Krista Friese, Appellant,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2016).

STATE OF MINNESOTA
IN COURT OF APPEALS
A17-0908

Krista Friese,
Appellant,

vs.

American Family Mutual Insurance Company,
Respondent.

Filed January 29, 2018
Affirmed
Bratvold, Judge

Hennepin County District Court
File No. 27-CV-16-791

Charles D. Slane, Jennifer E. Olson, TSR Injury Law, Bloomington, Minnesota (for
appellant)

Nathan Cariveau, Eden Prairie, Minnesota (for respondent)

Sharon L. Van Dyck, Van Dyck Law Firm, PLLC, Minneapolis, Minnesota (for amicus
curiae Minnesota Association for Justice)

Considered and decided by Johnson, Presiding Judge; Ross, Judge; and Bratvold,
Judge.
U N P U B L I S H E D O P I N I O N
BRATVOLD, Judge
Appellant Krista Friese challenges the district court’s decision that granted
summary judgment to respondent American Family Mutual Insurance Company and
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enforced a policy provision reducing the amount of underinsured-motorist (UIM) coverage
under a nonresident’s policy based on the amount recovered from other available liability
insurance. For two reasons, Friese argues that Minnesota law requires Minnesota-licensed
insurers to provide “add-on” UIM coverage for all collisions that occur in Minnesota,
therefore, the reducing clause is unenforceable. First, Friese claims the plain language of
Minn. Stat. § 65B.50, subd. 1 (2016), supports her position, along with the Minnesota
Supreme Court’s recent decision in Founders v. Yates, 888 N.W.2d 134 (Minn. 2016).
Second, Friese argues that American Family’s policy has a conformity clause that requires
it to provide add -on coverage consistent with Minnesota law. Based on long-standing
precedent interpreting Minn. Stat. § 65B.50, we affirm.
FACTS
This declaratory judgment action was decided based on stipulated facts. On
January 4, 2010, David Diede was driving on a Minnesota highway when he hit a vehicle
that Friese occupied, but did not own. The vehicle she occupied was owned by a Wisconsin
resident, garaged in Wisconsin, and insured under a policy issued in Wisconsin by
American Family. Friese is a Wisconsin resident. American Family is licensed to do
business in Minnesota. Diede’s negligence caused the accident and, as a direct result, Friese
was injured and sustained damages in excess of $100,000. Friese sued Diede and settled
her claim against him for his auto liability policy limits of $50,000.
Diede is an underinsured motorist, as defined by the American Family policy (the
policy). The policy’s limit for UIM coverage is $100,000, but the policy contains a
“reducing clause.” It states:
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The limits of liability of the coverage will be reduced by: 1. A
payment made or amount payable by or on behalf of any person
or organization which may be legally liable, or under any
collectible auto liability insurance, for loss caused by an
accident with an underinsured motor vehicle.

The parties agree that, if the reducing clause is enforced, Friese’s UIM recovery would be
reduced by $50,000, the amount that she received from Diede’s policy.
Friese sued American Family seeking a declaratory judgment that the reducing
clause is not enforceable because the Minnesota No-Fault Automobile Insurance Act
requires American Family to provide add-on coverage. Minn. Stat. §§ 65B.41-.71 (2016).
American Family contends that add-on coverage under the No-Fault Act does not apply to
auto policies held by nonresidents.
In March and June 2017, the district court granted summary judgment in favor of
American Family and held that the reducing clause was enforceable against Friese,
therefore, she is entitled to recover $50,000 in UIM coverage from American Family.1 This
appeal follows.
D E C I S I O N
I. Minnesota law does not require American Family to provide add-on UIM
coverage to Friese under a nonresident’s auto policy.

Summary judgment is appropriate when there are no genuine issues of material fact
and one party is entitled to judgment as a matter of law. Minn. R. Civ. P. 56.03. Here, there

1 In its March order, the district court described the proceedings as a “court trial,” because
the parties had submitted stipulated facts, briefing, and the only question before the court
was whether American Family’s reducing clause was enforceable against Friese. In June
2017, the district court approved the parties’ stipulation that the March order was “properly
construed” as one for summary judgment.
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are no material facts in dispute; American Family and Friese stipulated to the underlying
facts. Based on the undisputed facts, policy language, and Minnesota law, Friese contends
the district court misinterpreted the No- Fault Act and erred in enforcing the reducing
clause. Interpretation of a statute and an insurance policy based on undisputed facts raise
questions of law subject to de novo review. Jensen v. United Fire & Cas. Co., 524 N.W.2d
536, 538 (Minn. App. 1994), review denied (Minn. Feb. 3, 1995).
A. Add-on UIM coverage under the No -Fault Act and the nonr esident
policyholder exception

If the terms of an insurance policy conflict with or omit coverage required by the
No-Fault Act, those policy terms will be held invalid. Kwong v. Depositors Ins. Co., 627
N.W.2d 52, 55 (Minn. 2001). The No-Fault Act’s UIM coverage requirement has been
interpreted as requiring add-on UIM coverage for Minnesota motor vehicles. Mitsch v. Am.
Nat. Prop. & Cas. Co., 736 N.W.2d 355, 358 (Minn. App. 2007) (holding “Minnesota law
mandates that all UIM coverage issued in the state be add-on coverage”) (quoting Minn.
Stat. § 65B.49, subd. 4a (2006)), review denied (Minn. Oct. 24, 2007). 2 Briefly, add-on
coverage means that the amount of UIM coverage purchased is available to the insured/
claimant in addition to any applicable liability insurance coverage. See Minn. Stat.

2 Johnson v. Cummiskey, 765 N.W.2d 652, 661 (Minn. App. 2009), distinguished Mitsch,
stating that its broad declaration about add-on coverage included dicta because Mitsch did
not consider whether the No-Fault Act required UIM coverage for motorcycles. Johnson
went on to hold that the No-Fault Act does not require UIM coverage in motorcycle polices,
therefore, the applicable policy would not be reformed by statutory requirements for add-
on coverage. 765 N.W.2d at 662. Johnson did not suggest or imply that Mitsch incorrectly
analyzed the No-Fault Act’s requirement that Minnesota motor vehicles must have add-on
UIM coverage.
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§ 65B.49, subd. 4a (2016) (providing that “[w]ith respect to underinsured motorist
coverage, the maximum liability of an insurer is the amount of damages sustained but not
recovered from the insurance policy of the driver or owner of any underinsured at fault
vehicle”). Based on the statutory mandate , this court has held that a reducing clause is
unenforceable in a Minnesota automobile policy. Mitsch, 736 N.W.2d at 363.
Friese is seeking UIM coverage under a non resident’s policy and contends that ,
because American Family is licensed to do business in Minnesota, the policy’s reducing
clause violates the No-Fault Act. She relies on the plain language of Minn. Stat. § 65B.50,
which states:
Subdivision 1. Filing. Every insurer licensed to write motor
vehicle accident reparation and liability insurance in this state
shall, on or before January 1, 1975, or as a condition to such
licensing, file with the commissioner and thereafter maintain
a written certification that it will afford at least the minimum
security provided by section 65B.49 to all policy holders,
except that in the case of nonresident policyholders it need
only certify that security is provided with respect to accidents
occurring in this state.
Subd. 2. Contacts of liability insurance as security covering
the vehicle. Notwithstanding any contrary provision in it,
every contract of liability insurance for injury, wherever
issued, covering obligations arising from ownership,
maintenance, or use of a motor vehicle, except a contract
which provides coverage only for liability in excess of
required minimum tort liability coverages, includes basic
economic loss benefit coverages and residual liability
coverages required by sections 65B.41 to 65B.71, while the
vehicle is in this state, and qualifies as security covering the
vehicle.

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Minn. Stat. § 65B.50. The parties agree that subdivision 1 requires that insurers licensed in
Minnesota must certify that they provide basic coverage, which the statute refers to as
“minimum security.” Id. But the parties disagree what coverage is required.
American Family contends that s ubdivision 1 contains a specific exception for
nonresident policyholders that narrows the required coverage. The relevant language
provides, “except that in the case of nonresident policyholders it need only certify that
security is provided with respect to accidents occurring in this state.” Minn. Stat. § 65B.50,
subd. 1. Relying on precedent, American Family argues that “security” in the nonresident
exception to subdivision 1 must be read by referring to subdivision 2, which provides that
“every contract of liability insurance for injury, wherever issued . . . includes basic
economic loss benefit coverages and residual liability coverages.” Minn. Stat. § 65B.50,
subd. 2. Subdivision 2 coverage includes basic no-fault benefits but does not include UIM
insurance.
Friese argues “that security” in the exception refers to “minimum security,” which
is referenced earlier in the same sentence. Friese contends that minimum security is defined
in subdivision 1, which states that licensed insurers must certify that they provide “at least
the minimum security provided by section 65B.49 to all policyholders.” Minn. Stat.
§ 65B.50, subd. 1. Based on Mitsch and the language in section 65B.49, subd. 4a, which
mandates add-on coverage for UIM benefits, Friese argues that the policy’s reducing clause
is unenforceable.
Although Friese’s reading of the plain language of subdivision 1 has some merit,
this court is bound to follow relevant precedent that has interpreted these exact provisions
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of the No-Fault Act. Since 1980, appellate courts have read both subdivisions of section
65B.50 together, and held that the “security” referenced in subdivision 1 for nonresident
policyholders refers only to the required coverage in subdivision 2, which expressly refers
to “every contract of liability insurance . . . wherever issued.” See Petty v. Allstate Ins. Co.,
290 N.W.2d 764, 765- 66 (Minn. 1980) (referring to subdivision 1 exception and holding
“we look to Minn. Stat. § 65B.50, subd. 2, in order to determine what ‘security’ must be
afforded to nonresident insureds operating an insured vehicle in Minnesota” ); Hedin v.
State Farm Mut. Auto. Ins. Co., 351 N.W.2d 407, 408-09 (Minn. App. 1984) (holding “that
the word ‘security’ as used in [subdivision 1 of section 65B.50] with respect to nonresident
policyholders only refers to basic economic loss benefits required to be included under
subdivision 2 of 65B.50.”); see also Aguilar v. Texas Farmers Ins. Co., 504 N.W.2d 791,
793-94 (Minn. App. 1993) (explaining that Hedin’s analysis applies to underinsured
motorist benefits provided by an insurer, unlicensed in Minnesota, and holding the “No-
Fault Act only requires basic economic loss benefits and residual liability coverage for
nonresidents’ policies”).
In fact, this court previously has decided whether a Minnesota-licensed insurer may
enforce a reducing clause in a nonresident’s policy under section 65B.50. In Warthan v.
Am. Family Mut. Ins. Co., nonresident policyholders were injured in an accident in
Minnesota, the parties agreed that a third party was at fault, and the nonresident
policyholders received the policy limits from the third party’s insurer. 592 N.W.2d 136,
137-38 (Minn. App. 1999), review denied (Minn. July 28, 1999). The policyholders sought
UIM coverage under their American Family policy , which was issued in Wisconsin and
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had a reducing clause similar to the one in Friese’s policy. Id. The policyholders argued
the reducing clause was unenforceable in light of the add-on coverage required by
Minnesota law. Id. at 138.
This court affirmed the district court’s decision to enforce the reducing clause and
rejected the policyholders’ argument. Id. Relying on Pe tty, this court held that the
“security” referenced in the nonresident policyholder exception in subdivision 1, “is the
same security referenced in subdivision 2,” which only requires “basic economic loss and
residual liability coverage.” Id. at 139. After referencing Hedin and Aguilar, this court
summarized “the rule in Minnesota is that uninsured and underinsured motorist coverage
are not required for nonresidents, and therefore if nonresidents have such coverage it need
not comply with Minnesota law.” Id.
Friese concedes that Warthan would be dispositive, but argues that a recent decision
by the Minnesota Supreme Court is incompatible with Warthan because the court
implicitly rejected and therefore limited precedent upon which Warthan relied. We
disagree.
B. Founders Ins. Co. v. Yates did not decide, much less mandate, a different
interpretation of the nonresident policyholder exception.

In Founders Inc. Co. v. Yates, an Illinois resident with an Illinois insurance policy
was in a car accident in Minnesota. 888 N.W.2d 134, 135 (Minn. 2016). Founders provided
Yates’s automobile insurance and was not licensed to sell insurance in Minnesota. Id.
Founders denied Yates’s claim seeking no-fault benefits under Minnesota law, arguing that
section 65B.50 only applied to Minnesota-licensed insurers. Id. Analyzing the “plain
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language” of section 65B.50, the supreme court held that subdivision 2 “applies to all
contracts of liability insurance for injur y, wherever issued, including whether they were
issued in Minnesota, Illinois, or some other place.” Id. at 136. Founders argued that
subdivisions 1 and 2 should be read together, and because subdivision 1 only applied to
Minnesota-licensed insurers, subdivision 2 was similarly limited to Minnesota-licensed
insurers. Id. The supreme court disagreed and concluded that, “ Minn. Stat. § 65B.50,
subd. 2, applies to an out-of -state insurer when its insured is in an accident in Minnesota
and the insured vehicle is in Minnesota, even though the insurer is not licensed by the State
of Minnesota to issue motor vehicle insurance.” Id. at 137.
Friese argues that, after Founders, Minn. Stat. § 65B.50’s subdivisions can no
longer be read together, and must be read independently , with subdivision 1 applying to
Minnesota-licensed insurers and subdivision 2 applying to insurers that are not licensed in
Minnesota. Accordingly, Friese argues that “security” in subdivision 1, cannot “be defined
by looking to subdivision 2,” and must be defined by reference to subdivision 1, as “the
minimum security provided by section 65B.49.”
We agree with the district court that Warthan and Petty remain binding precedent.
Founders predicated its decision on subdivision 2 of section 65B.50, not subdivision 1. Id.
Founders clarified that subdivision 2 applies to all insurers if an insured is in an accident
in Minnesota, but Founders does not address previous caselaw on the nonresident
policyholder exception for Minnesota-licensed insurers. In reaching its conclusion in
Founders, the supreme court did not analyze or even mention Petty, Warthan, or any other
pre-Founders decision setting out no-fault coverage requirements for Minnesota-licensed
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insurers. We are bound by existing precedent that has not been overruled. Jackson ex rel.
Sorenson v. Options Residential, Inc., 896 N.W.2d 549, 553 (Minn. App. 2017).
Finally, “t he task of extending existing law falls to the supreme court or the
legislature, but it does not fall to this court.” Tereault v. Palmer, 413 N.W.2d 283, 286
(Minn. App. 1987), review denied (Minn. Dec. 18, 1987). Even if we would reach a
different conclusion were we writing on a blank slate, it is not our role to extend Founders
and overrule caselaw. Petty and Warthan held that Minnesota-licensed insurers need only
provide basic economic loss benefits coverage and residual liability coverage under
nonresident policies; this holding is unaffected by Founders’ holding that subdivision 2
applies to insurers that are not licensed in Minnesota.
Accordingly, we conclude that American Family was not required to provide add-
on UIM coverage in this policy, the reducing clause may be enforced, and American
Family was entitled to summary judgment as a matter of law.
II. The reducing clause is not in direct conflict with the No-Fault Act, and
therefore, the conformity clause does not operate to rewrite the reducing
clause.

Finally, Friese argues that the conformity clause in the American Family policy
requires the entire policy to conform to Minnesota law, and consequently, the UIM
endorsement should be rewritten to provide add-on coverage. A conformity clause in an
insurance policy operates to substitute a statutory provision for a policy provision only
where the two provisions are in direct conflict. Atwater Creamery Co. v. W. Nat. Mut. Ins.
Co., 366 N.W.2d 271, 275 (Minn. 1985). Here, we have determined that the policy
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complies with Petty, Warthan, and Minn. Stat. § 65B.50, and, therefore, does not conflict
with Minnesota law.
We conclude, based on the relevant statutes and long-standing caselaw, that the
district court correctly determined that Minnesota law does not require reformation of the
UIM coverage in the American Family policy with regard to Friese’s claim.
Affirmed.