Ritchie v. United Services Auto. Ass'n
| Decision Date | 12 March 1985 |
| Docket Number | No. C1-84-1781,C1-84-1781 |
| Parties | Linda RITCHIE, Respondent, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Appellant. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
When an insurer fails to make a meaningful offer of statutorily-mandated optional coverage, such coverage will be implied as a matter of law.
Edward I. Lynch, South St. Paul, for respondent.
Lawrence R. King, Michael J. Dwyer, St. Paul, for appellant.
Heard, considered and decided by SEDGWICK, P.J., and FOLEY and CRIPPEN, JJ.
Insurer appeals a partial summary judgment reforming an insurance contract to provide statutorily-mandated optional underinsured motorist and residual liability coverage. The trial court reformed the contract because the insurer failed to offer the insured residual coverage, or to make a meaningful offer of underinsured motorist coverage. We affirm.
In July 1977, Linda Ritchie was a passenger in a car owned by her father. She was injured when the car left the road, overturned and struck an embankment. As a result of the accident, she is a quadriplegic confined to a wheel chair.
United Services Automobile Association insured the car involved in the accident and five other cars owned by Donald Ritchie, Linda's father. The policy afforded bodily injury liability coverage of $100,000 per person, $200,000 per occurrence. It did not include underinsured motorist coverage.
Before the accident Donald Ritchie received three brochures inviting him to purchase underinsured motorist coverage. United Services mailed the first brochure to Ritchie in December 1974 in anticipation of Minnesota's new no-fault law. He received the other brochures by mail before his renewals in September 1975 and 1976.
1. Did the trial court err in implying residual liability coverage as a matter of law where an insurer failed to make a statutorily-mandated offer of such optional coverage?
2. Did the trial court err in implying underinsured motorist coverage as a matter of law where the insurer's offer misstated the law effective at the time of the accident?
This case arises out of the now repealed mandatory optional coverage provisions of Minn.Stat. § 65B.49, subd. 6 (Supp.1977) (repealed 1980). The statute required insurers to offer their insureds certain optional coverages including residual liability coverage and underinsured motorist coverage. An offer satisfies the statutory requirement only if it provides the insured enough information to allow him to make an intelligent decision about the optional coverages. League General Insurance Co. v. Tvedt, 317 N.W.2d 40, 42 (Minn.1982). The insurer, not the insured, has the burden of proving that it made the mandatory offer of coverages. Holman v. All Nation Insurance Co., 288 N.W.2d 244, 248 (Minn.1980). Failure to meet that burden will result in the optional coverages being read into the policy by operation of law. Id. at 250. United failed to make the mandatory offer of residual liability coverage of not less than $25,000 per person/$50,000 per accident. Therefore, such optional residual liability coverage must be implied at law.
Underinsured motorist coverage must likewise be implied because United failed to offer Ritchie the coverage mandated by Minnesota law at the time. The coverage offered was defective in two critical respects. First, the United materials stated that underinsured motorist coverage provided protection only when the liability limit of the insurance covering the negligent driver was less than the insured's underinsured motorist limit. Second, they stated that underinsured motorist benefits would be reduced by any amounts recovered from the negligent party.
Arguably both statements were legally accurate when made. 1 However, several months before the accident the legislature amended the no-fault act as follows to eliminate the liability limit and the set off provision:
An act relating to automobile insurance; clarifying certain ambiguous provisions in the Minnesota no-fault automobile insurance act; * * *
Sec. 3....
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