This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).
STATE OF MINNESOTA
IN COURT OF APPEALS
A16-0527
Bret Hedrington,
Appellant,
vs.
American Standard Insurance Company of Wisconsin,
Respondent
Filed December 19, 2016
Reversed and remanded
Worke, Judge
Hennepin County District Court
File No. 27-CV-13-18760
Mark J. Schneider, Erin F. Musland, Chestnut Cambronne, P.A., Minneapolis, Minnesota;
and
Thomas R. Hurwitz, Hurwitz Law Firm, St. Louis Park, Minnesota (for appellant)
Beth K. Bussian, Steven P. Pope, Eden Prairie, Minnesota (for respondent)
Considered and decided by Stauber, Presiding Judge; Worke, Judge; and Bratvold,
Judge.
UNPUBLISHED OPINION
WORKE, Judge
Appellant insured challenges the district court’s grant of summary judgment to
respondent insurer, arguing (1) a genuine issue of material fact exists as to appellant’s
residency; (2) respondent is estopped from denying that appellant is a Minnesota resident
with a vehicle principally garaged in Minnesota; and (3) the district court erred in
determining that if appellant is a Minnesota resident, appellant knowingly misrepresented
material facts on his insurance application. Because a genuine issue of material fact
remains as to appellant’s residency at the time of his accident, and the district court abused
its discretion by allowing, in a dispositive order, an amendment to the pleadings permitting
respondent to claim misrepresentation, we reverse and remand for further proceedings.
FACTS
In July 2009, appellant Bret Hedrington obtained auto insurance in Wisconsin from
respondent American Standard Insurance Company of Wisconsin. American Standard is
also licensed to sell insurance in Minnesota. Hedrington listed his parents’ Eau Claire,
Wisconsin address on his application for the policy. Hedrington was born and raised in
Eau Claire, but he has owned a home in Shafer, Minnesota for approximately 20 years.
Hedrington’s policy included underinsured motorist (UIM) coverage with a relevant
limit of $150,000. The policy included an exhaustion provision stating American Standard
would pay under the coverage “only after the limits of liability under any bodily injury
liability bonds or policies [had] been exhausted.” The policy also included a fraud
provision allowing American Standard to void the policy if Hedrington misrepresented a
material fact with intent to deceive or breached an affirmative warranty, and American
Standard relied upon that misrepresentation or breach or the misrepresentation or breach
contributed to “the loss.”
According to the agent who sold the policy, Hedrington never said he owned a home
in Minnesota or that his vehicle would be principally garaged in Minnesota, but Hedrington
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did say he intended to purchase a home in Minnesota and would stay with a friend in
Minnesota from time to time; the agent told Hedrington to alert him if his address changed.
According to the agent, the specific policy was selected and sold to Hedrington because he
represented that he lived in Wisconsin and his vehicle would be principally garaged in
Wisconsin; his premiums were calculated based upon this information; and the policy
would not have been sold if the agent knew Hedrington resided in Minnesota and the
vehicle would be principally garaged in Minnesota. Hedrington previously obtained auto
insurance from American Standard in Wisconsin in 2008, and Hedrington’s parents’
Wisconsin address was listed as his residence for that policy as well.
Hedrington has owned a home in Shafer, Minnesota and lived in that home for many
years, but the home was struck by lightning and burned down in August 2009. As a result,
Hedrington did not live there for some time. After the fire, Hedrington lived with a friend
in Shafer. Also, Hedrington leased a home in Minnesota while he waited for his home to
be rebuilt.
In September 2009, Hedrington obtained an umbrella policy with American
Standard. This policy was obtained in Minnesota and listed Hedrington’s Shafer address
as his residence. This policy had an endorsement provision, which noted that American
Standard would not cover UIM claims unless the policy was endorsed to provide such
coverage.
In October 2009, Hedrington was involved in an auto accident in Minnesota; his
vehicle was struck by a driver insured through Progressive. That driver eventually settled
with Hedrington for $50,000, though the driver’s liability limit was $100,000.
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In July 2013, Hedrington served a complaint upon American Standard seeking UIM
benefits under the July 2009 auto policy and the September 2009 umbrella policy.
American Standard moved for summary judgment. The district court granted summary
judgement for American Standard, finding that Hedrington could not collect UIM benefits
under his July 2009 policy because of the aforementioned exhaustion provision. The
district court acknowledged that if Hedrington was a Minnesota resident, the exhaustion
provision would be void under Minnesota law and the policy would be reformed to allow
Hedrington to collect UIM benefits. But, the district court found that either: (1) the
exhaustion provision was valid because Hedrington was a Wisconsin resident; or (2)
Hedrington knowingly misrepresented material facts in his insurance application, and the
policy was therefore void. The district court found that the UIM benefits under the
umbrella policy were not available because Hedrington did not purchase the required
endorsement. This appeal follows.
DECISION
Summary judgment is proper when “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that either party is entitled to a judgment as
a matter of law.” Minn. R. Civ. P. 56.03. On appeal from summary judgment, appellate
courts review de novo “whether there are any genuine issues of material fact and whether
the district court erred in its application of the law to the facts.” Commerce Bank v. W.
Bend Mut. Ins. Co., 870 N.W.2d 770, 773 (Minn. 2015). Appellate courts “view the
evidence in the light most favorable to the party against whom summary judgment was
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granted.” Id. No genuine issue of material fact exists where “the record taken as a whole
could not lead a rational trier of fact to find for the nonmoving party.” DLH, Inc. v. Russ,
566 N.W.2d 60, 69 (Minn. 1997) (quotation omitted).
I.
Hedrington argues that a genuine issue of material fact exists as to his residency.
As discussed below, Hedrington’s residency at the time of his accident is material because
it affects the validity of the exhaustion provision contained in his July 2009 policy,1 which
in turn controls access to UIM benefits under that policy. Viewing the evidence in a light
most favorable to Hedrington, a genuine issue of material fact exists as to whether
Hedrington was a Minnesota resident at the time of his accident.
Residency’s Impact on the Exhaustion Provision
Insurers licensed to sell auto insurance in Minnesota must provide certain minimum
insurance coverages to Minnesota resident policyholders. Minn. Stat. § 65B.50, subd. 1
(2014). These insurance coverages are outlined in Minn. Stat. § 65B.49 (2014). There are
reduced requirements for nonresident policyholders. Minn. Stat. § 65B.50, subd. 1;
Ziegelmann v. Nat’l Farmers Union Prop. & Cas. Cos., 686 N.W.2d 563, 567 (Minn. App.
2004), review denied (Minn. Dec. 14, 2004). Insurers licensed in Minnesota “must provide
nonresident insureds with basic-economic-loss and residual-liability coverages, but are not
required to provide UIM coverage.” Ziegelmann, 686 N.W.2d at 567. Generally, the rule
1
Hedrington did not brief the issue of UIM benefits under his umbrella policy. The district
court found that Hedrington conceded he was not entitled to these benefits. This issue is
deemed forfeited. See Melina v. Chaplin, 327 N.W.2d 19, 20 (Minn. 1982) (stating that
issue that was not briefed was forfeited).
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in Minnesota is that UIM coverage is not required for nonresidents, and so if nonresidents
have UIM coverage, it need not comply with Minnesota law. Warthan v. Am. Family Mut.
Ins. Co., 592 N.W.2d 136, 139 (Minn. App. 1999), review denied (Minn. July 28, 1999).
Following this rule, if a nonresident insured is injured in an auto accident in
Minnesota and the nonresident insured obtained UIM coverage in another state from an
insurer licensed to sell in Minnesota, the UIM coverage does not need to comply with
Minnesota-resident coverage requirements and the nonresident insured’s policy will not be
reformed. Id. at 137-39. But, if a Minnesota-resident insured is injured in an auto accident
in Minnesota, and the insured obtained UIM coverage in another state from an insurer
licensed to sell in Minnesota, the resident insured is entitled to the UIM coverage required
by Minnesota law. Schossow v. First Nat’l Ins. Co. of Am., 730 N.W.2d 556, 561-62 (Minn.
App. 2007). This is true even if the policy was not “‘renewed, delivered or issued for
delivery, or executed in [Minnesota] with respect to any motor vehicle registered or
principally garaged in [Minnesota].’” Id. at 561 (quoting Minn. Stat. § 65B.49, subd. 3a(1)
(2006)); see Warthan, 592 N.W.2d at 139 (noting when a Minnesota resident has an
accident in Minnesota, the UIM policy will be reformed to comply with Minnesota law).
This is because “Minnesota has a strong policy of extending coverage rather than allowing
coverage to be restricted.” Schossow, 730 N.W.2d at 562.
After his accident, Hedrington settled with the third-party driver for $50,000, which
was less than the driver’s liability limit of $100,000. The district court found Hedrington
could not collect UIM benefits because the exhaustion provision precluded benefits if
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certain limits of liability were not exhausted. The district court found Hedrington failed to
exhaust those limits by settling for $50,000.
However, under Minnesota law the exhaustion provision would be deemed void as
against public policy, and Hedrington’s policy would be reformed to comply with
Minnesota’s UIM laws. Schmidt v. Clothier, 338 N.W.2d 256, 260-61 (Minn. 1983),
superseded by statute on other grounds, Minn. Stat. § 65B.49, subd. 4a. The issue then
becomes whether or not the exhaustion provision is void in this instance, and a
determination of the validity of the exhaustion provision requires a determination of
whether Hedrington was a Minnesota resident at the time of his accident.2
Hedrington’s Residency at the Time of His Accident
In determining no-fault insurance coverage, residency is a question of fact, and
summary judgment is not proper when reasonable persons could reach different
conclusions from the evidence. Mut. Serv. Cas. Ins. Co. v. Wochnick, 397 N.W.2d 435,
437 (Minn. App. 1986). Residency for purposes of UIM benefits is determined at the time
of the accident. See Schossow, 730 N.W.2d at 562 (holding that district court did not err in
determining that insured was a Minnesota resident at the time of her accident); Schoer v.
W. Bend Mut. Ins. Co., 473 N.W.2d 73, 75-76 (Minn. App. 1991) (analyzing party’s
residency at time of accident for purposes of UIM benefits); Wochnick, 397 N.W.2d at 437-
38 (analyzing party’s residency at time of accident for purposes of UIM benefits).
2
The parties appear to concede that Minnesota law is applicable, and there is not a choice-
of-law issue.
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Viewing the evidence in a light most favorable to Hedrington, a rational factfinder
could find Hedrington was a Minnesota resident at the time of his accident. At the time of
his accident, Hedrington had owned a home in Minnesota for many years. The home had
burned down approximately two months before the accident, so Hedrington lived with a
friend in Minnesota and leased a home in Minnesota. In September 2009, approximately
one month before the accident, one of American Standard’s agents working in Minnesota
issued an umbrella policy to Hedrington providing homeowners liability insurance and
listing Hedrington’s home address in Shafer, MN. This evidence suggests that Hedrington
was a Minnesota resident at the time of his accident. Further, in Schossow, this court noted
people can have more than one residence and “[n]othing in Minn. Stat. § 65B.50 suggests
that a person can be a resident of only one state.” 730 N.W.2d at 561.
In sum, in viewing that evidence in a light most favorable to Hedrington, a genuine
issue of material fact remains as to whether Hedrington was a Minnesota resident at the
time of his accident.
II.
Hedrington argues American Standard should be estopped from asserting
Hedrington did not maintain his residency in Minnesota and keep his vehicle principally
garaged in Minnesota because American Standard admitted these facts in the answer.
Because the complaint lacked specifics, and Hedrington and the district court were made
aware of American Standard’s theory of the case, we conclude that American Standard is
not estopped from making these assertions.
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In the complaint, Hedrington claimed he “maintains a residence in … Minnesota.”
Hedrington also claimed he “purchased automobile insurance from [American Standard]
in order to insure his vehicle principally garaged in Minnesota.” American Standard
admitted these allegations in its answer.
Pleadings are intended to alert each party to the relevant claims and defenses being
offered so that the parties come to trial prepared and ready to address the matters in
controversy. Rogers v. Drewry, 196 Minn. 16, 19, 264 N.W. 225, 226 (1935). When
essential facts are admitted in the pleadings, those facts are not at issue unless the admitting
party alerts the court and the other party of a change in position. Phelps v. Benson, 252
Minn. 457, 457, 476, 90 N.W.2d 533, 534, 546 (1958).
Here, regarding Hedrington’s residence, the complaint was phrased in the present
tense; American Standard admitted Hedrington maintained a Minnesota residence at the
time of the complaint, not at the time of the accident or purchase of the policy, and
American Standard only admitted Hedrington maintained a Minnesota residence, not that
Hedrington was a Minnesota resident for purposes of UIM coverage. Further, American
Standard, in its motion for summary judgment and other filings, has argued Hedrington
was a Wisconsin resident and not entitled to UIM benefits in accordance with Minnesota
law. Both Hedrington and the district court were made aware of this position.
Regarding the admission that Hedrington purchased automobile insurance from
American Standard in order to insure his vehicle principally garaged in Minnesota,
Hedrington again failed to identify the timeframe, the exact vehicle, and the exact insurance
policy in that paragraph of the complaint. American Standard, in its motion for summary
9
judgment and other filings, has argued that Hedrington’s vehicle involved in the accident
was not principally garaged in Minnesota. Again, both Hedrington and the district court
were made aware of this position.
In sum, American Standard is not estopped from challenging Hedrington’s
residency and the place where Hedrington’s vehicle was principally garaged because the
complaint was not specific, and American Standard took the position in filings that
Hedrington, for purposes of UIM coverage, was a Wisconsin resident with a vehicle
principally garaged in Wisconsin.
III.
Lastly, Hedrington argues that the district court erred in concluding, as a matter of
law, that Hedrington knowingly misrepresented material facts in his insurance application.
Because the district court clearly abused its discretion by granting, in its dispositive order,
American Standard’s motion to amend the pleadings to allow a claim of misrepresentation,
summary judgment was improper.
Fraud and any matter constituting an avoidance are affirmative defenses that must
be pleaded appropriately. Minn. R. Civ. P. 8.03. Further, the circumstances constituting
fraud or mistake must be stated with particularity. Minn. R. Civ. P. 9.02. This includes
pleading all necessary facts underlying each element of a fraud claim. Hardin Cty. Sav.
Bank v. Hous. & Redevelopment Auth., 821 N.W.2d 184, 191 (Minn. 2012). Two of the
primary purposes for requiring affirmative defenses to be pleaded specifically are to
prevent surprise and ensure fairness. Snyder v. City of Minneapolis, 441 N.W.2d 781, 788
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(Minn. 1989). When an affirmative defense is properly raised, discovery can be undertaken
to produce the relevant facts. Id.
In this case, American Standard’s allegations of fraud were required to be pleaded
affirmatively and with particularity. See Hardin, 821 N.W.2d at 191 (noting a claim of
negligent misrepresentation must be pleaded with particularity); McBroom v. Al-Chroma,
Inc., 386 N.W.2d 369, 374 (Minn. App. 1986) (noting misrepresentation must be pleaded
with particularity). American Standard first raised the issue of fraud in its summary
judgment memorandum of December 8, 2015, arguing that if Hedrington alleged he was
not a resident of Wisconsin when he obtained his July 2009 policy, then he misrepresented
his residence and the place where his vehicle would be principally garaged in his insurance
application, and the policy could therefore be voided under the fraud provision of the
policy.
Hedrington denied that a misrepresentation had been made, asserting that he used
his parents’ Wisconsin address as a mailing address while his home was being rebuilt and
asserting that American Standard was alerted to the fact that Hedrington was a Minnesota
resident whose vehicle was principally garaged in Minnesota. Further, Hedrington argued
that fraud had not been sufficiently pled.
American Standard then cited Minn. Stat. § 60A.08, subd. 9 (2014) as a basis for
contract rescission and raised new facts to show that Hedrington had made a
misrepresentation, including: (1) a picture and police report showing Hedrington had a
Wisconsin license plate at the time of his accident; (2) Hedrington’s 2008 insurance
application listing a Wisconsin address and a Wisconsin driver’s license, and noting that
11
his vehicle would be principally garaged in Wisconsin; (3) an affidavit from the agent who
sold Hedrington’s July 2009 policy; and (4) insurance claim documents that American
Standard claims show Hedrington’s home burned down in August 2009.
At the hearing on January 5, 2016, American Standard appeared to offer the theory
that Hedrington was intentionally deceptive in representing that he was a Wisconsin
resident. Hedrington argued against allowing an amendment of the pleadings. On
February 2, 2016, the district court granted summary judgment for American Standard,
noting in a footnote that it would allow American Standard to amend its pleading.
A district court’s decision to allow an amendment of the pleadings will not be
reversed unless there was a clear abuse of discretion. LaSalle Cartage Co. v. Johnson Bros.
Wholesale Liquor Co., 302 Minn. 351, 357-58, 225 N.W.2d 233, 238 (1974). Here, the
district court had the authority to permit American Standard to amend its pleading. Minn.
R. Civ. P. 15.01. Leave to amend a pleading must be given freely when justice so requires.
Id. However, the discretion to allow an amendment of the pleadings is not unfettered. Rhee
v. Golden Home Builders, Inc., 617 N.W.2d 618, 621 (Minn. App. 2000). Given American
Standard’s failure to plead fraud, the lack of clarity in American Standard’s fraud
allegations, the untimeliness of American Standard’s motion to amend the pleadings, and
the fact that Hedrington was offered no opportunity to present evidence after the decision
to allow an amendment of the pleadings, Hedrington suffered prejudice and the district
court clearly abused its discretion. As such, the matter must be remanded so that
Hedrington is apprised of the fraud allegations and given an opportunity to respond.
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First, American Standard failed to plead fraud in any form, let alone with the
particularity that is required. See Minn. R. Civ. P. 9.02. As such, the contours of American
Standard’s fraud claim were ill defined at the time of the summary judgment hearing. It
was unclear if American Standard was relying on Hedrington’s insurance application as
the source for the misrepresentation, the oral representations made to the agent that sold
the policy, or both. It was unclear if American Standard was relying on the contract
language as the source for rescission, or Minn. Stat. § 60A.08, subd. 9, or both. It was
unclear if American Standard was alleging there was an intent to deceive, or a materially
increased risk of loss, or both. See Minn. Stat. § 60A.08, subd. 9 (noting a policy may be
avoided because of a material misrepresentation only if there was either intent to deceive
and defraud or an increased risk of loss).
Second, American Standard did not move the court to allow for an amendment of
its pleading until five days before the hearing, which is untimely. See Minn. R. Gen. Pract.
115.04(a) (noting nondispositive motions must be filed at least 14 days before the hearing).
Further, five days before the summary judgment hearing, American Standard filed a
number of supplemental affidavit attachments raising new facts in support of its fraud
argument, and it was at this time that American Standard first raised the applicability of
Minn. Stat. § 60A.08, subd. 9.
Third, the district court, by granting American Standard’s motion to amend the
pleadings in the order disposing of the case, effectively closed the door on Hedrington’s
ability to rebut specific fraud allegations with relevant evidence. The district court found
either Hedrington was a Wisconsin resident or he knowingly misrepresented material facts
13
in his insurance application and the policy was therefore void. However, this conclusion
ignores the fact that Hedrington could have legitimately listed a Wisconsin address on his
insurance application and legitimately affirmed that his vehicle was primarily garaged in
Wisconsin at the time the policy was obtained, while still claiming he was a Minnesota
resident at the time of his accident. In Schossow, the insurance policy was issued to a Fargo
address, the policy was never renewed to indicate a Minnesota address despite the fact that
the insured was living in Minnesota, the insured renewed her North Dakota driver’s license
while living in Minnesota, and the insured’s vehicle was registered and titled in North
Dakota, yet this court still held that it was not error to find the insured was a Minnesota
resident. 730 N.W.2d at 558, 562. Further, in Schossow, this court noted a person could
potentially have more than one residence and be a resident of more than one state. Id. at
561.
Lastly, if American Standard’s misrepresentation claim is based on the theory that
Hedrington was intentionally deceptive in listing a Wisconsin address and affirming that
his vehicle was principally garaged in Wisconsin at the time of the policy issuance, there
remains a genuine issue of material fact. There is evidence that Hedrington did not intend
to deceive American Standard. Hedrington obtained an umbrella policy in September 2009
from American Standard using a Minnesota address, and Hedrington had other dealings
with American Standard during this time indicating that Hedrington was not intending to
be deceptive about his connection to Minnesota.
A genuine issue of material fact remains on whether Hedrington was a Minnesota
resident at the time of his auto accident, and the district court clearly abused its discretion
14
when it permitted American Standard, in a dispositive order, to amend the pleadings so that
a claim of misrepresentation could be raised. This matter must be remanded for a
determination of Hedrington’s residency at the time of his accident. American Standard
must plead fraud with sufficient particularity, and Hedrington must be given an opportunity
to respond to American Standard’s particularized fraud allegation.
Reversed and remanded.
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