Wisconsin Supreme: UI Insurer Cannot Deduct Money that Was Paid but Reimbursed

Wisconsin law allows insurers to deduct from their liability any amounts paid for the same injury by a worker’s compensation carrier, but does that include amounts that are paid and later reimbursed?

Secura Supreme Insurance Co. argued that repayment makes no difference; it could deduct from its liability under an uninsured motorist policy all of the $35,798.04 in workers’ compensation benefits that were paid to the estate of Daniel Huck, even though the estate had returned $9,718.73 of that amount as required by the Wisconsin insurance code.

The Wisconsin Supreme Court ruled Wednesday that Secura had shortchanged the estate and cannot deduct an amount that was paid but reimbursed. The 6-1 decision decision affirmed rulings made by both the circuit court and state Court of Appeals.

“‘Amounts paid’ is interpreted as the current ‘amounts paid’ or outstanding such as by an installment agreement, at the time an insurer seeks to reduce its liability under § 632.32(5)(i),” the majority opinion says. “Stated otherwise, ‘amounts paid’ refers to an insured’s final recovery at the time an insurer reduces its liability, which we recognize may occur when a UIM claim accrues.”

Utility worker Daniel Keith Huck was struck and killed by an allegedly negligent motorist while working for the Village of Mount Pleasant. The motorist’s insurer paid its $25,000 liability coverage limit to Huck’s estate, which reimbursed the workers’ compensation insurer for his employer $9,718.73 as required by state law.

Huck’s estate also filed a claim against Secura, which had issued an auto insurance policy to Huck wtih a $250,000 liability limit.

Secura paid the claim, but deducted all of the $35,798.04 in workers’ compensation benefits that the estate had received, contending that the statute allows it to deduct all “amounts paid” regardless of whether any portion was reimbursed. The statutory language makes no mention of reimbursements, the carrier said.

Secura filed a lawsuit in state court seeking a declaratory judgment that it had made the right call. A Circuit Court judge in Racine County ruled that the insurer could not deduct the amount paid but reimbursed. The Court of Appeals affirmed the decision. Seneca took the case up the Supreme Court.

The majority opinion laid out a detailed examination of the meaning of the statutory words “amount paid” that included a discussion about how past participles are routinely used as adjectives. But four justices signed on to a concurring opinion written by Justice Rebecca Frank Dallet that offered a simpler explanation as to why Secura was wrong.

“If I buy an $8 sandwich, hand the cashier a $10 bill, and she hands me my sandwich and $2 in change, how much was she ‘paid’ for the sandwich?” Dallet wrote.Eight dollars, of course. But according to Secura, that isn’t so clear.”

Justice Rebecca Grassl Bradley wrote a dissenting opinion that supported Secura’s arguments. She said the insurer had made a correct “plain language” argument that showed it could deduct the full amount of workers’ compensation benefits paid.