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No. 95-1957
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Vickie L. Klimstra, *
*
Appellant, *
*
v. *
* Appeal from the United States
Leroy Granstrom, individually; * District Court for the District
Granstrom Insurance Agency; * of Minnesota.
State Farm Auto Insurance *
Company, an Illinois *
corporation licensed to do *
business in Minnesota, *
*
Appellees. *
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Submitted: November 16, 1995
Filed: September 11, 1996
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Before BOWMAN, BEAM, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
___________
BOWMAN, Circuit Judge.
Vickie Klimstra appeals the adverse grant of summary judgment by the
District Court1 in her claim for uninsured motorist benefits against State
Farm Auto Insurance Company (State Farm) and LeRoy Granstrom, individually,
and as the Granstrom Insurance Agency (herein referred to collectively as
Granstrom). We affirm.
1
The Honorable Michael J. Davis, United States District Judge
for the District of Minnesota.
I.
This case arises out of a "miss-and-run" accident on August 4, 1991.2
The facts of this case are provided in detail in the opinion of the
District Court. See Klimstra v. State Farm Auto. Ins. Co., 891 F. Supp.
1329 (D. Minn. 1995). The following is a summary of the facts material to
the issues raised on appeal. Klimstra alleged that as she was driving on
a Wisconsin highway, a car came toward her in her lane; to avoid a head-on
collision, she turned off the highway. Although the unidentified car did
not make physical contact with Klimstra's car, she was thrown from her car
and pinned underneath it. She was hospitalized and received medical care
for third and fourth degree burns. At the time of the accident, Klimstra
was a resident of Wisconsin, and had obtained her automobile insurance in
Wisconsin through the Charles Smader Agency, an exclusive State Farm
automobile insurance agency located in LaCrosse, Wisconsin. While still
hospitalized, she filed a claim with State Farm to obtain uninsured
motorist (UM) benefits for the bodily injuries she sustained in the car
accident. State Farm paid Klimstra $25,000 under the medical payments
coverage in her Wisconsin policy, but refused to provide her with UM
benefits.
Until May 1991 Klimstra had resided with her parents in Minnesota,
and had been covered by State Farm automobile insurance policies obtained
through the Granstrom Agency in Anoka, Minnesota. Klimstra's last
extension of her Minnesota policy covered the period between February 11
and August 11, 1991. The Minnesota policy contained the following
provision:
2
"Miss and run" describes an accident in which an unidentified
motor vehicle causes injury to another motor vehicle or its
occupants, but does not make physical contact with the other
vehicle.
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Change of Residence
When the change of location is from one state to another and
you are a risk still acceptable to us at the time you notify us
of the change, we shall replace this policy with the policy
form currently in use in the new state of garaging. The word
"state" means one of the United States of America.
In May 1991, Klimstra contacted Barb Daly, a secretary at the
Granstrom Agency in Minnesota, and informed her that she might be moving
to Wisconsin. Daly informed Klimstra that the Granstrom Agency was not
authorized to write insurance policies in Wisconsin and did not have access
to Wisconsin insurance rates, and advised Klimstra to find an agent in
Wisconsin. Daly further informed Klimstra, and Klimstra understood, that
Wisconsin's laws and insurance requirements might differ from Minnesota's.
Daly then sent Klimstra an automobile policy computer printout listing
Minnesota premium and policy limits to use in comparing Wisconsin rates for
similar coverages. The printout did not contain the terms or conditions
for the different coverages. Daly asked Klimstra to keep the Granstrom
Agency informed about her decision to relocate. Klimstra did not contact
the Granstrom Agency again concerning her move or her automobile policy.
Later in May 1991, Klimstra moved to Wisconsin. In June, she
contacted the Smader Agency in Lacrosse. The Smader Agency is not
affiliated in any way with the Granstrom Agency. Klimstra met in person
with Nancy Gregerson of the Smader Agency, and told her that she wanted the
same coverage that she had under her Minnesota policy with State Farm.
Klimstra showed Gregerson the computer printout that Daly had given to her,
but Klimstra did not bring her Minnesota policy with her containing the
specific terms and conditions of her coverage. On June 5, 1991, Gregerson
prepared an insurance application, and checked the box marked transfer and
left the boxes marked new and reinsurance blank. Gregerson advised
Klimstra that Wisconsin requires insureds to purchase medical
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payment coverage for medical expense benefits rather than the personal
injury protection coverage offered in Minnesota. Klimstra selected $25,000
in medical payment insurance. Gregerson also informed Klimstra that
because her Wisconsin premium was $90.00 lower than her Minnesota premium,
she could purchase $100,000 of UM coverage, instead of the $25,000 UM
coverage that she had under her Minnesota policy.
Gregerson prepared an insurance application and binder agreement
listing the coverages that Klimstra had selected. The application was
signed by Klimstra and the Smader Agency with coverage bound effective June
11, 1991. Klimstra applied her unearned premium from the Minnesota policy
toward payment of the initial premium on her Wisconsin policy. Klimstra
understood that her Minnesota policy would expire, and that her Wisconsin
policy would become effective as of June 11, 1991. The Smader Agency sent
Klimstra's Wisconsin policy to her along with insurance cards and a premium
notice. The notice required Klimstra to pay her Wisconsin premium by
August 11, 1991; following her accident she paid the premium from the
hospital on August 9, 1991.
The dispute in this case centers on a difference in UM coverage in
Minnesota and Wisconsin for a hit-and-run accident. With respect to UM
coverage, Klimstra's Minnesota policy provided:
We will pay damages for bodily injury an insured is legally
entitled to collect from the owner or driver of an uninsured
motor vehicle. The bodily injury must be caused by accident
arising out of the operation, maintenance or use of an
uninsured motor vehicle.
Uninsured Motor Vehicle--means:
. . . .
2. a "hit-and-run" land motor vehicle whose owner or driver
remains unknown and which was the proximate cause of
bodily injury to an insured.
-4-
Minnesota State Farm Insurance Policy, Section III, Uninsured Motor Vehicle
Coverage, at 13-14, reprinted in Appellant's Appendix at 48-49.
Klimstra's Wisconsin policy provided the following UM coverage:
We will pay damages for bodily injury an insured is legally
entitled to collect from the owner or driver of an uninsured
motor vehicle. The bodily injury must be caused by accident
arising out of the operation, maintenance or use of an
uninsured motor vehicle.
Uninsured Motor Vehicle--means:
. . . .
2. a "hit-and-run" land motor vehicle whose owner or driver
remains unknown and which strikes:
a. the insured or
b. the vehicle the insured is occupying and causes bodily
injury to the insured.
Wisconsin State Farm Insurance Policy, Section III, Uninsured Motor Vehicle
Coverage, at 14, reprinted in Appellant's Appendix at 71.
Minnesota courts have interpreted the term hit-and-run broadly to encompass
a miss-and-run accident where there is no physical contact between the two
vehicles, while Wisconsin courts have interpreted hit-and-run narrowly to
mean that physical contact is required. Neither the Granstrom Agency nor
the Smader Agency informed Klimstra of any differences in UM coverage in
the Minnesota and Wisconsin policies.
After State Farm refused UM coverage for the miss-and-run accident,
Klimstra filed suit against State Farm and Granstrom in Minnesota state
court on theories of breach of contract and negligence. State Farm removed
this action to federal court on the basis of diversity jurisdiction. The
parties filed cross-motions
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for summary judgment. In her motion for summary judgment, Klimstra argued
that (1) the Wisconsin State Farm policy containing UM coverage should
insure the miss-and-run accident; (2) Granstrom and State Farm were
negligent for failing to inform her when she moved from Minnesota to
Wisconsin of the reduced coverage under the Wisconsin policy; (3) Minnesota
law governed the interpretation of the miss-and-run coverage in the
Wisconsin insurance policy; (4) the Minnesota policy was still in effect
with the higher limits chosen by Klimstra in her Wisconsin policy; or (5)
alternatively, the Minnesota policy containing miss-and-run UM coverage was
still in effect with the policy limits established in Minnesota. In their
own separate motions for summary judgment, defendants responded that under
Wisconsin law, the UM coverage does not include miss-and-run accidents.
Further, they contended that Granstrom had no duty to counsel Klimstra
regarding differences in coverage under the Wisconsin policy. In addition,
defendants argued that Klimstra's Minnesota policy terminated on June 11,
1991 when she bought her new Wisconsin policy, and that Wisconsin law
governed the interpretation of the Wisconsin policy.
The District Court granted summary judgment to State Farm and
Granstrom. The District Court held (1) there is no question of material
fact as to whether Klimstra's Wisconsin insurance policy was in effect at
the time of her accident; (2) Wisconsin law controls the interpretation of
Klimstra's Wisconsin policy; (3) the Wisconsin policy did not cover miss-
and-run accidents; (4) Granstrom and State Farm did not have a legal duty
to explain to Klimstra that her Wisconsin policy did not cover miss-and-run
accidents; (5) an insurer must give notice to an insured only where there
is a material change at the time of its renewal or when an endorsement is
added; (6) State Farm and Granstrom did not unilaterally reduce Klimstra's
UM coverage; and (7) there are no grounds for rewriting the Wisconsin
policy to provide Klimstra with miss-and-run coverage.
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Klimstra challenges the District Court's grant of summary judgment
to the defendants on the grounds that (1) a material question of fact
remains as to when Klimstra received the Wisconsin policy; (2) Minnesota
and Wisconsin uninsured motorist laws are not in conflict, and even if
there is a conflict, Minnesota law should apply to the interpretation of
the Wisconsin policy; and (3) alternatively, the District Court misapplied
the rule of Canadian Universal Insurance Co. v. Fire Watch, Inc., 258
N.W.2d 570 (Minn. 1977) (holding insurer's failure to provide insured
written explanation that endorsement reduced coverage renders endorsement
void and restores original policy terms), and therefore the Wisconsin
policy should be rewritten to include miss-and-run coverage.
II.
We review de novo the decision to grant a summary judgment motion.
Brodnicki v. City of Omaha, 75 F.3d 1261, 1264 (8th Cir. 1996), petition
for cert. filed, 65 U.S.L.W. 3086 (U.S. July 23, 1996) (No. 96-129). We
will affirm if the record shows there is no genuine issue of material fact
and that the prevailing party is entitled to judgment as a matter of law.
Id.; see also Fed. R. Civ. P. 56(c).
III.
As a preliminary matter, we must address Klimstra's contention that
summary judgment should not have been granted to defendants because a
genuine issue of material fact remains in dispute. Klimstra argues there
is a fact issue as to the date she received the Wisconsin automobile
policy. Klimstra contends she may not have received her Wisconsin policy
before the accident on August 4, 1991. Although Klimstra raises a dispute
as to when she physically received her policy, Klimstra has not
demonstrated why this factual dispute is materially relevant.
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Klimstra does not articulate the relevancy of the physical receipt
of her policy. Perhaps she means to suggest that if she had not received
her Wisconsin policy then her Minnesota policy was still in effect. It is
undisputed that Klimstra applied for her Wisconsin policy on June 5, 1991,
with an effective date of June 11, 1991, and that her premium refund from
the Minnesota policy was applied to pay part of the first premium on her
Wisconsin policy. Whether Klimstra physically received the policy in June,
as State Farm argues, or sometime after her accident in August, as Klimstra
argues, her Wisconsin coverage became effective as a matter of law on June
11, 1991, and her Minnesota coverage terminated on the same date. As a
matter of law, when Klimstra's accident occurred on August 4, 1991, she was
insured under the Wisconsin policy only.
Having reviewed the record, we conclude the District Court correctly
determined there is no genuine issue of material fact remaining in dispute.
IV.
Klimstra next argues that the UM coverage provided by her Wisconsin
policy should be read as insuring her miss-and-run accident. Klimstra
contends that the District Court improperly found that a conflict of law
existed between Minnesota and Wisconsin law. She asserts that because
Wisconsin law permits insurers to provide more than the minimum coverage
required by statute, the two states' laws do not conflict. We disagree.
We conclude that the District Court correctly determined that the two
states' laws are in conflict because application of Minnesota law to
Klimstra's policy results in coverage for the miss-and-run accident, while
application of Wisconsin law to the policy does not.
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The Minnesota Supreme Court has ruled that insurance policy
provisions that require physical contact as a precondition of hit-and-run
coverage impermissibly restrict the coverage intended by the Minnesota
uninsured motorist statute. Halseth v. State Farm Mut. Auto. Ins. Co., 268
N.W.2d 730, 732-33 (Minn. 1978). Therefore under policies governed by
Minnesota law there can be no requirement of physical contact between the
uninsured motorist and the insured motorist for UM coverage to apply.
The Wisconsin Supreme Court, on the other hand, has held that
physical contact between the insured and the unidentified vehicle is a
prerequisite for hit-and-run UM coverage. Hayne v. Progressive N. Ins.
Co., 339 N.W.2d 588, 591 (Wis. 1983).
Nonetheless, Klimstra argues that Minnesota and Wisconsin laws are
not in conflict because Wisconsin does not preclude more than minimum
coverage in an insurance policy. This argument misses the mark.
Klimstra's Wisconsin policy covers damages for bodily injury arising from
"a hit-and-run land motor vehicle whose owner or driver remains unknown and
which strikes: the insured or the vehicle the insured is occupying and
causes bodily injury to the insured." Wisconsin State Farm Insurance
Policy, at 14, reprinted in Appellant's Appendix at 71 (emphasis added).
Application of Wisconsin law to the UM provision in Klimstra's Wisconsin
policy therefore results in no coverage for Klimstra's miss-and-run
accident. We hold that the District Court correctly determined that
Minnesota law and Wisconsin law are in actual conflict with respect to
interpretation of the UM provision in the Wisconsin policy.
Having determined that an actual conflict exists, we next turn to
Minnesota's choice-of-law rules. Minnesota courts employ Professor
Leflar's choice-influencing factors: predictability of results; maintenance
of interstate order; simplification of the judicial task; advancement of
the forum's governmental interest;
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and application of the better rule of law. See Milkovich v. Saari, 203
N.W.2d 408, 412-13 (Minn. 1973). Klimstra argues that even if an actual
conflict exists, the choice-influencing factors favor application of
Minnesota law to the Wisconsin policy. We are unpersuaded. The choice-
influencing factors overwhelmingly favor application of Wisconsin law to
the interpretation of the Wisconsin policy. Klimstra is a Wisconsin
resident; she is employed in Wisconsin; her accident occurred on a
Wisconsin highway; and the insurance policy at issue is a Wisconsin
insurance contract sold by a Wisconsin insurance agent. The District Court
carefully applied the Leflar factors and did not err in its decision to
apply Wisconsin law.
V.
Klimstra argues that even if (as we now have held) Wisconsin law
governs the interpretation of her Wisconsin policy, the Wisconsin policy
should be rewritten to conform to Minnesota law on the ground that when she
moved to Wisconsin and applied for a Wisconsin policy no one told her that
she would not have the miss-and-run coverage she previously had under her
Minnesota policy. She contends that under Fire Watch, 258 N.W.2d at 575,
Granstrom and State Farm had a contractual duty to inform her in writing
that the Wisconsin policy did not contain miss-and-run coverage, and that
in failing to do so the defendants materially reduced her coverage under
the Wisconsin policy without her assent.3 Therefore, Klimstra contends
that the Wisconsin policy should be
3
We agree with the District Court that the above choice-of-law
analysis favoring application of Wisconsin law to Klimstra's
Wisconsin insurance policy does not apply to the issue of whether
State Farm and Granstrom had an obligation to notify Klimstra that
her Wisconsin policy did not contain miss-and-run coverage. We
analyze this issue under Minnesota law because Granstrom is a
Minnesota-based insurance agent, his insurance relationship with
Klimstra took place in Minnesota, and prior to moving to Wisconsin
Klimstra was insured by State Farm under policies issued in
Minnesota.
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rewritten to restore the original miss-and-run coverage provided for in the
Minnesota policy. Her argument is without merit.
Klimstra's reliance on Fire Watch is misplaced. The Fire Watch rule
applies when, by renewal of a policy or by an endorsement to an existing
policy, an insurer substantially reduces the prior insurance coverage
without notifying the insured in writing of such a change. Id. In that
situation, the endorsement or alteration is void and the original policy
terms are restored. Id. In Fire Watch, the insured was in the business
of selling, distributing, and servicing fire protection equipment. Fire
Watch purchased an insurance policy from Canadian Universal Insurance
Company (Canadian) to cover completed operations and products liability.
A fire occurred at a building in which Fire Watch had installed equipment.
When Fire Watch's equipment failed to function, Fire Watch was sued. The
defense of this action was referred to Canadian, which brought an action
for a declaratory judgment that the loss in question was excluded from
coverage under the insurance policy because the language of a subsequent
endorsement drafted by Canadian and sent to Fire Watch denied coverage for
both negligent installation and manufacture. Id. at 571. The Minnesota
Supreme Court determined that the endorsement substantially reduced the
insurance coverage afforded Fire Watch under the original policy and
therefore concluded that the endorsement was void. Consequently, the court
in Fire Watch restored the original insurance policy, which included
coverage for losses arising from the negligent installation of a fire
protection system.
Having concluded that the original policy provided coverage for the
faulty installation and that the endorsement effectively removed such
coverage, the court then turned to the issue of whether an insurer is
obligated to notify the insured of the reduction in coverage. Explaining
that insurance contracts are contracts of adhesion between parties not
equally situated, the
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court held that when an insurer makes basic coverage changes, by way of
either renewal or endorsement, it has an obligation to notify the insured
in writing of the change of coverage. The court concluded that, to be fair
to the insured, the insurer has an obligation to inform the insured of any
limitation in coverage by sending a cover letter or by placing a
conspicuous heading on the amendatory endorsement.
In applying this rule to the facts in Fire Watch, the court focused
on what a reasonable insured in Fire Watch's position would have understood
the endorsement to mean. Id. at 572. The court noted that the president
of Fire Watch had several conversations with Canadian's agent in an attempt
to understand the meaning and purpose of the endorsement. The president
then signed the endorsement and attached a letter explaining his
understanding of the endorsement. Canadian did not respond to the
correspondence from Fire Watch, although it was clear from the letter and
the manner in which the endorsement was accepted that the insured was
confused about the way in which the endorsement would affect its insurance
coverage. Therefore, the court held, Canadian's failure to explain in
writing that the endorsement substantially reduced Fire Watch's insurance
coverage rendered the reduction void, and Fire Watch was entitled to the
coverage that it had under the original policy. Id. at 575.
Klimstra's case, in contrast, presents neither a renewal or
endorsement situation, nor does it involve a reduction in coverage. First,
Klimstra did not renew her Minnesota policy, nor was there an endorsement
to her Minnesota policy. Instead, she purchased a new policy in Wisconsin.
Granstrom informed Klimstra that they could not issue insurance in
Wisconsin. Klimstra's Minnesota policy put her on notice that upon change
of residence to another state, she would be issued a new policy. Even
assuming, as Klimstra argues, that defendants in fact referred to the
transaction as a "transfer," Klimstra did not effect a transfer of
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her Minnesota policy. Klimstra knew she was applying for a Wisconsin
policy, with Wisconsin rates, through a Wisconsin agent, subject to the
laws of Wisconsin. She knew that Wisconsin law might require her to carry
different coverages or accept different limits on coverage. At the Smader
Agency in Wisconsin, Klimstra filled out and signed an application for a
Wisconsin insurance policy.
Second, the Wisconsin policy issued to Klimstra by State Farm did not
reduce Klimstra's UM coverage. In point of fact, the Wisconsin policy
increased UM coverage to $100,000 from the $25,000 that Klimstra had under
her Minnesota policy. The difference in coverage with respect to miss-and-
run accidents between the Minnesota policy and the Wisconsin policy
resulted from the operation of state law and not from a reduction in
coverage by State Farm. We conclude that the rule of Fire Watch does not
apply to invalidate the Wisconsin miss-and-run limitation.
Moreover, even if we were to assume that State Farm or Granstrom
breached a duty owed to Klimstra by failing to give her notice that her
Wisconsin policy did not contain miss-and-run coverage, Klimstra's claims
under breach of contract or any negligence theory would fail for lack of
causation. See Nguyen v. Control Data Corp., 401 N.W.2d 101, 105 (Minn.
Ct. App. 1987) (holding proof required to support contract damages is
similar to that of tort; damages must result from or be caused by the
breach); see also Melin v. Johnson, 387 N.W.2d 230, 233 (Minn. Ct. App.
1986) (holding that agent's failure to notify the insured was not the
proximate cause of insured's inability to obtain coverage). In Klimstra's
case it is undisputed that miss-and-run coverage was not available in
Wisconsin in 1991. Even if Granstrom had told Klimstra to seek out such
coverage in Wisconsin, Klimstra would not have been able to obtain miss-
and-run coverage in Wisconsin because such coverage was not available in
the Wisconsin market. Indeed, Klimstra is now in the exact same position
that she would have been
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in if she had gone to any other insurer in Wisconsin and asked for miss-
and-run coverage. Therefore, any alleged breach of duty by State Farm and
Granstrom in not explaining the differences in UM coverage laws between
Minnesota and Wisconsin did not cause Klimstra's damages.4
VI.
Finally, Klimstra asserts that she did not receive any consideration
for the alleged UM reduction. She contends that the physical-contact
requirement therefore should be deleted from her Wisconsin policy. This
argument is without merit. We already have held that the defendants did
not "reduce" Klimstra's UM coverage. When Klimstra moved to Wisconsin, she
purchased a new Wisconsin policy, and her Minnesota policy terminated. She
paid for, and received, a policy that conformed with Wisconsin law. Her
failure-of-consideration argument simply has no basis in fact.
VII.
Having considered all of Klimstra's arguments, we conclude that the
District Court did not err in granting summary judgment for the defendants.
The judgment of the District Court is affirmed.
4
We do not wish to be read as suggesting the existence of such
a duty. To the contrary, we are unaware of any authority for
imposing a duty of this sort on insurers and their agents. To find
such a duty would mean that anytime an insured mentions that he may
move to another state, the insurance agent then is obligated to
advise the insured on all differences in state laws and coverages
in all potential states to which the insured may move, even if the
agent is not authorized to write insurance policies in those
states. We know of no state that has gone this far in imposing
burdensome and unrealistic duties.
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A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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