Blum ex rel. Studinski v. 1st Auto & Casualty Insurance ( 2010 )

ANN WALSH BRADLEY, J.

¶ 58. (concurring in part, dissenting in part). I agree with the majority that after the supreme court has overruled a court of appeals decision, that court of appeals decision no longer possesses any precedential value, unless this court has expressly stated otherwise. Majority op., ¶ 42. Therefore, I join Part III C of the majority opinion in full.

¶ 59. I part ways with the majority, however, on the interpretation and application of this insurance policy. The majority correctly explains that the purpose of uninsured motorist (UM) coverage under Wis. Stat. § 632.32(4) is to "place the insured in the same position as if the tortfeasor had been insured." Id., ¶ 36.

¶ 60. I also agree with the majority that the parties' expectation is that the UM insured (Blum) would be covered under the UM policy "if a tortfeasor's lack of insurance placed the insured in a worse position than he or she would have been in if the tortfeasor had been insured." Id., ¶ 28.

¶ 61. Both the purpose of UM coverage and the expectations of the parties are that the UM insured should not be in a worse position just because the tortfeasor did not have coverage under an automobile liability policy. See Hull v. State Farm Mut. Auto. Ins. Co., 222 Wis. 2d 627, 643-44, 586 N.W.2d 863 (1998). Yet, under the majority's analysis Blum is in a worse position. Why is this?

¶ 62. It is because the majority fails to recognize that if the father's vehicle had been insured, the sontortfeasor would have been a named insured under the father's policy as a resident of the household. Blum, then, would be in a better position because he would have had two liability policies from which to seek recovery instead of one.

¶ 63. He could seek recovery from the liability policy covering the vehicle, which would have provided coverage for injuries caused by the son's negligence. Further, because the son also had his own liability policy, Blum would have been able to recover from that policy as well.

¶ 64. It is on this precise point that the majority's analysis falters. It is built around the false premise that Blum is not in a worse position because he was not "denied a source of compensation" for his injuries. Majority op., ¶ 40. The majority contends that, "[h]ad the vehicle in this case been covered by insurance, the insurance would not have compensated Blum unless he had established negligence or other liability on the part of the owner." Id., ¶ 38. This statement is simply incorrect. As a member of the father's household, the son-tortfeasor would be considered a named insured on a liability policy the father took out covering the vehicle.¹

¶ 65. When I examine the policy, I conclude that it is ambiguous and should be construed in favor of coverage. Because 1st Auto did not raise the issue of the reducing clause until its response brief in this court, I would not make any determinations about the validity of the reducing clause. Rather, I would remand to the circuit court for full development of the issue and a determination of whether the reducing clause applies to reduce Blum's UM compensation. Accordingly, I respectfully concur in part and dissent in part.

I

¶ 66. The majority provides three reasons to support its conclusion that the policy unambiguously does not provide coverage here: (1) Blum is not "legally entitled to recover" damages from the "owner" of the vehicle; (2) the vehicle is not an uninsured motor vehicle because the driver's policy "applied" to the vehicle at the time of the accident; and (3) even if Blum's policy provided coverage, the reducing clause would reduce Blum's recovery to $0. See id., ¶ 23. I address each of the majority's conclusions in turn.

¶ 67. I begin with the UM insuring agreement. It provides: "We will pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle[.]" (Emphasis added.) The majority's focus is on the damages that Blum would be entitled to recover from Bruce Burch, the owner of the vehicle. Id., ¶ 24. It asserts that because Bruce Burch was not negligent, Blum is not legally entitled to recover compensatory damages from the owner or operator of the vehicle. Id. It contends that Blum's interpretation "remove[s] the element of negligence from the equation." Id.

¶ 68. This conclusion misses the mark. By focusing on whether Blum would be entitled to recover damages from the owner of the vehicle, the majority ignores the fact that Blum is legally entitled to recover damages from the operator of the vehicle, Nicholas Burch, who was negligent.² Blum's interpretation does not remove the element of negligence from the equation.

¶ 69. A liability policy taken out on a vehicle covers more than the liability incurred by the vehicle's owner. It also covers liability incurred by other insureds when they are driving that vehicle. Had there been a liability policy on the vehicle, Blum would have been legally entitled to recover compensatory damages from that policy due to Nicholas Burch's negligence. He also would have been entitled to recover compensatory damages from Nicholas Burch's separate American Standard policy.

II

¶ 70. I turn to the policy definition of an "uninsured motor vehicle." It provides that an uninsured motor vehicle is a land motor vehicle "[t]o which no bodily injury liability bond, or policy applies at the same time of the accident."

¶ 71. Blum asserts that any vehicle that does not have an insurance policy is an uninsured motor vehicle. On its face, this interpretation sounds reasonable.

¶ 72. Yet, the majority casts aside Blum's interpretation of the policy, calling it "ingenious." Majority op., ¶ 22. It focuses instead on the word "applies." Id., ¶ 25. Citing a dictionary definition of "apply," it asserts that a policy may apply to a vehicle even if the vehicle is uninsured. It concludes that this vehicle was not an uninsured motor vehicle at the time of the accident because Nicholas Burch's American Standard policy was "implicated."

¶ 73. Contrary to the majority, I conclude that a reasonable insured would likely interpret the language to mean that a policy "applied" to a vehicle if there was a liability policy on that vehicle. With this understanding, a reasonable insured would determine that no policy applied to the vehicle driven by Nicholas Burch.

¶ 74. Even if the majority's interpretation of the policy term "applies" is also reasonable, the policy language would be rendered ambiguous. Ambiguous language in an insurance policy is construed in favor of coverage. Folkman v. Quamme, 2003 WI 116, ¶ 13, 264 Wis. 2d 617, 665 N.W.2d 857.

Ill

¶ 75. Finally, I examine the majority's application of the reducing clause. It may well be that the reducing clause is valid and could be applied to reduce Blum's recovery. However, 1st Auto did not raise the issue of the reducing clause in the circuit court or in the court of appeals. The reducing clause was not raised until 1st Auto filed its response brief in this court.

¶ 76. As a general rule, issues not raised in the circuit court will not be considered for the first time on appeal. Marotz v. Hallman, 2007 WI 89, ¶ 16, 302 Wis. 2d 428, 734 N.W.2d 411. This court may, however, use its discretion to decide an issue that was not raised in the circuit court when that issue is a question of law, briefed by both parties, and of sufficient public interest to merit a decision. Id.

¶ 77. Not all reducing clauses are valid. Some are unenforceable because they are ambiguous — either in isolation or in the context of the policy as a whole, and others are unenforceable because they are contrary to law. See, e.g., Badger Mut. Ins. Co. v. Schmitz, 2002 WI 98, ¶ 7, 255 Wis. 2d 61, 647 N.W.2d 223. At oral argument, Blum's attorney asserted that 1st Auto's reducing clause might be unenforceable, but because 1st Auto did not raise the issue until the last moment, these arguments had not been explored. He asserted: "We have not researched it, we have not briefed it. There was no possibility of doing that in a reply brief." Given that the issue of the reducing clause has not been fully briefed and argued, I conclude that it should not be decided by this court.

¶ 78. In sum, I determine that Blum's UM policy is ambiguous, and I construe it in favor of coverage. I would remand to the circuit court for further briefing and arguments about the validity of the reducing clause and for a determination of whether Blum's recovery should be reduced. Accordingly, I respectfully concur in part and dissent in part.

¶ 79. I am authorized to state that Chief Justice SHIRLEY S. ABRAHAMSON joins this concurrence/ dissent.

1 See Wis. Stat. § 632.32(6)(b) ("No policy may exclude from the coverage afforded or benefits provided: (1) Persons related by blood, marriage or adoption to the insured.").

2 Prior to the lawsuit, Blum entered into a settlement agreement with Nicholas Burch and his insurer, American Standard. Depending upon its terms, the settlement agreement could affect Blum's entitlement to proceeds arising out of Nicholas Burch's negligent operation of the uninsured motor vehicle. Nevertheless, the settlement agreement would not change the interpretation of the UM policy, which is the larger question at issue here.