Court Opinion

ID: 9690006
Source: CourtListenerOpinion
Date Created: 2023-08-24 18:51:39.925647+00
Date Added: 2024-06-11T18:18:53.208231
License: Public Domain

DAVIES, Judge
(dissenting).
I respectfully dissent.
The doctrine of reasonable expectations should be applied here. That doctrine allows a court to construe an insurance policy without relying on “arbitrary rules which do not reflect real-life situations.” Atwater Creamery Co. v. Western Nat’l Mut. Ins. Co., 366 N.W.2d 271, 278 (Minn.1985). The doctrine recognizes that “people purchase insurance relying on others, the agent or company, to provide a policy that meets their needs.” Id. at 277. Further, nothing in Atwater
suggests that the doctrine of reasonable-expectations is not to be applied except in the presence of peculiar circumstances such as ambiguity or a hidden exclusion.
Hubred v. Control Data Corp., 442 N.W.2d 308, 311 (Minn.1989).
A farmer purchasing comprehensive liability insurance expects protection against ordinary, everyday risks — certainly including liability coverage for employee injuries when workers’ compensation does not apply. A farmer does not expect any subtle, but serious, gaps in “comprehensive” coverage.
In this case, the Johannessens paid a premium to obtain comprehensive coverage. It was their reasonable expectation that the policy would cover claims by injured employees. Their insurance broker himself sold the policy under the belief that it would cover claims of Johannessens’ workers if injured in the course of their employment.1 The broker, who had been in the insurance business for 16 years, admitted that he initially believed that the claim was covered under the policy; and even after he had studied the policy, including its declaration page, he could not be certain that it did not cover the Johannessens’ employee’s claim.
Two lines on the declarations pages are relevant. The first reads:
$100,000 Coverage L — Personal Liability (Each Occurrence).
A few lines below that line appears,
9303 INCL. INSURED FARM EMPLOYEES — $2,000 OR LESS IN PAYROLL.
The majority interpret this second line, as did the trial court, to be an exclusion of farm-employee coverage if employees are paid more than $2,000 in wages annually. In reality, the line — starting with “inch” — does not state an exception to the $100,000 per*567sonal liability coverage, but is rather inserted to define one element affecting the premium.
It is comparable to a provision typed on the declarations page in an automobile policy that says “multiple vehicle and air bag discounts have been applied,” or “auto and home premium advantage discounts have been applied,” or “50+ premium plan discount has been applied” or “vehicle symbol-16, class city-7A, territory-4”; or a provision typed on the declarations page of a life insurance policy that says “insured’s age — 45”; or provisions typed on the declarations page in a homeowner’s fire policy that say “ * * * family framed dwelling” “in town class 3.” All of these declaration page provisions relate, not to the extent of coverage, but to the cost of coverage.
In this case the troublesome line — troublesome to the majority (and thus, unfortunately, to the appellant) — is numbered “9303.” In the application for insurance is a page entitled “Schedule of Annual Rates.” There appears on it no reference to factor 9303, but there is reference to numbers sequential to it- — 9302 and 9301 — which suggests some relationship between these three items. Line 9301 identifies a situation where the farmer-applicant has “FULL-TIME Employees $5,000-7,999.99 Payroll” and designates premium surcharges of $14.00, $18.00, $23.00, and $27.00 for coverages of $50,000, $100,000, $300,000, and $500,000, respectively. Line 9302, in turn, reads “PART-TIME Employees $2,000-4999.99 Payroll” and designates premium surcharges of $5.00, $6.00, $8.00, and $10.00. These provisions identify, based on the answer of the applicant, the premium that will be charged.
In this case, with $100,000 of coverage, if the employee wages disclosed had been above $5,000, the extra charge would be $18.00 (identified by 9301). Because the employee wages were, in fact, between $2,000 and $5,000, the extra charge should have been $6.00 (identified by 9302). And, by implication, if the employee wages were less than $2,000 (as represented by Johannessen), the extra charge would be $0; and, as occurred, it would be identified on the policy declarations page by the sequential line number 9303. Thus, the declarations pages do not, in fact, contradict the Johannessens’ reasonable expectations.2
Now to the body of this strikingly complex printed policy and the provision that actually cost the Johannessens coverage:
3. Employer’s Liability — Farm Employees Coverage L — Personal Liability * * ⅝
b. We agree to provide this coverage only if total remuneration to all farmer employees, other than persons insured, is $2,000 or less in the 365 days preceding the date of occurrence.
(Emphasis in original.)
The history of how the workers’ compensation has been applied to farm employees explains how this $2,000 exclusion showed up in the Johannessens’ policy to deny them their reasonable expectations.
All farm operations were originally excluded from workers’ compensation. In 1971, however, the Supreme Court urged that farm workers be covered by workers’ compensation, noting:
Modern farming on a large scale involves the same hazards as many industrial operations. If the employees on large-scale farms are to be covered by workmen’s compensation, however, it must be done by the legislature.
Nelson v. Harder Royal Breeders, Inc., 290 Minn. 302, 307, 187 N.W.2d 634, 637 (1971). In 1973, the Minnesota Legislature responded to the Supreme Court suggestion by requiring all farmers who paid more than $2,000 in annual wages to provide workers’ compensation to their employees. Small farm operations — defined as those paying less than $2,000 a year in wages — were left, however, subject to common law liability. 1973 Minn. Laws ch. 657. Then, in 1978, the legislature modified the law so that more farmers, those who paid up to $1,000 in annual wages, were again excluded from workers’ compensation — and again exposed to eom-*568mon law tort liability. 1978 Minn. Laws ch. 574. In 1980, the amount was raised to $8,000. 1980 Minn. Laws ch. 556, § 12. That is the law today.
Those farmers excluded from workers’ compensation routinely protect themselves by purchasing comprehensive liability insurance policies, policies more or less similar to the one purchased by the Johannessens. Unfortunately, the Johannessens’ insurer, Reinsurance Association of Minnesota (RAM), used a comprehensive personal liability policy form that retains the $2,000 limit on employee wages dating back to the 1973-78 law. Thus, when read literally, the RAM “comprehensive” policy' — without any basis in law, reason or logic, but solely as a historical accident — creates a gap in liability coverage for any farmer who pays more than $2,000 in annual wages and does not also buy a workers’ compensation policy (an obligation that starts at $8,000). I see no reason for denying the Johannessens coverage simply because RAM failed to replace its obsolete form with one that reflects the current dividing line between workers’ compensation and common law liability, a law that has been in effect since 1980!3
I note that the majority says the policy “does not purport to be a workers’ compensation substitute.” That is true, but the policy does purport to provide comprehensive liability coverage, which sounds like a contract to cover farmers up to the point where they are obligated to carry workers’ compensation. The Johannessens had no obligation under Minnesota law to carry workers’ compensation because their employees earned nowhere near the $8,000 that triggers workers’ compensation responsibility. RAM did not give them a choice of a policy other than the one with the $2,000 limitation. There was no quotation to them of a price on a policy with an $8,000 floor rather than the $2,000 floor. There was no evidence presented that the insurer offered as a choice of coverage an endorsement with the appropriate $8,000 figure to cancel out the $2,000 limit.
The Johannessens had a reasonable expectation that RAM would keep its policies up-to-date and thus provide appropriate coverage. I would reverse and remand on the basis of reasonable expectations.
I would alternatively treat this case as an appropriate occasion for reformation of the insurance policy. It is unconscionable for RAM to claim an intent to leave the gap in coverage that blind-sides the Johannessens. And it is obvious that the Johannessens had no intent to buy such a defective comprehensive liability policy. This court should order that the 1970s policy form — pulled off some dusty shelf — be reformed to match the policy the parties intended to buy and to sell in the 1989 insurance marketplace.
There is yet a third reason for a reversal. It is unconscionable for the company to sell— without conspicuous notice — a policy that leaves such a devastating gap in coverage. That defect is in no way relieved by the fact that an action is proceeding against the agent for failure to obtain the appropriate coverage. For RAM to sell such a defective policy is unconscionable, independent of agent liability. Thus, I would rule that to have any number other than $8,000 in the exclusion is an unconscionable — and invalid — provision.
I would reverse.

. In his deposition, the broker was asked and answered the following:
Q. Was it your impression that if Mr. Johan-nessen didn't pay Eight Thousand ($8,000) Dollars in the previous calendar year, that employees injured on the property were covered when you wrote that policy in ’86?
A. You're referring to what my thoughts were in '86?
Q. Right. Up until Mr. Decker’s accident.
A. Yes.
Q. And is that the basis of why you told them that when they reported the accident of Mr. Decker, that you felt that they did have coverage for it?
A. I felt that they should have coverage.

. Perhaps the doctrine of reasonable expectations is not required here. Simply applying the general rule that ambiguities in insurance policies are read against the insurer might be sufficient.

. The only possible reason for denying coverage that I can discern would be misrepresentation on the application. But no misrepresentation has been found and neither insurer nor trial court nor majority even assert that theory, let alone rely on it.