Minn. Stat. § 604.18 authorizes the award of “taxable costs” when an insurer denies benefits without a reasonable basis. Earlier this month, the Minnesota Supreme Court was presented with the question of whether the award of “taxable costs” was capped by the insurance policy limit.
In Wilbur v. State Farm Mutual Automobile Insurance Company,1 a driver rear-ended Wilbur’s car from which he suffered injuries which caused permanent nerve damage. The at-fault driver’s liability insurer paid the full amount available under its policy. Wilbur made a demand of its insurer, State Farm, for the full underinsured-motorist policy benefits of $100,000. Following a nominal offer of $1,200, State Farm offered an additional $26,800 to settle the claim. Wilbur ultimately filed suit for breach of contract. The jury returned a verdict in Wilbur’s favor for $412,764.63. The trial court reduced the verdict to account for the at-fault driver’s payment and other collateral-source payments, ultimately entering judgment in the amount of $98,800, subtracting State Farm’s initial payment of $1,200.
Wilbur ultimately amended his complaint to add a claim under Minn. Stat. § 604.18, which provides a remedy of “one-half of the proceeds awarded that are in excess of an amount offered by the insurer at least ten days before the trial beings or $250,000, whichever is less.” Finding that State Farm denied Wilbur’s insurance benefits without a reasonable basis, the trial court ultimately awarded Wilbur $36,000, one-half of the difference between State Farm’s last settlement offer of $26,800 and $98,800. In addition, the court awarded litigation costs, attorney fees and prejudgment interest.
On appeal, the Minnesota Supreme Court was presented with determining whether the “proceeds awarded” to an insured under § 604.18 are capped by the insurance policy limit. In concluding they are capped, the supreme court looked to the statue’s use of the word “proceeds” in other sections. The supreme court concluded that all references within the statute refer to insurance policies and that such reference supports interpreting the phrase “proceeds awarded” in the same way. In concluding that the phrase “proceeds awarded” was capped by the insurance policy’s limit, the court relied upon the language within section 604.18, which provided that the award of taxable costs could only be determined subsequent to a determination by the finder of fact “of the amount an insured is entitled to under the insurance policy.”
1 Wilbur v. State Farm Mut. Auto. Ins. Co., No. A15-1438, 2017 WL 1245282 (Minn. April 5, 2017).