State Farm Mutual Automobile Insurance Company v. Merrill et al

Filing 57

ORDER granting 43 State Farm's Motion for Judgment on the Pleadings and Motion to Dismiss(Written Opinion) Signed by Judge Susan Richard Nelson on 11/20/2018. (ACT)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

State Farm Mutual Automobile Insurance
Company,

Case No. 18-cv-00430 (SRN/KMM)

Plaintiff,
v.
Phillip J. Merrill, Trustee for the heirs and
next-of-kin of P.B., a minor, deceased,
Defendant,
and

MEMORANDUM OPINION
AND ORDER

Phillip J. Merrill, Trustee for the heirs and
next-of-kin of P.B., a minor, deceased,
Counterclaim Plaintiff,
v.
State Farm Mutual Automobile Insurance
Company,
Counterclaim Defendant.

Robert E. Kuderer and Thomas C. Brock, Erickson, Zierke, Kuderer & Madsen, P.A., 7301
Ohms Lane, Suite 207, Minneapolis, MN 55439, and Gregory E. Kuderer, Erickson,
Zierke, Kuderer & Madsen, P.A., 114 West Second Street, Fairmont, MN 56031 for
Plaintiff and Counterclaim Defendant.
James A. Heuer, Jr., Heuer Fischer, P.A., 10 South Fifth Street, Suite 950, Minneapolis,
MN 55402 for Defendant and Counterclaim Plaintiff.

SUSAN RICHARD NELSON, United States District Judge

This insurance dispute arises out of a tragic car accident that occurred on Interstate
494 in December of 2016. Three family members died as a result of the accident. One of those
family members was a minor, who the Court will call P.B. The Trustee for P.B.’s Estate,
Defendant Phillip Merrill (“Merrill”), contends that Plaintiff State Farm Insurance Company
(“State Farm”) owes the Estate $100,000 in Underinsured Motorist Insurance (“UIM”). State
Farm disagrees. Accordingly, State Farm filed a declaratory judgment action seeking a
declaration from this Court that Merrill’s UIM claim is barred by Minnesota’s No-Fault Act.
Merrill answered and filed counterclaims of breach of contract and unjust enrichment. State
Farm now moves for judgment on the pleadings. It also moves to dismiss Merrill’s breach of
contract and unjust enrichment counterclaims under Fed. R. Civ. P. 12(b)(6).
After carefully reviewing the record and applicable case law, the Court grants State
Farm’s motions in full.
I.

BACKGROUND
In describing the background of this case, the Court assumes as true the factual

allegations in the complaint (and counterclaim) and construes all reasonable inferences from
those facts in the light most favorable to the non-moving party. See Great Lakes Gas
Transmission Ltd. P’ship v. Essar Steel Minnesota, LLC, 871 F. Supp. 2d 843, 851 (D. Minn.
2012) (noting that the same standard applies to motions to dismiss under Rule 12(b)(6) and
motions for judgment on the pleadings under Rule 12(c)). Further, while the Court may
consider “materials that are necessarily embraced by the pleadings” in describing the facts of
a case in this procedural posture, such as exhibits to a complaint, it “generally must ignore
materials outside the pleadings.” Id. Here, for instance, though the Court does consider the
2

exhibits attached to the complaint and counterclaim, it does not consider the affidavit
submitted by Merrill’s counsel alongside his brief in opposition. See Gorog v. Best Buy Co.,
Inc., 760 F.3d 787, 791 (8th Cir. 2014) (noting that “matters outside the pleadings” include
“any written or oral evidence in support of or in opposition to the pleading that provides some
substantiation for and does not merely reiterate what is said in the pleadings”).1
A. The Parties and Their Insurance Coverage
Although this insurance dispute technically revolves around only two parties – the
deceased minor P.B. (through his trustee Merrill) and State Farm – the Court also discusses
P.B.’s mother (Dylan Bailey), P.B.’s grandmother (Dawn Chiodo), and the driver of the other
vehicle involved in the accident (Patrick Hayes). These three persons, and their respective
automobile insurance policies, are central to this litigation.
Dylan Bailey was the mother and sole legal guardian of P.B. (Answer & Countercl.
[Doc. No. 29] ¶ 30-31.) Ms. Bailey was the “only named insured” under a State Farm auto
policy covering her 2010 Toyota Prius, which was not involved in the accident. (Id. ¶ 48.)
Although P.B. was insured as a “resident relative” under this policy, P.B. was not named
anywhere on the policy. (Id. ¶¶ 48-50.) This policy carried UIM limits of $100,000 per person
and $300,000 per accident. (Compl. [Doc. No. 1], Ex. 1 [Doc. No. 1-1] (“Bailey Policy”) at
56.)
Dawn Chiodo was Dylan Bailey’s mother and P.B.’s grandmother. (See Answer &
Countercl. ¶ 32.) Ms. Chiodo and Ms. Bailey co-leased a residence in Bloomington,

And, as explained in footnote five below, even if the Court did consider Merrill’s
affidavit, it would not change the outcome of this case.
1

3

Minnesota, where P.B. also resided. (Id. ¶¶ 8, 33-34; Compl. ¶ 20; see also Answer &
Countercl. Ex. A (Bailey & Chiodo Lease) at 1).)2 Ms. Chiodo owned and operated a 1998
Jeep Cherokee at the time of the accident. (Compl. ¶ 19.) Further, Ms. Chiodo was a named
insured on a policy issued by Geico Insurance Company covering the Jeep (“Chiodo Policy”).
The Chiodo Policy provided less generous coverage than her daughter’s policy, with UIM
limits of only $50,000 per person and $100,000 per accident. (Id.)
Patrick Hayes was the owner and operator of the other vehicle involved in the collision.
At the time of the accident, Mr. Hayes was insured under an automobile liability policy
through State Farm with bodily injury limits of $100,000 per person and $300,000 per
accident (“Hayes Policy”). (Compl. ¶ 18.)
B. Factual History
The salient facts of this case are generally undisputed. On December 2, 2016, Patrick
Hayes drove his Chevrolet Malibu eastbound in the westbound lanes of Interstate 494 near
Bloomington, Minnesota – “the wrong way and against traffic.” (Compl. ¶¶ 15-16.) Dawn
Chiodo, carrying a car full of friends and family, approached and then merged her Jeep
Cherokee onto westbound I-494. As she did so, Mr. Hayes struck her vehicle “head-on.” (Id.
¶ 16.) Tragically, Ms. Chiodo, Ms. Bailey, and P.B. died as a result of the collision. Jennifer
and Olivia Nord, the two other passengers in Ms. Chiodo’s Jeep, suffered serious injuries
(collectively, “Claimants”). (Id. ¶ 17.)

2

To the extent there was any confusion on this issue, at the July 23 motion hearing
Merrill’s counsel clarified that, prior to the crash, “P.B. lived in the home with [his]
mother [Ms. Bailey] and P.B.’s grandmother [Ms. Chiodo].” (July 23, 2018 Hr’g Tr. at
14.)
4

Following the accident, State Farm notified Claimants that it would tender the Hayes
Policy liability limit of $300,000 in exchange for the release of Mr. Hayes from all wrongful
death and personal injury claims. (Id. ¶ 28.) By a Schmidt notice dated August 8, 2017,
attorneys representing the trustees for the estates of Ms. Bailey and P.B. notified State Farm
of an internal agreement amongst the Claimants regarding the allocation of the $300,000
Hayes Policy limit, as well as the $100,000 Chiodo Policy UIM limit. (Compl., Ex. 2 [Doc.
No. 1-2] at 2, 4.) 3 Additionally, Merrill gave notice of his intent to seek $100,000 in excess
UIM coverage from State Farm under the Bailey Policy. (Compl., Ex. 2 at 2.)
Under the agreed-upon internal settlement, which the parties attached to the Schmidt
notice, available funds would be distributed among the Claimants as follows:
Claimants
(decedents
italicized)
Dawn Chiodo
P.B.

State Farm
Hayes Policy

Geico Chiodo
Policy (Primary
UIM)
$87,500.00
$50,000.00
$37,500.00
$0.00

Dylan Bailey

$37,500.00

$0.00

Jennifer Nord

$37,500.00

$0.00

$100,000.00

$50,000.00

Olivia Nord

3

Excess UIM
Coverage
$0.00
$100,000.00
(Bailey State
Farm Policy)
$100,000.00
(Bailey State
Farm Policy)
$100,000.00
(personal policy)
$50,000.00
(personal policy)

Claimants’
Expected
Coverage
$137,500.00
$137,500.00

$137,500.00

$137,500.00
$200,000.00

As explained later in this decision, a Schmidt notice provides notice of a tentative
settlement to an underinsurer, which then enables the underinsurer to protect its subrogation
rights against a tortfeasor. See Schmidt v. Clothier, 338 N.W.2d 256 (Minn. 1983).
5

(Answer & Countercl., Ex. C [Doc. No. 29-1] (“Claim Settlement”) at 31.)4 Under this
agreement, Olivia Nord and the estate of Dawn Chiodo would each recover $50,000 from
Chiodo’s Policy. The estates of P.B. and Dylan Bailey would each receive $100,000 in excess
UIM coverage as insureds under the Bailey Policy. Finally, Jennifer and Olivia Nord would
each recover excess UIM under personal policies.
By letter dated August 21, 2017, “State Farm, on behalf of Mr. Hayes, agreed to [the]
Claimants’ [] agreed-upon allocation of the [Hayes] Policy in exchange for a release of Mr.
Hayes.” (Compl. ¶ 30; Answer & Countercl. ¶ 16 (admitting this allegation).) On August 25,
2017, Merrill’s counsel advised State Farm that he would only accept the $37,500 allocation
under the Hayes Policy if State Farm tendered $100,000 under the Bailey Policy for Merrill’s
UIM claim. (Compl. ¶ 31.) State Farm declined this demand, contending that Merrill was not
entitled to such UIM coverage. (Id. ¶ 32.)5

4

A table similar to the one displayed here was included in a letter sent to State Farm
by attorneys for the Estate of Dylan Bailey on December 13, 2017. (Compl., Ex. 3 [Doc.
No. 1-3] at 7.) The bold lettering indicates the disputed UIM coverage at issue in this motion.
The exact time and manner of State Farm’s denial of UIM coverage to Merrill under
the Bailey Policy is a point of contention between the parties. (Compare Compl. ¶ 32 (not
stating when this denial occurred) with Answer & Countercl. ¶¶ 67-69 (stating that this
denial first occurred on November 14, 2017, following numerous “unreturned voice
mails”).) The affidavit submitted by Merrill’s counsel in opposition to State Farm’s motion
for judgment on the pleadings, which the Court may not consider in ruling on this motion,
provides further detail on this point. (See Affidavit of Jonathan J. Fischer (“Fischer
Affidavit”) [Doc. No. 53-1].)
However, this factual dispute does not bear on the threshold legal question of
whether Merrill is even entitled to UIM benefits under the Bailey policy. To the extent this
factual dispute bears on the equities of State Farm’s conduct, the Court notes that Merrill
never alleges that, in agreeing to the Claimants’ proposed allocation of the Hayes Policy in
return for a liability release, State Farm ever affirmatively promised or suggested that it
would pay P.B.’s UIM claim from the Bailey Policy as part of that release. To the contrary,
5

6

As evident from this account, State Farm’s denial of UIM coverage to Merrill under
the Bailey Policy was not anticipated by the Claimants’ internal settlement agreement. By
letter dated December 13, 2017, counsel for Ms. Bailey’s Estate joined Merrill’s demand that
State Farm provide UIM coverage to Merrill under the Bailey Policy, stating that “State
Farm’s position is holding up the proposed global settlement.” (Compl., Ex. 3 at 3.) In
response, State Farm maintained that its denial of UIM coverage was legally proper. (Compl.
¶ 34.)
Nonetheless, following these events, State Farm and Geico distributed the Hayes
Policy and Chiodo Policy funds pursuant to the Claim Settlement. (See Answer & Countercl.
¶¶ 56-58.) Further, State Farm distributed excess UIM benefits to Ms. Bailey’s Estate under
the Bailey Policy. (See Hr’g Tr. at 23.) However, because State Farm did not believe Merrill
was entitled to excess UIM coverage under the Bailey Policy, Merrill was left with only the
$37,500 allocation from the Hayes Policy.6
C. Procedural History

Merrill’s affidavit shows that State Farm, while perhaps dilatory in its responses,
repeatedly declined to make any promises about excess UIM benefits. (See Fischer
Affidavit ¶¶ 4-15.)
State Farm also paid Merrill $20,000 in “no-fault” benefits under the Bailey
Policy, for hospital treatment P.B. received after the crash. (See Answer & Countercl. ¶
52, Ex. B.) Although Merrill implies that this payment has some bearing on the excess
UIM question before the Court, it does not. UIM coverage and no-fault coverage are
separate and distinct coverages with different statutory schemes. Compare Minn. Stat. §
65B.47 (no-fault) with Minn. Stat. § 65B.49 (UIM).
6

7

State Farm filed the instant declaratory action on February 14, 2018 to determine its
rights, obligations, and liability under the Bailey Policy. (Compl. ¶¶ 34-35.) In its complaint,
State Farm asserted diversity jurisdiction, and maintained that, according to the plain
language of the Minnesota No-Fault Insurance Act, Minn. Stat. § 65B.49, subd. 3a(5), Merrill
was not entitled to excess UIM coverage under the Bailey Policy. (Id. ¶¶ 9-10, 27.)7
On April 17, 2018, Merrill answered and filed counterclaims of breach of contract and
unjust enrichment. (Answer & Countercl. ¶¶ 24-26.) On May 21, State Farm moved for
judgment on the pleadings on the UIM coverage issue. (Pl.’s Mem. in Supp. of its Mot. to
Dismiss Countercl. & for J. on the Pleadings (“State Farm’s Br.”) [Doc. No. 45].) In the same
motion, State Farm moved to dismiss Merrill’s breach of contract and unjust enrichment
counterclaims under Fed. R. Civ. P. 12(b)(6). (Id.) On June 25, Merrill filed an opposition to
State Farm’s motion to dismiss, as well as its own request for judgment on the pleadings with
respect to the UIM coverage issue. (See Def.’s Mem. in Opp’n & for J. on the Pleadings
(“Merrill’s Br.”) [Doc. No. 53].) State Farm followed up with a reply brief on July 10 (see
State Farm’s Reply Br. [Doc. No. 54]), and the Court entertained oral argument on July 23.
II.

DISCUSSION

7

Although State Farm initially named all five Claimants as defendants, as well as
Mr. Hayes, by May 30, 2018 State Farm had voluntarily dismissed every defendant
except Merrill. (See Apr. 9, 2018 Order [Doc. No. 27] (Jennifer and Olivia Nord); Apr.
20, 2018 Order [Doc. No. 32] (Trustee for Dylan Bailey’s Estate); May 8, 2018 Order
[Doc. No. 38] (Trustee for Dawn Chiodo’s Estate); May 30, 2018 Order [Doc. No. 52]
(Patrick Hayes).)
8

“Judgment on the pleadings is appropriate only where the moving party has clearly
established that no material issue of fact remains and the moving party is entitled to judgment
as a matter of law.” Potthoff v. Morin, 245 F.3d 710, 715 (8th Cir. 2001).
With respect to a motion to dismiss, a court may only dismiss a claim when the
complaint (or counterclaim) does not “contain sufficient factual matter, accepted as true, to
state a claim to relief that is plausible on its face.” Gorog, 760 F.3d at 792 (quoting Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009)). However, the Court need not accept as true wholly
conclusory allegations, Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th
Cir. 1999), or legal conclusions that the pleader draws from the facts pled, Westcott v. City of
Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). As noted above, courts in this Circuit view
factual allegations in motions to dismiss and motions for judgment on the pleadings under the
same, liberal standard. See Great Lakes Gas Transmission Ltd. P’ship, 871 F. Supp. 2d at
851.
The Court first addresses whether Merrill is entitled to excess UIM benefits under the
Bailey Policy. The Court then considers State Farm’s motion to dismiss Merrill’s breach of
contract and unjust enrichment counterclaims.
A. Whether Merrill is Entitled to Excess UIM Benefits
1. Legal Standard
This motion turns on Minnesota’s No-Fault Act, and on Minnesota case law
interpreting that statute. See State Farm Fire & Cas. Co. v. Ewing, 269 F.3d 888, 890 (8th
Cir. 2001) (applying Minnesota law to an insurance coverage dispute based on diversity
jurisdiction). When interpreting a Minnesota statute, courts must first assess “whether the
9

statute’s language, on its face, is clear or ambiguous.” Sleiter v. American Family Mut. Ins.
Co., 868 N.W.2d 21, 24 (Minn. 2015) (quoting Laase v. 2007 Chevrolet Tahoe, 776 N.W.2d
431, 434 (Minn. 2009)). “When the words of a law are ‘clear and free from all ambiguity,’
the plain meaning controls and will not be ‘disregarded under the pretext of pursuing the
spirit’ of the law.” Id. (quoting Minn. Stat. § 645.16). It is only “when the language of a statute
is unclear or ambiguous” that courts may “go beyond the specific language of the statute to
determine the intent of the legislature.” Id. (quoting Emerson v. Sch. Bd. Of Indep. Sch. Dist.
199, 809 N.W.2d 679, 684 (Minn. 2012)). Further, subsequent “judicial construction[s] of a
statute become part of the statute as though written therein.” State Farm Mut. Auto. Ins. Co.
v. Lennartson, 872 N.W.2d 524, 529 (Minn. 2015).
2. The Minnesota No-Fault Act
Minnesota’s No-Fault Act mandates that automobile policies provide minimum UIM
coverage limits. See Minn. Stat. § 65B.49, subd. 3a(1). UIM covers those “who are legally
entitled to recover damages for bodily injury from owners or operators of underinsured motor
vehicles.” Id. § 65B.43, subd. 19. An “underinsured motor vehicle” is a motor vehicle that is
covered by a bodily injury liability policy with a “limit . . . less than the amount needed to
compensate the insured for actual damages.” Id. § 65B.43, subd. 17.
The Minnesota No-Fault Act also “provides a framework for determining the source
of coverage for UIM claims.” West Bend Mut. Ins. Co. v. Allstate Ins. Co., 776 N.W.2d 693,
697 (Minn. 2009); see also Schons v. State Farm Mut. Auto. Ins. Co., 621 N.W.2d 743, 745
(Minn. 2001) (“[T]he No Fault Act . . . sets forth the order in which an injured party should
seek UIM coverage from relevant policies.”). The Act’s relevant provision provides that:
10

[i]f at the time of the accident the injured person is occupying a motor vehicle,
the limit of liability for uninsured and underinsured motorist coverages
available to the injured person is the limit specified for that motor vehicle.
However, if the injured person is occupying a motor vehicle of which the
injured person is not an insured, the injured person may be entitled to excess
insurance protection afforded by a policy in which the injured party is
otherwise insured.
Minn. Stat. § 65B.49, subd. 3a(5) (emphasis added). 8 Minnesota courts have interpreted this
provision as creating a “two-tiered statutory priority scheme” that determines the availability
of “primary” and “excess” UIM coverage. West Bend, 776 N.W.2d at 699-700.
For “primary” UIM coverage, the statute “require[s] the injured occupant to look first
and exclusively to the policy limits on the occupied vehicle.” Id. at 699 (citing Vue v. State
Farm Ins. Co., 582 N.W.2d 264, 267 (Minn. 1998)). This approach reflects the Minnesota
Legislature’s “broad policy decision” in 1985 “to tie uninsured motorist and other coverage
to the particular vehicle involved in the accident.” Id. (citing Hanson v. Am. Family Mut. Ins.
Co., 417 N.W.2d 94, 96 (Minn. 1987)).
However, “if the injured person is not an insured of the occupied motor vehicle, the
injured person may then be entitled to seek excess insurance protection through another
automobile insurance policy in which the injured person is insured.” Becker v. State Farm.
Mut. Auto Ins. Co., 611 N.W.2d 7, 11 (Minn. 2000) (emphasis added). To determine whether

In addition, assuming excess coverage is available, that coverage is limited “to the
extent of covered damages sustained.” Minn. Stat. § 65B.49, subd. 3a(5). Further, excess
coverage “is available only to the extent” that the injured person’s personal UIM policy
limit “exceeds the limit of liability of the coverage available to the person from the
occupied motor vehicle.” Id.; see also Sleiter, 868 N.W.2d at 27-28. However, because the
pertinent question is whether Merrill is even entitled to excess UIM coverage in the first
place, neither of these provisions is at issue here.
8

11

an injured person is “an insured of the occupied motor vehicle” for purposes of “excess” UIM
coverage, the Minnesota Supreme Court instructs courts to look to the No-Fault Act’s
definition of “insured.” Id. at 12. In other words, the excerpted provision “establishes the
priority scheme for the source of any UM/UIM coverage for persons injured in accidents
while occupants of motor vehicles, except for those persons excluded by the definition of
insured provided in [the statute].” Id. (emphasis added); accord Allianz Ins. Co. of Canada v.
Sanftleben, 454 F.3d 853, 857 (8th Cir. 2006).
Under the No-Fault Act, “insured” means “the named insured” and a “(1) spouse, (2)
other relative of a named insured, or (3) a minor in the custody of a named insured or of a
relative residing in the same household with a named insured,” who is “(a) residing in the
same household with the named insured and (b) not identified by name in any other” auto
insurance policy. Minn. Stat. § 65B.43, subd. 5.
It is not disputed that, “at the time of the accident,” P.B. was “occupying” Ms.
Chiodo’s Jeep Cherokee, for which Ms. Chiodo carried an automobile insurance policy with
UIM limits of $50,000 per person and $100,000 per accident. Further, it is not disputed that,
because P.B. resided with Ms. Chiodo (his grandmother) and Ms. Bailey (his custodial
parent), and because P.B. was not “identified by name in any other” auto insurance policy,
P.B. was statutorily “insured” under the Chiodo Policy.9
3. Analysis

By contrast, as a named insured of the Bailey Policy, P.B.’s mother, Ms. Bailey,
was not statutorily “insured” under the Chiodo Policy. State Farm accordingly provided
her “excess” UIM coverage from her own policy, beyond that available from the Chiodo
Policy. (See Hr’g Tr. at 23 (clarifying this distinction).)
9

12

Here, State Farm argues that Merrill’s claim begins and ends with the plain language
of the No-Fault Act. State Farm maintains that, where an injured occupant falls within the
Act’s definition of “insured,” their UIM coverage is “statutorily tied to the amount of
coverage specified for the occupied motor vehicle.” (State Farm’s Br. at 10.) Thus, because
P.B. is an “insured” of the Chiodo Policy under the Act, and because that was the vehicle
involved in the accident, State Farm contends that Merrill may not look beyond the Chiodo
Policy for excess UIM benefits. (Id.)
In the face of State Farm’s straightforward statutory argument, Merrill argues that (1)
P.B. is entitled to excess UIM coverage under the Bailey Policy because he was in the “legal
custody” of Ms. Bailey, and (2) the policy goals articulated in the Minnesota Supreme Court
decision Carlson v. Allstate Ins. Co., 749 N.W.2d 41 (2008) would be undermined were P.B.
denied excess UIM coverage simply because (a) he was residing with his grandmother, Ms.
Chiodo, at the time of the crash and (b) he was not specifically named in his mother, Ms.
Bailey’s, policy.
Although the Court is sympathetic to Merrill’s predicament, neither of his arguments
trump the No-Fault Act’s clear language, which this Court is dutybound to follow. See Sleiter,
868 N.W.2d at 24 (“When the words of a law are ‘clear and free from all ambiguity,’ the plain
meaning controls and will not be ‘disregarded under the pretext of pursuing the spirit’ of the
law.”) (quoting Minn. Stat. § 645.16).
Merrill’s first argument appears to be based on a misunderstanding. That is, that P.B.’s
“insured” status under the Bailey Policy has any bearing on whether P.B. is entitled to UIM
benefits beyond those offered in the Chiodo Policy. It does not. State Farm does not dispute
13

that P.B. is insured under the Bailey Policy as Ms. Bailey’s “minor in custody.” (See State
Farm’s Reply Br. at 4-5.) Rather, State Farm notes, because “[i]t is undisputed P.B. was [also]
an insured under Chiodo’s policy,” as a resident relative not identified by name on any other
insurance policy, P.B.’s UIM coverage is limited to that policy, regardless of his “insured”
status under the Bailey Policy. (Id. at 5.)
The one case Merrill relies on in support of this first argument, Jirik ex rel. Jirik v.
Auto-Owners Ins. Co., 595 N.W.2d 219 (Minn. Ct. App. 1999), further proves the point. (See
Merrill’s Br. at 4-5 (citing Jirik for the proposition that P.B.’s access to his mother’s UIM
benefits turns on custodial status).) In that case, a 13-year-old minor “in her mother’s custody”
was severely injured when her mother crashed into a landscaping truck. Jirik, 595 N.W.2d at
220-21. After collecting the maximum available “primary” UIM benefits under her mother’s
policy, the minor sought to collect “excess” UIM coverage from her father’s uninvolved
automobile policy, claiming entitlement as a resident relative even though “her mother and
father were divorced and [the minor] was living with her mother.” Id. The Appeals Court
rejected this argument, noting that, “[a]lthough [the minor] was not a named insured in her
mother’s policy, it is undisputed that she was covered by that policy because she was a minor
in the custody of the named insured.” Id. at 222 (citing the statutory definition of “insured”).
Therefore, the Appeals Court held, “the express language” of the No-Fault Act “limited [the
minor] to the UIM benefits for the vehicle in which she was injured.” Id. at 222; see also
Schons, 621 N.W.2d at 747 (“Because the injured passenger in Jirik was ‘an insured’ under
the host driver’s policy, the second sentence of subdivision 3a(5) rendered her ineligible for
UIM coverage beyond that available from the host driver.”).
14

As such, although the Appeals Court discussed custodial status, it did so only to
establish that the minor satisfied the statutory definition of “insured” for her mother’s vehicle,
i.e., the source of primary coverage. If anything, Jirik reinforces State Farm’s argument that
an injured person (including a minor) may not seek excess UIM coverage when they meet the
statutory definition of “insured” for the occupied vehicle, even if that result curtails the injured
person’s access to needed coverage. To do otherwise, the Jirik panel noted, would “invite”
courts “to ignore or to torture the language of” the No-Fault Act. Jirik, 595 N.W.2d at 223.
Merrill’s second argument centers around the Minnesota Supreme Court’s Carlson
decision. See 749 N.W.2d 41. Although the facts of that case are inapposite – Carlson
involved an injured pedestrian’s failed attempt to receive UIM benefits from his father’s auto
insurance policy10 – Merrill appears to cite the case for its policy dicta. In particular, that the
“goal” of the relevant provision of the No-Fault Act was “to give owners the ability to select
and purchase the amount of coverage they desire in excess of the mandatory minimum and
then to access that coverage if they are injured in a vehicle owned by someone with minimum
coverage.” Id. at 47 (citing Becker, 611 N.W.2d at 13)). Here, Merrill argues, Ms. Bailey
purchased more extensive UIM coverage “to protect herself and her son P.B.” from Ms.
Chiodo’s “minimum coverage.” (Merrill’s Br. at 9.) Surely, Merrill contends, it would

10

Specifically, the pedestrian cited a phrase from Section 65B.49, subd. 3a(5) not at
issue here – that “[i]f at the time of the accident the injured person is not occupying a
motor vehicle or motorcycle, the injured person is entitled to select any one limit of
liability for any one vehicle afforded by a policy under which the injured person is
insured” – and suggested that this implied definition of “insured” precluded the policy’s
“narrow definition of insured.” Id. at 46. The Minnesota Supreme Court rejected this
argument: “[T]he meaning of ‘insured’ for purposes of an injured pedestrian depends
upon the policy rather than the statute.” Id. (emphasis added).
15

contravene legislative intent for P.B. to not have access to his mother’s coverage “in excess
of the mandatory minimum,” “just because he happened to reside with [his] grandmother and
was riding in [her] vehicle at the time of the crash.” (Id. at 9.) This is especially so because,
at the age of two, P.B. “could not have been named in any policy.” (Id. at 2.) If Ms. Bailey is
not “insured” under the Chiodo Policy because she is “named” under the Bailey Policy,
Merrill’s argument implies, why doesn’t her young son fall under that exception, too?
Although this argument is quite sensible at first blush, it, unfortunately, clashes with
the No-Fault Act’s plain text and the relevant precedent. Cf. Jirik, 595 N.W.2d at 222-23
(denying a “logical” claim for excess UIM coverage because doing so would “invite” courts
“to ignore . . . the language of” the statute). In addition to the statutory text detailed above,
the Minnesota Supreme Court has been clear that, under the No-Fault Act, a party is only a
“named insured” if they are specifically named in a policy. This holds true even if a person
was “the obvious object” of the insurance policy, like P.B. here. Cf. Becker, 611 N.W.2d at
12-13 (finding that, even though an injured employee was “the obvious object of her
employer’s policy on the truck she was driving,” the employee was not statutorily “insured”
under that policy because she was not “the named insured”); see also West Bend, 776 N.W.2d
at 703 (denying excess UIM claim under same reasoning).
Under the unique circumstances of this case, Merrill’s only source for UIM coverage
was the Chiodo Policy. That the policy’s proceeds have already been distributed is,
regrettably, of no moment. State Farm’s Motion for Judgment on the Pleadings is accordingly
granted.
B. Merrill’s Counterclaims
16

In its Answer, Merrill also asserted counterclaims for breach of contract and unjust
enrichment. (See Answer & Countercl. ¶¶ 24-25.) Because Merrill fails to state a plausible
claim under either cause of action, the Court will also grant State Farm’s motion to dismiss
both counterclaims.
1. Breach of Contract
To prevail on a claim for breach of contract, a party must prove the following elements:
(1) formation of a contract; (2) performance by plaintiff of conditions precedent; and (3)
breach of the contract by defendant. See Lyon Fin. Serv., Inc. v. Ill. Paper and Copier Co.,
848 N.W.2d 539, 543 (Minn. 2014). Even accepting Merrill’s allegations as true, and drawing
all reasonable inferences in his favor, Merrill fails to state a plausible breach claim.
Most importantly, Merrill fails to allege facts showing that he and State Farm ever
entered into a contract for $100,000 in UIM benefits. Merrill simply alleges that State Farm
“considered the terms of the [Claim] Settlement,” attached to the aforementioned August 8,
2017 letter, “as binding.” (Answer & Countercl. ¶ 57.) State Farm, however, was plainly not
a party to the Claim Settlement. The Claim Settlement is only signed by the Claimants’
attorneys, and the letter accompanying the signed settlement is merely a Schmidt notice. (See
Answer & Countercl., Ex. C at 35-36.)11 As the text of both the Claim Settlement and the

11

As noted above, a Schmidt notice provides notice of a tentative settlement to an
underinsurer, which then enables the underinsurer to protect its subrogation rights against a
tortfeasor. See Schmidt v. Clothier, 338 N.W.2d 256 (Minn. 1983). The Minnesota Supreme
Court has explained that an “underinsurer has a ‘subrogation right against the tortfeasor
only if it has paid underinsurance benefits prior to release of the tortfeasor, . . . [so] the
underinsurer is entitled to notice of the tentative settlement and an opportunity to protect
those potential rights by paying underinsurance benefits before release.’” George v.
Evenson, 754 N.W.2d 335, 341 (Minn. 2008).
17

Schmidt notice indicate, this August 8 letter amounted to neither a contract, nor even an offer
to contract, on the issue of excess UIM benefits. (See id. at 32 (Claim Settlement) (“To the
extent any . . . insurer reviews this agreement, the undersigned [Claimant attorneys] urge
it to consider it a fair and reasonable resolution of the parties’ respective claims.”); id. at
35 (Schmidt Notice) (stating that the Estate of P.B. “will seek” excess UIM benefits through
the Bailey Policy); see also Great Lakes, 871 F. Supp. 2d at 851 (noting that courts may
consider “exhibits attached to the complaint” when evaluating a motion to dismiss).)
Moreover, even if this letter did somehow constitute an offer on the issue of excess
UIM benefits under the Bailey Policy, Merrill never alleges facts suggesting that State Farm
accepted that offer. Rather, the facts alleged demonstrate that State Farm repeatedly declined
to make any promises about excess UIM benefits under the Bailey Policy, even as it agreed
to the Claimants’ allocation with respect to the Hayes Policy. (See, e.g., Answer & Countercl.
¶¶ 64-67 (only alleging that, on August 8, “State Farm employees informed Merrill’s
attorney they were unable to discuss the [UIM] until the liability claims against Mr. Hayes
were settled”) (emphasis added); supra at n.5.) Thus, absent a plausible allegation of a
contract, Merrill’s breach claim must be dismissed. See, e.g., Minneapolis Cablesystems v.
City of Minneapolis, 299 N.W.2d 121, 122 (Minn. 1980) (“A contract requires a meeting of
the minds concerning its essential elements.”).
Merrill also attempts to characterize State Farm’s response to the Claim Settlement
as creating a contract implied-in-fact. (See Merrill’s Br. at 12.) A contract may be implied
in fact where the “circumstances . . . clearly and unequivocally indicate the intention of the
parties to enter into a contract.” Webb Bus. Promotions, Inc. v. Am. Elec. & Entm’t Corp.,
18

617 N.W.2d 67, 75 (Minn. 2000). However, “reliance on an implied contract ‘does not
relieve a plaintiff from his burden of establishing all essential contractual ingredients.’”
McIntosh Cty. Bank v. Dorsey & Whitney, LLP, 745 N.W.2d 538, 549 (Minn. 2008)
(quoting High v. Supreme Lodge of World, Loyal Order of Moose, 210 Minn. 471, 473
(1941)). “Like express contracts, contracts implied in fact require a meeting of the minds.”
J&M Distrib., Inc. v. Hearth & Home Tech., Inc., No. 13-cv-72 (SRN/TRL), 2014 WL
12597431, at *15 (D. Minn. July 8, 2014) (finding that an implied contract potentially
existed where “parties continued to operate as [if] they had [a contract] over the course of
many years”).
Again, even viewing the Counterclaim in the manner most favorable to Merrill, he
does not allege that State Farm’s conduct evinced a “clear and unequivocal” intent to
provide Merrill excess UIM benefits from the Bailey Policy. Webb Bus. Promotions, 617
N.W.2d at 75. Although State Farm appeared to be aware of Merrill’s request for UIM
benefits, Merrill fails to allege plausible facts showing that a “meeting of the minds”
occurred as to whether State Farm would, in fact, provide those benefits.
2. Unjust Enrichment
“In Minnesota, to state a claim for unjust enrichment, ‘the claimant must show that the
defendant has knowingly received or obtained something of value for which the defendant in
equity and good conscience should pay.’” Luckey v. Alside, Inc., 245 F. Supp. 3d 1080, 1099
(D. Minn. 2017) (quoting ServiceMaster of St. Cloud v. GAB Bus. Servs., Inc., 544 N.W.2d
302, 306 (Minn. 1996)). The Minnesota Supreme Court has further clarified that, to prevail
on this claim, a party “must establish an implied-in-law or quasi-contract in which the
19

[counterparty] received a benefit of value that unjustly enriched the [counterparty] in a
manner that is illegal or unlawful.” Caldas v. Affordable Granite & Stone, Inc., 820 N.W.2d
826, 838 (Minn. 2012) (emphasis added) (citing First Nat’l Bank of St. Paul v. Ramier, 311
N.W.2d 502, 504 (Minn. 1981)).
Here, Merrill claims that State Farm “led [him] to believe there was [UIM] coverage
available, thereby, inducing [him] to accept the pro rata bodily injury settlement from State
Farm on behalf of their negligent driver, [Mr.] Hayes.” (Merrill’s Br. at 10.) This is so, Merrill
argues, because State Farm allegedly “failed to raise any issue regarding lack of [UIM]
coverage for more than three months after State Farm received notice of the potential
settlement.” (Id. at 11.) As such, Merrill concludes, State Farm has been unjustly enriched by
its retention of the $100,000 in UIM coverage that, in his view, should have gone to P.B.’s
Estate. (Id.)
The Court agrees that, after it received notice of the Claim Settlement on August 8,
State Farm should have more quickly reached a decision about Merrill’s excess UIM claim,
and then advised Merrill’s counsel of that decision. This would have better informed the
Claimants’ internal settlement discussions. However, failure to exhibit best business practices
does not amount to unjust enrichment. Simply put, Merrill cannot state a claim for unjust
enrichment because he does not allege that State Farm retained the $100,000 in UIM benefits
“in a manner that is illegal or unlawful.” Caldas, 820 N.W.2d at 838. Minnesota law allowed
State Farm to deny Merrill’s excess UIM claim. And Merrill has not alleged that State Farm
entered into an “implied-in-law or quasi-contract” with him that promised it would do
otherwise. Id.
20

For these reasons, State Farm’s motion to dismiss is granted in full.
III.

CONCLUSION
Based on the submissions and the entire file and proceedings herein, IT IS HEREBY

ORDERED that State Farm’s Motion for Judgment on the Pleadings and to Dismiss Merrill’s
Counterclaims [Doc. No. 43] is GRANTED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: November 20, 2018

___/s/ Susan Richard Nelson__
SUSAN RICHARD NELSON
United States District Judge

21