Parsing the subrogation law
In December 2013, Craig Dollansky rented a motor home from Karavan Trailers. The rental contract provided:
INSURANCE: Renter is responsible for all damage or loss, including damage or loss you cause to others. Renter has provided us with an insurance binder indicating that Renter has Vehicle liability, collision, and comprehensive insurance covering Renter, [Karavan] and Vehicle.
RENTAL, INDEMNITY, AND WARRANTIES: … Renter agrees to indemnify [Karavan], defend [Karavan], and hold [Karavan] harmless from all claims, liability, costs and attorney fees incurred by [Karavan] resulting from, or arising out of, this rental and Renter’s use of the vehicle.
RESPONSIBILITY FOR DAMAGE: Renter is responsible for all damage to the Vehicle … regardless of whether or not Renter is at fault.
In January 2014, Dollansky was driving the motor home when it caught fire, causing damage in the amount of $204,895.05. The cause of the fire was unknown.
Depositors Insurance Company insured Karavan at the time of the fire; American Family Insurance was Dollansky’s automobile insurer. Karavan submitted a claim for the entire amount of the fire damage to American Family, which paid Karavan part of its deductible but denied the balance of the claim. Depositors then paid Karavan $204,895.05 and brought an action against Dollansky for breach of the rental contract as the subrogee of Karavan.
Depositors and Dollansky filed cross-motions for summary judgment. The court granted summary judgment in favor of Dollansky, concluding that he was an “insured” under Depositors’ policy and that state law prohibited Depositors from proceeding in a subrogation action against him. Depositors appealed.
On appeal, Depositors argued that the trial court erred by concluding that a state statute barred its suit.
The court noted that, under Minnesota law, an insurance company is prohibited from subrogating against its insured. Specifically, the statute provides:
(a) An insurance company providing insurance coverage or its reinsurer for that underlying insurance coverage may not proceed against its insured in a subrogation action where the loss was caused by the nonintentional acts of the insured.
Depositors argued that, in determining that its suit was barred by the statute, the trial court erred “in finding that the ‘controlling contract’ was Depositors’ contract” because “the correct contract to examine would have been Dollansky’s policy with American Family.” The appellate court disagreed, citing the subrogation provision above.
Depositors contended that the statute “distinguish[es] between claims against the subrogating insurance company’s own named insured and claims against another party who happened to be insured by the subrogating insurance company.” Depositors argued that because the statute contained the term “another person” rather than “insured,” the legislature intended to distinguish between individuals who purchased a policy from the insurer and “someone who might be considered an insured under the language of the insurance contract.” The court disagreed, noting that it could not add to a statute words that were intentionally or inadvertently omitted by the legislature.
The parties did not dispute that Dollansky entered into a contract with Karavan for the motor home rental. Dollansky therefore was an insured under Depositors’ policy issued to Karavan, and the statute prohibited Depositors from subrogating against Dollansky.
The judgment of the trial court was affirmed.
Depositors Insurance Company vs. Dollansky-Court of Appeals of Minnesota-December 11, 2017-A17-0631.