May 17, 2010 − An automobile insurance policy that does not clearly define the term “hit-and-run” will be construed in favor of coverage, the Wisconsin supreme court recently held in Zarder v. Acuity, A Mutual Insurance Co., 2008AP919 (May 14, 2010).

In December of 2005, then 13-year old Zachary Zarder was struck by an unidentified motorist while riding his bicycle down the street. The car stopped, and three occupants stepped out to determine whether Zarder was injured. Zarder stated that he was alright, so the motorists left without providing further information.

It was later determined, however, that Zarder sustained fractures to his leg and arm that required surgery. A health insurance policy was insufficient to cover all costs. The Zarders sought coverage under their automobile insurance provider, Acuity.

The Acuity policy covered damages for bodily injury sustained by an “uninsured motor vehicle” – defined in part by the policy as “a hit-and-run vehicle whose operator or owner is unknown and which strikes [an insured].” Acuity denied coverage, asserting that the vehicle that struck Zarder “did not constitute a ‘hit-and-run’ vehicle under the law.” The Zarders filed suit.

The circuit court denied Acuity’s motion seeking a no coverage declaration. Drawing on public policy, the appeals court affirmed, concluding that “a hit-and-run occurs when a driver leaves the scene of the accident without providing identifying information, even though the driver stopped to see if there was injury.” The supreme court − in an opinion written by Justice Ann Walsh Bradley − affirmed on a modified rationale.

Policy construed in favor of coverage

What constitutes a “hit and run” is not defined in the Acuity-Zarder policy. Acuity asserted that “hit and run” means to “flee without stopping” under Hayne v. Progessive Northern Insurance Co., 115 Wis. 2d 68, 339 N.W.2d 588 (1983).

In Hayne, the supreme court held that a “hit” under the statutory term “hit-and-run” unambiguously requires a physical striking. The court made additional statements about what is required for a “run” under the statute, but determining what it means to “run” was not important to resolution of the case.

Acuity asserted that both the circuit court and the appeals court erred because the vehicle involved was not a “hit and run” vehicle. The driver stopped, Acuity argued, and Hayne determines that the policy’s “hit and run” term is unambiguous.

But the supreme court rejected Acuity’s arguments, concluding that it must look to the intention of the parties to the contract, not the intention of the uninsured driver, to determine what constitutes a “hit and run” under the policy.

Since the term “hit and run” is ambiguous under the policy, the court concluded, “we will construe the policy in favor of the insured” because that is the rule of construction for ambiguous terms in insurance contracts.

The court concluded that Hayne does not control, primarily because Hayne interpreted the "hit" aspect of "hit-and-run" under statute, not the term under an insurance policy. The court applies different rules when construing a statute, the court stated.

Further, “although Hayne determined that the term ‘run’ in the statutory phrase ‘hit-and-run’ means ‘fleeing from the scene of an accident,’ this definition leaves unanswered the question presented in this case,” the court wrote. That is, Hayne did not discuss the circumstances in which a "flee" has actually occurred.

Can appeals court dismiss supreme court statement as dictum?

In Hayne, the supreme court stated: “plain meaning of ‘hit-and-run’ consists of two elements: a ‘hit’ or striking, and a ‘run,’ or fleeing from the scene of an accident.” Acuity argued that there was no “run” under Hayne because the driver stopped.

In making its decision, the appeals court determined that Hayne’s definition of run was dictum because that aspect was not necessary for resolution of the case.

Resolving the recurring issue of whether an appeals court can dismiss as dictum a statement from the supreme court is “fundamental to the meaning and precedential value of our decisions,” the court wrote.

The supreme court concluded that a court of appeals “may not dismiss a statement from an opinion by this court by concluding that it is dictum.”

Doing so in this case, the court wrote, would imply that the Hayne definition of “run” would never be binding authority in a case interpreting the same statute at issue in Hayne.

Related :

Meaning of ‘hit-and-run’ debated before Wisconsin Supreme Court– Feb. 16, 2010