Carlson v. Allstate Ins. Co., No. A06-1664.

CourtSupreme Court of Minnesota (US)
Citation749 N.W.2d 41
Docket NumberNo. A06-1664.
PartiesAaron R. CARLSON, et al., Appellants, v. ALLSTATE INSURANCE COMPANY, Respondent, Midwest Family Mutual Insurance Company, Respondent, and Allstate Insurance Company, defendant and third-party plaintiff, Respondent v. Michael J. Fay, et al., third-party defendants, Respondents.
Decision Date22 May 2008

David A. Arndt, Hibbing, MN, for Appellant.

Karen Kathleen Hatfield, Hansen Dordell Bradt et al., St. Paul, MN, Rolf E. Sonnesyn, Tomsche, Sonnesyn & Tomsche, P.A., Louise Annette Behrendt, Stich Angell Kreidler & Dodge P.A., Minneapolis, MN, for Respondent.

Heard, considered, and decided by the court en banc.



Appellant Aaron Carlson was struck and injured by an uninsured motorist while crossing Lyndale Avenue on foot. Aaron secured a default judgment against the uninsured driver and then sought uninsured motorist coverage under a policy purchased by his father, appellant Robert Carlson, and issued by respondent Allstate Insurance Company. Allstate denied coverage, and the Carlsons brought an action seeking no-fault and uninsured motorist benefits. The district court granted summary judgment in favor of Allstate. On appeal, the Carlsons argued (1) that the policy on its face provides coverage for the accident; (2) that Minn.Stat. § 65B.49, subd. 3a(5) (2006), precludes the policy definition of "insured" and therefore entitles the Carlsons to coverage; and (3) that regardless of the policy's technical terms the Carlsons are entitled to coverage under the doctrine of reasonable expectations. The court of appeals affirmed the district court's grant of summary judgment to Allstate, and we granted review. We affirm.

The facts in this case are largely undisputed. Aaron was the primary driver of a 2002 Ford Focus leased in Robert's name. Robert made all the lease payments on the vehicle and obtained and paid for the insurance. Aaron paid for some of the oil change, gas, and maintenance expenses on the vehicle.

On January 1, 2003, Aaron, then 27 years old, parked the Focus on Lyndale Avenue, left the vehicle, and began to cross the street. Around the center line, he was struck by a vehicle driven by an uninsured motorist making a U-turn. Aaron sustained several injuries, the most serious of which was to his right knee and required surgery. Aaron's injuries forced him to miss work over the ensuing months, resulting in a claimed $10,640 in lost wages. Aaron eventually obtained a default judgment against the uninsured driver in the amount of $170,000.

Robert's insurance policy with Allstate listed Robert and his wife Gail Carlson as named insureds. The policy listed Robert, Gail, Aaron, and Aaron's brother Christopher as drivers. The policy insured several vehicles but listed Aaron as the driver of the Focus 100% of the time.

The policy provided uninsured motorist insurance as follows: "[Allstate] will pay damages for bodily injury * * * which an insured person is legally entitled to recover from the owner or operator of an uninsured auto." (Emphasis added.) The policy defined "insured persons" to include in relevant part "[y]ou and any resident" and "[a]ny person while in, on, getting into or out of an insured auto with your permission."1 (Emphasis omitted.) "You" was defined in turn as "the policyholder named on the Policy Declarations and that policyholder's spouse who resides in the same household." The term "policyholder" appeared nowhere on the declarations page, which instead identified "named insureds" and "drivers."

Robert acquired the policy through his long-time insurance agent of many years Michael Fay. Robert fully disclosed to Fay that Aaron would be the primary driver of the Focus, that Aaron lived in Minneapolis while his parents lived in Hibbing, and that Robert would be making lease and premium payments. Robert and Fay never discussed, before the accident, the possibility that Aaron could be injured as a pedestrian by an uninsured motorist. Fay acknowledged that he was unaware before the accident that, under these facts, Aaron would not be covered, because Fay had never previously encountered these circumstances. Fay did caution Robert about the potential liability issues that could arise from having his sons on his policy, but Allstate's underwriting policies prohibited listing Aaron as a named insured unless he had an ownership interest in the vehicle. Robert received a multi-car discount as a result of insuring multiple vehicles under the same policy. Although Robert and Fay discussed the differing implications of issuing Aaron his own policy rather than listing Aaron as a driver under Robert's policy, those discussions centered around Robert's potential liability to an injured third party rather than the circumstances under which Aaron would be covered.

Allstate maintains that the facts are undisputed. The Carlsons, however, identify one area of factual dispute. In his deposition, Robert testified that before the accident, he asked Fay if they were insured "the same as I and my wife" and that Fay responded in the affirmative. Fay disputes that Robert asked that precise question, explaining as follows: "Was the question ever asked, are we covered, are the cars covered? Of course, and we say yes, but not to that detail." Because we are reviewing the grant of summary judgment in favor of Allstate, we credit the Carlsons' account for purposes of this appeal. See, e.g., Yang v. Voyagaire Houseboats, Inc., 701 N.W.2d 783, 788 (Minn.2005) (on review of grant of summary judgment, viewing facts in the light most favorable to the party against whom summary judgment was granted).

After the accident, Robert called Fay, who submitted the claim to Allstate, but Allstate declined to provide uninsured motorist coverage. In response, the Carlsons brought an action against Allstate seeking no-fault and uninsured motorist benefits in excess of $50,000.2 In early 2006, Allstate and later the Carlsons filed motions for summary judgment. The district court granted Allstate's motion and denied the Carlsons' motion as to Allstate, finding that neither the policy language, nor the doctrine of reasonable expectations, nor Minn.Stat. § 65B.49, subd. 3a(5) (2006), provided coverage for Aaron's injuries. The court of appeals affirmed. Carlson v. Allstate Ins. Co., 734 N.W.2d 695, 703 (Minn.App.2007). We granted review.


"On review of a grant of summary judgment, we inquire (1) whether there exists a genuine issue of material fact; and (2) whether the district court erred in its application of the law." Bjerke v. Johnson, 742 N.W.2d 660, 664 (Minn. 2007). "In reviewing the record for the existence of a genuine issue of material fact, we view the evidence `in the light most favorable to the party against whom summary judgment was granted.'" Id. (quoting O'Malley v. Ulland Bros., 549 N.W.2d 889, 892 (Minn.1996)). We review the district court's conclusions of law de novo. Id.

We turn first to the question of what coverage the policy by its terms affords the Carlsons. The policy provides uninsured motorist coverage to "an insured person" for damages that such person is legally entitled to recover from an uninsured motorist. "Insured person" is defined to include "You," and "You" in turn is defined as "the policyholder named on the Policy Declarations." The Carlsons rely on the fact that the declarations page nowhere uses the term "policyholder" but rather identifies "named insureds" and "drivers." The Carlsons argue that a reasonable person in the Carlsons' position would conclude that "policyholder" included the drivers listed on the declarations page. Allstate responds that a reasonable person in the Carlsons' position would understand that "policyholder" referred to the "named insureds" rather than to the "drivers."

"General principles of contract interpretation apply to insurance policies." Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn.1998). When a policy's language is clear and unambiguous, we interpret the policy "according to plain, ordinary sense so as to effectuate the intention of the parties." Canadian Universal Ins. Co. v. Fire Watch, Inc., 258 N.W.2d 570, 572 (Minn.1977). Whether a contract is ambiguous is a question of law that we review de novo. Bank Midwest, Minn., Iowa, N.A. v. Lipetzky, 674 N.W.2d 176, 179 (Minn.2004). Language in a policy is ambiguous if it is susceptible to two or more reasonable interpretations. Medica, Inc. v. Atl. Mut. Ins. Co., 566 N.W.2d 74, 77 (Minn.1997).

The parties advance two different interpretations of the phrase "policyholder named on the Policy Declarations": Allstate argues that the phrase refers only to the named insureds, whereas the Carlsons argue that the phrase encompasses both the named insureds and the drivers. We must decide whether both of these interpretations are reasonable.

The Allstate interpretation comports with standard definitions of the term "policyholder." Black's Law Dictionary defines "policyholder" as "[o]ne who owns an insurance policy." Black's Law Dictionary 1196 (8th ed.2004). A reasonable person would know who owned the policy, especially where, as here, the policy owner actually secured the policy and paid the premiums. Similarly, The Random House Dictionary of the English Language defines "policyholder" as "the individual * * * in whose name an insurance policy is written; an insured." The Random House Dictionary of the English Language 1497 (2d ed.1987). The use in this definition of both the word "name" and the word "insured" suggests a connection in the mind of a reasonable person between the terms "policyholder" and "named insured." We thus conclude that a reasonable interpretation of the policy is that the term "policyholder" refers to the named insureds and not the drivers listed on the declarations page.

The Carlsons' interpretation, on the other hand, does not appear reasonable. Other than the fact that the drivers...

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