No-Fault Act Permits UIM Policies To Limit Coverage To Persons Who Suffer “Bodily Injury” In Wrongful Death Actions

The Minnesota Court of Appeals recently held that a policy providing underinsured motorist (UIM) coverage only to “insureds” who sustain “bodily injury” in a motor vehicle accident complies with the Minnesota No-Fault Act.  The published opinion Hanbury v. American Family Mut. Ins. Co., — N.W.2d –, No. A14-1746 (Minn. App. June 15, 2015), involved a wrongful-death claim by a trustee-son, who was not in the car but nonetheless sought UIM benefits under his own policy, both as trustee and as a member of the next-of-kin.

Mary Ellen Hanbury was killed in an automobile accident caused by her husband’s negligence.  Mary Ellen’s son, Plaintiff Jon Hanbury, was not in the car when the accident occurred.  Plaintiff was appointed trustee for the next-of-kin under the wrongful-death statute, Minn. Stat. § 573.02.  Plaintiff filed a wrongful-death action against Mary Ellen’s husband and settled that claim for the liability limit of her husband’s insurer.

At the time of Mary Ellen’s death, Plaintiff and his children were insured under an automobile policy issued by American Family.  The policy included UIM benefits for “bodily injury to an insured person who is legally entitled to recover from the owner or operator of an underinsured motor vehicle.”  After Plaintiff settled the wrongful-death action, he submitted a claim to American Family, his own insurer, for UIM benefits. American Family denied coverage.  Both parties moved for summary judgment and the district court entered judgment in favor of American Family.

The Minnesota Court of Appeals affirmed, holding an automobile policy that restricts UIM benefits to insureds who sustain “bodily injury” does not violate the no-fault act.  The panel spilt the question into two issues.  The first was whether Plaintiff in his capacity as trustee could seek UIM benefits for the next-of-kin.  The panel concluded he could not.  Under the wrongful-death statute, the trustee may only maintain an action the decedent, Mary Ellen, could have maintained.  Because Mary Ellen was not an insured under the policy, Plaintiff as trustee could not seek UIM benefits on her behalf.

The second issue was whether Plaintiff could seek UIM benefits in his individual capacity as a member of the next-of-kin and an insured under the policy.  The no-fault act mandates coverage for the “protection of persons insured under that coverage who are legally entitled to recover damages for bodily injury.” Minn. Stat. § 65B.43, subd. 19.  As a matter of first impression, the panel found the provision to be ambiguous, because it could be read to mean the insured must actually sustain “bodily injury” to trigger coverage, or the insured must be only legally entitled to recover damages for bodily injury.  The panel held Plaintiff individually could not seek UIM benefits based on the purpose of the no-fault act, and amendments that limited access to UIM benefits.  The court also noted, as a matter of practicality, if it held otherwise an unwieldy system would be created where every next-of-kin’s insurer could be obligated to provide UIM coverage for every wrongful-death case, increasing the cost of UIM coverage.

This case is significant for its holding that trustees and members of next-of-kin under the wrongful death statute cannot look to their own policies to provide coverage, unless they actually sustained bodily injury.  If you have any questions concerning this case or first-party insurance law in general, please contact one of our attorneys.