Opinion ID: 1290952
Heading Depth: 1
Heading Rank: 2

Heading: the sentry insurance policy

Text: ¶ 13. Several provisions of the Sentry policy are important, and we set them out in detail with commentary. ¶ 14. First, the Declarations page shows that the Pittses purchased Underinsured Motorist Bodily Injury coverage of $250,000 per person and $500,000 per accident. ¶ 15. Under this specific coverage, the insurer never pays the full $250,000 for a single-person accident because the underinsured tortfeasor, by definition, has some insurance and the policy contains a reducing clause. If the tortfeasor had no insurance, the tortfeasor would be uninsured rather than underinsured. Every dollar obtained from the tortfeasor reduces the potential liability of the UIM insurer. ¶ 16. Second, the policy provides a broad grant of UIM coverage: Our Promise To You We promise to pay damages, excluding punitive or exemplary damages, the owner or operator of an underinsured motor vehicle is legally obligated to pay because of bodily injury you suffer in a car accident . . . as a result of having been struck by an underinsured motor vehicle. ¶ 17. Third, the policy defines Underinsured Motor Vehicle: An underinsured motor vehicle is a motor vehicle with liability protection afforded by liability insurance policies or bodily injury liability bonds with limits the sum of which are less than the limits you have selected for underinsured motorist coverage as shown on the declarations page. An underinsured motor vehicle does not include an uninsured motor vehicle. ¶ 18. On the facts at hand, Knueppel was the operator of an underinsured motor vehicle because her vehicle had liability protection afforded by liability insurance policies . . . with limits [$100,000] the sum of which are less than the limits [$250,000] you have selected. Until there is a judgment or settlement, a tortfeasor is not  legally obligated to pay damages. But the insurer (or underinsurer) has an obligation to deal with the insured in good faith at all times. Danner v. Auto-Owners Ins., 2001 WI 90, ¶ 57, 245 Wis. 2d 49, 629 N.W.2d 159. ¶ 19. Fourth, the reducing clause is found under the heading Payment of Damages. It provides: . . . The amount of damages payable under this insurance [$250,000] will be the limit of liability reduced by the amount paid by or on behalf of anyone responsible for your injury [i.e., the Trust and American Family]. ¶ 20. With this reducing clause in place, an insured who purchases $250,000 of underinsured motorist coverage is taking the risk that he or she will not suffer injuries of more than $250,000. If the insured suffers injuries of, say, $500,000, the only chance of being made whole is to be injured by one or more tortfeasors with liability insurance or other available assets equaling the $500,000 in damages. If a tortfeasor has insurance coverage of $250,000 or more, the insured's UIM policy will pay nothing. ¶ 21. Fifth, also under the heading Payment of Damages is a provision partly responding to the Vogt decision: No damages will be payable under this insurance, as a result of a car accident with an underinsured motor vehicle until: a. The sum of the limits of liability of available liability insurance policies or bodily injury liability bonds applicable to the underinsured motor vehicle have been exhausted by payment of judgments or settlements; or b. A tentative settlement has been made between you and the insurer of the underinsured motor vehicle which would exhaust the limits of liability under any applicable bodily injury liability bonds or policies and we have prompt written notice of such tentative settlement and advance payment to you in an amount equal to the tentative settlement within 30 days after receipt of notification. Paragraph (a) operates in tandem with the reducing clause. No damages will be paid to the insured under UIM coverage until the tortfeasor's limits of liability insurance have been exhausted. Paragraph (b) contemplates the substitution feature of the Vogt decision, in which the insured reaches a settlement with the tortfeasor's insurer. It requires the insured to provide prompt written notice to the underinsurer and a substitution decision from the underinsurer within 30 days. Paragraph (b) does not address the specific situation here in which the insured reaches a settlement with the tortfeasor. ¶ 22. Sixth, the policy contains a Trust Agreement which provides: When we pay damages under this insurance, you or your legal representative must agree in writing to repay us out of any damages recovered from anyone responsible for your injuries. You or your legal representative must also agree in writing to hold in trust and preserve for us all rights of recovery. At our request, you or your legal representative must take any necessary action to recover the payments we've made under this insurance through a representative we select. Expenses of recovery will be repaid to us out of any damages recovered. The Trust Agreement firms up the insurer's subrogation rights. ¶ 23. Seventh, the policy contains provisions addressing notice and consent: Bodily Injury Not Covered By This Insurance This insurance doesn't cover bodily injury if, without our written consent, settlement is made or judgment is taken against anyone responsible for your injury. . . . . Additional Duties Any person seeking underinsured motorist coverage must also promptly notify us in writing of a tentative settlement between you and the insurer of the underinsured motor vehicle and allow us 30 days to advance payment to you in an amount equal to the tentative settlement to preserve our rights against the insurer, owner or operator of such underinsured motor vehicle. ¶ 24. These provisions require the insured [Pittses] to give the insurer [Sentry] notice of any proposed settlements and to obtain the insurer's [Sentry's] consent prior to accepting settlement offers. ¶ 25. Eighth, the policy contains a subrogation clause: Our Right To Recover From Others After we have made payment under the Liability, Medical Expense, Uninsured Motorist, Comprehensive, Collision, Road Service or Rental Reimbursement insurance of this policy, we have the right to recover the payment from anyone who may be held responsible. You and anyone we protect must do whatever is necessary to enable us to exercise our right. You and anyone we protect will do nothing to prejudice our rights. . . . . Our rights do not apply with respect to Underinsured Motorist Coverage if we have been given prompt written notice of a tentative settlement between you and the insurer of an underinsured motor vehicle and we fail to advance payment to you in an amount equal to the tentative settlement within 30 days after receipt of notification. If we advance payment to you in an amount equal to the tentative settlement within 30 days after receipt of notification that payment will be separate from any amount you are entitled to recover under the provisions of Underinsured Motorist Coverage and we also have the right to recover the advance payment. These provisions also reflect the Vogt decision, particularly the insurer's consent feature. ¶ 26. Ninth, the policy requires the insured to undergo medical examinations and release medical records at the insurer's request: If you're injured, we may ask that you be examined by a doctor we select. You must be examined when and as often as we may reasonably require. We may need authorization to obtain medical records and copies of other records. You must give us authorization upon each request. . . . . You must cooperate with us in our effort to investigate the accident or loss, settle any claims against you and defend you. . . . If you fail to cooperate . . . we may have the right to refuse you any further protection for the accident or loss.