Vol. 83, No. 11, November 2010
Looking back over the last several decades, there has been an identifiable link between the political balance of power in Wisconsin state government and significant changes in Wisconsin insurance law. For example, in 1995, shortly after Republicans took control of the legislative and executive branches, a number of legislative measures were enacted that dramatically changed the landscape of tort law in Wisconsin.
In 1995, the governor signed into law changes regarding joint and several liability, punitive damages, and caps on noneconomic damages in medical malpractice lawsuits. Far-reaching changes in Wisconsin insurance law also were instituted, the most consequential being the allowance of anti-stacking language and reducing clauses in uninsured (UM) and underinsured (UIM) motorist policies issued in Wisconsin. In general, these legislative changes narrowed the scope of insurance coverage available to Wisconsin consumers seriously injured in motor vehicle accidents.
In 2008, the political winds began to blow in a different direction. For the first time in decades, Democrats took control of the legislative branch of government in Wisconsin at the same time that a Democrat was governor. Since this change in the balance of power in state government, new legislation has been enacted that, in many respects, rolls back the clock in Wisconsin to pre-1995 insurance law.
Known collectively as the Truth in Automobile Insurance Law (TAIL), these legislative enactments, included as part of Gov. Jim Doyle’s 2009 state budget, significantly alter the law pertaining to insurance coverage for Wisconsin consumers.1 For individuals seriously injured in motor vehicle accidents, especially accidents involving uninsured and underinsured drivers, insurance coverage is potentially much more expansive, akin to that available under Wisconsin law before 1995. In addition, the law imposes several new requirements on insurers issuing policies in Wisconsin. (See the accompanying charts “Comparison of Minimum Insurance Coverages Under the 1995 and 2009 Law Changes” on pages 17 and 54.)
Liability Insurance Limits
Effective for policies issued after Jan. 1, 2010, the minimum bodily injury liability insurance limits were increased from $25,000 per person/$50,000 per accident to $50,000 per person/$100,000 per accident. In addition, the minimum liability limit for property damage was raised from $10,000 per accident to $15,000 per accident.2 The original proposal in the budget called for a phased-in increase in limits over three years, up to $100,000 per person/$300,000 per accident for bodily injury and $25,000 per accident for property damage. The governor vetoed that provision before signing the bill.3
The old liability limits had been in effect since the early 1980s, and the statutes did not provide for periodic increases to keep up with inflation. With the institution of the new liability limits, the minimum limits of liability will be subject to adjustment every five years, after Jan. 1, 2012, based on the “consumer price index for all urban consumers, U.S. city average, for medical care group, as determined by the U.S. department of labor.”4
At the last minute in the budget process, a provision was added that, for the first time, mandated liability insurance coverage for vehicle operators in Wisconsin, effective June 1, 2010. As a consequence, drivers must now carry proof that they are in compliance with the mandatory insurance law and must display that proof “upon demand from any traffic officer” or face fines of up to $500.5
The likely impact of mandatory insurance for consumers in Wisconsin is not certain. Before mandating liability insurance coverage, Wisconsin mandated UM coverage as part of every automobile liability policy issued in Wisconsin.6 As a result, in cases involving accidents with uninsured drivers, Wisconsin consumers could turn to their own insurance carrier for recovery under their own UM policies. Although mandating liability insurance coverage for all drivers may result in a decrease in UM claims and an increase in liability claims, a reduction in the number of accidents in which there exists no available source of insurance recovery for the injured party is not, necessarily, certain to occur.
Uninsured and Underinsured Motorist Coverage
The most significant changes arising from the passage of TAIL are in the area of UM and UIM coverage. The new law substantially increases the amounts recoverable by Wisconsin consumers suffering serious injuries in accidents with uninsured or underinsured drivers.
With regard to both UM and UIM policies, the law increases the minimum limits of liability to $100,000 per person/$300,000 per accident.7 The prior minimum limits were $25,000 per person/$50,000 per accident for UM policies and $50,000 per person/$100,000 per accident for UIM policies.8 The changes in the law, however, go much further than just an increase in minimum limits.
Under prior law, only UM coverage was mandated for automobile liability insurance policies issued in Wisconsin.9 The new law mandates that policies issued in Wisconsin include both UM and UIM coverage.10 In addition, the new law requires that insurers writing umbrella or excess insurance policies that also insure automobiles offer, in writing, both UM and UIM coverage to the policyholder.11 The notice is required to be given only one time: with the application, for new policies issued after Nov. 1, 2009;12 or with the first renewal notice of the policy after Nov. 1, 2009, for existing umbrella or excess insurance policies.13 A policyholder’s rejection of the offered coverage must be in writing to be effective.14
If an insurer fails to provide the required notice, the policy shall be reformed at the insured’s request to provide the same limits for UM/UIM coverage as the liability coverage limits under the excess or umbrella policy.15 For example, in the case of a $1 million umbrella policy, failure to provide proper notice and obtain from the insured a written rejection of coverage will lead to the reformation of the policy to provide
$1 million of UM/UIM coverage. The new law significantly expands the penalty for the lack of statutory notice outlined by the Wisconsin Supreme Court in Stone v. Acuity Insurance Co., in which the court held that the proper remedy for lack of notice of availability of UIM coverage was to read in to the policy only the minimum level of coverage required under the Wisconsin statutes.16
Robert L. Jaskulski, Marquette 1988 cum laude, is a shareholder with Habush Habush & Rottier S.C., practicing in Milwaukee and West Bend. He is a member of the State Bar of Wisconsin and its Litigation Section, the Milwaukee Bar Association, the American Association for Justice, the American Board of Trial Advocates, and the Wisconsin Association for Justice, which he served as president in 2007. He is certified as a civil trial specialist by the National Board of Trial Advocacy, is a frequent lecturer on trial advocacy, and is coauthor of the chapter on physical and mental examinations in Wisconsin Discovery Law and Practice (3d ed. 2006) and the chapter on jury selection in Wisconsin Trial Practice (2d ed. 2007), both published by State Bar of Wisconsin Pinnacle.
The new law also significantly expands coverage for Wisconsin consumers by prohibiting the inclusion of reducing clauses and antistacking language in both UM and UIM policies. In so doing, the law reinstitutes protections afforded consumers before the enactment of the “tort reform” measures of 1995.
Before 1995, the Wisconsin Supreme Court had struck down as “illusory” clauses designed to reduce the insured’s ability to recover the full value of the UM/UIM limit of liability based on payments from other sources.17 This decision by the court was effectively overturned by the enactment in 1995 of Wis. Stat. section 632.32(5)(i), which allowed carriers to include in their UM/UIM policies clauses that reduce the UM/UIM limit of liability based on 1) amounts paid by or on behalf of any person or organization that may be legally responsible for the bodily injury or death for which payment is made; 2) amounts paid or payable under any worker’s compensation law; or 3) amounts paid or payable under any disability benefits law.18 With the enactment of TAIL, such reducing clauses are now specifically prohibited.19
In addition, before 1995, the Wisconsin Supreme Court had determined that, under certain circumstances, an insured could stack multiple policies of UM/UIM coverage based on the language contained in Wis. Stat. section 631.43(1). The inclusion of clauses designed to prohibit such stacking were held to violate Wisconsin law.20 Wisconsin law was changed in 1995 to specifically allow insurers to include clauses that prohibited stacking of UM/UIM policies and medical-payments coverage.21 With the enactment of TAIL, such antistacking clauses are now specifically prohibited.22
Finally, the Wisconsin statutes for the first time now contain a uniform definition of what constitutes an underinsured motor vehicle. Previously, each insurer was left to develop its own definition. The most common policy defined an underinsured motor vehicle as a land motor vehicle “whose limits of liability for bodily injury liability … are less than the limits of liability of this coverage.”23 The new law mandates that an underinsured motor vehicle be defined as a vehicle with liability insurance limits “less than the amount needed to fully compensate the insured for his or her damages.”24
Pursuant to this new definition, UIM coverage is available as excess coverage whenever the underlying liability limits are insufficient to compensate the insured for damages suffered in an accident with an underinsured driver. No longer can UIM coverage be denied based on the amount of liability insurance coverage available to the underinsured driver.
The impact of these changes on consumers in Wisconsin cannot be overstated, as illustrated by the following example. Assume driver A is involved in an accident with driver B and sustains damages valued at $400,000. The accident was caused by the negligence of driver B, who carried a $100,000 liability insurance policy at the time of the accident. Driver A carried his own automobile policy with coverage of $100,000 per person for both liability coverage and UIM coverage. Under that policy, driver A insured his three family vehicles, paying a separate premium for each vehicle covered under the policy.
Under Wisconsin’s old insurance laws, assuming the common industry definition of underinsured motor vehicle, which allowed the insured to recover only when the underinsured driver’s liability limits were less than the insured’s UIM liability limits, driver A would not be covered under the UIM policy issued by his insurer because driver B does not fit within the definition of an underinsured driver. The only avenue of recovery for driver A would be the $100,000 liability policy issued to driver B.
The same factual scenario yields a much different result under TAIL. First, driver A would be allowed to recover UIM benefits under his own insurance policy because, under the new statutory definition of underinsured motor vehicle, driver B has liability limits that are “less than the amount needed to fully compensate [driver A] for his or her damages.” Second, the amount recoverable under driver A’s UIM coverage can no longer be reduced based on payments made from other sources (for example, the underinsured driver’s liability carrier) and, thus, driver A would be entitled to the full UIM policy limit of $100,000. Third, driver A would be allowed to stack all three policies of UIM coverage under the new law, for a total UIM recovery of $300,000.
Coupled with the liability limits of driver B, driver A now is entitled to full compensation for injuries suffered in this serious accident whereas, under prior Wisconsin law, recovery would have been limited to only 25 percent of the recoverable damages. In almost every UM and UIM claim, the amount of insurance available to the insured will be increased by this legislative expansion of coverage, to the benefit of consumers seriously injured in accidents with uninsured and underinsured drivers.
Under prior Wisconsin law, UM coverage was available to insureds involved in hit-and-run accidents.25 The issue of exactly what constitutes a hit-and-run accident was extensively and repeatedly litigated, and Wisconsin courts made physical contact the lynchpin of coverage.26
TAIL has altered UM coverage for hit-and-run accidents by requiring carriers to provide UM coverage even in the absence of physical contact, “provided that an independent 3rd party provides evidence in support of the unidentified motor vehicle’s involvement in the accident.”27The statute does not define who or what constitutes an independent third party. Will a passenger in the vehicle of the insured making the UM claim be considered an independent third party? Will only someone unrelated in any regard to the insured making the UM claim satisfy the definition of an independent third party? The meaning of the language in the statute seems a likely subject of future litigation.
The scope of medical-payments coverage also has been dramatically altered by the recent changes in Wisconsin law. Under prior law, all policies issued in Wisconsin were required to include medical-payments coverage, with a minimum limit of $1,000 per person, unless the policyholder specifically rejected such coverage.28 The new law increases the minimum amount of medical-payments coverage to $10,000 per person.29 More important, antistacking provisions with respect to medical-payments coverage now are specifically prohibited.30 Consequently, like UM and UIM policies, medical-payments coverage can be stacked, with a three-vehicle limit.
Wisconsin Insurance Law in the Future
Lawyers should carefully review the insurance policies issued to their clients and become familiar with the recent legislative changes to Wisconsin insurance law when trying to determine the scope of coverage available to a client after a motor vehicle accident. Lawyers also must remember that a change in the political balance of power in state government may yield equally dramatic changes in Wisconsin insurance law in the future. It remains vitally important to keep abreast of changes in Wisconsin’s insurance statutes.
Comparison of Minimum Insurance Coverages
Under the 1995 and 2009 Law Changes
|Type of Insurance
||2009 Law (effective Jan. 1, 2010)|
||$25,000 per person or $50,000 per occurrence
||$50,000 per accident or $100,000 per occurrence|
||$25,000 per person or $50,000 per occurrence
||$100,000 per person or $300,000 per occurrence|
||$50,000 per person or $100,000 per occurrence
||$100,000 per person or $300,000 per occurrence|
|Reducing Clauses for UM/UIM coverages
||Companies were allowed to reduce UM/UIM coverage by amounts paid by the person or organization legally responsible, paid or payable under worker’s compensation law, or paid or payable under disability benefits law. If consumer purchased $100,000 in UIM coverage and the other driver carried $50,000 in liability coverage, insurers could deduct the $50,000 in coverage, leaving the consumer with only $50,000 in UIM coverage.
||Companies are not allowed to include reducing clauses in their policies. If consumers purchase $100,000 in UM/UIM coverage, that is the amount of coverage they are entitled to receive if the injuries sustained require that amount of coverage.|
||Companies were allowed to include language in their policies prohibiting consumers covered under more than one auto insurance policy from stacking coverage from multiple UM/UIM or medical-payments policies to pay for damages suffered in an accident.
||Companies are not allowed to include antistacking provisions in their policies. Consumers are able to stack the additional coverage from up to three UM/UIM or medical-payments policies to pay for damages suffered in an accident.|
Definition of UIM Coverage
|Definition of UIM Coverage
||Each company was allowed to create its own definition of what is considered an underinsured vehicle. Most companies adopted a definition comparing the negligent driver’s liability coverage with the UIM coverage of the policyholder. If the negligent driver had $100,000 in liability coverage and the policyholder had $100,000 in UIM coverage, there was no UIM coverage.
||There is a new common definition that requires all companies to define UIM coverage by comparing the negligent driver’s liability limit with the amount of damages actually sustained by the policyholder.|
||Previous law required that a vehicle be “hit” to qualify for hit-and-run coverage under a UM insurance policy. If someone was involved in an accident caused by an unidentified vehicle but there was no physical contact, the insurance company could deny coverage even if there were witnesses to the accident.
||UM coverage will apply if evidence can be shown by an independent party that an unidentified vehicle caused the accident, even if there was no physical contact. An injured party must prove that the unidentified vehicle caused the accident.|
Umbrella Policies and UM/UIM Coverage
|Umbrella Policies and UM/UIM Coverage
||Companies were obligated to offer UM/UIM policies when umbrella policies were written but were not required to document the consumers’ response to the offer. The penalty for failing to offer the coverage was the minimum coverage provided by law.
||Companies must still offer UM/UIM coverage as a part of umbrella policies, but consumers refusing the coverage must do so in writing. The penalty for failing to offer the coverage is the same limit as the liability coverage in the umbrella policy.|