Flоrence Hoglund appeals a summary judgment dismissing her complaint against American States Insurance Company for payment under its underinsured motorists (UIM) policy рrovisions. She contends the trial court erred by concluding that American States' policy definition of "underinsured motor vehicle" was valid and enforceablе and precluded her recovery under the UIM provisions. She argues that the definition, providing coverage only if the tortfeasor's policy limits are less than Hoglund's $25,000 UIM policy limits, (1) renders coverage under the UIM provision illusory because motorists are statutorily required to carry at least $25,000 of liability insurance under sec. 344.33, Stаts., and (2) is inconsistent with the insured's reasonable expectation of coverage. We conclude that American States' policy definition of "underinsured mоtor vehicle" is unambiguous; however, because we conclude that the purchased UIM coverage constitutes an illusory contract, we reverse the judgment.
Hoglund was injured when Douglas Lebal's vehicle collided with her husband's truck, in which she was a passenger. Lebal had a $25,000 automobile liability policy with Secura Insuranсe. Hoglund's damages exceeded Secura's $25,000 policy limits. The Hoglund vehicle was insured under an American States policy *268 that included $25,000 UIM coverage. An agеnt of American States twice confirmed to the Hoglunds that the premiums they paid purchased UIM coverage.
Hoglund commenced a personal injury action against Lebal and Secura Insurance. American States was joined because of its provision of UIM coverage to Hoglund and its subrogated rights to payments it made to Hoglund under its medical payment provisions. American States moved the trial court for summary judgment as to the UIM coverage issue, claiming that its policy definition of an underinsured motor vehicle precluded Hoglund's recovery under the UIM provisions. The trial court agreed and granted summary judgment to American Stаtes.
Summary judgment is appropriate because the facts are undisputed. Section 802.08(2), Stats. When reviewing a grant of summary judgment, we apply the same methodоlogy as the trial court.
Green Spring Farms v. Kersten,
Interpretation of an insurance policy is a question of law.
Keane v. Auto-Owners Ins. Co.,
The American States policy defines "Underinsured Motor Vehicle" as "a land motor vehicle or trailer of any type to which a bodily injury liability bond or policy applies at the time of the accident;
however, its limit for bodily injury liаbility is less than the limit of liability for this coverage."
(Emphasis added.) Our supreme court, held that the only reasonable interpretation of almost identical language is that UIM coverage is denied if the other motorist's liability coverage amount is equal to or more than the insurer's UIM policy limits, and thus is unambiguous as a matter of law.
Smith v. Atlantic Mut. Ins. Co.,
Hoglund argues that the policy's definition of underinsured motоr vehicle, when read in conjunction with sec. 344.33, Stats., and the policy's definition of uninsured motor vehicle, renders UIM coverage under the policy illusory becаuse there are no circumstances under which Hoglund can recover under the UIM provisions. Thus, Hoglund argues, the definition is inconsistent with the insured's reasonable expectations of UIM coverage and should be construed against the insurer, American States. We agree. American
*270
States points to
Smith
and
Krech v. Hanson
In
Smith,
our supreme court refused to entertain an illusory contract argument, not because it concluded that the policy languаge was unambiguous, but because the argument depended on hypothetical facts: "Smith raises certain hypothetical situations which she alleges would result in thе enforcement of illusory contracts and inequitable results. However . . . these hypothetical facts are not before the court. We do not reaсh decisions based on hypothetical facts."
Id.
at 813-14,
American States' definition of "underinsured motor vehicle" precludes coverage, in this case, if the tortfeasor's policy limits are $25,000 or less. However, in Wisсonsin, liability coverage cannot be issued for less than $25,000 under sec. 344.33, Stats. Because Wisconsin drivers must have a liability policy of at least $25,000, Hoglund will never recover under American States' $25,000 UIM policy if the tortfeasor is an insured Wisconsin driver. If the driver is uninsured, Hoglund would recover under the uninsured motorist provisions, not the UIM provisions.
*271 Moreover, the UIM provisions would not provide coverage if the tortfeasor is an insured out-of-state driver. American States' policy defines an "uninsured motоr vehicle" as:
a land motor vehicle or trailer of any type . . . [t]o which a bodily injury liability bond or policy applies at the time of the accident [with pоlicy limits] less than the minimum limit for bodily injury liability specified by the financial responsibility law of the state in which "your covered auto" is principally garaged. (Emphasis added.)
This language rendеrs an out-of-state vehicle with a liability policy limit less than $25,000 an uninsured vehicle. Therefore, Hoglund cannot recover under the UIM provisions if the tortfeasor is an insurеd or uninsured out-of-state driver. Consequently, there are no circumstances under which Hoglund can recover under the UIM provisions.
InKaun v. Industrial Fire & Cas. Ins. Co.,
The record indicates that Hoglund believed the policy provided UIM coverage based on the рolicy provisions and the insurance agent's representations, and was discouraged from further efforts to acquire the desired coverage by the existence of the illusory coverage. However, because this issue may not have been fully litigated, we remand the matter for findings concerning Hoglund's expectаtion. The trial court should then reform the UIM coverage contract so that it comports with Hoglund's reasonable expectations.
See Kaun,
By the Court. — Judgment reversed and cause remanded with directions.
Notes
We note that in
Paape v. Northern Assur. Co.,
American States cites an affidavit alleging that none of its insureds "effectively pays any premium for underinsured motorist coveragе at those minimum [$25,000] limits." We conclude that the insignificance of the amount of premiums paid for the coverage, from American States' perspective, is immaterial.