Opinion ID: 1296223
Heading Depth: 2
Heading Rank: 4

Heading: Dowhower

Text: ¶ 35. Two years ago, this court addressed the constitutionality and import of Wis. Stat. § 632.32(5)(i). Dowhower, 2000 WI 73. The plaintiffs in Dowhower argued that § 632.32(5)(i) is unconstitutional because it authorizes fraudulent, illusory UIM coverage. We disagreed, concluding that the statute does not violate substantive due process under the state and federal constitutions. Id. at ¶ 2. ¶ 36. We also determined that the type of reducing clause authorized in § 632.32(5)(i) is neither ambiguous nor against public policy. Id. at ¶ 20. We noted that [w]hile reducing clauses have in some instances rendered UIM coverage illusory, we have not held that reducing clauses are per se contrary to public policy. Id. at ¶ 22. We further stated that when a UIM policy contains a reducing clause conforming to Wis. Stat. § 632.32(5)(i), an insured is purchasing a predetermined level of coverage against injury sustained from an underinsured motorist. Id. at ¶ 20. ¶ 37. After discussing the holdings in several of the pre-§ 632.32(5)(i) UIM cases outlined in this opinion, we concluded that: When we consider these cases in conjunction with Wis. Stat. § 632.32(5)(i), we conclude that an insurer may reduce payments made pursuant to a UIM policy by amounts received from other legally responsible persons or organizations, provided that the policy clearly sets forth that the insured is purchasing a fixed level of UIM recovery that will be arrived at by combining payments made from all sources. Id. at ¶ 33 (emphasis added). Significantly, we also recognized that a reducing clause may be ambiguous within the context of the insurance contract.  Id. at ¶ 35 (emphasis added). ¶ 38. Implicit in our determination that reducing clauses would be valid only if they provided that the policy clearly sets forth that the insured is purchasing a fixed level of UIM recovery that will be arrived at by combining payments made from all sources was a recognition that the reasonable insured might not understand, intuitively, the scope of his or her UIM coverage. We signaled in Dowhower that UIM insurers that reduce UIM payments by amounts paid from other sources, are required to make clear to purchasers of UIM coverage that they are purchasing coverage that will put them in the same position they would be in if the underinsured tortfeasor had liability limits equal to the amount of UIM coverage the insured purchased. Insureds will then understand that if they want to be assured of having, say, $200,000 in total available coverage, they will have to purchase UIM coverage with a $200,000 limit. ¶ 39. In her concurring opinion, Justice Bradley emphasized the requirement that reducing clauses and automobile policies as a whole be written so as to clearly inform insureds of exactly what coverage their UIM provisions afford them: The legislature was aware of the concerns over deception voiced by Wisconsin courts. Although it authorized reducing clauses under Wis. Stat. § 632.32(5)(i)1, the legislature envisioned clear policies without a hint of illusion to protect consumers from fraudulent practices. It did not authorize deception in the implementation of the statute. Id. at ¶ 50 (Bradley, J., concurring).