Court Opinion

ID: 9743305
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:30:32.170387+00
Date Added: 2024-06-11T07:24:40.469958
License: Public Domain

STRINGER, Justice
(dissenting).
I respectfully dissent. While I agree with many of the concerns expressed by the majority regarding developments in the law of underinsured motorist (UIM) coverage that seem to have led to what appears to be an imbalance in the rights of injured parties with respect to their UIM coverage, I do not agree with the conclusion to write out of our carefully crafted UIM jurisprudence the established principle that a UIM insured must negotiate a “best settlement” under the circumstances with the tortfeasor. As the majority notes, this court has been instrumental in shaping the law on UIM coverage. E.g., Employers Mut. Cos. v. Nordstrom, 495 N.W.2d 855 (Minn.1993), Broton v. W. Nat’l Mut. Ins. Co., 428 N.W.2d 85 (Minn.1988), Schmidt v. Clothier, 338 N.W.2d 256 (Minn.1983). We should not now condone a practice that creates an imbalance between the rights of the respective parties. Therefore, I respectfully dissent.
I begin with black letter statutory and ease law that a UIM claim is premised on a showing that the vehicle causing the injury is. in fact underinsured, Broton, 428 N.W.2d at 90 — that is, the tortfeasor’s liability policy limit is less than the amount needed to compensate the insured for actual damages. Minn.Stat. § 65B.43, subd. 17 (2000).1 From this fundamental principle, it is difficult to explain how or why the claimant here should be permitted to assert a UIM claim against his carrier, American Express Property & Casualty Insurance Co. (AMEX), when he settled his claims for injuries for $20,000 against the tortfeasor insured by a liability policy limit of $50,000. By definition the tortfea-sor here is not underinsured because there was an additional $30,000 in liability coverage available to compensate the claimant for his damage. The claimant offered no explanation for his settlement at 40 percent of policy limits in his deposition, other than that he thought that was all the tort-feasor’s insurer would pay-which makes the point so succinctly that concerned Judge Davies in his concurrence cited by the majority: the purpose of UIM coverage is not to supplement a less-than-policy-limits settlement that on its face does not, in all probability, represent all that the claimant could have recovered from the tortfeasor’s insurer. United States Automobile Ass’n v. Morgan, C1-96-1333, 1997 WL 360595 at *3 (Minn.App. July 1, 1997) (Davies, J., concurring specially), rev. denied (Minn. Oct. 1, 1997). As the United States District Court certifying the cover*608age questions put it, in the absence of the UIM coverage, it would appear doubtful that the plaintiff would have settled for $20,000. The ruling of the majority places in the sole and exclusive control of the UIM insured to declare the tortfeasor un-derinsured, even though he may not be, and turn to his own UIM coverage.
As the majority notes, in Schmidt v. Clothier we held that a claimant may settle for less than the tortfeasor’s policy limits and still maintain a UIM claim. 338 N.W.2d at 261. Ironically however, the ruling of the majority here puts in place the very concern we had in Schmidt — that a below-the-limits settlement would provide a lack of incentive for the claimant to obtain the best settlement and lessen the incentive of the liability carrier to make the best offer, and further, underinsurance benefits would be converted to third party coverage. Id. This is precisely what the majority is condoning here.
Inherent in Schmidt, 338 N.W.2d at 260-61, and restated again in Nordstrom, 496 N.W.2d at 857, is that an injured party has two options with respect to UIM coverage — pursue a tort action to conclusion in the trial court and if the judgment exceeds the liability limits, pursue the un-derinsured carrier; or second, settle the tort claim “for the best settlement” and give the Schmidh-Clothier notice to the underinsurer with the opportunity to subr stitute its payment for that of liability carrier for the tortfeasor. In Nordstrom, we stated:
* * * the injured claimant can either (1) pursue a tort claim to a conclusion in a district court action, and then, if the judgment exceeds the liability limits, pursue underinsured benefits; or (2) settle the tort claim for “the best settlement,” give a Schmidt-Clothier notice to the underinsurer, and then maintain a claim for underinsured benefits.
495 N.W.2d at 857. In answering the first certified question in the negative, this court has abandoned the best settlement principle and the imbalance we feared in Schmidt is now firmly established in our UIM jurisprudence.
In a curious contradiction, the majority proclaims that with the 1985 legislative amendment, the state of the law is “exactly as it would have been in 1983 had the dissenters prevailed in Schmidt * * While that may have been true before the court’s ruling here, it is not true after the ruling because the dissenters in Schmidt emphasized the need for the “best possible settlement” to achieve the balance of affording the UIM carrier the right to manage the claim process without placing a financial burden on the claimant. Schmidt, 338 N.W.2d at 264 (Todd and Amdahl, JJ., concurring and dissenting, Scott, J., dissenting). In now dispensing with the need for the best possible settlement, the majority unravels the logical fabric woven by the dissenters in Schmidt that achieved the balance they sought and the legislature later adopted in 1985.
Claimant argues that the substitution of draft procedure set forth in Schmidt provides adequate protection to the UIM carrier. It does not, because if the UIM carrier declines to substitute its own payment for that of the tortfeasor’s liability carrier, it risks exposure to a claim for the gap between the settlement amount and the tortfeasor’s policy limits that may simply have come about due to a weak case of liability — an exposure for which the UIM carrier was not paid a premium and has no obligation to provide. On the other hand, if the UIM carrier substitutes its draft it runs the risk of not being able to recover *609its payment in a subrogation claim. Thus substitution of the draft by the UIM carrier is not protection to the UIM carrier against the UIM insured agreeing to less than a best settlement.2
Thus, I would conclude that the UIM carrier must be permitted to challenge its insured’s settlement with the third party tortfeasor as to whether it was a best settlement under the circumstances. Respondent’s argument that it would be unworkable to establish such a process because it would inject the court into a quagmire of issues relating to whether the settlement was the best is an overstatement. The majority notes the variety of proposals for such an analysis. Whatever the process, it could simply be made a part of the UIM arbitration and take into account a variety of facts that would bear on whether the settlement with the tort-feasor was in fact the best, or whether it was reached for some collateral purpose— such as relating to UIM coverage. Inquiry could be directed toward the percentage of the settlement relating to the tort-feasor liability limit, the benefit to the claimant of an early resolution of his or her claim in avoiding protracted litigation, the time value of an immediate payment, or any combination of these or other considerations relevant to whether the settlement was in fact the best. It need not delve into questions of liability or damages. Faced with circumstances as obvious as those now before the court, the task would not be difficult.
Therefore, I respectfully dissent and would bring an immediate halt to what appears to be misuse of the nature and purpose of UIM coverage.

. Minnesota Statutes § 65B.43, subd. 17 provides that a motorist is uninsured if "a bodily injuiy 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.”

. Judge Davies recognized this in his special concurrence in Morgan, C1-96-1333, 1997 WL 360595 at *3.