State Farm Mutual Automobile Insurance Company v. Merrill

Background

The dispute arose from a December 2, 2016 crash on Interstate 494 in Minnesota. Patrick Hayes, driving a Chevrolet Malibu in the wrong direction, collided head-on with a Jeep Cherokee driven by Dawn Chiodo. Chiodo, her daughter Dylan Bailey, and Bailey’s minor son, P.B., died. P.B. was occupying Chiodo’s Jeep when the crash occurred.

Bailey was the only named insured on a State Farm policy covering her Toyota Prius. P.B. was insured under that policy as a resident relative, although he was not named on it. Chiodo was a named insured under a Geico policy covering the Jeep, which provided underinsured-motorist coverage of $50,000 per person and $100,000 per accident. Hayes had a State Farm liability policy with limits of $100,000 per person and $300,000 per accident.

After the crash, State Farm agreed to distribute the Hayes policy’s $300,000 liability limit according to an allocation among the claimants. Under the proposed allocation, P.B.’s estate would receive $37,500 from the Hayes policy and would seek $100,000 in additional underinsured-motorist benefits under Bailey’s State Farm policy. State Farm declined to provide those additional benefits. Merrill, acting as trustee, asserted counterclaims for breach of contract and unjust enrichment.

Underinsured-Motorist Coverage

State Farm sought judgment on the pleadings, a ruling based on the pleadings that no material factual dispute remained and that the moving party was entitled to judgment as a matter of law. It argued that Minnesota’s No-Fault Act tied P.B.’s coverage to the vehicle he occupied because P.B. was an “insured” under Chiodo’s policy.

Merrill argued that P.B.’s legal custody by Bailey made him eligible for excess coverage under Bailey’s policy. He also argued that denying the coverage conflicted with the policy goals discussed in Minnesota case law and was unfair because P.B. was too young to have been named on a policy.

The court rejected those arguments. Under Minnesota law, an injured person occupying a vehicle generally must first look to the policy covering that vehicle. Excess coverage under another policy may be available only when the injured person was not an insured of the occupied vehicle. The court found that P.B. lived with Chiodo and Bailey and was not identified by name on another automobile insurance policy, so he met the statutory definition of an insured under Chiodo’s policy.

The court explained that P.B.’s insured status under Bailey’s policy did not change the result. Because he was also an insured under the policy covering the occupied vehicle, the No-Fault Act limited his underinsured-motorist coverage to that policy. The court therefore granted State Farm’s motion for judgment on the pleadings on the coverage issue.

Counterclaims

The court also granted State Farm’s motion under Federal Rule of Civil Procedure 12(b)(6) to dismiss Merrill’s counterclaims for failure to state a legally sufficient claim.

For breach of contract, the court held that Merrill did not plausibly allege that he and State Farm had entered into a contract requiring State Farm to pay $100,000 in additional benefits. The settlement allocation was signed by the claimants’ attorneys, not State Farm, and the related notice did not constitute a contract or an offer to contract concerning the additional benefits. Merrill also did not allege facts showing that State Farm accepted such an offer or that the parties had a meeting of the minds. The court rejected the argument that State Farm’s conduct created a contract implied from the parties’ actions.

For unjust enrichment, Merrill alleged that State Farm led him to believe additional coverage was available and retained the $100,000. The court acknowledged that State Farm should have decided and communicated its position more quickly, but held that poor business practices did not establish unjust enrichment. Minnesota law allowed State Farm to deny the claim, and Merrill did not allege that State Farm retained the money illegally or under an implied legal or quasi-contractual obligation.

Disposition

The court granted State Farm’s Motion for Judgment on the Pleadings and to Dismiss Merrill’s Counterclaims. The order states that the motion was granted and directs that judgment be entered. It does not state that the counterclaims were dismissed with or without prejudice.