This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
IN COURT OF APPEALS
State Farm Insurance Companies,
Filed March 14, 2000
Ramsey County District Court
File No. CX-98-011523
William A. Cumming, Moss & Barnett, P.A., 4800 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402; and
Stephen W. Hance, Martin & Squires, 2050 Piper Jaffray Plaza, 444 Cedar Street, St. Paul, MN 55101 (for appellant)
William M. Hart, Thomas H. Crouch, Katherine A. McBride, Meagher & Geer, P.L.L.P., 4200 Multifoods Tower, 33 South Sixth Street, Minneapolis, MN 55402; and
Gary D. Pontius, Brett W. Olander & Associates, 1000 Norwest Tower, 55 East Fifth Street, St. Paul, MN 55101 (for respondent)
Considered and decided by Randall, Presiding Judge, Toussaint, Chief Judge, and Huspeni, Judge.*
U N P U B L I S H E D O P I N I O N
Appellant seeks review of a summary judgment dismissing her complaint against respondent for underinsured motorist benefits. The district court ruled that the statute of limitations bars appellant’s claim because it was not brought within six years after the date of the accident. Appellant argues that the statute of limitations did not begin to run until she gave notice of her UIM loss and settled with the tortfeasor. We affirm.
Respondent State Farm Automobile Insurance Company insured appellant Marcia Hunziker under a policy issued to her husband Douglas Hunziker on April 17, 1987, and renewed on October 17, 1987. The policy affords $100,000 in underinsured motor vehicle coverage (UIM coverage) and is composed of a declarations page, a booklet containing the main policy provisions, and an endorsements section detailing changes to the policy language found in the booklet. The declarations page of the policy identified all endorsements that were included in the policy, including endorsement 6895AG.1. This endorsement replaced the uninsured and underinsured motor vehicle section contained in the booklet and eliminated the "no coverage until" clause in that section. The "no coverage until" clause provided that UIM benefits would be afforded to an insured only when the limits of liability of all the bodily injury bonds and polices that applied had been used up by payments, judgments, or settlements. When Douglas Hunziker renewed his policy he did not receive another copy of endorsement 6895AG.1 because it had already been given to him as part of the original policy.
On December 31, 1987, Hunziker was injured in an automobile accident after being hit by a car driven by Kathy Jo Jenkins. Hunziker brought a negligence suit against Jenkins. Pursuant to Schmidt v. Clothier, 338 N.W.2d 256 (Minn. 1983), Hunziker notified State Farm that Jenkins made a settlement offer and that it was for less than the liability limits available to Jenkins. In November 1996, Hunziker settled her claim against Jenkins for less than the policy limits available to Jenkins.
Two years later, on November 13, 1998, Hunziker commenced this suit against State Farm, seeking UIM benefits under the State Farm policy. State Farm moved for summary judgment, claiming that Hunziker's claim was barred by the six-year statute of limitations, which it argued began to run on the date of her accident. Hunziker brought a cross-motion for summary judgment, arguing that the State Farm policy provided an accrual date other than the date of the accident and that her claim was timely. The district court granted State Farm's motion for summary judgment, ruling that endorsement 6895AG.1 eliminated the "no coverage until" clause and the date of the accident triggered the running of the statute of limitations. The court rejected Hunziker's claim that "an ordinary person reading the endorsement would conclude that a claim for [UIM] benefits cannot be made until other benefits are exhausted" and the date of exhaustion becomes the contractual accrual date for the purpose of determining when the statute of limitations begins to run. This appeal follows.
D E C I S I O N
On appeal from summary judgment, a reviewing court determines whether any genuine issues of material fact exist and the district court erred in its application of the law. Offerdahl v. University of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn. 1988). "Whether the district court correctly calculated the limitations period is a question of law" reviewed de novo. Cattnach v. State Farm Ins. Co., 577 N.W.2d 251, 252 (Minn. App. 1998) (citation omitted), review denied (Minn. June 17, 1998).
The parties agree that the applicable statute of limitations governing this action is the six-year limitations period for contracts set forth in Minn. Stat. § 541.05, subd. 1(1) (1998). See O'Neill v. Illinois Farmers Ins. Co., 381 N.W.2d 439, 440 (Minn. 1986) (holding action for UIM benefits governed by six-year statute of limitations period for contracts). The parties dispute when the limitations period began to run. Hunziker contends that the limitations period did not begin to run until she provided notice of loss and settled with Jenkins. State Farm contends that the six-year limitations period began to run from the date of the accident.
Minnesota has adopted the minority rule that the statute of limitations on a claim for UIM coverage begins to run on the date of the accident whether the benefits are implied-in-law or specifically provided by contract. See Weeks v. American Family Mut. Ins. Co., 580 N.W.2d 24, 27 (Minn. 1998) (recognizing Minnesota has adopted minority rule that limitations period begins to run on date of accident where UIM or UM coverage is provided by contract); O'Neill, 381 N.W.2d at 441 (holding in action to imply UIM coverage, limitations period begins to run on date of accident).
In Sargent v. State Farm Mut. Auto. Ins. Co., 486 N.W.2d 14 (Minn. App. 1992), review denied (Minn. Aug. 4, 1992), this court recognized a narrow exception to the general rule. The policy at issue in that case provided that
"[t]here is no coverage until the limits of liability of all bodily injury liability bonds and polices that apply have been used up by payments of judgments or settlements."
Id. at 16. The court held this language provided an accrual date other than the date of the accident, enabling plaintiff to determine whether her injuries met the threshold amount before bringing a UIM claim. Id. The court noted that adopting the contractual accrual date served the dual purpose of discouraging unreasonable delay and endless litigation and of enforcing the parties' agreement. Id.
In Nelson v. State Farm Ins. Co., 567 N.W.2d 770, 772 (Minn. App. 1997), review denied (Minn. Oct. 31, 1997), this court limited the decision in Sargent, holding that "[a]bsent a 'no coverage until' clause like that in Sargent, there is no 'contractual accrual date' for this court to adopt."
Here, the policy issued by State Farm to Hunziker is composed of a declarations page, booklet form, and an endorsements section. While the booklet form does contain a "no coverage until" clause like that found in Sargent, it was eliminated by the language of endorsement 6895AG.1. The endorsement replaced the UIM and UM coverage section contained in the booklet form and does not contain "no coverage until" language. The endorsement was issued at the time Hunziker originally purchased his State Farm policy and continued in effect when the policy was renewed. Contrary to Hunziker's assertion, the endorsement was a part of the policy. Because Hunziker's State Farm policy does not contain any "no coverage until" language like that found in Sargent, the exception set forth in Sargent does not apply.
Hunziker argues that two other provisions in the policy have the equivalent effect as the "no coverage until" language found in Sargent. First, Hunziker relies on language contained in the "Conditions" section of the policy, which states "[t]here is no right of action against us * * * until 30 days after we get the insured's notice of accident or loss." Second, Hunziker relies on policy language contained in the "Limits of Liability" section, which provides that the most State Farm will pay is the difference between the limits of liability of its coverage and the amount paid to the insured by any person or organization legally liable for bodily injury caused by an underinsured motorist; or, the difference between the amount of the insured's damages for bodily injury and the amount paid to the insured by any person or organization legally liable for the injury. Hunziker contends that these provisions create a contractual accrual date other than the date of the accident and have the same effect as "no coverage until" in Sargent because they preclude her from obtaining UIM benefits unless she provides State Farm with notice of her loss and until she recovers an amount that is less than her damages from the tortfeasor or the tortfeasor's insurer.
That argument was rejected in Nelson. The policy in Nelson contained limits of liability language identical with that found in Hunziker's policy. Nelson, 567 N.W.2d at 771 n.2. The insured argued that the limitations period began to run on the date he settled with the tortfeasor and not the date of the accident because the policy stated that there must be a payment by one legally liable to the statute of limitations begins to run. Id. at 771. The court rejected this argument, noting that the insured's argument confused the concept of when a cause of action accrues with the concept of when suit may be brought on the cause of action. Id. at 772. The court held:
"The time within which an action must be commenced begins to run when the cause of action accrues. It does not necessarily follow that the right to sue on the cause of action arises immediately when the cause of action accrues. It may be necessary to obtain leave of court, to make a demand, or to give a notice before suit can be brought on the cause of action; but where such a condition precedent is not a part of the right or cause of action, but merely a part of or one step in the remedy, it does not delay the running of the statute. * * * [T]he test is whether the performance of the condition is a part of the cause of action, or merely a part of or step in the remedy."
Id. (alteration in original) (quoting Swing v. Barnard-Cope Mfg. Co., 115 Minn. 47, 50, 131 N.W. 855, 856 (1911)).
The fact that Hunziker was required to give notice to State Farm of her loss is simply a step in the process she must do to claim UIM benefits. The policy provisions relied on by Hunziker do not go to the elements of liability or her underlying cause of action. Rather, they simply outline the steps that must be satisfied before State Farm will provide UIM benefits. We conclude that the district court did not err when it ruled that the policy language relied on by Hunziker did not create an accrual date on her claim; the standard six-year limitations period began to run from the date of the accident.
The fact that an insured's entitlement to UIM benefits has not yet been established because the action has not been settled or reduced to judgment does not bar the running of the limitations period. The limitations period begins to run when the cause of action accrues and "'[m]aturation' of a UIM claim, * * * should not be equated with its 'accrual.'" Cattnach, 577 N.W.2d at 253 (citation omitted). In O'Neill, the supreme court rejected the insured's argument that a cause of action for underinsured benefits could not be brought until she recovered from the tortfeasor because it would not otherwise be known if the tortfeasor was underinsured. O'Neill, 381 N.W.2d at 441. The court held that
steps taken by a claimant in ascertaining what underinsured motorist benefits she might be entitled to, do not preclude the statute of limitations from beginning to run * * * [and] the fact that the damages are unknown or unpredictable does not stop the 6 years from running.
Id. (citations omitted); see also Johnson v. State Farm Mut. Auto. Ins. Co., 594 N.W.2d 243 (Minn. App. 1999) (holding "although tort recovery is a condition precedent to trying or arbitrating a UIM claim, it does not involve the tolling of the statute of limitations" (citations omitted)), review granted (Minn. Aug. 18, 1999), and appeal dismissed (Minn. Jan. 25, 2000).
Hunziker's argument that the limitations period did not begin to run until she settled with Jenkins confuses the concept of when her cause of action accrued with the concept of when she could bring suit. As O'Neill and its progeny make clear, the fact that damages are unknown or unpredictable does not stop the limitations period from running. In such situations, the insured must commence her UIM action within the six-year limitations period and "then request[ ] that trial be stayed until the tort action [is] either settled or litigated to completion, thus making the UIM action ripe for trial." Cattnach, 577 N.W.2d at 254. The settlement received by Hunziker from Jenkins was not part of her "cause of action under the policy; it was only a step in ascertaining the amount to which [she] was entitled." Nelson, 567 N.W.2d at 772. The district court ruled correctly that the six-year limitations period began to run on the date of the accident.
Finally, Hunziker argues that her UIM claims should be allowed because her policy "by all outward appearances tolled the statute of limitations until settlement of the underlying liability claim." To support her assertion, Hunziker relies on the "no coverage until" clause found in the booklet portion of the policy. This reliance is misplaced. The "no coverage until" clause was specifically deleted by the language of endorsement 6895AG.1. It was never a part of the policy issued to Hunziker. Hunziker failed to present any evidence that she or her husband did not receive a copy of endorsement 6895AG.1 when the policy was first issued.
The district court did not err in concluding that Hunziker's UIM claim is barred by the statute of limitations, finding that the statute began to run on the date of the accident.
* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. Art. VI, § 10.