West Bend Mut. Ins. v. Allstate Ins.

• Citation: 776 N.W.2d 693
• Decision Date: 24 December 2009
• Docket Number: No. A07-357.,No. A07-248.,A07-248.,A07-357.
• Court: Minnesota Supreme Court
• Parties: WEST BEND MUTUAL INSURANCE COMPANY, Respondent, v. ALLSTATE INSURANCE COMPANY, Appellant, Thomas Oczak, et al., Appellants.

776 N.W.2d 693

WEST BEND MUTUAL INSURANCE COMPANY, Respondent, v. ALLSTATE INSURANCE COMPANY, Appellant, Thomas Oczak, et al., Appellants.

No. A07-248.

No. A07-357.

Supreme Court of Minnesota.

December 24, 2009.

Dale M. Wagner, Louis J. Speltz, Bassford Remele, P.A., Minneapolis, MN, for respondent.

William L. Davidson, Lind, Jensen, Sullivan & Peterson, P.A., Minneapolis, MN, for appellant Allstate Insurance Company.

Richard D. O'Dea, Ralph S. Palmer, Palmer O'Dea, L.L.C., Roseville, MN; and David K. Cody, The Cody Law Group, Chtd., St. Paul, MN, for appellants Thomas Oczak, et al.

Paul D. Peterson, Lori L. Barton, Harper & Peterson, P.L.L.C., Woodbury, MN, for amicus curiae Minnesota Association for Justice.

OPINION

DIETZEN, Justice.

Appellant Thomas Oczak (Oczak) was seriously injured in a car accident in which the driver of the other car was underinsured. At the time of the accident, Oczak was the owner of North End 66, Inc. (North End),¹ and was driving a car owned by a customer of North End. After settling with the negligent driver's insurer, and the insurer of the car Oczak occupied, Oczak brought underinsured motorist (UIM) claims against West Bend Mutual Insurance Company (West Bend), the insurer of North End, and Allstate Insurance Company (Allstate), his personal insurer. West Bend brought a declaratory judgment action against Oczak and Allstate to determine the obligations and coverage priorities of the insurance policies. On cross-motions for summary judgment, the district court concluded that the Allstate policy provided excess UIM coverage and that the West Bend policy did not. The court of appeals affirmed, and we granted review. We affirm.

The material facts of the case are undisputed. Thomas Oczak was the owner and an employee of North End. North End is a corporation engaged in the business of servicing and repairing motor vehicles.

On July 13, 2000, Thomas Oczak was seriously injured in a car accident in which the driver of the other car was negligent and underinsured. At the time of the accident, Oczak was driving a car owned by North End's customer Justin Kelly. The negligent driver had liability coverage with policy limits of $100,000. The Kelly vehicle was insured with Mutual Service Insurance Companies (MSI) and had UIM policy limits of $100,000. Oczak had personal automobile insurance through an Allstate policy that provided UIM coverage with policy limits of $300,000. North End had garage business owner's liability insurance through West Bend that provided UIM coverage with policy limits of $500,000.

Oczak settled with the negligent driver's insurer for its liability policy limits of $100,000; and settled with Kelly's insurer, MSI, for its UIM policy limits of $100,000. Oczak then brought claims against Allstate and West Bend for excess UIM insurance benefits. The West Bend policy provides it will pay all sums an "insured" is legally entitled to recover as damages from an underinsured motorist, up to the policy limits of $500,000. An "insured" under the West Bend policy is defined, in part, as anyone occupying a "covered auto." In a letter to Oczak's attorney, West Bend conceded that the auto Oczak was driving was considered a "covered auto" under the policy.

West Bend brought a declaratory judgment action against Allstate and Oczak to determine the obligations and coverage priorities. All parties filed cross-motions for summary judgment. Oczak argued that MSI and West Bend were co-primary under the statute and their respective policies and therefore both provided UIM coverage to Oczak. Oczak and Allstate also argued that West Bend provided excess UIM coverage to Oczak. Following a hearing, the district court rejected both arguments, and concluded that West Bend was not co-primary, and that the Allstate policy, not the West Bend policy, provided excess UIM coverage. The court of appeals affirmed. West Bend Mut. Ins. Co. v. Allstate Ins. Co., Nos. A07-0248, A07-357, 2008 WL 1747826 (Minn.App. Apr. 15, 2008). Allstate and Oczak filed separate petitions for review. We granted review of both petitions.

It is undisputed that Oczak is entitled to UIM benefits as a result of the serious injuries he sustained in the accident. Oczak has already recovered $100,000 in his settlement with the negligent driver's insurer and $100,000 in primary UIM benefits under the MSI policy that insured his customer's vehicle, but Oczak contends that he still is not fully compensated for his actual damages. Allstate, which insured Oczak's personal vehicle, has acknowledged there is excess UIM coverage available under its policy as a result of the accident. At issue is whether the West Bend garage business owner's liability policy also provides UIM benefits to Oczak. The parties dispute whether Oczak is entitled to primary UIM benefits under the West Bend policy; whether he is entitled to excess UIM benefits under the West Bend policy; and whether any excess UIM benefits available under the West Bend policy have priority over the UIM benefits available under the Allstate policy. This dispute turns on the interpretation of various provisions of the No-Fault Act, and various provisions of the West Bend insurance policy.

I.

A. Statutory Framework

The No-Fault Act requires all motor vehicle insurance policies issued in Minnesota to provide certain minimum limits of uninsured (UM) and UIM coverage. See Minn.Stat. § 65B.49, subd. 3a(1) (2008). "Underinsured motorist coverage" means coverage for persons "who are legally entitled to recover damages for bodily injury from owners or operators of underinsured motor vehicles." Minn.Stat. § 65B.43, subd. 19 (2008). An "underinsured motor vehicle" is a motor vehicle "to which a bodily injury liability policy applies at the time of the accident but its limit for bodily injury liability is less than the amount needed to compensate the insured for actual damages." Minn.Stat. § 65B.43, subd. 17 (2008).

The No-Fault Act provides a framework for determining the source of coverage for UIM claims. Minnesota Statutes § 65B.49, subd. 3a(5), provides:

If at the time of the accident the injured person is occupying a motor vehicle, the limit of liability for uninsured and underinsured motorist coverages available to the injured person is the limit specified for that motor vehicle. However, if the injured person is occupying a motor vehicle of which the injured person is not an insured, the injured person may be entitled to excess insurance protection afforded by a policy in which the injured party is otherwise insured. The excess insurance protection is limited to the extent of covered damages sustained, and further is available only to the extent by which the limit of liability for like coverage applicable to any one motor vehicle listed on the automobile insurance policy of which the injured person is an insured exceeds the limit of liability of the coverage available to the injured person from the occupied motor vehicle.

The first sentence of subdivision 3a(5) addresses primary UIM benefits; the second and third sentences address excess UIM benefits.

B. Dispute over Meaning of Subdivision 3a(5)

Oczak first argues that under the language of Minn.Stat. § 65B.49, subd. 3a(5), and the West Bend policy, West Bend shares co-primary responsibility with MSI to provide UIM coverage. The interpretation of statutes and the interpretation of insurance policies are both questions of law that we review de novo. Auto-Owners Ins. Co. v. Forstrom, 684 N.W.2d 494, 497 (Minn.2004). The paramount goal of statutory interpretation "is to ascertain and effectuate the intention of the legislature." Minn.Stat. § 645.16 (2008). When interpreting a statute, we "construe words and phrases according to their plain and ordinary meaning." Am. Family Ins. Group v. Schroedl, 616 N.W.2d 273, 277 (Minn. 2000). When the language of a statute is unambiguous, its plain meaning is given effect. Burkstrand v. Burkstrand, 632 N.W.2d 206, 210 (Minn.2001).

We first consider the statutory language. The first sentence of subdivision 3a(5) addresses UIM benefits:

If at the time of the accident the injured person is occupying a motor vehicle, the limit of liability for uninsured and underinsured motorist coverages available to the injured person is the limit specified for that motor vehicle.

Minn.Stat. § 65B.49, subd. 3a(5). Although the word "primary" does not appear in this provision, we have referred to the coverage available under this sentence as primary UIM coverage. See, e.g., Hanson v. Am. Family Mut. Ins. Co., 417 N.W.2d 94, 96 (Minn.1987) (noting that the statute designates "the occupied motor vehicle as the primary source of uninsured or underinsured motorist coverage").

Oczak argues there can be more than one policy that provides primary UIM coverage and that MSI and West Bend "share co-primary underinsurance liability." According to Oczak, the UIM "coverages available" to him are the coverage provided by MSI, the insurer of Kelly's vehicle, as well as the coverage provided by West Bend, the insurer of North End. Oczak stresses that the statute uses the term "coverages," which suggests that the legislature contemplated coverage under more than one policy. Allstate and West Bend contend there is nothing in the statute or case law that supports an argument for "co-primary" UIM coverage in this situation.

We read the word "coverages" in the first sentence to refer to UM and UIM "coverages" in an insurance policy, and not multiple UIM coverages in different policies. But the language of subdivision 3a(5) does not expressly address whether there can be more than one policy that provides primary UIM coverage. The statute simply directs injured persons to look to the limit of liability specified for the motor vehicle they were occupying at the time of the accident. Minn.Stat. § 65B.49, subd. 3a(5). It is not clear from the language of the statute whether there can be more than one "limit of...