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.
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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/
Jury’s Findings Interpreting Insurance Contract Affirmed
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Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....
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Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy
In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.
The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS
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Attack by Vicious Dog Excluded
In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)
Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that
1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.
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ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
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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
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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
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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:
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A Heads I Win, Tails You Lose Story
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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...