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The Wisconsin Supreme Court Finds Ambiguity Regarding "Self-Insurer" In The Context Of UIM Coverage

Bethke v. Auto-Owners Ins. Co., 2013 WI 16 (Wis., Feb. 1, 2013).

In Bethke v. Auto Owners Ins. Co., the Wisconsin Supreme Court held that the term "self-insurer" is ambiguous in the context of a UIM policy. In that case, Kathryn Bethke was killed and her son Andrew Bethke was seriously injured in an auto accident caused by Frederick Goddard. Goddard, who did not have any auto insurance, was driving an Avis rental car at the time of the accident. Pursuant to Wis. Stat. § 344.51(1m), Avis paid its statutory liability as the owner of the car in the amount of $25,000 each to Kathryn's estate and Andrew. Plaintiffs then sought UIM coverage under Kathryn's policy with Auto-Owners; the policy provided UIM limits in the amount of $500,000. Auto-Owners denied the claim based on policy language that excluded any auto "owned or operated by a self-insurer under any automobile law" in the definition of "underinsured automobile." In the ensuing declaratory judgment action, the trial court granted judgment in favor of Auto-Owners on the basis that Avis was a "self-insurer" and the court of appeals affirmed. The supreme court, however, reversed.

The court agreed with plaintiffs that the term "self-insurer" was ambiguous when applied to the facts in their case. As the court noted, UIM coverage is intended to provide an insured with the same amount of coverage as if the underinsured driver had liability coverage in the amount of UIM limits. Plaintiffs recovered just $50,000 from Avis, leaving a gap of $450,000. The court stated that Wis. Stat. § 344.51(1m) limiting Avis's exposure to $50,000 "collided" with Wis. Stat. § 344.16(2), under which Avis qualified as a self-insurer. The purpose of being qualified as a "self-insurer" implied that the self-insured has sufficient financial means to satisfy any judgment against it. The court opined that a "self-insured car rental car cannot at the same time enjoy limited liability and be expected to fully satisfy judgments."

Accordingly, the court held that "self-insurer" was ambiguous as applied to the facts of the case. Alternatively, even if "self-insurer" appears to be unambiguous, it must be applied in favor of the insureds to avoid an absurd result.

Chief Justice Abrahamson dissented. Rather than impose statutory minimum liability as the majority stated, she observed that § 344.51(1m) supplants common law and makes a car owner, such as Avis, liable even with a showing of negligence. Thus, there is no collision with the self-insurer statute, and the Auto-Owners' policy should be applied as written.

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About this Author

Heidi Vogt, risk management lawyer, Von Briesen, toxic tort legal counsel, intellectual property attorney, insurance coverage law, draft allocation agreement representation

Heidi Vogt is a Shareholder and Co-Chair of the Litigation and Risk Management Practice Group as well as the Chair of the Insurance Coverage and Risk Management Section. Her practice focuses on insurance coverage litigation, commercial disputes, constitutional law, and complex litigation. She has represented insurance companies in Wisconsin and across the country in both state and federal courts in complex insurance coverage matters for more than 20 years.

She represents and counsels insurance clients on a wide variety of...

Jeffrey Evans, Insurance Risk Management Attorney, Von Briesen, insurance coverage litigator, general tort lawyer, legal malpractice counsel

Jeff Evans is a Shareholder in the Litigation and Risk Management Practice Group. His practice focuses on the preparation of insurance coverage opinions, insurance coverage litigation, and general tort litigation. Jeff also has extensive experience defending legal malpractice claims.

Jeff is a member of the Milwaukee and American Bar Associations, the State Bars of Wisconsin and California, and the Defense Research Institute.

Prior to entering law school, Jeff served as an auditor for the California Franchise Tax Board, and he has a Bachelor of Science in Accounting from the California State Polytechnic University at Pomona.

Jeff is a former Legal Research Attorney to the Hon. Ira A. Brown (Ret.) at the Superior Court of California for the County of San Francisco, and a former Extern to the Hon. Stanley Mosk (Ret.) of the California Supreme Court.