Greenwaldt v. Illinois Farmers Insurance Co.

OPINION SCHUMACHER, Judge. Respondent Brenda Greenwaldt sued appellant Illinois Farmers Insurance Company (Illinois Farmers) to recover underinsured motorist benefits for damages sustained in an automobile accident that occurred on October 3, 1988. Illinois Farmers challenges the district court’s award of underinsured motorist benefits, arguing the district court erred in determining the tortfeasor’s vehicle was un-derinsured. Greenwaldt challenges the district court’s determination that her award should be reduced by her comparative fault before deducting any no-fault benefits. We affirm in part and reverse in part. FACTS Greenwaldt’s car collided with a car driven by Roger Baumgartner on October 3, 1988. Greenwaldt brought an action against Baum-gartner for injuries she suffered in the collision. Baumgartner had $50,000 of liability insurance. Greenwaldt accepted $13,000 from Baumgartner in settlement of her action. Greenwaldt then demanded arbitration to recover underinsured motorist benefits from her insurer, Illinois Farmers. A panel of arbitrators determined that Greenwaldt was 40% at fault in the collision and that she had suffered $238,000 in damages. Greenwaldt petitioned the district court for a confirmation of the arbitrators’ award. Illinois Farmers opposed confirmation, arguing that after reductions for comparative fault and no-fault benefits paid and payable, Baumgartner’s vehicle was not underinsured. The district court held that Baumgartner’s vehicle was underinsured and Greenwaldt was entitled to underinsured motorist benefits. The district court reduced the arbitrators’ award by the amount of Greenwaldt’s comparative fault and then deducted no-fault benefits paid and payable from the remaining amount to arrive at a total of $36,200 in underinsured motorist benefits. The district court entered judgment for Greenwaldt on May 26, 1994. Illinois Farmers challenges the district court’s determination that Baumgartner’s vehicle was underinsured. Greenwaldt filed a notice of review challenging the district court’s order of reductions for comparative fault and no-fault benefits. ISSUES 1. Did the district court err in determining that the offset provision of Minn.Stat. [204] § 65B.51 is not applicable for purposes of defining an underinsured vehicle? 2. Did the district court err in reducing Greenwaldt’s award by the amount of her comparative fault before deducting no-fault benefits? ANALYSIS The facts of this ease are undisputed. The issues on appeal present pure questions of law. Where the material facts are not in dispute, this court need not defer to the district court’s application of the law. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn.1989). 1. Illinois Farmers argues the district court erred in determining that Baumgart-ner’s vehicle was underinsured. An underin-sured vehicle is defined as: a motor vehicle * * ⅜ to which a bodily injury liability policy applies at the time of the accident but its limit for bodily injury liability is less than the amount needed to compensate the insured for actual damages. Minn.Stat. § 65B.43, subd. 17 (1988). The No-Fault Act further provides: With respect to a cause of action in negligence accruing as a result of injury arising out of the * * * use of a motor vehicle ⅜ ⅜ ⅜ be deducted from any recovery the value of basic or optional economic loss benefits paid or payable, or which would be payable but for any applicable deductible. Minn.Stat. § 65B.51, subd. 1 (1988). Relying on Richards v. Milwaukee Ins. Co., 505 N.W.2d 97 (Minn.App.1993), rev’d, 518 N.W.2d 26 (Minn.1994), the district court held that the offset provision of section 65B.51 is not applied in calculating actual damages for purposes of defining an underin-sured motor vehicle. See id., 505 N.W.2d at 100. In Richards v. Milwaukee Ins. Co., 518 N.W.2d 26, 28 (Minn.1994), however, the supreme .court held that the determination of whether a vehicle is underinsured must be made after deductions for no-fault benefits. While the district court applied the correct law at the time of its decision, we must reverse the district court’s decision and apply the supreme court’s rationale from Richards to determine whether Baumgartner’s vehicle was underinsured. 2. Greenwaldt argues the district court erred in reducing her award by the amount of her comparative fault before deducting no-fault benefits. In 1990, the legislature added the following language to section 65B.51: In any case where the claimant is found to be at fault under section 604.01, the deduction for basic economic loss benefits must be made before the claimant’s damages are reduced under section 604.01, subdivision 1. 1990 Minn.Laws ch. 555, § 6. The added language applies “to all causes of action arising on or after” May 4, 1990. Id. at § 24. The district court used the 1988 version of the statute because it was in effect at the time of the collision. Greenwaldt argues the district court should have used the 1990 version because her “cause of action” for underinsured motorist benefits did not arise until July, 1992, when she settled the underlying liability action with Baumgartner. We disagree. The terms “cause of action” and “claim” are not interchangeable. See Employers Mutual Cos. v. Nordstrom, 495 N.W.2d 855, 856 (Minn.1993) (“An underin-sured motorist claim is both alike and unlike a tort cause of action.” (emphasis added)). Because a tort cause of action may give rise to any number of claims, including an under-insured motorist claim, the district court determined correctly that Greenwaldt’s cause of action arose on the date of the collision. Therefore, applying Minn.Stat. § 65B.51, subd. 1 (1988), and the supreme court’s analysis from Richards v. Milwaukee Ins. Co., 518 N.W.2d 26 (Minn.1994), the district court should have arrived at the following calculations: [205] Item Arbitrator’s Def. Fault Award Adjustment for Net Award No Fault Benefits Remaining Past Medical Exp. 60% $ 56,000 $ 33,600 $ 33,600 $ Future Medical Exp. 60% 12,000 7,200 7,200 Past Wage Loss 60% 100,000 60,000 60,000 Future Lost Income 20,000 12,000 12,000 Past Pain/Suffering 30,000 60% 18,000 18,000 Future Pain/Suffering 20,000 60% 12,000 12,000 Total $238,000 $142,800 $49,200 Because $49,200 is less than Baumgartner’s liability coverage of $50,000, Baumgartner’s vehicle was not underinsured. Illinois Farmers is therefore not liable to Greenwaldt for underinsured motorist benefits. DECISION The district court determined correctly that Greenwaldt’s cause of action arose at the time of the collision rather than when she submitted a claim for underinsured motorist benefits. The determination of whether a vehicle is underinsured, however, must be made after deductions for no-fault benefits paid and payable. Affirmed in part and reversed in part.