New state budget permits auto policy stacking, mandates coverage

Reproduced with permission of the State Bar of Wisconsin

July 24, 2009 – Fulfilling a long-standing policy goal of the State Bar of Wisconsin, the new 2009-11 biennial state budget (2009 Wisconsin Act 28), which Gov. Jim Doyle signed into law on June 29, repeals a 14-year statutory provision that effectively banned insureds from stacking auto insurance policy limits for uninsured and underinsured motorist coverage.

The act also makes several other far-reaching changes to state laws governing auto insurance that will affect the practice of many Wisconsin attorneys, including a ban on reducing clauses and a new mandate that all drivers on Wisconsin roads purchase liability insurance. While Gov. Doyle vetoed some provisions passed by the Legislature, many of the other changes described below survived his veto pen intact.

Prior to 1995, Wisconsin law generally permitted insureds to stack coverage limits under more than one auto policy. That changed when the Legislature passed 1995 Wisconsin Act 21, which permitted insurers to write policies that prohibited stacking. Prior to that 1995 act, policy holders could rely upon the sum of all their paid-for policies to cover proven damages. Sections 3168 and 3169 of the new state budget, however, renumber secs. 632.32(5)(f) and 632.32(5)(g) of the statutes as 632.32(6)(d) and 632.32(6)(e), respectively, and amend them to ban insurers from inserting anti-stacking provisions in auto policies, as long as the number of vehicles owned by the insured is three or less.

The State Bar’s Board of Governors has a long-standing public policy position supporting the ability of insureds to stack automobile policy limits because anti-stacking laws “work against the consumer by limiting coverage while providing no visible reduction in premiums.”

In his veto message, Gov. Doyle justified the inclusion of the anti-stacking repeal in the state budget, saying “I proposed changes to vehicle insurance requirements to ensure that policyholders obtained the full benefit of the coverage they have purchased . . . [these and other] reforms are necessary to protect consumers and to ensure that people injured in accidents are shielded from excessive financial loss due to insufficient coverage.”

Reducing clauses


The new state budget also bans another practice made legal under 1995 Act 21: reducing clauses. Since 1995 Act 21, insurance companies were permitted to insert reducing clauses into policies, which allowed the insurer to subtract from a policy holder’s uninsured or underinsured motorist coverage any recovery from the at-fault driver’s liability insurance and certain other sources of compensation, such as worker’s compensation and disability insurance.


Section 3171 of 2009 Act 28 renumbers 632.32(5)(i) of the statutes as sec. 632.32(6)(g). Newly renumbered 632.32(6)(g)(intro.), is amended to provide that insurance companies can no longer deduct the amount of insurance carried by a negligent driver from the uninsured or underinsured coverage purchased by an injured policyholder, allowing policy holders to access the full amount of insurance they have purchased. The new ban on reducing clauses also applies to benefits from worker’s compensation and disability insurance.

Mandatory purchase of auto insurance


On June 1, 2010, Wisconsin will join 48 other states in mandating that drivers purchase auto liability insurance, leaving New Hampshire the last remaining holdout that does not require insurance. Section 2967r of Act 28 creates sec. 344.62 of the statutes, which provides that “. . . no person may operate a motor vehicle upon a highway in this state unless the owner or operator of the vehicle has in effect a motor vehicle liability policy with respect to the vehicle being operated.” The new law will require drivers to carry proof of insurance with them whenever driving, which must be provided upon demand to any traffic officer. The new budget act also prohibits insurers from categorizing people who have not previously had insurance in a high-risk category.

Increased mandatory liability limits


Effective January 1, 2010, section 2962t of Act 28 increases on minimum coverage limits for auto liability policies, which have remained the same for more than 25 years. Newly created sec. 344.01(2)(am)2. requires that polices must cover “$50,000 because of bodily injury to or death of one person in any one accident and, subject to such limit for one person, $100,000 because of bodily injury to or death of two or more persons in any one accident, and $15,000 because of injury to or destruction of property of others in any one accident.”

When he introduced the proposed state budget in February, Gov. Doyle did not propose that state law require all drivers to purchase liability insurance – the Legislature added that requirement during budget deliberations. As originally passed by the Legislature in June, Act 28 would have required further increases in liability coverage to take effect in 2011 and 2012. Concerned about the impact of these proposed increases when combined with the new mandate to purchase insurance, Gov. Doyle vetoed any further policy limit increases in 2011 and 2012 but retained the requirement that the new limits be indexed for inflation.

In his veto message, Gov. Doyle stated “. . . I have revisited the liability limit increases and other reforms contained in the bill and have made several modifications through vetoes. Section 2962t increases the minimum amounts of liability insurance required for proof of financial responsibility over a three-year period. I am partially vetoing this section . . . to retain the increase in minimum liability coverage effective on January 1, 2010, but delete the additional increases in 2011 and 2012. This will balance the need to maintain affordability while addressing some of the concerns regarding the insufficiency of the current liability minimum.”

Other changes to uninsured and underinsured coverage

The new state budget makes several other changes to laws regulating uninsured and underinsured motorist coverage.

First, sections 3159 and 3161 of the budget act amend sec. 632.32(4)(a) of the statutes to require all liability policies to include underinsured motorist coverage with limits of $100,000 per person and $300,000 per accident. Previously, underinsured motorist coverage was not required.

Second, section 3153 of Act 28 creates sec. 632.32(2)(e), which defines an underinsured motor vehicle by comparing a negligent driver’s liability insurance limit with the amount of damages or injuries actually sustained by the policyholder.

Third, section 3167 of the budget act creates sec. 632.32(4r), which requires that the holder of an umbrella or excess liability policy reject in writing an offer of underinsured and uninsured coverage.

Fourth, section 3155 of Act 28 creates sec. 632.32(2)(g), under which insurance companies will no longer be able to deny coverage for hit-and-run accidents because no physical contact occurred. With the enactment of this provision, drivers who are injured will have access to uninsured motorist coverage if they can provide independent, third-party evidence of the accident.

Prohibiting health plans from refusing coverage


Section 3197 of Act 28 creates 632.845 of the statutes, which provides that a health insurance plan “may not refuse to cover health care services that are provided to an insured under the plan and for which there is coverage under the plan on the basis that there may be coverage for the services under a liability insurance policy.”

Other vetoed provisions

When Gov. Doyle signed the budget into law on June 29, he vetoed two other provisions related to auto insurance.

First, the governor vetoed section 3172 of Act 28, which would have prohibited insurers from denying coverage for an accident if the vehicle is not described in the policy under which a claim is made. In his veto message, the governor said he was vetoing this provision because of its potential to increase the cost of premiums.

Second, the governor partially vetoed section 3172k to delete a provision prohibiting insurers from determining premiums based on where the vehicle is located. In his veto message, the governor stated, “This provision is disruptive to the market and would increase premiums for policyholders in many locations. I am requesting that the Commissioner of Insurance study this issue to ensure fair treatment of citizens throughout the state. While these proposals are well-intended, I am vetoing these provisions because they may raise the costs of vehicle insurance premiums and are contrary to the goal of ensuring that all drivers are able to purchase affordable motor vehicle liability insurance.”

By Adam Korbitz, Government Relations Coordinator, State Bar of Wisconsin, link to original article

Effective dates:

The mandate that all licensed Wisconsin drivers carry insurance takes effect June 1, 2010.

The mandate permitting stacked coverage takes effect November 1, 2009.

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