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Jorgensen v. Knutson

June 19, 2003

ROYAL JORGENSEN, ET AL., RESPONDENTS,
v.
DEBRA L. KNUTSON, DEBTOR, MILBANK INSURANCE COMPANY, PETITIONER, APPELLANT.



Office of Appellate Courts

SYLLABUS BY THE COURT

The default statutory time-computation method established in Minn. Stat. § 645.15 (2002) applies to the ten-days' notice requirement for automobile insurance policy cancellations due to unpaid premiums as described in Minn. Stat. § 65B.16 (2000).

When an insurance company that seeks to cancel a policy for unpaid premiums provides at least ten calendar days' notice, but fails to provide the ten days' notice as calculated by Minn. Stat. § 645.15 (2002), the consequence of such insufficient notice is an extension of the notice period through the end of the accurately calculated ten-day period.

The district court never addressed the merits of respondents' argument that they were entitled to partial summary judgment based on the legal theories of estoppel and risk of delivery, and because our review is limited to those issues decided by the lower court, we remand to the district court to decide these issues in accordance with this opinion.

While considering "what a jury could award" is an appropriate factor in assessing the reasonableness of a Miller-Shugart settlement, it cannot be considered in isolation.

Affirmed in part, reversed in part, and remanded.

The opinion of the court was delivered by: Anderson, Paul H., Justice.

Concurring in part and dissenting in part, Meyer, J. and Page, J.

Heard, considered, and decided by the court en banc.

OPINION

Debtor Debra Knutson and her husband were insured by an automobile liability policy with garnishee-appellant Milbank Insurance Company. When the Knutsons failed to make their first premium payment for the relevant policy period, Milbank sent a notice of cancellation notifying them that their coverage would cease on a specific date at 12:01 a.m. unless the full policy premium was received before that date. Ten days after this cancellation date, Debra Knutson was involved in an automobile accident in which creditor-respondent Royal Jorgensen was injured. Six days after the accident, Milbank received and deposited a check from the Knutsons for the premium payment, but on that same day, Milbank sent the Knutsons a memorandum stating the policy had been cancelled. Milbank fully refunded the payment five days later.

Debra Knutson sought but was denied coverage by Milbank, which asserted that the Knutsons' policy had been cancelled due to nonpayment. Debra Knutson then entered into a Miller-Shugart settlement in which she confessed judgment in a specific amount and allowed Jorgensen and her husband to pursue an action against Milbank. The Miller-Shugart settlement resulted in a district court judgment. The Jorgensens then commenced a garnishment action against Milbank. On a motion for summary judgment, the district court ruled in favor of the Jorgensens on the ground that Milbank had not given the ten-days' cancellation notice required by Minn. Stat. § 65B.16 (2000). Following a bench trial, the court found the Miller-Shugart settlement to be reasonable and entered judgment in favor of the Jorgensens, finding Milbank liable for two-thirds of the Miller-Shugart settlement amount. The court of appeals affirmed. We affirm in part, reverse in part, and remand.

Debra Knutson and her husband had been insured off and on since 1987 under automobile liability policies with Milbank Insurance Company.*fn1 On September 26, 1993, Milbank sent the Knutsons a renewal insurance policy and invoice for the period of October 26, 1993 through April 26, 1994. The invoice contained an "IMPORTANT NOTICE" instructing the Knutsons not to pay the premium until they received their bill. When no premium payment had been made by or after the October 26, 1993 due date, Milbank sent a notice of cancellation on November 10 warning the Knutsons that coverage would cease at 12:01 a.m. on November 22, 1993, unless the full policy premium was received before that date.

The Knutsons maintain that they mailed their payment on November 20, 1993, the date written on their check. Milbank asserts that it did not receive the Knutsons' check until December 8, 1993. Milbank asserts that, in accordance with company policy, it deposited the Knutson check on the same day it was received. On that same day, however, Milbank sent the Knutsons a "Memorandum of Cancellation" stating that (1) the policy had been cancelled, (2) it had received the Knutsons' delayed payment, and (3) if there were no outstanding charges on the account, a full refund would be issued. Five days later, on December 13, 1993, Milbank mailed the Knutsons a full refund of their payment.

Meanwhile, on December 2, 1993, Debra Knutson was involved in an automobile accident with a vehicle in which Royal Jorgensen was a passenger. Royal Jorgensen was injured in the accident and suffers from chronic neck pain and headaches that have left her functionally disabled. When the insurer of the driver of the vehicle carrying Royal Jorgensen attempted to discuss recovery with Milbank, Milbank sent a letter stating that the Knutsons' policy had been cancelled. The Jorgensens then commenced an action against Debra Knutson. Knutson subsequently entered into a Miller-Shugart settlement*fn2 with Royal Jorgensen and her husband, Thomas Jorgensen, in which the parties agreed to the following: (1) Royal Jorgensen's damages exceed $150,000; (2) a jury could render a verdict against Debra Knutson in excess of that amount; (3) the Jorgensens would seek collection of the judgment solely from the Knutsons' insurance carrier, Milbank; (4) Debra Knutson consented to the entry of judgment against her and in favor of the Jorgensens; and (5) the parties would be bound by the amount the court determined to be reasonable, but this amount was to be payable only by Milbank. The settlement was filed with the Clay County District Court and a judgment consistent with the settlement was entered on December 13, 1999.

The Jorgensens served Milbank with a garnishment summons, and on June 22, 2000, the district court granted the Jorgensens' motion to file a supplemental complaint against Milbank. Milbank and the Jorgensens brought cross-motions for summary judgment on the issue of whether the insurance policy was in effect at the time of the accident. After a hearing, the court denied Milbank's motion and granted the Jorgensens partial summary judgment. The court used the computation method described in Minn. Stat. § 645.15 (2002) to determine that the ten-days' notice of cancellation required under Minn. Stat. § 65B.16, the automobile insurance cancellation statute, had not been given. It then found that the cancellation was not legally effective.

On June 19, 2001, a bench trial was held on the reasonableness of the Miller-Shugart settlement. The trial consisted of testimony about Royal Jorgensen's injuries, the circumstances leading to the settlement, and expert testimony on behalf of each party as to the reasonableness of the settlement. On July 31, 2001, the district court found that a jury "could have" awarded Royal Jorgensen damages equal to $150,000 and that the settlement was reasonable. The court considered many factors in determining reasonableness, including the following: what a reasonably prudent person would have done in the defendant's place; the presence of an undisputed injury; the risks of trial; expert testimony for both parties on the issues of the likely size of a jury award, the extent of damages, and liability; and the judge's own personal experience with jury awards in similar cases. The court then entered judgment in favor of the Jorgensens in the amount of $100,000, the Milbank policy limit. Milbank appealed and the court of appeals affirmed. Milbank then petitioned for and was granted review from this court.

I.

The first issue to be decided is whether Milbank's notice of cancellation was statutorily sufficient. To answer this question, we must decide whether the default statutory time-computation method established in Minn. Stat. § 645.15 applies to the ten-days' notice requirement for automobile insurance policy cancellations as described in Minn. Stat. § 65B.16. The district court decided this issue on summary judgment when it found that Minn. Stat. § 645.15 does apply to Minn. Stat. § 65B.16.

Our standard of review of a summary judgment award "is limited to determining whether there are any genuine issues of material fact and whether the district court erred in its application of the law." Amaral v. St. Cloud Hosp., 598 N.W.2d 379, 383 (Minn. 1999). We apply de novo review to statutory interpretation and interpretation of insurance contracts. Dohney v. Allstate Ins. Co., 632 N.W.2d 598, 600 (Minn. 2001). In this case, our interpretation of Minn. Stat. § 65B.16 and, in particular, whether it is governed by Minn. Stat. §á645.15, will determine whether Milbank's notice of cancellation was sufficient. We therefore review this issue de novo.

Minnesota Statutes ยง 65B.16 establishes that an insurer must give at least ten days' notice before canceling an automobile liability insurance policy for ...


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