Justia.com Opinion Summary: Gregory Latterell, on behalf of his stepson Jared Boom's estate, sued Progressive Northern Insurance and AIG Insurance to recover underinsured motorist (UIM) benefits following Boom's death from a motor vehicle accident. Progressive, the insurer of Boom's vehicle, denied Latterell's claim for UIM benefits because of a business-use exclusion in Boom's insurance policy. AIG, Lattrell's insurer, also denied Latterell's claim. Latterell sued, and the district court granted summary judgment to Progressive and AIG. The court of appeals affirmed, holding (1) the business-use exclusion in the Progressive policy was enforceable under the Minnesota No-Fault Automobile Insurance Act and unambiguously excluded UIM coverage under the specific circumstances of this case, and (2) Latterell could not recover UIM benefits under the AIG policy. The Supreme Court reversed the denial of Latterell's summary judgment as to Progressive, holding that Progressive's business-use exclusion was unenforceable under the No-Fault Act. Remanded with instructions to enter judgment in favor of Latterell against Progressive.
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STATE OF MINNESOTA
IN SUPREME COURT
A09-1138
Court of Appeals
Stras, J.
Dissenting, Dietzen, J.
Gregory Latterell, as trustee for the heirs of
Jared Travis Boom, decedent,
Appellant,
vs.
Filed: August 31, 2011
Office of Appellate Courts
Progressive Northern Insurance Company,
Respondent,
and
AIG Insurance Company,
Respondent.
________________________
Michael A. Bryant, Nicole L. Bettendorf, Bradshaw & Bryant, PLLC, Waite Park,
Minnesota, for appellant.
Curtis D. Ruwe, Michelle M. Carter, Arthur, Chapman, Kettering, Smetak & Pikala,
P.A., Minneapolis, Minnesota, for respondent Progressive Northern Insurance Company.
Michael M. Skram, Matthew M. Johnson, Johnson & Condon, P.A., Minneapolis,
Minnesota, for respondent AIG Insurance Company.
________________________
1
SYLLABUS
1.
An insurance policy provision excluding underinsured motorist coverage
for accidents occurring while using an automobile to carry persons or property “for
compensation or a fee” is not ambiguous.
2.
An insurance policy provision excluding underinsured motorist coverage
for accidents occurring while using an automobile to carry persons or property “for
compensation or a fee” is unenforceable under the Minnesota No-Fault Automobile
Insurance Act, Minn. Stat. §§ 65B.41-.71 (2010).
Reversed in part and remanded.
OPINION
STRAS, Justice.
Appellant Gregory Latterell, on behalf of his stepson Jared Boom’s estate, sued
respondents Progressive Northern Insurance Company and AIG Insurance Company to
recover underinsured motorist (UIM) benefits following Boom’s death from a motor
vehicle accident. Progressive, the insurer of Boom’s vehicle, denied Latterell’s claim for
UIM benefits because of a business-use exclusion in Boom’s insurance policy. The
district court granted summary judgment to both insurance companies, and the court of
appeals affirmed. Because the business-use exclusion in Progressive’s policy is invalid
under the Minnesota No-Fault Automobile Insurance Act (“No-Fault Act”), Minn. Stat.
§§ 65B.41-.71 (2010), we reverse the district court’s grant of summary judgment to
Progressive.
2
I.
The relevant facts in this case are undisputed.
subcontractor delivering and picking up books.
Jared Boom worked as a
For completing his delivery route,
Boom’s employer paid him $148 per day in addition to a surcharge for gas. During one
of Boom’s deliveries to a library in Kerkhoven, Minnesota, Boom was killed when
another vehicle collided with his 1998 Dodge Grand Caravan.
Gregory Latterell, Boom’s stepfather and trustee for Boom’s heirs, first made a
claim against the other driver’s insurer, which settled for the liability policy limit of
$100,000. Latterell then sought to recover UIM benefits from the insurance policy with
Progressive Northern Insurance Company that covered Boom’s vehicle. Progressive
denied the claim based on a business-use exclusion contained in Boom’s policy. The
policy exclusion states, in relevant part:
Coverage under this Part III [UIM coverage] will not apply:
1. to bodily injury sustained by any person while using or occupying:
a. a covered auto while being used to carry persons or property for
compensation or a fee, including, but not limited to, pickup or
delivery of magazines, newspapers, food, or any other products.
(Emphasis omitted.)
After Progressive denied coverage, Latterell sought UIM benefits from his own
insurance policy with AIG Insurance Company. In limited circumstances, the AIG policy
provided coverage for family members residing with Latterell, the named insured on the
AIG policy. Even though Boom resided with Latterell, AIG denied Latterell’s claim for
UIM benefits because of a policy exclusion for injuries sustained while occupying a
vehicle owned by a resident relative but not insured under the AIG policy.
3
Latterell subsequently sued Progressive and AIG in Hennepin County District
Court.
All three parties moved for summary judgment.
The district court granted
summary judgment to Progressive and AIG, but denied Latterell’s motion for summary
judgment. The court of appeals affirmed, concluding that the business-use exclusion in
the Progressive policy is enforceable under the No-Fault Act and unambiguously
excludes UIM coverage under the specific circumstances of this case.
Latterell v.
Progressive N. Ins. Co., No. A09-1138, 2010 WL 696747, at *2-3 (Minn. App. Mar. 2,
2010). The court further concluded that because Boom was the named insured on the
Progressive policy covering the motor vehicle he occupied at the time of accident,
Latterell could not recover UIM benefits under the AIG policy. Id. at *4 (citing Minn.
Stat. § 65B.49, subd. 3a(5)). We granted Latterell’s petition for review.
II.
This case requires us to address two questions in order to resolve whether Latterell
is entitled to UIM benefits under the Progressive policy. First, we must determine
whether the district court and the court of appeals correctly interpreted the business-use
exclusion in the Progressive policy. Second, we must decide whether the business-use
exclusion, as properly interpreted, is enforceable under the No-Fault Act. We address
each of these questions in turn.
A.
The first question is whether the business-use exclusion unambiguously
encompasses Boom’s conduct in delivering and picking up library books as a
subcontractor at the time of the accident.
4
Interpretation of an insurance contract,
including whether provisions in a policy are ambiguous, is a legal question subject to de
novo review. Dohney v. Allstate Ins. Co., 632 N.W.2d 598, 600 (Minn. 2001); Am.
Commerce Ins. Brokers, Inc. v. Minn. Mut. Fire & Cas. Co., 551 N.W.2d 224, 227
(Minn. 1996).
Progressive’s business-use exclusion states in relevant part that UIM coverage is
not available for bodily injury sustained “while using or occupying . . . a covered auto
while being used to carry persons or property for compensation or a fee, including, but
not limited to, pickup or delivery of magazines, newspapers, food, or any other products.”
(Emphasis omitted.) Latterell contends that the phrase “for compensation or a fee” is
ambiguous because it may refer to a per-trip charge, a daily charge for use of the car, or a
fixed hourly wage.
Insurance policy provisions are ambiguous only when they are “reasonably subject
to more than one interpretation.” Am. Commerce Ins. Brokers, 551 N.W.2d at 227. We
interpret unambiguous policy language “in accordance with its plain and ordinary
meaning.” Ill. Farmers Ins. Co. v. Glass Serv. Co., 683 N.W.2d 792, 799 (Minn. 2004).
Here, the broadly worded business-use exclusion in the Progressive policy is
unambiguous because it excluded UIM coverage for Boom’s delivery and retrieval of
books under any of the remuneration arrangements identified by Latterell, including the
daily wage that Boom received for his services. The definition of the term “fee” is
“compensation often in the form of a fixed charge for professional service or for special
and requested exercise of talent or of skill.”
Webster’s Third New International
Dictionary 833 (2002); see also Black’s Law Dictionary 690 (9th ed. 2009) (defining
5
“fee” as “[a] charge for labor or services”); The American Heritage Dictionary of the
English Language 647 (4th ed. 2009) (“A charge for professional services”). The term
“compensation,” by contrast, means “payment for value received or service rendered:
remuneration.”
Webster’s Third New International Dictionary 463 (2002); see also
Black’s Law Dictionary 322 (9th ed. 2009) (defining “compensation” as “[r]emuneration
and other benefits received in return for services rendered; esp., salary or wages”); The
American Heritage Dictionary of the English Language 376 (4th ed. 2009) (“Something,
such as money, given or received as payment or reparation, as for a service or loss.”).
Boom’s daily wage of $148, plus a gas surcharge, unambiguously constitutes
“compensation” because it is “remuneration” or “payment for . . . service[s] rendered” for
the delivery and retrieval of library books.
Moreover, Progressive’s business-use
exclusion uses the disjunctive “or” between the terms “compensation” and “fee,” which
means that using or occupying “a covered auto while being used to carry persons or
property for” either compensation or a fee is excluded from UIM coverage under the
Progressive policy. Therefore, even assuming the term “fee” is ambiguous or must be
interpreted as including only a fixed charge for each delivery, see Progressive Cas. Ins.
Co. v. Metcalf, 501 N.W.2d 690, 692 (Minn. App. 1993), the phrase “compensation or a
fee” is sufficiently broad to include Boom’s daily wage, plus the surcharge he received
for gas.
Latterell nonetheless argues that the phrase “for compensation or a fee” is
ambiguous because the phrase is so broad that it could include nearly any remuneration
arrangement between two parties, including the payment of money or “some [other] type
6
of tangible or intangible benefit.” Latterell’s argument, however, mistakenly equates
breadth with ambiguity; just because contractual language is broad does not mean it is
ambiguous. To the contrary, we have recognized that broad meanings in insurance
policies do not “necessarily create ambiguity.” Am. Commerce Ins. Brokers, 551 N.W.2d
at 228; see also Associated Indep. Dealers, Inc. v. Mut. Serv. Ins. Cos., 304 Minn. 179,
183, 229 N.W.2d 516, 519 (1975) (concluding that a “broad” provision in an insurance
contract was unambiguous). And we “must fastidiously guard against the invitation to
create ambiguities where none exist.” Columbia Heights Motors, Inc. v. Allstate Ins. Co.,
275 N.W.2d 32, 36 (Minn. 1979) (citation omitted) (internal quotation marks omitted).
Here, Progressive’s business-use exclusion unambiguously excluded UIM
coverage because Boom was transporting books for compensation in the form of a fixed
daily wage.
B.
Now that we have interpreted Progressive’s business-use exclusion, the next
question is whether the exclusion is enforceable under the No-Fault Act. The district
court and the court of appeals upheld Progressive’s policy exclusion, concluding that the
No-Fault Act does not specifically prohibit excluding UIM coverage for the business use
of a vehicle. We disagree.
It is true that “[p]arties to insurance contracts, as in other contracts, absent legal
prohibition or restriction, are free to contract as they see fit, and the extent of liability of
an insurer is governed by the contract they enter into.” Bobich v. Oja, 258 Minn. 287,
294, 104 N.W.2d 19, 24 (1960). Moreover, insurance policy exclusions are “ ‘given the
7
same consideration in determining’ ” coverage as other provisions in the policy. Lobeck
v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn. 1998) (quoting Bobich,
258 Minn. at 295, 104 N.W.2d at 24-25).
Generally speaking, automobile insurance coverage falls into one of two
categories:
first-party coverage or third-party coverage.
First-party coverage pays
benefits to the insured, often regardless of the vehicle the insured was occupying at the
time of a motor vehicle accident. See Lobeck, 582 N.W.2d at 250. In other words, firstparty benefits “protect persons, not vehicles, and therefore the benefits of first-party
coverage follow the insured person.” Id. As we have noted, “[t]he No-Fault Act is
primarily aimed at providing first-party benefits to the insured, thereby eliminating the
need to prove liability before an injured party can recover medical or other expenses.”
Id. at 249. On the other hand, third-party coverage pays benefits to individuals other than
the named insured. Id. at 250. One type of third-party automobile coverage is liability
insurance, which “compensates a third party who is injured in an automobile accident for
which the insured is liable.” Id. Third-party coverage follows the vehicle, not the person
who purchases the policy. Id.; see also Minn. Stat. § 65B.49, subd. 3(1) (“Each plan of
reparation security shall also contain stated limits of liability . . . with respect to each
vehicle for which coverage is thereby granted” (emphasis added)).
The validity of an exclusionary provision in an insurance policy may depend on
whether the exclusion applies to first- or third-party coverage. That is because the NoFault Act “ ‘leaves unaltered the basic framework of the law of liability insurance,’ ” but
imposes restrictions on the ability of insurers to exclude first-party benefits. Lobeck, 582
8
N.W.2d at 250 (quoting Hilden v. Iowa Nat’l Mut. Ins. Co., 365 N.W.2d 765, 769 (Minn.
1985)). Indeed, because the “No-Fault Act’s primary purpose is to ensure the availability
of first-party benefits,” we are more likely to invalidate exclusions to first-party coverage
than to third-party coverage. Lobeck, 582 N.W.2d at 250. As we have stated, the
“distinction between third-party and first-party benefits is crucial when determining the
validity of a policy exclusion.” Id.
The primary question here is whether Progressive has to pay UIM benefits for the
accident involving Boom even though Boom’s insurance policy has a business-use
exclusion that unambiguously applies to the circumstances of his motor vehicle accident.
The No-Fault Act requires every automobile insurance policy issued in Minnesota to
provide a minimum amount of UIM coverage.
Minn. Stat. § 65B.49, subd. 3a(1)
(requiring minimum UIM “limits of $25,000 because of injury to or the death of one
person in any accident and $50,000 because of injury to or the death of two or more
persons in any accident”). As a general matter, UIM coverage is triggered when a
tortfeasor’s liability coverage is insufficient to fully compensate the injured person for the
actual damages sustained in an accident.
See Minn. Stat. § 65B.43, subds. 17, 19
(defining “underinsured motor vehicle” and “underinsured motorist coverage”); Dohney,
632 N.W.2d at 601.
We have explained that UIM coverage constitutes first-party coverage because
UIM benefits “compensate[] an insured under his own policy if he is legally entitled to
recover damages from the owner or operator of an underinsured motor vehicle.” Lynch
ex rel. Lynch v. Am. Family Mut. Ins. Co., 626 N.W.2d 182, 188 (Minn. 2001). However,
9
primary UIM coverage, unlike some other types of first-party coverage, follows the
vehicle rather than the insured on the policy.1 Under Minn. Stat. § 65B.49, subd. 3a(5),
the injured occupants of a vehicle must initially seek UIM benefits from the insurer of the
motor vehicle they occupied at the time of the accident. Becker v. State Farm Mut. Auto.
Ins. Co., 611 N.W.2d 7, 11 (Minn. 2000). Therefore, UIM coverage shares qualities of
both first- and third-party coverage: UIM coverage can pay benefits to the insured when
the insured is occupying his or her own motor vehicle at the time of an accident (like
first-party coverage), but it also can pay benefits to other occupants of the vehicle who
are not insureds under the policy (like third-party coverage). See Minn. Stat. § 65B.49,
subd. 3a(5); cf. McIntosh v. State Farm Mut. Auto. Ins. Co., 488 N.W.2d 476, 478 (Minn.
1992) (stating that uninsured motorist coverage, which is similar to UIM coverage, is
“[a]rguably . . . not first party coverage” because it is more like substitute liability
coverage than basic economic loss benefits). Despite the unique nature of UIM coverage,
we have repeatedly and consistently treated UIM coverage as first-party coverage for
purposes of the No-Fault Act. See, e.g., Kelly v. State Farm Mut. Auto. Ins. Co., 666
N.W.2d 328, 330 (Minn. 2003); Lynch, 626 N.W.2d at 188; Lobeck, 582 N.W.2d at 249-
1
The Minnesota Legislature amended the No-Fault Act in 1985 by, among other
things, adding subdivision 3a to section 65B.49. Act of June 27, 1985, ch. 10, § 68, 1985
Minn. Laws 1st Spec. Sess. 1781, 1840-41. We have explained that the 1985 amendment
“reflect[s] a broad policy decision to tie . . . [UIM] coverage to the particular vehicle
involved in an accident.” Hanson v. Am. Family Mut. Ins. Co., 417 N.W.2d 94, 96
(Minn. 1987); see also W. Bend Mut. Ins. Co. v. Allstate Ins. Co., 776 N.W.2d 693, 699
(Minn. 2009) (“In other words, after the 1985 amendment, primary UIM coverage
follows the vehicle, rather than the person.”).
10
50. We will continue to do so here: for purposes of determining whether Progressive’s
business-use exclusion is enforceable under the No-Fault Act, we will look to cases
addressing policy exclusions to first-party rather than third-party coverage.2
One such case is Meister v. Western National Mutual Insurance Co., 479 N.W.2d
372 (Minn. 1992), in which we held that a business-use exclusion was unenforceable as
applied to “additional” economic loss benefits. Id. at 379. Michael Meister suffered
severe head injuries when he was thrown from the back of a pickup truck owned by
Meister’s employer, Gunflint Lodge. Id. at 373. The insurer of the pickup truck offered
to pay Meister basic economic loss benefits for his injuries. Id. at 374. Meister also
sought to recover additional economic loss benefits for medical expenses and income
losses under a policy purchased by his father from Western National Mutual Insurance
Company. Id. The Western National policy, however, explicitly excluded benefits for
bodily injuries that occurred while a motor vehicle was “being used in the business of
transporting persons or property.” Id. Even though the No-Fault Act does not explicitly
require every insurance policy to provide additional economic loss benefits, we
invalidated the business-use exclusion in Meister because an insurer must provide the
additional coverage “if the insured chooses to purchase it.” Id. at 379. Moreover, as we
noted, “Meister’s father paid an extra premium for additional coverage to protect the
2
The court of appeals therefore erred in relying on a case upholding a business-use
exclusion to third-party liability coverage. See Latterell, 2010 WL 696747, at *2-3
(discussing Ill. Farmers Ins. Co. v. Eull, 594 N.W.2d 559 (Minn. App. 1999)).
Moreover, based on our differing treatment of exclusions to first-party and third-party
coverage, we express no opinion about whether a similar business-use exclusion to thirdparty coverage would be enforceable.
11
people covered under his policy.” Id. As a result, we concluded that Western National
could not deny first-party coverage based on an exclusion tied to the vehicle rather than
the persons protected under the policy. Id.
The holding and rationale of Meister are equally applicable here. First, both
Meister and this case involve similar, broad policy exclusions that apply when a vehicle
is carrying persons or property for some business purpose. Second, like Meister, this
case involves a policy exclusion applicable to first-party benefits.
Third, although
Meister involved a different type of first-party coverage—additional economic loss
benefits—the rationale underlying Meister is arguably stronger in the context of UIM
benefits. To be sure, we recognized in Meister that additional economic loss benefits
were required “in th[e] sense” that they must be offered with every automobile insurance
policy. Id. But unlike additional economic loss benefits, which can be purchased at the
option of a policyholder, the No-Fault Act explicitly provides that every automobile
insurance policy issued in Minnesota must provide the minimum amount of UIM
coverage set forth by statute. Minn. Stat. § 65B.49, subd. 3a(1).3
3
The dissent is no doubt correct that Meister involved additional economic loss
benefits rather than UIM benefits. The dissent then proceeds to distinguish Meister on
two grounds. First, the dissent states that additional economic loss benefits are governed
by Minn. Stat. § 65B.47, subd. 7, rather than Minn. Stat. § 65B.49, subdivision 3a. The
dissent’s observation is interesting, but it fails to point to any disparate language between
the two provisions that would compel a different result in this case than in Meister. In
fact, the only statutory language relied on by the dissent in distinguishing Meister is the
same language supporting our conclusion that Meister’s rationale is even more
compelling here because UIM benefits are mandatory for every insurance policy issued in
Minnesota. Compare Minn. Stat. § 65B.49, subd. 3a(1) (stating that UIM coverage, “at a
minimum, must provide limits of $25,000 because of injury to or the death of one person
(Footnote continued on next page.)
12
Meister is consistent with other cases from this court addressing exclusions to
first-party coverage.
Other than cases involving coverage conversion, 4 which
indisputably is not present here, the parties cannot identify a single case from this court in
which we have upheld an exclusion to first-party coverage, and our research reveals
(Footnote continued from previous page.)
in any accident and $50,000 because of injury to or the death of two or more persons in
any accident” (emphasis added)), with Minn. Stat. § 65B.47, subd. 7 (providing that “[a]n
insurer shall notify policyholders that they may elect to have two or more policies added
together” (emphasis added)). Second, the dissent states that UIM benefits require a
determination of fault by a third party, while additional economic loss benefits are paid to
an insured without regard to fault. But the dissent again fails to articulate why this
distinction makes any difference for purposes of this case.
More fundamentally, the dissent fails to address the striking similarities between
this case and Meister: both involve similarly worded business-use exclusions, first-party
benefits, and coverage required by the No-Fault Act under the circumstances. In
addition, the dissent makes no attempt to distinguish the cases in which we have
invalidated insurance contract provisions excluding UIM benefits under the No-Fault
Act. In each of these cases, we struck down exclusions to UIM coverage by employing
reasoning consistent with Meister. See Am. Nat’l Prop. & Cas. Co. v. Loren, 597 N.W.2d
291, 293-95 (Minn. 1999) (invalidating a policy exclusion preventing recovery of UIM
benefits when the insured was injured while occupying a motorcycle owned by a resident
relative); Malmin v. Minn. Mut. Fire & Cas. Co., 552 N.W.2d 723, 728 (Minn. 1996)
(invalidating a policy exclusion denying UIM benefits unless the insured first obtained
written consent to sue a third party).
4
Coverage conversion arises when an individual attempts to convert inexpensive
UIM coverage into additional liability coverage by trying to recover both third-party
liability benefits and first-party UIM benefits from the same insurance policy (or multiple
insurance policies that all list the tortfeasor as the insured). One example of coverage
conversion is when a family member injured in an automobile accident tries to recover
third-party liability benefits from an at-fault family member, and then recover first-party
UIM benefits under the same policy to recoup the remainder of his or her damages. See
Lynch, 626 N.W.2d at 183-84. An insurer can write and enforce a policy provision
excluding UIM coverage in those circumstances because “allowing the UIM claim would
result in the payment of additional benefits for injuries caused by the negligence of the
insured tortfeasor, which is . . . the ‘essence of liability coverage.’ ” Kelly, 666 N.W.2d
at 331 (quoting Lynch, 626 N.W.2d at 188).
13
none. To the contrary, we have consistently invalidated policy exclusions involving firstparty coverage—including UIM benefits—under the No-Fault Act. See Am. Nat’l Prop.
& Cas. Co. v. Loren, 597 N.W.2d 291, 293-95 (Minn. 1999) (invalidating a policy
exclusion preventing recovery of UIM benefits when the insured was injured while
occupying a motorcycle owned by a resident relative); Iverson v. State Farm Mut. Auto.
Ins. Co., 295 N.W.2d 573, 574 (Minn. 1980) (invalidating a policy exclusion preventing
recovery of basic economic loss benefits when the insured was injured while using an
uninsured automobile); see also Malmin v. Minn. Mut. Fire & Cas. Co., 552 N.W.2d 723,
728 (Minn. 1996) (invalidating a policy exclusion denying UIM benefits unless the
insured first obtained written consent to sue a third party); Roering, 444 N.W.2d at 833
(invalidating a policy exclusion denying UIM benefits if the insured was injured while
occupying a vehicle owned by the insured or a resident relative, but was not insured
under the specific policy).
C.
The dissent argues that our holding in this case is not “anchor[ed]” to the language
of Minn. Stat. § 65B.49, subd. 3a. But the dissent struggles to find an anchor of its own
because there is no relevant language that supports the dissent’s interpretation. As the
dissent implicitly concedes in its analysis, the No-Fault Act is silent as to whether an
insurance policy may contain a business-use exclusion to UIM coverage. Thus, the
dissent must rely on the absence of language in subdivision 3a to support its view. At
most, the absence of language renders subdivision 3a ambiguous, requiring us to look at
other related statutes, such as those covering economic loss benefits, to interpret
14
subdivision 3a. See Milner v. Farmers Ins. Exch., 748 N.W.2d 608, 617 (Minn. 2008)
(stating that “[i]n the absence of any plain language” covering the subject matter of the
case, the court should look to “other related statutes for guidance”).
Even so, to the extent subdivision 3a addresses exclusions to UIM coverage, it
favors our approach here. Subdivision 3a states in relevant part: “Each [UIM] coverage,
at a minimum, must provide limits of $25,000 because of injury to or the death of one
person in any accident and $50,000 because of injury to or the death of two or more
persons in any accident.”
Minn. Stat. § 65B.49, subd. 3a(1).
An insurance policy
containing a business-use exclusion like the one in this case arguably does not provide
the UIM benefits required by statute in the circumstances covered by the policy
exclusion. We need not decide, however, whether other policy exclusions to UIM
coverage would be invalid under subdivision 3a because Meister and our other cases
addressing exclusions to first-party coverage support our conclusion that Progressive’s
business-use exclusion is unenforceable under the No-Fault Act.5
III.
For the foregoing reasons, we conclude that Progressive’s business-use exclusion
is unenforceable under the No-Fault Act.
Because the business-use exclusion is
Progressive’s sole argument for denying UIM benefits, we reverse the grant of summary
5
The dissent’s position is that the No-Fault Act permits “typical insurance policy
exclusions” if the Act does not specifically prohibit them. Even assuming we could
derive a list of “typical” insurance policy exclusions, nothing in the No-Fault Act
specifically prohibits an insurer from excluding UIM benefits when an accident occurs at
night, during rush hour, or even on weekdays. Therefore, the dissent’s position is not
only inconsistent with case law, it is breathtaking in its scope.
15
judgment to Progressive, reverse the denial of Latterell’s summary judgment motion as to
Progressive, and remand with instructions to enter judgment in favor of Latterell against
Progressive.6
Reversed in part and remanded.
6
It is unnecessary for us to decide whether the district court erred in granting
summary judgment to AIG because Latterell clearly asserted the UIM claim against AIG
in the alternative to the claim against Progressive. Latterell’s complaint states that
Boom’s estate “is entitled to receive underinsured motorist benefits from the Defendant
AIG Insurance Company as a resident relative if Jared Travis Boom is found not to be
covered by the Progressive policy.” Similarly, Latterell stated in his motion for summary
judgment that “it seems clear that if it was found that there was no UIM coverage with
Progressive, the estate should be able to turn to the next available UIM coverage which is
with AIG.” At oral argument, Latterell’s attorney conceded that Boom’s estate would not
have a claim against AIG for UIM benefits if Progressive’s policy covered Boom.
16
DISSENT
DIETZEN, Justice (dissenting).
The majority concludes, and I agree, that the Progressive insurance policy’s
business-use exclusion unambiguously excludes underinsured motorist (UIM) coverage
under the facts of this case. The question we must decide is whether the Minnesota NoFault Automobile Insurance Act, Minn. Stat. §§ 65B.41-.71 (2010) (No-Fault Act),
prohibits a business-use exclusion to UIM coverage in Progressive’s insurance policy.
Because the plain language of the No-Fault Act, particularly section 65B.49, subdivision
3a, does not prohibit a business-use exclusion, I conclude that such an exclusion is proper
and enforceable. The majority, however, fails to consider or interpret the language of the
No-Fault Act.
Rather, the majority skips over statutory construction and turns to
inapplicable case law to support its conclusion that the business-use exclusion ought to be
prohibited. Because the majority opinion does not rest on the plain language of the
statute, I respectfully dissent.
I.
The goal of all statutory interpretation is to “ascertain and effectuate the intention
of the legislature.” Minn. Stat. § 645.16 (2010); W. Bend Mut. Ins. Co. v. Allstate Ins.
Co., 776 N.W.2d 693, 698 (Minn. 2009). We construe the words of a statute according to
their plain and ordinary meaning. Am. Family Ins. Grp. v. Schroedl, 616 N.W.2d 273,
277 (Minn. 2000). Specifically, “[w]hen the words of a law in their application to an
existing situation are clear . . . , the letter of the law should not be disregarded under the
D-1
pretext of pursuing the spirit.” Minn. Stat. § 645.16; accord Turner v. Mut. Serv. Cas.
Ins. Co., 675 N.W.2d 622, 625 (Minn. 2004).
An exclusion in an insurance policy “is a limitation of liability or a carving out of
certain types of loss to which the coverage or protection of the policy does not apply.”
17 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 49:111
(4th ed. 2000). Typical exclusions in automobile insurance policies include familyhousehold exclusions, business-use exclusions, and fellow-employee exclusions.
Id.
§ 49:112. The exclusion at issue here is a business-use exclusion.
The relevant portion of the No-Fault Act set forth in Minn. Stat. § 65B.49 is quite
comprehensive. The statute contains provisions regarding insurance for basic economic
loss benefits (subdivision 1), residual benefits insurance (subdivision 3), uninsured
motorist (UM) and UIM coverage (subdivision 3a), rental vehicles (subdivision 5a),
additional benefits and coverages (subdivision 7), and family or group family day care
provider coverage (subdivision 9).
Subdivision 3a is the specific portion of the statute at issue in this case. It sets
forth the required UM and UIM coverage for insurance policies in Minnesota. Subpart 1
provides:
No plan of reparation security may be renewed, delivered or issued for
delivery, or executed in this state with respect to any motor vehicle
registered or principally garaged in this state unless separate uninsured and
underinsured motorist coverages are provided therein. Each coverage, at a
minimum, must provide limits of $25,000 because of injury to or the death
of one person in any accident and $50,000 because of injury to or the death
of two or more persons in any accident.
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Minn. Stat. § 65B.49, subd. 3a(1). It is undisputed that the Progressive policy has UM
and UIM coverage at the required policy limits mandated by subdivision 3a(1).
Subdivision 3a contains seven other subparts that describe who are required to
provide UM and UIM coverage, and how benefits are coordinated between different
types of coverage. For example, each owner of a vehicle “registered or principally
garaged” in Minnesota is required to have UM and UIM coverage. Id., subd. 3a(2).
Moreover, no reparation obligor is required to provide UM and UIM coverage in excess
of the applicable bodily liability limits.
Id., subd. 3a(3).
Further, no recovery is
permitted under UM and UIM coverage for basic economic loss benefits. Id., subd.
3a(4). Subdivision 3a(5) provides that UM and UIM coverage follows the vehicle the
injured person occupied, subject to certain limitations. Id., subd. 3a(5). Subdivision
3a(6) provides that the limits of liability for UM and UIM for two or more vehicles may
not be added together to determine the limit of coverage for any one person for one
accident. Id., subd. 3a(6). Further, UM and UIM coverage do not apply to bodily injury
of an insured while occupying a motor vehicle owned by the insured except as provided
in subpart 7, or while occupying a motorcycle as provided in subpart 8. Id., subd. 3a(7),
(8).
Applying section 65B.49, subdivision 3a, I conclude that the business-use
exclusion of the Progressive insurance policy is not prohibited, and therefore is proper
and enforceable. Specifically, subdivision 3a addresses the mandated policy limits, who
is required to provide the UM and UIM coverage, and certain exceptions that relate to the
No-Fault Act the Legislature determined should be included in every insurance policy.
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Subdivision 3a does not address typical insurance policy exclusions such as coverage
conversion exclusions, see Lynch ex rel. Lynch v. Am. Family Mut. Ins. Co., 626 N.W.2d
182, 189-90 (Minn. 2001), family-member exclusions, see Kelly v. State Farm Mut. Auto.
Ins. Co., 666 N.W.2d 328, 330-31 (Minn. 2003), geographic exclusions, see Smith v. Ill.
Farmers Ins. Co., 455 N.W.2d 499, 501-02 (Minn. App. 1990), or exclusions for racing
or speed contests or violations of the law, see 8A Lee R. Russ & Thomas F. Segalla,
Couch on Insurance 3d § 121:91-:92 (2005).
It is reasonable to conclude that the
Legislature was guided by the general principles of insurance contracts, that the contract
between the parties should govern and parties are free to limit coverage. See Am. Nat’l
Prop. & Cas. Co. v. Loren, 597 N.W.2d 291, 292 (Minn. 1999).
Otherwise, all
exclusions not expressly stated in the No-Fault Act would be prohibited. The potential
consequence of such an interpretation is to prohibit exclusions that are typically included
in insurance policies. Consequently, I would conclude that typical insurance policy
exclusions, like a business-use exclusion, are permissible under section 65B.49,
subdivision 3a. Thus, the Progressive policy’s business-use exclusion is proper and
enforceable.
II.
Having concluded that section 65B.49, subdivision 3a, does not prohibit the
business-use exclusion at issue in this case, it is not necessary to stray from the language
of the statute. As noted, however, the majority skips over statutory construction, and
relies on Meister v. Western National Insurance Co., 479 N.W.2d 372 (Minn. 1992), to
support its conclusion. But Meister is easily distinguishable.
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In Meister, we considered whether an insurance policy that contained a businessuse exclusion was enforceable as a limit on optional additional economic loss benefits.
Id. at 374. The plaintiff was injured in a fall from the back of a pickup truck owned by
the plaintiff’s employer. Id. at 373. In addition to basic economic loss benefits from the
employer’s insurer, the plaintiff filed a claim for additional economic loss benefits,
including medical expenses and income losses, under an insurance policy purchased by
the plaintiff’s father. Id. at 374. This policy, however, excluded benefits for bodily
injuries that occurred while a motor vehicle was “being used in the business of
transporting persons or property.” Id. We concluded that “the legislature mandated the
availability of additional benefits without restriction” and therefore the insurer must
provide the optional additional economic loss benefits coverage “if the insured chooses to
purchase it.” Id. at 378-79 (emphasis omitted).
Meister does not support the majority’s opinion for at least two reasons. First,
Meister did not interpret section 65B.49, subdivision 3a, the statute at issue in this case,
and did not analyze UIM coverage and benefits under the No-Fault Act. Rather, Meister
interpreted optional additional economic loss benefits, the subject of Minn. Stat.
§ 65B.47, subd. 7, which are not at issue in this case. Subdivision 7 states that “[a]n
insurer shall notify policyholders that they may elect to have two or more policies added
together.” Id. The Meister court expansively read the language of subdivision 7 to mean
that once the optional additional economic loss coverage with the extra premium was
offered and accepted, no business-use exclusions were enforceable for those additional
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benefits. See Meister, 479 N.W.2d at 379. Section 65B.49, subdivision 3a, however,
does not contain similar language, and therefore Meister is not applicable.
Second, the optional additional economic loss benefits discussed in Meister are
significantly different from UIM benefits. Specifically, economic loss benefits apply
absent a determination of fault, and additional economic loss benefits supplement this
coverage. Minn. Stat. § 65B.42(1). Optional additional economic loss benefits are part
of the overall scheme to “provide prompt payment of specified basic economic loss
benefits to victims of automobile accidents without regard to whose fault caused the
accident.” Id. UIM benefits under section 65B.49, subdivision 3a, however, are only
applicable when fault has been assigned, and the tortfeasor’s liability coverage is not
sufficient to cover all damages.
Minn. Stat. § 65B.43, subds. 17, 19 (defining
“underinsured motor vehicle” and “underinsured motorist coverage”).
Thus, UIM
benefits serve to supplement insufficient liability coverage and are distinguishable from
optional additional economic loss benefits that do not require a determination of fault.1
1
The majority relies on the statement that optional additional economic loss
benefits and UIM benefits are both “first-party benefits” to conclude that Meister is
equally applicable to cases addressing both types of benefits. But UIM coverage is
payable to both the insured and third parties who occupy the covered vehicle. Minn. Stat.
§ 65B.49, subd. 3a(5). Thus, UIM coverage is more properly characterized as a hybrid of
both first- and third-party benefits. See McIntosh v. State Farm Mut. Auto. Ins. Co., 488
N.W.2d 476, 478-79 (Minn. 1992) (stating that uninsured motorist coverage, which is
governed by the same section of the No-Fault Act as underinsured motorist coverage, is
not “true first party coverage” because it functions as substitute liability coverage). This
difference between UIM and additional economic loss benefits means that Meister cannot
be directly applied to the situation presented here absent additional analysis of the
statutory language underlying both types of coverage.
(Footnote continued on next page.)
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IV.
The majority’s analysis expands the conclusion in Meister beyond optional
additional economic loss benefits to UIM benefits without any analysis of section
65B.49, subdivision 3a. Specifically, the majority offers no interpretation of subdivision
3a to anchor its opinion. Indeed, the majority scrupulously avoids interpreting the statute.
The implicit conclusion of the majority, however, is that subdivision 3a does not address
exclusions, and therefore exclusions are prohibited.
The logical consequence of
prohibiting business-use exclusions because they are not mentioned in subdivision 3a is
to prohibit all typical insurance policy exclusions. This sweeping conclusion would
result in the invalidation of typical exclusions included in insurance policies, such as
family-use exclusions, geographic exclusions, coverage conversion exclusions, organized
racing or speed contest exclusions, or even exclusions for violations of the law. In my
view, the Legislature did not intend to prohibit typical exclusions in insurance policies in
subdivision 3a. Rather, the plain language of subdivision 3a does not prohibit these
exclusions. Had the Legislature intended to prohibit typical insurance policy exclusions,
such as business-use exclusions, it could have easily stated that they were prohibited. It
did not. Therefore, I conclude that this business-use exclusion is proper and enforceable.
(Footnote continued from previous page.)
The majority also attempts to apply Meister to this situation because of the
“similarly worded” business-use exclusions. But the issue is the language of section
65B.49, subdivision 3a, not the language of the business-use exclusion.
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