Beware Wisconsin car insurance consumers: Beginning with auto insurance policies issued or renewed after November 1, 2011, uninsured motorist coverage and underinsured motorist coverage can be reduced by amounts payable by or on behalf of the uninsured driver or the underinsured driver, by the amounts paid or payable under any worker’s compensation law, or amounts paid or payable under any disability benefits laws. Wisconsin Statute §632.32(5)(i).
Many of the people I meet with have no idea about these types of reducing clauses, which make it unlikely that a person would ever be able to ever receive the limits shown for the coverage in their declaration pages. This was the problem that the Wisconsin Supreme Court noted years ago, when they stated that the insurance company must make the effects of the reducing clause “crystal clear in the context of the whole policy.” Badger Mutual Ins. Co. v. Schmitz, 2002 WI 98, ¶ ¶ 46-47. In the event that there is ambiguity, a court will construe this ambiguity in favor of coverage. Dowhower v. West Bend Mut. Ins. Co., 2000 WI 73, ¶ 34.
While that language was retracted somewhat, in 2009, by a legislative change, the reducing clause was for all practical purposes, void. This legislation was commonly known as “Truth in Auto Insurance” which sought to eliminate the deceptiveness of these hidden clauses. This was short lived, as 2011 Wis. Act 14 now allowed the reducing clauses, which allow the policy limits to be reduced by payments received from other sources.
Because of the reducing clause, some claimants may be forced to apply for social security disability and await a determination on whether they are eligible before they can make a claim under their underinsured motorist policy. Will they be forced to file for workers compensation and go through a hearing before making an underinsured motorist claim? Both of these types of claims take a great deal of time, with both types of claims eligible for appeals. This could add years to a final resolution.
I have heard recommendations that people can protect themselves by asking their agent, in writing, for the same type of coverage they had, before the change in the law. It remains to be seen if the insurance industry will offer the older coverage, at an increased premium. I would surmise that if an insurance coverage offered the old coverage, knowledgeable buyers would probably opt for that, even if the premium was higher. There is a market for this “retro” coverage, and I hope some insurers will opt to write it.
