Articles

THE ASSIGNED CLAIMS PLAN: Insurance for the Uninsured

Marshall H. Tanick
(email)
Mansfield, Tanick & Cohen, P.A.
1700 U. S. Bank Plaza South
Minneapolis, MN 55402
Tel: 800-401-6194
FAX: 612.339.3161

Most lawyers, and many lay persons, are familiar with the general concept of uninsured and underinsured motorist insurance, even if they are not knowledgeable about the particulars. Basically, these forms of insurance provide liability coverage for persons injured in automobile accidents when other insurance is inapplicable or inadequate.¹

There is, however, much less awareness of the Minnesota Assigned Claims Plan. Often overlooked, this form of insurance may afford an injured person the opportunity to recover at least some of the pecuniary losses resulting from an automobile accident if no other insurance is available. This article illuminates this obscure, but important, source of compensation for victims of automobile accidents in this state.

The No-Fault Anchor

No-fault automobile insurance is intended to be a comprehensive means of furnishing insurance benefits for all Minnesotans injured in automobile accidents, regardless of culpability. The Assigned Claims Plan is an anchor of the Minnesota no-fault automobile insurance system. It has been part of the law since the inception of no-fault and is now codified in Minn. Stat. § 65B.63-65.

The Assigned Claims Plan was designed to fill in gaps in the no-fault system by providing certain minimum benefits to injured persons who are not otherwise required by law to carry their own no-fault insurance and are not covered by someone else's policy. If embraced within the Assigned Claims Plan, an injured person receives the same benefits as though no-fault insurance coverage actually existed. Unlike uninsured and underinsured benefits, recovery under the Assigned Claims is limited to first-party benefits, known as basic economic loss benefits. These consist of medical expenses (including death benefits), wage losses, survivor's benefits, replacement services and rehabilitation expenses. Benefits under the Assigned Claims program does not include liability coverage for claims made against the injured person.²

The Assigned Claims Plan went into effect in 1975, together with the no-fault system. As originally conceived, the Assigned Claims program permitted all insurers furnishing no-fault insurance in the State to adopt a system of coverage for persons not otherwise covered by no?fault.³ If not arranged by the carriers, the system was to be implemented by the Department of Commerce.

In 1985, the statute was amended to require private insurers to form and maintain the Assigned Claims system, referred to as a "bureau."⁴ It now is managed by a seven-member governing committee, four of whom are selected by insurers, one by self-insurers, and two appointed by the Governor. The bureau's expenses are paid from assessments imposed on no-fault carriers in the state. All insurers must participate and contribute to the fund as a condition of doing business in Minnesota. Self-insurers also are obligated to participate in the system in order to maintain their self-insured status.⁵

The "Lost Souls" of No-Fault

Because of the breadth of no-fault coverage, the Assigned Claims Plan does not encompass a large number of potential claimants. An injured person comes to the Plan as a last resort, when no other form of no-fault is available. The system then is supposed to furnish minimal first-party benefits for lost souls of the no-fault system, including:

• Individuals for whom no-fault benefits are not applicable for reasons other than theft, racing, or intentional injuries under Minn. Stat. § 65B.58-60. This includes the largest potential group of claimants, those involved in accidents in which none of the participants carry insurance;

• Car thieves under 15 years old;

• Persons whose applicable no-fault carrier "cannot be identified"; and

• Individuals whose no-fault carriers reject applications for benefits for reasons not otherwise provided for in the no-fault law, such as failure to pay premiums, misrepresentation in application, and other eligibility issues.⁶

The Assigned Claims Plan is the first-party analog of the Assigned Risk Pool, which provides liability coverage for drivers unable to secure insurance from the private insurers.⁷ Unlike Assigned Risk insurance, which is costly in light of the applicant's unfavorable driving record, participation in the Assigned Claims Plan is free of charge to applicants.

But not everyone without insurance coverage finds shelter under the umbrella of the Assigned Claims Plan. While culpability is not supposed to be a factor in no-fault coverage, the concept of "fault" plays a role in determining eligibility for Assigned Claims benefits. Persons whose lack of insurance coverage is attributable to their own "fault" generally are ineligible for benefits under the Assigned Claims system.

The most significant exclusion from the Assigned Claim system disqualifies owners of vehicles who fail to have the required no-fault insurance in effect "at the time" of the injury.⁸ Under this provision, car owners who violate the statutory requirement that they maintain no?fault insurance are excluded from participating in the Assigned Claims Plan.

This exclusion occasionally raises troublesome issues. The no-fault law requires car owners to carry insurance only "during the period in which operation or use (of the uninsured vehicle) is contemplated."⁹ Owners of uninsured cars who are injured in accidents occasionally attempt to avoid the statutory disqualification by claiming that insurance was not required because they did not "contemplate" or intend to use the car "at the time" they were injured. If insurance was not required, they argue, they are not excluded from the Assigned Claims system.¹⁰

These efforts of uninsured car owners to bring themselves within the Assigned Claim Plan often are unsuccessful. The Courts frown on extending Assigned Claims benefits to those who have "intentionally removed" themselves from coverage by failing to pay their own insurance premiums.¹¹

In Labrosse v. Aetna Casualty and Surety Co., the owner of an uninsured vehicle left his car unattended on the street after it broke down.¹² Four days later, he was injured in an accident involving a different vehicle. There was no insurance applicable to this accident, so the injured party sought no-fault benefits from the Assigned Claims bureau. The Trial Court denied his claim, and the Court of Appeals affirmed. The appellate court rejected the claimants' argument that since he did not "contemplate" use of his own inoperable car "at the time" of the accident, insurance was not required for that vehicle, and, therefore, the statutory exclusion for drivers who lack "required" insurance was inapplicable. The Court in Labrosse looked to the owner's intent and concluded that since he had driven the car without insurance within four days before the accident and left it on a "public street" he apparently contemplated "further use of the (uninsured) car at the time of the accident." Thus, insurance was required, and the lack of insurance doomed his application for benefits under the Assigned Claims Plan.

On the other hand, whether use of the uninsured vehicle is "contemplated" should generally be a question of fact. As such it is not susceptible to summary judgment or determination as a matter of law.¹³

The general disinclination to grant benefits to those who intentionally fail to insure their vehicles does not extend to all innocent victims of a failure to insure. In Kaysen v. Federal Ins. Co., minor children were granted no-fault survivor benefits under the Assigned Claims Plan after their parents were killed by an uninsured vehicle while emerging from their company car.¹⁴ Since the decedents' car was insured in the name of the company, neither they nor their children were covered by the policy. While the parents were barred from the Assigned Claims Plan, the Court held that the children were entitled to Assigned Claims benefits because they did not know, or should have known, of their deceased parents failure to insure and were in no position to remedy the deficiency even had they known. The favorable treatment given the children in Kaysen was codified a year later in Minn. Stat. § 65B.64, subd. 3, making minor children eligible for the Assigned Claims Plan even though their parents are not insured.

The Sunday Cruise

Disqualifying owners who failed to procure their own insurance is an additional means of penalizing, or at least not rewarding, statutory offenders. Occasionally, the penalty imposed on the guilty extends to non-offenders as well. Under the statute, all "household" members of vehicle owners who lack the requisite insurance also are disqualified from Assigned Claims coverage, except for minor children under the Kaysen rule. This, ownership by an individual of an uninsured vehicle can taint other members of the "household."

Consider the situation of a family in which one spouse owns a vehicle but does not insure it. This hypothetical household also consists of the other spouse; a 19-year old college student and her fiancé; a younger sibling; a foster child; and the elderly mother of one of the spouses, all living under the same roof. If the entire family is injured in a single car accident (a van, to be sure, to accommodate all seven of them) while out on a Sunday cruise, their rights for Assigned Claims benefits form a bewildering maze.

• The owner of the car is excluded since he did not maintain the required insurance "at the time" of the accident.

• The spouse and college student are likewise disqualified as "household" members.

• Grandma also is barred for the same reason.

• The fiancé, however, is eligible for Assigned Claims benefits because he is not related (yet) by "blood or marriage" to the family and, therefore, does not come within the exclusion for "household" members.¹⁵ Even if married, the in-law would not be precluded from benefits under the Assigned Claims Plan because the marital or consanguinity nexus necessary to disqualify a claimant applies only to the relationship with the uninsured owner. In this situation, the sins of the father are not visited upon the son-in-law.

• The two youngsters also are eligible for Assigned Claims benefits because of the provision permitting "minor children" to recover even if their parents cannot.

• The foster child also would be eligible for benefits since, like the prospective in-law, he is not related by "blood or marriage" to the uninsured owner.

Of course, the ineligibility of the two spouses, grandmother, and college-age child for insurance benefits would not occur if they were injured in a two-car accident. If so, they could seek no-fault payments from the insurer of the other vehicle, unless that car, like theirs, is uninsured as well.

Asserting and Collecting Claims

The mechanics of claiming benefits under the Assigned Claims system resemble seeking no-fault coverage from an insurance carrier. Originally, claimants were required to seek benefits from the system within one year from the accident. However, the law now provides that an application for Assigned Claims benefits may be made within the same time period that would be required to file an action seeking no-fault benefits.¹⁶ That time period is governed by Minn. Stat. § 65B.55, which permits an insurer to establish a notice period of not less than six months. But late notice does not disqualify a claim unless the insurer shows "actual prejudice."¹⁷

Once a claim is filed with the Assigned Claims bureau, it is "promptly" assigned to a no-fault carrier selected at random, and the claimant is notified of the identity of the carrier.¹⁸ The claim is to be treated similarly to one for basic economic loss benefits, but the claimant is eligible only for the statutory no-fault thresholds, which currently are $20,000 for medical expenses and a like amount for lost income and other economic losses.¹⁹

The assigned carrier may raise the same defenses as any no-fault carrier regarding the entitlement of the claimant to benefits, plus the additional issues of whether the claimant is eligible for inclusion in the Assigned Claims program. Few claims are litigated and rarely are appealed. There have been only six reported-appellate court decisions in Minnesota since the Assigned Claims system went into existence a dozen years ago.

As with ordinary no-fault payments, interest accrues at the rate of 15% within 30 days from the date the benefits are overdue.20 Statutory pre-judgment interest under § 549.09 may not be added to the no-fault interest.²¹

On occasion, the Assigned Claims bureau, or the insurance carrier to whom the claim is assigned, may contend that the claimant is, or should be, covered by a different no-fault insurer. A declaratory judgment action may be brought to assure that the issue is resolved swiftly and without unnecessary delay. If the bureau or rival insurers do not move promptly to resolve such a dispute, the claimant may bring an action to have the issue swiftly adjudicated.

The claimant ordinarily should not have to endure the delay or incur the expenses resulting from a coverage dispute between carriers. In keeping with the avowed purpose and spirit of the no-fault law to achieve prompt recovery at minimal expense, the assigned carrier should, in most circumstances, pay the benefits and then assert its rights against the perceived primary carrier. Subrogation is expressly authorized under the Assigned Claims statute.²² In addition, the standard Assigned Claims application form requires the claimant to assign "all subrogation and indemnity rights" to the Plan or the assigned carrier.

Conclusion

The Assigned Claims system serves as a last resort for securing no-fault for accident victims who lack any other source of recovery. The benefits, however, are limited to minimum first party payments and are surrounded by procedural and substantive pitfalls. Familiarity with this backwater area of the law may help achieve a flow of benefits when no other insurance is available.

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ENDNOTES

1. See generally, MOSKAL, "Uninsured Motorist Claims: A Malpractice Maze," 44 Bench & Bar 6, P. 25 (July, 1987). TANICK, "The Lady in the Trunk: Unlocking Some Mysteries of Uninsured Motorist Law," 50 HENN. LAWYER 8, (May-June, 1982) p. 14.

2. Mohs v. Aetna Casualty & Surety Co., 349 N.W.2d 580 (Minn. Ct. App.1984).

3. LAWS 1974 c. 408, § 25.

4. LAWS 1985, 1st. Sp., c. 10, § 69.

5. Op. Atty. Gen., No. 1005 (Oct. 20, 1975).

6. Minn. Stat. § 65B.64, subd. 3.

7. Minn. Stat. § 65B.64, subd. 1.

8. Minn. Stat. § 65B.42 (1) mandates that all owners of automobiles registered in Minnesota maintain no-fault coverage. Operation of a vehicle without insurance coverage is a misdemeanor, Minn. Stat. § 65B.67, subd. 2. In addition, the Department of Public Safety may suspend or revoke the automobile registration certificate and license plates of the owner of an uninsured vehicle. Department Public Safety Regulations, Driver & Vehicle Services Division, Automobile Insurance, §7413.0700.

9. Minn. Stat. § 65B.48, sub. 1.

10. The Department of Public Safety permits the owner of an uninsured car to file an affidavit verifying an intention not to operate a vehicle while it is not insured. Dept. of Pub. Safety Regs. §7413.0400. This permits a car owner to maintain registration without insurance and avoid criminal and administrative sanctions.

11. Mickelson v. American Family Mutual Ins. Co., 329 N.W.2d 814, 818 (Minn. 1983).

12. 383 N.W.2d 736 (Minn. Ct. App. 1986).

13. See Larson v. Aetna Casualty & Survey Co., Hennepin County District Court, File No. 85-7476 (July, 1986). (Jury finding that use of uninsured car was not "contemplated" during period it was not insured).

14. 268 N.W.2d 920 (Minn. 1978).

15. Kruse v. Minnesota Auto. Assigned Claims Bureau, 371 N.W.2d 602 (Minn. Ct. App. 1985).

16. Minn. Stat. § 65B.65, subd. 1. A claimant whose eligibility for Assigned Claims benefits arises because the applicable carrier is insolvent must file with the Assigned Claims bureau within six months of discovery of the insolvency. Minn. Stat. § 65B.65, subd. 2.

17. The statute formerly permitted insurers to absolutely limit the claim period to six months, without regard to prejudice. Absent any specific time limitation imposed by an insurer, the issue of timeliness of a claim under the Assigned Claims law is to be measured according to a general standard of reasonableness. Sullivan v. Grain Dealers Mutual Ins. Co. of Omaha, 361 N.W.2d 495 (Minn. Ct. App. 1985).

18. Minn. Stat. § 65B.63, subd. 2.

19. Minn. Stat. § 65B.44, subd. 1.

20. Minn. Stat. § 65B.54, subd. 2. Pederson v. All National Insurance Co., 294 N.W.2d 693 (Minn. 1980).

21. Burniece v. Illinois Farmers Ins. Co., 398 N.W.2d 542 (Minn. 1986).

22. Minn. Stat. § 65B.64, subd. 2.