Wisconsin Case Affirms Insurer Must Pay Out on Underinsured Motorist Policy when Involving a Rental

By Kirsti Correa

The Wisconsin Supreme Court reversed a decision in Bethke v. Auto-Owners Insurance Company that did not require the insurance company to cover the Bethke’s underinsured motorist policy of $500,000 per person and $500,000 per accident, when one Bethke family member died and another injured in an accident with a rental vehicle. Auto-Owners denied coverage, stating that Avis was a “self-insurer” and its underinsured policy with the Bethke family excludes vehicles owned by “self-insurers.” 

In a 4-3 decision on Feb.1, which can be viewed in full here, the court ruled in favor of the Bethke family. The opinion reversed the decision of the court of appeals that sided with Auto-Owners. The case was remanded to go back to circuit court for further proceedings.

Rental Car Company Liability Clarified

The Supreme Court determined that the exclusion of self-insured rental cars would lead to an “absurd result.”

Two laws, Wis. Stat. 344.16 and 344.51, were contradictory in the case and resulted in a disconnection for the liability of rental car companies. Under Wis. Stat. 344.16, Auto-Owners denied coverage because a “self-insurer” has the financial capacity to pay judgments. On the other hand, Wis. Stat. 344.51 limits the liability of rental car companies for non-negligent activity.

“Self-insurers are not covered because Auto-Owners expects that the Bethkes will collect a judgment from a self-insurer that fully addresses their damages,” said Justice Ann Walsh Bradley. “Auto-Owners cannot reasonably expect the Bethkes to collect a judgment that fully addresses their damages from a company whose liability is limited to a minimal amount by statute.”

William Te Winkle, the attorney for Bethke’s children, said with the case returning to circuit court, Auto-Owners Insurance could decide to defend the lawsuit or pay the coverage outlined in the underinsured policy issued to the Bethke family.

Case Background

In 2007 in Sheboygan Falls, Kathryn Bethke and her son, Andrew, were involved in a head-on collision with a man driving a rental car from Avis Rent-A-Car. Both drivers, Kathryn and Frederick Goddard — driver of the rental car — died and Andrew sustained serious injuries.

While Goddard did not have car insurance, under Wis. Stat. section 344.51(1m), which requires car rental companies to carry liability insurance for negligent driving by persons who rent cars, Avis paid the Bethke’s $50,000. The statute does not require car rental companies to cover more than $50,000.

However, the Bethke family had an underinsured motorist policy with Auto-Owners Insurance Company, covering $500,000 per person and $500,000 per accident.

The family then sought additional coverage of $450,000 from Auto-Owners since they purchased a $500,000 policy, but only received $50,000 from Avis.

Related news: NJ Case Is Reminder to Rental Car Companies to Consult State Insurance Laws

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