Insurers May Limit Coverage to only Those Insureds who are Injured
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Posted on February 18, 2022 by Barry Zalma
State Farm Mutual Automobile Insurance Company (State Farm) asked the Wisconsin Supreme Court to reverse the court of appeals decision reversing the circuit court’s grant of summary judgment in favor of State Farm. In Elliot Brey and Estate of Ryan B. Johnson v. State Farm Mutual Automobile Insurance Company, Channing H. Mathews, Craig A. Mathews and Sentry Insurance, A Mutual Company, 2022 WI 7, No. 2019AP1320, Supreme Court of Wisconsin (February 15, 2022) the uninjured Elliot sued for the loss of his uninsured father in a car neither owned nor used by Elliot nor involved in the accident.
The trial court determined the State Farm automobile liability insurance policy issued to Elliot Brey’s mother and her husband (the Policy) did not provide underinsured motorist (UIM) coverage to Elliot Brey (Brey) for the death of his father, Ryan B. Johnson (Johnson), in an automobile accident.
The Policy limited UIM coverage to compensatory damages for “bodily injury . . . sustained by an insured[.]” Brey was an insured under the Policy, but Johnson was not. The circuit court ruled Brey could not recover under the policy because Brey did not sustain bodily injury.
State Farm contendeed that Wis.Stat. § 632.32(2)(d) does not require insurers to extend UIM coverage to an insured for bodily injury or death suffered by a person who was not insured under the Policy.
BACKGROUND
Johnson died from injuries sustained in an automobile accident in 2015, leaving behind his minor son, Elliot Brey. State Farm insured Brey as a resident relative under the Policy issued to Hannah and Jake Brey, Brey’s mother and her husband, covering a 2007 Honda CRV. That vehicle was not involved in the accident. Johnson, who was a passenger in a vehicle driven by Channing H. Mathews, was not insured under any State Farm policy.
The UIM coverage provisions of the Policy provided that an insured must have sustained bodily injury caused by an accident involving an underinsured motor vehicle in order to collect compensatory damages.
Both Brey and State Farm moved for summary judgment. Brey acknowledged the terms of the Policy precluded coverage, but argued the Policy’s requirement that an insured sustain injury was contrary to Wis.Stat. § 632.32(2)(d) and therefore void and unenforceable. Section 632.32 is sometimes called the “Omnibus Statute” because it sets the minimum requirements all motor vehicle insurance policies in Wisconsin must satisfy.
The circuit court granted summary judgment in favor of State Farm based on the language of the Policy. The court of appeals reversed and remanded.
DISCUSSION
The parties do not dispute that the Policy bars coverage for Brey’s wrongful death claim because the UIM coverage provisions require an insured to sustain bodily injury, and Johnson was not an insured under the Policy.
The Supreme Court’s interpretation of Wis.Stat. § 632.32(2)(d) began, as with all statutory or contract interpretation, with the language of the statute. If the meaning of the language is plain, its inquiry ordinarily ends. Importantly, ascertaining the plain meaning of a statute requires more than focusing on a single sentence or portion thereof. A statute’s context and structure are critical to a proper plain-meaning analysis.
If statutory language is plain, courts must enforce it according to its terms, but oftentimes the meaning or ambiguity of certain words or phrases may only become evident when placed in context, so when deciding whether language is plain, courts must read the words in their context and with a view to their place in the overall statutory scheme. Properly applied, the plain-meaning approach is not “literalistic”; rather, the ascertainment of meaning involves a “process of analysis” focused on deriving the fair meaning of the text itself.
The court of appeals’ conclusion that Wis.Stat. § 632.32(2)(d) contains an “unambiguous statement” prohibiting State Farm from conditioning coverage on an insured sustaining bodily injury reflects a literalistic approach to statutory interpretation. That court reasoned: (1) Brey is an “insured”; (2) who is “legally entitled to recover damages”; (3) because he has a wrongful death claim against the “owner or operator of an underinsured motor vehicle…” he was entitled to claim against State Farm.
The Supreme Court, on the other hand, concluded that the Court Of Appeals erred by strictly construing the statutory definition in isolation rather than interpreting it in the context of the Omnibus Statute’s pertinent text as a whole. In doing so it rejected the hyper-literal approach.
Statutory interpretation centers on the “ascertainment of meaning,” not the recitation of words in isolation. By declining to address statutory context, the Court Of Appeals erroneously confined its statutory analysis to the definition in Wis.Stat. § 632.32(2)(d). It should have instead “interpreted [the definition] in the context in which it is used; not in isolation but as part of a whole; in relation to the language of surrounding or closely-related statutes; and reasonably, to avoid absurd or unreasonable results.” Perhaps no failure by a court when interpreting a statute or contract is more common than the failure to follow the whole-text canon, which calls on the judicial interpreter to consider the entire text, in view of its structure and of the physical and logical relation of its many parts.
The statutory context and structure indicates UIM coverage exists only when an insured suffers bodily injury or death. The reason to doubt a literal meaning of a statute is that it clashes with related statutes. The Supreme Court also concluded that read in the context of these paragraphs, § 632.32(2)(d) does not require insurers to extend UIM coverage when no insured has suffered bodily injury or death.
Interpreting § 632.32(2)(d) to require UIM coverage even if no insured person was injured conflicts with § 632.32(5)(f) and (g), which permit limits on coverage for insured persons who suffer bodily injury. The Supreme Court noted: “Interpreting § 632.32(2)(d) to apply anti-stacking provisions only to injured insureds while allowing uninjured insureds to circumvent them would be nonsensical.”
Wrongful Death Claims Under UIM/UM Policies
In order for a wrongful death claim to exist, the decedent must have had a valid claim for damages against the defendant at the time of his death. At the time of his death, Johnson could not have recovered damages under the UIM coverage provisions of the Policy because he was not an insured. Consequently, Brey cannot maintain a derivative action against State Farm.
Nothing in Wis.Stat. § 632.32(2)(d) precludes insurers from affording coverage to only those insureds who are injured in an auto accident.
CONCLUSION
Therefore, the trial court properly granted State Farm’s motion for summary judgment and the court of appeals erred in reversing it. The Policy affords UIM coverage to only an insured who sustained bodily injury caused by an accident involving an underinsured motor vehicle.
Brey’s father was not insured under the Policy. While Brey is an insured under the Policy, he was not involved in the accident in which his father was killed and therefore sustained no bodily injury. Wisconsin Stat. § 632.32(2)(d) plainly does not preclude an insurer from limiting UIM coverage to insureds who sustain bodily injury or death.
ZALMA OPINION
Although it is often said that “for every wrong there is a remedy” there is not insurance for every wrong. Stretching the language of a statute to revise the wording of an insurance contract entered into freely and issued in accordance with state statute is just plain wrong. The Supreme Court of Wisconsin, in a lengthy analysis, did the right thing and refused to rewrite the policy to help a child obtain money from an insurer that did not agree to indemnify him for a loss where neither he nor an insured of the policy was injured.
© 2022 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.
He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.
Subscribe to “Zalma on Insurance” at https://zalmaoninsurance.locals.com/subscribe and “Excellence in Claims Handling” at https://barryzalma.substack.com/welcome.
You can contact Mr. Zalma at https://www.zalma.com, https://www.claimschool.com, [email protected] and [email protected] . Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
You may find interesting the podcast “Zalma On Insurance” at https://anchor.fm/barry-zalma; you can follow Mr. Zalma on Twitter at; you should see Barry Zalma’s videos on https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/featured; or videos on https://rumble.com/zalma. Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims–library/ The last two issues of ZIFL are available at https://zalma.com/zalmas-insurance-fraud-letter-2/
Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
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Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
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ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
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In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.
BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...