Myers v. State Farm Mut. Auto. Ins. Co.

• Citation: 336 NW 2d 288
• Decision Date: 15 July 1983
• Docket Number: No. C2-82-1395.,C2-82-1395.
• Parties: Gay MYERS, as trustee for the heirs of Lawrence Joseph Myers, deceased, et al., Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.
• Court: Minnesota Supreme Court

336 N.W.2d 288 (1983)

Gay MYERS, as trustee for the heirs of Lawrence Joseph Myers, deceased, et al., Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.

No. C2-82-1395.

Supreme Court of Minnesota.

July 15, 1983.

Meshbesher, Singer & Spence and Gerald J. Seibel, Minneapolis, for appellants.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp & Brennan and Laura S. Underkuffler, Minneapolis, for respondent.

Considered and decided by the court en banc without oral argument.

SIMONETT, Justice.

This case comes to us on an appeal from an order denying a motion to compel arbitration and raises the issue whether an auto insurer's policy affords plaintiffs underinsured motorist coverage. We conclude there is no coverage, hence nothing to arbitrate, and remand for trial of the remaining issues.

Lawrence Myers was a passenger in a car that struck a tree. He was fatally injured. The car was owned by Allison Stein, who was insured with respondent State Farm Mutual Automobile Insurance Company. At the time of the accident, the car was being driven by still another person who had liability insurance with Iowa Kemper Insurance Company. Plaintiff-appellant Gay Myers, as trustee for the heirs of decedent Lawrence Myers, collected $25,000 from Iowa Kemper, the driver's liability insurer, and $25,000 from State Farm, the car owner's liability insurer. State Farm also paid $1,250 in no-fault benefits for funeral expense.

Thereafter the plaintiff trustee, being advised that State Farm's policy included underinsured motorist coverage, made a claim for underinsured motorist benefits and requested arbitration of the claim. In addition, the trustee asserted a claim for survivors' economic loss benefits against State Farm and suggested arbitration of that claim. State Farm denied both claims and declined to arbitrate. The trustee and the decedent's minor children then commenced this action in district court against State Farm for underinsured motorist benefits and for survivors' economic loss benefits.

During the discovery phase of the lawsuit, plaintiff-appellants learned that State Farm's underinsured motorist coverage contained an arbitration clause. Plaintiffs promptly renewed their demand for arbitration of the underinsured claim and, when rejected by State Farm, moved the trial court, pursuant to Minn.Stat. § 572.09 (1982) for an order compelling arbitration. The trial court denied the motion on the ground that it was not advisable for reasons of judicial economy to sever the underinsured motorist claim from the survivors' economic loss benefit claim. The trial court elected to leave for future determination the issue raised by State Farm whether the definition of "underinsured motor vehicle" in its policy precluded coverage for underinsured motorist benefits. Plaintiffs appeal. An order denying a motion to compel arbitration is appealable. Minn.Stat. § 572.26, subd. 1(1) (1982). See also Atcas v. Credit Clearing Corporation of America, 292 Minn. 334, 336, 197 N.W.2d 448, 450 (1972); Minn. R.Civ.App.P. 103.03(d).

While the parties raise the issue of whether plaintiff-appellants waived their right to demand arbitration, we do not reach this issue. Nor do we reach the issue whether, assuming a right to arbitrate, the underinsured claim should nevertheless be tried in district court with the no-fault claim. The dispositive question, we perceive, is whether the policy affords underinsured motorist coverage for appellants. We conclude it does not.

A "covered person" under State Farm's policy endorsement for underinsured motorist coverage includes the named insured, here Allison Stein, the car owner, and "any other person while occupying your covered auto." (Emphasis in original.) The decedent Myers was, of course, occupying Stein's automobile, so Myers is a "covered person." The policy goes on, however, to define an "underinsured motor vehicle" as:

A vehicle to which a bodily injury liability bond or policy applies at the time of the accident but its limit for bodily injury liability is not enough to pay the full amount the covered person is legally entitled to recover as damages.

However, "underinsured motor vehicle" does not include any vehicle:

* * * * * *

2. Owned by or furnished or available for the regular use of you "you" here means Allison Stein or any family member.

(Emphasis in original.)

State Farm argues that since the named insured, Allison Stein, owned the car that hit the tree, as well as had it available for her regular use, her car does not qualify as an "underinsured motor vehicle" under her policy for the purpose of conferring underinsured motorist coverage or for the purpose of invoking the arbitration clause.

1. The threshold issue is whether this coverage dispute is arbitrable, i.e., whether the coverage dispute is outside the scope of the arbitration clause and whether, initially, the arbitrators or the courts should decide this question. Respondent argues that the dispute is not arbitrable under the terms of the insurance contract; appellants contend that the dispute should go to arbitration. The arbitration clause reads, in part:

If we and a covered person disagree whether that person is legally entitled to recover damages from the owner or operator of an underinsured motor vehicle, or do not agree as to the amount of damages, either party may make a written demand for arbitration.

(Emphasis in original.)

If it is "reasonably debatable" whether the scope of the arbitration clause includes a coverage dispute, this court has said that the coverage dispute should initially go to arbitration. See Dunshee v. State Farm Mutual Automobile Insurance Co., 303 Minn. 473, 482, 228 N.W.2d 567, 572 (1975); Rosenberger v. American Family Insurance Co., 309 N.W.2d 305, 308 (Minn. 1981). The "reasonably debatable" test for arbitrability works particularly well for arbitration of labor disputes. See State v. Berthiaume, 259 N.W.2d 904 (1977). In auto insurance cases, where the question of coverage goes not to the merits of a claim but to whether a claim exists, an arbitration clause must be quite broad in...