
this 
theory 
of 
strict 
statutory 
prohibition, the Folkmans cite to Blazekovic v. City of 
Milwaukee, 2000 WI 41, 234 Wis. 2d 587, 610 N.W.2d 467, in which 
this court interpreted a UM exception in an automobile insurance 
policy 
and 
found 
it 
to 
be 
invalid 
under 
Wis. Stat. § 632.32(5)(j).21  The court based its reasoning 
primarily on (1) how the policy exception at issue failed to 
satisfy the statutory requirements of a permissible "drive other 
car" exclusion; and (2) the court's conclusion that only such 
exclusions were permitted by the statute.  Id., ¶¶21, 42. 
¶69 We hold that Wis. Stat. § 632.32(5)(f) has no bearing 
on the circumstances of this case.  Society is not barred from 
creating a traditional limit on liability for bodily injury 
                                                 
21 Wisconsin Stat. § 632.32(5)(j) states: 
A policy may provide that any coverage under the 
policy does not apply to a loss resulting from the use 
of a motor vehicle that meets all of the following 
conditions: 
1. Is owned by the named insured, or is owned by 
the named insured's spouse or a relative of the named 
insured if the spouse or relative resides in the same 
household as the named insured. 
2. Is not described in the policy under which the 
claim is made. 
3. Is not covered under the terms of the policy 
as a newly acquired or replacement motor vehicle. 
No. 
02-0261   
 
38 
 
simply because the limit is not expressly authorized by 
subsection (5)(f).  The focus of § 632.32(5)(f) is directed at 
policy provisions affecting UIM or UM coverage, or other 
coverage that implicates coverage to more than one vehicle.  To 
read its scope beyond this subject matter is unreasonable and 
was not seemingly intended by the legislature.22  Furthermore, 
Blazekovic is not controlling, as its reasoning was limited to a 
set of facts in relation to § 632.32(5)(j).  In fact, Blazekovic 
lends credence to a distinction between general limits of 
liability and UIM coverage limits in the context of § 632.32(5).  
The decision clearly stated that "liability coverage differs 
from uninsured motorist coverage, and the two are not to be 
equated.  . . .  There is no indicia that the legislature 
intended a convergence of liability and uninsured motorist 
coverage in light of the different goals underlying the two 
types of insurance."  Blazekovic, 234 Wis. 2d 587, ¶¶38-39. 
C. 
"Other Insurance" Provisions and Wis. Stat. § 631.43(1) 
¶70 The Folkmans also argue that the limit of liability 
clause in Debra's policy is void because it violates Wis. Stat. 
§ 631.43(1), which states: 
                                                 
22 The legislative policy behind Wis. Stat. § 632.32(5)(f) 
is contained in the Legislative Council Information Memorandum 
96-25 
to 
1995 
Wisconsin 
Act 
21, 
which 
states: 
"Section 
632.32(5)(f), Stats., as created by the Act, permits motor 
vehicle insurance policies to prohibit 'stacking' of uninsured 
or underinsured motorist coverage or any other coverage, such as 
medical 
payments 
coverage, 
provided 
under 
the 
policies."  
(Emphasis in original.) 
No. 
02-0261   
 
39 
 
When 2 or more policies promise to indemnify an 
insured against the same loss, no "other insurance" 
provisions of the policy may reduce the aggregate 
protection of the insured below the lesser of the 
actual insured loss suffered by the insured or the 
total indemnification promised by the policies if 
there were no "other insurance" provisions.   
¶71 This section expressly prohibits insurance policy 
provisions, such as anti-stacking clauses, that have the effect 
of reducing coverage below the total aggregate indemnification 
promised by multiple policies.  See Clark, 218 Wis. 2d at 179.  
The statute applies only when there are "two or more insurance 
policies [that] promise to indemnify an insured against the same 
loss."  Martin v. Am. Family Mut. Ins. Co., 2002 WI 40, ¶12, 252 
Wis. 2d 103, 
643 
N.W.2d 452. 
 
The 
"2 
or 
more 
policies" 
requirement means that § 631.43(1) will apply only to inter-
policy stacking or to intra-policy stacking when two or more 
premiums are paid within the same policy to cover the same loss.  
See Carrington v. St. Paul Fire & Marine Ins. Co., 169 
Wis. 2d 211, 224, 485 N.W.2d 267 (1992) ("Where an insured pays 
separate 
premiums, 
he 
or 
she 
receives 
separate 
and 
stackable . . . protections whether the coverage is provided in 
one or more than one policy.").23 
¶72 Clearly, there is no inter-policy stacking at issue in 
this case, since only one policy was issued to Debra promising 
                                                 
23 See also Playman, 171 Wis. 2d at 40 n.1, 43-44; Agnew v. 
Am. 
Family 
Mut. 
Ins. 
Co., 
150 
Wis. 2d 341, 
348-49, 
441 
N.W.2d 222 (1989) (citing Wood v. Am. Family Mut. Ins. Co., 148 
Wis. 2d 639, 651, 436 N.W.2d 694 (1989)); Burns v. Milwaukee 
Mut. Ins. Co., 121 Wis. 2d 574, 577-78, 360 N.W.2d 61 (Ct. App. 
1984); Anderson, supra, § 2.15. 
No. 
02-0261   
 
40 
 
to indemnify her, Keith, and Kenneth Sr. against bodily injury 
losses from an accident.  See Mills, 145 Wis. 2d at 482.24  
Neither is there any intra-policy stacking, because the policy 
charged only a single premium for bodily injury liability 
arising from use of the car that Keith was driving during the 
accident.  For the foregoing reasons, the limit of liability 
clause in the Folkmans' policy is not an "other insurance" 
clause subject to regulation by § 631.43 and Society's policy 
did 
not 
reduce 
liability 
coverage 
to 
below 
the 
total 
indemnification promised by the policy.25 
                                                 
24 The court of appeals in Mills mentioned this principle 
when it stated: "This is not a stacking case under sec. 
631.43(1), Stats., because there are not involved two or more 
policies promising to indemnify an insurer against the same 
loss."  Mills v. Wis. Mut. Ins. Co., 145 Wis. 2d 472, 482, 427 
N.W.2d 397 (Ct. App. 1988) (emphasis added).  This sentence was 
appended by a footnote quoting Wis. Stat. § 631.43(1), including 
its introductory language stating: "When 2 or more policies 
promise to indemnify an insured against the same loss, no "other 
insurance" provisions of the policy may reduce the aggregate 
protection of the insured below . . . ."  Id. at 482 n.4 
(emphasis added).  It is apparent that the court of appeals 
intended to use the term "insured" as opposed to "insurer" in 
its sentence.  Id. at 487. 
25 Nevertheless, the Folkmans argue that Society violated 
the spirit of Wis. Stat. § 631.43(1) by reducing the aggregate 
coverage for three insureds (Debra, Kenneth Sr., and Keith) to 
coverage for only one insured.  They cite Schult v. Rural Mutual 
Insurance Co., 195 Wis. 2d 231, 536 N.W.2d 135 (Ct. App. 1995), 
to support this contention.   
No. 
02-0261   
 
41 
 
D. 
Illusory Coverage 
¶73 As a final alternative, the Folkmans argue that the 
limit of liability clause renders Society's coverage illusory, 
because it ensures that Society will never cover Debra and 
Kenneth Sr.'s legal responsibility as sponsors for the accident, 
despite an express promise to do so.  This argument is 
contingent on the Folkmans establishing that Debra and Kenneth 
Sr. had a legitimate expectation of separate policy limits.  For 
the reasons expressed earlier in this opinion, the Folkmans are 
unable to demonstrate that such an expectation exists in the 
mind of a reasonable insured. 
¶74 It is true that Society separately insured Debra and 
Kenneth Sr., hence promising to provide coverage if they became 
"legally responsible" for an accident.  This observation, 
however, does not alter the fact that Debra and Kenneth Sr. were 
                                                                                                                                                             
Schult does not support the Folkmans' theory under the 
facts of this case.  In Schult, the court of appeals found the 
limit of liability clause to be an "other insurance" clause 
because the insured paid more than one premium to insure against 
the same loss and because he was driving a nonowned vehicle.  
Id. at 240.  Due to the wording of the insurance premiums for 
his three vehicles, the court of appeals concluded that the 
insured was entitled to more coverage from an accident while 
driving a nonowned vehicle than he would have been entitled to 
had he been driving his own car.  Id. at 242.  According to the 
court, "Had [the insured] been driving one of his three covered 
vehicles, [the injured person]'s recovery would have been 
limited to $100,000 because each premium insured against 
liability arising from the operation of the vehicle specified in 
the policy."  Id. (citing Agnew, 150 Wis. 2d at 349) (emphasis 
added).  In the present case, the insured, Keith, was driving an 
owned vehicle and the liability policy did not charge multiple 
premiums regarding bodily injury liability for that particular 
car. 
No. 
02-0261   
 
42 
 
both extended coverage; they merely happened to share the same 
liability subject to one limit of liability.  The coverage 
purchased by the Folkmans is not illusory because the policy 
accurately and fairly set out its liability coverage terms in an 
unambiguous fashion and coverage was extended to each insured. 
VII 
¶75 For the reasons expressed in this opinion, we hold 
that the Society insurance policy's provision limiting liability 
for bodily injures is unambiguous, both standing alone and in 
the context of the entire policy.  Under the policy, Society 
agreed only to indemnify its insureds for a maximum of $50,000 
for bodily injury liability from any one accident.  We also 
conclude that the policy's limit of liability clause did not 
violate Wis. Stat. §§ 632.32(3)(b), 632.32(5)(f), or 631.43(1) 
and was not illusory. 
 
By the Court.—The decision of the court of appeals is 
reversed. 
¶76 N. Patrick Crooks, J., did not participate.  
 
 
 
 
 
 
No. 
02-0261   
 
 
 
1