Berkley National Insurance Company v. Franklin

Background

William Franklin was driving a car rented by his employer, ISD 152 Moorhead, during a business trip when another vehicle struck his car in Duluth, Minnesota, on April 25, 2017. Franklin died on May 3, 2017, and his Estate alleged that his death resulted from injuries suffered in the accident. The other driver had bodily-injury liability coverage of up to $100,000. The Franklin Estate released its claims against that driver and American Family Insurance in exchange for the $100,000, while reserving claims for future underinsured-motorist benefits.

The Estate then sought benefits under a business auto policy that Berkley issued to the School District. The policy provided $1 million in underinsured-motorist coverage for each covered accident. Its definition of a covered automobile used Symbol 6, which generally covered automobiles owned by the insured when state law required uninsured-motorist coverage. The parties agreed that the School District did not own the rental vehicle, and neither party claimed that the vehicle was a temporary substitute for a covered automobile.

Berkley filed a declaratory-judgment action seeking rulings that the policy did not cover the Estate’s claim and that the Estate was not legally entitled to recover damages from the owner or driver of an underinsured vehicle. The Estate counterclaimed for rulings that Franklin was an insured under Minnesota law and that the Estate was legally entitled to recover damages from the owner or driver of an underinsured vehicle. The cross-motions for partial summary judgment addressed Berkley’s first claim and the Estate’s first counterclaim.

Legal standard

The court explained that summary judgment is appropriate when there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The court viewed the evidence in the light most favorable to the party opposing each motion.

Coverage analysis

The court considered Minnesota Statutes sections 60A.08, subdivision 12, and 65B.49, subdivision 5a. Section 60A.08, subdivision 12, requires commercial automobile liability policies to provide coverage for rented vehicles as required by chapter 65B. Section 65B.49, subdivision 5a, requires specified automobile insurance plans to extend uninsured- and underinsured-motorist coverage to the operation or use of rented vehicles.

Berkley argued that these statutes did not require coverage for a rental vehicle because the policy was issued to an organization, the School District, rather than to a natural person. The court rejected that argument. Relying on the Minnesota Supreme Court’s decision in Turner v. Mutual Service Casualty Insurance Co., the court concluded that the statutes require commercial policies to provide the listed coverages for rental vehicles, including underinsured-motorist coverage.

Berkley also argued that Minnesota Statutes section 65B.49, subdivision 3a(5), prevented the Estate from collecting benefits under Berkley’s policy because the policy did not specifically cover the occupied vehicle. The court rejected that argument as well. It distinguished West Bend Mutual Insurance Co. v. Allstate Insurance Co., explaining that West Bend involved a vehicle with primary coverage under an owner’s policy and a claim for additional primary coverage. Here, the optional insurance provided by Enterprise Rent-A-Car had been declined, and the Estate argued that Berkley was the sole insurer of the rental vehicle. The court also noted that West Bend did not involve the statutory rental-vehicle coverage provisions at issue here.

Ruling

The court concluded that Minnesota law required the Berkley policy to extend underinsured-motorist coverage to the rental vehicle Franklin was operating. It further concluded that Berkley bore sole primary underinsurance liability for the loss identified in the Estate’s claim.

Judge Donovan W. Frank denied Berkley’s motion for partial summary judgment. He granted the Franklin Estate’s motion for partial summary judgment and ordered Berkley to provide underinsured-motorist coverage to the Estate for the claim under the policy.