Summary
explaining why Kelly was not attempting an illicit conversion
Summary of this case from Kelly v. State Farm Mut. Auto. Ins. Co.Opinion
No. C0-02-217.
Filed August 13, 2002.
Appeal from the District Court, Ramsey County, File No. C9007576.
Emmett D. Dowdal, (for appellant)
Katherine A. McBride, John C. Hughes, (for respondent)
Considered and decided by Halbrooks, Presiding Judge, Klaphake, Judge, and Hanson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellant Marcia Kelly, injured while a passenger in an automobile owned and operated by her husband, challenges the district court's grant of summary judgment in favor of respondent State Farm Mutual Automobile Insurance Company. Because the district court did not err by concluding that an insurance policy covering an automobile not involved in the accident and naming appellant's husband as an insured excluded underinsured motorist coverage for appellant's injuries, we affirm.
FACTS
Appellant was injured when a Dodge automobile in which she was a passenger crashed on the freeway. The Dodge was driven and solely owned by appellant's husband and was insured by a State Farm Mutual Automobile Insurance Company (State Farm) policy naming both appellant and her husband as insureds. At the time of the accident, appellant and her husband jointly owned a Pontiac automobile insured by a second State Farm policy that named both appellant and her husband as insureds.
Appellant brought a damages claim against her husband. State Farm settled the claim by paying appellant $100,000, the liability limit of the Dodge policy. Appellant then brought a claim against State Farm to recover underinsured motorist (UIM) benefits under the Pontiac policy. The district court concluded that appellant was entitled to UIM coverage under the Pontiac policy despite the fact that appellant's husband, the tortfeasor, was a named insured on the Pontiac policy.
Shortly thereafter, we issued Johnson v. St. Paul Guardian Ins. Co., 627 N.W.2d 731 (Minn.App. 2001), review denied (Minn. Sept. 11, 2001). In Johnson, we held that a wife who was injured while riding on a motorcycle driven by her husband could not recover UIM benefits under an insurance policy covering an uninvolved vehicle and naming her husband as an insured. Id. at 732.
On reconsideration, the district court ruled that under Johnson, plaintiff was not entitled to UIM coverage, and granted summary judgment in favor of State Farm. This appeal follows.
DECISION
On appeal from summary judgment, we determine whether there are any genuine issues of material fact and whether the district court correctly applied the law. Vue v. State Farm Ins. Cos., 568 N.W.2d 527, 529 (Minn.App. 1997). The facts relevant to this appeal are undisputed. "On established facts, an insurance coverage issue is a question of law, which this court reviews de novo." Id. (citation omitted). The parties have stipulated that if appellant prevails, respondent shall pay the full $100,000 UIM benefits, and if respondent prevails, appellant shall not be entitled to any portion of the UIM coverage.
Every owner of a motor vehicle in Minnesota must obtain UIM coverage. Minn. Stat. § 65B.49, subd. 3a(2) (2000). UIM insurance provides personal benefits intended to compensate an accident victim when the policy limit of the at-fault driver's liability insurance is less than the victim's damages. See Johnson v. St. Paul Guardian Ins. Co., 627 N.W.2d 731, 732 (Minn.App. 2001), review denied (Minn. Sept. 11, 2001) (UIM insurance provides "excess coverage that is available when the tortfeasor carries inadequate liability insurance."). UIM coverage is generally first-party coverage in the sense that it follows the person insured, and not the vehicle the person may be occupying. Myers v. State Farm Mut. Auto. Ins. Co., 336 N.W.2d 288, 291 (Minn. 1983). By contrast,
[l]iability insurance is third-party coverage, meaning that it pays for damage the insured is legally obligated to pay another person, a third party, for bodily injury arising out of the insured's ownership, maintenance or use of a motor vehicle.
Lynch ex rel. Lynch v. Am. Fam. Mut. Ins. Co., 626 N.W.2d 182, 188 (Minn. 2001) (citations omitted).
Automobile insurance policies such as those at issue here frequently contain a standard "family vehicle exception" that defines "underinsured motor vehicle" to exclude a vehicle owned by or furnished or made available for the regular use of the party claiming the UIM benefit. See Myers, 336 N.W.2d at 292. The family-vehicle exception prevents an insured from collecting UIM benefits and liability benefits from the same policy on the theory that claiming first-party benefits under the policy of the owner or insurer of the at-fault vehicle would be tantamount to converting less expensive UIM coverage into more expensive third-party liability coverage. See id. at 291 (noting that an underinsured motorist policy "is not designed to compensate [the owner] or his additional insureds from [the owner's] failure to purchase sufficient liability insurance."). "First party coverage and third party coverage contemplate different risks. They are not the same and they are not priced the same." Petrich by Lee v. Hartford Fire Ins. Co., 427 N.W.2d 244, 246 (Minn. 1988); see also Johnson v. Am. Fam. Mut. Ins. Co., 426 N.W.2d 419, 422 (Minn. 1988) ("Underinsured motorist coverage is not an alternative to liability coverage."). The Myers rule, which authorizes the family-vehicle exception, arises out of a fact pattern where the same person owns the at-fault vehicle and the policy under which the injured claimant seeks first-party [UIM] coverage. Recovery in this situation inevitably compensates the owner who failed to adequately insure one of his vehicles.
Petrich, 427 N.W.2d at 245-46.
One line of Minnesota cases, beginning with Myers, has upheld the family-vehicle exclusion when the plaintiff first collected liability limits from the tortfeasor and then attempted to collect UIM benefits on the same or additional policies carried by the tortfeasor himself. See Johnson, 627 N.W.2d at 734; Linder by Linder v. State Farm Mut. Auto. Ins. Co., 364 N.W.2d 481, 483 (Minn.App. 1985) (holding Myers anti-conversion rule prevents insured from collecting UIM benefits from the tortfeasor's separate policies covering uninvolved vehicles), review denied (Minn. May 1, 1985); Myers, 336 N.W.2d at 291.
A second line of cases, however, has invalidated the family-vehicle exclusion when the injured party sought UIM coverage under a separate policy under which the tortfeasor was not a named insured. See, e.g., Northrup v. State Farm Mut. Auto. Ins. Co., 601 N.W.2d 900, 906 (Minn.App. 1999), review denied (Minn. Jan. 25, 2000); DeVille v. State Farm Mut. Auto. Ins. Co., 367 N.W.2d 574, 577 (Minn.App. 1985), review denied (Minn. July 26, 1985). In DeVille, we permitted a wife injured while a passenger on a motorcycle driven by her husband to recover UIM benefits under a UIM policy purchased by her for her own individual protection [because] * * * [s]he paid separate premiums for the car registered to her, and the policy was issued to her.
DeVille, 367 N.W.2d at 577.
In Johnson, we considered facts virtually identical to those here: a wife was injured in an accident while riding on a motorcycle owned, insured, and driven by her husband. 627 N.W.2d at 732. She settled with the husband's motorcycle liability insurer and then filed a UIM claim under a separate policy insuring an uninvolved vehicle owned by both herself and her husband and naming both spouses as insureds. See id. We concluded that allowing the wife to collect benefits under her tortfeasor husband's liability policy as well as benefits under a separate UIM policy naming the tortfeasor as an insured would impermissibly convert UIM coverage into liability coverage. See id. at 734. We held that the wife was not entitled to UIM coverage, stating [t]he purpose of UIM benefits is to protect the insured from those who carry inadequate liability coverage. Here, the tortfeasor, appellant's husband, had liability insurance on his motorcycle that was inadequate to cover appellant's injuries. This cannot be rectified by allowing the separate policy providing UIM coverage for appellant and the tortfeasor on their other motor vehicle to be converted to third-party coverage to cover his inadequate liability coverage.
Id. (citation omitted) (emphasis in original).
It is undisputed that appellant and her husband are both named insureds on the Pontiac policy and are both listed as owners on the Pontiac title. Appellant argues that her husband's name only appears on the Pontiac policy and the Pontiac title pursuant to a requirement imposed by husband's credit union, which financed the Pontiac purchase. Nonetheless, to allow appellant to collect UIM benefits under the Pontiac policy, which names appellant's husband as an insured, would "be an impermissible conversion of the underinsured motorist coverage purchased by the tortfeasor into what [is], in effect, additional liability limits for that tortfeasor." DeVille, 367 N.W.2d at 577. The Pontiac policy is simply not a separate policy under Myers, and the policy's family-vehicle exclusion, therefore, bars appellant's UIM claim here.
The district court did not err in determining that the Pontiac policy excluded underinsured motorist coverage for appellant's injuries in excess of the amount of liability coverage on the vehicle insured by State Farm that was involved in the accident.
Affirmed.
I concur in the result reached by the majority because our prior decision in Johnson v. St. Paul Guardian Ins. Co., 627 N.W.2d 731 (Minn.App. 2001), review denied (Minn. Sept. 11, 2001) is precedential and cannot be materially distinguished from the present case. See State v. Collins, 580 N.W.2d 36, 43 (Minn.App. 1998) (implying that court of appeals decisions have precedential effect after the deadline for granting review has expired), review denied (Minn. Jul. 16, 1998); Morgan v. Illinois Farmers Ins., 392 N.W.2d 37, 40 (Minn.App. 1986) (stating court was "bound" by a prior court of appeals decision), review denied (Minn. Oct. 22, 1986). I concur specially, however, because, were it not for Johnson, I would decide the matter differently. I believe that the distinctions drawn in Johnson lack substance and are not grounded in the public-policy considerations that underlie the statutory requirement of underinsurance coverage.
Our two lines of cases are difficult to reconcile. The majority correctly observes that one line of our cases has invalidated the family-vehicle exclusion where the UIM coverage was provided under a policy that was "separate" from the policy in which the tortfeasor was a named insured, even though the injured party was a member of the same household as the tortfeasor. See, e.g., Northrup v. State Farm Mut. Auto. Ins. Co., 601 N.W.2d 900, 906 (Minn.App. 1999), review denied (Minn. Jan. 25, 2000); DeVille v. State Farm Mut. Auto. Ins. Co., 367 N.W.2d 574, 577 (Minn.App. 1985), review denied (Minn. Jul. 26, 1985). But in today's prevalent circumstance of multiple-car families, the fact that the UIM benefits for one of the injured family members exists in a separate policy may be (and under the present facts, is) completely fortuitous. The decision whether to include multiple cars in separate policies or a single policy is likely made by the family's insurance agent, who may join them for administrative efficiency, without any thought that the joinder has any coverage implications. Similarly, the decision about whose name will be placed on the title of any vehicle is also likely made for reasons of efficiency, without thought of any insurance implications. This sheer fortuity of the UIM coverage being either in a separate policy or a joint policy has no real relevance to the public policy underlying the statute requiring underinsurance coverage, which is to assure that victims of vehicle accidents receive adequate compensation for their injuries. I would conclude that the analysis in Johnson was incomplete because it was based on fact distinctions that were not material to the policy goals of the statute.
This point is underscored by Kelly's observation that, even when the UIM coverage is provided in a "separate policy" in which the injured victim is a named insured, the tortfeasor who is a member of the same household is necessarily included as an "additional insured" on the separate policy. Thus, the only real distinction between Northrup and DeVille, on the one hand, and Johnson and the present facts, on the other hand, is a distinction in labels: in the former cases, the tortfeasor is not a "named insured" but is an "additional insured," whereas in the latter cases, the tortfeasor is a joint "named insured." This distinction seems too flimsy to be used as a basis to deny victims of vehicle accidents the adequate compensation that was intended by the statutory requirement of underinsurance coverage.
I also am not convinced by the argument that the invalidation of the family-vehicle exclusion in these circumstances (involving liability coverage applicable to one vehicle and UIM coverage applicable to another vehicle) is tantamount to converting UIM coverage to third-party liability coverage.
First, where the victim owns a separate vehicle, the victim's UIM insurance on that vehicle is first-party coverage that follows the person of the victim and does not become third-party coverage on the tortfeasor's vehicle.
Second, even though the UIM coverage might exist in a single policy covering several vehicles, it will always be excess to the liability coverage applicable to the tortfeasor's vehicle. It will not be available unless that third-party liability coverage does not fully compensate for the injuries. For this very reason, the UIM coverage would naturally be less expensive than third-party liability coverage and this difference in cost does not require the conclusion that the two coverages (so long as they are applicable to different vehicles) should be mutually exclusive.
Finally, an insurance company that provides coverage in a single policy for several vehicles is in the best position to determine the adequacy of the third-party liability coverage when it prices the UIM coverage.
The only supreme court decision in these two lines of cases, Myers v. State Farm Mut. Auto Ins. Co., 336 N.W.2d 288, 292 (Minn. 1983), upheld the family-vehicle exclusion in the situation where the injured party attempted to recover UIM on the tortfeasor's vehicle after recovering liability insurance on the same vehicle. The application of the family-owned vehicle exclusion made sense there because the victim did not own a separate car and, consequently, had no first-party UIM coverage to follow his person. But the application of the family-owned vehicle exclusion to preclude UIM insurance on the injured victim's separate vehicle, because the victim recovered liability insurance applicable to the tortfeasor's vehicle, does not make sense and conflicts with the statutory goals.
For these reasons, I conclude that the two lines of our cases cannot be fully reconciled and that this case would benefit from further review.