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WHO'S NOT COVERED? - COMMON MISTAKES ABOUT NO-FAULT COVERAGE

By Joe Crumley[1]

Most people underestimate the scope of Minnesota no-fault coverage. This is not surprising. The No-Fault Act provides a wide range of coverage, with very limited exclusions[2].

Even the most experienced personal injury lawyers are surprised to hear some of the extreme situations where coverage applies. In fact, you have to look long and hard to find someone that has no coverage. It's really easier to describe "Who's NOT covered?", than "Who is?"

This article will discuss examples of the misconceptions about no-fault coverage, and introduce two charts to help explain the no-fault priorities and coverage.

Mistake #1: If the client owns an uninsured vehicle, there is no coverage.

Usually wrong. In many or most situations where the client owns an uninsured vehicle, the client will be able to find coverage. For example, at a party recently, a well-respected personal injury lawyer was heard to say, "I have a client who was injured on an MTC bus. Too bad he owned an uninsured car, because that disqualified him from no-fault coverage." Several other kibitzing attorneys quickly endorsed this view.

Wrong. Under the Minnesota No-Fault priority statute,[3] a business vehicle, in this case, a vehicle "in the business of transporting persons or property" has the highest priority of no-fault coverage.[4]

In 1990, the MTC was successful in lobbying the Legislature for an exception to this rule. Now a person injured on a bus[5] looks first to any personal policy that the person is insured[6] under, even though buses are clearly business vehicles. However, the exception only applies if the injured person is an insured under a no-fault policy.[7] If the person is not insured, the coverage on the bus still applies.

Given time, any good lawyer reviewing the statute and the case law would come up with this result. However, we don't always have the time we'd like to review these issues.

I receive many calls asking about priority and coverage issues. I found myself going back to the statute over and over again every time a priority issue arose. Digging into the priority statute is like digging in mud. With hard and careful work, you may be able to dig a nice, neat, square hole, but when you come back three days later, it's all just mud again. I find the language of the priority statute (as well as a great deal of the No-Fault Act) a little thick.[8] Eventually, I decided that a flow chart would be appropriate to help me and the legal assistants in our firm organize and remember the complexities of the priorities.

Please review the two charts (Figures 1 and 2).[9] Figure 1 is the basic Minnesota No-Fault Priority Chart. It is a gross simplification of the priorities. It leaves out all the exclusions from coverage and most of the other complexities of the priority statute in order to form a clear systematic diagram of the priorities. Obviously, it completely excludes Workers' compensation issues.[10]

Figure 2 is obviously a little more complex. This is the full-fledged Minnesota No-Fault Priority Chart and it includes most of the exclusions and qualifications that relate to the priorities and the no-fault coverage. At first glance, the chart also looks a little "thick". It may not seem any improvement on the aforementioned muddy syntax of the statute. Nevertheless, I have found it to be extremely useful in organizing the statute and determining proper no-fault coverage. This leads me to:

Mistake #2. There is never no-fault coverage for a car thief.

Wrong. There are at least two circumstances under which there will be no-fault coverage available for someone injured in an auto accident even though they are stealing a car.

For this example, we will need a cadre of car thieves. Our first thief is Mr. Bill Cranberry. Mr. Cranberry is a successful Edina lawyer who owns a well-insured Cadillac but has a propensity for stealing cars. He goes out one bright Saturday morning, intending to golf. Fortunately for us, his bad habits get the best of him, and he steals a car instead. Joining with him in this theft are his 19-year-old son, Cranberry, Jr., who owns an uninsured 1964 Ford Galaxy, and his 14-year-old buddy, Poor Boy. Poor Boy owns no car and lives alone in a cardboard box under the Third Avenue Bridge.

Let's use figure 2 to help us with this one. This may be stating the obvious, but the inquiry should start at the box labeled "Start."[11]

The first two "diamond" shaped boxes discuss the only two absolute prohibitions from no-fault coverage contained in the statute. The first box asks,

"Was client in an official race off public roads?"[12] Don't over-read the provision. The exclusion is only for official races off public roads. Unofficial races (two teenagers drag racing in the street) would still have no-fault coverage. Even an official race on public roads (the Minnesota Grand Prix?[13]) would presumably have no-fault coverage available.

Getting back to our car thieves, they weren't involved in any race, so the answer to the first question is "no" and we move to the right to the next diamond,

"Was client trying to injure self or others?"[14] Again, don't over-read this provision. If the client is injured while attempting to hurt himself or others, the client will never have no-fault coverage. However, the people that the client injures often will have coverage, depending on the circumstances.[15]

Our thieves were not attempting to injure anyone, so the answer is "no" and we move to the right to the question,

"Was client stealing a vehicle?"[16] Obviously the answer is "yes" so we follow the line to the right to the question, "Is the client a named insured in a policy?"

For one of our thieves, Mr. Cranberry, the answer is "yes." The insurance on his Cadillac does name him as an insured. Following the "yes" brings us to the gray box, which states,

"Named insured's policy must pay." The insurance on Mr. Cranberry's Cadillac must pay for his injury regardless of the fact that he was stealing the other vehicle.

As to Mr. Cranberry's son, he is not a named insured in any policy.[17] Thus, we move to the right, "Is client living with a named insured?" Since Cranberry, Jr. is living with Cranberry, Sr., we again move to the right, "Is client a spouse or relative of a named insured?" Cranberry, Jr. is a relative of Cranberry, Sr., a named insured. Thus, the no-fault insurance on Mr. Cranberry's Cadillac must pay for Cranberry, Jr.'s injuries.

Finally, we will deal with the last thief, Cranberry, Jr.'s 14-year-old friend, Poor Boy. Going back to the question, "Is the client a named insured in a policy?", the answer is "no." We move to the right,

"Is the client living with a named insured?" and again the answer is "no." We follow the arrow down to the question, "Was client: (1) stealing a vehicle or (2) in a bus, or (3) neither?"

The client was stealing a vehicle, so we move to the right,

"Was client under age 15?" The answer is "yes" and so the Assigned Claims carrier must pay. If Poor Boy had been 15 or older, there would have been no coverage.

Thus all three of our thieves found no-fault coverage.

I think I understand how mistakes about no-fault coverage get started. The conscientious attorney goes through this research and determines that a 15-year-old car thief who lives alone does not have coverage. Unfortunately, a year later when the issue arises again, all the attorney remembers is that there was no coverage for a car thief. Thus, the mistaken generalization that a car thief doesn't have no-fault coverage is born. Since it makes some intuitive sense, the mistake thrives.

Mistake #3. If you own 2 cars, and only 1 is insured, you're not covered when driving the uninsured car.

Wrong! Let's say Cranberry, Jr. inherits a bit of money and decides to move out of his parent's house. He moves into an apartment on his own and spends some of his inheritance on a 1998 Nissan Maxima that he insures. Being somewhat nostalgic, he keeps the 1964 Galaxy (but doesn't bother to insure it) and drives it on Sunday despite its minor rust damage. One Sunday, Cranberry, Jr. finds out the rust goes a little deeper than he suspected when the front right wheel falls off the Galaxy while he's doing 95 on the Crosstown.

But wait! Following the directions in the chart brings you to "Named insured's policy must pay." Could the insurer for the shiny new Nissan Maxima be required to pay for the injuries suffered while driving the uninsured clunker? The Supreme Court answered this question, "Yes" in Iverson v. State Farm.[18] Where the client owns and is injured in an uninsured vehicle, the client is covered under any other vehicle's policy under which they are a named insured, despite policy language excluding coverage.

Mistake #4. If you own an uninsured vehicle, there is never no-fault coverage (redux).

This time, Cranberry, Jr. has spent his inheritance. He can't keep up the payments on the Nissan Maxima, which is repossessed. His Galaxy is in the garage (less one wheel) and he sends a letter to the Commissioner of Insurance that he is not going to use that vehicle until it can be repaired.

Unfortunately, Cranberry is accident-prone. While riding his bicycle one day, he is struck by an uninsured private passenger vehicle. Cranberry was not struck by a business vehicle, so the entire middle of the left side of Figure 2 is unavailable to him. He no longer owns an insured car, nor does he live with his parents, so the upper right of Figure 2 is unavailable to him.

Let's pick up the chart in the lower right portion,

"Was client in an insured vehicle?" - "No." "Was client a pedestrian or cyclist?" - "Yes." "Was any insured vehicle involved?" If the car that had struck Cranberry, Jr. had had coverage, the coverage on that car would thus provide him his no-fault. Unfortunately, "No", it had no coverage.

The next question asks (from right to left on the chart now), "Does client own a private passenger motor vehicle that the client did not insure?" In this example, the answer is "Yes."[19]

The final inquiry is,

"Can the client prove that the use of the vehicle was not contemplated." Since 1990, the Assigned Claims statute[20] has put the burden on uninsured owners to prove that they did not contemplate use of their uninsured vehicles in order to receive assigned claims coverage. After 1996, the claimant must rebut the presumption with “clear and convincing objective evidence.”[21]

Given that Cranberry, Jr.'s Galaxy had lost one wheel some time before, and that he had sent a letter to the Commissioner of Insurance indicating that he did not contemplate the use of that vehicle, he may prevail. The Assigned Claims Plan carrier should pay.

If Cranberry, Jr. had garaged the Galaxy before it lost its wheel, and never sent the letter to the insurance commissioner, a judge or jury may find that he did contemplate the use of the car, and thus the Assigned Claims carrier won't have to pay. Also, given the evidentiary standard, if there is not objective evidence, the judge may dismiss the case before it even gets to trial.

Again, be careful not to generalize this result. The only time ownership of an uninsured vehicle prohibits coverage is at the Assigned Claims level of the priorities, and then only if the use of the uninsured vehicle was contemplated.

As you can see, there are very few situations where there is no no-fault coverage available. On the other hand, determining the proper insurance can often be complicated. To simplify your task, the MAJ has available (for a small charge) enlarged copies of the Minnesota No-Fault Priority Chart. I hope you find them useful.

Some other interesting examples of Minnesota no-fault priorities law:

Non-Minnesota Policies. Minnesota has personal jurisdiction over Tennessee Farmers because their territory-of-coverage clause provides coverage throughout the United States. However, because the conformity clause language is located in the liability portion of the policy, Tennessee Farmers dos not have to provide no-fault coverages. State Farm v. Tennessee Farmers, 645 N.W.2d 169 (Minn. Ct. App. 2002)

Left vehicle, hit by another. In this case, apparently involving some deer hunter rage, one hunter allegedly revved his engine as he departed. Campeau got into his truck, passed the other truck and stopped, intending to confront the other driver. As he walked toward the other truck, he was struck by the other truck’s mirror. The Court of Appeals correctly reversed the denial of no fault coverage. The parties apparently intended to frame a stipulation of facts to determine whether Campeau still occupying his own vehicle. The court found that Campeau was NOT occupying his own vehicle (footnote 1) but felt that if Campeau’s vehicle was involved, this would somehow disqualify him from coverage. There is no basis for this in the caselaw or the Statute, which provides “The security for payment of basic economic loss benefits applicable to injury to a person not otherwise covered who is not the driver or other occupant of an involved motor vehicle is the security covering any involved motor vehicle.”[22] Clearly the State Farm vehicle was involved if its mirror struck Campeau.

Campeau v. State Farm Ins. Co. UNPUBLISHED Minn. Ct. App. June 3, 1997

Selected 2004 Minnesota Statutes pertaining to no-fault priorities

65B.47 Priority of applicability of security for payment of basic economic loss benefits.

Subdivision 1. Injury resulting from business use. In case of injury to the driver or other occupant of a motor vehicle, if the accident causing the injury occurs while the vehicle is being used in the business of transporting persons or property, the security for payment of basic economic loss benefits is the security covering the vehicle or, if none, the security under which the injured person is an insured.

Subd. 1a. Exemptions. Subdivision 1 does not apply to:

(1) a commuter van;

(2) a vehicle being used to transport children as part of a family or group family day care program;

(3) a vehicle being used to transport children to school or to a school-sponsored activity;

(4) a bus while it is in operation within the state of Minnesota as to any Minnesota resident who is an insured as defined in section 65B.43, subdivision 5;

(5) a passenger in a taxi; or

(6) a taxi driver, provided that this clause applies only to policies issued or renewed on or after September 1, 1996, and prior to September 1, 1997.

Subd. 2. Injury resulting from use of vehicle provided by employer. In case of injury to an employee, or to the employee's spouse or other relative residing in the same household, if the accident causing the injury occurs while the injured person is driving or occupying a motor vehicle other than a commuter van furnished by the employer, the security for payment of basic economic loss benefits is the security covering the vehicle or, if none, the security under which the injured person is an insured.

Subd. 3. Injury to other persons. In the case of any other person whose injury arises from the maintenance or use of a motor vehicle described in subdivision 1 or 2 who is not a driver or occupant of another involved motor vehicle, the security for the payment of basic economic loss benefits is the security covering the vehicle, or if none, the security under which the injured person is an insured.

Subd. 4. Other cases. In all other cases, the following priorities apply:

(a) The security for payment of basic economic loss benefits applicable to injury to an insured is the security under which the injured person is an insured.

(b) The security for payment of basic economic loss benefits applicable to injury to the driver or other occupant of an involved motor vehicle who is not an insured is the security covering that vehicle.

(c) The security for payment of basic economic loss benefits applicable to injury to a person not otherwise covered who is not the driver or other occupant of an involved motor vehicle is the security covering any involved motor vehicle. An unoccupied parked vehicle is not an involved motor vehicle unless it was parked so as to cause unreasonable risk of injury.

Subd. 5. Contribution. If two or more obligations to pay basic economic loss benefits are applicable to an injury under the priorities set out in this section, benefits are payable only once and the reparation obligor against whom a claim is asserted shall process and pay the claim as if wholly responsible, but the reparation obligor is thereafter entitled to recover contribution pro rata for the basic economic loss benefits paid and the costs of processing the claim. Where contribution is sought among reparation obligors responsible under subdivision 4, clause (c), proration shall be based on the number of involved motor vehicles.

Subd. 6. Subrogation. Where a reparation obligor pays basic economic loss benefits which another reparation obligor is obligated to pay under the priority provided in this section, the reparation obligor that pays is subrogated to all rights of the person to whom benefits are paid.

Subd. 7. Adding policies together. Unless a policyholder makes a specific election to have two or more policies added together the limit of liability for basic economic loss benefits for two or more motor vehicles may not be added together to determine the limit of insurance coverage available to an injured person for any one accident. An insurer shall notify policyholders that they may elect to have two or more policies added together.

HIST: 1974 c 408 s 7; 1976 c 180 s 1; 1976 c 233 s 7,8; 1985 c 168 s 8; 1986 c 444; 1986 c 455 s 50; 1990 c 496 s 1,2; 1995 c 227 s 1; 1996 c 446 art 1 s 58

65B.58 Converted motor vehicles.

A person who converts a motor vehicle is disqualified from basic or optional economic loss benefits, including benefits otherwise due as a survivor, from any source other than an insurance contract under which the converter is an insured, for injuries arising from maintenance or use of the converted vehicle. If the converter dies from the injuries, survivors are not entitled to basic or optional economic loss benefits from any source other than an insurance contract under which the converter is a basic economic loss insured. For the purpose of this section, a person is not a converter if that person uses the motor vehicle in the good faith belief that the person is legally entitled to do so.

HIST: 1974 c 408 s 18; 1986 c 444

65B.59 Races.

A person who is injured in the course of an official racing contest, other than a rally held in whole or in part on public roads, or in practice or preparation therefor is disqualified from basic or optional economic loss benefits. Survivors are not entitled to basic or optional economic loss benefits for loss arising from the death.

HIST: 1974 c 408 s 19; 1975 c 18 s 9; 1986 c 444

65B.60 Intentional injuries.

A person intentionally causing or attempting to cause injury to self or another person is disqualified from basic or optional economic loss benefits for injury arising from those acts, including benefits otherwise due the person as a survivor. If a person dies as a result of intentionally causing or attempting to cause injury to self, survivors are not entitled to basic or optional economic loss benefits for loss arising from the death. A person intentionally causes or attempts to cause injury if the person acts or fails to act for the purpose of causing injury or with knowledge that injury is substantially certain to follow. A person does not intentionally cause or attempt to cause injury (1) merely because the act or failure to act is intentional or done with the realization that it creates a grave risk of causing injury or (2) if the act or omission causing the injury is for the purpose of averting bodily harm to the person or another person.

HIST: 1974 c 408 s 20; 1986 c 444

65B.605 Renumbered 604.16

65B.61 Benefits primary; subtractions; coordination.

Subdivision 1. Generally; exception for workers' compensation benefits. Basic economic loss benefits shall be primary with respect to benefits, except for those paid or payable under a workers' compensation law, which any person receives or is entitled to receive from any other source as a result of injury arising out of the maintenance or use of a motor vehicle. Where workers' compensation benefits paid or payable are primary, the reparation obligor shall make an appropriate rebate or reduction in the premiums of the plan of reparation security. The amount of the rebate or rate reduction shall be not less than the amount of the projected reduction in benefits and claims for which the reparation obligor will be liable on that class of risks. The projected reduction or rebate in benefits and claims shall be based upon sound actuarial principles.

Subd. 2. Disability income loss benefits; coordination with workers' compensation benefits. If benefits are paid or payable under a workers' compensation law because of the injury, no disability income loss benefits are payable unless the weekly workers' compensation disability benefits are less than the weekly disability benefit as set out in section 65B.44, subdivision 3, in which case the reparation obligor shall pay to the injured person the amount that the weekly disability and income loss benefits payable under section 65B.44, subdivision 3, exceeds the weekly workers' compensation disability benefits.

Subd. 2a. Survivors' economic loss benefits; coordination with workers' compensation death benefits. If benefits are paid or payable under a workers' compensation law because of death, no survivors' economic loss benefits are payable unless the weekly workers' compensation dependency allowance is less than the weekly survivors' economic loss benefit rate as set out in section 65B.44, subdivision 6, in which case the reparation obligor shall pay to the surviving dependents the amount that the weekly survivors' economic loss benefits payable under section 65B.44, subdivision 6, exceed the weekly workers' compensation dependency allowances.

Subd. 2b. Repealed, 1984 c 420 s 2

Subd. 3. General right to coordinate benefits. Any legal entity, other than a reparation obligor obligated to pay benefits under a plan of reparation security or an insurer or employer obligated to pay benefits under a workers' compensation law, may coordinate any benefits it is obligated to pay for loss incurred as a result of injury arising out of the maintenance or use of a motor vehicle with basic economic loss benefits. No entity may coordinate benefits pursuant to this subdivision, unless it provides an appropriately reduced premium rate. The amount of this rate reduction shall be not less than the amount of the projected reduction in benefits and claims for which the entity will be liable on that class of risks, less the additional reasonable expenses incurred to administer the plan coordinating benefits. The projected reduction in benefits and claims shall be based upon sound actuarial principles.

Subd. 4. Repealed, 1979 c 57 s 2

HIST: 1974 c 408 s 21; 1975 c 359 s 23; 1979 c 57 s 1; 1980 c 539 s 2-5; 1984 c 420 s 1; 1995 c 258 s 51

65B.62 Repealed, 1976 c 79 s 2

65B.63 Assigned claims plan.

Subdivision 1. Requirement. Reparation obligors providing basic economic loss insurance in this state shall organize and maintain, subject to approval and regulation by the commissioner, an assigned claims bureau and an assigned claims plan, and adopt rules for their operation and for the assessment of costs on a fair and equitable basis consistent with sections 65B.41 to 65B.71. The assigned claims bureau shall be managed by a governing committee made up of four individuals selected by the insurer members, one individual selected by the self-insurer members, and two public members appointed by the governor to two-year terms. Public members may include licensed insurance agents. If such obligors do not organize and continuously maintain an assigned claims bureau and an assigned claims plan in a manner considered by the commissioner of commerce to be consistent with sections 65B.41 to 65B.71, the commissioner shall organize and maintain an assigned claims bureau and an assigned claims plan. Each reparation obligor providing basic economic loss insurance in this state shall participate in the assigned claims bureau and the assigned claims plan. Costs incurred shall be allocated fairly and equitably among the reparation obligors.

A ruling, action, or decision of the governing committee may be appealed to the commissioner within 30 days. A final action or order of the commissioner is subject to judicial review in the manner provided by chapter 14. In lieu of an appeal to the commissioner, judicial review of the governing committee's ruling, action, or decision may be sought.

Subd. 2. Assignment of claims. The assigned claims bureau shall promptly assign each claim and notify the claimant of the identity and address of the assignee-obligor of the claim. Claims shall be assigned so as to minimize inconvenience to claimants. The assignee thereafter has rights and obligations as if the assignee had issued a policy of basic economic loss insurance complying with sections 65B.41 to 65B.71 applicable to the injury or, in case of financial inability of a reparation obligor to perform its obligations, as if the assignee had written the applicable reparation insurance, undertaken the self-insurance, or lawfully obligated itself to pay basic economic loss benefits.

HIST: 1974 c 408 s 23; 1978 c 674 s 57; 1983 c 289 s 114 subd 1; 1984 c 655 art 1 s 92; 1Sp1985 c 10 s 69; 1986 c 444; 1987 c 337 s 109

65B.64 Persons entitled to participate in assigned claims plan.

Subdivision 1. Qualifications. A person entitled to basic economic loss benefits because of injury covered by sections 65B.41 to 65B.71 may obtain basic economic loss benefits through the assigned claims plan or bureau established pursuant to section 65B.63 and in accordance with the provisions for making assigned claims provided in sections 65B.41 to 65B.71, if:

(a) the person is 14 years old or younger and basic economic loss benefits are not applicable to the injury because of section 65B.58;

(b) basic economic loss benefits are not applicable to the injury for some reason other than those specified in section 65B.58, 65B.59, or 65B.60;

(c) the plan of reparation security applicable to the injury cannot be identified; or

(d) a claim for basic economic loss benefits is rejected by a reparation obligor on some ground other than the person is not entitled to basic economic loss benefits under sections 65B.41 to 65B.71.

In addition to the requirements for eligibility contained in section 65B.48, a nonresident is not entitled to basic economic loss benefits if the nonresident is the owner of a motor vehicle and does not carry the minimum automobile insurance coverage required by the state in which the vehicle is registered.

Subd. 2. Indemnification and subrogation rights. If a claim qualifies for assignment under subdivision 1, the assigned claims bureau or any reparation obligor to whom the claim is assigned shall have the right to seek indemnification from an uninsured tortfeasor. Except as otherwise provided in section 340A.801, subdivision 4, the reparation obligor to whom the claim is assigned shall further be subrogated to all of the rights of the claimant against any person for economic loss benefits provided by the obligor to whom the claim was assigned.

Subd. 3. Disqualification. A person shall not be entitled to basic economic loss benefits through the assigned claims plan with respect to injury which was sustained if at the time of such injury the injured person was the owner of a private passenger motor vehicle for which security is required under sections 65B.41 to 65B.71 and that person failed to have such security in effect.

For purposes of determining whether security is required under section 65B.48, an owner of any vehicle is deemed to have contemplated the operation or use of the vehicle at all times unless the owner demonstrates to the contrary by clear and convincing objective evidence.

Persons, whether or not related by blood or marriage, who dwell and function together with the owner as a family, other than adults who have been adjudicated as incompetent and minor children, shall also be disqualified from benefits through the assigned claims plan.

HIST: 1974 c 408 s 24; 1978 c 674 s 57; 1979 c 190 s 4; 1980 c 539 s 6; 1986 c 444; 1989 c 58 s 2,3; 1990 c 456 s 1,2; 1996 c 446 art 1 s 59

65B.65 Time for presenting claims under assigned claims plan.

Subdivision 1. Generally. Except as provided in subdivision 2, a person authorized to obtain basic reparation benefits through the assigned claims plan shall notify the bureau of the claim within the time that would have been allowed for commencing an action for those benefits if there had been identifiable coverage in effect and applicable to the claim.

Subd. 2. Discovery of obligor's inability to pay claim; notice to bureau. If timely action for basic reparation benefits is commenced against a reparation obligor who is unable to fulfill obligations because of financial inability, a person authorized to obtain basic reparation benefits through the assigned claims plan shall notify the bureau of the claim within six months after discovery of the financial inability.

HIST: 1974 c 408 s 25; 1975 c 18 s 10; 1986 c 444

65B.66 Claims against wrong insurer.

If timely action for economic loss benefits is commenced against a reparation obligor and benefits are denied because of a determination that the obligor's coverage is not applicable to the claimant under the provisions of section 65B.47 on the priority of applicability of security a claim against a proper obligor or assigned claims plan may be made not later than 90 days after such determination becomes final or the last date on which the action could otherwise have been commenced, whichever is later.

HIST: 1974 c 408 s 26









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