Supreme Court puts brakes on out-of-state auto insurance company that refused to pay

The Minnesota Supreme Court today overturned a state’s Court of Appeals decision that had left some people who moved here without auto insurance coverage.

The court ruled in the case of James Yates, of St. Paul, who had coverage from Founders Insurance Company as an Illinois resident when he moved here in 2013. He didn’t know the company wasn’t licensed to sell insurance in Minnesota. He found out two months later when he collided with a car that had spun out of control on a highway ramp in Maplewood.

The Court of Appeals ruled Founders Insurance wasn’t required to pay Yates’ $19,000 medical bill because it wasn’t licensed to do business in the state. And in Illinois, it would have been required to only pay $1,000, not the $20,000 Minnesota requires for coverage. Yates argued the state’s no-fault insurance law mandated Minnesota’s minimum coverage.

Then-Court of Appeals judge Margaret Chutich acknowledged in her February ruling that at first glance, Minnesota law suggests that any motor-vehicle insurance policy issued anywhere by any insurer includes no-fault coverage while the insured vehicle is in Minnesota. But she said it only applies if the insurance company is authorized to write insurance in Minnesota.

Chutich now sits on the Minnesota Supreme Court and the majority there today said she’s wrong. Chutich did not take part in the decision.

The court rejected Founders’ claim that the wording of this portion Minnesota law gives it an “out” in settling with Yates (emphasis mine).

Every insurer licensed to write motor vehicle accident reparation and liability insurance in this state shall, on or before January 1, 1975, or as a condition to such licensing, file with the commissioner and thereafter maintain a written certification that it will afford at least the minimum security provided by section 65B.49 to all policyholders, except that in the case of nonresident policyholders it need only certify that security is provided with respect to accidents occurring in this state.

Since it’s not licensed in Minnesota, it’s under no such burden to provide minimum coverage under the state’s “no fault’ policy, the insurance company argued.

But the Supreme Court said this provision of the law doesn’t allow unlicensed insurers to escape claims like Yates’ (emphasis is the court’s).

“Notwithstanding any contrary provision in it, every contract of liability insurance for injury, wherever issued . . . includes basic economic loss benefit coverages and residual liability coverages . . . while the vehicle is in this state.”

“The plain language of the statute is clear. By its terms, the statute applies to all contracts of liability insurance for injury, wherever issued, including whether they were issued in Minnesota, Illinois, or some other place,” Justice G. Barry Anderson wrote in today’s opinion.