Title: State Farm Mutual Automobile Insurance Company v. Franklin Gillette
Citation: 2002 WI 31
Docket Number: 2000AP000637
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: March 29, 2002

2002 WI 31 
 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
00-0637 
 
 
COMPLETE TITLE: 
 
 
State Farm Mutual Automobile Insurance Company,  
 
Plaintiff-Respondent-Petitioner, 
 
v. 
Franklin Gillette and V. Thomas Ostlund,  
 
Defendants-Appellants. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2001 WI App 123 
Reported at:  246 Wis. 2d 561, 630 N.W.2d 527 
(Published) 
 
 
OPINION FILED: 
March 29, 2002   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
January 10, 2002   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
La Crosse   
 
JUDGE: 
Dennis G. Montabon   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
CONCUR & DISSENT: 
WILCOX, J., concurs in part, dissents in part 
(opinion filed). 
 
DISSENTED: 
CROOKS, J., dissents (opinion filed). 
SYKES, J., joins dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiff-respondent-petitioner there were briefs 
by Claude J. Covelli and Boardman, Suhr, Curry & Field LLP, 
Madison, and oral argument by Claude J. Covelli. 
 
For the defendants-appellants there was a brief by Gregory 
J. Egan and Parke O'Flaherty, Ltd., La Crosse, and oral argument 
by Gregory J. Egan. 
 
 
2002 WI 31 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  00-0637 
(L.C. No. 
98 CV 202) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
State Farm Mutual Automobile Insurance  
Company,  
 
          Plaintiff-Respondent-Petitioner, 
 
     v. 
 
Franklin Gillette and V. Thomas Ostlund,  
 
          Defendants-Appellants. 
 
FILED 
 
MAR 29, 2002 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
SHIRLEY S. ABRAHAMSON, CHIEF JUSTICE.   This is a 
review of a published decision of the court of appeals1 affirming 
in part and reversing in part a judgment of the Circuit Court 
for La Crosse County, Dennis G. Montabon, Judge.   
¶2 
The question presented in this case is complex:  Is an 
insured who is a Wisconsin resident and who has underinsured 
motorist coverage in a policy issued in Wisconsin (which policy 
promises to pay "damages for bodily injury an insured is legally 
                                                 
1 State Farm Mut. Auto. Ins. Co. v. Gillette, 2001 WI App 
123, 246 Wis. 2d 561, 630 N.W.2d 527. 
No. 
00-0637   
 
 
 
2
entitled to collect from the owner or driver of an underinsured 
motor vehicle") entitled to recover noneconomic damages for pain 
and suffering from that Wisconsin insurance company for bodily 
injury arising from an automobile accident that occurred in 
Manitoba, Canada, between the insured and a Manitoba driver, 
when Manitoba law precludes the recovery of noneconomic damages?  
The circuit court answered the question no; the court of appeals 
answered the question yes.  We affirm the court of appeals and 
answer the question yes, although we reach this result by a 
different path. 
¶3 
The circuit court granted summary judgment to State 
Farm 
Mutual 
Automobile 
Insurance 
Company, 
declaring 
that 
Franklin Gillette and V. Thomas Ostlund were not legally 
entitled to underinsured motorist coverage from State Farm 
because their claimed noneconomic damages for pain and suffering 
were precluded by the automobile liability law of Manitoba, 
Canada, where the accident occurred.2   
¶4 
The court of appeals reversed this portion of the 
circuit court's judgment, concluding that Gillette and Ostlund 
were entitled to underinsured motorist coverage from State Farm.  
According to the court of appeals, only two requirements must be 
met to trigger the underinsured motorist benefits: (1) causal 
negligence on the part of an underinsured motorist, and (2) 
                                                 
2 The circuit court also declared that Gillette and Ostlund 
were not entitled to uninsured motorist coverage.  The court of 
appeals affirmed this portion of the circuit court's  judgment.  
The parties do not seek review of this portion of the court of 
appeals' decision, and we do not address this issue. 
No. 
00-0637   
 
 
 
3
damages that result from the accident but are not covered by the 
at-fault motorist's insurance.  Because the parties agree that 
these two requirements are met in the present case, the court of 
appeals ruled that Gillette and Ostlund were legally entitled to 
the noneconomic damages they sought from State Farm.3  The court 
of appeals reasoned that these two factors triggered the State 
Farm 
underinsured 
motorist 
coverage 
independent 
of 
any 
restrictions on recovery of damages from the underinsured 
motorist that were imposed by the law of the jurisdiction in 
which the accident occurred.4  The court of appeals concluded 
that the phrase "legally entitled to collect" did not preserve 
for State Farm all of the Manitoba tortfeasor's rights or 
immunities.5   
¶5 
We interpret the phrase "legally entitled to collect 
from the owner or driver of an underinsured motor vehicle" under 
Wisconsin contract choice of law rules.  The interpretation of 
the phrase "legally entitled to collect" from an underinsured 
motorist arises in a variety of issues, including statutes of 
limitations; a tortfeasor's immunity from liability, such as 
governmental immunity; comparative negligence; and a limitation 
on the amount or type of damages.  Each issue must be analyzed 
separately to determine whether an insurance company should be 
                                                 
3 State Farm Mut. Auto. Ins. Co. v. Gillette, 2001 WI App 
123, ¶30, 246 Wis. 2d 561, 630 N.W.2d 527.   
4 Id. at ¶¶29-30. 
5 Id. at ¶31.   
No. 
00-0637   
 
 
 
4
treated the same as or different than an underinsured motorist.  
Different considerations may apply to each issue presented in a 
particular case.6  
                                                 
6 Gillette and Ostlund analogize the present case to those 
cases in which the tortfeasor is immune from liability under the 
law of the state.  They characterize the Manitoba law as 
immunizing 
the 
tortfeasor 
from 
liability 
for 
noneconomic 
damages.  The inability to recover noneconomic damages in 
Manitoba does not stem, however, from an immunity that prevents 
enforcement of a tort cause of action against a particular 
tortfeasor.  Rather, the inability to recover noneconomic 
damages in Manitoba stems from the law that provides that a 
tortfeasor is liable for some damages but not for other damages.  
We do not address the issue of immunity because immunity may 
present different considerations than addressed in the present 
case relating to damages.  
Gillette and Ostlund cite numerous cases in which a 
tortfeasor is immune from liability and yet the court holds the 
insurance company liable for damages incurred.  See, e.g., Gen. 
Accident Fire and Life Assurance Corp., Ltd. v. Klatt, 460 
N.E.2d 339, 341 (Ill. Ct. App. 1984) (interspousal immunity in 
Illinois no bar to recovering under uninsured motorist coverage 
in Illinois); Sumwalt v. Allstate Ins. Co., 466 N.E.2d 544, 545-
46 (Ohio 1984) (parent-child immunity in Ohio no bar to 
recovering under uninsured motorist coverage in Ohio); Torres v. 
Kansas City Fire and Marine Ins. Co., 849 P.2d 407, 411 (Okla. 
1993) (workers' compensation immunity in Oklahoma no bar to 
recovering 
under 
uninsured 
motorist 
coverage 
by 
personal 
representative 
of 
decedent 
killed 
by 
negligence 
of 
coemployee/tortfeasor in Oklahoma). 
Professor Widiss states that from the standpoint of the 
insured who is injured by a negligent tortfeasor, there is no 
meaningful difference between inability to recover damages 
because the tortfeasor is underinsured or because the tortfeasor 
is immune.  In contrast, he comments that "there is no reason to 
allow a recovery of underinsured motorist insurance when an 
individual is fully indemnified."  3 Alan I. Widiss, Uninsured 
and Underinsured Motorist Coverage § 34.2, at 154-55 (Rev. 2d 
ed. 2001).  
No. 
00-0637   
 
 
 
5
¶6 
We conclude that the only reasonable interpretation of 
the policy for purposes of calculating damages in the present 
case is that "damages for bodily injury an insured is legally 
entitled to collect from the owner or driver of an underinsured 
motor vehicle" means that an insurance company will compensate 
an insured for damages for bodily injury that the insured 
actually incurs for which an underinsured motorist is liable to 
the insured under the applicable law up to the policy liability 
limits. 
¶7 
We further conclude that Wisconsin tort choice of law 
rules govern which jurisdiction's law determines the damages an 
insured is legally entitled to collect from an underinsured 
motorist. Applying Wisconsin choice of law rules in the present 
case instructs us to look to Wisconsin law, the law of the 
forum. Wisconsin has the most significant contacts to the 
present case. Wisconsin is the jurisdiction where the injured 
persons reside and where the insurance policy was issued by a 
Wisconsin insurance company to Wisconsin insureds.  Applying 
Wisconsin law comports with Wisconsin's public policy of 
compensating victims of 
tortfeasors. 
Under 
Wisconsin 
law, 
Gillette and Ostlund are legally entitled to collect noneconomic 
damages 
that 
arise 
from 
an 
automobile 
accident, 
and 
consequently, Gillette and Ostlund are legally entitled to 
collect noneconomic damages from State Farm on the basis of the 
underinsured motorist coverage.  
¶8 
We caution, however, that neither the law of the forum 
nor the law of the place of the accident is the choice of law 
No. 
00-0637   
 
 
 
6
rule applicable to every fact situation or to every issue that 
might 
arise 
regarding 
the 
"legally 
entitled 
to 
collect" 
language.  The law of one jurisdiction could be invoked with 
respect to some issues and in some fact situations and the law 
of another jurisdiction invoked in respect to other issues and 
other fact situations. 
¶9 
We further conclude that the State Farm policy 
exhaustion requirement is satisfied, because the amount of 
recovery for noneconomic damages from the Manitoba underinsured 
motorist is zero. Therefore in the present case the limits of 
liability 
of 
all 
bodily 
injury 
policies 
that 
apply 
for 
noneconomic damages have been used up. 
¶10 We shall first state the relevant facts (Part I) and 
then set forth the State Farm policy and a summary of the 
parties' arguments (Part II).  We discuss the following three 
questions that are necessary to resolve the question of law 
presented: Which jurisdiction's law governs the interpretation 
of the insurance policy (Part III)?  How is the policy language 
"legally entitled to collect" from an underinsured motorist to 
be interpreted (Part IV)?  Which jurisdiction's law governs the 
amount of damages Gillette and Ostlund are legally entitled to 
collect from an underinsured motorist (Part V)?  Finally, we 
consider the effect of the policy exhaustion provision that 
precludes the payment of underinsured motorist benefits until 
the limits of liability of all bodily injury policies have been 
used up by payment, judgments, or settlements (Part VI). 
 
No. 
00-0637   
 
 
 
7
I 
¶11 The relevant facts in the present case are undisputed.  
V. Thomas Ostlund, a Wisconsin resident, was driving his 
mother's pickup truck in Manitoba, Canada, on October 11, 1995.  
Franklin Gillette was a passenger in the pickup truck.   
¶12 While stopped, the pickup truck was struck by another 
truck driven by Norman Unrau, a resident of Manitoba.  The 
parties agree that Unrau, the underinsured motorist, was 
negligent and that the accident caused physical injuries to both 
Gillette and Ostlund.   
¶13 Unrau's vehicle was registered in Manitoba and insured 
by the Manitoba Public Insurance Corporation (MPIC) as required 
by Manitoba law.  The parties agree that Manitoba law governing 
motor vehicle accidents between a Manitoba insured and a non-
Manitoba claimant provides at-fault liability coverage that pays 
compensable damages, including medical care, income replacement, 
and permanent impairment damages.7  MPIC does not, however, 
permit the recovery of noneconomic damages from the driver that 
are now sought by Gillette and Ostlund from State Farm.8   
                                                 
7 The parties refer the court to Manitoba Public Insurance 
Corporation Act L.R.M. ch. P215 (1987) (Can.). 
8 The parties refer the court to Manitoba Public Insurance 
Corporation 
Act 
L.R.M. 
ch. 
P215, 
§ 72 
(1987) 
(Can.) 
(compensation under this act stands in lieu of all rights and 
remedies arising out of bodily injuries to which this act 
applies and no action in that respect may be admitted before any 
court). 
No. 
00-0637   
 
 
 
8
¶14 At the time of the accident, State Farm insured the 
pickup truck driven by Ostlund, but the policy on this truck did 
not include underinsured motorist coverage.  Ostlund had, 
however, two State Farm policies in force on motor vehicles he 
owned but that were not involved in the accident.  Each policy 
included identical underinsured motorist coverage with $100,000 
per person and $300,000 per accident limits of liability.9   
¶15 At the time of the circuit court's decision to grant 
State Farm's motion for summary judgment, MPIC had paid Ostlund 
and his subrogated health insurance carrier $26,833.51.  MPIC 
had not yet paid Gillette for his filed claim.   
 
II 
¶16 The key language in the State Farm policy in issue 
provides that State Farm will pay "damages for bodily injury an 
insured is legally entitled to collect from the owner or driver 
of an underinsured motor vehicle."10  An "underinsured motor 
vehicle" is defined in the policy as a motor vehicle the use of 
which is insured for bodily injury liability and whose liability 
limits are less than the amount of the insured's damages or have 
been reduced by payments to other than the insured to less than 
the amount of the insured's damages.  The policy also provides 
                                                 
9 Wisconsin Stat. § 632.32(4m) 
(1999-2000) 
requires 
an 
insurance company to notify an insured of the availability of 
underinsured motorist coverage and requires limits of liability 
of at least $50,000 per person and $100,000 per accident. 
10 The parties agree that Gillette and Ostlund qualify as 
"insureds" under the State Farm policies. 
No. 
00-0637   
 
 
 
9
that the most State Farm will pay is the lesser of (1) the 
difference between the amount of the insured's damages for 
bodily injury and the amount paid to the insured by or for the 
person who is or may be held legally liable for the bodily 
injury, or (2) the liability limits set forth in the policy.  
The policy provides that the insurance company and the insured 
must agree whether the insured is legally entitled to collect 
damages from the driver of an underinsured motor vehicle and if 
so in what amount.  The policy is in effect in the United States 
and Canada. 
¶17 The State Farm underinsured motor vehicle policy 
states in relevant part as follows: 
We will pay damages for bodily injury an insured is 
legally entitled to collect from the owner or driver 
of an underinsured motor vehicle.  The bodily injury 
must be caused by accident arising out of the 
operation, maintenance or use of an underinsured motor 
vehicle.   
THERE IS NO COVERAGE UNTIL THE LIMITS OF LIABILITY OF 
ALL BODILY INJURY LIABILITY BONDS AND POLICIES THAT 
APPLY HAVE BEEN USED UP BY PAYMENT OF JUDGMENTS OR 
SETTLEMENTS. 
Underinsured motor vehicle —— means a land motor 
vehicle: 
1. the ownership, maintenance or use of which is 
insured or bonded for bodily injury liability 
at the time of the accident; and  
2. whose limits of liability for bodily injury 
liability: 
a. 
are 
less 
than 
the 
amount 
of 
the 
insured's damages; or 
No. 
00-0637   
 
 
 
10
b. 
have 
been 
reduced 
by 
payments 
to 
persons other than the insured to less 
than 
the 
amount 
of 
the 
insured's 
damages. 
 . . .  
Limits of Liability 
Coverage W 
 . . .  
5. 
The most we pay will be the lesser of: 
a. 
the difference between the amount of 
the 
insured's 
damages 
for 
bodily 
injury, and the amount paid to the 
insured 
by 
or 
for 
any 
person 
or 
organization who is or may be held 
legally liable for the bodily injury; 
or 
b. 
the 
limits 
of 
liability 
of 
this 
coverage. 
(Emphasis in original.) 
¶18 The 
State 
Farm 
policy 
poses 
the 
following 
two 
questions to be decided in underinsured motor vehicle cases: 
Two questions must be decided by agreement between the 
insured and us: 
1. 
Is the insured legally entitled to collect 
damages from the owner or driver of the 
uninsured 
motor 
vehicle 
or 
underinsured 
motor vehicle; and 
2. 
If so, in what amount?  
(Emphasis in original.) 
¶19 We summarize the arguments of each party as follows: 
¶20 First, State Farm's position asserts that "legally 
entitled to collect" from an underinsured motorist means that an 
No. 
00-0637   
 
 
 
11
insured's tort cause of action against the underinsured motorist 
is the proper measure of damages against State Farm under the 
underinsured motorist coverage.  According to State Farm, an 
insured must have a viable tort claim against an underinsured 
motorist under the law of the jurisdiction governing tort 
liability.  State Farm recognizes, however, that at least one 
bar to a cause of action against an underinsured motorist, 
namely, the tort statute of limitations, does not bar an insured 
from recovering from State Farm under the underinsured motorist 
coverage.11   
¶21 State Farm in effect argues that (1) the insurance 
policy expressly incorporates by reference the substantive tort 
law applicable to determining what damages an insured is legally 
entitled to collect from an underinsured motorist; (2) the 
damages an insured is legally entitled to collect in the present 
case are governed by the laws of Manitoba, the jurisdiction 
where the accident took place and the residence of the 
underinsured motorist; (3) under Manitoba law the damages for 
bodily injury an insured is entitled to collect from the 
motorist do not include noneconomic damages such as pain and 
suffering; and (4) because Gillette and Ostlund have no legal 
entitlement under Manitoba law to compensation for noneconomic 
damages from the motorist, they cannot recover noneconomic 
                                                 
11 See, e.g., Sahloff v. Western Cas. & Surety Co., 45 
Wis. 2d 60, 69, 171 N.W.2d 914 (1969).  
No. 
00-0637   
 
 
 
12
damages from State Farm under the underinsured motorist coverage 
of the State Farm policy.   
¶22 Gillette's and Ostlund's position can be summarized as 
follows: Gillette and Ostlund argue that "legally entitled to 
collect" from an underinsured motorist means that an insured 
need 
prove 
only 
causal 
negligence 
on 
the 
part 
of 
the 
underinsured motorist and that damages resulted from the 
accident that the underinsured motorist's insurance does not 
cover.  They point out that State Farm does not dispute that the 
Manitoba driver is at fault and that Gillette and Ostlund have 
suffered damages that the Manitoba driver's insurance does not 
cover.  Because Manitoba law, unlike Wisconsin law, does not 
award damages for pain and suffering, Gillette and Ostlund 
contend that State Farm should pay these damages up to policy 
liability limits.   
¶23 Gillette and Ostlund argue in effect that (1) State 
Farm does not stand in the shoes of an underinsured motorist and 
does not have all the defenses available to that motorist; (2) 
an insured need prove only causal negligence on the part of the 
underinsured motorist and that damages resulted from the 
accident that the motorist's insurance does not cover; (3) the 
damages Gillette and Ostlund are legally entitled to collect 
under Wisconsin law include noneconomic damages, such as pain 
and suffering; (4) applying Manitoba law to determine their 
damages contravenes Wisconsin public policy; and (5) therefore 
they are entitled to recover compensation for noneconomic 
No. 
00-0637   
 
 
 
13
damages 
from 
State 
Farm 
under 
the 
underinsured 
motorist 
coverage. 
 
III 
¶24 We turn first to decide which jurisdiction's law 
governs the interpretation of the insurance policy.  The parties 
agree, and we conclude, that Wisconsin contract law governs the 
interpretation 
of 
this 
insurance 
policy 
and 
that 
the 
interpretation of an insurance policy ordinarily presents a 
question of law that this court determines independent of the 
circuit court and court of appeals, but benefiting from their 
analyses.12  
¶25 An insurance policy is a contract.  A claim against 
the insurance company for underinsured motorist coverage is "an 
action on the policy and sounds in contract," although an 
underlying tortious injury is also involved.13   
¶26 To determine which jurisdiction's law applies to a 
contractual dispute, we look to Wisconsin contract choice of law 
rules.  In contractual disputes, Wisconsin courts apply the 
"grouping of contacts" rule,14 that is, that contract rights must 
                                                 
12 Taylor v. Greatway Ins. Co., 2001 WI 93, ¶9, 245 
Wis. 2d 134, 628 N.W.2d 916. 
13 Sahloff, 45 Wis. 2d at 70.  See Abraham v. General Cas. 
Co., 217 Wis. 2d 294, 307, 576 N.W.2d 46 (1998) (claim arises 
from alleged breach of underinsured motorist insurance policy 
although claim would not have come to fruition without the 
injury out-of-state).  
14 Haines v. Mid-Century Ins. Co., 47 Wis. 2d 442, 449, 177 
N.W.2d 328 (1970). 
No. 
00-0637   
 
 
 
14
be "determined by the law of the [jurisdiction] with which the 
contract has its most significant relationship."15   
¶27 The insurance policy in the present case was issued in 
Wisconsin between State Farm, an insurance company doing 
business in Wisconsin, and Ostlund, a Wisconsin resident.  The 
policy covers cars registered in Wisconsin.  Wisconsin is the 
state 
with 
which 
the 
policy 
has 
its 
most 
significant 
relationship. 
 
Wisconsin 
law, 
therefore, 
governs 
the 
interpretation of the insurance policy in the present case.   
¶28 Under Wisconsin law, the words of an insurance policy 
are given their common and ordinary meaning.16  An insurance 
policy is interpreted as a reasonable person of ordinary 
intelligence in the position of an insured would understand it.17  
When a policy is susceptible to more than one interpretation by 
a reasonable person of ordinary intelligence in the position of 
an insured, the insurance policy must be interpreted against the 
insurance company, the drafter of the document, and in favor of 
coverage for the insured.18  
                                                 
15 American Std. Ins. Co. v. Cleveland, 124 Wis. 2d 258, 
267, 369 N.W.2d 168 (Ct. App. 1985). 
16 Danbeck v. American Family Mut. Ins. Co., 2001 WI 91, 
¶10, 245 Wis. 2d 186, 629 N.W.2d 150; Henderson v. State Farm 
Mut. Auto. Ins. Co., 59 Wis. 2d 451, 459, 208 N.W.2d 423 (1973). 
17 Maas v. Ziegler, 172 Wis. 2d 70, 81-82, 492 N.W.2d 621 
(1992); 
Garriguenc 
v. 
Love, 
67 
Wis. 2d 130, 
134-35, 
226 
N.W.2d 414 (1975). 
18 Tempelis v. Aetna Cas. & Sur. Co., 169 Wis. 2d 1, 10, 485 
N.W.2d 217 (1992); Garriguenc v. Love, 67 Wis. 2d 130, 135, 226 
N.W.2d 414 (1975). 
No. 
00-0637   
 
 
 
15
 
IV 
¶29 We next address how the policy language "damages for 
bodily injury an insured is legally entitled to collect from the 
owner or driver of an underinsured motor vehicle" is interpreted 
under Wisconsin law.  The parties disagree on the answer to this 
question.  Case law supports both parties' interpretations,19 but 
the analysis in the cases is limited and the cases are 
unpersuasive.  
¶30 State Farm reads the phrase "legally entitled to 
collect" from an underinsured motorist to require coverage only 
                                                 
19 See, e.g., United States Fid. & Guar. Co. v. Preston, 26 
S.W.3d 145, 147 (Ky. 2000) (setting forth interpretations of 
uninsured motorist policies using the phrase "legally entitled 
to recover"); West Am. Ins. Co. v. Popa, 723 A.2d 1, 6 (Md. 
1998) (setting forth interpretations of an underinsured motorist 
policy using the phrase "legally entitled to recover"); Vega v. 
Farmers Ins. Co., 918 P.2d 95, 102, 103 n.14 (Ore. 1996) 
(setting forth interpretations of an uninsured/underinsured 
motorist 
statute 
using 
the 
phrase 
"legally 
entitled 
to 
recover"). 
The parties and the courts appear to treat underinsured and 
uninsured cases interchangeably for purposes of interpreting the 
phrase "legally entitled to recover."  3 Alan I. Widiss, 
Uninsured and Underinsured Motorist Coverage 147 (Rev. 2d ed. 
2001).  Furthermore, the cases do not seem to differentiate 
between the phrases "legally entitled to recover" and "legally 
entitled to collect." 
Professor Widiss states that "[t]hus far, there have been 
relatively 
few 
appellate 
decisions 
addressing 
questions 
involving underinsured motorist insurance that have turned on 
the meaning to be accorded to the phrase "legally entitled to 
recover."  3 Alan I. Widiss, Uninsured and Underinsured Motorist 
Coverage § 34.1, 149 n.5 (Rev. 2d ed. 2001). 
No. 
00-0637   
 
 
 
16
when an insured can prove each element of a tort claim against 
the underinsured motorist.20  The insured's benefits under the 
policy are, according to State Farm, defined by the insured's 
claim against the underinsured motorist.  This interpretation 
does not, however, fully answer the question presented.   
¶31 When 
an 
insured 
sues 
an 
insurance 
company 
for 
underinsured motorist coverage, contract law and tort law 
converge.  Contract law applies to interpret the insurance 
policy, but an insured's right to underinsured motorist benefits 
hinges on the existence of a tort cause of action against the 
underinsured motorist.   
¶32 Some 
defenses, 
such 
as 
the 
tort 
statute 
of 
limitations, are available to an underinsured motorist but are 
not 
available 
to 
an 
insurance 
company.21 
 
Different 
considerations apply to the liability of an underinsured 
motorist under tort law and the liability of the insurance 
company under contract law.   
¶33 Gillette and Ostlund read the phrase "legally entitled 
to collect" from an underinsured motorist more broadly as 
requiring an insured to prove only the basic elements of a tort 
claim, that is, fault and damages.22  This interpretation, 
                                                 
20 For cases adopting this interpretation, see cases cited 
in Popa, 723 A.2d at 6-7; Vega, 918 P.2d at 103 n.14. 
21 Sahloff v. Western Cas. & Sur. Co., 45 Wis. 2d 60, 171 
N.W.2d 914 (1969). 
22 For cases adopting this interpretation, see cases cited 
in Preston, 26 S.W.3d at 148 n.10; Popa, 723 A.2d at 6; Vega, 
918 P.2d at 103 n.14. 
No. 
00-0637   
 
 
 
17
however, does not fully answer the question presented either.  
Legal principles define fault and damages, but which principles 
apply and when they apply are open questions under Gillette's 
and Ostlund's interpretation.  It is unclear, for example, the 
effect under this interpretation of the state's comparative 
negligence law on an insured's rights under the underinsured 
motorist coverage.   
¶34 Thus the parties' different interpretations of the 
policy illustrate what this court has noted previously, that is, 
that underinsured motorist coverage presents something of a 
"legal iceberg," an area of the law "nettlesome to analyze," and 
"an infinitely complex and troublesome area" of law.23    
¶35 State Farm's obligation to compensate an insured is an 
obligation to compensate for "damages."  In a case involving a 
different type of insurance policy, the court concluded that the 
word "damages" means the compensation that an insured may 
recover in the courts through the unlawful act of omission or 
negligence of another.24  Thus, the phrase "damages for bodily 
injury an insured is legally entitled to collect from the owner 
or driver of an underinsured motor vehicle" in the State Farm 
                                                 
23 Dowhower ex rel. Rosenberg v. West Bend Mut. Ins. Co., 
2000 WI 73, ¶22, 236 Wis. 2d 113, 613 N.W.2d 557 (quoting French 
v. New Jersey Sch. Bd. Ass'n Ins. Group, 694 A.2d 1008, 1009 
(N.J. 1997)). 
24 Shorewood Sch. Dist. v. Wausau Ins., 170 Wis. 2d 347, 
368, 488 N.W.2d 82 (1992) (citing Black's Law Dictionary 389 
(6th ed.)). 
No. 
00-0637   
 
 
 
18
policy might be interpreted to mean only those damages that an 
insured may recover in the courts.  
¶36 This analysis does not, however, fully answer the 
question presented.  As this court has explained, an insurance 
company does not, for all purposes, stand in the shoes of the 
tortfeasor in a lawsuit between an insurance company and the 
insured.  The insurance company cannot take advantage of all the 
defenses available to an underinsured motorist.  We clearly 
stated this rule in Sahloff v. Western Cas. & Sur. Co., 45 
Wis. 2d 60, 171 N.W.2d 914 (1969), an uninsured motorist case.  
¶37 In Sahloff, the insured filed a claim against the 
insurance company for uninsured motorist coverage well after the 
three-year statute of limitations on tort actions had expired 
but just before the statute of limitations on the contract 
action was to expire.  Because the three-year tort statute of 
limitations had already expired, the insurance company contended 
that the insured was no longer "legally entitled to recover" 
from the uninsured motorist and therefore was unable to recover 
from it.25  The insurance company argued in Sahloff that the 
phrase "legally entitled to recover" in the uninsured motorist 
coverage required an insured to be able to reduce the claim 
against the uninsured motorist to a judgment.   
¶38 But the Sahloff court rejected the insurance company's 
argument and concluded that a tort statute of limitations should 
not bar an insured from suing an insurance company for the 
                                                 
25 Sahloff, 45 Wis. 2d at 64. 
No. 
00-0637   
 
 
 
19
uninsured motorist coverage.  According to Sahloff, to prevail 
in a contract suit against an insurance company, an insured does 
not need an enforceable tort claim against the tortfeasor under 
the tort statute of limitations.  
¶39 Sahloff addressed the question whether an affirmative 
defense of the statute of limitations that is available to a 
tortfeasor is also available to the insurance company.  It did 
not address the elements of the tort cause of action, although 
the court stated that "legally entitled to recover" deals with 
the question of "whether the negligence of the uninsured 
motorist and the contributory negligence is such as to allow the 
insured to recover."26  Sahloff concluded that the insured's 
cause of action against the tortfeasor must exist at the time of 
the accident and need not also be enforceable against the 
tortfeasor at the time the insured sues the insurance company.  
Thus, Sahloff has limited application to the present case.    
¶40 The interpretation of the phrase "legally entitled to 
collect" arises in a variety of issues, including statutes of 
limitations; a tortfeasor's immunity from liability, such as 
governmental immunity; comparative negligence;27 and a statutory 
limitation on the amount of damages.  We conclude that each 
issue as presented by a particular case must be analyzed 
separately to determine whether the insurance company should be 
                                                 
26 Id. at 69. 
27 Id. at 69. 
No. 
00-0637   
 
 
 
20
treated the same as or different than an underinsured motorist.  
Different considerations may apply to each issue.28 
¶41 We now turn to discuss how the question of damages 
should be treated under the policy in the present case.  
¶42 Arguments have been made to support the position that 
"legally entitled to collect" from an underinsured motorist 
embraces the limitations imposed by law on the amount or type of 
damages recoverable from the driver of the underinsured motor 
vehicle.  Arguments have also been made to support the position 
that "legally entitled to collect" from an underinsured motorist 
means that an insurance company should compensate an insured for 
all damages incurred up to the policy limits.  The arguments 
supporting the former position are more persuasive.  
¶43 First, the policy contains no language that limits the 
phrase "legally entitled to collect" to a showing only of fault 
and damages.  Proof of fault and damages alone does not 
necessarily entitle an injured party to collect damages under 
tort law.  Allowing an insured to collect damages from an 
insurance company that an insured is not entitled to collect 
under tort law from an underinsured motorist seems to contravene 
the words of the insurance policy.  If an insurance company's 
liability was for damages for which an underinsured motorist was 
                                                 
28 In relying on Sahloff, the court of appeals applied the 
Sahloff case without considering whether the amount of damages 
recoverable should be treated differently from the affirmative 
defense of the tort statute of limitations. 
No. 
00-0637   
 
 
 
21
not liable under the law, the policy would simply read "damages 
for bodily injury an insured has incurred." 
¶44 Second, limiting State Farm's liability to the amount 
of damages for which an underinsured motorist is liable to the 
insured seems to comport with the purpose of underinsured 
motorist coverage.  We have stated that the purpose of 
underinsured motorist coverage is "solely to put the insured in 
the same position [the insured] would have occupied had the 
tortfeasor's liability limits been the same as the underinsured 
motorist limits purchased by the insured."29  Under this view of 
underinsured motorist coverage, the limits on the type or amount 
of damages recoverable from an underinsured motorist should 
apply to recovery from an insurance company. 
¶45 Wisconsin 
courts 
have, however, also 
stated the 
purpose of underinsured motorist coverage in a different way.  
We have stated that the purpose of underinsured motorist 
coverage is "to compensate the victim of an underinsured 
motorist's negligence where the third party's liability limits 
are not adequate to fully compensate the victim for his or her 
                                                 
29 See Dowhower ex rel. Rosenberg v. West Bend Mut. Ins. 
Co., 2000 WI 73, ¶18, 236 Wis. 2d 113, 613 N.W.2d 557 (citing 3 
Irvin E. Schermer, Automobile Liability Insurance § 57.01, p. 
57-2 (3d ed. 1995)). 
No. 
00-0637   
 
 
 
22
injuries."30 
 
Justice 
Ann 
Walsh 
Bradley 
concluded 
that 
"reasonable insureds believe that an underinsured motorist 
                                                 
30 See Wood v. American Family Mut. Ins., 148 Wis. 2d 639, 
654, 
436 
N.W.2d 594 
(1989), 
overruled 
on 
other 
grounds, 
Matthiesen v. Continental Cas. Co., 193 Wis. 2d 192, 532 
N.W.2d 729 (1995).  See also Taylor v. Greatway Ins. Co., 2001 
WI 93, ¶¶32-33, 245 Wis. 2d 134, 628 N.W.2d 916 (the purpose of 
underinsured motorist insurance is to compensate the victim of 
an underinsured motorist's negligence when the third party's 
liability limits are not adequate to compensate fully the 
damages of the victim) (Bradley, J., dissenting); Matthiesen v. 
Continental Cas. Co., 193 Wis. 2d 192, 204, 532 N.W.2d 729 
(1995) (underlying purpose of underinsured motorist coverage is 
to 
compensate 
the 
victim 
of 
an 
underinsured 
motorist's 
negligence where the third party's liability limits are not 
adequate to compensate fully the victim for his or her 
injuries); Kaun v. Industrial Fire & Cas. Ins. Co., 148 
Wis. 2d 662, 671, 436 N.W.2d 321 (1989) (underlying purpose of 
underinsured motorist coverage is to compensate the victim of an 
underinsured motorist's negligence where the third party's 
liability limits are not adequate to fully compensate the victim 
for his or her injuries); Ginder v. General Cas. Co. of 
Wisconsin, 2000 WI App 197, ¶4, 238 Wis. 2d 506, 617 N.W.2d 857 
(underinsured motorist coverage protects an insured when a 
tortfeasor has liability coverage inadequate in amount for the 
injuries caused); Meyer v. Michigan Mut. Ins. Co., 2000 WI App 
37, ¶17, 233 Wis. 2d 221, 607 N.W.2d 333 (underinsured motorist 
coverage compensates its purchaser if a third party's policy's 
liability limits do not adequately compensate for his or her 
injuries); Sweeney v. General Cas. Co. of Wisconsin, 220 
Wis. 2d 183, 199, 582 N.W.2d 735 (Ct. App. 1998) (underinsured 
motorist coverage compensates a victim when a tortfeasor's 
liability limits are not adequate to fully compensate the victim 
for his or her injuries) (Deininger, J., concurring); Filing v. 
Commercial Union Midwest Ins. Co., 217 Wis. 2d 640, 649, 579 
N.W.2d 65 
(Ct. 
App. 1998) 
(underinsured motorist coverage 
compensates the victim of an underinsured motorist's negligence 
when the third party's liability limits are not adequate to 
fully compensate the victim for his or her injuries); Hull v. 
Heritage Mutual Ins. Co., 203 Wis. 2d 547, 552, 553 N.W.2d 295 
(Ct. App. 1996) (citing Vogt v. Schroeder, 129 Wis. 2d 3, 8 n.2, 
383 N.W.2d 876 (1986) (underinsured motorist coverage protects 
against the inadequately insured motorist)); Krech v. Hanson, 
164 Wis. 2d 170, 175 n.2, 473 N.W.2d 600 (Ct. App. 1991) 
(underinsured motorist coverage compensates the victim of an 
No. 
00-0637   
 
 
 
23
endorsement 
provides 
coverage 
when 
an 
at-fault 
driver's 
liability insurance cannot fully compensate for the insured's 
damages."31  Stating the purpose of underinsured motorist 
coverage in this way emphasizes that an insured is seeking 
protection for all damages incurred up to the policy liability 
limits, regardless of whether the insured is legally entitled to 
collect the full amount of the damages from the underinsured 
motorist.   
¶46 In the present case, Gillette and Ostlund are not 
complaining about the adequacy of the liability coverage of the 
underinsured motorist. On the contrary, their complaint is with 
the law limiting the amount of damages recoverable from the 
underinsured motorist.  
¶47 In fact, underinsured motorist coverage has both 
purposes described in our cases: to put an insurance company in 
the shoes of an underinsured motorist and to compensate an 
insured fully for damages incurred up to the policy liability 
limits.  But a policy need not necessarily provide coverage to 
fulfill both these purposes.  For example, insureds might want 
to buy a policy authorizing compensation for all damages 
incurred, but State Farm need not sell this kind of policy.  We 
do not think the policy in the present case can reasonably be 
read to provide coverage for all damages incurred.  
                                                                                                                                                             
underinsured motorist's negligence where the third party's 
liability limits are not adequate to fully compensate the victim 
for his or her injuries). 
31 Taylor, 2000 WI 93, ¶29. 
No. 
00-0637   
 
 
 
24
¶48 After giving consideration to all these factors, we 
conclude that a reasonable person in the position of the insured 
would not understand "damages for bodily injury an insured is 
legally entitled to collect from the owner or driver of an 
underinsured motor vehicle" to mean that an insurance company 
will compensate an insured for damages for bodily injury that 
the insured actually incurs up to the liability limits of the 
insured's policy even though the underinsured motorist is not 
liable for the full amount of the damages under the applicable 
law.  We also conclude that the only reasonable interpretation 
is that "damages for bodily injury an insured is legally 
entitled to collect from the owner or driver of an underinsured 
motor vehicle" means in the present case that an insurance 
company will compensate an insured for damages for bodily injury 
that the insured actually incurs up to the amount of damages for 
which a driver of an underinsured motor vehicle is liable under 
the applicable law up to the policy's liability limits.  
 
V 
¶49 We have determined that Wisconsin law applies to 
interpret the insurance policy in the present case.  We next 
determine whether under Wisconsin law the insured is entitled to 
recover noneconomic damages for pain and suffering for bodily 
injury arising from an automobile accident that occurred in 
Manitoba, Canada, between the insured and a Manitoba driver, 
when Manitoba law precludes the recovery of noneconomic damages.  
To answer this question, we must apply all of Wisconsin law, 
No. 
00-0637   
 
 
 
25
including Wisconsin tort choice of law rules.  The choice of law 
is outcome determinative in the present case.   
¶50 Wisconsin has abandoned the tort choice of law rule 
that the jurisdiction where an accident occurred governs an 
action against a tortfeasor.  Although a weak presumption 
favoring the forum law remains, we have adopted a more flexible 
methodology based on a qualitative analysis of the contacts that 
one or more jurisdictions have with the facts.32     
¶51 The first rule in Wisconsin choice of law rules is 
"that the law of the forum should presumptively apply unless it 
becomes clear that nonforum contacts are of the greater 
significance."33 
¶52 In the present case, both Wisconsin and Manitoba 
contacts are notable.  Gillette and Ostlund are Wisconsin 
residents driving a car registered in Wisconsin and insured by 
an insurance policy issued in Wisconsin and governed by 
Wisconsin law.  But the accident in the present case occurred in 
Manitoba.  The driver was a Manitoba resident driving a car 
registered in Manitoba and insured under Manitoba law.  Although 
each jurisdiction has numerous and significant contacts with the 
tort, Manitoba contacts are not of greater significance, 
                                                 
32 Conklin v. Horner, 38 Wis. 2d 468, 473, 157 N.W.2d 579 
(1968).  See also Hunker v. Royal Indem. Co., 57 Wis. 2d 588, 
599, 204 N.W.2d 897 (1973) (select among rules with tangible 
existence in states substantially connected with the facts).  
33 Hunker, 57 Wis. 2d at 599 (quoting Wilcox v. Wilcox, 26 
Wis. 2d 617, 634, 133 N.W.2d 408 (1965)). 
No. 
00-0637   
 
 
 
26
however, than the Wisconsin contacts.  It is not clear that the 
nonforum contacts are of greater significance. 
¶53 The court has set forth the following five factors 
that influence the choice of law, and we shall consider each in 
turn: 
(1) Predictability of results; 
(2) Maintenance 
of 
interstate 
and 
international 
order; 
(3) Simplification of the judicial task; 
(4) Advancement 
of 
the 
forum's 
governmental 
interests; and 
(5) Application of the better rule of law.34 
¶54 The first factor, predictability of results, deals 
with the parties' expectations.35  The question here is what 
legal consequence of the Manitoba accident comports with the 
predictions or expectations of the parties?  The present case 
involves a dispute between Wisconsin residents and a Wisconsin 
insurance company about a policy issued in Wisconsin.  It is 
reasonable to assume that the parties involved in the insurance 
transaction expected that Wisconsin law would be applicable to 
claims under the policy.36  Applying Wisconsin law to the type of 
                                                 
34 Hunker, 57 Wis. 2d at 599. 
35 Id. at 600. 
36 "It is reasonable to assume [in an automobile collision 
occurring in Wisconsin] that the [Ohio] parties involved in the 
insurance transaction [in Ohio] expected that Ohio law would be 
applicable to automobile accident claims that arose under the 
policy."  Hunker, 57 Wis. 2d at 600. 
No. 
00-0637   
 
 
 
27
damages recoverable in the present case promotes uniformity of 
interpretation 
of 
an 
insurance 
policy 
regardless 
of 
the 
jurisdiction in which the injury occurs.  The parties will know 
at the time a policy is issued what benefits are available.  The 
laws of other jurisdictions relating to limitations on damages 
would not define the rights of an insured who purchased an 
underinsured motorist policy in this state.  The first factor 
points to applying Wisconsin law.  
¶55 The second factor, maintenance of interstate and 
international order, requires that the jurisdiction that is 
minimally 
concerned 
defer 
to 
the 
jurisdiction 
that 
is 
substantially concerned.37  Under the facts of this case, 
Manitoba is minimally concerned and Wisconsin is substantially 
concerned.   
¶56 Gillette and Ostlund were merely passing through 
Manitoba, and the location of the accident was happenstance. The 
Manitoba driver is not involved in the dispute about the 
insurance policy that is presently before this court.   
¶57 Manitoba public policy is not involved in the present 
dispute.  The public policy of Manitoba has been protected by 
determining the Manitoba driver's liability to the insured for 
damages 
according 
to 
Manitoba 
law. 
 
Whether 
State 
Farm 
compensates Gillette and Ostlund for their noneconomic damages 
will not change driving behavior on Manitoba's highways, a prime 
interest of Manitoba.  Moreover, the application of Manitoba law 
                                                 
37 Id. at 601. 
No. 
00-0637   
 
 
 
28
in the present case has no effect on the administrative and 
judicial 
costs 
of 
auto 
accident 
litigation 
in 
Manitoba.  
Manitoba has no interest in applying its law to bar Gillette's 
and Ostlund's action against State Farm to recover additional 
compensation.  Manitoba generally is not concerned with how 
nonresidents of Manitoba are compensated by their own insurance 
policies that were issued in the United States.   
¶58 On 
the 
other 
hand, 
Wisconsin 
is 
substantially 
concerned. Wisconsin has the most significant relationship to 
the parties, who are Wisconsin residents; the insurance policy, 
which was written in Wisconsin; and the issue presented in this 
case, compensation for Wisconsin residents.  We see no burden on 
international movement as the result of the choice of Wisconsin 
law.38  The second factor points to Wisconsin law.39  
¶59 The third factor is simplification of the judicial 
task, a principle in choice of law that states a "simple and 
easily applied rule of substantive or procedural law is to be 
preferred."40  A Wisconsin court can easily and simply apply 
Manitoba law to determine damages in the present case.  Manitoba 
                                                 
38 Conklin v. Horner, 38 Wis. 2d 468, 481, 157 N.W.2d 579 
(1968). 
39 See, e.g., Schlussler v. American Family Mut. Ins. Co., 
157 
Wis. 2d 516, 
526-27, 
460 
N.W.2d 756 
(Ct. 
App. 
1990) 
(applying Wisconsin law of bad faith where insured was Wisconsin 
resident; policy was issued in Wisconsin; and collision occurred 
in Minnesota). 
40 Heath v. Zellmer, 35 Wis. 2d 578, 597, 151 N.W.2d 664 
(1967).   
No. 
00-0637   
 
 
 
29
law does not complicate the task of Wisconsin judges.  Manitoba 
law simply bars further proceedings on noneconomic damages.  
¶60 Wisconsin courts can also easily apply Wisconsin law 
to determine damages.  We recognize, however, that if Wisconsin 
tort law were applied to determine anew the amount of damages 
that the insured is legally entitled to collect from the 
Manitoba driver for purposes of collecting from the insurance 
company, after damages have already been established under 
Manitoba law, litigation would increase. If we apply Wisconsin 
law in the present case, the liability of an underinsured 
motorist would be determined under one system of law and an 
insurance company's liability would be determined under another 
system of law.41  The factor of simplicity points to applying 
either Manitoba or Wisconsin law.  Because "simplicity may well 
be outweighed by other considerations,"42  we will examine other 
considerations.   
¶61 The fourth factor is advancement of the forum's 
governmental interests.  Wisconsin has a strong interest in 
compensating its residents who are victims of torts.   
¶62 "The question in private litigation, such as in an 
automobile-accident case, is whether the proposed nonforum rule 
comports with the standards of fairness and justice that are 
embodied in the policies of the forum law.  If it appears that 
                                                 
41 Zenker v. Allstate Ins. Co., No. 93-2614, 1993 WL 300132, 
at *6 n.3 (E.D. Pa. July 30, 1993). 
42 Heath, 35 Wis. 2d at 597.   
No. 
00-0637   
 
 
 
30
the application of forum law will advance the governmental 
interest of the forum state, this fact becomes a major, though 
not in itself a determining, factor in the ultimate choice of 
law."43 
¶63 Gillette and Ostlund argue that a "justice-seeking 
jurisdiction"44 
like 
Wisconsin 
should 
allow 
them 
to 
be 
compensated for damages for pain and suffering.  Although 
Manitoba law allows recovery for medical expenses and loss of 
earnings, it does not provide for an element of damages well 
recognized in Wisconsin law.  A difference in the amount or type 
of damages an insured can recover in Wisconsin and in Manitoba 
when the negligence and injury occurred in Manitoba does not 
necessarily violate fairness, justice, or Wisconsin public 
policy.  In fact, the Wisconsin legislature has itself limited 
damages for pain and suffering in some cases.  But the Wisconsin 
legislature has not totally barred such damages.45  Thus, the 
Manitoba statute barring damages for all pain and suffering 
adopts a concept foreign to Wisconsin law. 
¶64 We are mindful that Wisconsin negligence law has not 
only a compensatory aspect, but also an admonitory and deterrent 
aspect. Applying Wisconsin law of damages in the present case 
would not deter unsafe driving on Wisconsin or Manitoba 
                                                 
43 Id. at 598. 
44 Hunker, 57 Wis. 2d at 605. 
45 See, e.g., Wis. Stat. § 893.55(4) (1999-2000) (limiting 
total noneconomic damages for medical malpractice claims). 
No. 
00-0637   
 
 
 
31
highways.  Although the deterrent purpose of tort law 46 is not 
furthered by applying the Wisconsin law of damages to the 
present case, the compensatory purpose of tort law is furthered 
by applying the Wisconsin law of damages. 
¶65 Considering all these issues, we cannot conclude that 
Manitoba law is bad law, serves no legitimate purpose, and must 
be circumvented.  We can and do, however, conclude that limiting 
Gillette's and Ostlund's recovery to less than the damages 
recoverable under Wisconsin tort law undermines Wisconsin's 
significant interests in fully compensating victims of ordinary 
negligence.47  The fourth factor points to applying Wisconsin 
law. 
¶66 The fifth and final factor is the application of the 
better rule of law.  We cannot say that Manitoba law is 
anachronistic or fails to reflect modern trends, as we have said 
in other cases discussing a better rule of law.48  While it is 
arguable that the Manitoba law barring noneconomic damages may 
not be a Wisconsin "justice-serving rule,"49 the Manitoba law is 
founded on a rational basis and serves a discernible purpose. 
                                                 
46 Hunker, 57 Wis. 2d at 603-04; Conklin, 38 Wis. 2d at 482. 
47 See, e.g., Hunker, 57 Wis. 2d at 603 (apply Wisconsin law 
in choice of law tort case if necessary to further Wisconsin's 
governmental 
interest); 
Conklin, 
38 
Wis. 2d at 
481-83 
(importance of compensatory and deterrent aspects of tort law). 
48 See, e.g., Hunker, 57 Wis. 2d at 606-07. 
49 Id. at 605. 
No. 
00-0637   
 
 
 
32
¶67 Considering the primary choice of law rule "that the 
law of the forum should presumptively apply unless it becomes 
clear that nonforum contacts are of the greater significance,"50 
considering the present case's significant contacts to Wisconsin 
(as compared to Manitoba), and considering the five choice-
influencing considerations, we conclude that Wisconsin tort law 
applies in the present case. 51  
¶68 Our conclusion that Wisconsin tort law applies to 
determine the type and amount of damages the insured may collect 
from the insurance company is supported by cases in other 
jurisdictions. 
¶69 Gillette and Ostlund rely on four cases that support 
the conclusion we reach: Travelers Indem. Co. v. Lake, 594 A.2d 
38 (Del. 1991); O'Connor v. O'Connor, 519 A.2d 13 (Conn. 1986); 
Thomas v. Hanmer, 109 A.D.2d 80 (N.Y. 1985); and Miller v. 
White, 702 A.2d 392 (Vt. 1997).  
¶70 First, these cases support our interpretation of the 
policy that the phrase "damages for bodily injury an insured is 
legally entitled to collect from the owner or driver of an 
underinsured motor vehicle" requires us to apply Wisconsin tort 
choice of law rules to determine whether damages claimed by an 
                                                 
50 Id. at 599 (quoting Wilcox v. Wilcox, 26 Wis. 2d 617, 
634, 133 N.W.2d 408 (1965)).  
51 The Sahloff court expressly refrained from deciding which 
jurisdiction's 
law 
determines 
the 
effect 
of 
contributory 
negligence on the recovery of the insured against an insurance 
company under uninsured motorist coverage.  Sahloff v. Western 
Cas. & Sur. Co., 45 Wis. 2d 60, 69, 171 N.W.2d 914 (1969). 
No. 
00-0637   
 
 
 
33
insured from an insurance company are available in a tort cause 
of action against an underinsured motorist.   
¶71 Second, the courts in these cases applied the tort law 
of the forum although the facts of these cases are not precisely 
the same as those in the present case.  The factual differences 
between these cases and the present case are not, in our 
opinion, sufficiently different to justify a different result in 
the present case.   
¶72 For example, in Travelers, the insured was injured in 
a motor vehicle accident in Quebec, Canada, when an unidentified 
truck caused the insured's vehicle to crash into a highway 
barrier.  The insured would have recovered less than $30,000 if 
the court applied Quebec tort law, whereas he could recover up 
to $300,000 under Delaware tort law.52  The insured sued 
Travelers in Delaware to obtain the uninsured motorist benefits 
of his policy.  The insurance company and the insured made 
arguments similar to those made in the present case.  
¶73 The 
Delaware 
court 
used 
the 
most 
significant 
relationship contract choice of law rules to interpret the 
policy and the most significant relationship rules to determine 
the damages the insured was "legally entitled to recover" from 
the driver.  
¶74 The Delaware court concluded that Delaware had the 
most significant relationship to the event because the insured 
                                                 
52 Travelers Indem. Co. v. Lake, 594 A.2d 38, 40 (Del. 
1991). 
No. 
00-0637   
 
 
 
34
was a resident of Delaware, the insurance company conducted 
substantial business in Delaware, no compelling issue of Quebec 
public policy was involved, and the only contact with Quebec was 
that the accident happened there between the insured and an 
unknown 
motorist. 
 
We 
agree 
with 
the 
Delaware 
court's 
observation that "the significant relationship test does not 
require a court to disregard a foreign jurisdiction's law in all 
torts cases.  The flexibility of this doctrine requires that 
each case be decided on its own facts."53 
¶75 Although the insured in Travelers and the insured in 
the present case were injured in a motor vehicle accident while 
traveling in a Canadian province, the present case, unlike 
Travelers, involves an identified Manitoba motorist in Manitoba.  
Consequently, it is reasonable that, when in Travelers the only 
known tie to Quebec was that the accident occurred in Quebec, 
the Travelers court concluded that Delaware tort law governed 
the damages the insured was legally entitled to collect.  In the 
present case, the identity of the Manitoba driver is a tie to 
Manitoba but does not, we conclude, justify a different choice 
of law.  
¶76 O'Connor v. O'Connor, 519 A.2d 13 (Conn. 1986), Miller 
v. White, 702 A.2d 392 (Vt. 1997), and Thomas v. Hanmer, 109 
A.2d 80 (N.Y. 1985), support our conclusion that Wisconsin tort 
law should govern the damages to be recovered.  Each of these 
                                                 
53 Id. at 48. 
No. 
00-0637   
 
 
 
35
cases involved an accident in Quebec, Canada, and a lawsuit in a 
state court.   
¶77 In the first two cases, the passengers sued the driver 
of the car in which they were traveling.  In each case the 
injured passengers and the drivers were residents of the forum 
state, the vehicle was registered in that state, and the 
insurance policy was issued in that state.  The lawsuits were 
filed in the passengers' respective home states. 
¶78 In the third case, two cars collided in Quebec.  Both 
cars were in Canada for a short time only.  The lawsuit was 
brought in New York where both the plaintiffs and defendants 
were domiciled and where both cars were registered and insured.  
¶79 In each of these three cases the court applied the law 
of the forum state as its choice of tort law to allow the 
injured party to recover for pain and suffering from the 
insurance company.  The law of Quebec, where the accident 
occurred, did not allow such recovery.  Each court decided that 
under the facts of the case, the forum state had a superior 
interest in applying its tort law rather than applying the law 
of Quebec.  The forum state's superior interest was in granting 
full, fair, and adequate compensation to a resident of the 
forum, and Quebec's interest in maintaining low insurance 
premiums and reducing litigation was not impaired by the 
application of the forum's law.  We agree with this reasoning 
and apply the same legal principles in the present case.  
¶80 Cases from other jurisdictions have, however, applied 
the tort law of the place of the accident to determine the 
No. 
00-0637   
 
 
 
36
amount and type of damages recoverable. For example, in State 
Farm Mut. Auto. Ins. Co. v. Krewson, 764 F. Supp. 1012, 1013 
(E.D. Pa. 1991), a Pennsylvania resident was killed in the 
Cayman Islands in an automobile accident with an underinsured 
motorist.  Under Pennsylvania law, the loss of future earnings 
was 
recoverable; 
under 
Cayman 
Islands 
law, 
it 
was 
not 
recoverable.  The decedent's estate argued that the Pennsylvania 
measure of damages controlled because Pennsylvania had a more 
significant interest in the insurance dispute than did the 
Cayman Islands.   
¶81 Looking at the 
purpose 
of 
underinsured motorist 
coverage, the Pennsylvania court held that the underinsured 
motorist coverage obligating the insurance company to pay for 
damages that an insured is "legally entitled to collect from the 
owner or driver of an . . . underinsured motor vehicle" did not 
obligate the insurance company to compensate for damages for 
loss of future earnings because the law of the Cayman Islands 
No. 
00-0637   
 
 
 
37
where the accident occurred did not permit recovery of such 
damages.54 
¶82 Williams v. State Farm Mut. Auto. Ins. Co., 641 A.2d 
783 (Conn. 1994), also supports State Farm's position.  In 
Williams, a resident of Connecticut, with an underinsured 
motorist policy issued in Connecticut, was injured in a motor 
vehicle accident in New York.  The driver of the other car had a 
California driver's license, although the vehicle was registered 
                                                 
54 For cases following this reasoning, see, e.g., State Farm 
Mut. Auto. Ins. Co. v. Crockett, 103 Cal. App. 3d 652, 652-53 
(Cal. Ct. App. 1980) (California resident injured in Hawaii 
where no-fault law allowed less recovery than California law; 
the insured resided in and the uninsured coverage policy was 
issued in California; insured could not recover under policy 
because could not recover damages under Hawaii law); Crossley v. 
Pacific Employers Ins. Co., 251 N.W.2d 383, 384-85 (Neb. 1977) 
(insured resident of Nebraska, with uninsured motorist coverage, 
could not recover under uninsured motorist coverage because the 
tortfeasor was not legally responsible to pay damages under 
Colorado law after being injured in Colorado and Colorado no-
fault law allowed less recovery than Nebraska); Hertz Claim 
Mgmt. v. Marchetta, 656 A.2d 1298, 1300 (N.J. Super. Ct. 1995) 
(New Jersey resident "legally entitled to recover from the owner 
or operator of an . . . underinsured motor vehicle" requires 
application of Virginia substantive law after killed in a one-
car automobile accident in Virginia; driver was a Virginia 
resident; car was registered in New Jersey and underinsured 
motorist coverage was issued in New Jersey; Virginia wrongful 
death statute permits more compensation than the New Jersey 
law); Kurent v. Farmers Ins. of Columbus, Inc., 581 N.E.2d 533, 
534 (Ohio 1991) (insured's recovery of noneconomic damages under 
uninsured motor vehicle coverage denied as not "legally entitled 
to collect" because Michigan precluded recovery for noneconomic 
damages unless those damages reached a minimum threshold level 
when insureds were residents of Ohio, policy was issued in Ohio, 
accident occurred in Michigan, and driver causing the injury was 
a Michigan resident who was insured pursuant to Michigan's no-
fault insurance laws). 
No. 
00-0637   
 
 
 
38
in New York.  The driver of the other car carried $10,000 in 
liability coverage.  The $10,000 was exhausted by payments to 
the injured insured, after which the insured sought $15,000 
compensation from his insurance company under his underinsured 
motorist coverage for the remainder of his damages.  Under New 
York's no-fault automobile insurance law, the insured was not 
entitled to collect additional damages for bodily injury from 
the driver.  Connecticut tort law, however, would have allowed 
the insured to recover additional damages from the driver. 
¶83 The insured sued the insurance company in Connecticut.  
The dispute centered on whether Connecticut or New York law 
should govern recovery of damages.   
¶84 The Connecticut Supreme Court applied Connecticut law 
to interpret the underinsured motorist.  It held that the phrase 
"legally entitled to collect from the owner or driver" under 
Connecticut law required the insured to prove that the driver 
would have been liable for the damages under New York law where 
the accident occurred.  According to Williams, the mere 
existence of the right to pursue a claim for underinsured 
motorist coverage under an insurance policy does not in and of 
itself entitle an insured to recover those benefits.55 Any 
liability that would have attached to the underinsured motorist 
would have attached under New York law.56   
                                                 
55 Williams v. State Farm Mut. Auto. Ins. Co., 641 A.2d 783, 
787 (Conn. 1994). 
56 Id. at 788. 
No. 
00-0637   
 
 
 
39
¶85 Thus, Williams concluded that the applicable New York 
tort law, which proscribed recovery for the damages claimed, 
precluded the Connecticut insured from recovering underinsured 
motorist benefits from the Connecticut insurance company. 
¶86 These cases are in substantial agreement with the 
analysis we have used. They support our interpretation of the 
phrase "damages for bodily injury an insured is legally entitled 
to collect from the owner or driver of an underinsured motor 
vehicle" as requiring under the contract law of the state in 
which the policy was issued an underinsured motorist to be 
liable for the amount of damages allowed under the tort law 
applicable under the forum's choice of law rules.  In these 
cases, however, in balancing the factors to determine the choice 
of law the forum applied the tort law of the place of the 
accident.   
¶87 We caution that neither the law of the forum nor the 
law of the place of the accident is the tort choice of law rule 
applicable to every fact situation or to every issue that might 
arise regarding the policy language "legally entitled to 
collect" 
from 
an 
underinsured motorist.  
A 
law of one 
jurisdiction could be invoked with respect to some issues and in 
some fact situations and the law of another jurisdiction invoked 
in respect to other issues and other fact situations.57  This 
                                                 
57 Hunker v. Royal Indem. Co., 57 Wis. 2d 588, 603 n.1, 204 
N.W.2d 897 (1973).  See also Restatement (Second) of Conflict of 
Laws § 145, 414 (1971) (choice of law is evaluated with respect 
to the particular issue). 
No. 
00-0637   
 
 
 
40
court has long recognized that "it is not necessary in each case 
to apply only the law of a single state to all phases of [a] 
lawsuit."58 
 
VI 
¶88 We next consider whether this action is precluded by 
the State Farm policy exhaustion provision that precludes the 
payment of underinsured motorist benefits until the limits of 
liability of all bodily injury policies that apply have been 
used up by payment of judgments or settlements.   
¶89 The State Farm policy states, in relevant part, "THERE 
IS NO COVERAGE UNTIL THE LIMITS OF LIABILITY OF ALL BODILY 
INJURY LIABILITY BONDS AND POLICIES THAT APPLY HAVE BEEN USED UP 
BY PAYMENT OF JUDGMENTS OR SETTLEMENTS." 
¶90 It is undisputed that the Manitoba driver's liability 
policy has not been exhausted——that is, "used up."  Gillette has 
received no payments from the Manitoba driver's liability policy 
whatsoever.  Ostlund has received payments amounting only to a 
fraction of the coverage available to him under the Manitoba 
driver's liability policy.  In addition, there is no evidence of 
a settlement or judgment having been entered to exhaust the 
limits of the Manitoba driver's insurance coverage.   
¶91 State Farm argues that absent a settlement payment or 
a judgment payment, there can be no exhaustion of the Manitoba 
                                                 
58 Wilcox v. Wilcox, 26 Wis. 2d 617, 631, 133 N.W.2d 408 
(1965). 
No. 
00-0637   
 
 
 
41
driver's liability insurance.  To support its position, State 
Farm relies on Danbeck v. American Fam. Mut. Ins. Co., 2001 WI 
91, 245 Wis. 2d 186, 629 N.W.2d 150, which addressed whether an 
underinsured motorist carrier was obligated to pay underinsured 
motorist benefits to an insured after the insured settled with 
an underinsured motorist's liability insurer for less than that 
insurer's full policy limits.  Danbeck required exhausting the 
full limits of the underinsured motorist's liability policy 
before the underinsured motorist carrier was obligated to pay 
underinsured motorist benefits to the insured. Danbeck concluded 
that the policy language precluded exhaustion by way of 
"settlement plus credit."    
¶92 We conclude that Danbeck does not support State Farm's 
position in the present case.  Neither Gillette nor Ostlund has 
settled the liability portion of their claims for less than the 
amount of the underinsured motorist's policy limits.  The 
present case raises the question of the effect of the exhaustion 
requirement in State Farm's underinsured motorist policy on 
recovery of noneconomic damages in Wisconsin from State Farm 
when Manitoba law governing the tortfeasor's liability allows no 
recovery for noneconomic damages.  
¶93 Nevertheless, applying Danbeck's analysis, we conclude 
that the Manitoba driver's limits of liability, that is, the 
total amount of liability coverage available for noneconomic 
damages, are zero.  The term "exhaust" as used in the policy 
means consume completely.  The total amount of liability 
coverage available to the Manitoba driver under his policy for 
No. 
00-0637   
 
 
 
42
noneconomic damages has been totally consumed.  The trigger 
under the State Farm policy is "by payment of judgements or 
settlements."  This phrase has no application to this case;  
both parties agree that any judgment or settlement would award 
zero dollars for noneconomic damages.     
¶94 Here, Gillette and Ostlund are not entitled to 
noneconomic damages from the underinsured motorist. Gillette and 
Ostlund are not entitled to collect any further damages for 
noneconomic 
damages 
from 
the 
underinsured 
motorist 
under 
applicable Manitoba law.  The court of appeals held, without 
citation 
to 
any 
precedent 
for 
its 
conclusion, 
that 
the 
exhaustion requirement found in the State Farm underinsured 
motorist policy was not applicable in the present case because 
the exhaustion requirement was unrelated to Manitoba's law that 
bars the recovery of noneconomic damages arising from automobile 
accidents.59  
¶95 We agree with the court of appeals. We conclude that 
the State Farm policy exhaustion requirement is satisfied, 
because the amount of recovery for noneconomic damages from the 
                                                 
59 See State Farm Mut. Auto Ins. Co. v. Gillette, 2001 WI 
App 123, ¶¶32-33, 246 Wis. 2d 561, 630 N.W.2d 527.   
The court of appeals cited its Danbeck decision, Danbeck v. 
American Fam. Mut. Ins. Co., 2000 WI App 26, ¶10, 232 
Wis. 2d 417, 605 N.W.2d 925 (Ct. App. 1999), solely for the 
proposition that the insurance policy exhaustion provision was 
not ambiguous.  This court similarly held in its review of 
Danbeck that the provision requiring exhaustion "by payment of 
judgments or settlements" was not ambiguous. See Danbeck v. 
American Family Mut. Ins. Co., 2001 WI 91, ¶13, 245 Wis. 2d 186, 
629 N.W.2d 150. 
No. 
00-0637   
 
 
 
43
Manitoba underinsured motorist is zero.  Therefore, in the 
present case, the limits of liability of all bodily injury 
policies that apply for noneconomic damages have been "used up." 
 
VII 
¶96 In 
summation, 
we 
interpret 
the 
phrase 
"legally 
entitled to collect from the owner or driver of an underinsured 
motor vehicle" under Wisconsin contract choice of law. 
¶97 The interpretation of the phrase "legally entitled to 
collect" from a driver of an underinsured motor vehicle arises 
in a variety of issues, including statutes of limitations; a 
tortfeasor's immunity from liability, such as governmental 
immunity; comparative negligence; and a limitation on the amount 
or type of damages.  Each issue must be analyzed separately to 
determine whether an insurance company should be treated the 
same as or different than an underinsured motorist.  Different 
considerations may apply to each issue.  
¶98 We conclude that the only reasonable interpretation of 
the policy for purposes of calculating damages in the present 
case is that "damages for bodily injury an insured is legally 
entitled to collect from the owner or driver of an underinsured 
motor vehicle" means that an insurance company will compensate 
an insured for damages for bodily injury that the insured 
actually incurs for which an underinsured motorist is liable to 
the insured under the applicable law up to the policy's 
liability limits. 
No. 
00-0637   
 
 
 
44
¶99 We further conclude that Wisconsin tort choice of law 
rules govern which jurisdiction's law determines the damages an 
insured is legally entitled to collect from an underinsured 
motorist. Applying Wisconsin choice of law rules in the present 
case instructs us to look to Wisconsin law, the law of the 
forum.  Wisconsin has the most significant contacts to the 
present case. Wisconsin is the jurisdiction where the injured 
persons reside and where the insurance policy was issued by a 
Wisconsin insurance company to Wisconsin insureds.  Applying 
Wisconsin law comports with Wisconsin's public policy of 
compensating victims of 
tortfeasors. 
Under 
Wisconsin 
law, 
Gillette and Ostlund are legally entitled to collect noneconomic 
damages 
that 
arise 
from 
an 
automobile 
accident, 
and 
consequently, Gillette and Ostlund are legally entitled to 
collect noneconomic damages from State Farm on the basis of the 
underinsured motorist coverage. 
¶100 We repeat our caution, however, that neither the law 
of the forum nor the law of the place of the accident is the 
choice of law rule applicable to every fact situation or to 
every issue that might arise regarding the "legally entitled to 
collect" language.  The law of one jurisdiction could be invoked 
with respect to some issues and in some fact situations and the 
law of another jurisdiction invoked in respect to other issues 
and other fact situations.60   
                                                 
60 Hunker v. Royal Indem. Co., 57 Wis. 2d 588, 603 n.1, 204 
N.W.2d 897 (1973).  See also Restatement (Second) of Conflict of 
Laws § 145, 414 (1971) (choice of law is evaluated with respect 
to the particular issue). 
No. 
00-0637   
 
 
 
45
¶101 We further conclude that the State Farm policy 
exhaustion requirement is satisfied, because the amount of 
recovery for noneconomic damages from the Manitoba underinsured 
motorist is zero. Therefore in the present case the limits of 
liability 
of 
all 
bodily 
injury 
policies 
that 
apply 
for 
noneconomic damages have been used up. 
By the Court.—The decision of the court of appeals is 
affirmed. 
 
No.  00-0637.jpw 
 
1 
 
 
¶102 JON P. WILCOX, J.   (concurring in part, dissenting in 
part).  I concur with the majority's reasoning and conclusions 
in Parts I-IV.  However, I do not agree with the majority's 
choice of law analysis in Part V, nor do I agree with the 
ultimate decision of the court to affirm the court of appeals.  
I would find that under Wisconsin choice of law rules, Manitoba 
law should apply to determine the amount that Gillette and 
Ostlund would be legally entitled to collect.  I therefore 
dissent from the opinion of the court. 
¶103 The majority correctly states that Wisconsin has 
abandoned the lex loci delicti rule in favor of a more flexible 
rule, which takes into account the policies and interests of the 
jurisdictions involved in order to determine the jurisdiction 
with the most significant relationship to the lawsuit and the 
parties.  Wilcox v. Wilcox, 26 Wis. 2d 617, 621, 631, 133 
N.W.2d 408 (1965).  I also agree there are significant contacts 
that would support the application of either Wisconsin or 
Manitoba law.  See majority op. at ¶52.  However, I disagree 
with the majority's conclusion that the contacts, when viewed in 
light of the five guiding factors we adopted in Heath v. 
Zellmer, 35 Wis. 2d 578, 595-96, 151 N.W.2d 664 (1967), are 
insufficient to overcome the weak presumption that the forum law 
should apply. 
¶104 In our choice of law analysis, we have traditionally 
started, as the majority notes, with the weak presumption that 
the law of the forum state applies.  Zelinger v. State Sand & 
No.  00-0637.jpw 
 
2 
 
Gravel Co., 38 Wis. 2d 98, 106, 156 N.W.2d 466 (1968); Wilcox, 
26 Wis. 2d at 634; Heath, 35 Wis. 2d at 593.  We then apply an 
"interest 
analysis" 
to 
the 
contacts 
of 
the 
interested 
jurisdictions, where we place less emphasis on the quantitative 
contacts of the parties and focus on the relevance of the 
contacts to the policies of the place of the wrong and the 
forum.  Zelinger, 38 Wis. 2d at 105.  If this analysis 
demonstrates that the jurisdiction where the wrong took place is 
preferable to the forum jurisdiction, the law of the location of 
the tort will be applied. 
¶105 In conducting this analysis, we are guided by the 
factors we adopted in Heath.  Heath, 35 Wis. 2d at 596 (citing 
Robert Leflar, Choice-Influencing Considerations in Conflicts 
Law, 41 N.Y.U. L. Rev. 267, 282 (1966)).  These factors are: 
(1) the predictability of results; (2) the maintenance of 
interstate and international order; (3) simplification of the 
judicial task; (4) advancement of the forum's governmental 
interests; and (5) application of the better rule of law.  Id.  
These factors are considered in each case and vary according to 
the precise issue involved.  Here, I would hold that they lead 
to the conclusion that Manitoba law is more appropriately 
applied to determine what Gillette and Ostlund were legally 
entitled to collect. 
¶106 With regard to the first factor, the predictability of 
results, the majority concludes that it is reasonable to assume 
that the parties expected that Wisconsin law would apply to 
claims under the policy.  Majority op. at ¶54.  The majority 
No.  00-0637.jpw 
 
3 
 
argues 
that 
this 
conclusion 
promotes 
uniformity 
of 
interpretation regardless of where the injury occurs.  Id.  I do 
not think there is a basis for making such an assumption. 
¶107 "Predictability" under this factor is not an element 
of pre-selection that controls the choice of law in an accident.  
Rather, the predictability must arise when all of the relevant 
facts are made available and analyzed.  Heath, 35 Wis. 2d at 
599.  The analysis must lead to a reasonable certainty based on 
a rational analysis, as opposed to the certain but irrational 
selection of the site of the tort, Conklin v. Horner, 38 
Wis. 2d 468, 479-80, 157 N.W.2d 579 (1968), or as the majority 
suggests in this case, the site where the contract was made. 
¶108 A lay person driving across a state or international 
border probably gives little thought to which jurisdiction's 
damages laws would be reasonable to apply in the event of an 
accident, and the rule applied by the majority——that the parties 
would assume that Wisconsin law applies under the contract——does 
provide some certainty, but is no more rational than assuming 
that the law of the fortuitous site of the accident would apply.  
Although a UIM claim is an action against the contract, Sahloff 
v. W. Cas. & Sur. Co., 45 Wis. 2d 60, 70, 171 N.W.2d 914 (1969), 
the choice of the underlying negligence law is not guaranteed.  
As we have stated previously, "a tort which is not intended can 
never, by definition, be the subject of advance planning with 
reference to a particular state's law."  Conklin, 38 Wis. 2d at 
478.  Although it may be reasonable to assume that the parties 
expected that the law of the state where the contract was made 
No.  00-0637.jpw 
 
4 
 
should apply, it is equally reasonable to assume that a 
Wisconsin resident who drives in Manitoba, and then is involved 
in a collision involving a Manitoba resident who is driving a 
vehicle licensed and registered in Manitoba would have tort 
damages computed under Manitoba law.  Thus, I do not think that 
predictability, as guided by this factor, is necessarily 
fostered by the application of Wisconsin law. 
¶109 With regard to the second factor, the maintenance of 
interstate and international order, the majority notes that 
under these circumstances, Manitoba is minimally concerned and 
Wisconsin is substantially concerned.  Majority op. at ¶55.  The 
majority points out that the location was happenstance and that 
the 
imposition 
of 
noneconomic 
damages 
would 
not 
affect 
administrative costs or driving habits in Manitoba.  Id. 
at ¶¶56-57.  In light of how we have treated this factor 
previously, I think this elevation of the forum state's concerns 
with regard to international comity comes across as somewhat 
parochial. 
¶110 As pointed out by the majority, both Manitoba and 
Wisconsin have real interests at stake.  Id. at ¶52.  However, 
Manitoba is more than "minimally concerned," as the majority 
suggests, because the negligent activity in question here did 
occur on Manitoba's highways, and involved a Manitoba resident.  
See Conklin, 38 Wis. 2d at 479.  Moreover, I fail to see how 
comity, the flow of commerce, or travel between Wisconsin and 
Manitoba (or, more generally, between the United States and 
Canada) would either be promoted or discouraged under the 
No.  00-0637.jpw 
 
5 
 
application of either law, as I doubt that any judicial 
decisions regarding automobile insurance would be likely to have 
such an effect.  See Zelinger, 38 Wis. 2d at 109.  At most, I 
would 
conclude 
that 
this 
factor 
does 
not 
favor 
either 
jurisdiction's law. 
¶111 In its analysis of the third factor——whether the 
judicial task will be simplified by the application of one law 
or the other——the majority notes that the Wisconsin court can 
simply and easily apply Manitoba law as well as Wisconsin law on 
noneconomic damages, and that this renders this factor neutral.  
Majority op. at ¶¶59-60.  I disagree. 
¶112 It is true that the Wisconsin court could competently 
apply both Manitoba and Wisconsin law, since Wisconsin courts 
often are required to interpret the law of other states and the 
federal government.  However, applying Wisconsin law here will, 
as the majority concedes, require the Wisconsin court to 
calculate the noneconomic damages on top of the liability 
damages already calculated under Manitoba law.  Further, as the 
majority correctly points out, if Wisconsin law is applied to 
the present case, the liability of an underinsured motorist 
would be determined under one system of law, while a straight 
liability suit would be determined under a different system.  
Id. (citing Zenker v. Allstate Ins. Co., No. CIV. A. 93-2614, 
1993 WL 300132, *6 n.3 (E.D. Pa. 1993)).  Although the majority 
attempts to minimize this factor, both of these results would 
undoubtedly make the litigation more complex, significantly 
increase the amount of money and time spent on litigation, and 
No.  00-0637.jpw 
 
6 
 
ultimately increase the judicial burden.  For these reasons, I 
would find that this factor clearly supports the application of 
Manitoba law. 
¶113 The fourth factor, the advancement of the forum's 
governmental interests, is admittedly one of the most important.  
Conklin, 38 Wis. 2d at 481.  The majority finds that this factor 
promotes the use of Wisconsin law, since Wisconsin has a strong 
interest in compensating its residents who are victims of torts, 
majority op. at ¶61, and that the Manitoba statute barring 
noneconomic damages is contrary to Wisconsin policy.  Id. at 
¶63.  The majority concludes that this factor also shows a 
preference for Wisconsin law. 
¶114 Although I agree that Wisconsin has a policy of 
compensating tort victims, I cannot conclude that the policy is 
necessarily better served by applying Wisconsin law.  The fact 
that Manitoba law allows for different, albeit less, recovery is 
not a per se indication that the Manitoba law is less reasonable 
or that it goes against the public policies of Wisconsin.  As 
the majority recognizes, the Wisconsin legislature itself has 
limited tort damages in some circumstances.  Id. (citing 
Wis. Stat. § 893.55(4) (1999-2000)).  Under Manitoba law, there 
is no question that Gillette and Ostlund will be compensated for 
their medical expenses and their lost wages.  As such, the 
Wisconsin policy of compensation for tort victims will not be 
contravened. 
¶115 Finally, I agree with the majority's conclusion that 
neither Wisconsin law nor Manitoba law is necessarily a "better 
No.  00-0637.jpw 
 
7 
 
rule of law."  Majority op. at ¶66.  As the majority points out, 
denying noneconomic damages is not anachronistic, and is founded 
on a rational basis.  I agree that, at most, this factor is 
inconclusive. 
¶116 After reviewing the five factors, I would find that 
the choice of law analysis demonstrates that Manitoba law is 
properly applied in this case.  In my opinion, most of the 
choice of law factors are neutral at best, and those that show 
any preference for one jurisdiction over the other——particularly 
the judicial economy factor——tend to favor the application of 
Manitoba law.  Here, I think that the application of Manitoba 
law would provide a consistent result, would comport with the 
public policies of Wisconsin tort law, and most notably, would 
promote judicial efficiency.  For that reason, I would hold that 
the damages which Gillette and Ostlund are legally entitled to 
collect for the purpose of their UIM policy should be measured 
by Manitoba tort law, and I would reverse the decision of the 
court of appeals. 
¶117 For the foregoing reasons, I dissent. 
 
No.  00-0637.npc 
 
1 
 
 
¶118 N. PATRICK CROOKS, J.   (dissenting).  I agree with 
some portions of the majority's opinion.  I agree that Wisconsin 
contract law governs the interpretation of this insurance 
policy.  I also agree that the insurance policy's UIM provision, 
promising to pay "damages for bodily injury an insured is 
legally entitled to collect from the owner or driver of an 
underinsured motor vehicle," is reasonably interpreted to mean 
"that an insurance company will compensate an insured for 
damages for bodily injury that the insured actually incurs up to 
the amount of damages for which a driver of an underinsured 
motor vehicle is liable under the applicable law up to the 
policy's liability limits."  Majority op. at ¶48. 
¶119 I respectfully dissent, however, because the rest of 
the majority opinion fails to properly interpret the State Farm 
policy under applicable Wisconsin law.  I would reverse the 
decision of the court of appeals because under Wisconsin law 
and, thus, the plain language of the policy, Manitoba law, not 
Wisconsin law, determines the amount of damages Gillette and 
Ostlund are legally entitled to collect from the underinsured 
motorist.  Furthermore, I would reverse the court of appeals' 
decision because under Danbeck v. American Family Mutual 
Insurance Co., 2001 WI 91, 245 Wis. 2d 186, 629 N.W.2d 150, the 
State Farm policy exhaustion provision has not been satisfied 
merely because there is no recovery for non-economic damages.  
The majority claims that such a bar to recovery satisfies the 
exhaustion requirement. 
No.  00-0637.npc 
 
2 
 
¶120 First, by interpreting the plain language of the 
policy consistent with Wisconsin law, I conclude that Manitoba 
law must not be ignored in determining the amount of damages 
Gillette and Ostlund are legally entitled to collect from the 
underinsured motorist.  It is well established in Wisconsin, and 
the majority agrees, that the words of an insurance policy are 
given their common and ordinary meaning.  Danbeck v. American 
Family Mut. Ins. Co., 2001 WI 91, ¶10, 245 Wis. 2d 186, 629 
N.W.2d 150; majority op. at ¶28.  It is also well established 
that an insurance contract is interpreted based on what a 
reasonable 
person 
in 
the 
position 
of 
the 
insured 
would 
understand the words to mean.  Mau v. North Dakota Ins. Reserve 
Fund, 2001 WI 134, ¶13, 248 Wis. 2d 1031, 637 N.W.2d 45; 
majority op. at ¶28.  Furthermore, insurance contracts should be 
interpreted 
and 
applied 
"according 
to 
their 
unambiguous 
language."  American Family Mut. Ins. Co. v. Powell, 169 
Wis. 2d 605, 608, 486 N.W.2d 537 (Ct. App. 1992).  Using these 
Wisconsin 
canons 
of 
contract 
interpretation, 
I 
find 
it 
appropriate to look at the language of the policy to interpret 
the meaning of "legally entitled to collect from the owner or 
driver of an underinsured motor vehicle."  Unlike the majority, 
I conclude that the question of which jurisdiction's law 
determines what damages Gillette and Ostlund are "legally 
entitled to collect" is resolved by interpreting the policy 
itself, rather than resorting to choice of law considerations. 
¶121 As the majority opinion recognizes, damages for bodily 
injury an insured is legally entitled to collect requires that 
No.  00-0637.npc 
 
3 
 
the damages must be compensable under the law.  Majority op. at 
¶43.  However, the majority opinion then ends its analysis of 
the policy itself and effectively ignores the rest of the 
phrase, "from the owner or driver of an underinsured motor 
vehicle."  Giving this phrase its common and ordinary meaning, 
which is the approach that is consistent with Wisconsin law,  
requires the court to conclude that Manitoba law, not Wisconsin 
law, determines liability for damages. 
¶122 Here, the owner or driver of the underinsured motor 
vehicle is Norman Unrau.  Under the facts of this case, and 
Gillette and Ostlund's claim for UIM coverage, the insurance 
policy essentially provides "damages for bodily injury [Gillette 
and Ostlund are] legally entitled to collect from [Unrau]."  The 
only question is how and where Gillette and Ostlund can legally 
recover damages for bodily injury from Unrau.  This is not a 
choice of law issue, but rather a determination made consistent 
with Wisconsin law,  because Gillette and Ostlund could only 
effectively file suit against Unrau, and consequently recover 
damages from Unrau, under Manitoba law.  Gillette and Ostlund 
could not legally recover damages for bodily injury from Unrau 
under Wisconsin law, because Gillette and Ostlund could not 
bring Unrau into a Wisconsin court. 
¶123 Unrau, a Manitoba resident, does not have sufficient 
contacts with Wisconsin in order to be hauled into a Wisconsin 
court.  None of the bases for personal jurisdiction set forth in 
Wis. Stat. § 801.05 or § 801.06, as required by § 801.04(2), are 
present.  The accident did not occur in Wisconsin, but rather in 
No.  00-0637.npc 
 
4 
 
Manitoba, nor does the record reflect that Unrau has ever been 
to Wisconsin, or even had any contacts with Wisconsin.  It is 
inappropriate and unnecessary, therefore, to even consider 
whether Gillette and Ostlund are "legally entitled to collect" 
damages from Unrau under Wisconsin law.  See Burns v. Geres, 140 
Wis. 2d 197, 201-202, 409 N.W.2d 428 (Ct. App. 1987) (stating 
that contacts in Wisconsin "are so fortuitous and circumstantial 
that 
to 
impose 
Wisconsin 
law 
would 
constitute 
officious 
intermeddling").  In other words, because Gillette and Ostlund, 
if a lawsuit is necessary, could only legally collect damages 
from Unrau by filing suit in Manitoba, under Manitoba law, there 
is no choice of law issue.  The unambiguous language of the 
insurance 
policy 
itself, 
coupled 
with 
the 
facts 
and 
circumstances of this case, answer the question of what "legally 
entitled to collect" means. 
¶124 In addition to ignoring the plain language of the 
policy itself, I note what appears to be the inconsistent 
consequence of the majority's opinion.  By using Wisconsin law 
to determine State Farm's liability on the insurance policy, the 
majority opinion effectively creates a situation where the 
liability of the underinsured motorist would be determined under 
one system of law, Manitoba law, but the insurance company's 
liability would be determined under another system of law, 
Wisconsin law.  This result is inconsistent with the plain 
language of the insurance policy, and seems contrary to common 
sense principles relating to insurance contract interpretation 
and application. 
No.  00-0637.npc 
 
5 
 
¶125 Applying Manitoba law, I would conclude that because 
Gillette and Ostlund are not entitled to collect non-economic 
damages from Unrau, they, accordingly, are not entitled to 
collect those damages under the State Farm underinsured motorist 
policy provisions.  I would, therefore, reverse the decision of 
the court of appeals. 
¶126 I also respectfully dissent because I disagree with 
the majority's interpretation and application of Danbeck.  I 
would reverse the court of appeals' decision, because the State 
Farm policy exhaustion provision has not been satisfied merely 
because there is no recovery for non-economic damages under 
Manitoba law. 
¶127 Before discussing the merits of Danbeck, however, I 
note that the court of appeals' decision in this case, which the 
majority relies on, was issued before this court issued the 
Danbeck decision.  See majority op. at ¶94.  The court of 
appeals here, therefore, relied only on the court of appeals' 
decision in Danbeck, 2000 WI App 26, 232 Wis. 2d 417, 605 
N.W.2d 925.  Although this court ultimately affirmed the court 
of appeals' decision, this court's opinion further explained and 
clarified the law relating to the exhaustion clause, and our 
opinion is dispositive here. 
¶128 The majority opinion and the court of appeals' 
decision in this case both fail to follow Danbeck, and do not 
give the required meaning to the specific language in the State 
Farm policy.  The policy states, "THERE IS NO COVERAGE UNTIL THE 
LIMITS OF LIABILITY OF ALL BODILY INJURY LIABILITY BONDS AND 
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POLICIES THAT APPLY HAVE BEEN USED UP BY PAYMENT OF JUDGMENTS OR 
SETTLEMENTS."  (Emphasis added.)  This language is nearly 
identical to the language of the policy in Danbeck, because both 
policies require that the policy limits be exhausted/used up "by 
payment of judgements or settlements."  2001 WI 91, ¶3.  In 
Danbeck, this court found that the manner of exhaustion was 
important, because "settlement plus credit" did not constitute 
"payment."  Id. at ¶13.  Although we recognized that "settlement 
plus credit" has "the same practical effect as payment of full 
policy limits, it is not consistent with the plain language of 
the policy, which unambiguously requires exhaustion 'by payment 
of judgements or settlements,' not 'settlement plus credit.'"  
Id.   
¶129 Following the same reasoning, I would uphold the plain 
language of the State Farm policy, and conclude that UIM 
coverage is not applicable here, because the liability policy 
limits have not been "used up by payment of judgements or 
settlements" for either Gillette or Ostlund.  In fact, the 
record reflects that Unrau's insurer, MPIC, has paid Ostlund and 
his medical providers and subrogated health insurer a total of 
$26,833.51, and MPIC has not made any payments to, or for the 
benefit of, Gillette.  Furthermore, there has been no payment of 
judgments or settlements here because Gillette and Ostlund will 
not be able to recover any amount of money for non-economic 
damages 
from 
Unrau, 
the 
so-called 
Manitoba 
underinsured 
motorist.  Because there has been no payment whatsoever for 
Gillette and further payments are possible under the Manitoba 
No.  00-0637.npc 
 
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policy for Ostlund and Gillette, I find it unreasonable, under 
Danbeck, to conclude that the limits have been "used up by 
payment of judgements or settlements."  Applying Danbeck, I find 
a further reason to reverse the court of appeals' decision. 
¶130 For these reasons, I respectfully dissent. 
¶131 I am authorized to state that Justice DIANE S. SYKES 
joins this dissent. 
 
 
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