Rosenberger v. American Family Mutual Insurance Co.

309 N.W.2d 305, 1981 Minn. LEXIS 1390

• Court: Supreme Court of Minnesota
• Decided: August 21, 1981
• Docket: 51229
• Status: Published

Opinions

TODD, Justice.

Respondent, Jean Jernigan Rosenberger (Rosenberger), was injured in an accident involving two uninsured motorcycles. Ro-senberger owned an automobile but had failed to obtain the mandatory insurance coverages. Rosenberger filed a claim with appellant, American Family Mutual Insurance Company (American Family), her stepfather’s automobile insurer, for uninsured motorist benefits. American Family denied the claim, contending that Rosenberger was not a resident of her stepfather’s home at the time of the accident and that her ownership of an automobile and failure to insure it barred her recovery. The matter was submitted to a panel of three arbitrators, a majority concluding that Rosenber-ger was not a resident of her stepfather’s home at the time of the accident. On review of this finding, the district court concluded that Rosenberger was a resident of her stepfather’s home at the time of her accident and that her recovery of uninsured motorist benefits was not barred by her ownership of an automobile or her failure to insure it. We affirm.

On June 9, 1977, Rosenberger was riding as a passenger on an uninsured motorcycle. The time was approximately 2:30 a. m., and the motorcycle was traveling in an easterly direction on State Highway No. 10 just west of Big Lake, Minnesota. The rear tire of the motorcycle blew out, causing it to skid. Rosenberger jumped off the motorcycle, landing on her left knee. The injury to her left knee caused her to be unable to move or stand after the accident.

Another motorcycle carrying two persons with whom Rosenberger and her companion were traveling was approximately three-quarters of a mile ahead of the Rosenberger motorcycle when the tire blew out. When the occupants of the second motorcycle realized that Rosenberger and her companion were no longer behind them, they turned the motorcycle around and headed back down the shoulder of the road in the wrong direction. Rosenberger was attempting to move with the companion’s help when they realized that the other motorcycle was right on top of them. Unable to move out of the way, Rosenberger’s right leg was run over and crushed by the motorcycle. The damages sustained by Rosenberger exceed $50,-000.

Because both of the motorcycles involved in the accident were uninsured, Rosenber-ger sought to recover uninsured motorist benefits under the two policies of no-fault automobile insurance belonging to her stepfather. Rosenberger owned a Mustang automobile but had not obtained no-fault insurance. She had falsely stated to the Motor Vehicle Division that she had insurance.

American Family, the insurer that issued both uninsured motorist policies to Rosen-berger’s stepfather, denied coverage. American Family claimed that Rosenberger was not a member of her stepfather’s household and therefore not covered under the policies. American Family also claimed that Rosenberger’s ownership of an automobile and the fact that she had no insurance on her automobile prevented coverage under its policy and under the No-Fault Act.

Pursuant to an arbitration clause in the insurance policies, the dispute was submitted to a panel of three arbitrators. After the hearing, two of the arbitrators concluded that Rosenberger was not a resident of her stepfather’s home and therefore was not covered by the uninsured motorist provisions of the policies. The third arbitrator filed a dissenting opinion in which he disagreed with the majority’s finding that Ro-senberger was not a resident of her stepfather’s home.

Rosenberger’s attorney then moved the district court to vacate the arbitration award on the ground that the arbitrators had exceeded their authority in determining the residency issue and requested that this issue be determined de novo by the district court. After hearings, the district court concluded that the arbitrators’ determination of residency should be reviewed de novo. The court then concluded that Ro-senberger was a resident of her stepfather’s home at the time of the accident and that she was entitled to uninsured motorist benefits under the American Family policies. American Family appeals that determination.

The issues presented by this appeal are:

1. Whether the district court erred in reviewing the arbitrators’ determination de novo.

2. Whether the evidence is sufficient to support the district court’s finding that respondent was a resident of her stepfather’s home at the time of the accident.

3. Whether the district court erred in concluding that respondent’s recovery was not barred by her ownership of an automobile or her failure to insure it.

1. American Family’s first argument is focused on the scope of review applied by the district court in its reconsideration of-the residency question. American Family claims that the question of Rosenberger’s residency in her stepfather’s home was a question of fact to be determined by the arbitrators, thus precluding de novo review. Alternatively, American Family argues that respondent is estopped, by submitting the issue of residency to the arbitrators, from now claiming that issue is not arbitrable. Resolution of this issue is governed by the question of whether the arbitration clause is broad enough to encompass the question of coverage. The arbitration clause states, in part, as follows:

If any person making claim hereunder and the company do not agree that such person is legally entitled to recover damages from the owner or operator of an uninsured automobile because of bodily injury to the insured, or do not agree as to the amount payable hereunder, then each party shall, upon written demand of either, select a competent and disinterested arbitrator.

In Dunshee v. State Farm Mutual Automobile Insurance Co., 303 Minn. 473, 480, 228 N.W.2d 567, 572 (1975), this court held that whether an arbitration clause of almost identical language encompassed coverage questions was “reasonably debatable.” Dunshee went on to state that because the coverage question was not clearly encompassed by the arbitration clause, the whole dispute should initially be determined by arbitration, subject to the right of judicial review. See id. 483-84, 228 N.W.2d at 573.

In U. S. Fidelity & Guaranty Co. v. Fruchtman, 263 N.W.2d 66, 71 (Minn.1978), the court was confronted with the question of the scope of review applicable to a coverage question initially determined by the arbitrator under the Dunshee procedure. The Fruchtman court stated:

Where coverage is preconditioned on the establishment of facts, such as in this case, concerning either the unidentifiability of the operator or owner of a “hit- and-run vehicle” or its physical contact with the insured’s vehicle, such factual dispute must be tried and resolved by the trial court accompanied by findings of fact. Rule 52.01, Rules of Civil Procedure. If such factual preconditions are not established, coverage is not afforded by the policy, and the objecting party must be protected from the burden of unauthorized arbitration of both the coverage dispute and the merits of the insured’s claim.

In this case, the arbitrability of the coverage dispute is challenged in judicial proceedings to vacate the arbitrator’s award. In State v. Berthiaume, Minn., 259 N.W.2d 904, we held that such proceedings are de novo; that the trial court is not bound by the arbitrator’s determination; that the objecting party has the burden of proving the invalidity of the arbitrator’s award; and that where the arbitrator has clearly exceeded his powers, the award must be vacated.

Based on the policy language, it seems clear that the question of whether Rosen-berger was a resident of her stepfather’s home is equivalent to the question of whether she is covered under the insurance policies. The uninsured motorist coverage in the American Family policies provides insurance for an “insured.” An insured is defined in the policy as “the named insured as stated in the policy and any person designated as named insured in the declarations and, while residents of the same household, the spouse of any such named insured and relatives of either * * The policy defines a relative as “a person related to the named insured who is a resident of the same household, but does not include any person who, or whose spouse, owns a private passenger automobile.” Therefore, if Rosenberger is found not to be a resident of her stepfather’s home, she is not an insured and not covered by the policy.

Since the question of Rosenber-ger’s residency is a coverage question and since the court in Dunshee declared an almost identical arbitration clause to be “reasonably debatable” as to whether questions of coverage were arbitrable, the district court was correct in reviewing the arbitrators’ finding on this issue de novo. American Family’s argument that respondent is estopped to contest the arbitrability of the coverage question because it was not raised before the arbitrators is based on Twomey v. Durkee, 291 N.W.2d 696 (Minn.1980). In Twomey, this court held that one of the parties to a grievance and arbitration procedure was estopped to claim later that the arbitrator’s decision was a nullity. The Twomey court did indicate, however, that objections relating to arbitrability would be preserved pursuant to Minn.Stat. § 572.19 (1980). This statement is consistent with the court’s statement in Layne-Minnesota Co. v. Regents of the University, 266 Minn. 284, 291, 123 N.W.2d 371, 376 (1963), that Minn.Stat. § 572.19, subd. 1(3, 5) (1980), reserves a party’s right to challenge the arbitrability of any question passed upon by the arbitrator in subsequent court proceedings. Since the question of arbitrability was expressly excepted from the estoppel in Twomey and since the court has indicated that Minn.Stat. § 572.19, subd. 1(3, 5) (1980), reserves a party’s right to challenge arbi-trability, Rosenberger is not estopped from challenging the arbitrability of the residency issue.

2. American Family contends that the district court erred in its factual determination that Rosenberger was a resident of her stepfather’s home. American Family relies on Minn.Stat. § 65B.43, subd. 5 (1980), which defines a resident as: “[a] person resides in the same household with the named insured if that person usually makes his home in the same family unit, even though he temporarily lives elsewhere” and argues that because Rosenberger resided only temporarily in her stepfather’s home, she was not a resident. To support this argument, American Family relies on Fruchtman v. State Farm Mutual Automobile Insurance Co., 274 Minn. 54, 142 N.W.2d 299 (1966), a case holding that a son who temporarily resided with his parents was not a resident of the household.

The standard of review governing our consideration of the district court’s findings of fact is that those findings will be overturned only if they are clearly erroneous. Minn.R.Civ.P. 52.01. We find the following facts to be of significance in determining whether Rosenberger was a resident of her stepfather’s home.

Rosenberger testified that she lived with her mother until 1971. From 1971 until 1973, she lived with her father. In 1973, Rosenberger moved back with her mother but then ran away and was placed in a group home. In 1974, she moved in with her boy friend, remaining there until August of 1976. In August of 1976, she moved in with her mother for two months and then moved back in with her boy friend. In April of 1977, after a fight with her boy friend, Rosenberger moved back into her mother’s home. In the intervening period, her mother had remarried. Rosenberger’s stay with her mother and stepfather was understood by all parties to be of limited duration while she looked for a job and another place to live. These facts are essentially undisputed.

In late May or early June of 1977, a dispute arose between Rosenberger, her mother, and stepfather. Rosenberger testified that she was told to get out of the house as soon as she could. Both her mother and her stepfather testified that in late May they gave her a two-week deadline to move out of their house. On June 3, 1977, Rosenberger left on a camping trip with friends. She returned from this trip on June 7. Rosenberger testified that she planned to return to the home after her trip. Her stepfather testified that Rosen-berger was to leave the home permanently but could not recall if she moved her belongings from the house on that date. Ro-senberger did not return to the home until after the accident on June 9, 1977.

This evidence shows that there was a conflict in the testimony presented on the residency question. Although Rosenber-ger’s residence in her stepfather’s home was understood by all parties to be of less than infinite duration, the evidence shows that she believed she could stay until she located a job and another place to live. Since the testimony was conflicting as to whether this relationship was terminated before the date of the accident, we cannot conclude that the district court’s finding that Rosen-berger was a resident of her stepfather’s home is clearly erroneous.

The Fruchtman case is distinguishable from this case and we therefore decline to follow it. In Fruchtman, the son was self-supporting while at the home; Rosenberger was not. The son in Fruchtman was not physically present in the home for more than 2 weeks at a time in 2½ years; Rosen-berger resided in her stepfather’s home for 2 months. In Fruchtman, the son had specific future plans to leave the home; Rosen-berger had no such plans. The son in Fruchtman was 27 years of age; at the time of the accident, Rosenberger was 19. In Fruchtman, both parents and son testified that they intended no permanent relationship; here, there is a sharp conflict in the evidence. Based on these factual differences, the Fruchtman case is not controlling. As we have previously stated, the “determination of * * * whether individuals are living together as members of the same household rests on the facts of each case.” Pederson v. All Nation Insurance Co., 294 N.W.2d 693, 695 (Minn.1980).

3. Rosenberger’s final argument for reversal is that the trial court erred in concluding that failure to obtain insurance on her own automobile did not bar her from recovering uninsured motorist benefits. This argument is based on two separate points. First, American Family argues that Rosenberger’s failure to obtain insurance was a violation of Minn.Stat. § 65B.48, subd. 1 (1980), requiring every owner of a motor vehicle to obtain insurance, a criminal violation under Minn.Stat. § 65B.67, subd. 2 (1980). Because of this criminal act, American Family argues that Rosenberger should be barred from collecting benefits under its policy. Second, American Family argues that the clause in its policy which excludes from the definition of an insured “any person who, or whose spouse, owns a private automobile” prevents Rosenberger’s recovery.

American Family’s argument that Rosen-berger’s failure to obtain insurance is a criminal violation barring her recovery was rejected by this court in Iverson v. State Farm Mutual Automobile Insurance Co., 295 N.W.2d 573 (Minn.1980). In Iverson, the court rejected an almost identical argument involving basic economic loss benefits under the No-Fault Act. The court reasoned that “the legislature [did not intend] to delegate to insurance companies the authority to enforce the mandatory obligation of vehicle owners to obtain insurance * Id. at 575. In fact, Iverson went further than the instant case since the accident there arose out of the use of an uninsured automobile. See id. This case is close to Nygaard v. State Farm Mutual Automobile Insurance Co., 301 Minn. 10, 221 N.W.2d 151 (1974), in which the court held that an insured, riding an uninsured motorcycle when struck by an uninsured motor vehicle, could obtain uninsured motorist benefits.

American Family’s second argument, that its policy language excluding as an insured one who owns an automobile precludes Ro-senberger’s recovery, is controlled by this court’s decision in Anderson v. Illinois Farmers’ Insurance Co., 269 N.W.2d 702 (Minn.1978). In Anderson, this court held that a passenger in a car struck by an uninsured motorist could recover benefits under her stepfather’s uninsured motorist coverage even though she owned her own automobile. The court rejected this exclusion as too broad, holding that the plaintiff would have to be specifically excluded by name in order to be denied benefits under the policy. Id. at 707, n.8.

Affirmed.