Farm Bureau Mutual Insurance Co. v. National Family Insurance Co.

Citations: 474 N.W.2d 424; 1991 Minn. App. LEXIS 906; 1991 WL 166246Docket: No. C6-91-631

Court: Court of Appeals of Minnesota; September 3, 1991; Minnesota; State Appellate Court

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An appeal was made against the trial court's decision that an insured individual cannot waive an insurer’s subrogation rights, leading to a reversal and remand of the case. The facts are straightforward: on December 21, 1981, Kevin Eckblad, driving his father's insured grain truck, ran out of gas and went to retrieve fuel using his pickup truck, which was insured by Farm Bureau. While he and his father were refueling the grain truck, they were struck by an uninsured driver, resulting in Eckblad’s father's death and Eckblad's severe injuries.

Eckblad received $50,758.64 from Farm Bureau for no-fault benefits and subsequently filed a claim for benefits under the National Family policy covering the grain truck. In September 1983, Eckblad entered into a settlement agreement with National Family for $250,000, which included a release of all claims against the insurer related to the accident, but explicitly preserved claims against other insurers, including Farm Bureau.

Following this, Farm Bureau sought reimbursement from National Family for the no-fault benefits paid to Eckblad. National Family refused, arguing the settlement agreement released them from further liability. Farm Bureau filed an action in 1984, which culminated in a summary judgment in their favor, awarding $50,758.64 plus interest, totaling $119,387.80 in January 1991.

In February 1991, National Family sought to amend a judgment, arguing that the trial court incorrectly applied the interest rate under Minn. Stat. 549.09 instead of the penalty interest rate under Minn. Stat. 65B.54, subd. 2. National Family contended that interest should accrue from the date Farm Bureau demanded payment, not from the accident date. The trial court did not address this motion, leading National Family to appeal.

The appeal raises two issues: (1) whether Eckblad can waive Farm Bureau's subrogation rights to deny recovery of no-fault benefits paid under Minn. Stat. 65B.47, subd. 6; and (2) whether the trial court erred in determining the applicable interest rate.

The appellate court's review of legal questions is de novo. Farm Bureau asserts that National Family, as a priority obligor under Minn. Stat. 65B.47, subd. 6, must reimburse it for the $50,758.64 paid to Eckblad, arguing that it mistakenly covered economic loss benefits that National Family was responsible for. National Family counters that a settlement and release extinguished its obligation.

Minnesota law delineates insurer priorities in no-fault scenarios, where the priority insurer is responsible for covering basic economic loss benefits. If a lower priority insurer pays these benefits, it is entitled to reimbursement from the priority insurer, as supported by the subrogation rights outlined in Minn. Stat. 65B.47, subd. 6. However, since National Family paid Eckblad $250,000 for a release from claims, the rights of the subrogee (Farm Bureau) depend on the rights of the subrogor (National Family), which lacks standing due to the settlement. Thus, Farm Bureau's ability to claim reimbursement is contingent upon National Family's rights and obligations.

Subrogation rights of insurers regarding basic economic loss benefits are limited under Minnesota law. Specifically, an insurer may assert subrogation only to avoid duplicate recovery and can only pursue claims against the insured. In the case of Milbrandt, the court addressed subrogation under Minn.Stat. 65B.53, while the current issue pertains to Minn.Stat. 65B.47, subd. 6, which allows an insurer paying no-fault benefits to step into the rights of the claimant. However, the court determined that Farm Bureau's subrogation claim against National Family is barred because Eckblad, the insured, released his claims against National Family. Consequently, Farm Bureau can only assert rights that belong to Eckblad, who had waived those rights. Farm Bureau also incorrectly relied on the Travelers Indem. Co. v. Vaccari case, which involved a different context of notified subrogation claims. National Family argued that Farm Bureau failed to notify them of the claim payment, further negating Farm Bureau’s subrogation rights. As a result, the court ruled that Farm Bureau could not recover the amount paid to Eckblad, reversing the lower court’s judgment and directing that the complaint be dismissed. The court also granted National Family’s motion to strike parts of Farm Bureau’s brief.