Oct. 28, 2016 – Wisconsin’s Underinsured Motorist (“UIM”) laws have gone through several significant transformations in the last decade. As a result of legislative changes effective November 1, 2009, and again as of November 1, 2011, UIM practitioners needed to analyze whether or not reducing clauses and anti-stacking provisions contained in insurance policies were applicable or inapplicable in a given case.
Michael Gill, University of Minnesota Law School (1982) is a Partner with the La Crosse law firm of Hale, Skemp, Hanson, Skemp & Sleik, where he specializes in civil litigation, including insurance defense, products liability defense, insurance coverage litigation, personal injury and professional negligence cases.
In 2009, the legislature passed the “Truth in Auto Law,” Wis. Stats. §632.32 (2009-2010), effective for insurance policies issued or renewed on or after November 1, 2009. The “Truth in Auto Law” essentially invalidated clauses contained in insurance policies which reduced the limits of UIM coverage by amounts recovered from “legally liable” parties. The same law established a minimum limit of $100,000 for UIM for policies issued in Wisconsin and eliminated anti-stacking provisions, which previously prevented a policyholder from stacking multiple coverages for a single occurrence.
The legislature again revised the law effective November 1, 2011, with Wis. Act 14, §15(c), 29(1). The 2011 legislation again made reducing clauses and anti-stacking provisions in UIM coverages valid and provided that if an insured elects UIM coverage, the minimum limits must be $50,000 per person, $100,000 per accident.
As we now approach the 5th anniversary of the effective date of the last major revision to UIM law, most of the UIM cases involving the 2009 legislation have gone through the system. As a result, both plaintiff and defense counsel handling UIM cases recognize the validity of certain reducing clauses and anti-stacking provisions in UIM coverage.
In addition, many UIM coverage forms, particularly, but not exclusively, commercial auto policies, contain “duplicate payments” provisions. Most practitioners are familiar with duplicate payment provisions that prohibit the UIM claimant from recovering the “same element of loss” that the plaintiff has already been compensated for by the tort-feasor or from other UM or UIM coverages. For example, if a UIM claimant has $100,000 in damages as a result of an accident and has already received $100,000 from the tort-feasor or the tort-feasor’s liability carrier, there is no expectation that UIM benefits will be paid in addition to the tort recovery. The same would be true if all damages have already been compensated by another uninsured motorist insurer or underinsured motorist insurer.
However, other duplicate payment issues can arise. It is less commonly known that UIM coverage may be reduced by payments from other sources such as workers’ compensation, disability benefits or similar law. A common duplicate payment provision contained in insurance policies will have language similar to the following:
“We will not make a duplicate payment to the extent amounts are paid or payable because of “bodily injury” under workers’ compensation, disability benefits or similar law.”
The Wisconsin Court of Appeals recently analyzed a similar provision in Foster v. Regent Insurance Company, 2016 WI App 67, 884 N.W.2d 534 (Table), 2016 WL3982603, S.Ct. Pet. for Review pending. In Foster, the court of appeals affirmed a trial court ruling reducing damages awarded to the plaintiff in a jury verdict by approximately $180,000 due to duplicate payments received from workers’ compensation and Social Security Disability. Foster was injured in July of 2011 while in the course and scope of his employment and received workers’ compensation benefits to cover both his medical expense and wage loss. Regent argued that pursuant to the duplicate payments provision in the UIM coverage of the policy, plaintiff could not recover payments for a portion of the medical expenses and wage loss as he had already been compensated for these damages by the combination of workers’ compensation and Social Security Disability payments. Plaintiff sought to avoid the application of the “duplicate payments” provision arguing that it violated Wisconsin’s “Truth in Auto Law,” which was in effect as of the date of the Foster accident, and was also contrary to the language of the policy itself. Plaintiff also argued that the collateral source rule prohibited the application of the “duplicate payments” provision.
The court of appeals rejected the plaintiff’s arguments and ruled that the duplicate payments provision did not violate the “Truth in Auto Law” and it was enforceable. The court specifically rejected Foster’s argument that the statutory definitions of “underinsured motorist coverage” and “underinsured motor vehicle” required UIM insurers to stand in the shoes of the tort-feasor for all purposes. The court also indicated that nothing in the “Truth in Auto Law” prohibited a UIM insurer from taking into account payments that an insured received from other sources when computing the payment amount that is necessary for the insured to be fully compensated, up to the policy limit.
The court rejected Foster’s argument that the collateral source rule prohibited the application of the duplicate payments provision. Again, the court noted that neither the “Truth in Auto Law” nor the policy language itself required Regent to duplicate payments made by “collateral sources,” in this case workers’ compensation and SSD. The Court distinguished a duplicate payments provision from a reducing clause concluding that a duplicate payments provision does not reduce the coverage amount available to the UIM claimant. Rather, a duplicate payments provision simply eliminates the UIM claimant’s ability to recover compensation from multiple sources for the same damage items.
Counsel representing insureds in UIM cases must be aware of duplicate payments provisions in insurance policies and be prepared to analyze how they may impact the amount of UIM benefits that a claimant may recover. Counsel should determine whether or not his or her client is in a better position to pursue a disputed workers’ compensation claim or Social Security Disability claim.
Defense counsel should look for the presence of duplicate payment provisions and analyze how they may apply to a given case. If the UIM claimant has purposefully delayed the presentation of a workers’ compensation claim to avoid a reduction in UIM benefits, consideration should be given to filing a motion to refer the issue of workers’ compensation compensability to the Office of Workers’ Compensation Hearings and Appeals for determination of compensability.
Although duplicate payments provisions have been present in insurance policies for many years, few Wisconsin cases address their meaning and application. Because of that, some UIM practitioners may not recognize duplicate payment provisions in the policies. Whether you are representing the plaintiff or the defendant in a UIM case, it can be a significant issue that deserves your attention.