The Enforceability of the Drive-Other-Car Exclusion in Light of the Truth in Automobile Insurance Act of 2009
In July 2010, Sam was riding his moped in his hometown of Appleton, Wisconsin, when Natasha, an uninsured driver, crashed into the moped. Sam’s moped was insured under a policy with one insurer, while two cars that he and his wife, Nancy, owned were separately insured under a different policy issued by a separate insurer. Both the moped policy and the vehicle policy carried $100,000 of uninsured motorist coverage per vehicle. How much uninsured motorist coverage is available to Sam?
That issue is being heavily litigated throughout courts in Wisconsin, and the answer generally turns on the enforceability of the drive-other-car exclusion under the Truth in Automobile Insurance Act of 2009 (“the Act”).[i] The drive-other-car exclusion typically precludes coverage for policy holders driving vehicles they own but do not list on the policy under which they are making a claim, while one provision of the Act prohibits insurers from limiting the availability of more than one policy against the same loss.
This Article analyzes the issue from an insurer’s perspective and is intended to offer guidance for insurance defense counsel faced with the issue. Part I introduces the issue. Part II offers five reasons why drive-other-car exclusions should be enforced notwithstanding the provisions of the Act. Part III offers counterarguments to arguments typically made by policy holders as to why the Act’s provisions should invalidate the drive-other-car exclusion. Part IV concludes the Article.
The dispute between insurers and policy holders with respect to the availability of uninsured and underinsured motorist coverage under separate policies of insurance arises from the intersection between Wis. Stat. § 632.32(5)(j) and the former Wis. Stat. § 632.32(6)(d), which was enacted as part of the Act in November 2009 but was repealed in November 2011. While § 632.32(5)(j) permits insurers to include drive-other-car exclusions in their policies with respect to “any coverage” provided by an automobile insurance policy, § 632.32(6)(d) prohibited policy provisions that do not allow the limits for insurance coverage applying to each of a policy holder’s vehicles to be added together, regardless of the number of policies or vehicles involved and premiums paid.
More specifically, Wis. Stat. § 632.32(5)(j) provides as follows:
(j) A policy may provide that any coverage under the policy does not apply to a loss resulting from the use of a motor vehicle that meets all of the following conditions:
1. Is owned by the named insured, or is owned by the named insured’s spouse or a relative of the named insured if the spouse or relative resides in the same household as the named insured.
2. Is not described in the policy under which the claim is made.
3. Is not covered under the terms of the policy as a newly acquired or replacement motor vehicle.
And, from November 1, 2009, until November 1, 2011, Wis. Stat. § 632.32(6)(d) provided as follows:
(d) No policy may provide that, regardless of the number of policies involved, vehicles involved, persons covered, claims made, vehicles or premiums shown on the policy, or premiums paid, the limits for any uninsured motorist coverage or underinsured motorist coverage under the policy may not be added to the limits for similar coverage applying to other motor vehicles to determine the limit of insurance coverage available for bodily injury or death suffered by a person in any one accident, except that a policy may limit the number of motor vehicles for which the limits for coverage may be added to 3 vehicles.
Also bearing upon the issue is Wisconsin case law from before 1995. At that time, automobile insurance policy provisions that prevented policy holders from collecting damages under separate policies, known as stacking, were not permitted in automobile policies issued in Wisconsin. And, in a 1985 decision, Welch v. State Farm Mut. Auto. Ins. Co.,[ii] the Wisconsin Supreme Court held that, in all practical respects, a drive-other-car exclusion similar to the type of drive-other-car exclusion permitted under Wis. Stat. § 632.32(5)(j) violated public policy because it constituted an impermissible anti-stacking provision with respect to the availability of uninsured or underinsured motorist coverage. When Welch was decided, however, Wisconsin’s statutes did not yet permit the inclusion of drive-other-car exclusions in automobile policies now permitted under § 632.32(5)(j).
The issue for accidents that occurred between November 1, 2009, and November 1, 2011, then, is whether the drive-other-car exclusion permitted under Wis. Stat. § 632.32(5)(j) is an impermissible anti-stacking provision under the former Wis. Stat. § 632.32(6)(d).
From an insurer’s perspective, the drive-other-car exclusion permitted under Wis. Stat. § 632.32(5)(j) should be enforced for at least the following five reasons.
Drive-Other-Car Exclusions Are Specifically and Unambiguously Authorized by Statute. When interpreting statutes, a court’s purpose is to discern legislative intent, and to that end, courts in this state first look to the language of a statute as the best indication of such intent.[iii] Because courts presume that the legislature says what it means and means what it says, interpretation is unnecessary when a statute is plain and unambiguous—in other words, intentions cannot be imputed to the legislature except as may be gathered from the statute’s plain terms.[iv]
Wisconsin Stat. § 632.32(5)(j) specifically authorizes one category of drive-other-car exclusions with respect to “any coverage” provided by an automobile insurance policy, and as the Wisconsin Supreme Court has found, the legislature’s directive in authorizing the exclusion was clear and unambiguous, and—out of respect for the separation of powers—cannot be ignored or rewritten by the courts.[v] Because the drive-other-car exclusion has been clearly and unambiguously authorized by the legislature, it must be enforced by the courts.[vi] Indeed, under well-established principles of statutory construction and out of respect for the separation of powers, no further analysis is arguably warranted or necessary.
Properly Construed, Wis. Stat. §§ 632.32(5)(j) and 632.32(6)(d) Can Be Harmonized, Giving Effect to the Drive-Other-Car Exclusion. It is well recognized that, if possible, statutes should be harmonized in a way that gives each force and effect.[vii]
To give force and effect to both Wis. Stat. §§ 632.32(5)(j) and 632.32(6)(d), courts should interpret the statutes as being mutually exclusive and recognize that § 632.32(6)(d) does not prohibit the drive-other-car exclusion authorized by § 632.32(5)(j). Section 632.32(6)(d) provides that “[n]o policy may provide that . . . the limits for any uninsured motorist coverage . . . may not be added to the limits for similar coverage applying to other motor vehicles,” but no “coverage [applies] to other motor vehicles” where a policy contains a drive-other-car exclusion authorized by § 632.32(5)(j).
In other words, Wis. Stat. § 632.32(6)(d) does not apply to a policy when it contains a valid drive-other-car exclusion because no coverage is provided in the first instance.[viii] On the other hand, when the drive-other-car exclusion does not apply, multiple uninsured motorist coverages against the same loss may exist—for example, where a policy includes coverage for multiple vehicles owned by the policy holder. In such a circumstance, the drive-other-car exclusion does not apply and multiple policies may provide coverage against the same loss, thus becoming subject to the limitation in § 632.32(6)(d).
Like the Statutory Text, Wis. Stat. § 632.32(5)(j)’s Context and History Demonstrate that Drive-Other-Car Exclusions Should Be Enforced. If necessary, Wisconsin courts may examine a statute’s context and history to discern legislative intent.[ix] And in analyzing a statute’s context and history, Wisconsin courts recognize that the legislature acts with full knowledge of existing statutory and case law.[x] Therefore, under well-established law, a statute’s construction will stand unless the legislature explicitly changes the law.[xi]
In order to place Wis. Stat. § 632.32(5)(j)’s enforceability in context, two propositions must be considered: (1) at the time that Wis. Stat. § 632.32 was amended in 2009, the specific type of drive-other-car exclusion authorized by § 632.32(5)(j) was valid and enforceable; and (2) the legislature specifically chose not to change any of § 632.32(5)(j)’s terms at the time that § 632.32 was amended by the Act.
In 2000, the enforceability of drive-other-car exclusions came before the Wisconsin Supreme Court in Blazekovic v. City of Milwaukee.[xii] There, Blazekovic was injured when an uninsured motorist negligently collided with a fire truck she occupied while on the job as a City of Milwaukee firefighter.[xiii] The City had uninsured motorist coverage for occupants of its fire trucks, and at issue was whether Blazekovic had additional uninsured motorist coverage under a policy that covered her personal car.[xiv] The personal policy contained a drive-other-car exclusion that stated that uninsured motorist coverage “shall not apply to [Blazekovic] when using non-owned emergency type vehicles in connection with [her] employment, occupation, or profession.”[xv]
In analyzing whether the drive-other-car exclusion contained in the personal policy was enforceable, the supreme court specifically found that Wis. Stat. § 632.32(5)(j) was intended to replace the broad proposition that uninsured motorist coverage is available in all circumstances and that the statute authorized a particular type of exclusion that excluded uninsured motorist coverage.[xvi] Because the drive-other-car exclusion in Blazekovic’s personal policy was not the type of drive-other-car exclusion authorized by § 632.32(5)(j), the supreme court found it to be unenforceable, but at the same time, the court affirmed that any drive-other-car exclusion that follows § 632.32(5)(j)’s terms must be enforced by the courts.[xvii]
In 2009, the legislature revisited the law on uninsured motorist insurance and, as part of wide-ranging amendments, enacted Wis. Stat. § 632.32(6)(d). Although early versions of the amendments revised Wis. Stat. § 632.32(5)(j) so that drive-other-car exclusions could not limit the availability of uninsured and underinsured motorist coverage, the final version did not include any amendment to § 632.32(5)(j).[xviii] In other words, § 632.32(5)(j) was specifically left unchanged.
In sum, when the legislature amended the law on uninsured motorist insurance in 2009, courts must assume that it did so fully aware of the Wisconsin Supreme Court’s construction of Wis. Stat. § 632.32(5)(j), which declared drive-other-car exclusions to be unambiguous and enforceable. Though the legislature considered amending § 632.32(5)(j) in early versions of the 2009 amendments, the section was ultimately left unchanged. The legislative history of § 632.32(5)(j) thus demonstrates that drive-other-car exclusions were intended to be and are authorized, valid, and enforceable.
As Applied, Wis. Stat. § 632.32(5)(j) Is More Specific than Wis. Stat. § 632.32(6)(d) and Should Therefore Control. Under well-established principles of statutory construction, if two statutes that apply to the same subject conflict, the more specific statute controls.[xix] Or, in other words, where two statutes are irreconcilable, the more specific prevails over the more general.[xx] As the United States Supreme Court recently recognized, “[t]he general/specific canon is perhaps most frequently applied to statutes in which a general permission or prohibition is contradicted by a specific prohibition or permission. To eliminate the contradiction, the specific provision is construed as an exception to the general one.”[xxi]
Even assuming that Wis. Stat. §§ 632.32(5)(j) and 632.32(6)(d) irreconcilably conflict—which, as demonstrated above, need not be the case—§ 632.32(5)(j) provides a specific permission and should therefore control. Section 632.32(6)(d) does not mention drive-other-car exclusions, while § 632.32(5)(j) describes and authorizes a particular type of drive-other-car exclusion. Accordingly, if the statutes cannot be reconciled, the validity and enforceability of drive-other-car exclusions must be controlled by and enforced under § 632.32(5)(j) because that is the more specific statute as applied to the circumstances.
The Drive-Other-Car Exclusion Should Be Enforced Because Doing so Would Advance Wis. Stat. § 632.32(5)(j)’s Purpose. In interpreting statutes, courts ultimately presume that “the legislature intends for a statute to be interpreted in a manner that advances the purposes of the statute” and construe statutes in a manner that directly advances their purposes.[xxii]
Wisconsin Stat. §§ 632.32(6)(d) and 632.32(5)(j) authorize different things, serve different purposes, and function in different ways. The purpose of the former was to establish a monetary limit on recovery by limiting stacking. As Wisconsin law recognizes, “[s]tacking is just another word to denote the availability of more than one policy in the reimbursement of the losses of the insured.”[xxiii] Stacking is required only when two or more policies promise to indemnify an insured against the same loss.[xxiv]
On the other hand, Wis. Stat. § 632.32(5)(j) is not an anti-stacking statute—the section instead authorizes an exclusion. Uninsured motorist policies with drive-other-car exclusions authorized by § 632.32(5)(j) promise protection against losses arising from the use of the vehicle described in that policy and exclude protection against losses arising from the potential or habitual use of other vehicles owned by the named insured. Therefore, policies with the drive-other-car exclusion authorized by § 632.32(5)(j) are intended to and do promise protection against different losses.[xxv]
The point is aptly demonstrated by the example at the beginning of this Article. The policy that was issued to Sam with respect to his vehicles contained a drive-other-car exclusion authorized by Wis. Stat. § 632.32(5)(j) and, as a result, was clearly not intended to protect against a loss resulting from Sam’s potential or habitual use of a moped that he owned. Sam was aware of this and so separately procured insurance specific to losses resulting from his use of his moped. The policy on Sam’s moped and the policy on his cars were intended to and do promise protection against different losses that arise from different risks and that are covered by different policies. Because the policies do not promise to indemnify Sam for the same loss, stacking is not required and applying Wis. Stat. § 632.32(6)(d) would not advance that statute’s purpose. On the other hand, the purpose of § 632.32(5)(j) is to allow insurers to exclude the particular type of loss at issue, and applying the statute to enforce the drive-other-car exclusion would directly advance that purpose.
In response to insurers’ arguments concerning the availability of uninsured and underinsured motorist coverage, policy holders typically argue that the drive-other-car exclusion permitted under Wis. Stat. § 632.32(5)(j) should only be enforced to limit the availability of liability coverage to a policy holder who is using a vehicle he or she owns, but is not listed on any policy issued to him or her. The argument should be rejected for at least three reasons.
The Policy Holder Argument Ignores Wis. Stat. § 632.32(5)(j)’s Plain Terms. Section 632.32(5)(j)’s introduction states that “[a] policy may provide that any coverage under the policy does not apply to a loss resulting from the use of a motor vehicle . . . .” The subsection clearly, unambiguously, and unquestionably authorizes drive-other-car exclusions with respect to “any coverage” available under an automobile insurance policy and is not limited to “liability” coverage.
The Policy Holder Argument Improperly Relies on Wis. Stat. § 632.32(5)(e). Policy holders often ask courts to resolve the issue by relying upon § 632.32(5)(e), which states that “a policy may provide for exclusions not prohibited by Subsection (6) or other applicable law.” Because § 632.32(6)(d) states that no policy may prohibit stacking uninsured or underinsured motorist coverage limits, and since enforcing the drive-other-car exclusion would arguably limit the amount of uninsured or underinsured motorist coverage available to the policy holder, policy holders argue that drive-other-car exclusions should be invalidated with respect to uninsured or underinsured motorist coverage in accordance with § 632.32(5)(e).
That argument is misplaced, both under Wis. Stat. § 632.32’s terms and under controlling case law. Wisconsin Stat. § 632.32(5) is entitled “Permissible Provisions.” Under one of its subsections, Wis. Stat. § 632.32(5)(j), drive-other-car exclusions are expressly permitted. A separate subsection, Wis. Stat. § 632.32(5)(e), states that a policy may provide for exclusions not prohibited by Wis. Stat. § 632.32(6) or other applicable law. Accordingly, in proper context, drive-other-car exclusions that track § 632.32(5)(j)’s terms are permissible under § 632.32(5) as are any exclusions that are not specifically prohibited by § 632.32(6) or other applicable law.
Indeed, Wisconsin case law has consistently interpreted Wis. Stat. § 632.32(5) in that precise manner.[xxvi] The court of appeals’ 2008 decision in Nischke v. Aetna Health Plans is directly on point.[xxvii] There, the plaintiff, Nischke, was injured while driving a car owned by her mother-in-law, a resident of her household.[xxviii] Nischke had her own insurance policy separate from the one covering the automobile, and that policy included a drive-other-car exclusion permitted under Wis. Stat. § 632.32(5)(j). At the circuit court and on appeal, Nischke argued that the drive-other-car exclusion violated Wis. Stat. § 632.32(6)(b), which provided that no policy may exclude from coverage or benefits “[a]ny person who is a named insured or passenger in or on the insured vehicle,” and thus conflicted with Wis. Stat. § 632.32(5)(e). Though the provisions could have been construed to conflict, the court of appeals disagreed when comparing the statutory subsections, concluding that “the legislature intended to use [§ 632.32(5)(j)] to authorize certain specific, optional provisions that could be included in policies, the broad prohibitions of § 632.32(6) notwithstanding.”[xxix] Because the policy exclusion was plainly consistent with § 632.32(5)(j), the court of appeals found that it was required to enforce the exclusion’s terms notwithstanding §§ 632.32(5)(e) and 632.32(6)(b).[xxx]
The same is true here. Because the legislature has chosen to allow drive-other-car exclusions that comply with Wis. Stat. § 632.32(5)(j)’s terms, the exclusion should be enforced notwithstanding Wis. Stat. § 632.32(5)(e) and any prohibitions in Wis. Stat. § 632.32(6).
The Policy Holder Argument Often Misconstrues the Legislative History of the 2009 Statutory Changes. Policy holders often rely on a gubernatorial veto and its supporting message as evidence that the drive-other-car exclusion should be enforced only with respect to liability coverage.[xxxi] That argument misconstrues the veto and supporting message.
At issue is 2009 Wisconsin Act 28, § 3172. One of the early forms of the Act was to renumber and amend Wis. Stat. § 632.32(5)(j) as follows:
SECTION 3172. 632.32 (5) (j) of the statutes is renumbered 632.32 (6) (h), and 632.32 (6) (h) (intro.), as renumbered, is amended to read:
632.32 (6) (h) (intro.)
A No policy may provide that any uninsured motorist coverage or underinsured motorist coverage under the policy does not apply to a loss resulting from the use of a motor vehicle that meets all of the following conditions:
Had Wis. Stat. § 632.32(5)(j) been renumbered and amended as proposed, no drive-other-car exclusion could have been applicable specifically with respect to uninsured or underinsured motorist coverage. A later proposal sought to remove drive-other-car exclusions altogether, but that proposal was vetoed by the governor because the change would have increased the cost of insurance premiums too greatly:
Section 3172 prohibits insurers from denying coverage for an accident if the vehicle is not described in the policy under which a claim is made. I am vetoing this provision and cross references to this section under sections 3147 and 9326 (6), because it may increase the cost of premiums, but I am retaining separate provisions that prohibit insurers from categorizing people who have not previously had insurance in a high-risk category and that allow the stacking of coverage limits for up to three vehicles owned by the insured.
Wisconsin courts unquestionably consider a governor’s veto and its message as part of the legislative history and as evidence of legislative intent.[xxxii] But the legislative history of the 2009 statutory changes is clear: when the legislature amended the law on uninsured and underinsured motorist insurance in 2009, a proposal was made to prohibit drive-other-car exclusions from specifically applying to uninsured and underinsured motorist coverage, but because of the concern of rising premiums, the proposal was ultimately rejected. Courts now considering the question should not, and cannot, rewrite Wis. Stat. § 632.32(5)(j) as it would have been written had the legislature adopted a proposed amendment that was never enacted. The drive-other-car exclusion described in § 632.32(5)(j) is therefore authorized, valid, and enforceable.
A decision by a Wisconsin appellate court will ultimately determine whether the drive-other-car exclusion permissible under Wis. Stat. § 632.32(5)(j) constitutes an impermissible anti-stacking provision in contravention of Wis. Stat. § 632.32(6)(d). In the meantime, insurance defense counsel may use some, or all, of the arguments set forth in this Article to defend insurers in coverage disputes involving the stacking of uninsured or underinsured motorist coverage.
[i] 2009 Wis. Act 28 (enacted and published on June 29, 2009).
[ii] 122 Wis. 2d 172, 361 N.W.2d 680 (1985).
[iii] State v. Carey, 2004 WI App 83, ¶ 8, 272 Wis. 2d 697, 679 N.W.2d 910.
[iv] Czapinski v. St. Francis Hosp., Inc., 2000 WI 80, ¶ 17, 236 Wis. 2d 316, 613 N.W.2d 120.
[v] See Wis. Stat. § 632.32(5)(j); Blazekovic v. City of Milwaukee, 2000 WI 41, ¶ 17, 234 Wis. 2d 587, 610 N.W.2d 467.
[vi] See Myers v. Gen. Cas. Co. of Wis., 2005 WI App 49, ¶ 12, 279 Wis. 2d 432, 694 N.W.2d 723 (recognizing that Wis. Stat. § 632.32(5)(j) does not require insurers to use “magic language,” or use the exact language of the statute).
[vii] American Family Mut. Ins. Co. v. Wis. Dept. of Revenue, 222 Wis. 2d 650, 661, 586 N.W.2d 690 (1998).
[viii] Koshiol v. Am. Fam. Mut. Ins. Co., 171 Wis. 2d 192, 198-99, 491 N.W.2d 776 (Ct. App. 1992) (recognizing, in a similar context, that no two policies apply to provide coverage because of the application of the drive-other-car exclusion).
[ix] Carey, 272 Wis. 2d 697, ¶ 8.
[x] State ex rel. Campbell v. Township of Delavan, 210 Wis. 2d 239, 256, 565 N.W.2d 209 (Ct. App. 1997).
[xi] Czapinski, 236 Wis. 2d 316, ¶ 22.
[xii] 234 Wis. 2d 587.
[xiii] Id., ¶ 2.
[xiv] Id., ¶¶ 2-3.
[xv] Id., ¶ 3.
[xvi] Id., ¶ 22.
[xvii] Id., ¶¶ 21-22.
[xviii] See 2009 Wis. Act 28, § 3172.
[xix] State v. Anthony D.B., 2000 WI 94, ¶ 11, 237 Wis. 2d 1, 614 N.W.2d 435.
[xx] Wyss v. Albec, 193 Wis. 2d 101, 112, 532 N.W.2d 444 (1995).
[xxi] RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. ___ (2012) (citing Morton v. Mancari, 417 U.S. 535, 550-551 (1974)).
[xxii] Carey, 272 Wis. 2d 697, ¶ 8.
[xxiii] Tahtinen v. MSI Ins. Co., 122 Wis. 2d 158, 160 n.1, 361 N.W.2d 673 (1985).
[xxv] See Agnew v. Am. Fam. Mut. Ins. Co., 150 Wis. 2d 341, 349, 441 N.W.2d 222 (1989) (recognizing the situation in which, like here, policies are intended to protect against different losses).
[xxvi] Blazekovic v. City of Milwaukee, 2000 WI 41, 234 Wis. 2d 587, 610 N.W.2d 467; Nischke v. Aetna Health Plans, 2008 WI App 190, 314 Wis. 2d 774, 763 N.W.2d 554.
[xxvii] See 314 Wis. 2d 774, ¶¶ 12-13.
[xxviii] Id., ¶ 2.
[xxix] Id., ¶ 12.
[xxx] See generally id., ¶¶ 10-18.
[xxxi] In the veto statement relied on by policy holders, Governor Doyle stated as a general matter that he “vetoed several related provisions that, while well-intentioned, could have the effect of unreasonably increasing premiums for liability insurance coverage. These vetoes balance the need for ensuring adequate coverage with maintaining the affordability of liability insurance premiums.” Doyle Summary of Partial Vetoes of 2009 Wisconsin Act 28, Legislative Fiscal Bureau, July 6, 2009, pp. xii, 39, 41.
[xxxii] Wis. Patients Compensation Fund v. St. Paul Fire & Marine Ins. Co., 116 Wis. 2d 537, 546-47, 342 N.W.2d 693 (1984); Am. Med. Transp. of Wis., Inc. v. Curtis-Universal, Inc., 154 Wis. 2d 135, 143 n.5, 452 N.W.2d 575 (1990).