Pepper v. State Farm Mutual Automobile Insurance Co.

TOUSSAINT, Judge

(dissenting).

I respectfully dissent. The analysis conducted by the majority focuses on whether the present case involves an issue of coverage conversion. But because the plain language of the policy excludes the only vehicle involved in this accident from its definition of an “underinsured motor vehicle” and I believe the policy neither omits coverage required by law nor violates applicable statutes, I would affirm the district court’s award of summary judgment. See Lynch v. Am. Family Mut Ins. Co., 626 N.W.2d 182, 185 (Minn.2001) (stating that an insurer’s liability is generally determined by the insurance contract, as long as the relevant insurance policy neither (1) omits coverage that is required by law nor (2) violates applicable statutes).

I agree with the majority’s decision that the plain language of the policy prevents Pepper from recovering UIM benefits. But I cannot conclude that the policy exclusion violates Minn.Stat. §§ 65B.41-.71 (2010), the Minnesota No-Fault Automobile Insurance Act. Minnesota caselaw allows for insurance companies to impose limitations on receipt of UIM benefits. See, e.g., Myers v. State Farm Mut. Auto. Ins. Co., 336 N.W.2d 288, 292 (Minn.1983) (holding that insurance policy’s exclusion of vehicles owned by, furnished for, or made available for the regular use of the named insured from the definition of an underinsured motor vehicle is valid).

As explained by the majority, we have held that an insurance policy may not prohibit a passenger from recovering UIM benefits from the driver’s insurer to the extent that the passenger suffered uncompensated injuries caused by an underin-sured motor vehicle and the fault for those injuries was attributable to another motoring tortfeasor, as such a situation presents no risk of impermissible coverage conversion. Lahr v. Am. Family Mut. Ins. Co., 528 N.W.2d 257, 259-260 (Minn.App.1995). We later held that there is no coverage conversion when an injured person seeks UIM benefits from a driver’s insurer to cover injuries sustained — and left otherwise uncompensated — as a result of the negligence of another motorist. Mitsch v. Am. Nat’l Prop. & Cas. Co., 736 N.W.2d 355, 363 (Minn.App.2007), review denied (Minn. Oct. 24, 2007).

I believe both of these cases are distinguishable. In Lahr, we addressed a multi-vehicle accident and held that a passenger may pursue UIM claim against the driver’s insurer if the other vehicle was underin-sured. 528 N.W.2d at 260. In Mitsch, we addressed whether an insurance policy’s “reducing clause” that reduced the amount payable for UIM benefits by the liability payments made by an insurer on behalf of another at-fault, underinsured driver was unenforceable. 736 N.W.2d at 358. Furthermore, there was no dispute that the second vehicle involved in the accident in *100Mitsch met the definition of an “underin-sured motor vehicle” under the relevant policy. Id. at 362. In the present case, the only vehicle involved in the accident was specifically excluded from that definition.

By adopting Pepper’s argument, the majority extends the rationale behind the Lahr and Mitsch decisions to enable an injured party to collect UIM benefits from a driver’s insurer based on the alleged negligence of the non-motoring owner of the vehicle. I cannot agree with this extension. While Minnesota courts have allowed injured parties to collect UIM benefits from a driver’s insurer, each case where the court has allowed such recovery has involved a vehicle that met the relevant policy’s definition of an underinsured motor vehicle.

This court has repeatedly noted that, where only one car is involved or at fault, an injured passenger may not obtain UIM benefits from the driver’s insurer. See, e.g., Lahr, 528 N.W.2d at 259. On appeal after remand, we clarified our ruling in Lahr as allowing “a passenger in a multi-vehicle accident [to] recover UIM benefits from her driver’s insurance if the other driver is underinsured.” Lahr v. Am. Family Mut. Ins. Co., 551 N.W.2d 732, 733 (Minn.App.1996) (Lahr II) (emphasis added) (discussing holding from initial appeal), review denied (Minn. Nov. 15, 1996). Moreover, the commentary relied on in Mitsch indicates that “there is no obstacle to collecting both the liability coverage and the underinsured motorist coverage under one single policy” so long as there is another “motoring tortfeasor.” 736 N.W.2d at 363 (emphasis added) (quoting Theodore J. Smetak, Underinsured Motorist Coverage in Minnesota: Old Precedents in a New Era, 24 Wm. Mitchell L.Rev. 857, 902 (1998)). Here, even if the owner of the vehicle was at fault and some portion of Pepper’s injuries were attributable to the negligence of the vehicle’s owner, the vehicle’s owner is not a motoring tortfeasor.

To extend the holding in Lahr to allow an injured party to collect UIM benefits from a driver’s insurer following a single-vehicle accident — even to the extent that a third party may be liable — requires one to read the language in Lahr as repetitive. If the Lahr court had meant to restrict its language to situations involving more than one tortfeasor — as opposed to more than one vehicle or motoring tortfeasor — as Pepper argues and the majority holds, there would have been no reason to include the two alternatives of only one “car” being “involved or at fault.” Lahr, 528 N.W.2d at 259 (emphasis added). Lahr therefore restricts its holding to situations involving multi-vehicle accidents.

I also disagree with Pepper’s assertion, not addressed by the majority, that her status as a pedestrian entitles her to UIM benefits under Minn.Stat. § 65B.49, subd. 3a(5). The supreme court specifically addressed this argument in Carlson v. Allstate Ins. Co., 749 N.W.2d 41 (Minn.2008). Carlson—decided nearly seven years after Holmstrom v. III. Farmers Ins. Co., 631 N.W.2d 102 (Minn.App.2001), on which Pepper relies—rejected the idea that the statute is intended to define mandatory minimum coverage. 749 N.W.2d at 47. The supreme court therefore concluded that “subdivision 3a(5) constitutes a system of priorities and as such governs the source, not the scope, of coverage.” Id. at 47 n. 4. Because the policy in this case provides coverage when an insured is injured by an underinsured motor vehicle and specifically excludes vehicles that are provided liability coverage under the policy from the definition of an underinsured motor vehicle, I would conclude that Minn. Stat. § 65B.49, subd. 3a(5), does not entitle Pepper to UIM benefits. See id. at 47 *101(holding that because the policy “by its terms” afforded the injured party no coverage, “neither does Minn.Stat. § 65B.49, subd. 3a(5)”).

Because I believe that the plain language of the policy excludes the vehicle involved in the accident from its definition of an underinsured motor vehicle and the policy neither omits coverage required by law nor violates applicable statutes, I would conclude that Pepper is not entitled to UIM benefits under the policy. See Myers, 336 N.W.2d at 291 (“Since the car involved in this one-car accident does not meet [the insurer’s] policy definition of an ‘underinsured motor vehicle’ for the purpose of a claim by [an injured party], there is no underinsured motorist coverage unless the policy definition is invalid.”). I would therefore affirm the district court’s award of summary judgment.