On August 26, 2014, the Wisconsin Court of Appeals, District 1, affirmed a decision from the Milwaukee County Circuit Court, denying coverage in an underinsured motorist finding that there was no coverage under the policy because the insured was injured, “while ‘occupying’, or when struck by, any motor vehicle owned by that ‘insured’ which is not insured for this coverage under this policy.”[i]
The case arises from a motor vehicle accident that occurred on May 28, 2010.[ii] On that date, Edward Hahn was driving a Kawasaki Mule – an ATV – across Highway G to pick up the mail.[iii] As he was crossing Highway G to return home, he was struck by a car driven by Harry Schoephoerster, and was fatally injured. Mr. Schoephoerster’s insurer, American Family Mutual Insurance Company, paid its policy limits of $150,000.00. Bonnie Hahn, Mr. Hahn’s widow, made an underinsured motorist claim against her insurer, Harleysville Insurance Company.[iv]
The Harleysville policy at issue in this case had two vehicles listed under the heading “what we cover and the cost of your protection,” a 1997 Dodge Ram 1500 and a 2002 Chrysler Town & Country.[v] The policy provided coverage for:
We will pay compensatory damages which an “insured” is legally entitled to recover from the owner or operator of an “underinsured motor vehicle” because of “bodily injury”:
1. Sustained by an “insured”; and
2. Caused by an accident.
The owner’s or operator’s liability for these damages must arise out of the ownership, maintenance or use of the “underinsured motor vehicle.”[vi]
However, the policy also contained the following exclusion:
We do not provide Underinsured Motorists Coverage for “bodily injury” sustained:
1. By an “insured” while “occupying”, or when struck by, any motor vehicle owned by that “insured” which is not insured for this coverage under this policy. This includes a trailer of any type used with that vehicle.[vii]
The policy did not define the term “motor vehicle,” but the UIM endorsement explained that an “underinsured motor vehicle” did not include motor vehicles that were designed for use, “off public roads while not upon public roads.”[viii] Harleysville denied coverage, arguing that the Mule was not a vehicle listed under the policy.[ix] The circuit court agreed, and Ms. Hahn appealed to the appellate court.[x]
On appeal, Ms. Hahn argued that the language was ambiguous and that, therefore, coverage should not be excluded.[xi] The appellate court disagreed, finding that the policy unambiguously excluded coverage for the Mule.[xii] “The meaning of this exclusion is plain: an insured is only entitled to receive UIM benefits if he or she is involved in an automobile accident while driving a vehicle for which a premium was paid. There is no other way to read the exclusion.”[xiii]
The appellate court was not persuaded by Ms. Hahn’s argument that the exclusion was ambiguous because it did not define the term “motor vehicle.”[xiv] The court ignored the statutory definition of “motor vehicle” cited by Ms. Hahn – motor vehicle means a self-propelled land motor vehicle designed for travel on public roads and subject to motor vehicle registration under ch. 341, Wis. Stat. § 632.32(2)(at) (2009-10) – and instead focused on the fact that the Mule was not listed on the policy and no premium was paid to insure it.[xv] Further, because Ms. Hahn admitted in deposition that Mr. Hahn frequently used the Mule to cross the highway to pick up the mail, it would be unfair to allow the Hahn’s to escape additional premiums by using a vehicle that was not insured under the policy.[xvi] Finally, the appellate court noted that, under Wisconsin case law, “an off-road vehicle operated on a public highway is a ‘motor vehicle’ for purposes of determining insurance coverage.”[xvii] The appellate court warned that extending coverage in this case would allow insureds to insure and pay for only one vehicle under the policy, but force insurers to cover other vehicles, potentially illegal vehicles, in the event that an accident occurred in the uninsured vehicle.[xviii]
Lastly, the appellate court rejected Ms. Hahn’s argument that there was contextual ambiguity. “Notably, the liability portion of the policy states, as does the UIM endorsement, that there is only coverage for covered vehicles under the policy.”[xix] Further, the court noted that,
“the UIM endorsement explains that an “underinsured motor vehicle” does not include motor vehicles designed for use ‘off public roads while not upon public roads.’ Under this definition, a vehicle such as Edward’s Mule would be considered a motor vehicle because he was operating it on a public highway.”[xx]
This case really boils down to two points. First, the exclusion in this case was unambiguous – no reasonable insured would believe that coverage applied when the Mule was not listed under the insurance policy. Second, public policy dictates that an insured is not entitled to coverage for a vehicle where he/she chose not to pay premiums for coverage.
[ii] Hahn at ¶ 2.
[v] Id. at ¶ 3.
[vi] Id. at ¶ 4.
[vii] Id. at ¶ 5.
[viii] Id. at 6.
[ix] Id. at ¶ 7.
[x] Id. at ¶ 8.
[xi] Id. at ¶ 10.
[xii] Id. at ¶ 12.
[xiii] Id. at ¶ 13.
[xiv] Id. at ¶ 14.
[xvi] Id. at ¶ 16.
[xvii] Id. at ¶ 22.
[xix] Id. at ¶ 25.
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