Court Opinion

ID: 9668273
Source: CourtListenerOpinion
Date Created: 2023-08-24 02:08:04.781108+00
Date Added: 2024-06-11T08:29:23.380870
License: Public Domain

STEINMETZ, J.
(dissenting). I dissent from the majority’s decision and opinion.
The majority holds today that underinsurance reducing clauses will no longer have any effect in Wisconsin. The majority decision contravenes the very nature of underinsurance, allows recovery from an insurance policy with well-defined and unambiguous terms which plainly limits the coverage under such *674circumstances, and judicially creates an absolute prohibition of reducing clauses notwithstanding a total lack of legislative intent to void such clauses in underinsu-rance policies.
In Wisconsin, every policy of insurance must contain uninsured motorist coverage. Sec. 632.32(4)(a), Stats. This section of the statutes also contains definitional phrases and legislative intent which give meaning to the term “uninsurance.” However, the Wisconsin statutes do not require insurers to offer underinsurance and therefore this court must resort to the insurance policy and other legitimate sources to determine the character of underinsurance.
In this case, the policy purchased by Eileen Kaun defined an underinsured motor vehicle as follows: “‘Underinsurance motor vehicle’ means a land motor vehicle insured by a liability policy or bond at the time of the accident which provides bodily injury liability limits less than the limit of liability for this coverage.” This is consistent with what I wrote in Vogt v. Schroeder, 129 Wis. 2d 3, 28-29, 383 N.W.2d 876 (1986) and is quoted by the majority: “[T]he limit of the underinsurer’s liability is for the amount of damages suffered by the insured in excess of the liability limits of the tortfeasor." Majority opinion at page 671. When purchasing underinsurance, a person must predetermine what amount of coverage he or she wants available in the event of an incident in the future.
Underinsurance is not related to the total damages sustained by an insured because when the policy is purchased there is neither thought nor expectation of an accident with anyone. The maximum coverage or policy limit is just that and it is that for which a premium is charged. The coverage is not governed by the extent of an unknown injury but rather by the *675maximum coverage purchased. In this the insured chooses the amount and has only to pay the premium for it. Underinsurance is not meant to fully compensate the victim under all circumstances, since the extent of injury is not known when the policy is purchased. The statement in Vogt, 3 Wis. 2d at 32, cited by the majority at page 671, "underinsurance benefits constitute the insurance coverage for damages in excess of the tortfea-sor’s insurance coverage” cannot be interpreted to mean all damages no matter what amount as the majority rules but only up to the amount of coverage. There is nothing inconsistent between what I wrote in Vogt and what I now write in Kaun.
Absent any legislative initiative concerning under-insurance, this court should view the character of underinsurance in determining the issue presented by the parties in this case. The character of underinsu-rance should not be changed by judicial decisions mandated years after the insurance contract was executed by the parties. A reducing clause in an underin-surance policy should be valid because of the very purpose and function of this type of policy; underinsu-rance guarantees payment only to the extent that recovery from the tortfeasor has not yielded the recovery to which the insured would otherwise be entitled under the underinsurance coverage. Put another way:
[T]he coverage [underinsurance] is appropriately viewed and provided as a means of placing the insureds in the position they would have been in had the tortfeasor been insured by liability insurance with limits of liability equal to those selected by the purchaser of the underinsured motorist insurance applicable to the accident.
*6762 Widiss, Uninsured and Underinsured Motorist Insurance, 2d ed. sec. 41.7 (1987).
By its very nature an underinsurance clause involves the existence of other insurance; but ... construing an underinsurance provision to provide additional insurance whenever the injured insured has not fully recovered his damages would be to render the term “underinsured” meaningless. The status of being underinsured is measured against another insurance policy, not against the injured party’s damages.
Kuehn v. Safeco Ins. Co. of America, 140 Wis. 2d 620, 628, 412 N.W.2d 126 (Ct. App. 1987) (quoting Grabski v. Finn, 630 F. Supp. 1037, 1047-48 (E.D. Wis. 1986), (which held the underinsurance does not provide coverage where the limits are less than the tortfeasor’s liability insurance limits.))
Furthermore, the majority opinion discounts the clear language of the policy issued. The clause under review in this case stated:
Amounts payable will be reduced by payments:
(1) made by the owner or operator of the underinsured motor vehicle or organization which may be legally liable;
This language unequivocally demonstrates that the parties intended the underinsurance policy amount to be reduced by payments made by the tortfeasor or his insurer. The majority (at page 669) states that if Badger Mutual’s position is accepted, “the respondent [Badger Mutual] will not be providing the $50,000 of UIM benefits it indicated it would pay on the declarations page of its policy;” Nowhere in the underinsurance policy did Badger Mutual declare that it would provide $50,000 in addition to amounts recovered from the *677tortfeasor or his insurer. Quite to the contrary, the underinsurance policy contained the $50,000 figure immediately after the heading “Limit of Liability” which was then defined on the following two pages with a subsection plainly indicating that Badger Mutual’s limit of liability was not in addition to funds recovered from the tortfeasor or on his behalf.
In this same vein, the majority states that “[unde-rinsurers] will never pay the policy limit of its UIM policies." Majority opinion at pages 669-670. (Emphasis in majority opinion.) Obviously, something as important as the policy limit of an insurance policy requires definition. This underinsurance policy provided a definition of the policy limit, just as other terms of the insurance policy were defined, but the majority failed to consider it.
To support the statement that underinsurers will never pay the limits of an underinsurance policy, the majority cites an example which is facially convincing. Majority opinion at pages 669-670. It is true that an underinsurance policy with a limit of $25,000 would never protect the insured, because underinsurance is only effective when the tortfeasor has liability insurance, which by law must have a minimum limit of $25,000. However, this example is not relevant to the case at hand. There was no evidence submitted in this case showing that when $25,000 of underinsurance is provided, the insured pays an additional premium. In this case, the underinsured motorist coverage limit was $50,000 and the record does not show whether a premium was charged for the first $25,000 or not. Also the $25,000 lower limit would be protection in the event the insured had an accident with a driver from another state who carried liability coverage in an amount less than $25,000.
*678In an attempt to overcome the plain language of the policy, the majority, quoting Gomolka v. State Automobile Mutual Ins. Co., 15 Ohio St. 3d 27, 472 N.E.2d 700, 702-03 (1984), majority opinion at pages 671-673) states that an insured's expectations when purchasing insurance should be given deference over the plain language of the insurance policy. A reasonable insured could not possibly have misunderstood the clear meaning of the terms of this contract.
The majority cites Gomolka as precedent; however, that case has no value in analyzing Wisconsin insurance law since Ohio Statute 3937.18 makes mandatory the offering of underinsured motorist coverage. Therefore, the Ohio legislature has taken over underinsured motorist, an action unlike the Wisconsin legislature. It is also interesting that in Ohio sec. 3937.18(E) allows an insurance contract to preclude stacking of uninsured motorist coverages contrary to our requirements in Tahtinen v. MSI Ins. Co., 122 Wis. 2d 158, 361 N.W.2d 673 (1985) and Welch v. State Farm Mut. Auto. Ins. Co., 122 Wis. 2d 172, 361 N.W.2d 680 (1985). This is how a state should allow insurance law to develop, not by judicial fiat.
In interpreting insurance coverage, in the past this court has consistently held that in the absence of stated legislative policy to the contrary, the extent of liability of an insurance company is based upon the contract entered into between the parties and must be governed by the contract’s terms and conditions. See Tischendorf v. Lynn Mut. F. Ins. Co., 190 Wis. 33, 42, 208 N.W. 917, 921 (1926); Paape v. Northern Assur. Co., 142 Wis. 2d 45, 51, 416 N.W.2d 665 (Ct. App. 1987).
Just as the majority ignores the very character of underinsurance and the plain language of the insurance *679policy, so too it ignores the underpinnings of previous cases in this area of the law.
The modem Wisconsin history of uninsured motorist coverage started with Leatherman v. American Family Mut. Ins. Co., 52 Wis. 2d 644, 190 N.W.2d 904 (1971). At that time, uninsured motorist coverage was not required by statute. The court held that the reducing clause was valid and not against public policy.
The same issue was presented in Scherr v. Drobac, 53 Wis. 2d 308, 193 N.W.2d 14 (1972). Scherr was injured at a time when uninsured motorist coverage was mandatory. Notwithstanding, the court determined that sec. 204.30(5)(a), Stats. (1967) (predecessor to sec. 632.32 (1977)) did not affect the validity of the reducing clause found in the plaintiff’s uninsured motorist coverage.
Again in Nelson v. Employers Mut. Casualty Co., 63 Wis. 2d 558, 567, 217 N.W.2d 670 (1974), this court was faced with the issue of whether an uninsurance policy’s reducing clause was in derogation of sec. 204.30(5), Stats. The court indicated that the Leatherman and Scherr decisions controlled. Therefore, throughout the uninsured motorist coverage cases, this court has reiterated that reducing clauses are not violative of public policy, unless enforcement of the reducing clause caused the insured to receive less protection than mandated by the legislature.
In 1975, sec. 631.43(1), Stats., was created and reads:
Other Insurance Provisions. (1) General. 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 *680total 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 coverage it provided. Settlement among the insurers shall not alter any rights of the insured.
In Landvatter v. Globe Security Ins. Co., 100 Wis. 2d 21, 26, 300 N.W.2d 875 (Ct. App. 1980), the court of appeals found the legislative prohibition of reducing clauses in uninsured motorist coverage was stated in sec. 631.43(1), Stats. With this legislative mandate, the issue became whether a particular insurance policy promised to indemnify. Only if the policy was an indemnification policy did sec. 631.43(1) apply which thereby would invalidate the uninsurance reducing clause. The court of appeals stated:
[W]e determine that uninsured motorist coverage does not function as a pure liability contract but instead functions as an indemnification contract.
Indemnity contracts require an insurer to indemnify or make whole the insured after he has sustained an actual loss, whereas a liability policy requires the insurer to shield the insured from making payment on the claim for which he is liable. G. Couch, Cyclopedia of Insurance Law sec. 44.4 (2d ed. R. Anderson 1963). Uninsured motorist coverage has been distinguished from liability insurance and recognized as a form of insurance which promotes indemnification of the injured party. 44 C.J.S. Insurance sec. 48.1 (Supp. 1980); 7 Am. Jur. 2d Automobile Insurance sec. 293 (1980).
*681We conclude that enactment of sec. 631.43, Stats., provides the legislative mandate which was missing at the time the Leatherman, Scherr, and Nelson cases considered the public policy considerations governing reducing clauses. Accordingly, we conclude that sec. 631.43(1) must be read together with sec. 632.32(3) to permit the stacking of uninsured motorist insurance coverages
The court of appeals held that the reducing clause was void on the basis of two statutory provisions, secs. 631.43 and 632.32(3), Stats., which required the offering of uninsured motorist coverage.
In Tahtinen, 122 Wis. 2d at 163, this court relied on Landvatter and stated:
Subsequently, [after the uninsured motorist coverage became mandatory] the legislature enacted sec. 631.43(1), Stats., which the court of appeals in Landvatter found provided “the legislative mandate which was missing at the time the Leatherman, Scherr and Nelson cases considered the public policy considerations governing reducing clauses.
The court further stated in Tahtinen: “These cases clearly demonstrate that the validity of reducing clauses in uninsured motorist coverage is controlled by legislative mandate, not by public policy considerations.” Id. at 164. The court went on to state: “that the court of appeals in Landvatter correctly held that sec. 631.43(1) is applicable to uninsured motorist coverage.” Id. at 169. It is obvious that such decision was not only influenced, but also controlled, by the fact that uninsured motorist coverage was required by the legislature. The court in Tahtinen did not find reducing clauses prohibited by sec. 631.43(1), Stats., for all coverages but only for required uninsured motorist coverage.
*682That the court meant to apply sec. 631.43(1), Stats., to prohibit reducing clauses in uninsured motorist coverage became more clear in Welch, 122 Wis. 2d at 173, decided the same day as Tahtinen. In Welch the court held:
We hold, consistent with Tahtinen v. MSI Insurance Company, decided on this date, that the legislature, in enacting Wisconsin’s stacking statute, voided reducing clauses which attempt to prohibit the stacking of multiple policy coverages of uninsured motorist protection issued by the same insurer to the same insured. (Emphasis added.)
Welch repeated the language of Tahtinen as follows: “[t]his statute clearly and unambiguously voids reducing clauses which attempt to prevent stacking of uninsured motorist benefits.” Id. at 176. (Emphasis added.)
This position was repeated in Welch as follows: “We held that the legislature, in enacting sec. 631.43(1), Stats., clearly and unambiguously voided reducing clauses which attempt to prevent stacking of uninsured motorist protection." Id. at 176. (Emphasis added.)
The court in Welch recognized public policy established by the legislature due to uninsured motorist coverage being required by statute as follows: “We hold that ‘drive other car’ exclusionary clauses are contrary to the legislative policy and express legislative intent embodied in this state’s uninsured motorist and stacking statutes.” Id. at 181. Obviously, the court believed the two statutes integral for its holding — the “anti-stacking” statute and statute requiring uninsured motorist coverage.
The uninsured motorist coverage is a statutory protection created by the legislature and is not an area *683of liability originating in this court and therefore subject to change by this court. Underinsured motorist coverage is not a statutorily required coverage and is a matter of private contract with no connection with sec. 631.43(1), Stats.
In Nicholson v. Home Ins. Cos., 137 Wis. 2d 581, 592-93, 405 N.W.2d 327 (1987), the court made it clear it was holding reducing clauses illegal in policies as applied to the uninsured motorist coverage provisions. The court stated:
If the purpose of the uninsured motorist statute is to be achieved, the plaintiff must be entitled to the proceeds of the uninsured motorist coverage without reductions that would not have been available had the uninsured motorist been insured.
The court in Nicholson also stated:
We hold that the reducing provision violates sec. 632.32(4)(a). This holding is mandated by the text of sec. 632.32(4) (a), which requires the policy to include uninsured motorist coverage, and the public policy underlying sec. 632.32(4)(a), which puts the injured party in the same position as if the uninsured tortfeasor had been insured.
Id. at 594.
It could not be more clear then that the court was holding that reducing clauses defeated the statutory obligation to compensate and therefore such clauses affected negatively the statutorily mandated coverage of uninsured motorists.
Reducing clauses also were held unenforceable because they violated the legislative mandate expressed in sec. 631.43(1), Stats. The court held in Nicholson “that the Home Insurance policy reducing clause *684violates sec. 632.32, Stats. 1979.” Id. at 603. (Footnote omitted.) Section 632.32 is the uninsured motorist provision.
Crystal clear in Nicholson, the court stated that reducing clauses could not be allowed since the legislature had required uninsured motorist coverage. The court stated:
If the legislative objective in requiring uninsured motorist coverage is to be fulfilled, the injured party must be entitled to the proceeds of uninsured motorist coverage free from any reductions contingent solely on the fact that a negligent uninsured motorist was a tortfeasor. (Emphasis added.)
Id. at 604.
Finally in Nicholson, the court stated, “Any policy provisions effectively reducing the coverage required by the statute are void.” Id. at 605. (Emphasis added.) The Nicholson decision was that of six justices of this court with only this writer dissenting and it was decided as recently as 1987.
The last time this court had the subject of underin-sured motorist coverage before it was in Schwochert v. American Family Ins., 139 Wis. 2d 335, 407 N.W.2d 525 (1987), a unanimous decision. The Schwocherts carried underinsured motorist coverage on one of their two vehicles, but this coverage was on the vehicle not involved in the accident. The “drive other car” exclusion on the non-accident vehicle kept the underinsured motorist coverage from being applied to the accident car. Under similar circumstances, Welch allowed such a transfer of uninsurance. In Schwochert the court clearly distinguished between uninsurance and underinsu-rance. It determined that underinsurance is solely a matter of contract between the insurer and insured. Id. *685at 348. The Schwocherts claimed their liability coverage was insufficient and that their underinsurance motorist coverage should be available. An important issue of the case was whether uninsurance principles could be applied to underinsurance cases. This language of Schwochert cannot be dismissed as dicta.
The court stated: “Underinsured motorist coverage has not been made mandatory under sec. 632.32(4) or any other statute. Therefore, the holding of Welch does not encompass underinsured motorist coverage.” Id. at 347. In Schwochert, the court interpreted and applied Welch as follows:
The majority opinion of Welch makes it clear that the uninsured motorist coverage mandated by statute must be made available under all automobile policies issued in Wisconsin and, therefore, any policy provision that would have the effect of thwarting that legislative purpose was invalid. This conclusion was arrived at by finding that the “drive other car” provision was invalid to bar coverage due to the combined legislative intent of sec. 632.32(4), Stats., uninsured motorist coverage, and sec. 631.43(1), the stacking statute.
The language of Welch is clear that the ruling was on the efficacy of “drive other car” exclusions to negate statutory coverages only.

Id.

Precedent in Landvatter, 100 Wis. 2d at 25, was established by the court of appeals in distinguishing between liability coverage and indemnity coverage. The majority has relied on Landvatter for precedent since Tahtinen, but ignores it today.
I dissent from the majority decision and rationale of its opinion. I will not convert a private contract of insurance to a social contract of recovery — that should *686be left to the legislature to effectuate if believed desirable.
I am authorized to state that JUSTICE WILLIAM G. CALLOW joins this dissenting opinion.