Wisc. Supreme Court Limits Bodily Injury Coverage to Insured Persons

An auto insurer is not required to pay underinsured motorist benefits to the son of man who was killed in an auto crash because the father was not insured by its policy, the Wisconsin Supreme Court ruled Tuesday in an unanimous decision.

The high court overturned what it called a “hyper-literal” interpretation of state law by a panel of the Wisconsin Court of Appeals, which ruled in 2020 that state law requires insurers to pay UIM benefits to any insured who is legally entitled to recover damages for bodily injury or death caused by an underinsured motorist.

The Supreme Court’s unanimous opinion said the appellate panel failed to read the statute within the context of an insurance coverage system.

“Statutory interpretation centers on the ‘ascertainment of meaning,’ not the recitation of words in isolation,” the opinion says. “By declining to address statutory context, the court of appeals erroneously confined its statutory analysis to the definition in Wis. Stat. § 632.32(2)(d).”

Elliot Brey, a minor, filed a claim against his mother’s auto insurance policy with State Farm Automobile Insurance Co. after his father Ryan B. Johnson was killed in a 2015 auto accident. Brey was insured by the policy because he was a member of his mother’s household, but Johnson lived elsewhere and was not.

Nonetheless, Brey’s attorneys that the state statute that establishes minimum coverages for auto insurance policies does not permit insurers to limit the UIM coverage available to only insured persons who are injured. The Monroe County Circuit Court didn’t buy that argument and granted summary judgment in favor of State Farm, but the Court of Appeals reversed.

Even though the State Farm policy states that coverage is available for bodily injuries only to insured persons, the Fourth District Court of Appeals panel said the plain language of Section 632.32 prohibits that exclusion. The so-called “omnibus statute” establishes minimum coverages for Wisconsin auto insurance policies.

The panel said the statute defines UIM coverage as “coverage for the protection of persons insured under that coverage who are legally entitled to recover damages for bodily injury, death, sickness, or disease from owners or operators of underinsured motor vehicles.” Brey matches that definition, the panel found.

State Farm appealed. The Wisconsin Insurance Alliance and Wisconsin Defense Counsel filed amicus briefs supporting the insurer’s position.

“Requiring insurers to cover the risks associated with individuals who are strangers to the insurance transaction, who are unidentified, and about whom the insurer lacks any information poses significant challenges to, and costs on, insurers who write policies in Wisconsin,” attorneys for the Insurance Alliance said in their brief.

Alliance President Andy Franken said the legislature passed sweeping overhauls of the state insurance statute in 2009, but the vast majority of those changes were repealed after a Republican majority wrested control of the statehouse away from Democrats in 2010. He said plaintiff’s attorneys thought they found an opportunity in the newly worded statute to greatly expand uninsured motorists coverage.

“Getting a unanimous Supreme Court opinion sends a clear message that this is not the way to view the statute, even if it could be written better,” Franken said.

The Supreme Court said if it accepted the Court of Appeals ruling, the omnibus statute would conflict with itself. For example, Section 632.32(5)(f) and (g) permits limits on coverage for insured persons who suffer bodily injury. The opinion said it would be “nonsensical” to apply those limits to insured persons but allow uninjured insureds to circumvent them.

When read in its entirety, the court said, it is clear that the statute intends for UIM coverage to extend only to insured persons who suffer bodily injury.

“We conclude the circuit court properly granted State Farm’s motion for summary judgment and the court of appeals erred in reversing it,” the opinion says.