This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2002).







American Family Insurance Company,





The Hertz Corporation,



Filed January 14, 2003


Hudson, Judge


Stearns County District Court

File No. C8014994


William J. Cashman, LeAnne D. Bartishofski, Rajkowski Hansmeier Ltd., 11 Seventh Avenue North, P.O. Box 1433, St. Cloud Minnesota 56302 (for appellant)


John F. Angell, Louise A. Behrendt, Stich, Angell & Kreidler, P.A., The Crossings, Suite 120, 250 Second Avenue South, Minneapolis, Minnesota 55401 (for respondent)


            Considered and decided by Schumacher, Presiding Judge, Halbrooks, Judge, and Hudson, Judge.

U N P U B L I S H E D   O P I N I O N


            In this summary judgment appeal, appellant American Family Insurance Company (American Family) contends that respondent The Hertz Corporation (Hertz) should reimburse American Family for no-fault benefits American Family paid to its insured Tina Gunther (Gunther) for injuries Gunther sustained in an automobile accident while driving Hertz’s rental car.  Because Gunther was using the rental car as a replacement for her personal vehicle at the time of the accident, we affirm.


            Appellant American Family brought this subrogation action against respondent Hertz for recovery of no-fault benefits American Family paid on behalf of its insured, Gunther.  The parties stipulated that Gunther sustained injuries in an automobile accident while driving Hertz’s rental car for personal use.  American Family paid approximately $19,000 in no-fault benefits, then sought reimbursement from Hertz.  The district court granted Hertz’s summary judgment motion, concluding that, because Gunther was using the rental vehicle for personal reasons at the time of the accident, the personal insurance coverage provided through American Family was primary to Hertz’s commercial insurance policy.  In an amended order of clarification, the district court rejected American Family’s alternative argument that a term in Hertz’s standard rental agreement obligates Hertz to assume primary responsibility for payment of no-fault benefits.

            This appeal followed.


            American Family argues that Minn. Stat. § 65B.47, subd. 1 (2002), compels a business insurer, based solely on its participation in the transportation industry, to provide primary no-fault benefits to an injured party regardless of the party’s purpose for using the rental vehicle.  Further, American Family maintains that, consistent with the purpose of no-fault legislation, Hertz should bear the risk of this type of loss as a cost of doing business.  We disagree.

            When reviewing a grant of summary judgment, this court examines the record to determine if genuine issues of material fact remain for trial and if the district court properly applied the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  Like all questions of law, we review statutory construction de novo.  Illinois Farmers Ins. Co. v. League of Minnesota Cities Ins. Trust, 617 N.W.2d 428, 429 (Minn. App. 2000), review denied (Minn. Dec. 12, 2000).    

            A private passenger automobile insurance policy must provide coverage for a rented private passenger vehicle.  Minn. Stat. § 65B.49, subd. 5a(a) (2002). 

Every plan of reparation security * * * covering private passenger vehicles * * * and pickup trucks and vans * * * must provide that all of the obligation for damage and loss of use to a rented private passenger vehicle * * * would be covered by the property damage liability portion of the plan. * * * [N]othing in this section amends or alters the provisions of the plan of reparation security as to primacy of the coverages in this section. 


The policy must also provide for “basic economic loss” benefits.  Minn. Stat. § 65B.48, subd. 1 (2002).  “Basic economic loss” benefits provide reimbursement for all loss suffered through “injury arising out of the maintenance or use of a motor vehicle,” including medical expense loss, income loss, and other specified losses.  Minn. Stat. § 65B.44, subd. 1 (2002).  As a general rule, an injured person looks to his or her personal automobile insurer for payment of no-fault benefits unless the “character or use of the involved vehicle is for business purposes.”  Amco Ins. Co. v. Indep. Sch. Dist. No. 622, 627 N.W.2d 683, 685 (Minn. App. 2001), review denied (Minn. Aug. 15, 2001); see also Minn. Stat. § 65B.47, subds. 1 - 4 (2002).  When the vehicle is used in the business of transporting persons or property, the responsibility shifts to the business vehicle’s insurer to provide the injured person with no-fault benefits.  Amco, 627 N.W.2d at 685; Minn. Stat. § 65B.47, subd. 1.  Specifically, Minn. Stat. § 65B.47, subd. 1, provides, in relevant part:

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.


(Emphasis added.)

The meaning and application of the statutory phrase “in the business of transporting persons or property” involves the manner in which a business vehicle is used.[1]  See Amco, 627 N.W.2d at 686-87 (school bus not in “business”); Illinois Farmers Ins., 617 N.W.2d at 431 (bookmobile not in “business”); Dakota Fire Ins. Co. v. Hartford Fire Ins. Co., 558 N.W.2d 524, 526 (Minn. App. 1997) (rental van used by beauty school in “business” where students were en route to a seminar); Peterson v. Colonial Ins. of California, 493 N.W.2d 152, 154-55 (Minn. App. 1992) (state car used for undercover police investigation not in “ business” where car not being used for actual police work at time of accident); Home Mut. Ins. Co. v. Snyder, 356 N.W.2d 780, 785 (Minn. App. 1984) (potato farmer’s truck in “business” where accident occurred while farmer transporting potatoes to store).  These cases illustrate that the proper focus is the nature of the driver’s use of the vehicle at the time of the accident, not the character or status of the owner of the car. 

Nevertheless, American Family argues that because the renting of private passenger vehicles to the general public is clearly the business of transporting persons, Hertz was “using” the rental car “in the business” of “transporting persons” at the time of the accident, and therefore Hertz is primarily responsible for Gunther’s no-fault benefits.  But as Hertz accurately notes, American Family’s interpretation of the statute inappropriately shifts the focus away from the actual use of the car at the time of the accident to the character or status of the owner of the car.  The clear language of Minn. Stat. § 65B.47, subd. 1, does not support this interpretation.  Had the legislature intended to make the primary obligation for basic economic loss benefits depend on whether the owner of the vehicle is engaged in the business of transporting persons or property, it could have done so.  It did not.

When statutory language is clear and free from ambiguity, “the letter of the law shall not be disregarded under the pretext of pursuing the spirit.”  Minn. Stat. § 645.16 (2002).  Here, American Family attempts to circumvent this critical component of no-fault legislation—that personal insurance plans are responsible for coverage of rental vehicles obtained for personal use.  But “[e]very law shall be construed, if possible, to give effect to all its provisions.”  Id.  Under American Family’s theory, a car rental company such as Hertz would presumptively provide no-fault benefits simply because it generates income by renting cars to the general public for transporting persons.  But American Family has failed to show a compelling reason for this court to overturn well-established law; thus we decline American Family’s invitation to turn Minnesota’s no-fault legislation on its head.  The district court properly applied Minn. Stat. § 65B.47, subd. 1, to the undisputed facts here, and we will not disturb its decision.


            Alternatively, American Family asserts that Hertz’s rental contract obligated it to assume responsibility for primary no-fault benefit coverage.  Insurance contract interpretation is a question of law reviewed de novo.  Jenoff, Inc. v. New Hampshire Ins. Co., 558 N.W.2d 260, 262 (Minn. 1997).  Where terms are not defined, this court reads them according to their “plain, ordinary, or popular meaning.”  Id.  Applying general rules of contract interpretation, this court harmonizes, where possible, all provisions in a given contract.  Am. Warehousing and Distrib., Inc. v. Michael Ede Mgmt. Inc., 414 N.W.2d 554, 557 (Minn. App. 1987).  Similarly, we avoid construing a contract in a way that generates an “absurd” result.  Id.

            As with no-fault benefits, Hertz is obligated by law to provide liability coverage.  Minn. Stat. §§ 65B.48, subds. 2, 3, .49, subd. 3 (2002).  Specifically, Minn. Stat. § 65B.49, subd. 5a(i)2 (2002), sets forth the statutory maximum amounts Hertz can be held vicariously liable for.  Moreover, state law requires that the following notice accompany every rental contract:

Under Minnesota law, a personal automobile insurance policy issued in Minnesota must cover the rental of this motor vehicle against damage to the vehicle and against loss of use of the vehicle.  Therefore, purchase of any collision damage waiver or similar insurance affected in this rental contract is not necessary if your policy was issued in Minnesota.


Minn. Stat. § 65B.49, subd. 5a(f) (2002). American Family points to a provision in Hertz’s contract, titled “LIABILITY PROTECTION,” that outlines Hertz’s assumption of liability to third parties.  Specifically, the provision provides, in pertinent part,  



(a)  Within the limits stated in this paragraph, Hertz will indemnify, hold harmless and defend You and any Authorized Operators FROM AND AGAINST LIABILITY TO THIRD PARTIES * * * .


This will conform to the basic requirements of any applicable “No Fault” law * * * .  If such coverage is imposed by operation of law, then the limits of such coverage will be the minimum required by the law of the jurisdiction in which the accident occurs.  Hertz warrants that the protection described in this paragraph is primary with respect to any insurance coverage You or an Authorized Operator may have.


American Family contends that this language contractually obligates Hertz to provide primary liability and primary no-fault coverage.  We disagree.  Standing alone, and taken out of context, this language appears to support American Family’s position.  But this language does not stand alone—it must be read in light of all the other contract provisions.  Here, the very title of the provision—liability protection—suggests that Hertz is providing notice to its customers that it is required by law to provide liability protection from third-parties.  See Minn. Stat. § 65B.49, subd. 1 (2002).  Likewise, the first sentence—that “Hertz will indemnify, hold harmless and defend You and any Authorized Operators from and against liability to third parties” indicates that the liability coverage Hertz is obligated to provide under applicable state law is “primary” over any liability coverage maintained by the renter of the car.

            As Hertz correctly notes, to construe paragraph 10 to reflect an intent by Hertz to make both liability and basic economic loss coverages primary over the renter’s own coverage would render meaningless both the title of the paragraph (“Liability Protection”), as well as the numerous references within the paragraph to liability coverage.  American Family’s proposed construction would swallow the rental contract and lead to absurd results.  Such constructions are to be avoided.  See Am. Warehousing, 414 N.W.2d at 577. 

            Gunther was driving the Hertz rental car as a replacement for her personal vehicle at the time of the accident.  Accordingly, pursuant to Minn. Stat. § 65B.47, subd. 1 (2002), American Family bore primary responsibility for the payment of no-fault benefits, and the district court properly granted Hertz’s summary judgment motion.


[1] The phrase “in the business of” is “commonly understood to refer to a commercial enterprise or activity.”  Mut. Serv. Cas. Ins. Co. v. Wilson Township, 603 N.W.2d 151, 153 (Minn. App. 1999), review denied (Minn. Mar. 14, 2000).