Title: Dean v. American Family Mut. Ins. Co.

State: minnesota

Issuer: Minnesota Supreme Court

Document:

535 N.W.2d 342 (1995) Dale E. DEAN, et al., Respondents, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Petitioner, Appellant. No. C5-94-1042. Supreme Court of Minnesota. August 4, 1995. *343 Joe E. Thompson, Schmidt, Thompson, Johnson & Moody, P.A., Willmar, for appellant. Ronald H. Schneider, Schneider Law Office, Willmar, for respondents. Heard, considered and decided by the court en banc. GARDEBRING, Justice. In a claim for underinsured motorist benefits, the trial court applied the collateral source provision in Minn.Stat. § 548.36 (1994) to reduce the aggregate damage award before subtracting the amount associated with the claimant's comparative fault, as determined in an earlier jury trial. The court of appeals affirmed, and we reverse. While driving his own car, Dale Dean, the plaintiff-respondent in this matter, was injured in a two-car collision with a vehicle driven by Nathan Sing. The passenger in Sing's car was killed, and the trustee for her heirs and next of kin brought an action against both Sing and Dean. In that action, Dean was only a party defendant and did not assert any personal injury cross-claim against Sing. The jury found Dean 10 percent at fault and Sing 90 percent at fault. Dean settled with Sing's insurer for the policy limits of $100,000 and gave proper notice to American Family Mutual Insurance Company (AFM), his underinsured motorist (UIM) carrier. Dean then asserted a claim against AFM to collect underinsured motorist benefits. The only issue presented to the jury was the amount of damages Dean was entitled to collect. The jury awarded Dean $353,646. The trial judge initially determined that Dean's 10 percent fault should be deducted from the jury's damage award, and then the $100,000 settlement award Dean received from Sing's insurer should be subtracted. As a result, the trial court issued a judgment against AFM for $218,281.40.[1] However, Dean brought a timely post-trial motion requesting the court apply the collateral source statute, Minn.Stat. § 548.36, and amend the judgment by reducing the aggregate damage award by the settlement award before applying Dean's 10 percent comparative fault. The trial court applied the collateral source rule and amended the judgment against AFM to reflect a damage award in the amount of $228,281.40, a difference of $10,000.[2] The court of appeals upheld the amended judgment and AFM appealed. The only issue we must address is whether an automobile accident liability insurance payment from an underinsured tortfeasor triggers the collateral source rule in a claim for underinsured motorist benefits when the claimant is partially at fault. Where there is no dispute of facts, a de novo standard of review is applied to determine whether the lower courts erred in their application of the law. State by Cooper v. French, 460 N.W.2d 2 (Minn.1990). First, we turn to the relevant statutory provision known as the collateral source rule. Minn.Stat. § 548.36 (1994) provides: AFM argues that if the tortfeasor, Sing, had been sufficiently covered to fully compensate Dean, then Dean would have received $318,281.40,[3] but by deeming Sing's $100,000 liability payment a collateral source, the amended judgment awarded Dean $10,000 more than his actual damages. We agree. In determining the applicability of the collateral source rule under slightly different circumstances we have held: Imlay v. City of Lake Crystal, 453 N.W.2d 326, 334 (Minn.1990) (citing Buck v. Schneider, 413 N.W.2d 569, 572 (Minn.App.1987)). Similarly, we have consistently held that the purpose of the underinsured provisions of the No-Fault Act is to compensate injured persons without allowing for double recoveries.[4]See Richards v. Milwaukee Ins. Co., 518 N.W.2d 26, 28 (Minn.1994); Johnson v. American Family Mut. Ins. Co., 426 N.W.2d 419, 422 (Minn.1988); Schmidt v. Clothier, 338 N.W.2d 256, 261 (Minn.1983). In Richards we held: Richards, 518 N.W.2d at 28. Thus, both the collateral source rule and the UIM provisions were meant to avoid double recovery. As a *345 result, applying the collateral source rule in this case is unwarranted because it would clearly allow Dean to recover more than the amount needed to compensate him for actual damages. Furthermore, under the facts of this case the collateral source rule is clearly inapplicable because a tortfeasor's liability insurance cannot, by definition, constitute a collateral source. In Imlay we said: Imlay, 453 N.W.2d at 334. Despite the concerns we expressed in Imlay, the legislature has chosen not to clarify the statute. However, while it might not be precisely clear exactly what the legislature meant to include as a collateral source, it is patently clear that a tortfeasor's liability insurance can never be within the definition of collateral source. The Black's Law Dictionary definition of "collateral source rule" is helpful: Black's Law Dictionary, 262 (6th ed. 1990) (emphasis added) (citations omitted). Additionally, we have previously stated that one distinguishing element of a collateral source is that the money or services in reparation of plaintiff's injury is from a source other than the tortfeasor. See Hueper v. Goodrich, 314 N.W.2d 828 (Minn.1982); see also Richard C. Maxwell, The Collateral Source Rule in the American Law of Damages, 46 Minn.L.Rev. 669, 670-71 (1962). The analysis in Hueper illustrates why a tortfeasor's liability insurance payment does not trigger the collateral source rule. Hueper, 314 N.W.2d at 830 (citations omitted). As a result, neither the language of the statute nor the underlying justifications for applying the collateral source rule warrant its application in this case. We reverse the court of appeals decision and order the reinstatement of the trial court's original judgment awarding Dean uncompensated damages totalling $218,281.40. Reversed. [1] The trial court's initial computation provided: [2] The trial court's amended judgment computed the damages as follows: [3] Computed as follows: [4] The relevant portion of the No-Fault Act provides: With respect to underinsured motorist coverage, the maximum liability of an insurer is the amount of damages sustained but not recovered from the insurance policy of the driver or owner of any underinsured at fault vehicle. * * * [I]n no event shall the underinsured motorist carrier have to pay more than the amount of its underinsured motorist limits. Minn.Stat. § 65B.49, subd. 4a (1994).