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Published: April 1, 2007
Author: Jodi Yin
Just two months ago, the Wisconsin Supreme Court issued its decision in LaCount v. General Casualty Company (2006 WI 14), and held that insurance companies are not required by state law to provide separate policy limits for a minor driver and her insured adult sponsor. With this decision, the Wisconsin Supreme Court drastically limited the potential exposure of automobile insurers across the state and the increase in insurance premiums that was certain to follow.
The facts in LaCount are typical of many automobile accident cases involving injuries to multiple parties. Daniel LaCount was injured in a car accident in 1999 while riding as a passenger in an automobile driven by a minor. The accident also resulted in the death of a 45-year-old man and injury to six passengers in his vehicle. Both LaCount and the family of the 45-year-old man filed suit.
By signing the application, the sponsor became liable for any negligence on the part of the minor driver in operating a motor vehicle. In this case, the minor's sponsor was her father, who was the named insured on the policy that covered the automobile she was driving at the time of the accident. The minor driver was named as a family member in the policy, and she was a permissive user of the vehicle. The insurance policy covered both the minor driver and her sponsor, with a per accident policy limit of $500,000.
LaCount was whether General Casualty was required to provide the minor driver with this liability limit of $500,000 and provide her sponsor with a liability limit of $500,000--for a total limit on liability of $1 million--or whether the insurer was obligated to provide a total liability limit for both of $500,000. Like many automobile insurance policies in Wisconsin, the policy in this case promised to pay bodily injury damages for which "any insured becomes legally responsible because of an auto accident." In addition, the policy explicitly limited General Casualty's total liability for one occurrence to $500,000, regardless of the number of insureds, claims made, or vehicles listed in the policy.
General Casualty appealed. The court of appeals reversed the judgment of the circuit court, finding that General Casualty's $500,000 policy limit was its total liability for both the sponsor and the minor driver. As long as the sponsor's liability is not based on a separate negligent act, the court of appeals concluded that the sponsor and minor driver share a single limit.
In doing so, it adopted the reasoning of Folkman v. Quamme (2003 WI 116), in distinguishing between an insured's active negligence and an insured's imputed negligence. In cases where the negligence of a permissive minor driver is imputed to the sponsor, the court held that state law does not require an insurer to extend policy-limits protection to both because "a single liability is shared" by them. Applying this rule to the case, the court concluded that the sponsor in LaCount shared a single liability with the negligent minor driver. Consequently, General Casualty was obligated to provide a total liability limit of $500,000.
LaCount has far-reaching implications for Wisconsin's automobile insurance industry, as well as those involved in automobile accidents with a negligent minor driver in the state. In cases where an adult sponsor is not actively negligent, this decision limits an insurer's potential liability.
Jodi S. Yin is an attorney with Axley Brynelson, LLP. For more information, contact Ms. Yin at 608.283.6781 or jyin@axley.com.
This article was featured in the April 2007 issue of the Wisconsin Insurance Law Alert, published by Axley Brynelson.
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