Financial Responsibility Law Trumps Insurance Policy Language

January 27, 2014

In a recent decision, Hechimovich v. Acuity, 2013AP1011, the Wisconsin Court of Appeals discussed the limitations Wisconsin’s Financial Responsibility Law (§§ 44.29 – 344.33) places on insurance companies’ right to limit their coverage.

The plaintiff in Hechimovich had sustained severe injuries while riding as a passenger on a motorcycle operated by Westra, Acuity’s insured. After payments from a number of other sources were insufficient to cover the plaintiff’s medical bills, she sought to recover from a policy Acuity had issued to Westra as proof of financial responsibility under Wis. Stats. §§ 344.31 and 344.33. The policy, by its terms, excluded coverage for accidents involving motorcycles. The trial court concluded Acuity was entitled to exclude coverage, but the Court of Appeals disagreed.

The Court of Appeals noted a policy certified as proof of financial responsibility must meet the specific requirements of Section 344.33, which defines the requirements such policies must satisfy. The Court concluded Section 344.33 did not permit an exclusion of coverage for two-wheeled vehicles. Since the policy language conflicted with the statutory language, Acuity was required to provide coverage.

The subset of insureds who have policies certified as proof of financial responsibility is relatively small. There are companies that write a significant number of such policies. The decision will likely be of particular concern to them.

The Financial Responsibility Law does allow companies to recover from their own insureds’ amounts paid for losses that would not be covered if the policy was not certified as proof of financial responsibility. The Court in Hechimovich was unwilling to address the company’s claim for reimbursement because it concluded the company had not yet suffered a loss. While there is no reason to believe the company would not be entitled to recover from its insured, the practical difficulties of doing so are generally formidable.

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