Appeals court says worker’s compensation does not offset
umbrella policy limit
Insured individual gets additional $345,000 where “reducing
clause” not clearly incorporated into an umbrella policy of
insurance, appeals court concludes.
By org jforward wisbar Joe Forward, Legal Writer,
State Bar of Wisconsin
April 23, 2012
– A deputy sheriff who received nearly $345,000 in worker’s
compensation benefits will also get the full $1 million policy limit
from his private insurer because of ambiguous language in the policy, a
state appeals court recently ruled.
Dale Veto was working as a deputy sheriff for Dane County when he was
struck and seriously injured by an uninsured driver who had stolen the
car. His injuries exceeded $1 million.
Worker’s compensation covered about $345,000. Veto also had two
insurance policies with American Family Insurance Company – an
underlying auto insurance policy with a $100,000 cap per person and an
umbrella policy with a $1 million limit.
The auto insurance policy contained a “reducing clause”
that reduced the policy limit by amounts obtained through worker’s
The umbrella policy did not contain a reducing clause, but American
Family argued that the auto policy’s reducing clause was
incorporated into the umbrella policy and paid Veto about $655,000, the
$1 million policy reduced by the worker’s compensation amount.
The Dane County Circuit Court agreed with American Family and dismissed
Veto’s claim that the umbrella policy did not incorporate the auto
policy’s “reducing clause” and thus American Family
still owed Veto $345,000 under his umbrella policy.
But in Veto
v. American Family Ins. Co., 2011AP557 (April 12, 2012), the
District IV Wisconsin Court of Appeals reversed, concluding that the
umbrella policy was ambiguous and thus the reducing clause did not apply
to the umbrella policy.
American Family relied on a provision in the umbrella policy that said
the umbrella policy would be “no broader than” the
underlying uninsured motorist insurance.
The phrase “no broader than” was a catch-all phrase,
American Family argued, incorporating all the terms of the auto policy
into the umbrella policy, including the reducing clause.
The appeals court disagreed. “If all of the terms of the
underlying coverage were incorporated into the coverage provided by the
umbrella policy endorsement, the automobile policy’s uninsured
motorists coverage limit would necessarily be incorporated,” wrote
Judge Gary Sherman, noting that the uninsured motorist policy capped
amounts at $100,000 per person.
“A reasonable policyholder would not pay the additional premium
for an endorsement in order to get noting additional,” Judge
Thus, the court reversed the circuit court judgment. “There being
two reasonable interpretations of the policy language, it is ambiguous
as a matter of law,” Sherman wrote.