By Greg Johnson, Esq. The Minnesota No-Fault Automobile Insurance Act requires that every policy issued in Minnesota afford “a minimum of $40,000 for loss arising loss arising out of the injury of any one person, consisting of: (1) $20,000 for medical expense loss arising out of injury to any one person; and (2) a total of $20,000 for income loss ….” Minn. Stat. §65B.44, subd. 1.
Assume the injured insured’s gross weekly wage at the time of the accident is $900 and the insured had two insured motor vehicles. Section 65B.44, subd. 3(a) of the No-Fault Act states that “disability and income loss benefits shall provide compensation for 85 percent of the injured person’s loss of present and future gross income from inability to work proximately caused by the nonfatal injury subject to a maximum of $500 per week …” So, is the injured person in this hypothetical entitled to collect weekly benefits based on 85% of his weekly wage: (a) subject to the weekly rate-of-pay limit of $500, meaning the injured insured can only collect $500 per week; or (b) subject to a weekly rate-of-pay limit of $1,000, meaning the injured insured can collect $765 per week?
Prior to an 1985 amendment, when an injured person insured two or more motor vehicles (whether under the same policy or separate policies), the limit of liability for basic economic loss (a/k/a “no-fault) benefit coverages applicable to each insured vehicle were “stacked” (added together) by operation of law. Weiss v. Farmers Insurance Group, 302 N.W.2d 353, 355 & n.2 (Minn.1981). Thus, if an insured had two insured vehicles, the no-fault limits of liability would be $40,000 (medical expense)/$40,000 (income loss) instead of $20,000/$20,000. (See Minn. Stat. §65B.44, subd. 1).
The issue of whether an injured insured could “stack” the weekly rate-of-payment limit applicable to two or more insured vehicles under pre-1985 law was addressed by the Minnesota Supreme Court in Peterson v. Iowa Mut. Ins. Co., 315 N.W.2d 601 (Minn. 1982). The insurer in Peterson argued that the weekly rate-of-pay limit in section 65B.44, subd. 3, could not be added together (such that the injured insured in the above-hypothetical would only be entitled to $500 in weekly income loss benefits). The Supreme Court disagreed, holding that the weekly rate-of-payment limits could be added together in the same vertical fashion as the limits of liability. The Court noted that Iowa Mutual had presented “no evidence of a legislative intent to treat the rate-of-pay ceiling in section 65B.44, subd. 3, differently from the other limits set forth in section 65B.44.” Id. at 602. Further, a contrary rule “would force many households onto a budget well below their usual standards, regardless of the injured wage earner’s prior income or the number of policies on which premiums are being paid.” Id.
Thus, prior to the 1985 amendment, if the injured person had two insured vehicles, both the limits of liability and weekly rate-of-pay limit would be added together. As a result, the injured insured in the above-hypothetical was entitled to collect weekly income loss benefits of $765 ($900 x 85%, subject to weekly rate-of-pay limit of $1,000) rather than $500 ($900 x 85%, subject to rate-of-pay limit of $500).
So, what’s the result after 1985? At least one large motor vehicle insurer has recently argued that the Peterson holding does not apply to post-1985 claims. In 1985, the Minnesota legislature enacted a so-called “anti-stacking” amendment. Minn.Stat. § 65B.47, subd. 7 states as follows:
Unless a policyholder makes a specific election to have two or more policies added together the limit of liability for basic economic loss benefits for two or more motor vehicles may not be added together to determine the limit of insurance coverage available to an injured person for any one accident. An insurer shall notify policyholders that they may elect to have two or more policies added together.
Under the 1985 amendment, stacking by operation of law was eliminated. If two or more vehicles are insured under a policy, the named insured has to elect to add together the no-fault coverages on those vehicles and pay an extra premium. Otherwise, stacking of no-fault coverages is not permitted.
Is the Supreme Court’s decision in Peterson v. Iowa Mut. Ins. Co., 315 N.W.2d 601 (Minn. 1982) good law after 1985?
First, the 1985 legislature was aware of the Supreme Court’s holding in Peterson. While the 1985 amendment refers to the “limit of liability” applicable to each vehicle and does not specifically mention the weekly rate-of-pay limit, nothing in the 1985 amendment or legislative history suggests that the legislature intended to treat stacked no-fault coverages, including the weekly rate-of-pay limit, different from that which had been the case before 1985.
Second, since 1985, an insured has had to pay an extra premium to purchase the stacking option. If the weekly rate-of-pay limit applicable to two or more insured vehicles were not added together in the fashion described in Peterson, the stacking option would be essentially useless insofar as income loss benefits are concerned. Regardless of the number of vehicles insured, stacking premiums paid and the insured’s level of income, the injured insured would always be subject to the $500 weekly rate-of-pay ceiling. This would defeat one of the primary purposes for purchasing the stacking option. As the Minnesota Supreme Court noted in Meister v. W. Nat. Mut. Ins. Co., 479 N.W.2d 372 (Minn. 1992), “[i]n electing to increase coverage . . . an insured is choosing to add first-party coverage for losses not covered because of the limitations on no-fault benefits in the Act.” Id. at 375. One of the limitations an injured insured seeks to avoid by purchasing the stacking option is the weekly rate-of-pay ceiling. As a result, the Peterson holding should remain good law.
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