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    April
    23
    2012

    Appeals court says worker's compensation does not offset umbrella policy limit

    Joe Forward
    Legal Writer

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    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.

    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

    Appeals court says worker’s compensation does 
not offset umbrella policy limit 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 compensation.

    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 Sherman explained. 

    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.