Smith v. Atlantic Mut. Ins. Co
In Smith v. Atlantic Mut. Ins. Co., 155 Wis. 2d 808, 811, 456 N.W.2d 597 (1990), after Smith recovered the policy limit of $ 50,000 from the tort-feasor's insurer, she sought to recover UIM benefits under her own policy, which also had a $ 50,000 UIM policy limit.
Smith's policy defined underinsured motor vehicle as a vehicle "to which a bodily injury liability bond or policy applies at the time of the accident but its limit for bodily injury liability is less than the limit of liability for this coverage." Smith, 155 Wis. 2d at 811, 456 N.W.2d at 599.
That definition was the major focus for the court's reasoning, which led it to the conclusion that there was no UIM coverage available because the policy definition of an underinsured motorist was unambiguous and it precluded UIM coverage for Smith. See id.
In so holding, it concluded that a policy could accomplish a reduction in the amount of UIM coverage stated on the declaration page through the way in which it defined an underinsured motor vehicle, and it rejected Smith's argument that to strictly construe the definition would render the UIM coverage illusory under the holding of Wood v. American Family Mutual Insurance Co.
The supreme court declined to examine whether the UIM coverage was illusory because it concluded that whether an underinsured motorist was involved in the accident must be determined before a court could analyze other provisions in the policy and their potential effects on UIM coverage. See 155 Wis. 2d at 814, 456 N.W.2d at 600.
In sum, Smith had $ 50,000 of UIM coverage and the tortfeasor had a liability limit of $ 50,000 which was paid in full to Smith.
The court determined that the definition of "underinsured motor vehicle" was unambiguous. That definition stated that an "underinsured motor vehicle" is a motor vehicle "to which a bodily injury liability bond or policy applies at the time of the accident but its limit for bodily injury liability is less than the limit of liability for this coverage." Smith, 155 Wis. 2d at 811.
The court held that the plain meaning of the definition did not permit Smith to recover under her UIM coverage because the tortfeasor did not have policy limits less than Smith's UIM coverage.
In reaching its conclusion, the court explained that because it decided "in the first instance" that the tortfeasor's vehicle was not an underinsured motor vehicle, it need not reach an issue pertaining to the policy's reducing clause. See id. at 814.