WI Supreme Court rules UM coverage is only reduced by payments to insured or estate.

Byline: David Ziemer

Section 632.32(5)(i)2 does not allow an insurer to reduce uninsured motorist (UM) policy limits by worker's compensation payments that are not made to or on the behalf of the insured, the insured's heirs, or the insured's estate.

Despite the unanimity of the Supreme Court justices on that issue, no majority of the court agreed on the rationale for the decision.

Scott Shira died in the course of his employment when an uninsured motorist's vehicle struck the car which he was driving. Because he was unmarried and had no dependents, his worker's compensation death benefit - $159,900 - was paid to the Wisconsin Work Injury Supplemental Fund, instead of his estate, pursuant to sec. 102.49(5)(b).

At the time of the accident, Shira was insured by American Family with UM coverage limits of $150,000.

Shira's parents brought a wrongful death action against American Family to recover the UM benefits. American Family moved for summary judgment, claiming its liability was zero, pursuant to the statute, which authorizes reducing clauses for amounts paid under any worker's compensation law.

Milwaukee County Circuit Court Judge Jeffrey A. Kremers granted the motion, concluding that the statute unambiguously permits the reduction.

The Shiras appealed, and the court of appeals reversed in a published, but split, decision. The majority held that the statute unambiguously allows reduction only for payments to the insured, his heirs, or his estate. Teschendorf v. State Farm Ins. Cos., 2005 WI App 10, 278 Wis.2d 354, 691 N.W.2d 882. The dissent concluded the statute unambiguously did permit reduction for any payment pursuant to the worker's compensation laws.

The Supreme Court granted review, and affirmed the court of appeals, in an opinion written by Justice David T. Prosser Jr.

Three justices - Prosser, Ann Walsh Bradley, and Patience Drake Roggensack - concluded that the statute is ambiguous. Three others - Jon P. Wilcox, N. Patrick Crooks, and Louis B. Butler, Jr. - concluded that the statute unambiguously permits the reduction, but that the result is absurd and must therefore be rejected.

Chief Justice Shirley S. Abrahamson rejected the distinction between ambiguous and unambiguous as futile, but agreed with the end result. Finally, Prosser wrote a concurrence to his own decision, joined by Roggensack, arguing that the reducing clause at issue is ambiguous, and thus, must be interpreted in favor of the insured, regardless of whether the...