Underinsured Motorist Coverage - Definition of Underinsured Motorist

WDC Journal Edition: December 2001
By: Civil Trial Counsel of Wisconsin

Taylor v. Greatway Insurance Company
___ Wis.2d ___, 628 N.W.2d 916 (2001)
Decided July 6, 2001

In this case, the plaintiff was insured by American Family Insurance Company. American Family had two cars on the policy with $50,000 Underinsured Motorist (UIM) coverage. The plaintiff's husband, Paul Taylor, was struck by a vehicle driven by Ross Hermanson and insured by Greatway Insurance Company. Hermanson had $50,000 in liability coverage and Taylor settled with Greatway for the full $50,000. It was stipulated that Taylor's damages exceeded $160,000. American Family denied coverage citing the policy definition of an underinsured vehicle in their policy. American Family moved for summary judgment. The circuit court denied the motion for summary judgment and determined American Family's reducing clause created illusory UIM coverage and was therefore against public policy. The court of appeals reversed in a published opinion, Taylor v. Greatway Insurance Company, 233 Wis.2d 703, 608 N.W.2d 722 (Ct.App.2000). The supreme court affirmed the court of appeals decision.

The supreme court determined the case was governed by its decision in Smith v. Atlantic Mutual Insurance Company, 155 Wis.2d 808, 456 N.W.2d 597 (1990). The definition of underinsured motorist was unambiguous and the Hermanson vehicle did not qualify as an underinsured vehicle in this case. Therefore, the reducing clause, which only applies after a vehicle has satisfied the definition of underinsured vehicle, does not affect the definition itself nor the ruling in this case.