WI Supreme Court Expands UM Coverage

Hull v. State Farm Mutual Insurance Company, 222 Wis. 2d. 627 (Dec. 15, 1998).

On December 15, 1998, the Wisconsin Supreme Courtheld that uninsured motorists' coverage applies to a vehicle which is uninsured, even if the driver of that vehicle is insured. This decision overrules a 1985 Court of Appeals decision which had held to the contrary.

A pickup truck driven by a Badger State employee, while the vehicle was consigned to Badger State, ran into an auction ring, killing Betty Hull's husband. The owner of the pickup truck did not have insurance, but the driver was covered by Badger State's policy. Instead of making a claim against Badger State and its insurer, Mrs. Hull opted to proceed against her own two State Farm UM policies. Obviously, State Farm maintained that the vehicle which struck Mr. Hull was not "uninsured", because it was covered by the Badger State policy. State Farm relied heavily on the 1985 Court of Appeals decision in Hemerly v. American Family Mutual Insurance Company, 127 Wis. 2d. 304, 379 N.W. 2d. 860 (Ct. App. 1985), which held that such a vehicle was not "uninsured". The Supreme Court, however, ruled that Sec. 632.32(4), which governs the provisions of motor vehicle insurance policies, requires an insurer to provide UM coverage whenever the owner or the operator of a moor vehicle is allegedly negligent and is not covered by liability insurance. Because the owner of the motor vehicle was alleged to be negligent, and was not insured, Sec. 632.24(4), and the policy language of Mrs. Hull's State Farm policies, required that State Farm provide UM coverage to Mrs. Hull. The Trial Court upheld State Farm's Motion for Declaratory Judgment that the truck was not "uninsured", and the Court of Appeals affirmed, stating that there would be UM coverage "only when no coverage exists under any scenario". The Supreme Court decided that a vehicle is an "uninsured motor vehicle" when its ownership, maintenance, or it use is uninsured.

The Supreme Court's decision appears to open the door to allow UM coverage when only one of several tortfeasors is not insured. This decision also presents interesting subrogation opportunities for subrogating carriers, while providing headaches and possibly limitless UM coverage for liability carriers. When subrogating against a tortfeasor with no insurance or minimum limits, and when faced with possible "made whole arguments", subrogation investigation should include issues of coverage of both the owner and the operator of the vehicle.