Holman v. All Nation Ins. Co.

Decision Date11 January 1980
Docket Number49807.,No. 49744,49744
PartiesLawrence R. HOLMAN and Denise L. Holman, husband and wife, Appellants (49744), v. ALL NATION INSURANCE COMPANY, Defendant and third party plaintiff, Appellant (49807), v. INSURANCE SHOPPE, 620 University Avenue, St. Paul, Minnesota, and Kenneth McIntosh, third party defendants, Respondents.
CourtMinnesota Supreme Court

Engebretson & Ulleberg and Andrew P. Engebretson, St. Paul, for Holman, et al.

Rothstein, Kaplan & Wolf and Howard L. Kaplan, St. Paul, for All Nation Ins. Co.

Cragg & Bailly and David A. Bailly, Minneapolis, for respondents.

Heard before YETKA, SCOTT and WAHL, JJ. and considered and decided by the court en banc.

WAHL, Justice.

Plaintiff Lawrence Holman, the victim of a serious one-vehicle accident, brought this declaratory judgment action against his insurer, All Nation Insurance Company. Plaintiff sought a judgment that the mandatory offer of optional coverages required by Minn.Stat. § 65B.49, subd. 6, was not made and these coverages should be imposed by operation of law, that these coverages, as well as the "no-fault" benefits should be "stacked," and that the optional underinsured motorist coverage so implied should not be offset by liability coverage. All Nation sought indemnification from Kenneth McIntosh, the insurance sales agent.

The Ramsey County District Court found that underinsured motorist benefits had not been offered but that plaintiff had failed to prove that the other optional coverages were not offered. The court ordered "stacking" of the "no-fault" benefits for plaintiff's two insured vehicles, as well as the underinsured motorist benefits added to the policy by operation of law. These imposed benefits were held to be additional to plaintiff's liability coverage. The court dismissed All Nation's complaint against McIntosh for indemnification. Both All Nation and Holman appeal from the portions of the court's determination which are adverse to them. We affirm in part, reverse in part.

Plaintiff Holman was the owner of a 1948 Ford pickup truck and a 1969 Pontiac automobile, both of which were named in a single insurance policy issued by All Nation Insurance Company. In November 1976, Holman was seriously injured in a one-vehicle accident while a passenger in his own 1948 pickup truck. All Nation paid Holman the minimum coverage amounts on the face of his policy relating to the 1948 pickup truck: $20,000 medical expense benefits and $10,000 economic loss benefits (hereinafter "no-fault" benefits), and $25,000 bodily injury liability. It is undisputed that Holman's damages greatly exceed this figure.

The Holmans brought this declaratory judgment action. Evidence brought out in depositions and at trial concerning the communication between Holman and McIntosh when plaintiff purchased his All Nation policy indicates that Holman could recall practically nothing that had occurred at any of his meetings with McIntosh and was generally ignorant about automobile policies. Holman was unaware of the types and limits of available coverages. To him, "insurance was insurance," purchased to fulfill a statutory obligation, preferably at the lowest possible price. His understanding of his dealings with McIntosh are summed up in his statement: "I don't know if I was offered higher limits. I would say that I got the insurance I asked for."

McIntosh's recollection of the sales transactions was not much more specific. He testified that when he sold Holman his first policy with All Nation, Holman indicated he wanted to pay the lowest possible premium and that he had informed Holman "that he was receiving the minimum liability as required by state law, and medical payments; that if he wanted * * * higher coverages, he could have them but that he'd have to pay a higher premium." However, McIntosh did not explain or discuss any of the optional coverages of § 65B.49, subd. 6, in more than general terms. It was his belief that All Nation would not provide coverage beyond the minimum requirement for "high risk" insureds, such as Holman.

The insurance policy "face sheet" or "endorsement," which is marked for minimum coverage, and the insurance application form were introduced. A separate premium for uninsured motorist coverages is charged, but the premium for "no-fault" benefits is included in the basic premium rate. No space at all is provided for "writing up" underinsured motorist benefits. On the application form, an "X" had been drawn with blue ink through the entire printed list of available coverages, except for the minimum coverages required by statute.

All Nation introduced its pamphlet of rules and premium rates, which McIntosh had when he sold Holman the policy. However, All Nation had given McIntosh no specific instructions that he should make the statutorily mandated offers as its agent, nor does the record contain any evidence that All Nation directly communicated the availability of these optional coverages to Holman himself.

After this lawsuit was filed, and McIntosh named as a third-party defendant, McIntosh and Holman agreed that McIntosh would write, and Holman would sign, a letter from Holman which stated, "I was offered higher limits of liability and PIP,1 but had rejected them because of a higher premium." Holman testified that when he signed the letter, he did not understand what "PIP" represents. The letter suggests, however, that McIntosh himself was not aware that insurance companies are required by law to offer underinsured motorists coverages, as well as "higher limits of liability and PIP."

This appeal raises the following issues:

1. Does the insured carry the burden of proof as to whether the mandatory offer of optional coverages was made?

2. Must the mandatory offer of optional coverages and its rejection be made in writing?

3. Does the evidence establish that the mandatory offer of optional coverages was made?

4. Does the rule in Lick v. Dairyland Insurance Co., 258 N.W.2d 791 (1977), operate to limit underinsured motorist coverage implied by law to the amount by which such coverage exceeds the liability coverage of the underinsured motorist?

5. May no-fault coverages on two vehicles covered by one insurance policy be "stacked"?

6. Should optional coverages implied by law be "stacked"?

7. Is All Nation entitled to indemnification from Kenneth McIntosh for any coverages imposed by reason of a failure to offer the mandatorily offered supplemental coverages required by § 65B.49, subd. 6?

1.-3. Plaintiff Lawrence Holman claims that All Nation Insurance Company failed to make him the offer of supplemental coverages mandated by Minn.Stat. § 65B.49.2 The trial court cast the burden of proof on the plaintiff and found "that the evidence fails to show that the mandatory offers of additional medical expense benefits and residual bodily liability coverage were not made to plaintiff * * *." Minnesota law ordinarily requires that the party who must allege a given fact also has the burden of proving it. See Ertsgaard v. Bowen, 183 Minn. 339, 237 N.W. 1 (1931). However, we are persuaded that the statute before us requires that the insurer meet the initial burden of proving that it did make the mandatory offer of coverages to its insured, rather than requiring the insured to prove the negative of that proposition. The means of proving that the mandatory offer was made are peculiarly within the insurer's control. The insurer keeps records of its sales transactions and has a much better understanding of the often complex language of the insurance industry. Furthermore, the beneficiaries of an auto insurance policy are likely to be survivors of the insured, who may have no knowledge of events surrounding the purchase of the policy. Considerations of fairness gravitate in favor of forcing the insurer to demonstrate that he did in fact make the statutorilymandated offers. See Rustad v. Great Northern Railway Co., 122 Minn. 453, 142 N.W. 727 (1913); 9 J. Wigmore, Evidence, § 2486 at 275 (3rd ed. 1940).

Our decision in National General Insurance Co. v. American Standard Insurance Co., 311 Minn. 415, 249 N.W.2d 453 (1977), demonstrates that this court will strictly scrutinize circumstances in which an insured is said to have rejected optional coverages. In National General, we construed a provision of Minnesota auto insurance law which required that all insurance policies contain certain minimum levels of uninsured motorist coverage unless lower limits were selected by the insured in writing. Minn.Stat. § 65B.22 (1971). Under such a statute, we held, the writing itself must demonstrate that the insured's selection of lower limits was knowing, mindful, and intentional, and that no such knowing selection was manifested by an insurance application form on which the spaces provided for insertion of lower policy limits were left blank. While the statute which we construed in National General differs substantially from the one under which the Holmans seek to recover, the case does demonstrate the strictness with which we will enforce the burdens which the legislature has imposed on insurers.

All Nation argues that our decision here is controlled by Jacobson v. Illinois Farmers Insurance Co., 264 N.W.2d 804 (Minn.1978), where we construed an earlier version of the section at issue in this action which required that insurers "make available" to their insureds certain supplemental coverage, including underinsured motorist coverage. In Jacobson, plaintiff, who was in an accident with another driver who carried only minimum liability coverage, sued his own insurer, charging that it had failed to make underinsured motorist coverage available to him. Jacobson compared underinsured motorist coverage with uninsured motorist coverage, arguing that equally weighty policy considerations led to the inclusion of each as coverages mandated in some way by the legislature. The court found the legislative placement of the...

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