Dean v. American Family Mut. Ins. Co., C5-94-1042

• Decision Date: 04 August 1995
• Docket Number: No. C5-94-1042,C5-94-1042
• Citation: 535 N.W.2d 342
• Parties: Dale E. DEAN, et al., Respondents, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Petitioner, Appellant.
• Court: Minnesota Supreme Court

Page 342

535 N.W.2d 342

Dale E. DEAN, et al., Respondents, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Petitioner, Appellant.

No. C5-94-1042.

Supreme Court of Minnesota.

Aug. 4, 1995.

Syllabus by the Court

An automobile accident liability insurance payment from an underinsured tortfeasor does not trigger the collateral source rule in a claim for underinsured motorist benefits.

Joe E. Thompson, Schmidt, Thompson, Johnson & Moody, P.A., Willmar, for appellant.

Ronald H. Schneider, Schneider Law Office, Willmar, for respondents.

Heard, considered and decided by the court en banc.

OPINION

GARDEBRING, Justice.

In a claim for underinsured motorist benefits, the trial court applied the collateral source provision in Minn.Stat. § 548.36 (1994) to reduce the aggregate damage award before subtracting the amount associated with the claimant's comparative fault, as determined in an earlier jury trial. The court of appeals affirmed, and we reverse.

While driving his own car, Dale Dean, the plaintiff-respondent in this matter, was injured in a two-car collision with a vehicle driven by Nathan Sing. The passenger in Sing's car was killed, and the trustee for her heirs and next of kin brought an action against both Sing and Dean. In that action, Dean was only a party defendant and did not assert any personal injury cross-claim against Sing. The jury found Dean 10 percent at fault and Sing 90 percent at fault. Dean settled with Sing's insurer for the policy limits of $100,000 and gave proper notice to American Family Mutual Insurance Company (AFM), his underinsured motorist (UIM) carrier.

Dean then asserted a claim against AFM to collect underinsured motorist benefits. The only issue presented to the jury was the amount of damages Dean was entitled to collect. The jury awarded Dean $353,646. The trial judge initially determined that Dean's 10 percent fault should be deducted from the jury's damage award, and then the $100,000 settlement award Dean received from Sing's insurer should be subtracted. As a result, the trial court issued a judgment against AFM for $218,281.40. ¹ However, Dean brought a timely post-trial motion requesting the court apply the collateral source statute, Minn.Stat. § 548.36, and amend the judgment by reducing the aggregate damage award by the settlement award before applying Dean's 10 percent comparative fault. The trial court applied the collateral source rule and amended the judgment against AFM to reflect a damage award in the amount of $228,281.40, a difference of $10,000. ² The court of appeals upheld the amended judgment and AFM appealed.

The only issue we must address is whether an automobile accident liability insurance payment from an underinsured tortfeasor triggers the collateral source rule in a claim for underinsured motorist benefits when the claimant is partially at fault. Where there is no dispute of facts, a de novo standard of review is applied to determine whether the lower courts erred in their application of the law. State by Cooper v. French, 460 N.W.2d 2 (Minn.1990).

First, we turn to the relevant statutory provision known as the collateral source rule. Minn.Stat. § 548.36 (1994) provides:

Subd. 1. For purposes of this section, "collateral sources" means payments related to the injury or disability in question made to the plaintiff, or on the plaintiff's behalf up to the date of the verdict, by or pursuant to:

* * * * * *

(2) health, accident and sickness, or automobile accident insurance or liability insurance that provides health benefits or income disability coverage; * * *

Subd. 2. In a civil action, whether based on contract or tort, when liability is admitted or is determined by the trier of fact, and when damages include an award to compensate the plaintiff for losses available to the date of the verdict by collateral sources, a party may file a motion within ten days of the date of entry of the verdict requesting determination of collateral sources. If the motion is filed, the parties shall submit written evidence of, and the court shall determine:

(1) amounts of collateral sources that have been paid for the benefit of the plaintiff or are otherwise available to the plaintiff as a result of losses except those for which a subrogation right has been asserted; and

(2) amounts that have been paid, contributed, or forfeited by, or on behalf of, the plaintiff or members of the plaintiff's immediate family for the two-year period immediately before the accrual of the action to secure the right to a collateral source benefit that the plaintiff is receiving as a result of losses.

Subd. 3. (a) The court shall reduce the award by the amounts determined under subdivision 2, clause (1), and offset any reduction in the award by the amounts determined under subdivision 2, clause (2).

* * * * * *

(c) In any case where the claimant is found to be at fault under section 604.01, the reduction required under paragraph (a) must be made before the claimant's damages are reduced under section 604.01, subdivision 1.

AFM argues that if the tortfeasor, Sing, had been sufficiently covered to fully compensate Dean, then Dean would have received $318,281.40, ³ but by deeming Sing's $100,000 liability payment a collateral source, the amended judgment awarded Dean $10,000 more than his actual damages. We agree.

In determining the applicability of the collateral source rule under slightly different circumstances we have held:

Because the primary purpose of this statute is to prevent double recoveries, no deduction is allowed where subrogation rights are asserted "to ensure that the amount of collateral sources deducted from the award is the amount to which the plaintiff is actually entitled, and does not include amounts plaintiff must ultimately pay over to a subrogee."

Imlay v. City of Lake Crystal, 453 N.W.2d 326, 334 (Minn.1990) (citing Buck v. Schneider, 413 N.W.2d 569, 572 (Minn.App.1987)).

Similarly, we have consistently held that the purpose of the underinsured provisions of the No-Fault Act is to compensate injured persons without allowing for double recoveries. ⁴ See Richards v. Milwaukee Ins. Co., 518 N.W.2d 26, 28 (Minn.1994); Johnson v. American Family Mut. Ins. Co., 426 N.W.2d 419, 422 (Minn.1988); Schmidt v. Clothier, 338 N.W.2d 256, 261 (Minn.1983). In Richards we held:

UIM coverage is a tort based coverage designed to provide a supplemental source of recovery only when the damages that the insured is legally entitled to recover from the tortfeasor exceed the tortfeasor's liability insurance limits. The tort judgment establishes conclusively the damages to which the claimant is legally entitled, and if these damages exceed the tortfeasor's liability insurance limits, the excess is payable by the underinsurance carrier to the extent of its coverage * * *.

Richards, 518 N.W.2d at 28. Thus, both the collateral source rule and the UIM provisions were meant to avoid double recovery. As a result, applying the collateral source rule in this case is unwarranted because it would clearly allow Dean to recover more than...