Vol. 84, No. 10, October 2011
Less than two years after the legislature passed an automobile insurance law as part of the 2009-11 state budget,1 a legislature comprised of many new members passed a law2 that repealed the 2009 legislation and created more restrictions to recovery. This article discusses the changes that will become effective on Nov. 1, 2011, and how these changes will affect Wisconsin residents who are injured in automobile accidents.3
Changes to Required Minimum Amounts of Liability Insurance Coverage
Before passage of the 2009 law, the minimum coverage for automobile liability insurance was $25,000 per injured person, $50,000 per accident, and $10,000 for property damage. The required minimum amounts of $25,000/$50,000 were first established in 1982.4 The $10,000 property damage amount was first established in 1978.5 The 2009 law increased the required minimum limits of coverage to $50,000 per injured person, $100,000 per accident, and $15,000 for property damage.6 The 2011 law returns the liability limits to what they had been before the 2009 increases.7
Changes to Uninsured Motorist Coverage and Underinsured Motorist Coverage
Before the 2009 law, automobile insurance policies were required to provide uninsured motorist (UM) coverage but not underinsured motorist (UIM) coverage. The 2009 law required insurers to include both UM and UIM coverage in their policies and raised the minimum UM coverage of $25,000/$50,000 to $100,000/$300,000 and the minimum levels of UIM coverage from $50,000/$100,000 to $100,000/$300,000.8
The 2011 law returns the limits to what they had been before the 2009 legislation and repeals the law that required automobile insurance policies to include UIM coverage.9 Although UIM coverage is no longer mandatory, insurance companies must provide written notice of the availability of that coverage and a brief description of the coverage. An insurer is required to provide the notice only one time and in conjunction with the delivery of the policy. Acceptance or rejection of UIM coverage need not be in writing. The absence of a premium payment for UIM coverage is conclusive proof that the person has rejected such coverage. If a person rejects UIM coverage after being notified in writing by the insurer, the insurer is not required to provide such coverage under a policy that is renewed to the person by that insurer, unless an insured person requests such UIM coverage in writing.10
A major change from the current law is the repeal of the 2009 provision that defined the term underinsured motor vehicle in a way that prevented insurers from avoiding payment of UIM benefits to some seriously injured people. Before the 2009 legislation, an insurer could define underinsured vehicle as a vehicle with less liability insurance than the limit of UIM coverage protecting the injured person. Thus, if a person had purchased UIM coverage of $100,000 and then was injured in a collision and had damages of $200,000, and the negligent driver had $100,000 of liability coverage, the injured person would not recover the $100,000 of UIM benefits because the at-fault driver’s liability insurance policy limit was not “less than” the UIM limit. The 2009 legislation defined an underinsured motor vehicle as one
for which the limits of liability insurance were less than the amount needed to fully compensate the insured “for his or her damages.”11 Thus, in the example above, the injured person would be entitled to the full $100,000 of UIM coverage under the 2009 law. With the 2011 repeal of the statutory definition of underinsured motor vehicle, the insurance companies are again allowed to define UIM coverage in a way that may deprive the injured person of receiving any of the UIM coverage the person thought he or she had purchased.
A related change brought about by the new legislation is that insurance companies are no longer prohibited from including “reducing clauses” in their automobile insurance policies. The new law allows insurers to provide in their policies that UM and UIM coverage can be reduced by amounts paid by or on behalf of the at-fault driver, by amounts paid or payable under any worker’s compensation law, and by amounts paid or payable under any disability benefits laws.12 Such reducing clauses were disallowed by the 2009 law.13
The new legislation also repeals a provision of the 2009 law that prohibited insurance companies from having policy provisions precluding the “stacking” of UM or UIM coverage when the insured had more than one automobile insured by the company. Such antistacking insurance provisions had been specifically allowed by legislation passed in 1995.14 The 2009 law provided that no insurance policy could limit UM or UIM coverage to the amount contained in just one policy if the insured purchased such coverage on more than one vehicle, although the insurer could limit the number of “stacked” motor vehicle policies to three.15
A perfect example of the significance of the UIM coverage changes was presented at a committee hearing on the 2011 bill. Carroll Plumb was severely injured in an accident during the summer of 2010. His medical expenses were in excess of $1 million. He was reaching his lifetime limit on his rehabilitation costs. The at-fault driver who hit Plumb had a $250,000 liability-insurance policy. Plumb had purchased UIM coverage of $300,000 for each of his two vehicles. Under the law established in 2009, Plumb received the at-fault driver’s $250,000 and both of his $300,000 underinsured motorist policies, for a total of $850,000. He was able to pay his bills and save his home. Under the terms of the new law, Plumb’s own insurance company could have written into the policies an “anti-stacking clause” and a “reducing clause” that could have limited Plumb’s recovery from his own insurer to just $50,000, the UIM amount of just one policy reduced by the proceeds from the other driver’s liability policy. A total recovery of $300,000 is a far cry from the $850,000 Plumb recovered under the statutory protections of the current law.
J. Michael End, Marquette 1973, is a partner in the Milwaukee law firm of End, Hierseman & Crain LLC, where he represents plaintiffs in tort actions, with an emphasis in medical malpractice law. He is president of the Wisconsin Association for Justice and a past president of the Wisconsin chapter of the American Board of Trial Advocates. He was selected as the first recipient of the Robert L. Habush Trial Lawyer of the Year by the Wisconsin Academy of Trial Lawyers in 2000. Reach him at firstname.lastname@example.org.
Medical Payments Coverage Changes
Wisconsin first required automobile insurance companies to offer medical-payments coverage of $1,000 in 1976.16 The minimum-coverage amount continued to be $1,000 until the 2009 legislation increased it to a minimum of $10,000.17 The new law repealed the increased limit contained in the 2009 law, returning the required offer of coverage to $1,000.18 If the insured person rejects the coverage, the coverage need not be provided in a subsequent renewal policy issued by the same insurer unless the insured requests it in writing.19 That provision is the same as existing law.20
The new legislation also changes the law regarding stacking of medical payments when an insured has such coverage for more than one vehicle. The 2009 law forbade policy provisions preventing stacking of medical-payments coverage and specifically allowed stacking up to three policies.21 The new law allows insurance companies to again prohibit stacking of medical-payments coverage.22
Umbrella and Excess Liability Policies
The new legislation repeals a provision of the 2009 law that required insurers selling umbrella or excess-liability policies to provide written offers of UM and UIM coverage, which offers had to include a brief description of the coverage offered.23 The 2009 law provided that a person rejecting such coverage had to do so in writing.24
Phantom Motor Vehicle Law
The changes made by the new legislation that are discussed above do nothing more than return automobile insurance law to what existed before the 2009 legislation. The 2011 law adds new statutory conditions that must be met for a person to recover compensation for injuries caused by a “phantom vehicle.” The 2009 law included in the definition of uninsured motor vehicle an unidentified motor vehicle, so long as an independent third party provided evidence in support of the unidentified motor vehicle’s involvement in the accident.25
The new law repeals that part of the 2009 law and replaces it with a definition of phantom vehicle, which is a motor vehicle involved in an accident with a person who has UM coverage, if the motor vehicle makes no physical contact with the insured or with a vehicle the insured is occupying and the identity of neither the operator nor the owner of the motor vehicle is known.26 To recover compensation under the UM coverage, the facts of the accident must be corroborated by “competent” evidence that is provided by someone other than the insured or any other person who makes a claim against the UM coverage as a result of the accident.
Informing Clients about the New Law
Most clients do not discuss automobile insurance with their lawyer until after an accident, when it is too late. To try to remedy this, the Wisconsin Association for Justice (WAJ) will have available by Nov. 1, 2011, a template for a brochure that lawyers can send to clients. For more information, contact WAJ research director Ruth Simpson at email@example.com.
In addition, the insured or someone on behalf of the insured must report the accident to a police officer or to the Wisconsin Department of Transportation within 72 hours after the accident and must, within 30 days after the accident, file with the insurer a statement under oath that the insured or a legal representative of the insured has a cause of action arising out of the accident for damages against a person whose identity is not ascertainable and setting forth the facts in support of the statement.27 These new time-sensitive requirements may be difficult to comply with when an injured person suffers a life-threatening or incapacitating injury. These requirements will undoubtedly require courts to determine the consequences when an injured person is unable to comply with the statutory requirements.
Mandatory Automobile Insurance
Wisconsin did not have a law requiring automobile insurance until the 2009 legislation was enacted.28 That change in Wisconsin law was not repealed by the new legislation. Other than maintaining the mandatory-insurance provision of the 2009 law and enacting the phantom-vehicle reporting requirements mentioned above, the 2011 legislation simply returns Wisconsin automobile law to what had existed before passage of the 2009 law.
Potential Policy-Renewal Issue
The 2009 law placed restrictions on insurance companies’ use of policy language to provide less coverage than what many consumers thought they were getting. Examples are the prohibition of antistacking of UM or UIM coverage and the prohibition of reducing clauses. The new law again allows insurers to include such provisions in their policies. It also allows insurers to sell lower amounts of coverage. The unresolved question is what the insurers will do with the opportunities they again have. Will they sell policies with antistacking provisions, reducing clauses, and definitions of underinsured motor vehicle that will deny insured people the coverage they think they are purchasing?
A consideration for the insurance companies and agents is whether, when current policies complying with the 2009 law expire and are to be renewed, the companies and agents will sell policies that contain less favorable terms than the current policies. If they do, will the provisions of Wis. Stat. section 631.36(5) come into play? That statute provides that if an insurer offers or purports to renew a policy on less favorable terms, the new terms take effect on the renewal date if the insurer sent by first-class mail or delivered to the policyholder notice of the new terms at least 60 days before the renewal date. If the insurer does not notify the policyholder of the new terms before the renewal date, the insurer must continue the policy for an additional period equivalent to the expiring term and on the same terms as the expiring policy.
What Consumers Should Do
Most people drive. All drivers, passengers, and pedestrians are at risk of serious injury as a result of an automobile accident. People maintain adequate automobile liability insurance so that they can responsibly compensate someone they injure through their negligence and protect their assets. People maintain adequate UM and UIM coverage to financially survive when they are injured in a serious accident. The ability of insurance companies to write restrictive definitions of UIM coverage, reducing clauses, and antistacking provisions means that consumers’ ability to be adequately compensated if they are badly injured may be adversely affected if they are not vigilant in understanding the terms of the policies they purchase. When a current policy is about to expire, a person should make sure that the current coverage will continue in the new policy. If the current insurer is unwilling to sell the same coverage, a person should find another company that will.
Because many consumers are unaware of what reducing clauses are, or of the significance of how underinsured motorist is defined in their policies, lawyers should try to let their clients know about these potential traps contained in the insurance policies they may be getting ready to buy.
The law that will go into effect on Nov. 1, 2011, reduces the minimum amounts of liability coverage to amounts first enacted in 1982; the minimum amount for property damage to the amount first enacted in 1978; and the minimum amount of medical-payments coverage to the amount first enacted in 1976. The law allows insurance companies to reduce UM and UIM coverage if they choose to provide for that in their policies. It is likely that many consumers will not recognize the potential weakening of the insurance they purchase and, as a result, will suffer financially if they are seriously injured in an automobile accident. It is the lawyer’s responsibility to advise clients of the potential risks they may face as a result of the new law.
1 2009 Wis. Act 28.
2 2011 Wis. Act 14.
3 Id., § 29.
4 1981 Wis. Act 284.
5 1977 Wis. Act 293.
6 2009 Wis. Act 28, § 2962t.
7 2011 Wis. Act 14, §§ 3 – 11.
8 2009 Wis. Act 28, §§ 3156, 3159, 3161.
9 2011 Wis. Act 14, §§ 17m, 18m, 21m.
10 Id., § 21m.
11 2009 Wis. Act 28, § 3153.
12 2011 Wis. Act 14, § 26.
13 2009 Wis. Act 28, § 3168.
14 1995 Wis. Act 21, § 4.
15 2009 Wis. Act 28, § 3169.
16 1975 Wis. Act 375.
17 2009 Wis. Act 28, § 3164.
18 2011 Wis. Act 14, § 20c.
19 Id., § 20m.
20 Wis. Stat. § 632.32(4)(b).
21 2009 Wis. Act 28, § 3170.
22 2011 Wis. Act 14, § 24.
23 Id., § 22.
24 2009 Wis. Act 28, § 3167.
25 Id., § 3155.
26 2011 Wis. Act 14, § 14.
27 Id., § 17.
28 2009 Wis. Act 28, § 2967r.