Cody Devereaux Sleiter, et al. vs. American Family Mutual Insurance Company

Appellant Cody Sleiter seeks excess underinsured motorist (UIM) coverage

benefits from his family’s automobile policy with respondent American Family Mutual

Insurance Company (American Family) because his damages exceeded the recovery

available to him under the coverage of the vehicle in which he was a passenger. Sleiter

argues that the district court and court of appeals erred in concluding that he cannot

recover UIM benefits from his policy because his $100,000 UIM limit is not greater than

the UIM “coverage available” to him from the occupied vehicle. For the following

reasons, we reverse.

The facts of this case are undisputed. Sleiter was one of 19 individuals injured

when a school bus was struck by an at-fault vehicle on February 19, 2008, in

Cottonwood. Sleiter suffered extensive damage to his right leg, hip, and lower back. The

at-fault vehicle had a liability limit of $60,000 per accident; the school bus had

$1,000,000 in UIM coverage. Following the accident, the carriers for the at-fault vehicle

and the school bus tendered their respective policy limits to the district court. Then, the

district court appointed a Special Master to assess the victims’ damages and determine

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the value of each claim. The Special Master found that the damages for the 19 victims

totaled $5,302,800. With respect to Sleiter, the Special Master found that his damages

totaled $140,000. Due to the substantial gap between the total damages and the tendered

insurance limits, the Special Master concluded that the 19 victims would share on a

percentage basis in the insurance proceeds. After calculating the percentage basis for

each claimant, the Special Master found that Sleiter’s pro rata share was $1,600.33 from

the at-fault vehicle’s policy, and $34,543.70 from the school bus’s policy. The district

court approved the Special Master’s findings and Sleiter received his respective share of

the proceeds, which totaled $36,144.03.

Because Sleiter’s damages exceeded the insurance coverage available to him

under the pro-rata distribution, Sleiter sought $65,456 in excess UIM benefits from

American Family, which insured the Sleiter family vehicle for up to $100,000 in UIM

coverage. American Family denied coverage, claiming that, pursuant to Minn. Stat.

§ 65B.49, subd. 3a(5) (2014), of the Minnesota No-Fault Automobile Insurance Act (No

Fault Act), Sleiter’s excess UIM coverage ($100,000) did not “exceed” the UIM coverage

provided by the school bus’s insurance ($1,000,000). American Family, therefore,

denied Sleiter’s claim for excess UIM benefits.

After American Family denied Sleiter’s claim, Sleiter brought this action, seeking

the difference between the recovery he received and his UIM policy limits, or $65,456,

from American Family. The parties brought cross-motions for summary judgment. The

district court agreed with American Family’s reasoning, granted its summary judgment

motion, and denied Sleiter’s motion. The court of appeals affirmed. See Sleiter v. Am.

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Family Mut. Ins. Co., No. A13-1596, 2014 WL 1272402, at *3 (Minn. App. Mar. 31,

2014). We granted Sleiter’s petition for review.

I.

It is undisputed that Sleiter has recovered less than his total damages from the at

fault vehicle and the school bus. The question is whether he is entitled to recover excess

UIM benefits from his family’s policy to compensate for that under-recovery.

On appeal from a grant of summary judgment, we determine whether any genuine

issues of material fact exist and whether the trial court erred in its application of the law,

Midwest Family Mut. Ins. Co. v. Wolters, 831 N.W.2d 628, 636 (Minn. 2013), construing

the facts in the light most favorable to the party against whom summary judgment was

granted, J.E.B. v. Danks, 785 N.W.2d 741, 746 (Minn. 2010). Here, the facts are

undisputed and the only question before us concerns the correct application of the

No-Fault Act. Statutory interpretation is a question of law that we review de novo.

Emerson v. Sch. Bd. of Indep. Sch. Dist. 199, 809 N.W.2d 679, 682 (Minn. 2012).

“The No-Fault Act requires all motor vehicle insurance policies issued in

Minnesota to provide certain minimum limits of uninsured (UM) and UIM coverage.”1

West Bend Mut. Ins. Co. v. Allstate Ins. Co., 776 N.W.2d 693, 697 (Minn. 2009); see also

Minn. Stat. § 65B.49, subd. 3a(1) (2014). Minnesota Statutes § 65B.49, subd. 3a(5),

1 A motor vehicle is “underinsured” if the “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 (2014).

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establishes the framework for determining the sources of coverage for UIM claims, West

Bend, 776 N.W.2d at 697, and 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.

Minn. Stat. § 65B.49, subd. 3a(5) (emphasis added).

The three sentences in this provision explain the source of primary UM and UIM

coverage (the “occup[ied]” vehicle), the source of excess UM and UIM coverage (a

vehicle covered by a “policy in which the injured party is otherwise insured”), and the

availability of excess coverage. West Bend, 776 N.W.2d at 698, 702; Carlson v. Allstate

Ins. Co., 749 N.W.2d 41, 46 (Minn. 2008) (“[T]he statute is intended as a list of

priorities. . . .”). The final sentence in Minn. Stat. § 65B.49, subd. 3a(5), which explains

limits on excess-insurance protection, is the focus of this appeal. Specifically, the

parties’ dispute requires that we consider the proper interpretation of the phrase

“coverage available” in the final sentence.

“The object of all interpretation and construction of laws is to ascertain and

effectuate the intention of the legislature.” Minn. Stat. § 645.16 (2014). To interpret a

statute, we first assesses “whether the statute’s language, on its face, is clear or

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ambiguous.” Laase v. 2007 Chevrolet Tahoe, 776 N.W.2d 431, 434 (Minn. 2009)

(citation omitted) (internal quotation marks omitted). When the words of a law are “clear

and free from all ambiguity,” the plain meaning controls and will not be “disregarded

under the pretext of pursuing the spirit” of the law. Minn. Stat. § 645.16; Laase, 776

N.W.2d at 434. When the words of a law are susceptible to more than one reasonable

interpretation, the statute is ambiguous. Emerson, 809 N.W.2d at 682. “When the

language of a statute is unclear or ambiguous, we will go beyond the specific language of

the statute to determine the intent of the legislature.” Id. at 684. With these principles in

mind, we turn to interpreting the phrase “coverage available.”

We have previously considered the application of subdivision 3a(5) in the context

of a multi-vehicle, single-injured plaintiff accident. In Schons v. State Farm Mut. Auto.

Ins. Co., the injured plaintiff (Schons) was a passenger in V.G.’s automobile when an

accident occurred with B.K’s automobile. 621 N.W.2d 743, 744 (Minn. 2001). Schons

sustained extensive injuries and damages. Id. Both drivers were negligent and

underinsured. Id. V.G. carried insurance of $50,000 each in liability and UIM coverage,

while B.K. carried insurance of $50,000 in liability coverage. Id. Schons received

$50,000 in liability benefits from V.G., and $48,000 in liability benefits from B.K. Id. at

744-45. After this recovery, Schons’ damages exceeded the benefits she received. Id. at

745. Accordingly, Schons sought additional benefits from V.G.’s UIM coverage for both

drivers’ underinsured negligence. Id. V.G.’s insurer paid Schons $50,000 for B.K.’s

underinsured negligence, but denied Schons’ claim for additional benefits for V.G.’s

underinsured negligence because Schons had already received $50,000 in liability

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benefits under V.G.’s policy. Id. Consequently, Schons sought $50,000 in UIM benefits

from her own insurance provider—which had insured Schons up to a $50,000 UIM

limit—for V.G.’s underinsured negligence. Id. Schons’ insurance company denied the

claim, asserting that Minn. Stat. § 65B.49, subd. 3a(5), precluded Schons from recovering

additional UIM benefits because the $50,000 UIM limit on her policy did not exceed the

host vehicle’s policy limit, which was also $50,000. Id.

We recognized that Schons’ claim “center[ed] on the third sentence of subdivision

3a(5),” and that the function of this subdivision “is to connect an injured passenger’s total

UIM benefit recovery to the limit specified for the motor vehicle the passenger occupied”

unless “the passenger’s preselected level of UIM coverage exceeds the host vehicle’s

UIM limits.” Id. at 747-48. We held that, because the $50,000 of UIM benefits available

to and recovered by Schons through V.G.’s policy was the same as the $50,000 in UIM

coverage through her policy, “Schons [was] not entitled to recover additional UIM

benefits from her own insurer” because “she could not reasonably expect to recover more

than the $50,000 of UIM coverage for which she paid premiums.” Id. at 747. We did not

consider, however, what “coverage available” means outside the context of the facts

before us in that case, such as when an injured insured is incapable of recovering the

occupied vehicle’s policy limit, which is the case here.2 We, therefore, return to the

language of the statute.

2 American Family concedes that “[t]his Court in Schons therefore did not address a factual situation where multiple injured parties claimed access to the UIM limits of the host policy. . . .”

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The term “coverage available,” while undefined in the statute, appears twice in

Minn. Stat. § 65B.49, subd. 3a(5), once in the first sentence and once in the third

sentence. American Family urges us to conclude that “coverage available” is the same as

the policy limit of the host vehicle’s UIM coverage; in this case, the school bus’s

$1,000,000 UIM policy limit. Under this interpretation, Sleiter would be unable to

recover UIM benefits from American Family because the “limit of liability for [Sleiter’s]

like coverage” ($100,000) would not exceed the “coverage available” to Sleiter from the

school bus’s policy ($1,000,000). This is a reasonable interpretation of “coverage

available” and is one that could have been applied in the context of a single-injured

insured accident. See Schons, 621 N.W.2d at 747. American Family’s interpretation is

consistent, for example, with “the goal of connecting a passenger’s recoverable UIM

benefits to the host vehicle’s policy.” Id. at 748.

Sleiter argues that “coverage available” means the amount recovered by the

insured person from the host vehicle’s UIM policy. Here, once the Special Master

calculated all of the claims for purposes of determining the distribution of the vehicles’

UIM policy limits, the “coverage available” to him, Sleiter argues, was $34,543.70, his

pro rata share. Then, Sleiter concludes, he is entitled to recover excess UIM benefits

from American Family because the “limit of liability for like coverage” ($100,000)

exceeds the “coverage available to” him ($34,543.70).

Sleiter’s interpretation is also reasonable. First, it preserves a distinction between

two different phrases in the third sentence, “limit of liability” and “coverage available.”

State v. Nelson, 842 N.W.2d 433, 439 (Minn. 2014) (“Generally, when different words

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are used in the same context, we assume that the words have different meanings.”

(citation omitted) (internal quotation marks omitted)). Second, Sleiter’s interpretation is

consistent with the legislative purpose of UIM coverage, which is to “relieve the severe

economic distress of uncompensated victims of automobile accidents.” Minn. Stat.

§ 65B.42(1) (2014). This is most apparent in the context of accidents involving multiple

injured passengers. The “coverage available” to a single victim is obvious: the policy

limits. In contrast, the “coverage available” in accidents involving a large number of

injured passengers is unknown until the claims are made against the policy.

Perhaps the best example of the inability to identify the “coverage available” in a

multi-victim accident is Sleiter’s situation in this case. Here, Sleiter was one of 19

individuals injured when a school bus was struck by an at-fault vehicle. The “limit[s] of

[UIM] liability” were established before the accident occurred: $1,000,000 for the school

bus, and $60,000 for the at-fault car. The “coverage available” from those liability limits,

however, depended on factors unknown until after the coverage-triggering event: the

number of injured persons, the extent of the injuries, and the claims made. The coverage

available from the UIM proceeds was inadequate to fully compensate all of the injured

passengers. Thus, in accidents involving a large number of injured passengers, Sleiter’s

reading of “coverage available” is the more natural reading because it is more consistent

with the legislative purpose of preventing injured passengers from being

undercompensated. See Michael K. Steenson, Minnesota No-Fault Automobile Insurance

§ 15.07[2][e] (3d ed. 2007) (explaining that it is reasonable to allow an excess insurance

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claim for the coverage that was “in fact available” to the injured party).3 It also prevents

overcompensation by limiting claims to the amount of coverage selected by the insured.

See id.

American Family argues, in essence, that Sleiter’s interpretation is flawed because

the Legislature did not intend for the phrase “coverage available” in the first sentence to

be divorced from or given a separate meaning from the same phrase in the third sentence.

We disagree. As previously noted, the first and third sentence read respectively:

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.

[E]xcess insurance protection is . . . available only to the extent by which the limit of liability for like coverage applicable to any one motor vehicle . . . exceeds the limit of liability of the coverage available to the injured person from the occupied motor vehicle.

Minn. Stat. § 65B.49, subd. 3a(5) (emphasis added). While the first and third sentences

use many of the same words and phrases, the two sentences do not use those words and

phrases in the same context. More importantly, the two sentences serve different

purposes. The first sentence simply defines one source for UIM benefits: the occupied

3 See also Theodore J. Smetak, Underinsured Motorist Coverage in Minnesota: Old Precedents in a New Era, 24 Wm. Mitchell L. Rev. 857, 939 (1998) (“It would seem that the Minnesota UM/UIM system is preserved if the surplus UM/UIM carrier is given credit for the amount of the host/primary UM/UIM which was legitimately ‘available’ to the insured. In other words, if the insured was one of several injured in a vehicle, and if the host vehicle’s UM limits were fairly divided, then the surplus UM/UIM insurer is responsible for a maximum of its limit less the amount that was ‘available’ to the insured from the host vehicle. It is unfair to the insured who selected and paid for a policy limit to eliminate that coverage.”).

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vehicle’s UIM coverage up to the limit of liability. In contrast, the third sentence

distinguishes between the “limit of liability for like coverage” on the insured’s vehicle

from the “coverage available” to the injured person from the policy limit for the occupied

vehicle. If the Legislature had intended the comparison to be only between two policy

limits, it could easily have ended the third sentence with “exceeds the limit of liability

specified for the occupied motor vehicle.” The Legislature did not do so. See Frederick

Farms, Inc. v. Cty. of Olmsted, 801 N.W.2d 167, 172 (Minn. 2011). Instead, the

Legislature used a different comparison, looking to the “coverage available to the injured

person” from the UIM policy on the occupied vehicle. Therefore, it is not unreasonable

for the phrase “coverage available” in the first sentence to have a separate meaning from

the same phrase in the third sentence.

II.

Because there are two reasonable interpretations of the term “coverage available”

in Minn. Stat. § 65B.49, subd. 3a(5), we conclude that the phrase, and therefore the

statute, is ambiguous. When a statute is ambiguous, “we will go beyond the specific

language of the statute to determine the intent of the legislature.” Emerson v. Sch. Bd. of

Indep. Sch. Dist. 199, 809 N.W.2d 679, 684 (Minn. 2012). Additionally, the Legislature

has set forth a nonexclusive list of factors that we are to consider to determine legislative

intent. See Minn. Stat. § 645.16. This list includes:

(1) the occasion and necessity for the law; (2) the circumstances under which it was enacted; (3) the mischief to be remedied; (4) the object to be attained; (5) the former law, if any, including other laws upon the same or similar subjects; (6) the consequences of a particular interpretation; (7) the

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contemporaneous legislative history; and (8) legislative and administrative interpretations of the statute.

Id. The most relevant factors here are the purpose of the legislation and the consequences

of the interpretations proposed by the parties.

The No-Fault Act’s relevant purposes are “to (1) relieve uncompensated victims

from the economic stress caused by automobile accidents, (2) prevent overcompensation

of automobile accident victims, . . . and (5) prevent automobile accident victims from

receiving duplicate recovery.” Scheibel v. Ill. Farmers Ins. Co., 615 N.W.2d 34, 37

(Minn. 2000). As noted above, Sleiter’s proposed interpretation furthers the legislative

purposes by compensating accident victims while also limiting their claims to the

amounts of coverage selected by the insured. See Michael K. Steenson, Minnesota

No-Fault Automobile Insurance § 15.07[2][e] (3d ed. 2007). American Family’s

interpretation, while reasonable in the context of a single-victim accident as in Schons, is

unreasonable in the context of accidents involving multiple injured passengers.

American Family’s interpretation leaves victims insufficiently compensated for their

injuries and unable to access the coverage limits they purchased.4

Our interpretation is not inconsistent with our decision in Schons. There, it was

undisputed that the limit of the occupied vehicle’s UIM coverage, $50,000, was

“available” and paid to Schons. 621 N.W.2d at 747. We therefore concluded that Schons

American Family concedes that Sleiter “did not ‘get what he paid for,’ because his own UIM limits with American Family ($100,000) are less than the approximately $34,000 he actually received out of the available limits of $1 million under the school bus’s policy.” recovered what she could reasonably have expected to recover: “$50,000 of UIM coverage for which she paid premiums.” Id. Here, in contrast, Sleiter paid premiums for

UIM coverage that he reasonably expected would be available to him, up to $100,000, if

the UIM “coverage available” to him from an occupied vehicle’s UIM policy was less

than that amount.

Accordingly, Sleiter’s interpretation is the better interpretation because it allows

individuals such as Sleiter to access their personal insurance coverage giving them

nothing more than access to the coverage that they have selected and purchased. See id;

Hayes, 826 N.W.2d 799, 804 (Minn. 2013) (embracing the more reasonable of the two

interpretations of a statute); In re Estate of Butler, 803 N.W.2d 393, 397 (Minn. 2011)

(adopting the “better interpretation” of a statute). Because Sleiter’s interpretation of

“coverage available” more fully advances the legislative purposes of Minn. Stat.

§ 65B.49, subd. 3a(5), we conclude that “coverage available” means the benefits actually

paid to the insured under the coverage provided by the occupied vehicle’s policy.

Reversed.