McClain v. Begley

• Decision Date: 15 February 1991
• Docket Number: INC,A-C,No. C1-89-2206,RENT-A-CA,C1-89-2206
• Citation: 465 N.W.2d 680
• Parties: Claudia McCLAIN, as Trustee for the heirs and next of kin of Michelle Elizabeth McClain, decedent, petitioner, Appellant, v. Bridget J. BEGLEY, petitioner, Appellant, Christine S. Meyers, Defendant, Altra Auto Rental, Inc., a division of Agency Rent-ar, Inc., Respondent. and ALTRA AUTO RENTAL, INC., A DIVISION OF AGENCY RENT-AR, INC., Respondent, v. FIREMEN'S FUND INSURANCE COMPANY, Defendant, Allstate Insurance Company, petitioner, Appellant.
• Court: Minnesota Supreme Court

Page 680

465 N.W.2d 680

Claudia McCLAIN, as Trustee for the heirs and next of kin of

Michelle Elizabeth McClain, decedent, petitioner, Appellant, v. Bridget J. BEGLEY, petitioner, Appellant, Christine S. Meyers, Defendant,

Altra Auto Rental, Inc., a division of Agency Rent-A-Car,

Inc., Respondent.

and

ALTRA AUTO RENTAL, INC., A DIVISION OF AGENCY RENT-A-CAR, INC., Respondent, v. FIREMEN'S FUND INSURANCE COMPANY, Defendant, Allstate Insurance Company, petitioner, Appellant.

No. C1-89-2206.

Supreme Court of Minnesota.

Feb. 15, 1991.

Syllabus by the Court

A self-insured automobile rental agency which represented to the Department of Commerce in its application for a certificate of self-insurance that it could provide liability coverage in excess of the statutory minimum was held liable to the amount of the self-insured retention it declared.

Eric Magnuson, Andrew M. Walsh, Rider, Bennett, Egan & Arundel, William M. Hart, R. Gregory Stephens, Meagher & Geer, Minneapolis, for appellants.

Scott W. Johnson, James A. O'Neal, Paul W. Heirling, Faegre & Benson, Bonita J. Girard, Bassford, Hecht, Lochhart & Mullia, Minneapolis, for respondents.

Heard, considered and decided by the court en banc.

YETKA, Justice.

This case is here on appeal from the court of appeals, which reversed summary judgment awarded by the trial court on motion of plaintiff McClain. We reverse the court of appeals and reinstate the judgment of the trial court.

Petitioner McClain brought an action against Altra Auto Rental, Inc., Bridget Begley, and Christine Meyers for the wrongful death of her daughter, Michelle McClain. The death resulted from a car accident involving a car rented by Michelle McClain, Begley and Meyers from Altra. Altra insured the rental car through a plan of self-insurance under the no-fault act. Allstate insured Begley, the driver of the rental car at the time of the accident, through her parents' liability policy. After McClain commenced suit, Altra brought a declaratory judgment action against Allstate to determine priority of coverage.

In January 1988, McClain moved for partial summary judgment, claiming that Altra's self-insurance plan provided primary coverage to the extent of the $500,000 liability limits stated on the certificate of insurance. The motion was granted on April 7, 1988. Altra's petition for discretionary review was denied by the court of appeals. Thereafter, the parties stipulated to damages and the entry of judgment with the express understanding that Altra would appeal the summary judgment decision. ¹

The court of appeals reversed the trial court, holding that, in the absence of express liability coverage limits in a self-insurance plan, a self-insurer is liable only for the statutory minimum amount of coverage. McClain v. Begley, 457 N.W.2d 230 (Minn.App.1990). Respondents McClain and Begley appealed. This court granted respondents' petition for review.

This case arises from an automobile accident on March 30, 1986, in Missouri. Michelle McClain, Bridget Begley, Christine Meyers, and Shannon Murphy, all college students, planned a spring-break trip to Padre Island, Texas. Prior to the trip, Murphy contacted Altra about renting a car. An agent of Altra told Murphy that, to qualify for the least expensive rate, she must rent the car as a replacement for an insured, but out-of-service car. Murphy told the agent that McClain had an out-of-service car insured through Firemen's Fund Insurance.

On March 21, 1986, the Altra agent delivered the car to Murphy and Meyers. Meyers signed the rental contract which stated that Altra did not provide liability coverage on the car and that the car was to be insured by the lessee. A few days after the rental contract was signed, the agent filled in the rental form with a fictitious policy number, agent, and agency phone number. On March 30, 1986, as the women were returning from the trip, Begley fell asleep at the wheel and collided with a car parked on the shoulder of an interstate in Missouri. McClain was killed in the collision.

Altra insures its cars through a plan of self-insurance. As a self-insured entity, Altra completed and filed the forms developed by the Department of Commerce. One of the forms included a question and an answer which we repeat as follows:

12. List all excess insurance applicable to motor vehicle accidents, with name(s) of insurer(s), policy number(s) and limits of liability.

Lexington Insurance Company

Policy No. 552 8742

Effective: 12-31-86/87

Amount of Insurance: $2,500,000 in excess of $500,000 S.I.R.

[Self-insured Retention]

The above question and answer was part of a form entitled "REQUEST FOR EXEMPTION FROM INSURING LIABILITIES UNDER THE MINNESOTA NO-FAULT AUTOMOBILE INSURANCE ACT."

The parties to the lawsuit entered into a stipulation which, in substance, provided the following: Altra owned the car in which McClain was killed. The negligence of Begley, the driver, was the sole cause of McClain's death. The total damages for the death are $155,000. If the trial court orders are upheld on final appeal, Altra will pay $155,000 to plaintiff. If Altra's obligation is limited to the statutory minimum, Altra will pay $30,000 and Allstate will pay $100,000.

As a result of all this pre-appeal maneuvering, the parties agree and have submitted to the court the following:

1. The question of the applicability of Minnesota's car owner's responsibility act is not raised and is thus not before this court.

2. Altra sought protection of its fleet under the Minnesota no-fault act.

3. Altra, through its rental agreements, had attempted to shift responsibility for all liability coverage to the lessees of its cars and absolve itself of any liability. This has been held illegal by the Minnesota Department of Commerce.

4. Thus, the sole issue for this court to decide involves the interpretation of the no-fault insurance act, Minn.Stat. Secs. 65B.41-65B.71 (1990), and its applicability to self-insurers. Interpretation of statutes is a question of law. Hibbing Educ. Ass'n v. Public Employment Relations Bd., 369 N.W.2d 527, 529 (Minn.1985). The parties have stipulated to the facts and to the amount of damages. This court thus must determine whether the court of appeals erred in its application of the law to the facts of this case. This court is not bound by the decision of the court of appeals. A.J. Chromy Constr. Co. v. Commercial Mechanical Serv., Inc., 260 N.W.2d 579 (Minn.1977).

The Minnesota no-fault act imposes a duty on the owner of a motor vehicle to maintain "a plan of reparation security * * * insuring against loss resulting from liability imposed by law for injury and property damage by any person arising out of the ownership * * * of the vehicle." Minn.Stat. Sec. 65B.48, subd. 1. The owner has the choice of self-insuring or buying an insurance policy. The act states five purposes: to relieve the "severe economic distress of uncompensated victims," to prevent overcompensation, to provide prompt payment, to reduce litigation, and to correct abuses of the tort liability system. Minn.Stat. Sec. 65B.42. The obligations imposed on self-insurers should reflect those goals.

Self-insurance is the functional equivalent of a commercial insurance policy. The law of workers' compensation treats self-insurers no differently than those who insure by commercial policy. The purpose of either form of insurance is to compensate victims appropriately. The certificate filed with the commissioner is the functional equivalent of an insurance policy.

While under the Minnesota no-fault statutes, Minn.Stat. Sec. 65B.49, subd. 3(1), any insurer is required to have liability coverage of $30,000 as a minimum, Altra made a deliberate representation to the Department of Commerce to provide coverage in excess of that amount, namely, $500,000. Based on that representation and other data supplied to the Department of Commerce, Altra was accepted as a self-insured. It should thus be held to the representations that it made.

The cases and precedent cited in the briefs are simply not applicable to the unique facts of this case, for the decision in this case is based more on equitable estoppel principles than on any other.

The court of appeals is thus reversed and judgment of the trial court reinstated.

COYNE and GARDEBRING, JJ., took no part in the consideration or decision of this matter.

SIMONETT, Justice (concurring).

I join in the majority opinion but my reasoning, only sketched out here, is different.

A Minnesota car owner can satisfy the requirements of our No-Fault Act by purchasing a liability policy with limits of $30,000 for bodily injury to any one person, $60,000 for any one accident, and $10,000 property damage. Minn.Stat. Sec. 65B.49, subd. 3(1). These limits, of course, do not limit the car owner's tort liability; a car owner remains liable for any tort exposure over the policy limits. By purchasing minimum coverage, a car owner in this state keeps his car registered, keeps his driver's license, and avoids criminal penalties. Minn.Stat. Sec. 65B.67. Policy limits measure the amount of protection afforded the insured. Also, policy limits, whether the statutory minimum or higher, are significant in determining when other auto liability policies covering the driver (if such is the case) will come into play.

A self-insurer must approach these risk management problems a little differently than a regular policyholder. The self-insurer's exposure is its tort liability exposure, which the self-insurer may limit by purchasing an excess policy for claims against it over and above a certain amount. In relation to this excess policy, the self-insurer's underlying personal exposure is its self-insured retention. This self-insurance, by statutory definition, is a plan of reparation. Minn.Stat. Sec. 65B.43, subd. 15. Consequently, there is no need for a self-insurer to file any detailed plan. See Anderson v. Northwestern Bell Tel. Co., 443 N.W.2d...