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Rebernick v. Wausau General Insurance
Citations: 2006 WI 27; 711 N.W.2d 621; 289 Wis. 2d 324; 2006 Wisc. LEXIS 208Docket: 2004AP487
Court: Wisconsin Supreme Court; March 30, 2006; Wisconsin; State Supreme Court
Dale and Sandra Rebernick, along with their minor son Gregory, sought review of a court of appeals decision that upheld the dismissal of their claim against American Family Mutual Insurance Company for underinsured motorist (UIM) coverage under their umbrella policy. They argued that American Family was obligated to notify them of UIM coverage availability per Wis. Stat. 632.32(4m). The Wisconsin Supreme Court found that while American Family was required to notify the Rebernicks, it had sufficiently provided notice regarding UIM coverage under the umbrella policy. Consequently, the court affirmed the court of appeals' decision without addressing potential remedies for a failure to notify. The case arose from an incident where Dale Rebernick was injured by a car, which had a liability insurance limit of $25,000, and he subsequently claimed $100,000 UIM coverage under their automobile insurance with American Family. The Rebernicks also held a $1 million umbrella policy that required them to maintain the automobile policy as primary insurance. Although the umbrella policy explicitly excluded UIM coverage, the Rebernicks contended they were entitled to reform the policy due to the alleged lack of notice from American Family regarding UIM coverage under the umbrella policy. American Family contended that the notice requirements were applicable only to primary auto insurance policies. The circuit court noted the statute’s intent to ensure that insureds are aware of UIM coverage availability and pointed out that the Rebernicks already had UIM coverage in their primary auto policy. It concluded that the Rebernicks were aware that their umbrella policy did not provide UIM coverage unless specifically endorsed. The circuit court ruled that the notice requirements in Wis. Stat. 632.32(4m) were satisfied and denied the Rebernicks' claim for underinsured motorist (UIM) coverage under their umbrella policy, granting American Family's motion. The Rebernicks appealed, and the court of appeals affirmed the circuit court's decision, albeit with differing reasoning. Both the majority and dissent acknowledged that the statutory provisions applied to the Rebernicks’ umbrella policy, necessitating notification of UIM coverage availability. The majority concluded that the Rebernicks were aware of the potential for UIM coverage through an endorsement, thus they were not entitled to reformation of the policy. The central legal issue is whether American Family was obligated to notify the Rebernicks about UIM coverage under Wis. Stat. 632.32(4m). The court determined that notification was indeed required, relying on the statutory language and its historical context. However, the court also found that American Family had adequately notified the Rebernicks of the UIM coverage's availability, negating the need to consider remedies for a failure to notify. The Rebernicks contended that the interplay of Wis. Stat. 632.32(4m) and the "scope clause" in Wis. Stat. 632.32(1) clearly indicated that the notice provisions applied to their umbrella policy. The court clarified that Wis. Stat. 632.32(1) delineates the types of insurance policies subject to its provisions, while Wis. Stat. 632.32(4m) specifies the policies that must adhere to the UIM notice requirements, particularly those related to motor vehicles registered in the state. The court's opinion in Rocker v. USAA Casualty Insurance Co. clarifies the application of Wis. Stat. 632.32, particularly the scope clause in Wis. Stat. 632.32(1), which mandates that any insurance policy providing motor vehicle liability coverage must adhere to the requisites of the statute unless stated otherwise. The court emphasized that while one subsection may apply to specific policies, it does not automatically extend to all other subsections, which may contain their own exemptions. In the case of the Rebernicks' umbrella policy, it includes automobile liability coverage for accidents involving cars owned by the insured, thus clearly falling under the jurisdiction of Wis. Stat. 632.32(1). However, a closer examination of Wis. Stat. 632.32(4m) is necessary to determine if it exempts the umbrella policy from the broader statute. Wis. Stat. 632.32(4m) pertains to policies insuring vehicles registered or principally garaged in Wisconsin against liabilities for bodily injury or death from vehicle ownership or use. American Family argues that this subsection only applies to policies that cover specific motor vehicles, asserting that the Rebernicks' umbrella policy does not meet this criterion. The court rejects this interpretation, clarifying that the statute does not require coverage for a particular vehicle but rather for any motor vehicle registered or principally garaged in the state. American Family's interpretation of the Rebernicks' umbrella policy is challenged by the assertion that the policy does provide coverage for a specific motor vehicle, as it requires underlying primary automobile insurance. The declaration page of the umbrella policy clearly lists a "Schedule of Underlying Insurance," which includes the primary "Car Liability Insurance" policy and its limits. The terms stipulate that underlying automobile coverage is necessary, linking the umbrella policy to a specific motor vehicle. The interpretation aligns with the court of appeals' agreement that American Family must inform the Rebernicks about the availability of Underinsured Motorist (UIM) coverage under the umbrella policy, as mandated by Wis. Stat. 632.32(1) and (4m). Critics of American Family's view argue that it overlooks the fundamental nature of umbrella policies requiring primary coverage. One judicial opinion suggested that umbrella policies generally cover policyholders rather than specific vehicles, but this perspective fails to acknowledge the conditional nature of excess insurance on primary policies. Thus, asserting that an umbrella policy does not insure a particular motor vehicle is misleading when the policy necessitates underlying coverage. Consequently, American Family was obligated under Wis. Stat. 632.32(4m) to notify the Rebernicks about UIM coverage. Legislative history shows no intent to exempt umbrella policies from these notification requirements, emphasizing the importance of insureds being aware of available UIM coverage. The statute's language and legislative intent underscore the necessity for insurers to inform policyholders about UIM options, reinforcing the requirement for American Family to notify the Rebernicks. Some states exempt umbrella policies from uninsured or underinsured motorist (UIM) statutes, while the relevant state legislature has not done so. In 1987, the Office of the Commissioner of Insurance exempted umbrella policies from the uninsured motorist coverage requirements but did not apply the same exemption to the later-mandated notice of UIM coverage requirements established in Wis. Stat. 632.32(4m). The absence of such an exemption suggests that insurers, like American Family, are required to notify policyholders of UIM coverage availability in umbrella policies. The legislature's 1995 enactment of Wis. Stat. 632.32(4m) distinguishes between uninsured and underinsured motorist coverages, requiring insurers to provide notice of UIM coverage rather than mandating its inclusion in policies. Counsel for American Family acknowledged the existence of UIM coverage as an endorsement to their umbrella policies but raised concerns about how consumers would be informed of it. The statute aims to help consumers make informed insurance decisions, and providing this notice is a manageable obligation for insurers. The Rebernicks claim that American Family did not notify them of UIM coverage availability and assert that, as a remedy, their umbrella policy should be reformed to allow retroactive purchase of UIM coverage. An insurer must provide written notice to one insured under each policy (effective after October 1, 1995) that does not include underinsured motorist (UIM) coverage, informing them of UIM coverage availability and including a brief description. This notice is required only once and must accompany the policy delivery. In the case at hand, the Rebernicks were already aware of UIM coverage, having requested it in their primary automobile policy issued on April 29, 2001, which included $100,000 in UIM coverage. American Family provided the required notice for this policy, which explained UIM coverage's purpose and encouraged policyholder inquiries. Subsequently, on May 7, 2001, American Family issued an umbrella policy to the Rebernicks, which contained an exclusion stating that UIM claims would not be covered unless the policy was endorsed for such coverage. This exclusion indicated the availability of UIM coverage via endorsement, but it lacked the necessary brief description mandated by statute. However, considering the context and the prior notice provided for the primary policy, it was determined that American Family effectively notified the Rebernicks of UIM coverage availability under the umbrella policy. Consequently, there is no need to address potential remedies for any failure to notify. Insurance companies must ensure that they provide explicit notice of the availability of Underinsured Motorists (UIM) coverage in each policy as required by Wis. Stat. 632.32(4m). American Family Insurance was determined to have notified the Rebernicks about the UIM coverage under their umbrella policy, fulfilling the statutory requirement. However, the dissenting opinion argues that American Family did not meet the statutory notice requirements and suggests that the case should be reversed and remanded for further proceedings to determine the appropriate remedy. The facts noted that the Rebernicks had a primary automobile insurance policy with UIM coverage and an umbrella policy that did not automatically cover UIM claims unless specifically endorsed. The Rebernicks claimed they were entitled to retroactively purchase UIM coverage under the umbrella policy due to lack of proper notice. The overarching legal issue revolves around the adequacy of the notifications provided by American Family in accordance with the statute, which is a matter of law subject to appellate review. An insurer's obligation to provide separate written notice for each insurance policy under Wis. Stat. 632.32(4m), including the umbrella policy in this case, hinges on statutory interpretation. The statute mandates that insurers provide written notice of the availability of underinsured motorist (UIM) coverage to each insured for policies effective after October 1, 1995, and states that this notice must be given only once at the time of policy delivery. In this instance, American Family provided the necessary notice for the Rebernicks' auto policy issued on April 29, 2001, detailing the availability of UIM coverage. However, when American Family issued their umbrella policy on May 7, 2001, they failed to include any written notice regarding UIM coverage, which is a requirement under the statute. The majority opinion contends that the short time frame since the Rebernicks received notice for their auto policy implied their awareness of UIM coverage. Furthermore, the umbrella policy contained an exclusion clause indicating that UIM coverage was not included unless endorsed, which the majority argued served as a sufficient alert about the availability of UIM coverage. Although the majority acknowledged that the exclusion provision alone does not fulfill the notice requirement, they concluded that American Family substantially complied with the statutory notice obligations regarding the umbrella policy, deeming the insurer's actions adequate under the circumstances. American Family failed to comply with the notice requirements for Underinsured Motorist (UIM) coverage as mandated by Wis. Stat. 632.32(4m), specifically by not providing the Rebernicks with a written description of such coverage upon delivery of their umbrella policy. The statutory language clearly requires that notice must include a brief description of UIM coverage, and American Family's previous communication regarding UIM coverage was deemed insufficient. The notice of exclusion in the umbrella policy did not inform the Rebernicks of the availability of UIM coverage nor describe it, failing to meet the statutory requirements. The ambiguity of the exclusion may lead a reasonable insured to misunderstand their coverage options. Some may conclude that UIM coverage was unavailable under the umbrella policy due to the lack of a special notice that was provided for the underlying automobile policy, while others might believe that prior notice of UIM coverage sufficed for the umbrella policy. The insurer's obligation is to provide explicit written notice regarding the availability and description of UIM coverage for each policy issued. Because this was not done, the question arises regarding the remedy for this failure. The Rebernicks propose that the remedy should allow them to retroactively purchase UIM coverage for their umbrella policy, as authorized by Wis. Stat. 631.15(3m), which allows for reformation of a policy that violates statutory requirements. However, determining the appropriate remedy is not straightforward under the circumstances presented. American Family failed to comply with Wis. Stat. 632.32(4m) regarding the required notice about underinsured motorist (UIM) coverage when issuing the Rebernicks' umbrella policy. Consequently, the Rebernicks did not receive the necessary written notification, which raises questions about whether they would have purchased UIM coverage if properly informed. Even if it is assumed they would have opted for such coverage, there remains uncertainty regarding its applicability and any potential exclusions, particularly since Mr. Rebernick was acting within the scope of his employment at the time of his accident. American Family's UIM endorsement includes a reducing clause that may decrease UIM coverage limits by any worker's compensation payments made. The resolution of the remedy in this case hinges on factual issues that cannot be determined with the current record. Unlike other cases where reformation of a policy under Wis. Stat. 632.15(3m) is straightforward, this situation is complicated by the lack of notice about UIM coverage, which does not automatically equate to entitlement for insurance payouts. Therefore, it is recommended to remand the matter to the circuit court for further proceedings to ascertain what remedy, if any, is appropriate due to American Family's failure to provide the required notice. The dissenting opinion concludes that the court of appeals' decision should be reversed, and the case should be sent back for additional evaluation, with Chief Justice Shirley S. Abrahamson joining in this dissent. Insurance policies in Wisconsin, effective from October 1, 1995, must include a written notice about the availability of underinsured motorist (UIM) coverage when the policy does not include this coverage. Insurers are required to provide this notice only once, coinciding with the first renewal notice after 120 days from the specified date. Wisconsin Statute 632.32(1) applies to all insurance policies against liability for motor vehicle accidents, covering both property and personal injury losses. The Rebernicks assert that the statute mandates insurers to inform the public about UIM coverage availability, emphasizing that it does not require all umbrella policies to include UIM coverage or specify coverage limits, but simply a notice requirement. The legal discourse references prior cases, such as Jaderborg v. American Family Mutual Insurance Co., illustrating that previous rulings on different subsections of the statute do not necessarily dictate outcomes for subsections relevant to the current case. The language in 632.32(4) and 632.32(4m) is similar but distinct, each outlining the scope of applicable policies. The court clarifies that it does not endorse the specific phrasing used by American Family in their notice, nor does it imply that such phrasing is the only acceptable form under the statute. The case specifically involves policies that took effect after the aforementioned date. American Family contends that the wording in exclusion 21 of their umbrella policy adequately informs the insured about the option to purchase excess UIM coverage.