At the time of his death, Huck had an active personal auto policy from Secura Supreme Insurance that included a $250,000 per person limit for UIM coverage. The policy also included a "reducing clause." When Secura owed a UIM payment to an insured, this clause permitted reducing the amount of the payment by any amounts the insured had received from the tortfeasor or as workers compensation benefits.

Since the amount the Estate received from the other driver's auto insurer was insufficient to cover the damages due, the Estate filed a UIM claim with Secura. Secura deducted the $25,000 the Estate had received from the other driver, as well as the $35,798.04 the Estate had received in the initial payment from the Village's workers compensation carrier.

The Estate protested the subtraction of the full workers compensation payment, arguing Secura could not deduct the $9,718.73 the Estate had repaid to the Village's workers compensation carrier. Secura thereafter filed a motion for declaratory judgment that the UIM reducing clause in Huck's policy could be reduced by the initial amount the Estate received from the workers compensation carrier. The trial court denied the motion and ruled in favor of the Estate, ordering Secura to pay the disputed funds to the Estate. Secura appealed. The trial verdict was affirmed by the intermediate appellate court based on Teschendorf v. State Farm Ins. Cos., 717 N.W.2d 258 (Wis. 2006), where the Supreme Court of Wisconsin had ruled that state law "[did] not allow an insurer to reduce uninsured motorist [UM] policy limits by worker's compensation payments that are not made to or on the behalf of the insured, the insured's heirs, or the insured's estate" (emphasis added). Secura appealed a second time.

Secura argued it was permissible to reduce its UIM payment by the "amounts paid" to the Estate for workers compensation because the payment had been made for $35,798.04, and it was irrelevant that the Estate was required to return $9,718.73 to the workers compensation carrier by state law. The Estate, on the other hand, claimed the reimbursement could not be considered an "amount paid" to the Estate because the Estate was legally obligated to return it; Secura, therefore was obliged to return the disputed funds to the Estate.

The "reducing clause" in Huck's policy stated that Secura's "limit of liability shall be reduced by all sums: (1) Paid because of the bodily injury by or on behalf of persons or organizations who may be legally responsible . . . . (2) Paid or payable because of the bodily injury under any of the following or similar law: a. Worker['s] compensation law:..." (emphasis added). However, the policy did not define what it meant for funds to be "paid." According to Secura, "paid" referred to "an obligation has been discharged, 'no matter the ultimate destination'" of the funds. Since the initial payment from Mount Pleasant's workers compensation insurer had discharged the workers compensation carrier's obligation to the Estate, Secura could reduce its UIM payment by that initial amount.

The justices of the Supreme Court of Wisconsin pointed out that the policy, and in particular the reducing clause, "contemplate[d] payments made consistent with worker's compensation laws" (emphasis added) when it stated that Secura's UIM liability would be reduced by any funds an insured received under state workers compensation laws. The statute obligating the Estate to reimburse Mount Pleasant's workers compensation carrier, Wis. Stat. §102.29, was a workers compensation law.

The general reference to "worker's compensation laws" in the policy's reducing clause, according to the court, meant that Secura's reduced payment to Mr. Huck's estate had to be consistent with and account for "all sums…[p]aid or payable because of [w]orker['s] compensation law" (emphasis added) including reimbursements made under Wis. Stat. §102.29. As the reducing clause referenced "workers compensation laws" in general, Secura could not cherry-pick which workers compensation statutes were included and which ones were not. The policy contained no exception for reimbursements under Wis. Stat. §102.29, and the justices refused to "read in an exception that [was] not there."

The court ruled that Secura could not deduct the disputed funds from its payment to the Estate and ordered that Secura return the $9,718.73 to the Estate. The decision of the appellate court was affirmed.

Editor's Note: When Mr. Huck's estate was required to return some of the money it had received from Mount Pleasant's workers compensation carrier, it essentially reduced the "amount payable" to the Estate. Since the $9,718.73 was no longer payable to the Estate, it was improper for Secura to deduct that amount from the UIM payment due to the Estate.

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