Legislative Changes Concerning Motor Vehicle Liability Insurance and Umbrella/Excess Liability Insurance Policies in 2009 Wisconsin Act 28

WDC Journal Edition: Summer 2009
By: Ariella Schreiber, Winner, Wixson & Pernitz

On June 29, 2009, the Wisconsin legislature and Governor Jim Doyle passed 2009 Wisconsin Act 28 (“the Act”). The Act includes specific changes concerning motor vehicle liability[1] and umbrella[2] insurance policies. This article seeks to outline and comment briefly upon the legislature’s changes included in the Act, Sections 3152 through 3167, all of which concern motor vehicle liability and umbrella policies.


I.
Effective Date and Applicability

The Motor Vehicle Coverages, Prohibited Risk Factors, and Liability Provisions discussed below all have effective dates “on the first day of the 5th month beginning after publication.”[3] The Act was officially published on June 29, 2009. November 1, 2009, is the “first day of the 5th month” after publication. The changes discussed below are effective as of November 1, 2009.

The Motor Vehicle Insurance Coverages sections of the Act “first apply to motor vehicle insurance policies issued or renewed on the effective date of this subsection.”[4] Legislation is presumed to operate prospectively “unless the statutory language clearly reveals by express language or necessary implication an intent that it apply retroactively.”[5] This presumption applies even where the statute is ambiguous as to its retroactive effect.[6] The Act expressly states that it is not intended to have retroactive effect.[7] Therefore, the legislature did not intend the changes discussed below to have retroactive effect, and the changes do not apply to insurance policies issued or renewed before November 1, 2009.

II. Changes Concerning Motor Vehicle Liability Insurance Policies.

The Act creates new definitions for the Wisconsin Statutes, makes both uninsured motorist (“UM”) and underinsured motorist (“UIM”) coverage mandatory, increases the minimum UM and UIM coverages to $100,000 per person and $300,000 per accident, and increases the minimum amount of medical payments coverage. It also prohibits the inclusion of anti-stacking and reducing clauses, except in certain specific situations.

A. Newly Created Definitions

1. UIM Provisions

Section 3152 creates Wisconsin Statutes § 632.32(2)(d), which defines “underinsured motorist coverage” as follows:

Coverage for the protection of persons insured under that coverage who are legally entitled to recover damages for bodily injury, death, sickness, or disease from owners or operators of underinsured motor vehicles.[8]

This is a newly-created definition for “underinsured motorist coverage.” Traditionally this term was defined by the applicable insurance policy, so insurers and their attorneys must take care to ensure that the definition of “underinsured motorist coverage” included within policies issued on or after November 1, 2009, is substantially similar or even identical to the one accepted by the legislature. This definition does not appear to differ substantially from most definitions of “underinsured motorist coverage.”

Section 3153 creates Wisconsin Statutes § 632.32(2)(e), which defines “underinsured motor vehicle” as follows:

A motor vehicle to which all of the following apply:

  1. The motor vehicle is involved in an accident with a person who has underinsured motorist coverage.
  2. A bodily injury liability policy applies to the motor vehicle at the time of the accident.
  3. The limits of the bodily injury liability insurance policy are less than the amount needed to fully compensate the insured for his or her damages.[9]

Again, this is a term that insurers have traditionally defined within their policies. As with the definition of “underinsured motorist coverage,” insurers and their attorneys should take the time to ensure that the policy definition of the term complies substantially with the legislature’s definition of the term. Of note is the fact that, on its face, this definition is neither conjunctive nor disjunctive. The legislature apparently omitted the terms “and” or “or” from the definition, thereby making this definition arguably ambiguous. However, under the currently accepted definition of an underinsured motor vehicle, it appears that the definition is meant to be read conjunctively and that all three factors must be apparent before UIM coverage is available to a claimant.

2. UM Provisions

Section 3154 creates Wisconsin Statutes § 632.32(2)(f), which defines “uninsured motorist coverage” as follows:

Coverage for the protection of persons insured under that coverage who are legally entitled to recover damages for bodily injury, death, sickness, or disease from owners or operators of uninsured motor vehicles.[10]

This is a newly-created definition for “uninsured motorist coverage.” Traditionally this term was defined by the applicable insurance policy. As with underinsured motorist coverage, this term was usually defined by the policy purchased by the insured. Insurers and their attorneys must take care to ensure that the definition of “uninsured motorist coverage” included within policies issued on or after November 1, 2009, is substantially similar or even identical to the one accepted by the legislature. This definition does not appear to differ substantially from most definitions of “uninsured motorist coverage.”

Section 3155 creates Wisconsin Statutes § 632.32(2)(g), which defines “uninsured motor vehicle” as follows:

A motor vehicle that is involved in an accident with a person who has uninsured motorist coverage and with respect to which, at the time of the accident, a bodily injury liability insurance policy is not in effect and the owner or operator has not furnished proof of financial responsibility for the future under subch. III of ch. 344.

“Uninsured motor vehicle” also includes any of the following motor vehicles involved in an accident with a person who has uninsured motorist coverage:

  1. An insured motor vehicle if before or after the accident the liability insurer of the motor vehicle is declared insolvent by a court of competent jurisdiction.
  2. Except as provided in subd. 3., an unidentified motor vehicle, provided that an independent 3rd party provides evidence in support of the unidentified motor vehicle’s involvement in the accident.
  3. An unidentified motor vehicle involved in a hit-and-run accident with the person.[11]

This newly-created definition for “uninsured motor vehicle” is similar to the one contained in many motor vehicle liability insurance and business motor vehicle policies. But to ensure that no litigation arises out of the policy definition versus the legislative definition, the policy definition should probably be amended to mirror the legislative definition.

Of note is the fact that it is possible that this definition could be seen as ambiguous in certain situations. Take, for example, a situation where the vehicle was uninsured (and thus had no “bodily injury liability insurance policy in effect”), but the driver was insured – thus insuring the car through the driver’s permissive use. The above definition could be interpreted to mean that even if the driver is insured, if the vehicle itself is not insured, then it is an “uninsured motor vehicle.” There is a good argument that a driver who permissively uses a vehicle, and who has motor vehicle liability insurance coverage in effect, turns that vehicle into one that has a “bodily injury liability insurance policy in effect.”


B. Changes to Required Coverages

Section 3156 amends Wisconsin Statutes § 632.32(4) to provide “Required Uninsured Motorist, Underinsured Motorist, and Medical Payments Coverages.”[12]

The italicized language indicates language that was added to this statutory section. Before this legislation was passed, only UM and medical payments coverage was mandatory in Wisconsin. Wisconsin law currently only requires that insurers notify policyholders of the availability of UIM coverage.[13] An insured could opt to reject UIM coverage as long as the rejection was in writing.[14] Now UIM coverage is mandatory.

Section 3157 renumbers Wisconsin Statutes § 632.32(4) (intro.) to § 632.32(4)(a), and amends it to provide as follows:

Every policy of insurance subject to this section that insures with respect to any motor vehicle registered or principally garaged in this state against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall contain therein or supplemental thereto for all of the following coverages:[15]

The italicized language indicates language that was added to this statutory section. This change essentially reiterates that UIM coverage is now mandatory under this section.

a. UM and UIM Coverage – Minimum Limits of $100,000/$300,000

Section 3159 amends Wisconsin Statutes § 632.32(4)(a)1. to require uninsured motorist limits of at least$100,000 per person and $300,000 per accident:

Excluding a policy written by a town mutual organized under ch. 612, uninsured motorist coverage in limits of at least $100,000 per person and $300,000 per accident.[16]

Section 3161 creates Wisconsin Statutes § 632.32(4)(a)2m., which requires underinsured motorist limits of at least $100,000 per person and $300,000 per accident:

Excluding a policy written by a town mutual organized under ch. 612, underinsured motorist coverage in limits of at least $100,000 per person and $300,000 per accident.[17]

The italicized language indicates language that was added to these statutory sections. This legislative change represents a substantial increase in minimum UM/UIM limits. The current minimum limits for UM coverage are $25,000 per person and $50,000 per accident, and there is not currently any minimum limits for UIM coverage.[18] Thus, every policy issued or renewed after November 1, 2009, must have both UM and UIM coverage included and both coverages must have limits of at least $100,000/$300,000.

b. Medical Payments Coverage – Minimum Limits of $10,000

Section 3164 renumbers Wisconsin Statutes § 632.32(4)(b) to § 632.32(4)(a)3m. and amends it to provide as follows:

Medical payments coverage, in the amount of at least $10,000 per person. Coverage written under this subdivision may be excess coverage over any other source of reimbursement to which the insured person has a legal right.[19]

Section 3165 creates Wisconsin Statutes § 632.32(4)(bc), which allows a named insured to reject medical payments coverage:

Notwithstanding par. (a)3m., the named insured may reject medical payments coverage. If the named insured rejects medical payments coverage, the coverage need not be provided in a subsequent renewal policy issued by the same insurer unless the insured requests it in writing.[20]

The italicized language indicates language that was added to this statutory section. Like UM coverage, Medical Payments coverage is mandatory under the current legislative scheme.[21] However, again like UM, this new limit represents a substantial increase in the minimum limits of Medical Payments coverage in a motor vehicle liability insurance policy. The previous limit was $1,000[22]; the limit is now $10,000.[23]

Every motor vehicle liability insurance policy issued or renewed after November 1, 2009, must include a minimum limit of $10,000 in Medical Payments coverage unless the applicant or insured has specifically rejected that coverage.[24]


C.
Changes to Anti-Stacking and Reducing Clauses

Section 3168 renumbers Wisconsin Statutes § 632.32(5)(f) to § 632.32(6)(d) and amends it to prohibit anti-stacking clauses, except that no more than three vehicle policy limits may be stacked:

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.[25]

The italicized language indicates language that was added to this statutory section. This Section prohibits the inclusion of anti-stacking clauses in motor vehicle liability insurance policies, except that the policy may limit the number of motor vehicles for which the limits of coverage may be “stacked” to three vehicles. This section specifically prohibits anti-stacking clauses with respect to UM/UIM coverage.

Section 3169 renumbers Wisconsin Statutes § 632.32(5)(g) to § 632.32(6)(e) and amends it to provide as follows:

No policy may provide that the maximum amount of uninsured motorist coverage or underinsured motorist coverage available for bodily injury or death suffered by a person who was not using a motor vehicle at the time of the accident is any single limit of uninsured motorist coverage or underinsured motorist coverage, whichever is applicable, for any motor vehicle with respect to which the person is insured, except that a policy may limit the number of motor vehicles for which coverage limits may be added to 3 vehicles.[26]

The italicized language indicates language that was added to this statutory section. This Section prohibits the inclusion of anti-stacking clauses in motor vehicle policies, except that the policy may limit the number of motor vehicles for which the limits of coverage may be “stacked” to three vehicles. This Section changes the language of the previous statute to conform with the newly-created definition of “uninsured motorist coverage.” This section specifically prohibits anti-stacking clauses with respect to UM/UIM coverage.

Section 3170 renumbers Wisconsin Statutes § 632.32(5)(h) to § 632.32(6)(f), and amends it to provide as follows:

No policy may provide that the maximum amount of medical payments coverage available for bodily injury or death suffered by a person who was not using a motor vehicle at the time of an accident is any single limit or medical payments coverage for any motor vehicle with respect to which the person is insured, except that a policy may limit the number of motor vehicles for which medical payments coverage limits may be added to 3 vehicles.[27]

The italicized language indicates language that was added to this statutory section. This Section prohibits the inclusion of anti-stacking clauses in motor vehicle policies, except the policy may limit the number of motor vehicles for which the limits of coverage may be “stacked” to three vehicles. This section specifically prohibits anti-stacking clauses with respect to medical payments coverage.

Section 3171 renumbers Wisconsin Statutes § 632.32(5)(i) to § 632.32(6)(g), and amends it to prohibit the use of reducing clauses in UM or UIM coverages:

No policy may provide that the limits under the policy for uninsured motorist coverage or underinsured motorist coverage for bodily injury or death resulting from any one accident shall be reducing by any of the following that apply.[28]

The italicized language indicates language that was added to this statutory section. This Section prohibits the inclusion of reducing clauses in motor vehicle liability insurance policies. Currently, insurance policies may provide that UM and UIM coverage are to be reduced by amounts paid on behalf of the tortfeasor, amounts paid under worker’s compensation law, or amounts paid under any disability laws.[29] For policies issued or renewed after November 1, 2009, that language is now prohibited and must be omitted from the policies.

Thus, the amended statute will read, in its entirety, as follows:

No policy may provide that the limits under the policy for uninsured motorist coverage or underinsured motorist coverage for bodily injury or death resulting from any one accident shall be reducing by any of the following that apply:

1. Amounts paid by or on behalf of any person or organization that may be legally responsible for the bodily injury or death for which the payment is made.

2. Amounts paid or payable under any worker's compensation law.

3. Amounts paid or payable under any disability benefits laws.



III. Changes Concerning Umbrella Insurance Policies.

Over the past few years, there have been a number of cases regarding an insurer’s responsibility to offer UM/UIM coverage through an umbrella policy and the consequences of an insurer’s failure to offer such coverage through an umbrella policy.[30] Apparently in response to these holdings, the legislature made significant changes to an insurer’s responsibility to offer UM/UIM coverage in an umbrella policy.

Under the new legislative scheme, an insurer must offer UM/UIM coverage in its umbrella policies in writing, including a brief explanation of the effect of those coverages. It also provides that an insured may reject such coverage, and that the rejection must also be in writing. Finally, the newly-created statute provides a sanction for an insurer failing to follow these rules: any insurer who fails to offer UM/UIM coverage in writing through its umbrella policies faces the sanction of having a court “read in” such coverage in the same amount as the liability coverage available to the insured under the umbrella policy. Thus, an insurer’s failure to fulfill its statutorily-imposed obligations to its insureds under this statute could result in a court “reading in” UM or UIM coverage in the amount of at least $1,000,000.

Section 3151 creates Wisconsin Statutes § 632.32(2)(cm), which defines “umbrella or excess liability policy” as follows:

An insurance contract providing at least $1,000,000 of liability coverage per person or per occurrence in excess of a certain required underlying liability insurance coverage or a specified amount of self-insured retention.[31]

As with the newly-created definitions for “uninsured motorist coverage” and “underinsured motorist coverage,” this new definition explains the types of insurance policies that the legislature is attempting to affect with these changes.

Section 3167 creates Wisconsin Statutes § 632.32(4r), which requires written offers of uninsured motorist and underinsured motorist coverages for umbrella or excess liability policies:

(a) An insurer writing umbrella or excess liability policies that insure with respect to a motor vehicle registered or principally garaged in this state against loss resulting from liability imposed by law for bodily injury or death suffered by a person arising out of the ownership, maintenance, or use of a motor vehicle shall provide written offers of uninsured motorist coverage and underinsured motorist coverage, which offers shall include a brief description of the coverage offered. An insurer is required to provide the offers required under this subsection only one time with respect to any policy in the manner provided in par. (b).[32]

Subsection (a) codifies several recent Court of Appeals and Supreme Court rulings regarding umbrella/excess policies.[33] It requires an insurer that is writing umbrella policies, as that term is defined by the legislature, to provide the applicants or existing insureds with written offers of UM and UIM coverage, and thus requires those policies to offer such coverage. The offer of such coverage must only be made one time, in writing, to the applicant or insured.

(b) 1. Each application for an umbrella or excess policy issued on or after of the effective date of this subdivision shall contain a written offer of uninsured motorist coverage and a written offer of underinsured motorist coverage.[34]

Subsection (b)1. governs new applications for umbrella insurance issued on or after November 1, 2009. It requires that insurers offering umbrella/excess coverage include a written offer of UM or UIM coverage for the new applicants. However, keep in mind that subsection (a) also requires that the written offer of such coverage include a brief description of the coverage, as well. So a written offer, alone, is insufficient to meet the statutory requirements; the insurer must also explain in the application what UM/UIM coverage is and what it does.

2. For umbrella or excess liability policies that are in effect on the effective date of this subdivision, the insurer shall provide a written offer of uninsured motorist coverage to the named insureds under each policy that does not include uninsured motorist coverage and a written offer of underinsured motorist coverage to the named insureds under each policy that does not include underinsured motorist coverage. The insurer shall provide an offer under this subdivision in conjunction with the notice of the first renewal of the policy occurring after the effective date of this subdivision.[35]

Subsection (b)2. governs already-existing umbrella insurance policies. It provides that for umbrella policies that do not already offer UM/UIM coverage, the insurer must provide a written offer of such coverage to the insureds under the policy. The insurer must provide the offer of such coverage “in conjunction with the notice of the first renewal of the policy after the effective date,” meaning that the written offer does not need to occur until the umbrella/excess policy is due for renewal after November 1, 2009. Again, the insurer must meet the requirements of subsection (a), as well, and therefore must include a written description of the UM/UIM coverage along with the offer of the coverage.

(c) An applicant or named insureds may reject one or both of the coverages offered, but must do so in writing. If the applicant or named insureds reject either of the coverages offered, the insurer is not required to provide the rejected coverage under a policy that is renewed to the person by that insurer unless an insured under the policy subsequently requests the rejected coverage in writing.[36]

Subsection (c) permits applicants or named insureds to reject UM or UIM coverage under their umbrella policies, but they must do so in writing. If the applicant or named insured rejects the offer of UM/UIM coverage, then the insurer is not obligated to offer that coverage again. However, the insured may request to add such coverage to their policy at a later date.

The fact that this section requires already-existing insureds to reject UM/UIM coverage in writing may present a logistical challenge for insurers. Although an insurer may send a document to the insured requesting that the insured fill out and return an offer and explanation of UM/UIM coverage, the insured may not do so. However, the statute specifically requires the insured to “opt out” of that coverage and requires that the insurer show that the insured rejected the coverage in writing. An insurer’s agent may end up needing to meet individually with the insured in order to get the rejection of the coverage in writing, as the new statutory section requires.

(d) If an umbrella or excess liability policy that was issued on or after the effective date of this paragraph, or an umbrella or excess liability policy that was in effect on, but renewed after, the effective date of this paragraph, includes neither uninsured motorist coverage nor underinsured motorist coverage, or only one of the coverages, and the insurer did not provide a written offer required under par. (b)1. or 2. with respect to the coverage or coverages not included, on the request of the insured the court shall reform the policy to include the coverage or coverages not included and for which the insurer did not provide a written offer, with the same limits as the liability coverage limits under the policy.[37]

Subsection (d) outlines the consequences of an insurer’s failure to provide the applicant or insured with written notice of the availability of UM/UIM coverage under an umbrella policy. It provides that if the insurer fails to follow the notification guidelines outlined in subsections (b)1. or 2., then the insured may request that a court reform the policy “to include the coverage[s] . . . not included and for which the insurer did not provide a written offer, with the same limits as the liability coverage limits under the policy.”

In essence, the consequence of an insurer’s failure to notify an applicant or insured of the availability of UM/UIM coverage under an umbrella/excess policy is reformation of the policy, with the applicable UM/UIM limits being the limits of the liability policy. Thus, if an insured claims that he or she did not receive the requisite notification and the insurer does not have the insured’s written rejection of such coverage, then the policy will be reformed to reflect UM and/or UIM limits with the same limit as the liability limit in the umbrella/excess policy.

(e) This subsection does not apply to a town mutual organized under ch. 612.


IV. Conclusion

The changes to motor vehicle liability insurance and umbrella liability insurance policies reflected in 2009 Wisconsin Act 28 are significant and substantial. Although most of the onus of these changes is placed directly on insurers, attorneys representing insurance companies must be aware of these changes and understand their importance in order to properly defend the insurer and the insured in litigation.

For example, the new statutory scheme includes a remedy for insureds that do not get written notice of the availability of UM/UIM coverage under an umbrella policy.[38] However, if the insurer has a “conformance to law” clause in its policy, the insurer may argue that the statutory remedy does not apply because of that clause.[39] In Brunson v. Ward, the Wisconsin Supreme Court construed a “conformance to law” clause and found that the inclusion of such a clause in the policy obviated the need to reform the policy to reflect the proper amount of UIM coverage under a motor vehicle liability policy.[40] Because the clause automatically amended the policy to provide the statutory minimum of UIM coverage, judicially-created and statutory remedies did not apply.[41] It is possible that, in cases where “conformance to law” clauses exist in the policy, similar arguments may be advanced to minimize the insurer’s exposure in the event that violations of the new statutes occur.

The above, of course, is just a discussion of what could happen. But it highlights the need for insurers and attorneys representing them to be aware of these statutory changes and to anticipate methods of defending the insurer in light of these changes.


[1] In this case, “motor vehicle liability insurance” means is a “policy of insurance issued or delivered in this state against the insured’s liability for loss or damage resulting from accident caused by any motor vehicle, whether the loss or damage is to property or to a person.” Wis. Stat. § 632.32(1).

[2] In this case, “umbrella or excess liability policy” is “an insurance contract providing at least $1,000,000 of liability coverage per person or per occurrence in excess of certain required underlying liability insurance coverage or a specified amount of self-insured retention.” 2009 Wis. Act 28, Section 3151 (creating Wis. Stat. § 632.32(2)(cm)).

[3] 2009 Wis. Act 28, Section 9426(2).

[4] See Id., Section 9326(6) (emphasis added).

[5] Chappy v. LIRC, 136 Wis. 2d 172, 180, 401 N.W.2d 568 (1987).

[6] Shaurette v. Capitol Erecting Co., 23 Wis. 2d 538, 544, 128 N.W.2d 34 (1964).

[7] 2009 Wis. Act 28, Section 9326(6).

[8] Id., Section 3152.

[9] Id., Section 3153.

[10] Id., Section 3154.

[11] Id., Section 3155.

[12] Id., Section 3156.

[13] Wis. Stat. § 632.32(4m).

[14] Id.

[15] 2009 Wis. Act 28, Section 3157.

[16] Id., Section 3159.

[17] Id., Section 3161.

[18] See Wis. Stat. § 632.32(4)(a).

[19] 2009 Wis. Act 28, Section 3164.

[20] Id., Section 3165.

[21] Wis. Stat. § 632.32(4)(b).

[22] Id.

[23] 2009 Wis. Act 28, Section 3164.

[24] Id., Sections 3164-3165.

[25] Id., Section 3168.

[26] Id., Section 3169.

[27] Id., Section 3170.

[28] Id., Section 3171.

[29] See Wis. Stat. § 632.32(5)(i) 1.-3.

[30] See Rebernick v. Wausau Gen. Ins. Co., 2006 WI 27, 289 Wis. 2d 324, 711 N.W.2d 621 (discussing an insurer’s responsibility to give the insured written notice of the availability of UIM coverage under an umbrella policy and adequately explain the purpose of such coverage); Stone v. Acuity, 2008 WI 30, 308 Wis. 2d 558, 747 N.W.2d 149 (discussing the impact of an insurer’s failure to offer UIM coverage under an umbrella policy and holding that an insurer’s failure to offer such coverage resulted in the court “reading in” such coverage in the amount of $50,000 per person and $100,000 per accident); Nault v. West Bend Mut. Ins. Co., 2008 WI App 91, 312 Wis. 2d 677, 754 N.W.2d 520 (holding that Wis. Stat. § 632.32(4m) required the insurer to offer excess UIM coverage and give the insureds notice that such coverage was available through their umbrella policy); and Etter v. State Farm Mut. Ins. Co., 2008 WI App 168, 314 Wis. 2d 678, 761 N.W.2d 26 (discussing the effect of an insurer’s failure to give written notice of UM coverage under an umbrella policy).

[31] 2009 Wis. Act 28, Section 3151.

[32] Id., Section 3167(a) (emphasis added).

[33] See, generally, Nault, 2008 WI App 91; and Stone, 2008 WI 30.

[34] 2009 Wis. Act 28, Section 3167(b)1 (emphasis added).

[35] Id., Section 3167(b)2 (emphasis added).

[36] Id., Section 3167(c) (emphasis added).

[37] Id., Section 3167(d) (emphasis added).

[38] Id.

[39] See, e.g., Brunson v. Ward, 2001 WI 81, 245 Wis. 2d 163, 629 N.W.2d 140.

[40] Id., ¶¶ 16-17.

[41] Id., ¶ 17.