Storm v. Wisconsin Mutual Insurance Co. (UIM Reducing Clause)

In Storm v. Wisconsin Mutual Insurance Co. (2018AP1285), the Court of Appeals District III found that an insurer gave proper notice to its insured about a policy change adding a reducing clause. Therefore, the policy was valid, and the underinsured motorist (UIM) limit was properly reduced.

Teresa Storm was injured in a car accident and sued the other drivers and their insurers. After receiving the policy limit of $50,000 from one of the other drivers, Storm sought the $100,000 UIM coverage limit from her own insurer Wisconsin Mutual. Wisconsin Mutual paid Storm $50,000 based on the reducing clause in Storm’s policy.

On appeal, Storm argued that the reducing clause in her policy was invalid because Wisconsin Mutual failed to provide her proper notice under Wis. Stat. § 631.36(5) when it added the reducing clause to her policy. Section 631.36(5) requires insurers to notify policyholders sixty days prior to renewal when the renewing policy contains new terms less favorable to the insured.

The court found that the reducing clause was valid because Wisconsin Mutual did provide notice to Storm more than sixty days prior to when her policy was renewed with the reducing clause. Wisconsin Mutual sent an initial letter informing Storm of new legislation that allowed UIM reducing clauses. The initial letter noted that Storm’s coverage would change upon her next policy renewal. Wisconsin Mutual sent a second notification letter to Storm when her policy actually renewed with the new UIM reducing clause several months later.

The court rejected Storm’s argument that Wisconsin Mutual’s sixty day notice was untimely because Wisconsin Mutual sent the initial letter more than sixty days before Storm’s policy changed. Additionally, even if the initial letter did not suffice as notification under § 631.36(5), the statute provides that, upon violation, the original policy applies for an additional renewal period. Storm’s additional renewal period of six months had expired by the time the accident occurred, so the new policy with the reducing clause applied.

Because the court found the reducing clause in Storm’s policy valid, Storm’s $100,000 UIM coverage limit was reduced by the $50,000 paid to Storm by the other driver in the accident.