April 3, 2023 – An insurer may not reduce its underinsured motorist (UIM) coverage by the amount the insured was required to reimburse to a workers’ compensation insurer, the Wisconsin Supreme Court has ruled.

In Secura Supreme Insurance Company v. The Estate of Daniel Huck, 2023 WI 21 (March 22, 2023), the supreme court held (6-1) that “amounts paid” for purposes of Wis. Stat. section 632.32(5)(i) means the final amount of a insured’s workers’ compensation settlement.

Justice Patience Roggensack wrote the majority opinion, joined by Chief Justice Annette Ziegler, Justice Ann Walsh Bradley, Justice Rebecca Dallet, Justice Brian Hagedorn, and Justice Jill Karofsky.

Justice Dallet filed a concurring opinion, joined by Justice A.W. Bradley, Justice Hagedorn, and Justice Karofsky. Justice Rebecca Bradley dissented.

Killed on the Job

The Village of Mount Pleasant employed Daniel Huck as a utility worker. While Huck was on the job in September 2018, a motorist struck and killed him.

The motorist who killed Huck carried $25,000 in liability coverage, and the motorist’s insurer paid that amount to Huck’s estate (Estate).

The village’s workers’ compensation insurer paid $35,798 to the Estate.

Section 102.29 obligated the Estate to pay $9,718 from the $25,000 received from the motorist’s insurer to the village’s workers’ compensation insurer.

UIM Coverage

Under a policy issued by Secura Supreme Insurance Company (Secura), Huck had $250,000 in UIM coverage.

Under the policy, the amount Secura was obligated to pay Huck would be reduced by all sums: 1) “paid because of bodily injury by or on behalf of persons … who may be legally responsible;” and 2) “[p]aid or payable because of the bodily injury under” a workers’ compensation law.

Secura reduced the $250,000 it was obligated to pay Huck by $60,798 – the $25,000 paid out by the motorist’s insurer plus the $35,798 paid out by the village’s workers’ compensation insurer.

Court Fight over $9,718

Secura tendered $189,201 to the Estate.

Secura also sought a declaration from the Racine County Circuit Court that the reducing clause applied to the entire amount paid to the estate by the village’s workers’ compensation insurer and moved for a judgment on the pleadings.

The Estate filed a counterclaim for $198,920 – $250,000 minus: 1) the $25,000 received from the motorists’ insurer, plus 2) $26,079 – (the $35,798 received from the village’s workers’ compensation insurer minus the $9,718 paid out by the Estate under section 102.29).

The circuit court denied Secura’s motion and found for the Estate on the counterclaim. Secura appealed.

The Wisconsin Court of Appeals affirmed. Secura appealed.

Meaning of ‘Paid’

Justice Roggensack began her opinion by pointing out that “paid” was not defined in the Secura policy.

Secura argued that “paid” means a monetary obligation that’s been discharged, regardless of where the money that’s the subject of the obligation ends up.

Therefore, Secura argued, because the village’s workers’ compensation carrier paid $35,798 to the Estate, it was entitled to reduce its $250,000 UIM coverage by that amount, despite the fact the Estate later paid $9,718 out of the $25,000 that it received from the motorist’s insurer to the village’s workers’ compensation insurer under section 102.29.

Link to Section 102.29

Justice Roggensack reasoned that Secura was not entitled to reduce its obligation by the entire $35,798, because the reducing clause referenced sums paid or payable because of bodily injury under a workers’ compensation law, and section 102.29 was such a law.

“It follows that the ‘sums’ by which Secura may reduce its liability because of ‘worker’s compensation law’ accounts for the Estate’s reimbursement pursuant to the Wis. Stat. section 102.29 requirements,” Justice Roggensack wrote.

“Because the policy’s plain language does not except reimbursements made under ch. 102, we will not read in an exception that is not there,” Roggensack wrote. “To do so would re-write the policy, which we cannot do.”

Grammar Governs

Justice Roggensack also cited section 632.32(5)(i), which specifies that insurers may reduce UIM policy coverage by “amounts paid or payable under a worker’s compensation clause.”

Roggensack looked to the dictionary meaning of “payable,” and wrote that “[t]he plain meaning of ‘payable’ … is that payment is due, but the manner and the timing of payment may involve future payments.”

“We conclude that the plain language of the statute grants permission to an insurer to reduce its liability limit when the final amount of an insured’s worker’s compensation recovery has been determined,” Justice Roggensack wrote.

“Stated otherwise, ‘amounts paid’ refers to an insured’s final recovery at the time an insurer reduces its liability, which we recognize may occur when a UIM claim accrues.”

Concurrence: ‘Hyper-literal’ Interpretation

In her concurrence, Justice Dallet concluded that Secura’s argument rested on a “hyper-literal” interpretation of “paid.”

Such an interpretation, Dallet reasoned, would undo the bargain Huck thought he was striking when he purchased the Secura insurance policy.

“The Estate is only ‘paid’ the money it retains after resolving both its claims against the tortfeasor and any resulting obligations to the workers’ compensation insurer,” Justice Dallet wrote.

Dissent: Majority Improperly Adds Word to Statute

In her dissent, Justice R.G. Bradley argued that the $9,718 reimbursement made by the Estate was irrelevant under the terms of the plain wording of Secura’s policy.

“Reimbursement of money paid does not change the simple fact that money, was in fact, paid,” R.G. Bradley wrote. “While this result may seem ‘unfair,’ nothing gives this court the authority to disregard the plain wording of an insurance policy.”

Justice R.G. Bradley also pointed out that Huck bought UIM insurance to protect against being injured by a motorist carrying less than $250,000.

Huck had received exactly that amount, R.G. Bradley noted, when Secura’s tender was added to the amounts the Estate received from the motorist’s insurer and the village’s workers’ compensation insurer: $189,201 plus $25,000 plus $35,798.