OPINION
Tammy Pepper suffered serious injuries in a single-vehicle accident when she was struck by a pickup truck owned by her sister and driven by her stepfather. Following the accident, Pepper sought insurance benefits under three policies. First, Pepper sought and recovered liability benefits from her sister’s insurer. Second, Pepper sought and recovered liability benefits from her stepfather’s insurer, State Farm Mutual Insurance Company (State Farm). Third, Pepper sought, but did not recover, underinsured motorist coverage under a separate State Farm policy held by her stepfather. State Farm denied that it owed Pepper underinsured motorist coverage under the stepfather’s policy on
On September 3, 2009, respondent Tammy Pepper suffered injuries when a 1994 Ford pickup truck, owned by Pepper’s sister Tracie Drew, and driven by Pepper’s stepfather, Frank Matlachowski, backed into Pepper and pressed her against an exterior wall of her home. Just before the accident, Pepper had been standing in the yard of the home she shared with her mother and Matlachowski, while she watched Matlachowski prepare to unload a dishwasher from the back of the truck. To make unloading easier, Matlachowski wanted to back up the truck to a set of steps leading into the house. He began to back up the truck by pressing on the accelerator while the truck was in reverse gear. When Matlachowski pressed on the truck’s accelerator, the accelerator stuck “wide open” and the truck shot backward toward Pepper and pinned her against the exterior wall of the house. Following the accident, Pepper required hospitalization and surgery. As of February 2010 Pepper had incurred medical expenses in excess of $170,000.
Drew insured the truck through State Farm. Pepper sought liability benefits under Drew’s State Farm policy. State Farm eventually paid Pepper the policy’s liability limit of $100,000.
Because $100,000 from Drew’s policy did not adequately compensate Pepper for her injuries, she sought additional liability benefits under two policies owned by Matla-chowski. Matlachowski insured two vehicles through State Farm under separate policies. Even though Matlachowski was not the owner of Drew’s truck, his liability coverage in each policy extended to the accident. More specifically, the policies provided liability coverage for the “use, by [Matlachowski], of a ... a non-owned car,”
The terms of Matlachowski’s two policies with State Farm contained a provision that required State Farm to pay on Matla-chowski’s behalf only the limits of the policy with the “highest limit of liability.” The specific provision in the policies stated that:
If There Is Other Liability Coverage
1. Policies Issued by Us to You, Your Spouse, or Any Relative
If two or more vehicle liability policies issued by us to you, your spouse, or any relative apply to the same accident, the total limits of liability under all such policies shall not exceed that of the policy with the highest limit of liability.
Both policies had a liability limit of $100,000 per person, so State Farm paid $100,000 to Pepper in liability benefits. Pepper then signed releases of all claims against Drew and Matlachowski. In both of those releases, however, Pepper “specifically reserve[d]” a “claim for underin-sured motorist benefits against State Farm Insurance.”
Pepper next sought underinsured motorist (UIM) benefits from State Farm under
UNDERINSURED MOTOR VEHICLE-COVERAGE
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We will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an underin-sured motor vehicle. The bodily injury must be sustained by an insured and caused by accident [sic] arising out of the operation, maintenance or use of an underinsured motor vehicle.
Matlachowski’s policies define an underin-sured motor vehicle as a vehicle
insured or bonded for bodily injury liability in amounts that:
(1) meet the requirements of the laws of the state where your car is mainly garaged; and
(2) are less than the amount needed to compensate the insured for damages.
The policies each have a $100,000 UIM coverage limit per person. But the policies exclude from underinsured motor vehicles any vehicle “insured under the liability coverage of this policy” (hereinafter referred to as the insured-vehicle exclusion).
Pepper asserted to State Farm that as an “insured” under Matlachowski’s policies, she was entitled to UIM coverage because the at-fault vehicle, Drew’s truck, was an underinsured motor vehicle. State Farm denied UIM coverage on the ground that Drew’s truck did not qualify as an underinsured motor vehicle because of the insured-vehicle exclusion in the policies. State Farm argued that Drew’s truck was “insured under the liability coverage” of Matlaehowski’s policies by virtue of Matla-chowski’s operation of the truck.
On January 14, 2010, Pepper commenced an action against State Farm in Roseau County District Court, alleging that she was entitled to UIM coverage under the Matlachowski policy that did not pay out liability benefits. State Farm moved for summary judgment, arguing that Pepper was not entitled to UIM benefits because Drew’s truck did not qualify as an underinsured motor vehicle because of the insured-vehicle exclusion. The court granted summary judgment to State Farm. The court found the policy exclusions in Matlachowski’s policies to be similar to other insured-vehicle exclusions that have been “consistently upheld” because the exclusions “prevent an insured from using their own UIM coverage ... to compensate for their failure to purchase sufficient liability coverage.” The court concluded that an exception to this reasoning — which allows an injured person to recover UIM benefits from an at-fault driver when another at-fault vehicle provided insufficient liability coverage — did not apply because the exception requires two vehicles, and Pepper’s accident in
Pepper appealed. A divided panel of the court of appeals reversed the district court, noting that this case presented a “matter of first impression.” Pepper v. State Farm Mut. Auto. Ins. Co.,
State Farm appealed and we granted review. On appeal, State Farm argues that allowing Pepper to recover both liability benefits and UIM benefits under Mat-lachowski’s policies results in coverage conversion. State Farm further argues that policy exclusions that prevent coverage conversion are enforceable under the No-Fault Act. Following State Farm’s appeal, Pepper filed a motion to strike references by State Farm to the sheriffs report of the accident, arguing that the report is not properly part of the record on appeal in this case.
I.
As a preliminary matter, on December 19, 2011, Pepper filed a motion to strike certain references made by State Farm to the sheriffs report of the accident. Pepper argues that neither party filed the report with the district court or introduced the report as an exhibit, and thus under Minn. R. CivApp. P. 110.01 the report is not part of the record on appeal. But the record indicates that Pepper’s counsel attached the sheriffs report to his August 6, 2010, affidavit, which accompanied a discovery motion submitted to the district court. Thus, we conclude that the report is part of the record. We therefore deny Pepper’s motion to strike.
II.
We interpret insurance contracts de novo. Auto-Owners Ins. Co. v. Forstrom,
While this case presents a matter of first impression, our jurisprudence concerning the No-Fault Act and coverage conversion is extensive and well developed. The No-Fault Act attempts “to relieve the severe economic distress of uncompensat
We have explained that “[f]irst party coverage and third party coverage contemplate different risks. They are not the same and they are not priced the same.” Petrich v. Hartford Fire Ins. Co.,
We have also explained that if first- and third-party coverage are substituted for one another, the result is that the “UIM benefits are used as a substitute for the tortfeasor’s inadequate liability coverage,” and thus “[cjoverage conversion occurs.” Kelly v. State Farm Mut. Auto. Ins. Co.,
Coverage conversion can arise “when a family member injured in an automobile accident tries to recover third-party
. For the reasons listed above, we have stated that “an insurer may permissibly preclude such coverage conversion with an owned-vehicle exclusion and that UIM coverage will not be implied as a matter of law where it would result in coverage conversion.” Lynch,
Our “well-settled general rule in the construction of insurance contracts” permits parties “to contract as they desire, and so long as coverage required by law is not omitted and policy provisions do not contravene applicable statutes, the extent of the insurer’s liability is governed by the contract entered into.” Am. Family Mut. Ins. Co. v. Ryan,
We have held that policy exclusions that prevent coverage conversion do not violate the No-Fault Act and are otherwise enforceable. E.g., Kelly,
We have stated that the “[g]eneral principles of contract interpretation apply to insurance policies.” Lobeck,
State Farm asserts, and Pepper does not dispute, that the insured-vehicle exclu-sión is unambiguous. Thus, we must determine whether allowing Pepper to re
While this case presents a matter of first impression for our court, we have previously considered whether coverage conversion exists in other somewhat similar circumstances. For example, we have held that coverage conversion arises when an insured recovers both liability benefits and UIM benefits under the same policy. E.g., Lynch,
In Kelly, the insured was injured when the vehicle that she occupied as a passenger collided with an unoccupied vehicle. Id. at 329. The insured’s husband was the driver and sole owner of the occupied vehicle involved in the accident. Id. The insured and her husband were both listed as named insureds on two separate automobile policies issued by the same insurer. Id. One policy covered the vehicle in the accident, and the second policy covered another vehicle the insured and her husband jointly owned. Id. The insured recovered $100,000 in liability benefits under the policy insuring the occupied vehicle involved in the accident. Id. The insured then sought UIM coverage under the policy insuring the jointly owned vehicle not involved in the accident. Id. But that policy excluded from its definition of “underin-sured motor vehicle” a vehicle “furnished for the regular use of you, your spouse or any relative.” Id. at 330. The district court held that the insured was not entitled to UIM benefits because her husband, the tortfeasor, was also listed as an insured under the policy. Id.
We agreed with the district court and upheld the exclusion. Id. at 331. We concluded that allowing the insured to recover UIM coverage under the second policy would constitute coverage conversion because “[wjhen a liability claim is made on one policy and a UIM claim is made on a second policy,” and “both [policies] list the tortfeasor as an insured, allowing the UIM claim would result in the payment of additional benefits for injuries caused by the negligence of the insured tortfeasor,” which is “the ‘essence of liability coverage.’ ” Id. at 331 (quoting Lynch,
We conclude that our analysis in Kelly dictates the result in this case. Here, both State Farm policies insure the same tort-feasor — Matlachowski. Allowing Pepper to recover both liability benefits and UIM benefits from policies insuring Matlachow-ski would create the same coverage conversion prohibited by the policy exclusion we upheld in Kelly. Arguably, because the Matlachowski policies also insure Pepper, we could view Pepper as seeking UIM coverage under “her own [separate] under-insured motorist coverage.” Myers,
Here, Matlachowski chose to purchase insurance under two separate policies, each of which had a liability limit of $100,000. Pepper suffered more than $100,000 in injuries. Allowing Pepper to recover UIM benefits under Matlachow-ski’s policies would allow Matlachowski “to benefit from providing inadequate liability coverage ... by supplementing that coverage with cheaper UIM coverage.” Kelly,
Reversed.
Notes
. The policies define a "non-owned car” as a "car not: (1) owned by or- leased to, (2) registered in the name of; or (3) furnished or available for the regular or frequent use of you, your spouse or any relatives.” (Emphasis omitted.)
. Under Minn.Stat. § 65B.49, subd. 3a(5) (2010), which governs UIM coverage, as a pedestrian, Pepper was “entitled to select any one limit of liability for any one vehicle afforded by a policy under which the injured person is insured.”
. As noted earlier, Matlachowski's policies provided liability coverage for the "use, by an insured, of a newly acquired car, a temporary substitute car or a non-owned car.” (Emphasis omitted.) Thus, Drew's truck was insured under the Matlachowski policies because Mat-lachowski drove the nonowned vehicle.
. We recently explained:
The Minnesota Legislature amended the No-Fault Act in 1985 by, among other things, adding subdivision 3a to section 65B.49. Act of June 27, 1985, ch. 10, § 68, 1985 Minn. Laws 1st Spec. Sess. 1781, 1840-41. We have explained that the 1985 amendment "reflect[s] a broad policy decision to tie ... [UIM] coverage to the particular vehicle involved in the accident.”
Latterell,