Court Opinion

ID: 9664401
Source: CourtListenerOpinion
Date Created: 2023-08-24 00:18:24.06365+00
Date Added: 2024-06-11T18:15:06.050205
License: Public Domain

SIMONETT, Justice
(concurring).
I join in the majority opinion but my reasoning, only sketched out here, is different.
A Minnesota car owner can satisfy the requirements of our No-Pault Act by purchasing a liability policy with limits of $30,-000 for bodily injury to any one person, $60,000 for any one accident, and $10,000 *683property damage. Minn.Stat. § 65B.49, subd. 3(1). These limits, of course, do not limit the car owner’s tort liability; a car owner remains liable for any tort exposure over the policy limits. By purchasing minimum coverage, a car owner in this state keeps his car registered, keeps his driver’s license, and avoids criminal penalties. Minn.Stat. § 65B.67. Policy limits measure the amount of protection afforded the insured. Also, policy limits, whether the statutory minimum or higher, are significant in determining when other auto liability policies covering the driver (if such is the case) will come into play.
A self-insurer must approach these risk management problems a little differently than a regular policyholder. The self-insurer’s exposure is its tort liability exposure, which the self-insurer may limit by purchasing an excess policy for claims against it over and above a certain amount. In relation to this excess policy, the self-insurer’s underlying personal exposure is its self-insured retention. This self-insurance, by statutory definition, is a plan of reparation. Minn.Stat. § 65B.43, subd. 15. Consequently, there is no need for a self-insurer to file any detailed plan. See Anderson v. Northwestern Bell Tel. Co., 443 N.W.2d 546, 549 (Minn.App.1989) (“[S]elf-insureds are not required to have the carefully worded, highly specific policy provisions, declarations and coverage limits required of insurance companies.”).
Ordinarily, a self-insured retention operates much the same as stated limits in a regular insurance policy. But not necessarily. Arguably, a self-insurer may, with respect to certain persons, place limits on its self-insured retention which are lower than the self-insured retention. The self-insurer will try to do this so that if there are other auto insurance policies also covering the driver of the car, such other insurance will no longer be excess but will then apply. In this ease, for example, the driver of the rented car, Bridget Begley, had her parents’ auto policy affording her coverage, and the question arises as to when this other insurance takes over.1
In this case Altra, Inc. (the Rental Agency) purchased an excess policy with coverage of “$2,500,000 in excess of $500,000 S.I.R.” (the initials refer to Self-Insured Retention). This excess policy, however, contained a “Renter's Exclusion” endorsement which appears to exclude claims such as McClain’s arising from accidents while the automobile is being operated by a lessee under a rental agreement.2
I understand the Rental Agency’s position to be that it is self-insured for claims arising when its own employees are driving its cars up to $500,000, after which the excess policy takes over for the next $2.5 million; but that as to claims arising where a lessee is operating the rented vehicle, while the personal exposure, if any, of the Rental Agency as owner of the rented car is limitless, the Rental Agency’s self-insurance exposure for the lessee-operator is the minimum statutory limits under the Minnesota No-Fault Act.
The issue then becomes: To what extent, if any, does the grant of self-insurance authority to the Rental Agency provide protection to persons operating the Rental Agency’s automobiles as lessee-operators?
*684It seems to me there are two possible ways in which the Rental Agency, as a self-insurer, might possibly provide coverage to its lessee-operators.
One possibility is that the self-insurer contracts with the lessee to protect the lessee the same as if the lessee had purchased a standard auto liability insurance policy for the rented car. Presumably the Rental Agency could place limits on this contractual coverage by so stating in the rental contract. The problem with this arrangement, however, is that the Rental Agency is a self-insurer, not an insurer. I doubt if a self-insurer is authorized to issue contracts of insurance.3
The second possibility is to treat the self-insurer as if it had purchased a policy of auto liability insurance for each of its vehicles with itself as the named insured. Such a policy, if purchased, would contain an omnibus clause extending coverage to permissive drivers as additional unnamed insureds.4 This seems to me the better approach and more in keeping with the concept of self-insurance. This brings up, however, another question: Can omnibus coverage limits ever be less than the coverage limits for the named insured?
Courts in other states appear to differ on this. For example, in Balboa Ins. Co. v. State Farm Mut. Auto. Ins. Co., 17 Ariz. App. 157, 496 P.2d 147 (1972), a rental car agency had purchased a liability policy with $100,000/300,000 coverage but with an endorsement limiting coverage for lessee-operators to $10,000/20,000, the statutory minimum. The court held these differing limits were permissible, relying on Rocky Mountain Fire & Cas. Co. v. Allstate Ins. Co., 107 Ariz. 227, 485 P.2d 552 (1971). Compare Southern Home Ins. Co. v. Burdette’s Leasing Service, Inc., 268 S.C. 472, 234 S.E.2d 870 (1977), where the South Carolina Supreme Court held that an auto rental agency’s self-insurance covered permissive users including lessee-customers, and that the self-insurance “substitutes for an insurance policy to the extent of the statutory policy requirements.” Id., 234 S.E.2d at 872 (emphasis added).
Wisconsin has a so-called “omnibus statute” which provides that coverage applicable to the named insured is to be extended to any person using the motor vehicle. Wis.Stat.' § 632.32(3), successor to Wis. Stat. § 204.30(3) (1967). In Smith v. National Indemnity Co., 57 Wis.2d 706, 205 N.W.2d 365 (1973), the car rental agency had liability insurance with coverage for itself, as the named owner insured, of $100,000/300,000; an endorsement to the policy, however, limited coverage for renters to $10,000/20,000. The Wisconsin Supreme Court held, applying its omnibus coverage statute, that the car rental agency could not have less coverage for its lessee-customers than for itself.
In National Indemnity Co. v. Manley, 53 Cal.App.3d 126, 125 Cal.Rptr. 513 (1975), the rental agency’s liability policy con*685tained an endorsement that it was excess over other insurance. The intermediate appellate court held that under the California Insurance Code an insurer could provide in its policy for only minimum statutory coverage for permissive users, but that in this instance the policy clause attempted to exclude permissive users from any coverage whatsoever and, hence, was void. 53 Cal.App.3d at 133, 125 Cal.Rptr. at 513. The court, therefore, ruled that permissive users would be entitled to coverage in the same amount as that specified by the policy for the named insured. See also Globe Indemnity Co. v. Universal Underwriters Ins. Co., 201 Cal.App.2d 9, 17-18, 20 Cal.Rptr. 73, 78-79 (1962).
I think arguments can be made both for and against restricting omnibus coverage to minimum statutory limits in cases where a self-insurer is engaged in the business of short-term car rentals.5 One would need, however, a better record than the one we have here to resolve this question. The record does indicate that the Minnesota Department of Commerce expects a self-insured rental agency to provide liability protection for its lessee-operators, and there is some indication that this coverage can be limited to the statutory minimum.6
On this record and for this case, I take the following position. The Rental Agency affords protection to its lessee-operators as if it had omnibus coverage. Car rental companies are a special case of self-insurance. The Rental Agency may limit its omnibus coverage — at least for lessee-operators — to the statutory minimum and it may do this in the rental contract. In this case, however, the Rental Agency went further and attempted to deny all omnibus coverage. This attempt was void.7 Therefore, left in place for omnibus coverage are the same “limits” for residual liability coverage as for the named insured, see Manley, supra, which in this case is either unlimited or $500,000, depending on how the renter's exclusion is construed. In any event, for the purposes of this case, the Rental Agency is responsible under the stipulation of the parties to pay $155,000.
I think the $500,000 self-insured retention refers to residual tort liability, not to first party no-fault benefits, and, therefore, no-fault economic loss benefits are the statutory minimum.

. The trial court ruled that Altra’s self-insurance was primary vis-a-vis Allstate's policy issued to Bridget Begley’s parents and affording coverage to Bridget Begley as driver of the rented car. This ruling was not appealed. Altra appeals only the issue of how much of its self-insured retention must be paid on the wrongful death claim before Allstate’s policy must pay.
This case has another twist. Altra, Inc., is a special division of Rent-A-Car and rents to persons whose own cars are disabled. Altra assumed that the customer's own policy would protect the customer under his or her temporary substitute coverage. Under this arrangement, Altra figured it could rent at a more competitive rate, and, indeed, the four women in this case found Altra’s rental rate to be the cheapest. Unfortunately for Altra, the Commerce Department struck down this arrangement. See footnotes 6 and 7, infra.

. Thus, while a car is out on rental, the excess policy does not provide coverage to either the Rental Agency or the lessee-operator, and the $500,000 retention figure is irrelevant. Hence the Rental Agency’s self-insurance for this rental risk is unlimited except as tort law limits tort liability and as perhaps auto liability insurance policies issued to others may come into play.

. Compare Nathanson v. Hertz Corp., 183 Cal.App.3d 78, 227 Cal.Rptr. 799 (1986), where Hertz, as a self-insurer, had a provision in its rental contract stating, "Lessor provides liability coverage for customer * * * in accordance with the standard provisions of a Basic Automobile Liability Insurance Policy, as required in the jurisdiction in which the Vehicle is operated * * * " -pjjg contract ⅛611 Went on to specify limits of $100,000/300,000, which were more than the statutory mínimums of $15,000/30,000. 183 Cal.App.3d at 80 n. 2, 227 Cal.Rptr. at 800 n. 2. The appellate court pointed out that Hertz, by contract, was "agreeing to protect its rental customer against his or her negligence that causes damage to a third person.” 183 Cal.App.3d at 82, 227 Cal.Rptr. at 802 (emphasis in original). The court held, for purposes of a bad faith claim against Hertz for the manner in which it settled a claim, that the higher contractually declared limits governed. The court noted that Hertz was not authorized to act as an insurer, bpt this did not prohibit plaintiffs bad faith claim under California's Unfair Claims Practices Act.

. Minn.Stat. § 65B.43, subd. 5, lists persons who are deemed an insured under a reparation plan even though not identified by name, and permissive users are not included. Apparently, however, the Minnesota Department of Commerce will not approve an auto insurance policy for sale in this state unless it contains a “permissive user" provision which extends coverage under the policy to anyone using the car with the permission of an insured. See affidavit of Assistant Commissioner O’Malley. Whatever the value of this affidavit, I take judicial notice that auto policies issued in this state contain an omnibus clause.

. No Minnesota case deals with this issue. Unlike Wisconsin, our state has no “omnibus statute.” On the omnibus clause generally, see Dairy land Ins. Co. v. Munson, 292 Minn. 141, 193 N.W.2d 476 (1972); Milbank Mut. Ins. Co. v. U.S. Fidelity, 332 N.W.2d 160 (Minn.1983).

. In its brief the Rental Agency says it now provides the statutory minimum coverage for residual tort liability to its lessee-customers and that this action has been approved by the Attorney General. This information is not in the record and cannot be considered by us.
Nevertheless, we do know that in the summer of 1987 (after the McClain accident), the Department of Commerce conducted an administrative hearing on the legality of the clause in Altra’s rental contract purporting to place sole responsibility for liability insurance coverage on the lessee customer. In September of that year the Commerce Commissioner ruled that the Rental Agency was in violation of the No-Fault Act because "it has not provided residual liability coverage * * * ” and because it attempted to "eliminate by contract the above coverages required by Minnesota law."
The Rental Agency was given 45 days to change the wording in its rental contracts to comply with the Commissioner’s decision. The record indicates that the Rental Agency did not appeal this decision but not whether it chose to comply. While the reasoning of the Commissioner is obscure, nothing in the Commissioner’s decision suggests that compliance would require more than the minimum limits mandated by the No-Fault Act.

.Altra’s rental contract, it will be recalled, said, "If customer’s insurance fails for any reason to afford coverage, customer shall be solely responsible." The administrative law judge ruled that this contract clause flatly contradicts Minnesota law which requires a car owner (except one who leases its car for 6 months or more) to be legally responsible for the car. See Minn.Stat. § 65B.43, subd. 4 (dealing with leased cars), and Minn.Stat. § 170.54 (the Safety Responsibility Act). Implicit in this decision, it seems to me, is that the self-insurer must provide omnibus coverage in at least the minimum statutory amounts for residual tort liability.