Secura Sup. Ins. Co. v. Est. of Huck, 2021 WL 4449249 (Wis. App. 2021).
A new Wisconsin Court of Appeals decision has ruled that an uninsured/underinsured (UM/UIM) automobile insurance carrier cannot reduce UM/UIM payments to its insured by the amount of workers’ compensation benefits the insured received, if the insured had to reimburse those benefits to the employer or subrogated workers’ compensation carrier. In Secura Supreme Insurance Company v. Estate of Huck, Daniel Huck was struck and killed by a motorist while working for the Village of Mt. Pleasant. The tortfeasor had an insurance policy with liability limits of $25,000, which were paid to Huck’s Estate. The Estate initially received $35,798.04 from the Village’s worker’s compensation carrier. However, the Estate was obligated by § 102.29 to refund the worker’s compensation carrier $9,718.73 from the $25,000 settlement with the tortfeasor. Thus, the Estate netted only $26,079.31 from workers’ compensation.
Daniel Huck purchased a Secura policy with underinsured motorist’s limits of $250,000 and submitted a claim under his policy. The policy, which effectively tracks the language of § 632.32(5)(i)2, permits reducing the UIM limits by “all sums … [p]aid or payable because of the bodily injury under … [w]orker’s compensation law.” Secura sued its insured to determine its obligations, arguing that its limits could be reduced by the amount paid by the $9,718.73 which was paid back to, the workers’ compensation carrier pursuant to § 102.29. The trial court ruled, and the Court of Appeals affirmed that Secura was permitted to reduce its coverage limits only by the total amount of worker’s compensation actually received and retained by the Estate.
Effective November 1, 2011, § 632.32 was amended to change the required minimum limits from $100,000 per person and $300,000 per accident back to $25,000 per person and $50,000 per accident for UM coverage. However, § 632.32(5)(i)(2)—which governs acceptable provisions within a UM/UIM policy—says that no insurance policy is allowed to provide UM/UIM policy limits which allow those limits to be reduced by payments made by another source, including payments made by workers’ compensation and disability insurance. Because Huck’s Secura policy had UIM limits of $250,000 and the workers’ compensation lien repayment didn’t reduce those limits below the $25,000 statutory policy limits, the prohibition against offset for workers’ compensation benefits did not apply.
The Court of Appeals referred to the 2006 Wisconsin Supreme Court decision in Teschendorf v. State Farm, 717 N.W.2d 258 (Wis. 2006), in which the court ruled that an insured under a UM/UIM policy would reasonably expect that the coverage limits would be reduced only by payments the insured actually receives. Therefore, the stated rule is that the UM/UIM coverage limits can only be reduced by worker’s compensation amounts paid to, and retained by, the insured, the insured’s heirs, or the insured’s estate. In other words, § 632.32(5)(i)(2) does not permit UIM benefits to be reduced by any workers’ compensation benefits made, regardless of the ultimate recipient. In the case of Huck’s estate, the court logically ruled that although the estate “received” the benefits initially, they were not retained by the estate. The estate had to reimburse the workers’ compensation carrier and therefore the $9,718.73 was not technically “paid” to the estate and Secura could not reduce the benefits it owed to Huck’s estate by that amount.
If you should have questions regarding this article or subrogation in general, please contact Doug Lehrer at [email protected].