Tim Johnson, Michael Johnson, Trustee for the Next of Kin of Karen Johnson v. Ironshore Indemnity, Inc.
A16-994
| Minn. Ct. App. | Dec 12, 2016Background
- Tim and Karen Johnson purchased an Ironshore classic-automobile liability policy that named Tim and Karen as "named insureds" and Tim, Karen, and their son Trevor as "insureds."
- Trevor, driving a Model T owned by Tim and Karen, was involved in a single-vehicle accident in Utah in which passenger Karen died.
- Michael Johnson, as trustee for Karen’s next of kin, sued to recover the policy’s $500,000 general-liability limit for wrongful death.
- Ironshore relied on an endorsement ‘‘drop-down’’ exclusion (A.13) that limits coverage for bodily injury to a family member to Minnesota’s statutory minimum auto-liability limits ($30,000 per person / $60,000 per accident).
- The policy also contains an "Out of State Coverage" clause that provides for application of the higher of the declared limits or the other state’s financial-responsibility limit when an accident occurs outside the state where the covered classic is garaged.
- The district court granted summary judgment for Ironshore, holding the drop-down exclusion enforceable and applicable and that Utah’s minimum ($25,000) does not exceed Minnesota’s $30,000; the court therefore applied Minnesota’s statutory minimum.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of the drop-down exclusion under the reasonable-expectations doctrine | The drop-down is ambiguous or hidden (definitions separate from exclusion; failure to show the numeric Minnesota minimum in the exclusion) so it violates reasonable expectations and public policy | The exclusion is clear when read with policy definitions and is placed in the Exclusions section; prior case law upholds similar clauses | Exclusion is not ambiguous or hidden; reasonable-expectations doctrine inapplicable; exclusion enforceable |
| Whether the out-of-state clause requires application of the $500,000 declared limit for the Utah accident | The out-of-state provision (A.1) requires application of the higher declared limit ($500,000) because Utah has a financial-responsibility law specifying limits | The declarations incorporate endorsements (including the drop-down), so the "limit shown in the Declarations" is subject to the drop-down and thus becomes Minnesota's $30,000 minimum | Paragraph A.1 must be read with endorsements; the declarations’ limits are not free-standing; drop-down controls and applies |
| Choice between Minnesota and Utah minimums under the out-of-state clause | Utah’s financial-responsibility limit applies and would trump the drop-down if Utah’s minimum were higher | Compare statutory minima: Minnesota $30,000 vs Utah $25,000; the greater amount governs | Utah’s minimum is lower; Minnesota’s $30,000 (per drop-down) is greater and applies |
| Proper construction of integrated policy language (declarations + endorsements) | Declarations show $500,000 and should control A.1 | Endorsements are part of the contract and must be read together with declarations; cannot render endorsements meaningless | Endorsements incorporated into declarations; contract construed holistically to give effect to all provisions |
Key Cases Cited
- Frey v. United Servs. Auto. Ass'n, 743 N.W.2d 337 (Minn. App. 2008) (upholding a drop-down exclusion and discussing reasonable-expectations factors)
- Atwater Creamery Co. v. Western National Mutual Insurance Co., 366 N.W.2d 271 (Minn. 1985) (articulating the reasonable-expectations doctrine and when hidden exclusions may be unenforceable)
- Agency Rent-A-Car, Inc. v. American Family Mutual Insurance Co., 519 N.W.2d 483 (Minn. App. 1994) (construing similar language limiting coverage to statutory minimums)
- Bobich v. Oja, 104 N.W.2d 19 (Minn. 1960) (endorsements attached to a policy are part of the contract and must be construed together)
- Carlson v. Allstate Ins. Co., 749 N.W.2d 41 (Minn. 2008) (defining ambiguity standard for insurance contracts)