Wisconsin Rejects Crystal Clarity Policy Standard

Wisconsin Rejects Crystal Clarity Policy Standard

Aug. 4The Wisconsin Supreme Court has rejected “crystal clarity” as the standard for determining whether an insurer-drafted insurance policy is ambiguous and should therefore be interpreted in favor of the policyholder.

Insurer trade groups applauded the courtss ruling.

“The most recent ruling comes barely a year after the Wisconsin Supreme Court, in another case, first suggested that insurance policies should be drafted so their meaning would be 'crystal clear' to policyholders to avoid 'contextual ambiguity,'” said Donald S. Cleasby, assistant vice president and assistant general counsel for the Des Plaines, Ill-Based National Association of Independent Insurers.

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

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

Both drivers were at fault for the accident.

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

The Folkmans sued their insurer, arguing that the company owed them $125,000 because three insureds under the policy were liable for the accident.

The court found that the “split liability limits” endorsement in the policy was not ambiguous when read in conjunction with other parts of the policy, and that a single limit of liability applied regardless 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 serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.