Hastings v. United Pac. Ins. Co., 81-774.
| Citation | 318 NW 2d 849,280 Minn. 616 |
| Decision Date | 07 May 1982 |
| Docket Number | No. 81-774.,81-774. |
| Parties | Richard A. HASTINGS, Respondent, v. UNITED PACIFIC INSURANCE COMPANY, Appellant. |
| Court | Supreme Court of Minnesota (US) |
Cousineau, McGuire, Shaughnessy & Anderson, and Kathleen Drake, Minneapolis, for appellant.
Schmidt, Thompson, Thompson & Johnson and David C. Moody, Willmar, for respondent.
Considered and decided by the court en banc without oral argument.
Plaintiff Richard Hastings was involved in an automobile accident on October 20, 1979, while a passenger in a friend's automobile, and sustained a serious brain injury. There is no dispute that his injuries far exceed the insurance coverages available on the two involved automobiles. This declaratory judgment action was commenced by plaintiff against defendant United Pacific Insurance Company seeking reformation of the policy of insurance held by plaintiff's mother, Nancy Hastings Fairfield, to include $400,000 in underinsured motorist coverage. The issue on appeal is whether the trial court erred in concluding that materials mailed by United Pacific did not sufficiently comply with Minn.Stat. § 65B.49, subd. 6(e) (1978) (repealed 1980), and in ordering the reformation of the policy issued by United Pacific to afford coverage in the amount of $400,000.
The Hastings family held automobile insurance with United Pacific from May 13, 1974, until the date of plaintiff's accident. The agent representing United Pacific negotiated with plaintiff's father, Lee Hastings, until the latter's death on March 9, 1977; thereafter, the policy was reissued, naming Nancy Hastings as the insured and covering plaintiff as an additional insured. On the date of the accident, the policy covered four separate automobiles with bodily injury liability coverage of $100,000 per person and $300,000 per accident on each vehicle. There was no underinsured motorist coverage in the policy in effect on October 20, 1979.
United Pacific claims that it made a legally adequate offer of optional underinsured motorist coverage by mailing a "Dear Policyholder" letter and Minnesota No-Fault Automobile Coverage option form in December 1974 and a followup letter in January 1975. The first letter explains that the no-fault act was to become effective on January 1, 1975, and sets forth the minimum compulsory coverages for bodily injury liability, property damage liability, uninsured motorist coverage, medical expense benefits and work loss or essential services benefits. After brief mention of the intent of the no-fault act, its effect on third-party recovery and the penalties for failing to maintain the required insurance, the letter describes changes that might have to be made to existing policies and premium rates.1 The "Dear Policyholder" letter ends with the following:
The option form included in the first mailing allowed the insured to express interest in various options that were listed under six headings: personal injury protection deductibles, additional personal injury protection, additional insureds other than resident relatives, additional bodily injury limits, additional uninsured motorist limits and underinsured motorist coverage. Under the last heading, the insured is told simply that underinsured motorist coverage "is offered as an option" with limits of $50,000 per person/$100,000 per occurrence or $100,000 per person/$300,000 per occurrence. The insured is requested to check his or her policy "as you may already have selected this coverage or the coverage selected may no longer be offered."
The followup letter sent in January 1975 made no mention of underinsured motorist coverage.2 United Pacific alleges no other communications by which it might meet its burden of establishing compliance with the mandatory offer provision.
Recently, in League General Insurance Co. v. Tvedt, 317 N.W.2d 40 (Minn.1982), we again had occasion to examine the mandatory offer provision in Minn.Stat. § 65B.49, subd. 6 (1978) (repealed 1980), and to review our application in earlier cases of the provision and its predecessor statute, Minn.Stat. § 65B.25 (1971). We there held that the mailed offering materials in question satisfied section 65B.49, subd. 6, because the materials enabled the insured to make an intelligent decision regarding the purchase of optional coverage. From League General and the cases cited therein, four basic concerns have emerged relevant to determining compliance with the mandatory offer provision.
The first of these concerns, where the purported offer is made in other than face-to-face negotiations, is that the notification process be commercially reasonable. Jacobson v. Illinois Farmers Insurance Co., 264 N.W.2d 804, 808 (Minn.1978). The trial court ruled that United Pacific's agent used a commercially reasonable process to communicate the availability of optional coverages, and respondent makes no objection to this ruling.
Second, the insurer must specify the limits of optional coverages and not merely offer additional coverage in general terms. Holman v. All Nation Insurance Co., 288 N.W.2d 244, 250 (Minn.1980). Section 65B.49, subd. 6(e), required that underinsured motorist coverage be offered "in an amount at least equal to the insured's residual liability limits and also at lower limits which the insured may select." The trial court found that United Pacific did not "advise the insured of the availability of underinsured motorist coverage in an amount less than $50,000 per person or $100,000 per accident." The specific amounts of coverage offered to Lee Hastings included one option with limits equal to his residual liability limits and one option at a lower limit. Neither the statute nor our decision in Holman requires more.
The third concern is that the insurer intelligibly advise the insured of the nature of the optional coverage. Kuchenmeister v. Illinois Farmers...
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