Neuman v. State Farm Mut. Auto. Ins. Co., C2-91-1209
| Decision Date | 21 January 1992 |
| Docket Number | No. C2-91-1209,C2-91-1209 |
| Citation | 480 N.W.2d 133 |
| Parties | Darrell Robert NEUMAN, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., an Illinois corporation, Respondent. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
1. When an insurance policy provides a method of calculating underinsured motorist benefits that is not contrary to law, the method of calculating benefits will be enforced.
2. To determine available underinsured motorist benefits, the trial court correctly subtracted the amount received from an underinsured motorist from the limits of liability under the underinsured motorist coverage provided by each of three separate stackable policies rather than from the sum of the limits of liability under the underinsured motorist coverage provided by all three policies.
John P. Clifford, Meshbesher & Spence, Ltd., Minneapolis, for appellant.
Kay Nord Hunt, Michael P. Shroyer, Lommen, Nelson, Cole & Stageberg, P.A., Minneapolis, for respondent.
Considered and decided by PETERSON, P.J., and FORSBERG and SHORT, JJ.
Appellant Darrell Neuman brought this declaratory judgment action seeking a determination of the amount of underinsured motorist (UIM) coverage available to him under three insurance policies issued by respondent State Farm. A final appealable judgment was entered in favor of State Farm. We affirm.
Darrell Neuman was injured on October 26, 1985, when his 1977 Ford pick-up was struck by a motor vehicle operated by Arthur Bruce. Bruce, who was insured by Farmers Insurance Group, carried liability coverage of $100,000 per person, $300,000 per occurrence. Farmers agreed to pay Neuman $95,000 of the $100,000 available. Following proper notice, State Farm agreed to allow Neuman to accept the $95,000. The parties have stipulated that Neuman's damages may exceed the $95,000 paid by Farmers.
Neuman owned three vehicles, which were insured under three separate insurance policies issued by State Farm. The three vehicles were the 1977 Ford pick-up involved in the accident, a 1985 Pontiac and a 1977 Buick. Neuman's policy on the 1977 Ford pick-up came up for renewal in October of 1985, prior to the accident and after the effective date of the 1985 legislative amendments to the No-Fault Act. As required by the 1985 amendments, State Farm added UIM coverage to Neuman's policy with liability limits equal to the liability limits of Neuman's uninsured motorist coverage. When Neuman renewed his policy on the 1977 Ford pick-up, he elected to purchase stacked UIM coverage, which State Farm refers to as Coverage W3. At the time of the accident, Neuman had yet to renew the insurance policies on his two other vehicles. The insurance policies on Neuman's two other vehicles did not contain underinsured motorist coverage; however, because Neuman elected to purchase stacked UIM coverage on the 1977 Ford pick-up, State Farm agrees he is entitled to UIM coverage on his two other policies.
As a result, the insurance policies issued by State Farm to Neuman provided UIM coverage with the following limits of liability set out in the policy declarations:
Vehicle No. 1 (1977 Ford pick-up): $ 50,000 per person/
$100,000 per occurrence
Vehicle No. 2 (1985 Pontiac): $100,000 per person/
$200,000 per occurrence
Vehicle No. 3 (1977 Buick): $ 50,000 per person/
$100,000 per occurrence
State Farm takes the position that the policy language requires that the $95,000 Neuman received from Farmers be offset separately against the limits of liability under the UIM coverage provided by each policy. Under State Farm's construction, Neuman would be entitled to the following coverage:
Vehicle No. 1: $ 50,000 limit of liability
-95,000 offset
--------
$ 0
Vehicle No. 2: $100,000 limit of liability
-95,000 offset
--------
$ 5,000
Vehicle No. 3: $ 50,000 limit of liability
-95,000 offset
--------
$ 0
Under State Farm's analysis, Neuman is entitled to $5,000 UIM coverage.
Neuman takes the position that the limits of liability under the UIM coverage of the three policies must be combined before the $95,000 is offset. Neuman calculates the available UIM coverage as follows:
$200,000 combined limits of liability
(50,000 k 100,000 k 50,000)
-95,000 offset
--------
$105,000
Under Neuman's analysis, he is entitled to $105,000 in UIM coverage.
Neuman moved for summary judgment. The trial court denied this motion, and Neuman sought reconsideration. The trial court, noting single-vehicle UIM coverage was designated "W" and stacked coverage was designated "W3," ordered additional briefing. After receiving additional briefs, the trial court denied Neuman's motion for reconsideration. The parties stipulated to entry of a final appealable judgment pursuant to Minn.R.Civ.P. 54.02, and Neuman appealed.
Did the trial court err in interpreting the State Farm policies to require that the $95,000 paid to Neuman be separately offset against the limit of liability under the UIM coverage provided by each of Neuman's policies?
There is no dispute about any of the relevant facts. The trial court's decision was based on its interpretation of the State Farm policies. This is a question of law on which this court need not defer to the trial court. Iowa Kemper Ins. Co. v. Stone, 269 N.W.2d 885, 886-87 (Minn.1978).
When the No-Fault Act was first adopted, insurers were required to offer UIM coverage. Minn.Stat. § 65B.49 (1974). This coverage was "add-on"; that is, it was added on to the other driver's liability coverage. If an insurer failed to make an adequate offer of UIM coverage, the coverage would be read into the policy according to the terms of the statute. Holman v. All Nation Ins. Co., 288 N.W.2d 244, 250 (Minn.1980). In response to the Holman decision, the legislature repealed the UIM statute in 1980. See Hauer v. Integrity Mut. Ins. Co., 352 N.W.2d 406, 408 (Minn.1984).
In 1985, the legislature adopted a new UIM statute. 1 The 1985 amendments established a modified "difference in limits" formula for determining whether an insured could receive UIM benefits. See Broton v. Western Nat. Mut. Ins. Co., 428 N.W.2d 85 (Minn.1988). Under this formula, the maximum liability of an insurer was the difference between the limits of UIM coverage set out in the policy declarations and the amount which "has been paid or will be paid" to the insured by or on behalf of the tortfeasor, or the amount of damages sustained but not recovered, whichever is less. Broton, 428 N.W.2d at 90. 2
In addition to changing the calculation of the amount recoverable under UIM coverage the 1985 amendments prohibited judicially imposed stacking of UIM coverage. In re State Farm, 392 N.W.2d at 567. The 1985 amendments, however, did not prohibit contractual stacking of UIM coverage. Austin Mut. Ins. Co. v. Templin, 435 N.W.2d 584, 587 (Minn.App.1989), pet. for rev. denied (Minn. Apr. 24, 1989). The State Farm policies at issue in the present case provide for contractual stacking.
State Farm agrees that Neuman's UIM coverage can be stacked. Both parties agree that Neuman is entitled to the "difference in limits" UIM coverage enacted in 1985. The parties disagree about how the payment made on behalf of the tortfeasor is to be offset against Neuman's UIM liability limits.
An insurance policy is similar to other contracts. The terms of the policy determine the extent of the insurer's liability. Bobich v. Oja, 258 Minn. 287, 294, 104 N.W.2d 19, 24 (1960). Stacking is permitted by the language of the State Farm policies. The extent of State Farm's liability for stacked UIM coverage must also be determined from the language of the policies.
The UIM coverage language in Neuman's policies reads as follows:
Limits of Liability
2. The most we will pay under this [underinsured motorist] coverage will be the lesser of:
a. the difference between the limits of liability of this [underinsured motorist] coverage and the amount paid to the insured by or for any person or organization who is or may be held legally liable for the bodily injury; or
b. the...
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Neuman v. State Farm Mut. Auto. Ins. Co.
...aggregate coverage? The trial court and the court of appeals ruled the offset should be applied seriatim. Neuman v. State Farm Mut. Auto. Ins. Co., 480 N.W.2d 133 (Minn.App.1992). 1 We disagree and While driving his Ford pickup on October 26, 1985, plaintiff-appellant Darrell Neuman was inv......