Preview:

COURT OF APPEALS
NOTICE
DECISION
DATED AND FILED                                                                      This opinion is subject to further editing.   If
published, the official version will appear in
the bound volume of the Official Reports.
October 7, 2003
A party may file with the Supreme Court a
Cornelia G. Clark                                                                                                                                       petition to review an adverse decision by the
Clerk of Court of Appeals                                                                                                                               Court of Appeals.   See WIS. STAT. § 808.10
                                                                                                                                                        and RULE 809.62.
                                                                                                                                                        Cir. Ct. No.   02CV000118
Appeal No.                                                                           03-0583-FT
STATE OF WISCONSIN                                                                                                                                      IN COURT OF APPEALS
DISTRICT III
SHARON KNIGHT, PERSONALLY AND AS SPECIAL
ADMINISTRATOR OF THE ESTATE OF THE DECEASED,
EDWARD KNIGHT,
PLAINTIFF-RESPONDENT,
V.
ACUITY, A MUTUAL INSURANCE COMPANY,
DEFENDANT-APPELLANT.
APPEAL from a judgment of the circuit court for Langlade County:
JAMES P. JANSEN, Judge.  Reversed and cause remanded with directions.
Before Cane, C.J., Hoover, P.J., and Peterson, J.
¶1                                                                                   PER CURIAM.    Acuity,  a  mutual insurance  company,  appeals a
judgment denying its motion for a declaration that no coverage exists under its
uninsured  motorist  provisions  for  injuries  sustained  by  Edward  and  Sharon




No.   03-0583-FT
Knight.1   Acuity argues the circuit court erred by concluding that its uninsured
motorist   policy   and   concomitant   reducing   clause   are   ambiguous   and
unenforceable.   We agree and reverse the judgment.
BACKGROUND
¶2                                                                                     The Knights were injured in an accident with an uninsured driver in
Iowa.   At the time of the accident, the Knights were working as truck drivers for
Karl’s Transport of Antigo, Wisconsin, and thus received worker’s compensation
benefits for their  medical expenses and wage  loss.    The  Knights also sought
uninsured motorist benefits under a policy Acuity issued to them.
¶3                                                                                     The policy provided uninsured motorist coverage in the amount of
$25,000  per  person/$50,000  per  accident  and  included  a  reducing  clause  for
amounts received in worker’s compensation.   Acuity filed a motion for declaratory
judgment seeking interpretation and enforcement of its policy.   The circuit court,
citing Hanson v. Prudential Prop. & Cas. Ins. Co.,  2002 WI App  275,  258
Wis. 2d  709,  653  N.W.2d  915, denied Acuity’s declaratory judgment  motion,
concluding  that  the  uninsured  motorist  provision  and  reducing  clause  were
ambiguous and unenforceable.   This appeal follows.
ANALYSIS
¶4                                                                                     The grant or denial of relief in a declaratory judgment action is a
matter within the discretion of  the circuit court.    United Fire & Cas. Co. v.
Kleppe,  174 Wis.  2d  637,  640,  498 N.W.2d  226  (1993).    A circuit court acts
1  This is an expedited appeal under WIS. STAT. RULE 809.17.
2




No.   03-0583-FT
outside the ambit of that discretion when it bases its discretionary decision upon
an error of law.    Id.    Resolution of this case turns on the interpretation of an
insurance  contract,  a  question  of  law  that  we  review  independently,  although
benefiting from the circuit court’s analysis.   Hull v. State Farm Mut. Auto. Ins.
Co.,  222 Wis.  2d  627,  636,  586 N.W.2d  863  (1998).   A court gives insurance
policy  language  its  common  and  ordinary  meaning,  construing  the  insurance
policy as would a reasonable person in the position of the insured.   See Wisconsin
Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 221 Wis. 2d 800, 806, 586
N.W.2d 29 (1998).
¶5                                                                                       Here, the Knights argue that Acuity’s uninsured motorist policy and
reducing clause are confusing, unclear and ambiguous, suffering the same faults as
the  underinsured  motorist  policies  in  Hanson  and  Badger  Mut.  Ins.  Co.  v.
Schmitz, 2002 WI 98, 255 Wis. 2d 61, 647 N.W.2d 223.   We are not persuaded.
¶6                                                                                       Reducing  clauses  are  expressly  allowed  pursuant  to  WIS.  STAT.
§ 632.32(5)(i) which provides:
(i)   A policy may provide that the limits under the policy
for uninsured or underinsured motorist coverage for bodily
injury or death resulting from any one accident shall be
reduced by any of the following that apply:
1. Amounts paid by or an behalf of any person or
organization that may be legally responsible for the bodily
injury or death for which the payment is made.
2.  Amounts  paid  or  payable  under  any  worker’s
compensation law.
3.  Amounts  paid  or  payable  under  any disability
benefits laws.
Acuity’s policy, adopting much of the language found in § 632.32(5)(i), provides
in relevant part:
3




No.   03-0583-FT
We will pay damages for bodily injury which an insured
person  is  legally  entitled  to  recover  from  the  owner  or
operator of an uninsured motor vehicle.   Bodily injury must
be sustained by an insured person and must be caused by
accident and result from the ownership, maintenance or use
of the uninsured motor vehicle.
.…
The limits shown are subject to the following:
.…
3.   The Uninsured Motorists limits will be reduced by any
of the following that apply:
a.                                                                                     Amounts paid by or on behalf of any person
or  organization  that  may  be  legally  responsible  for  the
bodily injury for which the payment is made.
b.                                                                                     Amounts   paid   or   payable   under   any
Workers’ Compensation law.
c.                                                                                     Amounts   paid   or   payable   under   any
disability benefits law.
¶7                                                                                     Although the policy’s language is substantially consistent with WIS.
STAT. § 632.32(5)(i), our supreme court has concluded that § 632.32(5)(i) is not a
“blanket  endorsement”  to  validate  a  reducing  clause.    Badger  Mutual,          255
Wis. 2d  61,  ¶46.    The Knights therefore contend that the test for determining
whether a reducing clause is enforceable is whether it is “crystal clear” in context
of the whole policy.   Id.; Hanson, 258 Wis. 2d 709, ¶7   After the parties’ briefs
were filed in this case, however, our supreme court addressed the “crystal clear”
language, noting that a series of court of appeals decisions had used the “crystal
clarity” admonition “to alter the analytical focus.”   Folkman v. Quamme, 2003
WI 116, ¶30, ___ Wis. 2d ___, 665 N.W.2d 857.
¶8                                                                                     The Folkman court clarified that “any contextual ambiguity in an
insurance policy must be genuine and apparent on the face of the policy, if it is to
4




No.   03-0583-FT
upset the intentions of an insurer embodied in otherwise clear language.”   Id., ¶29.
The court further noted that the test for determining whether contextual ambiguity
exists is whether words or phrases of an insurance contract, when read in the
context of the policy’s other language, are reasonably or fairly susceptible to more
than one construction.   Id.                                                                            “The standard for determining a reasonable and fair
construction is measured by the objective understanding of an ordinary insured.”2
Id.
¶9                                                                                                      Here, we conclude that the provision and attendant reducing clause
when read in context of the entire policy are neither ambiguous nor illusory.
Acuity’s policy, including the declarations page, is seventeen pages long and is
preceded by an “Index of Policy Provisions” that references the uninsured motorist
coverage under Part 3 of the policy and directs the reader to page 5.   On page 5,
the  uninsured  motorist  provision  then  plainly  refers  the  reader  to  the                        “State
Uninsured/Underinsured Motorists Endorsement.”   The actual uninsured motorist
policy is less than two pages long and contains all language relevant to coverage,
including definitions and the limits of liability, in which the reducing clause at
issue  is  located.    The  uninsured  motorist  provision  clearly  indicates  that  the
2   To the extent the court of appeals used the “crystal clarity” admonition “to alter the
analytical focus,” our supreme court clarified that “[a]spirational goals and admonitions on how
to avoid ambiguity are admittedly different from minimum legal standards.”      Folkman v.
Quamme, 2003 WI 116, ¶29, ___ Wis. 2d ___, 665 N.W.2d 857.
Ultimately, the court noted that Badger Mut. Ins. Co. v. Schmitz, 2002 WI 98, 255
Wis. 2d                                                                                                 61,                                                                  647  N.W.2d  223,  and  its  predecessors   “do  not  demand  perfection  in  policy
draftsmanship.”   Folkman, 2003 WI 116, ¶31.   Rather, they “advise insurers to draft policies in a
clear manner if they upset the reasonable expectations of insureds.”   Id.   The Folkman court
added that  “[t]o prevent contextual ambiguity, a policy should avoid inconsistent provisions,
provisions that build up false expectations, and provisions that produce reasonable alternative
meanings.”   Id.   Further, “inconsistencies in the context of a policy must be material to the issue
in dispute and be of such a nature that a reasonable insured would find an alternative meaning.”
Id., ¶32.
5




No.   03-0583-FT
uninsured motorist benefits will be reduced by amounts paid or payable under any
workers’ compensation law.   We discern no contextual ambiguity.
¶10    Likewise, the combined effect of the policy and its reducing clause
does  not  render  the  uninsured  motorist  coverage  illusory,  as  is  often  seen  in
underinsured  motorist  policies.                                                             Application  of  a  reducing  clause  in  the
underinsured  motorist  context  results  in  an  insured  never  receiving  the  full
underinsured motorist limits shown on the declarations page.   Where neither the
declarations  nor  the  limits  of  liability  provide  notice  to  the  insured  that  the
coverage limits shown on the declarations page are intended to include all amounts
received from the statutory sources, an insured is led to believe the limits are
obtainable when, in reality, the reducing clause guarantees they will rarely, if ever,
be paid.   In contrast to underinsured motorist coverage, the full limits of uninsured
motorist coverage are always available unless the insured has received payments
as a result of the injury from those supplemental sources referenced in WIS. STAT.
§ 632.32(5)(i).
¶11    Here, the Knights received worker’s compensation benefits for their
medical  expenses  and  wage  loss.    Because  they  received  benefits  from  this
specifically referenced statutory source, the reducing clause properly operated to
offset the limits otherwise payable by their uninsured motorist coverage.
By  the  Court.—Judgment  reversed  and  cause  remanded  with
directions for further proceedings consistent with this opinion.
                                                                                              This  opinion  will  not  be  published.     See  WIS.  STAT.  RULE
809.23(1)                                                                                     (b)5.
6

Download 6228.pdf

Wisconsin Law