Jessie Stoltenberg, Respondent,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c)

STATE OF MINNESOTA
IN COURT OF APPEALS
A20-0656

Jessie Stoltenberg,
Respondent,

vs.

American National Property and Casualty Company,
Appellant.

Filed February 16, 2021
Affirmed
Halbrooks, Judge*

Hennepin County District Court
File No. 27-CV-18-19343

Jennifer E. Olson, James S. Ballentine, Sc hwebel, Goetz & Sieben , P.A., Minneapolis,
Minnesota (for respondent)

Klay C. (KC) Ahrens, Hellmuth & Johnson, Edina, Minnesota (for appellant)

Charles A. Bird, Grant M. Borgen, Bird, St evens & Borgen, P.C., Rochester, Minnesota
(for amicus curiae Minnesota Association for Justice)

Considered and decided by Connolly, Presiding Judge; Reyes, Judge; and
Halbrooks, Judge.

* Retired judge of the Minnesota Court of Ap peals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.

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NONPRECEDENTIAL OPINION
HALBROOKS, Judge
Appellant-insurer challenges the district court’s grant of su mmary judgment to
respondent-insured on her declaratory-relief claim regarding the amount of underinsured-
motorist coverage available to her under an insurance policy issued by appellant. The
district court determined that a step-down provision in the policy limiting underinsured-
motorist coverage for nonrelative insureds is void. Appellant argues that the district court
erred by concluding that (1) the step-down pr ovision substantially reduced coverage and
(2) appellant did not provide adequate noti ce to the policyholder of the reduction in
coverage. Because we conclude that the provision substantially reduced coverage and that
appellant failed to provide adequate notice of the reduction, we affirm.
FACTS
The facts in this case are undisputed. In August 2016, respondent Jessie Stoltenberg
was injured in a car accident while she was a passenger in a vehicle driven, owned, and
insured by her long-term partner. The at-fault driver’s insurance company paid its liability
limits, but Stoltenberg asserted that the am ount did not fully compensate her for her
injuries. Thereafter, Stoltenberg made a cl aim for underinsured-motorist (UIM) benefits
from her partner’s insurer, appellant Americ an National Property and Casualty Company
(ANPAC). See Minn. Stat. § 65B.49, subd. 3a(5) (201 8) (requiring an injured person to
look to the policy covering the vehicle occupi ed at the time of the accident for primary
underinsured-motorist benefits).

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At the time of the accident, Stoltenberg ’s partner had been insured by ANPAC
continuously since 1997. Am ong other coverage, the 2016 policy provided $250,000 in
UIM coverage to the named insured and pers ons related to the named insured by blood,
marriage, or adoption. A lthough the policy had previously provided the same UIM
coverage limits for other insureds, a “step-dow n” clause was added in 2005 that reduced
UIM coverage for nonrelative insureds to “t he minimum required liability limits of any
financial responsibility law applicable to the accident.” Under Minnesota law, the
minimum amount of UIM coverage required is $25,000. Minn. Stat. § 65B.49, subd. 3a(1)
(2018). Because Stoltenberg is not relate d by blood, marriage, or adoption to the
policyholder, ANPAC declined to cover Stoltenberg’s injuries beyond $25,000.
Stoltenberg sued ANPAC, seeking a declaratory judgment that the step-down
provision was void because ANPAC had failed to provide adequate notice to the
policyholder of the reduction in coverage.1 The parties stipulated that the case involved a
purely legal question and that the policy provided either $25,000 or $250,000 in UIM
benefits. They brought cross-motions for summary judgment.
The district court granted Stoltenberg’ s summary-judgment motion. The district
court concluded that the step-down clause substantially reduced coverage and that ANPAC
was therefore required to provide, in writing, “[b]asic information to allow the insured to
understand and quantify the reduction in covera ge.” The district court determined that

1 Stoltenberg also brought a claim seeking damages for her personal injuries. The parties
subsequently stipulated to dismiss that cl aim without prejudice, leaving Stoltenberg’s
declaratory-judgment claim as the only issue to be decided by the district court.

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ANPAC’s 2005 renewal packet failed to provide that information and the step-down clause
was therefore void. Consequently, the district court determined that the policy provided
$250,000 in UIM benefits. ANPAC appeals.
DECISION
This court reviews a district court’s summary judgment decision de novo. Riverview
Muir Doran, LLC v. JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn. 2010). Because
the issues in this cas e involve only legal determinations , we must examine “whether the
district court properly applied the law.” Id.
The Minnesota Supreme Court’s decision in Canadian Universal Ins. Co., Ltd. v.
Fire Watch, Inc. , 258 N.W.2d 570 (Minn. 1977), controls this case. In Canadian
Universal, the supreme court held that an insurer must pr ovide written notice when it
substantially reduces insurance coverage, and that the failure to provide such notice voids
the reduction in coverage. Id. at 575. “Any question of an individual’s insurance coverage
shall then be determin ed in accordance with the terms of the original po licy prior to the
renewal or endorsement.” Id.
Subsequent court of appeal s cases have applied the Canadian Universal rule and
further developed standards for determining whether written notice is adequate. See, e.g.,
Benton v. Mut. of Omaha Ins. Co. , 500 N.W.2d 158 (Minn. App. 1993), review denied
(Minn. July 19, 1993); Campbell v. Ins. Serv. Agency, 424 N.W.2d 785 (Minn. App. 1988).
Under Canadian Universal and subsequent cases, there are two primary inquiries: (1) did
the insurer “substantially reduce” coverage under the policy and, if so, (2) did the insurer
provide adequate notice to the policyholder?

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On appeal, ANPAC argues that the distri ct court erred because (1) the amendment
did not substantially reduce c overage and (2) even if the reduction in coverage was
substantial, ANPAC provided adequate no tice of the reduction via the 2005 renewal
packet. We address each of ANPAC’s arguments in turn.
I. The district court did not err by co ncluding that the step-down provision
substantially reduced insurance coverage.

Minnesota caselaw does not provide a clea r test for determining whether a reduction
in insurance coverage is “substantial.” However, Canadian Universal and subsequent
court of appeals decisions are instructive. In Canadian Universal, the policyholder sold,
installed, and serviced fire protecti on equipment. 258 N.W.2d at 571. The original
insurance policy covered losses arising from the negligent installation of a fire protection
system, but a later amendment excluded that coverage. Id. at 574. The supreme court
determined that the policy amendmen t substantially reduced coverage. Id. Following
Canadian Universal , this court in Campbell held that an insurer substantially reduced
coverage when it modified an “all-risk” home-insurance policy to exclude “mixed perils.”
424 N.W.2d at 790. And, in Benton, we concluded that the in surer substantially reduced
coverage when it decreased the distribution period of disability benefits from 520 weeks to
104 weeks for disabilities occurring after age 63. 500 N.W.2d at 159-60.
In contrast, in Samuelson v. Farm Bureau Mut. Ins. Co., we held that a modification
to an automobile-insurance policy—which required that UIM claims must be settled
through litigation rather than arbitration—was not a substantial reduction in coverage
because the change “was a procedural change which did not result in any reduction of [the

6
insured’s] basic insurance coverage.” 446 N.W.2d 428, 431 (Minn. App. 1986). We drew
a distinction between purely procedural ch anges that have “no effect” on insurance
coverage and substantive changes that actually reduce coverage. Id. at 432.
Here, the district court reasoned that th e change was substantial regardless of
“[w]hether the court considers the coverage changes as to unrelated insureds under all lines
of insurance or only the changes as to the un derinsured motorist coverage alone.” The
district court emphasized that the step-dow n clause “dramatically reduces the maximum
coverage limits from . . . $250,000 to $25,000,” and that, although the significance of the
change may vary by policyholder, a reasonabl e policyholder, when deciding whether to
renew an automobile insurance policy, would deem important a steep drop in coverage for
nonrelative passengers.
We agree with the district court that th e reduction in coverage was substantial.
Unlike the amendment in Samuelson, the provision actually reduced coverage under the
policy. And the change amounts to a 90% reduction in UIM coverage for nonrelative
insureds, which here included the policyholder’s household member.
ANPAC argues that the step-down provisi on did not substantially reduce coverage
because Canadian Universal applies only to a reduction in coverage to the policyholder
personally, not to nonrelative passengers. It bases this argument on the language of
Canadian Universal , which states that the affirmativ e duty to notify applies “when an
insurer . . . substantially reduces the prior insurance coverage provided the insured.”
Canadian Universal, 258 N.W.2d at 575 (emphasis added).

7
We are not persuaded. Firs t, nonrelative passengers are “insureds” under the policy.
Second, the caselaw makes no di stinction between insurance c overage that protects the
policyholder individually versus other insureds. Canadian Universal is grounded in the
consumer-protection principle that, because in surance contracts involve parties that are
unequally situated, th e insurer, as the dominant party, is obligated to inform the
policyholder when it creates exceptions or limitations in coverage. Id. at 574-75. There is
no basis in caselaw to apply this principl e where a reduction affects the policyholder
personally, but not where the reduction only directly affects the policyholder’s guests. The
district court properly determined that th e step-down provision substantially reduced
coverage.
II. The district court did not err by conclu ding that the 2005 renewal packet failed
to provide adequate notice of the reduction in coverage.

In Canadian Universal , the supreme court establishe d that an insurer “has an
obligation to inform the insu red, by cover-letter or a conspicuous heading to the
amendatory endorsement, or some similar means, that the endorsement contains significant
changes in coverage, and offer to explain and discuss the significance of the changes to the
insured upon request.” Id. at 575 (quoting Allstate Inc. v. Reeves, 136 Cal. Rptr. 159, 163
(1977)). This court has subsequently applied this standard in two cases. See Benton, 500
N.W.2d at 160-61 (concluding that notice wa s inadequate where th e insurer advised the
policyholder of a reduction in coverage in a letter that “fail[ed] to put the limits prominently
before the insured” and contained “a headi ng and content which [d id] little to apprise a
reasonable recipient that primary benefits were being decreased significantly”); Campbell,

8
424 N.W.2d at 790 (concluding that notice was inadequate where the insurer sent the
policyholder a copy of the renewal policy alo ng with a document stating: “Your renewal
policy contains better protection than ever. New and revised coverages have been added
per the enclosed [amendatory endorsement]. Contact your agent if you have any
questions.”).
Here, the 2005 renewal packet included ei ght documents. The fourth and seventh
documents relate to the reduction at issue. The fourth document reads as follows:
Important Information Regarding Your Policy

ANPAC® continually strives to provide the best insurance
coverage possible at an affordable rate to our policyholders. At
times, it is necessary for change s to be made to our policy
language in order to ensure this goal is achieved.

Previously, your ANPAC® policy provided liability coverage
protection up to the limits s hown on your policy Declaration
for all insureds, including others who operate your insured
vehicle with your permission. Your existing policy with
ANPAC® continues to provide coverage for the named
insured, your spouse, and your relatives up to the Limits of
Liability as shown on your policy Declaration.

The definition of “insured person” in Part I – Liability,
Additional Definitions Used in Pa rt I Only, and the Limits of
Liability Provision have been re vised for others who operate
your vehicle with your permissi on (referred to as permissive
users). Other clarifications to the definition of an “insured
person” have been made. The Limits of Liability provided to
those permissive users of your insured vehicle has been limited
to the minimum limits of liab ility insurance coverage as
indicated in the state financial responsibility law. Please read
your policy language for complete details.
Please note the reduced Limits of Liability for permissive
users of your insured vehicle DO NOT apply to your
liability protection coverage. THE LIABILITY
PROTECTION PROVIDED TO YOU, YOUR SPOUSE

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AND YOUR RELATIVES HAS NOT CHANGED. You,
your spouse, and your relativ es are insured for covered
losses up to the Limits of Li ability shown on your policy
Declaration.

Also, if you have previously selected Uninsured Motorist
Coverage (UM) and/or Underi nsured Motorist Coverage
(UIM), the minimum limits of li ability insurance coverage as
indicated in the state financial responsibility law for insureds
other than you, your spouse and your relatives are now
applicable. Please read your policy language for complete
details. The reduced limit of UM Coverage DOES NOT
apply to the UM Coverage protection provided to you, your
spouse and your relatives.

Additionally, the definition of “financial responsibility law”
has been added to the Definitions Used Throughout This Policy
section in our automobile and mo torcycle policies. Financial
responsibility refers to the level of insurance coverage required
to own and operate a vehicle in your state of residence, any
other state the insured vehicle may be operated within, or
Canada.

Please read the enclosed docum ents for complete details.
These documents should be kept in a secure place along with
your other policy information.

If you have questions about any of these changes or if you want
to make any additions or changes to your policy, please contact
your local American National agent.

[ANPAC Logo]

This notice contains only a general description of the changes
in coverage and is not a statem ent of contract. All coverages
are subject to the insuring agreements, exclusions and
conditions of the policy, and applicable endorsements.

The seventh document, Amendatory Endorse ment #SA-472, is five pages long and
provides a variety of revisions to the insurance policy. It states the following, in relevant
part:

10
AMERICAN NATIONAL PROPERTY AND
CASUALTY COMPANY

AMERICAN NATIONAL GENERAL INSURANCE
COMPANY

MINNESOTA AUTOMOBILE AMENDATORY
ENDORSEMENT

THIS ENDORSEMENT CHANGES YOUR POLICY,
PLEASE READ IT CAREFULLY

[. . .]

IV. In PART III – UNINSURED MOTORIST AND
UNDERINSURED MOTORIST, ADDITIONAL
DEFINITIONS USED IN THIS PART ONLY is
revised by deleting item (1) and replacing it with the
following:

(1) “Insured person” means:

(a) you or a relative;
(b) any other person occupying your insured car;
(c) any person who is entitled to recover damages
because of bodily injury to you, a relative, or another
occupant of your insured car.

[. . .]

V. Under PART III – UNINSURED MOTORIST AND
UNDERINSURED MOTORIST, LIMITS OF
LIABILITY, the first paragraph is deleted and replaced
with the following:

LIMITS OF LIABILITY

A. For:

(a) you or a relative; or
(b) a person related to you by blood, marriage or
adoption,

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the limits of liability shown in the Declarations apply
subject to the following:

(1) The limit for “each person” is the maximum we
will pay as damages for bodily injury , including
damages for care and loss of services, to one person in
one accident.
(2) Subject to the limit fo r “each person,” the limit for
“each accident” is the maximum we will pay as
damages for bodily injury, including damages for care
and loss of services, to tw o or more persons in one
accident. But, no person is entitled to receive duplicate
payments for the same elements of loss.

B. For any other insured person, we will only provide up
to the minimum required liability limits of any financial
responsibility law applicable to the accident.

Under Canadian Universal , new limitations on covera ge must be prominently
placed and clearly phrased such that the policyh older is apprised that coverage is being
significantly decreased. 258 N.W.2d at 575; Benton, 500 N.W.2d at 160. ANPAC did not
provide a cover letter in the renewal packet explaining the reduction in coverage. And the
heading of the amendatory endorsement—“This Endorsem ent Changes Your Policy.
Please Read It Carefully”—fails to highlight a reduction in coverage. ANPAC contends
that the heading satisfies the Canadian Universal rule simply because it is conspicuous.
But, while the bolded, all-caps heading is conspicuous, it merely informs the policyholder
that the endorsement “changes” the policy; the heading does nothing to alert the
policyholder that coverage is being reduced. And the heading of the notice document—
“Important Information Regarding Your Policy”—is, at best, vague.
Moreover, the contents of the notice doc ument fail to prominently place and clearly
phrase the reduction in coverage. The first pa ragraph informs the po licyholder that “[a]t

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times,” “changes” are necessary “to our policy language.” The next three paragraphs focus
on “liability protection covera ge,” “liability insurance cove rage,” “liability protection
coverage,” and permissive users—those who “operate” the vehicle with permission.
Paragraph three specifically notes a revised definition of “insured person” in Part I—
Liability coverage. These para graphs emphasize th at “liability protection coverage” has
not changed for the policyholder or relatives.
The purported notice of reduction in covera ge is provided in the fifth of nine
paragraphs. Like the paragraphs before it, pa ragraph five references “liability insurance
coverage” and specifically mentions a reduced limit of uninsured motorist (UM) coverage,
but not UIM coverage. Paragraph five does not clearly stat e that UIM coverage for
nonrelative insureds is reduced or limited:
Also, if you have previously selected Uninsured Motorist
Coverage (UM) and/or Underi nsured Motorist Coverage
(UIM), the minimum limits of li ability insurance coverage as
indicated in the state financial responsibility law for insureds
other than you, your spouse and your relatives are now
applicable. Please read your policy language for complete
details. The reduced limit of UM Coverage DOES NOT
apply to the UM Coverage protection provided to you, your
spouse and your relatives.

We conclude that the notice falls short of Canadian Universal ’s requirement that
substantial reductions in coverage be clearly phrased and prominently placed.
ANPAC emphasizes the content of the ame ndatory endorsement and contends that
providing the policyholder with the new lang uage was “all which is required” under
Canadian Universal. But Canadian Universal requires more than simply placing the
amendatory endorsement language in front of the policyhold er—it requires the insurer to

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clearly articulate, in a promin ent location, that coverage is being reduced. ANPAC also
argues that the step-down clause is valid because it has been upheld as unambiguous and
permissible under public policy and the Minnes ota No-Fault Automobile Insurance Act.
And ANPAC relies on caselaw that provides that policyholders are obligated to read their
insurance policy. These arguments are not pe rsuasive. Regardless of the policyholder’s
duty to read the policy, and regardless of the fact that step-down provisions have been
upheld as consistent with the law, an insure r still has a duty to provide adequate notice to
the policyholder of a substantial reduction in coverage.
In sum, we conclude that the notice ANPAC provided regarding a substantial
reduction in UIM coverage for nonrelative in sureds was inadequate. We reach this
conclusion because the 2005 renewal packet did not contain a cover letter or conspicuous
heading highlighting the reduction, the notice was buried in the fifth paragraph of the fourth
document, and the notice was not clearly phrased. We therefore conclude that the district
court properly determined that the step-dow n provision is void and that the $250,000
coverage limit applies to Stoltenberg’s claim.
Affirmed.