Uninsured, Underinsured, and No-Fault Case Law Update
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By: Richard K. Besonen |
Gerdesmeier v. Sutherland, – N.W.2d – , 2004 WL 2903498 (Minn. 2004)
UM Insurer Receiving Adequate Notice of Action Against Uninsured Motorist Bound to Default Judgment Against Tortfeasor
Gerdesmeier was injured by an uninsured motorist. After submitting an uninsured motorist (UM) claim to his insurer, Illinois Farmers Insurance Company, he and his wife, brought a tort action against the uninsured motorist. They obtained a default judgment against the tortfeasor and then presented it to Farmers and demanded payment of UM benefits. Farmers declined to pay and demanded arbitration of the UM claim. The Gerdesmeiers then brought suit on the policy and the District Court granted judgment on the pleadings for the Gerdesmeiers, holding that Farmers had notice of, and an opportunity to intervene in, the tort action and that its failure to do so prevented it from compelling arbitration. The Court of Appeals reversed holding that despite the judgment the contract required arbitration. The Supreme Court reversed the Court of Appeals and reinstated the judgment in favor of the Gerdesmeiers.
The Supreme Court adopted the insureds’ position that enforcement of the arbitration clause in the insurance policy would delay payment to the victim and require relitigation of liability and damages issues already established against the tortfeasor. The court held that "an arbitration clause will not be enforced to allow a UM insurer to avoid payment of damages established by a valid judgment against the uninsured motorist, where, as here, the UM insurer has received notice of and had an opportunity to intervene in the suit against the uninsured motorist."
Miklas v. Parrott, 684 N.W.2d 458 (Minn. 2004)
Six Year Statute of Limitations Applies to UM Claims Involving Wrongful Death
The Minnesota Supreme Court reversed the Court of Appeals decision in Miklas v. Parrott, 663 N.W.2d 583 (Minn. Ct. App. 2003) and held that the six year contract statute of limitations applies to wrongful death claims made for uninsured motorist benefits. Generally, the statute of limitations for wrongful death claims is three years and the only party that may settle a wrongful death claim is the court appointed trustee. The Court of Appeals held that because a trustee had not been appointed within three years of the death there was no entitlement to UM benefits for the heirs – because the statute of limitation expired on the claims against the driver, there was no longer a legal right to recover from the driver, and that was a "condition precedent to Illinois Farmers’ obligation to pay uninsured motorist benefits."
As an initial matter, the Supreme Court held that the six year contract statute of limitations applies to uninsured motorist claims. Next, the court addressed whether the statutory definition of uninsured motorist coverage limiting coverage to those "legally entitled to recover
damages" should be read to mean that a trustee must comply with the three year statute of limitations in Minn. Stat. §573.02, subd. 3 (2002) (the Wrongful Death Act). The court noted that this phrase was ambiguous and thus interpreted it bearing in mind the remedial nature of the No-Fault Act and held that the six year statute of limitations applies to claims for UM benefits involving wrongful death.
Auto-Owners Ins. Co. v. Forstrom, 684 N.W.2d 494 (Minn. 2004)
Extrinsic Evidence Inadmissible to Rebut Vehicle Ownershipfor Purposes of Owned Auto Exclusion
In Forstrom, Heath was driving a vehicle owned by a friend with permission when he was involved in an accident. Heath and the owner of the vehicle were sued and the insurer for the vehicle deposited its liability limits into District Court. The injured parties then sought excess coverage from an Auto-Owners policy issued to Heath’s grandmother with whom he lived at the time of the accident. Auto-Owners denied the claim based upon the "owned auto exclusion" (there is no coverage for a family member’s operation of an owned vehicle). Heath testified that the vehicle he allegedly owned was in his father’s name, that he was in the process of purchasing the car from his parents by making payments to them, but he had not yet completed making payments. Auto-Owners sought to use this extrinsic evidence to prove that he, not his parents, was the true owner of the vehicle and thus, the owned automobile exclusion applied to preclude coverage for Heath under its policy. The Court of Appeals held that this extrinsic evidence was inadmissible to rebut non-ownership by Heath.
The Supreme Court affirmed after revisiting its holding in American Nat. v. Solum, 641 N.W.2d 891 (Minn. 2002) wherein the court acknowledged two exceptions to the general rule that extrinsic evidence is inadmissible to rebut presumptive ownership by the vehicle’s titleholder. In Solum the court stated that the ability to rebut ownership of a vehicle is "available only to prove the identity of the true owner in cases where the seller-transferor failed to comply with the transfer requirements of the Act and sought to avoid liability under the Safety Responsibility Act or determine rights and responsibilities relating to uninsured motorist coverage." Neither scenario was present here, thus, extrinsic evidence was inadmissible to rebut the presumption that Heath’s parents were owners and the owned auto exclusion did not apply.
Turner v. Mut. Svc. Cas. Ins. Co., 675 N.W. 2d 622 (Minn. 2004)
Commercial Auto Policies Need Not Provide UM/UIM Coverage to Occupants of out of State Rental Vehicles
In Turner, the court addressed a single issue – whether the Minnesota No-Fault Act requires commercial automobile policies to provide uninsured/underinsured motorist coverage to occupants of out of out of state rental vehicles. The appellants raised the novel argument that Minn. Stat. § 60A.08, subd. 12, required every Minnesota commercial automobile policy to extend UM/UIM (and all other coverages) to an out-of-state rental vehicle. The Supreme Court recognized that the sole purpose of that statute was to fill a gap in Minnesota’s system by which the property damage liability coverage of a commercial policy must pay for damage to a rental vehicle just as is required of a personal automobile policy. The court rejected the argument that the statute required commercial policies to provide UM and UIM coverage for rental vehicles.
As a result, the Turners were entitled to the UM/UIM limits of their personal policy with MSI but not entitled to recover from the Minnesota corporate employer’s policy with Liberty Mutual.
Murray v. Puls, – N.W.2d – , 2004 WL 2985396 (Minn. Ct. App. Dec. 20, 2004)
Binding Arbitration Agreements in BI Claims and the Impact on a Subsequent UIM Claim
Murray sued Puls for injuries received in an accident and prior to trial sent a Malmin notice to Prudential, her underinsured motorist carrier, informing Prudential of the suit and of the possibility she would seek UIM benefits. Prudential did not participate in the lawsuit. Instead of proceeding to trial Murray and Puls agreed to participate in a high-low binding arbitration. A formal agreement was never written or signed, but Puls’ attorney sent confirming correspondence to Murray’s attorney. Murray’s attorney made it clear before the arbitration to Puls that they planned to use live medical testimony to increase the chances of obtaining an excess arbitration award. The arbitrator issued an award more than $100,000 in excess of Puls’ liability limits. Murray’s attorney sent the award along with a Schmidt-Clothier notice to Prudential inviting it to substitute its draft to preserve future subrogation rights – Prudential informed Murray it would not substitute. Murray then received the liability limits and executed a general release.
Murray then requested payment of the remaining portion of the award as UIM benefits from Prudential. Prudential refused to pay arguing that unless the award was confirmed as a judgment Prudential had no obligation to pay.
On appeal the court addressed "whether confirming an arbitration award was necessary in order to pursue UIM benefits after the parties reached a settlement through arbitration and provided the underinsured motorist carrier with a Schmidt-Clothier notice." The court noted there are generally two circumstances where an insured can claim entitlement to UIM benefits. The insured can either (1) pursue a tort claim to conclusion in a district court action, or (2) settle the BI claim for the "best settlement." The court then concluded that pursuing a claim through arbitration is one way of arriving at the "best settlement" and went on to address whether judicial confirmation of the arbitration and was required prior to recovering UIM benefits. Ultimately, the court held that the award must be confirmed before the injured party may make a UIM claim.
The court also analyzed whether the arbitration agreement limited Murray’s total damages to the BI limits and thus extinguished her rights to pursue a UIM claim. Because the confirming letter (the arbitration agreement) did not clarify whether the high was a complete settlement or a limit on the tortfeasor’s liability the court found that it was ambiguous and did not necessarily limit Murray’s damages to the BI limits. Finally, the court addressed whether the parties intended to enter into a Schmidt-Clothier settlement. The court upheld the District Court’s determination that the parties intended to enter into a Schmidt type settlement which allowed Murray to pursue her UIM claim. The court concluded that the parties did not agree to limit Murray’s damages to the BI limits because Puls had the opportunity to reject the arbitration agreement if it was not intended to limit all damages, Puls was aware of the injured party’s intention to seek UIM benefits and Puls actual participation in the arbitration manifested the mutual assent required to show intent to enter into a Schmidt settlement and allow Murray to later pursue a UIM claim.
Dougherty v. State Farm Mut. Ins. Co., 683 N.W.2d 855 (Minn. Ct. App. July 2004), review granted (October 19, 2004).
Maintenance and Use of a Motor Vehicle
Dougherty brought a claim for no-fault benefits for frostbite injuries she sustained while walking home after her car became stuck in a snowdrift. She locked her keys and gloves inside the car after becoming stuck. The evidence showed she had attempted to walk up the parking lot entrance to her complex but it was blocked by snow. She used her elbows and hand to pull herself through the snow and ultimately crawled behind a garage where she may have fallen asleep. When she was taken to the hospital her BAC was .136 and several of her fingers had to be amputated. The Court of Appeals addressed whether Dougherty’s injuries were caused by the maintenance or use of a motor vehicle entitling her to no-fault benefits or whether an act of independent significance occurred breaking the causal link between use of the vehicle and the injuries. State Farm argued that her voluntary intoxication constituted the act of independent significance, which broke the causal link precluding recovery.
The Court of Appeals affirmed the District Court’s holding that there was no act of independent significance noting that it would be practically problematic to create judicial precedent that would allow breaking the causal link whenever an insured contributed to their own injuries. Next, the court analyzed whether the injuries were causally related to the use of her vehicle applying the Klug test which requires the vehicle to be an active accessory in causing the injuries. Continental W. Ins. Co. v. Klug, 415 N.W.2d 876 (Minn. 1987). In upholding the District Court’s determination that the vehicle was an active accessory the court noted that Dougherty had not finished using her vehicle – she never reached home because it became stuck in the snow. "Because the hazards of winter are a fundamental part of the driving experience, it is a foreseeable condition of vehicle use that vehicles may become disabled on the road due to snow or ice, and drivers may be exposed to injury in attempting, sometimes unreasonably, to provide for their safety." Thus, the court concluded that her frostbite injuries were a natural consequence of the use of her motor vehicle and she was entitled to no-fault benefits.
American Family Ins. Group v. Kiess, 680 N.W.2d 552 (Minn. Ct. App. 2004), review granted (Aug 25, 2004)
$10,000 Jurisdictional Limit for No-fault Arbitration Does Not Include Interest
Keiss presented a claim of unpaid medical expenses to No-Fault arbitration of $10,000 (waiving expenses in excess of the jurisdictional limit) and over $7,000 in interest. Blue Cross and Blue Shield had paid the medical bills prior to the hearing. The arbitrator awarded the full amount of medical expenses and interest. Post-hearing American Family moved the arbitrator to reduce the award by the $10,000 already paid by Blue Cross pursuant to the collateral source statute. After the arbitrator denied this motion American Family presented a motion to vacate the award in District Court arguing that the arbitrator exceeded his authority by (1) exercising jurisdiction over the claim because of inclusion of interest over the $10,000 jurisdictional limit, (2) awarding interest, (3) refusing to deduct the Blue Cross payments, and (4) concluding the claimant had standing to assert a no-fault claim when the bills had been paid by Blue Cross. The District Court denied the motion and confirmed the award.
The Court of Appeals held that the interest penalty shall not be included in calculating the $10,000 jurisdictional limit noting that including the interest in the $10,000 jurisdictional calculation would allow insurers who fail to timely pay claims to avoid paying interest – the insured would be required to waive it in many instances. However, the court noted that interest did not accrue until the insurer received reasonable proof of the fact and amount of loss realized – the claimant was only entitled to interest accumulating 30 days after the claim was actually presented to the insurer. Next, the court addressed whether the collateral source statute should apply to reduce any recovery by payments already made by Blue Cross. In holding that the collateral source statute did not apply to preclude the claimant’s duplicate recovery the court quoted Stout v. Amco, wherein the Minnesota Supreme Court stated "if there is to be a windfall either to an insurer or to an insured, the windfall should go to the insured." 645 N.W.2d 108, 114 (Minn. 2002). Utilizing similar reasoning, the court also rejected the claim that Keiss lacked standing to assert his medical claims because they had been paid by Blue Cross.
State Farm v. Liberty Mut. Ins. Co., 678 N.W.2d 719 (Minn. Ct. App. 2004)
No-Fault Indemnity Claim Governed by Six Year Statue of Limitations Involving Wrongful Death
Three State Farm insureds were injured when the school bus they were riding in was struck by a semi-tractor insured by Liberty Mutual. One of the children died as a result of the accident. State Farm claimed indemnity from Liberty Mutual for no-fault benefits paid on behalf of the dead child. Liberty Mutual contended that the wrongful death statute of limitations applied to State Farm’s cause of action for indemnity, and because the claim was not made within three years of the child’s death Liberty Mutual’s indemnity claim was barred. The court compared the statutory right of indemnity granted by the No-Fault Act (Minn. Stat. §65B.53) and the purpose of the Wrongful Death Act (Minn. Stat. §573.02) and concluded that the right of indemnity is outside the scope of claims governed by the wrongful death statute.
Why? Because the claim is made by the insurer, not the insured, and is a direct right of recovery independent of the injured insured. Also, a wrongful death claim is created by the death of the decedent while the indemnity claim arises when the insurer pays or is obligated to pay No-Fault benefits. Additionally, recovery under the Wrongful Death Act is for pecuniary loss for the benefit of the next of kin while indemnity claims arise from medical expenses paid for personal injuries of the decedent. Finally, in refuting Liberty Mutual’s argument that an indemnity claim should be treated the same as a subrogation claim the court pointed to the different ways indemnity claims and subrogation claims are treated under the No-Fault Act. Simply put, there are limited enumerated instances where subrogation may be had which evidences the legislature’s intention to treat indemnity and subrogation interests differently.
Klinefelter v. Crum and Forester Ins. Co., 675 N.W.2d 330 (Minn. Ct. App. 2004)
Workers Compensation Decision does not Estop Insured from Recovering No-Fault Benefits
The court in Klinefelter was asked to address whether principles of collateral estoppel or res judicata precluded arbitration of No-Fault claims including benefits and expenses that were previously denied in a worker’s compensation proceeding. The court held that despite litigation of the claims in a workers compensation action the claimant was not barred from subsequently arbitrating the claims in a No-Fault proceeding. The court noted that in addition to the dissimilarities of both types of proceedings a contrary holding would amount to treating workers compensation benefits as both exclusive and final. Thus, a claimant would be required to pursue workers compensation benefits only and would not be entitled to collect any no-fault benefits. A harmonious reading of both statutes allows no-fault benefits to be coordinated with workers compensation benefits under certain circumstances.
White v. White, 676 N.W.2d 682 (Minn. Ct. App. 2004)
Liability Coverage for Owners and Operators of Motor Vehicles
The defendant drove his mother, his daughter, and grandmother to a restaurant. The son parked the car while grandmother and his daughter exited the vehicle, walked across the street to a restaurant and purchased some take-out food. His daughter entered the car and as his grandmother was entering the vehicle, the daughter inadvertently closed the door on her hand severing one of her fingers. The grandmother sued her son and his daughter alleging that the daughter was negligent in closing the rear passenger door, and that as owner of the vehicle, the son was vicariously liable under Minn. Stat. § 170.54. Grandmother’s theory was that the daughter was operating the vehicle with her dad’s express or implied consent. The district court granted the son and daughter’s motion for summary judgement for the following reasons: 1) the daughter was not actively or inactively involved in loading or unloading the car of anything besides herself; 2) the daughter was not in control of her dad’s vehicle at any time and therefore could not have been acting as his agent when she closed the rear door on her grandmother’s finger; and 3) the daughter was not operating the vehicle under Minn. Stat. § 170.54. The Court of Appeals agreed and affirmed.
The Court of Appeals addressed several important facets of Minn. Stat. § 170.54. First, the statute provides"that a person who operates a motor vehicle with the express or implied consent of its owner is deemed to be the owner’s agent in case of an accident." Because there is no specific statutory definition of what it means to "operate" a motor vehicle, the court looked to prior case law and concluded that a person sitting in the driver’s seat, with their hands on the wheel and foot on the pedal, controlling both speed and directions, is operating the vehicle. The court went on to note that "a vehicle has only one operator, and unless a passenger is invited to share in that operation, or circumstances create a plausible justification for the passenger’s assisting in the vehicle’s operation, the vehicle is not considered to be operated by the passenger."
In this case, the court noted Defendant son was in the driver’s seat when his daughter closed the car door. The son had driven the vehicle to the restaurant and was clearly operating the vehicle. And, there was nothing being loaded or unloaded into the vehicle, besides the passengers and their take-out food. Finally, the court noted that the facts of this case required them to factor into their analysis "whether more than one person could ‘operate’ a vehicle simultaneously." Under the specific facts of this case, the court held that the daughter could not be considered an operator along with her father.
Entzion v. Illinois Farmers Ins. Co., 675 N.W.2d 925 (Minn. Ct. App. 2004)
Statute of Limitations for No-fault Claims Is Six Years
The Court of Appeals has ruled that where neither the No-Fault Act nor the insured’s policy expressly prescribed a period of limitations for bringing an action for the recovery of no-fault benefits, the claim is subject to the six-year contract statute of limitations set forth in Minn. Stat. §541.05, subd. 1(1). The Entzion court also concluded that an action for no-fault benefits accrues – and the statute of limitations begins to run – when the insurer discontinues or denies benefits.
Rowe v. Munye, 674 N.W.2d 761 (Minn. Ct. App. 2004),
review granted (Apr 28, 2004)
Pre-Existing Conditions and Proper Use of CIVJIG 91.40 – Items of Personal Damage— Aggravation
In Rowe, the Court of Appeals addressed the question of whether it is proper to give CIVJIG 91.40 in a case with a plaintiff that has a pre-existing medical condition who is involved in an accident with a single tortfeasor. The accident allegedly aggravated the prior condition. The plaintiff admitted to having a pre-existing neck and back injury that she received treatment for prior to an automobile accident but she could not attribute those complaints to any particular incident. In addressing use of CIVJIG 91.40 the court noted that it impermissibly shifts the burden of proof to the defendant to show they did not cause the portion of plaintiff’s damages attributable to the pre-existing condition. Because the court could not determine that use of the instruction was not prejudicial a new trial was granted.
CIVJIG 91.40
There is evidence that (plaintiff) had a pre-existing disability or a medical condition at the time of the accident.
Defendant is liable only for any damages that you find to be directly caused by the accident.
[If you cannot separate damages caused by the pre-existing disability or medical condition from those caused by the accident, then defendant is liable for all the damages.]
Heine v. Simon, 674 N.W.2d 411 (Minn. Ct. App. 2004),
review granted (Apr 28, 2004)
Pre-Existing Conditions and Use of JIG 163 – Items of Personal Damage – Aggravation
In certain cases, it is appropriate to instruct the jury using JIG 163 despite its apparent replacement by CIVJIG 91.40. In Heine, the Court of Appeals rejected the argument that JIG 163 erroneously shifts the burden of proof to the plaintiff. If there is a pre-existing injury that is aggravated by the negligence of a tortfeasor, the plaintiff still has the burden of proving the injuries directly caused by the defendant but also of proving the extent to which plaintiff’s condition was caused by the defendant’s conduct. Put another way, damages for aggravation of a pre-existing condition are simply a means to assure that the defendant pays only for the harm they cause, not the harm plaintiff already had. However, the court also noted that when two or more persons through consecutive, independent acts of negligence "closely related in point of time" cause a single indivisible injury that is incapable of apportionment, the negligent actors are jointly and severally liable for damages incurred. Thus, in order to trigger joint and several liability (the single-indivisible-injury rule) for damages, the injury must be incapable of being divided.
Noteworthy is that in Heine, the aggravation of plaintiff’s pre-existing injury was not an apportionable cause giving rise to joint and several liability, because there were two distinct accidents separated by months, and the contention was that the second accident aggravated injuries from the first – not that it produced a single indivisible injury.
JIG 163
A person who has a defect or disability at the time of an accident is nevertheless entitled to damages for any aggravation of such pre-existing condition, even though the particular results would have followed if the injured person had not been subject to such pre-existing condition. Damages are limited, however, to those results which are over and above those which normally followed from the pre-existing condition had there been no accident- in this case, had there been no second accident.
Heine v. Simon, 674 N.W.2d 411 (Minn. Ct. App. 2004),
review granted (Apr 28, 2004)
Workers’ Compensation Determination Not Binding as to Wage Loss Claims in Tort Action
In Heine, the defense argued that the doctrine of collateral estoppel applied to a worker’s compensation determination. Heine was involved in two separate auto accidents while in the course and scope of his employment. Prior to litigating the tort action Heine commenced a workers compensation proceeding and a hearing was held. In that proceeding the judge found there was insufficient evidence to establish a causal relationship between injuries sustained in the two separate accidents and Heine’s alleged loss of earnings. In the tort action the defendant argued that Heine was collaterally estopped by the workers compensation determination from litigating his wage loss claims.
The District Court properly declined to apply collateral estoppel to the issues decided in the worker’s compensation proceeding, because the issues were not identical and plaintiff was not afforded a full and fair opportunity to be heard on his wage-loss claim. The court noted that the issue of liability for damages, such as lost wages, is not litigated in workers’ compensation proceedings. Also, in contrast to the worker’s compensation proceeding which addressed the extent that two accidents caused resulting wage loss, the jury in the district court action was only asked to determine whether wage loss flowed from the second accident.