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COURT OF APPEALS DECISION DATED AND RELEASED November 14, 1996 |
NOTICE |
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A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 96-1935-FT
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT IV
STEVEN J. GROSHEK,
Plaintiff-Appellant,
v.
RURAL MUTUAL INSURANCE
CO.,
Defendant-Respondent.
APPEAL from an order of
the circuit court for Dodge County:
DANIEL W. KLOSSNER, Judge. Reversed
and cause remanded with directions.
Before Eich, C.J.,
Dykman, P.J., and Deininger, J.
PER
CURIAM. Steven J. Groshek appeals from an order on summary judgment
dismissing his complaint against Rural Mutual Insurance Company (RMIC). Groshek's action for declaratory judgment
sought a ruling that RMIC owed him $100,000 under his underinsured motorist
(UIM) policy. The trial court held that
under the plain terms of the reducing clause in the policy, Groshek was only
entitled to the $75,000 that RMIC had already agreed to pay him. We conclude that under controlling precedent
the reducing clause in the policy is illusory and therefore void on public
policy grounds. We therefore reverse.[1]
Groshek's UIM coverage
provided a maximum policy limit of $100,000.
A reducing clause in the policy provided that "the limit of
liability [$100,000] shall be reduced by all sums paid because of the `bodily
injury' by or on behalf of persons or organizations who may be legally
responsible."
Groshek's wife was
killed in an accident caused by a driver whose automobile insurance coverage
contained a $25,000 limit on personal injury liability. The liable driver's insurance company
subsequently tendered the $25,000 policy limit to Groshek, who then claimed
$100,000 from RMIC under his UIM coverage.
RMIC took the position that the reducing clause quoted above reduced its
liability to $75,000, and Groshek commenced this declaratory judgment action to
resolve the dispute.[2]
RMIC cannot use the
reducing clause in Groshek's policy to reduce its liability to $75,000. If the reducing clause is valid, then RMIC
will never have to pay the stated policy limits of its UIM coverage. The result is an illusory contract that
defeats the reasonable expectation of the insured and is therefore contrary to
public policy. Kuhn v. Allstate
Ins. Co., 181 Wis.2d 453, 463-65, 510 N.W.2d 826, 830-31 (Ct. App.
1993), aff'd on other grounds, 193 Wis.2d 50, 532 N.W.2d 124
(1995). In a decision on related
issues, the supreme court stated that "we do not overrule or limit
language in previous holdings of this court and the court of appeals [including
Kuhn] that invalidated reducing clauses in UIM policies in part
on the basis of the illusory nature of the coverage." Matthiesen v. Continental Casualty Co.,
193 Wis.2d 192, 204, 532 N.W.2d 729, 733-34 (1995). The issue is therefore settled.
We reverse and remand with instructions to enter judgment declaring that
Groshek's claim against RMIC shall not be reduced by payments received from the
tortfeasor's insurer.
By the Court.—Order
reversed and cause remanded with directions.
This opinion will not be
published. See Rule 809.23(1)(b)5, Stats.