Opinion ID: 1868866
Heading Depth: 2
Heading Rank: 3

Heading: Legislative History and Public Policy

Text: ¶ 44 Upon review of legislative history and public policy, the court concludes that the more reasonable interpretation of the statute is that payments to the Fund cannot reduce uninsured motorist coverage limits. As we see it, the statute authorizes reductions in coverage limits by the total amount of worker's compensation payments made to or on behalf of the insured, the insured's heirs, or the insured's estate.
¶ 45 We return to history. Uninsured motorist coverage dates back to the mid-1950s. Helen Freedman, Uninsured Motorist Developments in Wisconsin, 30 The Gavel 3 (Dec.1969). The legislature first required insurers to offer this coverage beginning in 1966. See Wis. Stat. § 204.30(5) (1967-68) (created by ch. 486, Laws of 1965). ¶ 46 Reducing clauses have been part of the insurance landscape during most of this period. Nicholson v. Home Insurance Companies, Inc., 137 Wis.2d 581, 594-601, 405 N.W.2d 327 (1987), contains a thorough history of reducing clauses up to 1987. We will not repeat that history in its entirety, but merely summarize the essentials to lay the groundwork for the developments since Nicholson. ¶ 47 The take-away points from Nicholson are as follows. Before the legislature made uninsured motorist coverage mandatory in 1971, this court upheld reducing clauses that reduced uninsured motorist limits by amounts the insured received from any other source. E.g., Scherr v. Drobac, 53 Wis.2d 308, 310-11, 193 N.W.2d 14 (1972); Leatherman v. Am. Family Mut. Ins. Co., 52 Wis.2d 644, 650-51, 190 N.W.2d 904 (1971). In response to Drobac and Leatherman, the legislature prohibited reducing clauses. See ch. 72, Laws of 1973 (then-codified at Wis. Stat. § 204.30(5)(a) (1973-74)). Then the legislature amended § 204.30(5)(a) (1973-74) and renumbered it as Wis. Stat. § 632.32(3)(a) (1975-76) in 1975. See ch. 375, Laws of 1975. This legislation removed the express prohibition on reducing clauses enacted in 1973 without actually approving their use. Nicholson, 137 Wis.2d at 599, 405 N.W.2d 327; see also Legislative Council Committee Comment to § 632.32 ch. 375, Laws of 1975. In 1987 this court refused to enforce reducing clauses because, we said, they would thwart the purpose of uninsured motorist coverage of placing the injured party in the same position that she would have been in had the uninsured motorist been insured[.] Nicholson, 137 Wis.2d at 592, 405 N.W.2d 327. ¶ 48 Thereafter, until 1995 Wisconsin Act 21, this court consistently struck down reducing clauses as contrary to the requirement that motor vehicle insurance policies include uninsured motorist coverage. E.g., Kuhn v. Allstate Ins. Co., 193 Wis.2d 50, 61, 532 N.W.2d 124 (1995); United Fire & Cas. Co. v. Kleppe, 174 Wis.2d 637, 643, 498 N.W.2d 226 (1993). A review of these cases demonstrates that since the first case to review an uninsured motorist reducing clause, Leatherman, 52 Wis.2d 644, 190 N.W.2d 904, in every case the insurer has attempted to reduce uninsured motorist limits because of a payment to the insured. Of particular relevance to this case is Kleppe, in which we held unenforceable a reducing clause that would have reduced uninsured motorist limits by the amount of worker's compensation benefits received by the plaintiff. Kleppe, 174 Wis.2d at 643, 498 N.W.2d 226. In Kleppe, we based our decision on the fact that enforcing the reducing clause would have left the plaintiff worse off than if the uninsured motorist had been insured. Id. ¶ 49 1995 Wisconsin Act 21 was intended to overturn the Nicholson/Kleppe line of cases that refused to enforce reducing clauses in the context of uninsured motorist coverage. The analysis from the Legislative Reference Bureau stated: The bill also permits motor vehicle insurance policies to reduce the limits payable under the policy for uninsured and underinsured motorist coverage by payments received from other sources. Payments for bodily injury or death may be reduced ... by amounts paid or payable under a worker's compensation law. . . . See 1995 Senate Bill 6, Analysis by the Legislative Reference Bureau (discussing proposed Wis. Stat. § 632.32(5)(i)). ¶ 50 The source of 1995 Wisconsin Act 21 was 1995 Senate Bill 6.1995 Senate Bill 6 was introduced by Senator Joanne Huelsman. It was based in part on her 1993 Senate Bill 135. Senator Huelsman sent an early draft of the 1993 bill to the Wisconsin Insurance Alliance for comment. The Insurance Alliance replied in a letter dated January 12, 1993, from its president, Eric Englund. Englund wrote: (1) Amendments to Draft: We would like to amend the draft to include a provision permitting insurers to include language in their policies that would reduce the underinsured (UIM) limit shown in the policy by the total amount of other limits providing coverage to the owner of the underinsured vehicle. 1991 SB 105 did not include similar language. We suggest language inserted as subsec. (h) and reading as follows: (h) Notwithstanding § 631.43(1), a policy may provide that the limit under the policy for underinsured motorist coverage for bodily injury or death resulting from any one accident will be reduced by all of the following: 1. Amounts paid by or on behalf of persons or organizations who may be legally responsible. 2. Amounts paid or payable under any worker's compensation law. 3. Amounts paid or payable under any disability benefits laws. ¶ 51 It should be noted that Englund's letter makes reference only to reductions in underinsured motorist coverage. Reductions in uninsured motorist coverage came in a later draft. Englund's letter also references Wis. Stat. § 631.43(1) (1991-92), which at that time read in part: When 2 or more policies promise to indemnify an insured against the same loss, no other insurance provisions of the policy may reduce the aggregate protection of the insured below the lesser of the actual insured loss suffered by the insured or the total indemnification promised by the policies if there were no other insurance provisions. The policies may by their terms define the extent to which each is primary and each excess, but if the policies contain inconsistent terms on that point, the insurers shall be jointly and severally liable to the insured on any coverage where the terms are inconsistent, each to the full amount of the coverage provided. ¶ 52 Current Wis. Stat. § 631.43(3) provides: Subsection 1 does not affect the rights of insurers to exclude, limit or reduce coverage under s. 632.32(5)(b), (e), or (f) to (j). This includes paragraph (i). ¶ 53 Despite having added uninsured motorist coverage to the proposal suggested by the Wisconsin Insurance Alliance, having changed the word limit to limits, having changed the text of § 632.32(5)(i)1., and having excepted the application of § 631.43(1) to § 632.32(5)(i), Senator Huelsman still submitted legislation, in two consecutive sessions, with an analysis that used the phrase reduce the limits payable under the policy ... by payments received from other sources. (Emphasis added.) In addition, paragraph (i) contains language not suggested by the Insurance Alliance: A policy may provide that the limits ... shall be reduced by any of the following that apply: . . . . The words that apply are a protection against payments that do not apply and thus do not reduce coverage. ¶ 54 Nothing in the legislative history demonstrates that the legislature contemplated or intended that uninsured motorist limits should be reduced by payments to an entity unrelated to the insured (except a provider such as a hospital which stands in the place of the insured). Often, silence in legislative history is merely the result of an incomplete record, and therefore, not meaningful. Where, however, a party proffers an interpretation that marks a radical departure from prior law or produces an unusual, counter-intuitive, or unreasonable result, silence can be significant. See Strenke v. Hogner, 2005 WI 25, ¶ 50, 279 Wis.2d 52, 694 N.W.2d 296. American Family's interpretation would constitute a marked departure from prior law and would produce absurd results. ¶ 55 Prior to 1995indeed prior to this very caseno Wisconsin case discussed the possibility that uninsured motorist limits could be reduced by payment of worker's compensation benefits to unrelated third parties such as the Fund. Moreover, in none of the leading treatises on uninsured motorist and underinsured motorist insurance is there even a hint that uninsured motorist limits could be reduced by worker's compensation payments made to anyone other than the insured or to someone on behalf of the insured, the insured's heirs, or the insured's estate. See generally, 2 Irvin Schermer & William Schermer, Automobile Liability Insurance §§ 28:3 to 28:8 (4th ed.2004); 1 Alan Widiss, Uninsured and Underinsured Motorist Insurance §§ 14.3, 41.10 (Revised 2nd ed.1999); 3 Matthew Bender & Co., Inc., No-Fault and Uninsured Motorist Automobile Insurance § 31.20 (2003); 12 Lee Russ & Thomas Segalla, Couch on Insurance §§ 171:37 to 171:43. Rather, a review of these treatises reveals that the application of a setoff or reducing clause presumes some payment to the insured, which in turn reduces the amount of uninsured motorist benefits owed to the insured. Because the result proposed by American Family is not suggested by any case or secondary source that we have been able to find, and because American Family has not directed our attention to any such source, we think it extraordinarily unlikely that the legislature contemplated the result sought by the insurer. ¶ 56 We are mindful of the instruction that a court should consider the mischief sought to be remedied by a statute when interpreting the statute. See Heyde Companies, Inc. v. Dove Healthcare, LLC, 2002 WI 131, ¶ 15 n. 3, 258 Wis.2d 28, 654 N.W.2d 830. We think it telling that 1995 Wisconsin Act 21 was intended to remedy the refusal of Wisconsin courts to allow insurers to reduce uninsured motorist limits by amounts received by an injured person from other sources. See Kleppe, 174 Wis.2d at 642, 498 N.W.2d 226. We think the legislature responded to a discrete series of cases and did not intend to permit insurers to reduce uninsured motorist limits by worker's compensation benefits paid to the Fund. ¶ 57 This result is completely harmonious with the legislative goal that all motor vehicle policies include uninsured motorist coverage to protect persons injured in automobile accidents who are legally entitled to recover damages from owners or operators of uninsured motor vehicles.
¶ 58 American Family argues that allowing insurers to reduce uninsured motorist limits in this situation is consistent with the public policy reflected in Wis. Stat. Chapter 102 (Worker's Compensation). According to American Family, Chapter 102 embodies a policy of denying recovery to claimants whose relationships to an injured person are remote. American Family notes this policy decision is embodied in Wis. Stat. §§ 102.48, 102.49, and 102.51, which limit a death benefit to dependents of the deceased. Therefore, American Family concludes, it is reasonable that the legislature would have intended that people like the Shiras, who were not financially dependent upon Scott, be denied uninsured motorist coverage. ¶ 59 While American Family is correct that the Shiras do not qualify as dependents under the WCA, the policies underlying the WCA and tort law differ. The WCA reflects a decision to limit the amounts recovered by injured employees to avoid imposing burdensome expenses upon employers. See Threshermens Mut. Ins. Co. v. Page, 217 Wis.2d 451, 459-60, 577 N.W.2d 335 (1998) (explaining the compromise reached by the legislature to balance the interests of employers and employees); id. at 483, 577 N.W.2d 335 (Bradley, J., dissenting) (recounting the history of the compromise). The WCA ensures a minimal safety net for those financially dependent upon a deceased or injured employee by causing an employee to relinquish all common law remedies in exchange for the abrogation of the employer's defenses. See Page, 217 Wis.2d at 460, 469 n. 7, 577 N.W.2d 335. [13] ¶ 60 Tort law offers more than a minimal financial safety net. The purpose of tort law is to make an injured person whole. Though an insurer's potential obligation to pay under an uninsured motorist policy arises by contract, the insured's actual recovery is affected by common law remedies and common law defenses applicable in a tort action for negligence. See State Farm Mut. Auto. Ins. Co. v. Gillette, 2002 WI 31, ¶¶ 43-48, 68, 251 Wis.2d 561, 641 N.W.2d 662. The legislature has not imposed a compromise between insureds and uninsured motorist insurers that limits the recovery of insureds in exchange for depriving insurers of common law defenses available to tortfeasors. Cf. id., ¶ 68, 641 N.W.2d 662. Accordingly, we conclude the policy considerations at play in the WCA are not present here and do not preclude the Shiras from recovering under Scott's policy. ¶ 61 In addition, American Family suggests that our decision should adhere to the analysis in Seider. In Seider we considered whether the Office of the Commissioner of Insurance (OCI) exceeded its authority in adopting an administrative rule interpreting the valued policy law, Wis. Stat. § 632.05(2). The valued policy law provides that anytime real property that is owned and occupied by the insured primarily as a dwelling is wholly destroyed, . . . the amount of the loss shall be taken conclusively to be the policy limits of the policy insuring the property. § 632.05(2). The OCI promulgated an administrative rule that defined dwelling to exclude real property any part of which is used for commercial (non-dwelling) purposes other than on an incidental basis. . . . Wis. Admin. Code § INS 4.01(2)(e) (June, 1999). We invalidated the administrative rule because its restrictive definition of dwelling contradicted the plain and unambiguous meaning of dwelling in § 632.05(2). Seider, 236 Wis.2d 211, ¶ 6, 612 N.W.2d 659. ¶ 62 Seider does not control this case. Unlike in Seider, where the statute was unambiguous, Wis. Stat. § 632.32(5)(i)2. is either ambiguous when applied to the facts of this case or its plain meaning produces absurd results. Hence, this court has a duty to clarify the ambiguity or look beyond the plain meaning and state definitively what the law is.