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American Family Insurance Group v. Schroedl8/24/2000
Respondent, Harold Schroedl, suffered a severe closed-head injury when he was hit by a car on December 6, 1997. Because of the accident, Schroedl was incapacitated and resided in a nursing home until he died in December 1998. Although Schroedl was retired at the time of the accident, he owned income-producing rental property that he managed and maintained. Because he was incapacitated after the accident, he was no longer able to maintain the rental property. As a result, Schroedl's son and others were hired and paid to maintain the property. At the time of his injuries, Schroedl had an automobile insurance policy with appellant, American Family Insurance Group. Schroedl filed a no-fault insurance claim with American Family for "replacement services" or, in the alternative, a claim for wage loss to recover the amount expended hiring his son and others to maintain the rental property. American Family denied Schroedl's claim, contending that when Schroedl purchased the no-fault insurance policy from American Family, he elected to exclude coverage for "work loss" and that the exclusion was still in effect on Decemberá6, 1997.
After American Family's denial of the claim, the matter proceeded to arbitration. The arbitrator ruled that Schroedl was entitled to recover income loss benefits and that those benefits were not barred by his insurance policy's "work loss" exclusion. In addition, the arbitrator noted that American Family had not complied with its responsibility under Minn. Stat. §á65B.491 to inquire about Schroedl's need for wage loss reimbursement coverage. American Family appealed to the district court, which vacated the arbitrator's award based on its finding that Schroedl's policy with American Family specifically excluded "work loss" benefits from coverage. Schroedl appealed and the court of appeals reversed, holding that American Family had an ongoing statutory duty to inquire whether Schroedl needed wage loss reimbursement coverage and, having failed to make such inquiry, was precluded from denying coverage.
In 1992, at the age of 72, Schroedl purchased the initial policy from American Family. Consistent with the no-fault insurance scheme, the policy provided mandatory benefits for basic economic loss as required by Minn. Stat. §á65B.49. Basic economic loss benefits encompass income loss benefits including "costs incurred by a self-employed person to hire substitute employees to perform tasks which are necessary to maintain" income. Minn. Stat. §á65B.44, subd. 3 (1998). Income includes wages, see Minn. Stat. § 65B.43, subd. 6 (1998), and loss means "economic detriment resulting from the accident" and includes losses resulting from replacement services. Minn. Stat. § 65B.43, subd. 7 (1998).
Minnesota Statutes §á65B.491 provides an exception to the mandatory basic economic loss benefits required by section 65B.49. Section 65B.491 provides that:
o plan of reparation security issued to or renewed with a person who has attained the age of 65 years may provide coverage for wage loss reimbursement that the insured will not reasonably be expected to be able to receive. It is the responsibility of the person issuing or renewing the plan to inquire as to the applicability of this section. Id.
In its effort to comply with the provisions of Minn. Stat. §á65B.491, the American Family application Schroedl filled out when he applied for the initial plan contained the following provision:
EXCLUSION OF WORK LOSS UNDER PERSONAL INJURY PROTECTION COVERAGE * * * *
I also acknowledge and agree that I have been given the opportunity to exclude Work Loss Coverage under the Minnesota Personal Injury Protection (PIP) Endorsement an
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