Tollefson v. American Family Ins. Co., 44251

• Decision Date: 01 November 1974
• Docket Number: No. 44251,44251
• Citation: 226 N.W.2d 280,302 Minn. 1
• Parties: Patricia Ruth TOLLEFSON, Respondent, v. AMERICAN FAMILY INSURANCE COMPANY, Appellant, and FEDERATED MUTUAL INSURANCE COMPANY, Respondent, v. Patricia TOLLEFSON, Respondent, American Family Insurance Company, Appellant.
• Court: Minnesota Supreme Court

Page 280

226 N.W.2d 280

302 Minn. 1

Patricia Ruth TOLLEFSON, Respondent, v. AMERICAN FAMILY INSURANCE COMPANY, Appellant, and FEDERATED MUTUAL INSURANCE COMPANY, Respondent, v. Patricia TOLLEFSON, Respondent, American Family Insurance Company, Appellant.

No. 44251.

Supreme Court of Minnesota.

Nov. 1, 1974.

Erickson & Casey, Brainerd, for appellant.

Felhaber, Larson, Fenlon & Vogt, and Edward J. Bohrer, St. Paul, for Tollefson.

Meagher, Geer, Markham, Anderson, Adamson, Flaskamp & Brennan, and M. J. Coyne, Minneapolis, for Fed. Mut. Ins.

Heard before KNUTSON, C.J., and OTIS, PETERSON and MacLAUGHLIN JJ., and considered and decided by the court en banc.

OTIS, Justice.

American Family Insurance Company, an automobile liability carrier, appeals from a decision of the trial court requiring the company to provide coverage for Patricia Tollefson whose father, Robert Tollefson, was the named insured in a policy issued by American. The issue is whether American must continue to provide coverage for Patricia when she fails to notify the company that she is no longer a member of her father's household and accordingly is excluded from coverage with respect to non-owned cars. The trial court, with the aid of an advisory jury, held that the parties intended coverage and that the company waived and was estopped from asserting the exclusion and reformed the contract accordingly. We reverse.

In November 1968, while Patricia, then 17, was living with her parents in Brainerd and attending school there, she obtained her driver's license. She and her mother thereupon called on Frederick Casey, the local agent for American, to secure whatever liability insurance was necessary to cover her use of an automobile. She owned no car of her own, and Casey therefore added an endorsement to her father's policy naming Patricia as an additional insured. For an additional premium of $28, which she paid, she was listed as an incidental driver using her father's car 10-percent of the time. the policy contained the following limitation on coverage for driving non-owned vehicles:

'The following are insured under the Liability Coverage:

'b. With respect to a non-owned automobile,

'(2) any relative * * *.'

'Relative' is defined in the policy as follows:

"(R)elative' means a person related to the named insured who is a resident of the same household but does not include any person who, or whose spouse, owns a private passenger automobile.'

Patricia left her family's household and became emancipated on June 9, 1969, when she moved to Minneapolis and took a position as a medical secretary at the Variety Club Hospital. While living there, on January 1, 1971, she become involved in a fatal accident near Madelia, Minnesota, out of which this litigation arose. A collision occurred between a car owned by Sandra Sue Hopp, which was driven by Patricia and insured by Farm Bureau Mutual Insurance Company, and a vehicle owned and operated by Arnold Joseph Nelson and insured by Federated Mutual Insurance Company. As a result of the accident, Mr. Nelson was killed and Patricia incurred medical expenses for her own injuries.

A claim for the death of Arnold Nelson by wrongful act was settled for $33,000 by Patricia, American, her father's liability carrier, Sandra Hopp, Farm Bureau, her liability carrier, and Federated, the Nelson liability carrier. The limit of liability of the Hopp insurer, Farm Bureau, was $25,000, which it paid the Nelson trustee. The remaining $8,000 is the subject of this litigation.

Two actions arising out of the $8,000 deficiency were consolidated and are here for disposition. In its policy covering the decedent Nelson, Federated included an uninsured or underinsured motorist provision on which the Nelson trustee asserts a claim against Federated. Accordingly, Federated has brought an action for declaratory judgment against the Tollefsons and American to require that American assume coverage for Patricia and to relieve Federated of liability under its underinsured motorist provisions. The other action was brought by Patricia against American seeking the same relief.

The trial court submitted the matter to an advisory jury which returned the following special verdicts: (1) Patricia was found not to be a resident of her father's household on January 1, 1971; (2) American was found to have waived any claim that its policy did not afford Patricia coverage; (3) American was found to have intended that Patricia have coverage at the time of the accident; (4) Patricia was found to have believed and intended that she had coverage at the time of the accident; and (5) the Tollefsons and American were found not to have ratified the contract of insurance following the accident. The trial court adopted these findings and in addition found that prior to January 1, 1971, American, through its agent, Frederick Casey, became aware that Patricia was living in Minneapolis and negligently assumed that she was a student and 'that said knowledge was not based upon any misrepresentation or other conduct on the part of Robert Tollefson or Patricia Tollefson.' The court concluded that American waived any claim it had that coverage was not afforded and held that American was estopped to deny coverage by its conduct and that of its agent. In addition, the court reformed the American policy to provide specific coverage for Patricia. American was directed to pay the Nelson trustee $8,000 and to pay Patricia $519.63 for medical expenses and $1,869.59 for attorney's fees incurred in her own defense.

Sometime between September and December 1970, Casey received from Mr. Tollefson a check from Patricia showing that she had a Minneapolis address. The trial court's findings reflect the contention of respondents that this information was sufficient to impose liability on American on the theory of waiver or estoppel. Respondents argue that by accepting the $28 additional premium for carrying Patricia as a 10-percent incidental driver without confirming Casey's assumption that Patricia was still a student and a member of the Tollefson household, American is estopped from denying coverage. It is undisputed that American treated as members of the household unemancipated children who were students even if they were living away from home.

The principal issue then is whether the agent had an ongoing duty to inquire about any change of status of an insured, or whether that duty falls on those who claim coverage. We are...