Craig Dollansky signed a rental agreement with Karavan Trailers for a motor home. The RV caught fire while Dollansky was driving it in Nebraska. The cause of the fire was unknown, but nothing in the record suggested thatintentional acts by Dollansky caused the fire or the subsequent damage to theRV. The damage totaled $204,895.05.
The rental agreement provided that Dollansky was responsible for all damages to the RV during the term of the agreement, regardless of the cause. Dollansky had obtained an extension of his personal vehicle insurance for the RV as required by the rental agreement. After the fire, Karavan submitted a claim for the full amount of the damages to Dollansky’s insurer, American Family Insurance Company.
American Family paid Karavan $4,500—the $5,000 deductible in Karavan’s policy with Depositors Insurance Company minus the $500 deposit Dollansky had paid to Karavan. American Family denied the remainder of Karavan’s claim.
Karavan submitted a claim to Depositors. Depositors paid Karavan the full amount of the damages and then filed a complaint against Dollansky, alleging that Depositors was subrogated to the rights of Karavan in the same amount.
Depositors and Dollansky filed cross-motions for summary judgment. Dollansky argued that a state statute barred Depositors from subrogating against Dollansky because he was an “insured” under Karavan’s policy with Depositors. The statute states that “[a]ninsurance 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 disagreed and argued that Dollansky was not an “insured” because he had not purchased a policy from Depositors. Alternatively, Depositors argued that Dollansky was not an “insured” because its policy did not cover him for the damage to the RV.
Karavan’s policy with Depositors defined an insured as “any person ororganization qualifying as an insured in the Who Is An Insured provision of the applicable coverage.” The court found that because the provision defined “insured” as including “[a]nyone else while using with your permission a covered ‘auto’ you own, hire or borrow,” Dollansky was an “insured” for purposes of the statute because Karavan permitted Dollansky to use the covered vehicle, in this case, the RV. The court denied Depositors’ motion and granted Dollansky’s motion, concluding that Depositors was barred by the statute from proceeding against Dollansky in a subrogation action. The court dismissed all claims against Dollansky.
Depositors appealed, and the courtof appeals affirmed the district court’sjudgment. The court rejected Depositors’argument that Dollansky was not an insur-ed because he was not a named insured on Karavan’s policy with Depositors. Relying on the policy definitions, the court held that Dollansky was an insured. The court concluded that the statute unambiguously barred Depositors’ subrogation action. Depositors’ petition for review was granted.
On appeal, the Minnesota Supreme Court noted that dictionary definitions of “insured” interpreted the word to mean (a) any party who is covered by some part of the insurance policy or (b) any party who is covered by the specific section of the policy that applies to the particular loss at issue.
Depositors argued that the first definition was not reasonable because interpreting the statute to encompass all persons covered by the policy would render the statute superfluous. The court disagreed, and it also rejected Depositors’ argument that the legislature intended the definition of “insured” to apply only to named insureds. The court pointed out that the word “named” is not used before “insured” in the statute.
Depositors argued further that any reading of the statute that included Dollansky in the definition of “insured” was improper because the definition must be read in light of a provision that states: “Nothing in this section prevents an insurer from allocating the loss internally to the at-fault insured for purposes of underwriting, agency, or claims information.” The court rejected this argument, noting that the statute states only that it does not prohibit such allocation. The court interpreted the statute as barring subrogation by an insurer against anyone insured under the policy and held that its interpretation was consistent with the common law that existed in the state before the statute was enacted.
Finally, Depositors argued that it would be inequitable to bar a suit in subrogation against Dollansky because he had his own insurance with American Family. The court noted that nothing in the text of the statute suggests that its meaning might vary depending on the existence of other insurance.
The court held that Dollansky was an insured under the Depositors policy because he was a permissive user of the RV. The judgment of the appellate court was affirmed.
Depositors Insurance Company vs. Dollansky-Supreme Court of Minnesota-November 14, 2018-A17-0631.