Wisconsin Rejects Crystal Clarity PolicyStandard

Aug. 4The Wisconsin Supreme Court has rejected “crystalclarity” as the standard for determining whether an insurer-draftedinsurance policy is ambiguous and should therefore be interpretedin favor of the policyholder.

Insurer trade groups applauded the courtss ruling.

“The most recent ruling comes barely a year after the WisconsinSupreme Court, in another case, first suggested that insurancepolicies should be drafted so their meaning would be 'crystalclear' to policyholders to avoid 'contextual ambiguity,'” saidDonald S. Cleasby, assistant vice president and assistant generalcounsel for the Des Plaines, Ill-Based National Association ofIndependent Insurers.

In the current case, Folkman v. Quamme, the stateshighest court unanimously ruled that an automobile insurance policyunambiguously limited its bodily injury liability protection to$50,000 for a single accident in which only one insured wasactively negligent.

The Society Insurance Company, based in Fond du Lac, Wis.,issued an automobile policy covering the named policyholder DebraFolkman, her husband Kenneth Folkman and two of her three sons. Oneson, Kenneth Jr., was driving when the Folkmans' vehicle hit SheriQuamme's vehicle.

Both drivers were at fault for the accident.

Because the Folkmans sponsored Kenneth Jr. when he obtained hisdriver's license, his negligence was imputed to both of hisparents.

The Folkmans sued their insurer, arguing that the company owedthem $125,000 because three insureds under the policy were liablefor the accident.

The court found that the “split liability limits” endorsement inthe policy was not ambiguous when read in conjunction with otherparts of the policy, and that a single limit of liability appliedregardless of the number of insureds.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, August 11, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.