Opinion ID: 1296223
Heading Depth: 3
Heading Rank: 3

Heading: The Ambiguity of the UIM provisions

Text: [10] ¶ 60. In interpreting the policy language, we begin with the reducing clause on the twenty-eighth page, which provides that: B. The limit of liability shall be reduced by all sums: 1. Paid because of the bodily injury by or on behalf of persons or organizations who may be legally responsible. This includes all sums paid under Part A; and 2. Paid or payable because of the bodily injury under any of the following or similar law: a. Workers' compensation law; or b. Disability benefits law. [11, 12] ¶ 61. There is no dispute that this reducing clause is in conformity with Wis. Stat. § 632.32(5)(i). Thus, the reducing clause itself is not ambiguous or contrary to public policy. Dowhower, 2000 WI 73, ¶ 20. If we looked only at the reducing clause and not at the policy as a whole, our inquiry would be at an end. See Sukala, 2000 WI App 266, ¶ 20. However, language in an insurance policy may be ambiguous in the context of the entire insurance contract. See Taylor, 2001 WI 93, ¶ 26 (citing Dowhower, 2000 WI 73, ¶ 35). Here, the policy as a whole, and the Availability of Underinsured Motorists CoverageWisconsin form in particular, create ambiguity. ¶ 62. First, we note that the declarations page, which is generally the portion of an insurance policy to which the insured looks first, does not mention UIM coverage at all. It mentions only UM coverage. One consequence is that there is no place on the declarations page to explain that the policy's UIM liability will be reduced by payments from other sources. There is no place to alert the insured that although the insured could receive the full limit of uninsured motorists coverage from the insurer, there is no possibility of receiving the full limit of underinsured motorists coverage from the insurer. The reasonable insured would look to the declarations page for the total premium and the breakdown of the premium by type of coverage. There is no separately-listed cost for underinsured motorist coverage on the declarations page or any other page. ¶ 63. Second, there is no reference to Underinsured Motorists Coverage on the Quick Reference Index Sheet. If, on a hunch, the insured turned to Part CUninsured Motorists Coverageanticipating a discussion of Underinsured Motorists Coverage under the subheading Other Insurance, the insured would be disappointed. ¶ 64. Third, the twenty-third page contains the Split Underinsured Motorists Limits, which might be characterized as a declarations page for underinsured motorists liability limits. This page states limits of $250,000 for each person capped by $500,000 for each accident. The schedule reads in relevant part: The limit of liability shown in the Schedule or in the Declarations for each person for Underinsured Motorists Coverage is our maximum limit of liability for all damages . . . . This is the most we will pay regardless of the number of: 1. Insureds; 2. Claims made; 3. Vehicles or premiums shown in the Declarations; or 4. Vehicles involved in the accident ¶ 65. The Schedule on the twenty-third page fails to inform that these dollar limits represent combined payments from all sources and will never be paid by the insurer because of the policy's reducing clause. Because the maximum limits of liability are described as the most American Merchants will pay, they imply that these limits are attainable. [13] ¶ 66. Finally, we examine the document entitled Availability of Underinsured Motorists Coverage Wisconsin, which is located on the fifth page. The document states that the insurer must notify the insured of the availability of UIM coverage, but that the insured does not have to buy it. It states If you have purchased this coverage, please disregard this notice. It also explains that This coverage will pay the remainder of the bodily injury damages up to the limit of liability you select for underinsured motorists coverage. American Merchants asserts that this document is not part of the policy and does not modify the policy as an endorsement would. It also claims that a reasonable insured who had already purchased UIM coverage would do what the document saysdisregard this notice. The court of appeals agreed with this argument, noting that this page was not part of the policy's terms and specifically informed policyholders with UIM coverage, such as Schmitz, to disregard the information it provided. See Schmitz, unpublished slip op. at ¶ 6. ¶ 67. Schmitz, on the other hand, asserts that a reasonable insured would read the definition of UIM coverage and assume that the policy he or she had purchased utilized the same definition. ¶ 68. We note that the notice of availability document, #511-8822 0996, is specifically listed on the fourth page of the policy, under Forms on this policy. It is the second listed form. We think that a reasonable insured, reading the fourth page, would expect the notice of availability to be part of the policy. ¶ 69. As to the portion of the notice reading If you have purchased this coverage, please disregard this notice, we note that pursuant to Wis. Stat. § 632.32(4m)(a)1, the notice must contain written notice of availability of underinsured motorist coverage, including a brief description of the coverage. We think the words If you have purchased this coverage, please disregard this notice clearly means to inform the insured to disregard the notice in terms of the availability of UIM coverage, not the description of the coverage. The availability of coverage is relevant to prospective insureds, but the description of the coverage is relevant to both prospective insureds and current insureds. ¶ 70. We believe a reasonable insured, reading the notice, would understand that he or she should disregard the notice if he or she has already purchased UIM coverage. However, the explanation in the notice is the most readily understandable definition of UIM coverage in the policy. It appears to tell a prospective insured that if he or she purchases UIM coverage, the coverage will pay the remainder of the bodily injury damages up to the limit of liability the person selects. ¶ 71. We do not see why an insured would think that the UIM coverage being offered to persons who do not have UIM coverage will be different from the UIM coverage the insured has already purchased. Moreover, the definition of UIM coverage in the notice of availability form is likely to be what an average insured understands. See Taylor, 2001 WI 93, ¶ 35 (Bradley, J., dissenting) (reasonable insureds believe they are purchasing coverage for their damages in a set dollar amount above and beyond the liability limits of the at-fault driver). ¶ 72. To sum up, the American Merchants policy is a maze that is organizationally complex and plainly contradictory. It sends several false signals to the insured. It is not user-friendly. The notice of availability of UIM coverage, together with the maximum of liability listed on the declarations page and on the split UIM limits page, combine to create confusion, ambiguity, and illusory coverage in the context of the entire policy. This renders an otherwise unambiguous, although poorly labeled, reducing clause unenforceable. Under the circumstances, the circuit court performed the correct analysis and properly granted Schmitz summary judgment in his case against American Merchants. This determination was necessary to advance the insured's reasonable expectation of coverage.