Oct. 14, 2014 – Barry Hunt was seriously injured when his vehicle collided with a Dane County snow plow. Recently, a state appeals court ruled that a statutory damages cap does not limit Hunt’s ability to recover under his underinsured motorist insurance policy.
Under Wis. Stat. section 345.05(3), individuals injured or killed as a result of the negligent operation of a vehicle owned and operated by a municipality cannot seek more than $250,000 in damages against the municipality.
Hunt and his wife sought $5.85 million in damages resulting from the negligent operation of the snow plow. The Hunt’s argued that the damages cap triggered their underinsured motorist policy with State Farm Insurance, but State Farm did not agree.
State Farm argued that under the policy, the Hunts could only get damages that they were “legally entitled to recover” from the driver of the underinsured vehicle, and the Hunts were legally entitled to recover no more than $250,000 from Dane County.
In addition, State Farm argued that government-owned vehicles were not considered “underinsured motor vehicles” under the policy and were thus exempted from coverage.
The circuit court ruled for State Farm, concluding the underinsured motorist policy did not cover the Hunts for the collision. However, in State Farm Mutual Automobile Ins. Co. v. Hunt, 2013AP2518 (Oct. 2, 2014), the District IV Appeals Court reversed.
A three-judge panel noted that the policy was issued in 2011, a time when underinsured motorist coverage was mandated by Wisconsin statute (it isn’t anymore). Thus, the court reviewed prior statutes to determine the damages cap was not a bar to recovery.
The panel noted that underinsured motorist coverage covered persons who were “legally entitled to recover” from the underinsured motorist. However, it rejected State Farm’s claim that the Hunts were legally entitled to recover no more than $250,000.
“On its face, this language requires that the insured be able to demonstrate a valid tort claim for damages in some amount against the tortfeasor, but it does not speak to whether all alleged damages are recoverable,” wrote Judge Brian Blanchard.
The panel also noted that applicable statutes defined “underinsured motor vehicle” as a vehicle with policy limits less than needed to fully compensate an injured party.
“It follows that the legislature used the phrase ‘legally entitled to recover’ to mean recovery that exceeds what insureds can actually recover from tortfeasors,” wrote Judge Blanchard, noting the law ensured individuals were covered up to policy limits, regardless of whether the vehicle at issue was owned by a governmental unit.
The panel also rejected State Farm’s argument that its policy with the Hunts excluded coverage for accidents with government-owned vehicles.
The panel explained that the applicable law required policies to include underinsured motorist coverage, and excluding coverage for government vehicles violated the law.
Underinsured Motorist Coverage: What You Don’t Know Can Hurt You – WisBar InsideTrack, July 2, 2014