Minnesota Supreme Court: Underinsured Motorist (UIM) Insurance Statute Ambiguous In Context Of Auto Accident Involving Several Injured Persons

In the recent case of Sleiter v. American Family Mutual Ins. Co., No. A13-1596 (Minn. Aug. 5, 2015), the Minnesota Supreme Court found that a statute allocating excess UIM coverage proceeds is ambiguous in a case involving several persons injured in an auto accident. The crash in that case was unfortunately very tragic. The claimant, Sleiter, was one of 19 children injured when a school bus was struck by a van in 2008 near Cottonwood, Minnesota (four children also died in the accident). Sleiter suffered “extensive” injuries to his right leg, hip, and lower back. The van’s driver was solely at fault.

The 19 victims all made claims to the insurers for both involved vehicles. The liability policy on the van had limits of just $60,000 per accident, while the bus’ underinsured motorist (UIM) coverage had a $1,000,000 limit per accident. The insurers for both involved vehicles tendered their limits to the district court, but they were found to be far short of the actual losses. A special master appointed by the court said the losses totaled over $5 million for the 19 victims.

Sleiter’s total losses were found to be $140,000, but he only collected only about $36,000 after the available funds were split. He then turned to his family’s auto policy for excess UIM benefits, seeking roughly $65,500 (the difference between his AmFam policy’s $100,000 UIM limits and the $34,500 recovered from the bus’ policy).

The Minnesota Supreme Court needed to interpret Minn. Stat. §65B.49 subd. 3a(5), which says “The excess [UIM] insurance protection is … available only to the extent by which the limit of liability for [the Sleiters’ AmFam policy] exceeds the limit of liability of the coverage available to the injured person from the occupied motor vehicle [the bus].” In other words, Sleiter can only recover excess coverage under his policy if it had limits higher than the “coverage available” to him under the bus’ policy.

This “coverage available” language was at the root of the argument. The Minnesota Court of Appeals had sided with AmFam and said that the “coverage available” meant the entire $1,000,000 limits under the bus’ policy. Thus, it had higher limits than the AmFam’s $100,000 policy and meant Sleiter could not recover anything.

But the Minnesota Supreme Court said that, in a case like this involving several injured claimants, the “coverage available” means the amount actually recovered by a claimant after the policy proceeds are divided. Thus, Sleiter was awarded the excess coverage he sought under his family’s AmFam policy.

Importantly, the court commented that “the ‘coverage available’ in accidents involving a large number of injured passengers is unknown until the claims are made against the policy.” This case therefore complicates the analysis of whether and to what extent excess UIM coverage will be available under policies covering persons – but not vehicles – involved in an accident which results in multiple injured victims. A clear outlook of an insured’s obligation to pay such excess coverage will not be clear from the outset, because it will depend on several factors, such as (1) the number of injured persons, (2) the extent of the injuries, and (3) the claims actually made as a result of the accident by the victims.