In Wilbur v. State Farm, the appellate court holds that the phrase “proceeds awarded” in Minn. Stat. Section 604.18, subd. 3(a)(1) means the amount of the judgment entered by the district court as UIM benefits.
The appellant, Mr. John Wilbur, had sustained severe injuries resulting from a motor vehicle collision. Mr. Wilbur recovered the full $100,000.00 policy limit in damages from the at-fault driver’s insurance company. Mr. Wilbur then sought additional insurance coverage from his own insurer, State Farm, under his underinsured motorist (UIM) coverage. State Farm made an initial offer and payment of $1,200.00, then later offered an additional $26,800.00 to settle the UIM claim. Mr. Wilbur declined the offer and sought the $100,000.00 policy limit. Mr. Wilbur sued State Farm and the matter proceeded to a jury trial, after which the jury awarded Mr. Wilbur $412.764.63 in injury damages. After collateral source offsets, the district court determined the underinsured loss was $255,956.59. Because the UIM policy was only $100,000 in coverage, and State Farm had already paid $1,200, the district court entered judgement in the amount of $98,800.00 in Mr. Wilbur’s favor.
Following the jury verdict, Mr. Wilbur moved to amend his complaint to add a claim of bad faith against State Farm pursuant to Minn. Stat. Sec. 604.18, which provides that if an insurer unreasonably denies benefits to an insured, the district court may award taxable costs of “an amount equal to one-half of the proceeds awarded that are in excess of an amount offered by the insurer at least ten days before the trial begins or $250,000, whichever is less.” The statute also provides that the district court may award reasonable attorney fees up to $100,000.00 for an unreasonable denial of benefits. A bench trial took place in July 2014 to resolve the additional bad faith claims. State Farm argued that “proceeds awarded” was ambiguous and should be limited to the insurance policy limit. Mr. Wilbur argued that “proceeds awarded” meant the net jury verdict for damages, after being adjusted for collateral source payments. The district court sided with State Farm and determined that “proceeds awarded” meant the amount that was entered into judgment in Mr. Wilbur’s favor. The court, therefore, awarded $36,000 in taxable costs to Mr. Wilbur. Mr. Wilbur then appealed.
The central issue on appeal was whether the district court erred in interpreting the term “proceeds awarded” contained in Minn. Stat. Sec. 604.18, subd. 3(a)(1). The court first considers both the common and technical definitions of the terms “proceeds” and “awarded.” However, the court concludes that none of the definitions considered shed light on whether proceeds awarded meant the net jury verdict, or the amount entered into judgment by the district court. The court, therefore, finds that the term “proceeds awarded” is ambiguous because it is subject to more than one reasonable interpretation and it is not defined by statute.
Because of the ambiguity of the statute, the court next considers legislative intent behind the statute. The court considers statements made by Senator Clark during the final senate floor debate regarding the language of the statute. Senator Clark stated “the amount determined due under the insurance policy after the trial” when giving an example of “proceeds awarded.” The court finds that this statement supports State Farm’s interpretation of the term to be limited by what is actually owed, within the insurance policy limits. The court also considers the fact that the Minnesota Supreme Court has stated that statutory provisions that provide for a penalty are to be construed narrowly against the penalty, that the use of the term “proceeds” in case law is often used in reference to insurance benefits, and that the use of “proceeds” within the statute refers, again, to insurance proceeds. The court ultimately holds that State Farm’s interpretation of “proceeds awarded” is correct, that the the term refers to the amount entered into judgment by the district court.