Personal Injury and Uninsured Motorist Benefits: Court holds that “Coverage Available” For Excess UIM Coverage Equals the Difference Between the UIM Benefits Paid to the Insured from the Occupied Vehicle and the Excess UIM Policy’s Limit.

The Minnesota Supreme Court recently held that the term “coverage available” for excess UIM coverage refers to benefits paid to the insured under the coverage provided by the occupied vehicle’s policy, not the occupied vehicle’s UIM policy limit.  In Sleiter v. Am. Family Mut. Ins. Co., — N.W.2d —, No. A13-1596, (Minn. Aug. 5, 2015), Plaintiff Cody Sleiter was injured in a school bus accident in which 18 other children were injured.  The at-fault vehicle and the school bus insurer tendered their respective $60,000 liability and $1 million UIM limits to the district court.  The district court found the total damages significantly exceed the available limits.  As such, Sleiter’s damages totaling $140,000 were reduced on a pro-rata basis to $35,000.

Thereafter, Sleiter sought $65,000 in excess UIM benefits from American Family, which insured his family for up to $100,000.  American Family denied coverage, arguing that Minn. Stat. § 65B.49, subd. 3a(5), precluded coverage because Sleiter’s excess UIM coverage ($100,000) did not “exceed” the UIM coverage provided by the school bus’s insurance ($1,000,000).

The district court and court of appeals agreed with American Family, holding that the availability of excess UIM coverage is dependent on the underlying UIM carrier’s limits, not the amount actually available.  In other words, because the school bus’s UIM policy limits were higher than Sleiter’s American Family policy limits, he was not entitled to excess UIM coverage.

The Minnesota Supreme Court reversed.  The decision turned on the meaning of UM and UIM priority statute: “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) (emphasis added).  The court held the phrase “coverage available” is ambiguous because it could reasonably mean two things, either a) the total UIM “coverage available” on the occupied vehicle’s policy or b) the total UIM “coverage available” to the injured insured from the occupied vehicle.

Due to the ambiguity, the court proceeded to go beyond the specific language of the statute to determine the intent of the legislature. See Minn. Stat. § 645.16.  Because the purpose of the No-Fault Act is to compensate persons injured by automobile accidents, the court adopted Sleiter’s interpretation to hold that “coverage available” means “benefits actually paid to the insured under the coverage provided by the occupied vehicle’s policy.

This case is significant for its departure from Schons v. State Farm Mut. Auto. Ins. Co., 621 N.W.2d 743 (Minn. 2001), under which insurers merely determined whether and in what amount coverage was available based on difference between the excess UIM policy and occupied vehicle’s UIM policy.  Under Sleiter, the excess UIM coverage determination turns on the difference between the excess UIM limits and the occupied vehicle’s limits.  Now, however, that difference is calculated by what the insured actually recovers from the occupied vehicle’s UIM policy.

If you have any questions concerning this case or insurance law in general, please contact one of our attorneys.