Stewart v. Illinois Farmers Ins. Co., A06-759.

• Decision Date: 27 February 2007
• Docket Number: No. A06-759.,A06-759.
• Citation: 727 N.W.2d 679
• Parties: William STEWART, Respondent, v. ILLINOIS FARMERS INSURANCE COMPANY, Appellant.
• Court: Minnesota Court of Appeals

727 N.W.2d 679

William STEWART, Respondent, v. ILLINOIS FARMERS INSURANCE COMPANY, Appellant.

No. A06-759.

Court of Appeals of Minnesota.

February 27, 2007.

Raymond R. Peterson, McCoy, Peterson & Jorstad, Ltd., Minneapolis, MN, for respondent.

Roger H. Gross, Timothy J. Crocker, Gislason & Hunter, LLP, Minneapolis, MN, for appellant.

Considered and decided by STONEBURNER, Presiding Judge; HALBROOKS, Judge; and HUSPENI, Judge.^*

OPINION

HALBROOKS, Judge.

Appellant insurer challenges the district court's denial of summary judgment based on the district court's determination that appellant's policy exclusion is invalid and unenforceable against respondent. Appellant argues that respondent is precluded from recovering excess uninsured-motorist (UM) benefits because (1) appellant's spouse's policy with appellant contains an exclusion that bars coverage for owned-but-not-insured vehicles and (2) respondent is an "insured" under his employer's insurance policy for purposes of the Minnesota No-Fault Automobile Insurance Act (no-fault act), Minn.Stat. §§ 65B.41-.71 (2006). Because we conclude that appellant's policy exclusion is unenforceable under these circumstances and that respondent is not an "insured" under his employer's policy for purposes of the no-fault act, we affirm.

FACTS

On August 2, 2001, respondent William Stewart was injured in a motor-vehicle accident when the driver of another vehicle ran a red light and struck Stewart's vehicle. At the time of the accident, Stewart was driving in the course and scope of his employment as a courier for Quicksilver Express. Stewart brought a workers' compensation claim against his employer and a third-party liability claim against the at-fault driver, who was subsequently determined to be uninsured. Stewart owned the vehicle that he was driving at the time of the accident, but it was insured under his employer's policy with United States Fire Insurance Company (USFIC), which had a UM coverage limit of $50,000 per person.

Stewart's wife owned a vehicle that was not involved in the accident; that vehicle was insured by appellant Illinois Farmers Insurance Company. Stewart's wife was the named insured on the Illinois Farmers policy. It is undisputed that, under the terms of the Illinois Farmers policy, Stewart is an additional insured as a spouse. The Illinois Farmers policy provided UM coverage of $100,000 per person and $300,000 per occurrence.

Stewart received the $50,000 UM benefit limit from USFIC. Because his damages exceeded that amount, Stewart sought excess UM benefits from Illinois Farmers. Illinois Farmers denied Stewart's claim on the ground that the policy excluded coverage for vehicles that the insured owned but did not insure. Stewart brought a declaratory-judgment action to determine coverage, and Illinois Farmers moved for summary judgment.

The district court determined that the Illinois Farmers policy exclusion is invalid and unenforceable against Stewart and denied Illinois Farmers' motion for summary judgment and its subsequent motion for reconsideration. The parties then entered into a stipulation for entry of judgment in favor of Stewart and against Illinois Farmers for UM benefits in the amount of $50,000, and judgment was entered. This appeal follows.

ISSUE

Is the exclusion in the Illinois Farmers policy valid and enforceable against Stewart so as to preclude his recovery of excess uninsured-motorist benefits?

ANALYSIS

The underlying issues in this case involve the interpretation of an insurance contract and Minn.Stat. §§ 65B.41-.71 (2006) (the no-fault act), which we review de novo. See Dohney v. Allstate Ins. Co., 632 N.W.2d 598, 600 (Minn.2001) (stating that appellate courts review statutory interpretation and interpretation of insurance contracts de novo); see also Nelson v. Am. Family Ins. Group, 651 N.W.2d 499, 503 (Minn.2002) (holding that interpretation of the no-fault act is a question of law, which appellate courts review de novo).

The no-fault act was adopted for the purpose of relieving the severe economic distress of uncompensated automobile-accident victims. Minn.Stat. § 65B.42(1). "[T]he purpose of the no-fault act is to fully compensate the insured to the extent of the mandated insurance." Scheibel v. Ill. Farmers Ins. Co., 615 N.W.2d 34, 39 (Minn.2000). "[P]olicy terms that conflict with the No-Fault Act will be held invalid." Kwong v. Depositors Ins. Co., 627 N.W.2d 52, 55 (Minn.2001). The no-fault act requires every vehicle owner to carry, and every insurance policy to provide, certain first-party benefits, including UM coverage. Minn.Stat. § 65B.49, subds. 2, 3a.¹

UM coverage provides for the "protection of persons insured under that coverage who are legally entitled to recover damages for bodily injury from owners or operators of uninsured motor vehicles." Minn.Stat. § 65B.43, subd. 18. Uninsured vehicles are defined as "motor vehicle[s] . . . for which a plan of reparation security . . . is not in effect." Minn.Stat. § 65B.43, subd. 16.² But "as long as insurance is available to cover the vehicle at the time of accident, the vehicle is not uninsured." Wilson v. State Farm Mut. Auto. Ins. Co., 451 N.W.2d 216, 220 (Minn.App.1990) (citing Sorbo v. Mendiola, 361 N.W.2d 851, 853 (Minn.1985)), review denied (Minn. Mar. 22, 1990).

The Illinois Farmers policy included what is known as a "family-owned-vehicle" exclusion, which stated that UM "coverage does not apply to bodily injury sustained by a person . . . [w]hile occupying any vehicle owned by you or a family member for which insurance is not afforded under this policy. . . ." In addition, the Illinois Farmers policy included a "commercial-use" exclusion, which stated that coverage did not apply to "your insured car when used to carry persons or property for a charge."

I.

Illinois Farmers argues that Stewart is barred from recovering excess UM benefits from Illinois Farmers based on the family-owned-vehicle exclusion. Stewart argues, and the district court held, that the exclusion does not apply here because the vehicle was insured and, thus, satisfied the no-fault statutory scheme. This is a case of first impression; in our review of the caselaw, we have not found a case factually similar where an individual seeking excess UM benefits was injured while operating a vehicle that he owned and that was insured, albeit by a different entity.

When insurance policy language is clear and unambiguous, "the language used must be given its usual and accepted meaning." Lobeck, 582 N.W.2d at 249 (quotation omitted). "[E]xclusions in a policy . . . are as much a part of the contract as other parts thereof and must be given the same consideration in determining what is the coverage." Id. (quotation omitted). "As long as an insurance policy does not omit coverage that is required by law and the policy does not violate applicable statutes, the extent of the insurer's liability is governed by the contract entered into." Id. (quotation omitted). Therefore, before we may enforce a coverage exclusion, we must determine whether that exclusion "omits coverage required by law or violates an applicable statute." Id.

Here, the district court concluded that the Illinois Farmers' family-owned-vehicle exclusion was unenforceable because it precluded excess UM coverage to which Stewart was entitled. Illinois Farmers challenges the district court's conclusion, relying on current caselaw, including Wintz v. Colonial Ins. Co. of Cal., 542 N.W.2d 625 (Minn.1996), to support its argument that the exclusion is enforceable.³

As the supreme court noted in Wintz, in 1985, "the legislature amended [the no-fault act] to allow insurance companies to exclude certain vehicles from uninsured motorist coverage if the vehicle was owned by the policyholder, but not insured by the policyholder." Id. at 626 (citing Minn.Stat. § 65B.49, subd. 3a(7) (Supp. 1985)). Specifically, the amendment stated that "uninsured . . . motorist coverages required by this subdivision do not apply to bodily injury of the insured while occupying a motor vehicle owned by the insured, unless the occupied vehicle is an insured motor vehicle." Minn.Stat. § 65B.49, subd. 3a(7). Thus, UM coverage on one vehicle does not apply "to bodily injury suffered by the insured while occupying a second vehicle he owns, unless the occupied vehicle is itself insured." Perfetti v. Fid. & Cas. Co. of N.Y., 486 N.W.2d 440, 443 (Minn.App.1992) (citing Minn.Stat. § 65B.49, subd. 3a(7)).

Currently, there are two recognized scenarios in which a family-owned-vehicle exclusion will be enforced: (1) a policyholder attempts to recover UM benefits under his own policy when injured in an accident involving another family-owned vehicle that is uninsured; and (2) the insured attempts to convert coverage from first-party to third-party benefits.⁴ Wintz, 542 N.W.2d at 626-27; Perfetti, 486 N.W.2d at 443-44. Illinois Farmers is not arguing that Stewart is attempting to convert first-party to third-party benefits. Rather, Illinois Farmers argues that because Stewart owned but did not, himself, insure the vehicle involved in the accident, he is precluded from recovering excess UM benefits as a result of the family-owned-vehicle exclusion.

We agree with the district court that the family-owned-vehicle exclusion is not enforceable here because of the unique circumstances that are present. Cases such as Wintz involve vehicles that were uninsured. In Wintz, Linda Wintz was injured while riding as a passenger on an uninsured motorcycle that her husband owned and was operating. 542 N.W.2d at 626. The insurer of Wintz's husband's automobile denied UM benefits. Id. The district court granted the insurer's summary-judgment motion. Id. This court reversed on the ground that, because Linda Wintz had not failed to insure the motorcycle, the UM coverage should follow the person. Id. The supreme court reversed this court, concluding that an exclusion that precluded...