American Family Insurance, Appellant,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2018).

STATE OF MINNESOTA
IN COURT OF APPEALS
A20-0078

American Family Insurance,
Appellant,

vs.

Cory Klingehoets,
Respondent.

Filed September 14, 2020
Reversed and remanded
Reyes, Judge

Wright County District Court
File No. 86-CV-18-3666

David W. VanDerHeyden, Nicholas M. Rotar, VanDerHeyden Law Office, P.A.,
Rochester, Minnesota (for appellants)

Cory A. Klingelhoets, Elk River, Minnesota (pro se respondent)

Considered and decided by Slieter, Presiding Judge; Ross, Judge; and Reyes, Judge.
U N P U B L I S H E D O P I N I O N
REYES, Judge
Appellant insurer of a passenger injured by respondent -uninsured-motorist argues
that the district court improperly dismissed its subrogation claim at summary judgment
based on the determination that the Minnesota No-Fault Automobile Insurance Act, Minn.
Stat. §§ 65B.41-.71 (2018), precludes the claim. We reverse and remand.

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FACTS
The parties do not dispute the limited factual record, including the request for
admissions served by appellant American Family Insurance (American Family), to which
respondent Corey Klingelhoets 1 did not respond. See Minn. R. Civ. P. 36.01-.02. On
October 5, 2012, Klingelhoets drove his vehicle while intoxicated through a stop sign and
into a ditch at a high rate of speed . He struck a utility pole, severing the pole from the
ground and injuring passenger A.B., an insured of American Family. Klingelhoets had no
insurance. Klingelhoets pleaded guilty to and was convicted of criminal vehicular
operation, bodily harm, under Minn. Stat. § 609.21, subd. 1(2)(i) (2012). American Family
paid A.B. $160,000 in uninsured-motorist (UM) bodily injury coverage.
American Family initiated this negligence action in July 2017 against Klingelhoets,
seeking $160,000 for the UM benefits it paid to A.B. as a result of Klingelhoets’s driving
conduct. A.B. is not a party to this action. American Family filed a motion for summary
judgment. The district court denied the motion and informed American Family that it
would sua sponte grant summary judgment to respondent, but it allowed American Family
time to file a motion opposing the dismissal. Following American Family’s response, the
district court granted summary judgment to respondent . It determined that the No -Fault

1 The final judgment entered by the district court administrator spells respondent’s last
name “Klingehoets,” without the second “l,” which the caption on appeal must match. See
Minn. R. Civ. App. P. 143.01 . However, because the district court’s orders as well as
documents in the record, such as the title for respondent’s vehicle and police report from
the accident, spell his name Klingelhoets, we use this spelling in the body of this opinion.

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Act did not allow American Family to bring a UM subrogation claim in an independent
action when it was not preventing double recovery by A.B. This appeal follows.2
D E C I S I O N
American Family argues that the district court incorrectly determined that insurers
have subrogation rights to UM benefits only to prevent duplicate recovery, and it asserts
instead that an insurer “becomes subrogated to the claimant[’]s action against the uninsured
motorist when it makes payment to its insured.” We agree that the district court misapplied
the law.
We review a district court’s grant of summary judgment de novo. Kelly v. Kraemer
Constr., Inc., 896 N.W.2d 504, 508 (Minn. 2017). “A district court may grant summary
judgment when there is no genuin e issue as to any material fact” and a party, as a matter
of law, “is entitled to a judgment.” Id. (quoting Minn. R. Civ. P. 56.03) (quotation marks
omitted). We must view the evidence “in the light most favorable to the nonmoving party.”
Id. A district court has the inherent authority to enter summary judgment on its own
motion. Del Hayes & Sons, Inc. v. Mitchell, 230 N.W.2d 588, 591-92 (Minn. 1975).
“Subrogation rights under the Minnesota No -Fault Act present a difficult area.”
Preferred Risk Mut. Ins. Co. v. Pagel , 439 N.W.2d 755, 756 (Minn. App. 1989) , review
denied (Minn. July 12, 1989) . The No-Fault Act requires every automobile insurer to
provide UM benefits, which an insured can receive by showing damages and fault by an
uninsured driver. See Minn. Stat. §§ 65B.43, subd. 18 (defining UM coverage), .49, subd.

2 Klingelhoets did not file a brief, and we therefore review the case on its merits under
Minn. R. Civ. App. P. 142.03.

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3a (2018) (requiring UM coverage); see also Hegseth v. Am. Family Mut. Ins. Grp. , 877
N.W.2d 191, 195 (Minn. 2016) (distinguishing UM claims from underinsured -motorist
(UIM) claims).
The No -Fault Act does not address subrogation of UM benefits. However, the
common law gives “a reparation obligor [an insurer] . . . a right to subrogation upon
payment of uninsured motorist benefits to the extent that the insured will achieve a
duplicate recovery.” Flanery v. Total Tree, Inc., 332 N.W.2d 642, 645 (Minn. 1983). This
requires the insured to be fully compensated first. See Pagel, 439 N.W.2d at 755 (holding
insurer can “recover the value of uninsured motorist benefits paid to its insured, pr ovided
the insured has first been fully compensated”). T he No -Fault Act does not relieve an
uninsured driver from tort liability. Minn. Stat. § 169.797, subd. 1 (2018) (providing
penalties for failure to maintain vehicle insurance). And an insurer may assert a UM
subrogation claim against an uninsured tortfeasor. See Ill. Farmers Ins. Co. v. Wright, 391
N.W.2d 519, 522 (Minn. 1986) (allowing UM subrogation acti on against tortfeasor);
Pagel, 439 N.W.2d at 757 (concluding Flanery, which “upheld the insurer’ s right to
recover from the tortfeasor,” is controlling).
UM benefits stand in contrast to basic economic-loss benefits, coverage of which
the No-Fault Act also requires, in which an insurer must pay regardless of the fault of its
insured or another driver. See Minn. Stat. § 65B.44 (2018). The No-Fault Act limits tort
liability for basic economic -loss benefits and permits subrogation of these benefits by
insurers only if the underlying action is “based upon negligence in another state, or arises
from claims other than negligence in the maintenance, use, or operation of a motor

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vehicle.” Ayers v. Kalal , 925 N.W.2d 291, 301 (Minn. App. 2019) (citing Minn. Stat.
§ 65B.53 (2018)).3
In dismissing American Family’s complaint at summary judgment, the district court
stated, “To be sure, this is not a case where [American Family] is attempting to stop double
recovery from its insured. [American Family] thus cannot maintain an independent action
for recovery of benefits paid to its ins ured against [Klingelhoets].” In reaching this
conclusion, the district court referred interchangeably to basic economic-loss benefits, and
related caselaw, and UM ben efits. But the No -Fault Act does not preclude American
Family from pursuing a subrogation claim against Klingelhoets, provided that A.B. has
been fully compensated, as discussed below . Summary judgment is therefore improper
due to this misapplication of law.
American Family also appears to argue that State Farm Mut. Auto. Ins. Co. v.
Galloway permits an insurer to pursue a subrogation claim upon payment of UM benefits,
without first showing that the insured has been fully compensated. 373 N.W.2d 301 (Minn.
1985). In discussing how UM benefits operate when the only tortfeasor is the uninsured

3 Some cases, such as Ayers, refer to no-fault insurers’ subrogation rights generally as being
limited to these two situations described in Minn. Stat. § 65B.53 or state that “[s]ubrogation
for no-fault benefits” exists only under the No-Fault Act. See 925 N.W.2d at 301 (emphasis
added); see also Great W. Cas. Co. v. Northland Ins. Co., 548 N.W.2d 279, 280-81 (Minn.
1996) (describing “ principle that subrogation in the no -fault context is exclusively a
creature of statute” (emphasis added) (citing Milbrandt v. Am. Legion Post of Mora , 372
N.W.2d 702, 705-06 (Minn. 1985)). These cases use “no-fault benefits” to refer to basic
economic-loss benefits. While the No-Fault Act mandates coverage of both UM and basic
economic-loss benefits , these cases involve subrogation of only basic economic-loss
benefits. See, e.g., Ayers, 925 N.W.2d at 293. We therefore do not read them to overrule
caselaw stating that an insurer’s right to subrogation of UM benefits exists under common
law.

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motorist, Galloway states that the insured “will ordinarily seek to collect uninsured
motorist benefits from her own carrier. The carrier, having paid the benef its, is then
subrogated to the claimant’ s action against the uninsured motorist and attempts to obtain
full or partial reimbursement.” Id.at 304. But in a footnote to that sentence, it states that
“[t]he No -Fault Act does not expressly provide for subrog ation rights for an uninsured
motorist carrier but we have recognized such a right, provided the claimant has first been
made whole.” Id. at 304 n.1 (emphasis added). It also thereafter states, “If [the] claimant
receives full compensation in uninsured motorist benefits from her carrier, the carrier is
subrogated to claimant’s personal injury claim . . . .” Id. at 304. Further, while Galloway
refers to the situation of an uninsured motorist as the only tortfeasor, it involved three
tortfeasors, only one of whom was uninsured, and its holding focuses on when an insurer
that has not yet paid UM benefits can require its insured to obtain its consent to settle with
a tortfeasor. Id. at 303, 305-06. Galloway therefore does not relieve an insurer of the
requirement that its insured be fully compensated before it can seek subrogation of UM
benefits. To the extent that American Family is arguing this, its argument fails.
In addition, an issue of material fact exists as to whether A.B. has been fully
compensated. Cf. Pagel, 439 N.W.2d at 756 (noting district court ’s finding that insured
was fully compensated for total damages). 4 American Family did not assert until its

4 Cases involving an action by the insured against the tortfeasor or a settlement with the
tortfeasor commonly indicate that the insured signed a “release and trust agreement” for
the benefit of the insurer. See, e.g., Wright, 391 N.W.2d at 520; State Farm Ins. Cos. v.
Galajda, 316 N.W.2d 564, 565 (Minn. 1982); Maday v. Yellow Taxi Co. of Minneapolis ,
311 N.W.2d 849, 850 ( Minn. 1981); Pagel, 439 N.W.2d at 756; see also Flanery, 332

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appellate brief that its payments to A.B. compensated her in full. For that assertion, it cites
to its request for admissions and a transaction summary showing its payments to A.B.
American Family’s request for admissions states that it paid A.B. $160,000 in UM benefits
“for damages incurred as a direct result of [the] accident.” Its transaction summary shows
that it paid A.B. $160,000 in UM benefits. Finally, American Family’s complaint also
asserts that it paid A.B. $160,000 in UM benefits . But none of these explicitly state that
those benefits fully compensated A.B. for her losses. Nevertheless, viewing this evidence
in the light most favorable to American Family, there is a genuine issue of material fact
regarding whether A.B. has been fully compensated. See DLH, Inc. v. Russ, 566 N.W.2d
60, 71 (Minn. 1997) ( stating genuine issue of mat erial fact exists regarding element of
nonmoving party’s case when evidence would “permit reasonable persons to draw different
conclusions”).
Because the district court misapplied the law and because an issue of material fact
exists regarding whether A.B. has been fully compensated, we reverse and remand for the
district court to apply the law consistent with this opinion and to reopen the record for
evidence of whether A.B. has been fully compensated.
Reversed and remanded.

N.W.2d at 643 & n.2 (noting insurer “reserved its right of subrogation” and insured settled
with tortfeasor in agreement that reserved insurer’s subrogation right).