Minnesota No-Fault Insurer must provide benefits for out of state accident

The Minnesota Court of Appeals concluded that a Minnesota resident could seek No-Fault benefits from his insurer regardless of priority. In addition, the court reversed the reduction of an arbitration award based on a “Other Insurance” clause within the policy.

Steven Meyer was a passenger in a motor-vehicle accident in Wisconsin. Meyer was a Minnesota resident and had auto insurance through American Family. The driver of the vehicle was a Wisconsin resident insured by West Bend Mutual.

Both American Family and West Bend agreed that the Wisconsin policy provided first priority for No-Fault. However, Meyer sought benefits from American Family under his Minnesota policy and did not submit a claim to West Bend. American Family denied the benefits and argued that Meyer must first exhaust the $10,000 available under the West Bend policy.

Meyer’s No-Fault claim proceeded to arbitration and he was awarded $14,000 in medical benefits. American Family moved to vacate the award. American Family brought a district court suit to vacate the arbitration award. The Minnesota Court of Appeals did not address which policy provided priority of coverage. Instead, the court examined the purpose of the No-Fault Act which was to ensure people involved in accidents “receive prompt payment of medical expenses.”  Requiring Meyer to exhaust the Wisconsin benefits before being eligible for benefits from his own insurer would frustrate the purpose of the Act and “hinder the administration of justice.” Therefore, Meyer could collect benefits from his insurer regardless of the priority of the Wisconsin policy.

In addition, the district court reduced the arbitration award pursuant to a “Limits of Liability” clause in the American Family policy, which states “[i]f there is other insurance that applies to the same accident…we will pay our share according to this endorsement’s proportion of the total limits of all similar insurance.” The American Family policy provided limits of $20,000 and the West Bend provided $10,000 in benefits. Therefore, the district court ruled American Family only owed two-thirds of the award.

The Court of Appeals again looked to the purpose of the No-Fault act and held that the award is within the limits of coverage. American Family could not reduce its statutory obligation to provide No-Fault benefits and it was error to reduce the arbitration award.

The decision leaves several questions unanswered. Under Minnesota Statute § 65B.47, Subd. 5, an insurer that pays No-Fault benefits has a right of contribution from all other insurers on the same level of priority. The statute provides that the contribution is on a “pro rata” basis. In this case, the insurers appear to agree West Bend is the first priority for benefits. Therefore, can American Family recoup the $10,000 in benefits available under the West Bend policy or is the right to contribution “pro rata” in which case West Bend only contributes one-third of the award?

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