This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1994).


Mark D. Anderson, et al.,


Auto-Owners Insurance Company,

Western National Mutual Insurance Company,

Filed September 3, 1996
Affirmed in part, reversed in part, and remanded
Willis, Judge

Faribault County District Court
File No. C895179

Kelton Gage, Blethen, Gage & Krause, 127 South Second Street, P.O. Box 3049, Mankato, MN 56002 (for Appellants)

Mark S. Ullery, Gislason, Dosland, Hunter & Malecki, P.L.L.P., 75 Teton Lane, P.O. Box 4157, Mankato, MN 56002 (for Respondent Auto-Owners Insurance Company)

John M. Riedy, Farrish, Johnson & Maschka, 201 North Broad Street, P.O. Box 550, Mankato, MN 56002 (for Respondent Western National Mutual Insurance Company)

Considered and decided by Willis, Presiding Judge, Harten, Judge, and Holtan, Judge. 1


WILLIS , Judge
This is an appeal from a grant of summary judgment to the underinsured motorist (UIM) carrier for the third vehicle involved in a three-vehicle accident and to the UIM carrier of an injured passenger. Appellants, the injured passenger and his wife, challenge the district court's determination that the third vehicle's UIM carrier was prejudiced by appellants' failure to give it proper notice of their intent to settle with the liability coverage insurer for the first vehicle involved in the accident. Appellants also contend that the district court erroneously limited their potential recovery from their own UIM carrier to amounts exceeding the liability coverage limits of the policy on the first vehicle. The third vehicle's UIM carrier challenges by notice of review the district court's holding that a statute of limitations defense does not apply. Because we find genuine issues of material fact as to whether the lack of notice resulted in prejudice to the third vehicle's UIM carrier, we affirm in part, reverse in part, and remand for further proceedings.

This action arises from an automobile accident that occurred on November 19, 1986, when a vehicle owned by Janet Berens and driven by Troy Lonning struck a second vehicle, which then collided with a third vehicle, driven by William Olson and carrying appellant Mark Anderson as a passenger. Anderson claims to have sustained back injuries as a result of the accident.
On December 10, 1992, Anderson received a $75,000 settlement from Farm Bureau Mutual Insurance Company, the liability insurer for the Berens-Lonning vehicle. The liability coverage limit under the Farm Bureau policy was $100,000. Anderson did not give Western National, William Olson's UIM carrier, notice of his intent to settle with Farm Bureau, and no representatives from Western National participated in the settlement discussions.
Anderson did notify his own UIM carrier, Auto-Owners, of his intent to settle with Farm Bureau. Before Anderson finalized the settlement, Auto-Owners did a credit investigation of Berens and Lonning, which revealed that the two had few assets at the time of the settlement: They owned three used cars and a mobile home on which they still owed payments; Berens was not employed; and Lonning earned a weekly income of approximately $250 to $300. Auto-Owners ultimately chose not to preserve its subrogation rights by substituting its check for that of Farm Bureau.
Seeking UIM benefits for damages allegedly in excess of the $75,000 settlement amount, Anderson commenced this action against Western National on September 28, 1994. Anderson's wife sought damages for loss of consortium. The Andersons later amended the complaint to add Auto-Owners as a defendant.
Western National and Auto-Owners filed separate motions for summary judgment. Western National argued the Andersons' claims against it should fail because (1)applicable statute of limitations had run before the Andersons commenced this action and (2)National was prejudiced by the Andersons' failure to give a Schmidt v. Clothier notice of their intent to settle with Farm Bureau. See Schmidt v. Clothier , 338 N.W.2d 256, 263 (Minn. 1983) (discussing notice requirement). Auto-Owners argued that the Andersons' claims against it should be dismissed on the ground that the Auto-Owners policy required that the Andersons seek benefits through binding arbitration.
The district court rejected Western National's statute of limitations argument, but granted summary judgment to Western National on the ground that the Andersons' failure to give proper notice of their intended settlement had prejudiced Western National. The district court also granted Auto-Owners' motion, ordering the Andersons to arbitrate their claims against Auto-Owners pursuant to the arbitration clause in the Auto-Owners policy. The court further ruled that Auto-Owners was not responsible for the $25,000 gap between the $75,000 settlement and the $100,000 liability limit under the Farm Bureau policy.
The Andersons appeal. Western National seeks review of the district court's determination that the statute of limitations did not start to run until the date of the Andersons' settlement, rather than the date of accident.

On appeal from a summary judgment, we review (1) whether there are any genuine issues of material fact and (2)the lower court erred in applying the law. State by Cooper v. French , 460 N.W.2d 2, 4 (Minn. 1990). We view the evidence in the light most favorable to the party against whom summary judgment was granted. Fabio v. Bellomo , 504 N.W.2d 758, 761 (Minn. 1993).
1. Statute of Limitations

The applicability of a statute of limitations is a legal question. Leisure Dynamics, Inc. v. Falstaff Brewing Corp. , 298 N.W.2d 33, 34-35 (Minn. 1980). A reviewing court is not required to defer to a decision of the district court on a pure matter of law. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n , 358 N.W.2d 639, 642 (Minn. 1984).
A six-year statute of limitations governs claims for UIM benefits. Minn. Stat. §subd.(1992) (actions "[u]pon a contract or other obligation"); O'Neill v. Illinois Farmers Ins. Co. , 381 N.W.2d 439, 440 (Minn. 1986) (stating that action for UIM benefits "sounds in contract and is governed by the 6-year statute of limitations for contracts"). The statute begins to run when the cause of action accrues, that is, when the action can be brought. Id.
For UIM benefits claims based on express contract, policy provisions may establish an accrual date other than the date of the accident. Sargent v. State Farm Mut. Auto. Ins. Co. , 486 N.W.2d 14, 16 (Minn. App. 1992), review denied (Minn. Aug. 4, 1992). This rule is unaffected by the recent case of Hermeling v. Minnesota Fire & Casualty Co. , 548 N.W.2d 270, 275 (Minn. 1996), in which the supreme court held that a UIM insurer's subrogation claim against a tortfeasor accrued on the date of the insured's accident and was barred by the statute of limitations for negligence actions, Minn. Stat. §subd.(1994). The court in Hermeling did not discuss Sargent . The two cases involved different causes of action and different statutes of limitation. We therefore conclude that Sargent governs our analysis here.
The Andersons commenced their action for UIM benefits from Western National on September 28, 1994, more than six years after the date of the accident, but less than six years after the date of their settlement with Farm Bureau. The Andersons argue that the following provision of the Western National policy requires that we hold, under Sargent , that their cause of action against Western National did not accrue until they settled their claims with the tortfeasors:

The limit of liability for this coverage shall be reduced by all sums paid because of the bodily injury by or on behalf of persons or organizations who may be legally responsible.

The district court found this language to be ambiguous, requiring a construction in favor of the Andersons. See Bobich v. Oja , 258 Minn. 287, 294, 104 N.W.2d 19, 24 (1960) (stating that ambiguities as to meaning of policy language should generally be resolved in favor of insured). We agree. Because of this provision, the statute of limitations did not begin to run on the Andersons' claims until the date of their settlement. See Sargent , 486 N.W.2d at 17 (holding that exhaustion clause in UIM policy postponed commencement of running of statute of limitations until claimant had exhausted applicable limits under other policies). The Andersons' claims are, therefore, not barred by the statute of limitations.
2. Schmidt v. Clothier Notice

Potential claimants of UIM benefits are required to give UIM carriers written notice of tentative settlement agreements with any tortfeasors 30 days before settling their claims. Schmidt v. Clothier , 338 N.W.2d 256, 263 (Minn. 1983). Failure to give such notice is presumptively prejudicial to the UIM carrier. American Family Mut. Ins. Co. v. Baumann , 459 N.W.2d 923, 927 (Minn. 1990). A claimant may rebut the presumption by demonstrating, by a preponderance of the evidence, the absence of prejudice. Id. The amount of a tortfeasor's assets is a relevant factor in determining prejudice. Behrens v. American Family Mut. Ins. Co. , 520 N.W.2d 763, 768 (Minn. App. 1994), review denied (Minn. Oct. 14, 1994). Evidence that tortfeasors are poor prospects for subrogation may be adequate to rebut the presumption of prejudice. Elwood v. Horace Mann Ins. Co. , 531 N.W.2d 512, 516 (Minn. App. 1995).
It is undisputed that the Andersons failed to give a Schmidt v. Clothier notice to Western National before their settlement with Farm Bureau. The Andersons did, however, present evidence of the tortfeasors' limited assets: They owned three used cars and a mobile home; Berens was unemployed; and Lonning earned between $250 and $300 per week. As the district court stated in its decision, this evidence suggested that the tortfeasors were judgment proof.
The Andersons argue this finding and other matters in the record suggest that there is a genuine issue of material fact as to whether Western National was prejudiced. We agree and conclude that summary judgment was inappropriate. See Donnay v. Boulware , 275 Minn. 37, 45, 144 N.W.2d 711, 716 (1966) (stating that summary judgment is an extraordinary remedy, a "blunt instrument" to be used only where it is perfectly clear that no issue of fact is involved). We remand the question of prejudice to Western National for determination by the fact-finder.
3. Secondary Insurer's Liability for "Gap"

The Andersons next challenge the district court's determination that Auto-Owners, as the secondary UIM carrier, could not be required to pay the $25,000 difference between the $75,000 amount of the Andersons' settlement and the $100,000 liability coverage limit of the tortfeasors' Farm Bureau policy.
The district court's conclusion was based, in part, on its finding that the Andersons' failure to give a Schmidt v. Clothier notice prejudiced Western National. We have reversed summary judgment on that issue. If on remand it is determined that Western National was prejudiced by the lack of notice, we agree with the district court that Auto-Owners should not be responsible for the $25,000 gap because that would penalize the secondary UIM carrier for the Andersons' error in failing to give the primary insurer, Western National, notice of the proposed settlement. See Broton v. Western Nat'l Mut. Ins. Co. , 428 N.W.2d 85, 90 (Minn. 1988) ("[A]n UIM insured who settles with and releases an underinsured tortfeasor without notifying the UIM insurer does so at his or her peril.").
4. Preclusive Effect of Judgment on Future Arbitration

Under the district court's order, the Andersons must resolve their claims against Auto-Owners through arbitration. Auto-Owners argues that because it will therefore no longer be a party to the Andersons' continuing litigation against Western National, any determinations of damages in that litigation should not be binding on the Andersons' arbitration proceedings against Auto-Owners. The district court did not explicitly rule on the question of whether a judgment against Western National should be binding on Auto-Owners. Therefore, we do not address this issue. See Thiele v. Stich , 425 N.W.2d 580, 582 (Minn. 1988) (stating that reviewing court generally only considers issues considered by district court).
Affirmed in part, reversed in part, and remanded.

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Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.