INSURANCE-RELATED COURT CASES

Digested from case reports published online

COURT DECISIONS

Does UIM claim apply to decedent?

Ryan Johnson died from injuries sustained in an automobile accident in 2015, leaving behind his minor son, Elliot Brey. State Farm Mutual Automobile Insurance Company insured Brey as a resident relative under the policy issued to Hannah and Jake Brey, Brey’s mother and her husband, covering a 2007 Honda CRV. That vehicle was not involved in the accident. Johnson, who was a passenger in a vehicle driven by Channing Mathews, was not insured under any State Farm policy.

Brey intervened in an action brought by Johnson’s parents against the driver, the owner of the vehicle, and their insurance companies, and added State Farm as a defendant, seeking to recover damages under the policy for the death of his father. The policy’s underinsured motorist (UIM) provisions stipulated that to collect compensatory damages, an insured must have sustained bodily injury caused by an accident involving an underinsured motor vehicle.

Both Brey and State Farm moved for summary judgment. State Farm sought a declaration that the policy under which Brey was insured did not provide UIM coverage for the death of Johnson because he was not an “insured” under the policy. In response, Brey acknowledged that the terms of the policy precluded coverage but argued that the policy’s requirement that an insured sustain injury was contrary to a state statute and therefore was void and unenforceable. A section of the statute is sometimes called the “omnibus statute” because it sets the minimum requirements all motor vehicle insurance policies in Wisconsin must satisfy.

The circuit court granted summary judgment in favor of State Farm based on the policy language, the history of the statute, and case law.

The court of appeals reversed and remanded, determining that the case law in question did not govern and holding that the statute did not bar an insurer from limiting coverage to only those insureds who suffer injury or death. The court granted State Farm’s petition for review.

On appeal, the Supreme Court of Wisconsin stated that the case required it to interpret and apply the omnibus statute.

The parties did not dispute that the policy bars coverage for Brey’s wrongful death claim because the UIM coverage provisions require an insured to sustain bodily injury, and Johnson was not an insured under the policy. Nonetheless, Brey contended that the statute precluded an insurer from limiting UIM coverage to only injured insureds. The omnibus statute provides: “‘Underinsured motorist coverage’ means coverage for the protection of persons insured under that coverage who are legally entitled to recover damages for bodily injury, death, sickness, or disease from owners or operators of underinsured motor vehicles.” According to the court, this case turned on whether the UIM coverage clauses comport with this definition.

According to the supreme court, the court of appeals’ conclusion that the omnibus statute contains an “unambiguous statement” prohibiting State Farm from conditioning coverage on an insured sustaining bodily injury reflects a literalistic approach to statutory interpretation.

The court of appeals erred by strict-ly construing the statutory definition in isolation rather than interpreting it in the context of the omnibus statute’s pertinent text as a whole.

The supreme court rejected this hyper-literal approach. By declining to address statutory context, the court of appeals erroneously confined its statutory analysis to the definition in the statute. The context and structure of the statute indicate that UIM coverage exists only when an insured suffers bodily injury or death.

In this case, the person insured—Brey—did not suffer bodily injury or death. Johnson died, but he was not insured under the policy.

For a wrongful death claim to exist, “the decedent must have had a valid claim for damages against the defendant at the time of his death.” At the time of his death, Johnson could not have recovered damages under the UIM coverage provisions of the Policy because he was not an insured. Consequently, Brey cannot maintain a derivative action against State Farm.

The supreme court concluded that the circuit court properly granted State Farm’s motion for summary judgment and the court of appeals erred in reversing it. The policy afforded UIM coverage only to an insured who sustained bodily injury caused by an accident involving an underinsured motor vehicle. Brey’s father was not insured under the policy. While Brey was an insured under the policy, he was not involved in the accident in which his father was killed and therefore sustained no bodily injury. The statute plainly does not preclude an insurer from limiting UIM coverage to insureds who sustain bodily injury or death. With respect to the car accident involving Brey’s father, the policy does not provide any UIM coverage for Brey, nor does the law require it.

Brey v. State Farm Mutual Automobile Insurance Company—Supreme Court of Wisconsin—February 15, 2022—No. 2019AP1320.