On April 5, the Wisconsin Supreme Court issued a decision in Shugarts v. Allstate Property and Casualty Insurance Co. The court held that the event triggering the notice requirement in an underinsured motorist (UIM) policy is when the tortfeasor’s underlying policy limit is exhausted.

In this case, Robert Shugarts, a deputy sheriff in Eau Claire County, was severely injured in his squad car in a pursuit of defendant Dennis Mohr. The accident occurred in October 2011. Mohr was insured by Progressive. The squad car was insured by Wisconsin Municipal Mutual Insurance Company, and Shugarts had a personal policy with Allstate that included UIM coverage.

Shugarts and Progressive negotiated for several years, and in October 2014 Progressive eventually offered a $50,000 settlement (the Progressive policy’s bodily injury liability limit). Believing his injuries were in excess of the $50,000 policy limit, Shugart notified Allstate of the proposed settlement in February 2015.

When Shugarts added Allstate as a defendant to his complaint in March 2015, Allstate argued that UIM coverage was not available to Shugarts because he did not provide timely notice of his intention to make a claim after the accident, pursuant to the Allstate policy and Wis. Stat. § 631.81(1):

Provided notice or proof of loss is furnished as soon as reasonably possible and within one year after the time it was required by the policy, failure to furnish such notice or proof within the time required by the policy does not invalidate or reduce a claim unless the insurer is prejudiced thereby and it was reasonably possible to meet the time limit.

In a unanimous decision, the court held that Shugarts did provide timely notice to Allstate because UIM coverage is not triggered until the tortfeasor’s liability limits are met. The decision noted that Allstate’s UIM policy did not specifically require Shugarts to provide “proof of loss” at the time of the accident, but instead required “proof of claim.” Because UIM coverage is excess coverage, the court said Shugarts did not have a claim until Progressive offered the $50,000 settlement. Furthermore, the court said Wis. Stat. § 631.81(1) did not apply because the Allstate UIM policy required “proof of claim,” not “notice or proof of loss” as presumed by the statute.