SIR Is “Other Insurance,” Wisconsin Supreme Court Rules

March 21, 2016 | Insurance Coverage

The Wisconsin Supreme Court, affirming a decision by a Wisconsin appellate court, has ruled that an insured’s self-insured retention (“SIR”) qualified as “other applicable liability insurance” under an insurance policy’s “other insurance” clause.

The Case

Claimant allegedly was injured when the insured’s employee loaded materials onto his trailer using a forklift. Claimant sued the insured for damages.

The insured sought coverage from Millers First Insurance Company, which had issued an auto policy to the claimant. The insured also sought excess coverage under a commercial general liability policy issued by CNA. The CNA policy had a liability limit of $500,000 and a SIR endorsement under which the insured was required to pay the first $500,000 worth of damages and defense costs arising from an occurrence.

Millers First contended that the insured’s $500,000 SIR under the CNA policy qualified as “other applicable liability insurance” under the Millers First policy’s “other insurance” clause. After litigation ensued, Millers First asked the trial court to declare that the SIR was “other insurance.”

The trial court granted Millers First’s motion and the court of appeals affirmed the trial court’s determination that the SIR was “other insurance.”

The dispute reached the Wisconsin Supreme Court.

The Wisconsin Supreme Court’s Decision

The court affirmed the court of appeals’ decision and agreed that the SIR was “other insurance” for purposes of the Millers First policy.

In its decision, the court reasoned that insured’s responsibility under its SIR had to be analyzed in terms of how it shifted risk in exchange for premium payments. The court observed that the insured had chosen “to retain its own risk for the first $500,000 of liability coverage.” In doing so, the court continued, the insured had avoided paying premiums to an insurer for that coverage and it had “gained the benefit of lower premiums” with the risk of the SIR. According to the court, the insured “understood that it had an obligation as a primary insurer up to the limits of its $500,000 [SIR].”

Accordingly, the court concluded that the insured’s SIR was “other applicable liability insurance” under the Millers First policy’s “other insurance clause.”

The case is Burgraff v. Menard, Inc., No. 2013AP907 (Wisc. Feb. 24, 2016).

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