The court of appeals affirmed dismissal of a suit for underinsured motorist ("UIM") benefits because it was commenced more than six years after the accident in which the injury occurred. We are asked to determine whether the statute of limitations begins to run on a UIM claim on the date of the accident or at a later time. In the past, we have indicated that the claim accrues and the limitations period commences at the time of the accident that causes the injury. See Weeks v. American Family Mut. Ins. Co., 580 N.W.2d 24, 27 (Minn.1998); O'Neill v. Illinois Farmers Ins. Co., 381 N.W.2d 439, 439 (Minn.1986). Yet we have also held that a UIM claim is not ripe until is has been determined that the tortfeasor is in fact underinsured by settlement or adjudication of the claim against the tortfeasor. See Employers Mut. Cos. v. Nordstrom, 495 N.W.2d 855, 857 (Minn.1993). Because the confluence of these decisions creates the possibility that the statute of limitations could run on a UIM claim before it becomes ripe, we conclude that the better rule is that UIM claims accrue and the statute of limitations begins to run when the UIM claim becomes ripe by settlement or adjudication of the claim against the tortfeasor. We therefore reverse and remand.
On October 7, 1998, appellants, Patricia and Gerald Oanes (collectively "the Oanes"), brought suit in Hennepin County District Court against respondent, Allstate Insurance Company ("Allstate"), seeking to recover UIM benefits under their Allstate policy for a March 18, 1992, automobile accident. Allstate moved for summary judgment, claiming that the Oanes' claims were time barred. Agreeing with Allstate, the district court granted the motion and dismissed the action. The court of appeals affirmed.
The relevant facts from the record are as follows. Patricia Oanes was injured in a multi-vehicle, chain reaction collision on March 18, 1992, as a result of being rear-ended by a car driven by Jeffrey Giefer. Oanes suffered injuries to her head, neck and back. Oanes, along with her husband, Gerald, first brought a claim against Giefer. That claim was settled on August 12, 1995. In July 1995, before the settlement, the Oanes notified Allstate of their intent to seek underinsured motorist benefits under their Allstate policy. Under the policy, UIM benefits were not recoverable until all tortfeasors' "limits of liability" had been exhausted by settlement or judgment. Allstate informed the Oanes that their claim was not ripe because they had not pursued a claim to settlement or judgment against Howard Theis, the driver of the car that rear-ended Giefer. As a result, on April 2, 1997, the Oanes commenced an action against Theis' estate. That action was settled on August 26, 1998.
In a complaint filed on October 7, 1998, the Oanes commenced an action against Allstate seeking to recover UIM benefits. Allstate moved for summary judgment arguing that O'Neill and Weeks establish that the six-year statute of limitations for UIM claims begins to run on the date of the accident causing the injury for which recovery is sought and the Oanes' action was therefore time-barred because it was commenced more than six years after the date of Patricia Oanes' injuries. The Oanes responded that the O'Neill-Weeks
In their petition for review to this court, in addition to the policy-language argument presented to the district court and the court of appeals, the Oanes raised a new issue. For the first time, the Oanes asked the court to address the general issue of when a UIM claim accrues, independent of the specific language in their policy. Specifically, they presented the question of whether this court should reject the O'Neill-Weeks rule that the statute of limitations on a UIM claim begins to run on the date of the accident causing the injuries and instead hold that the statute of limitations for a UIM claim begins to run on the date the insurance contract is breached—that is, when a claim for UIM coverage is denied by the insurer.
The first issue we must address is whether we should consider the claim accrual issue in light of the fact that it was raised for the first time in the petition for review. Generally, issues not raised below will not be considered on appeal. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). This is not, however, an ironclad rule. We have recognized an exception to this rule when the issue "is plainly decisive of the entire controversy on its merits, and where, as in a case involving undisputed facts, there is no possible advantage or disadvantage to either party in not having had a prior ruling by the trial court on the question." Watson v. United Servs. Auto. Ass'n, 566 N.W.2d 683, 687 (Minn. 1997) (quoting Holen v. Minneapolis-St. Paul Metro. Airports Comm'n, 250 Minn. 130, 135, 84 N.W.2d 282, 286 (1957)). Here, there are no disputes of fact that affect the purely legal question presented and there is no possible advantage or disadvantage to either party by not having a prior lower court ruling. Although the issue is not decisive of the entire case on the merits, the procedural posture of this case is such that we will entertain the issue. See Minn.R.Civ.App.P. 103.04 (appellate court may "review any other matter as the interest of justice may require").
The issue the Oanes first raised in their petition for review—when a UIM claim accrues—was pending before this court in another case when the Oanes filed their petition. See Johnson v. State Farm Mut. Auto. Ins. Co., 594 N.W.2d 243 (Minn.App. 1999), rev. granted (Minn. Aug. 18, 1999), and rev. vacated and appeal dismissed as moot (Minn.Jan.25, 2000). The Johnsons brought their UIM claim more than six years after the accident causing their injuries but before their claims against the tortfeasor were resolved. In early November 1999, the Johnsons' claim against the tortfeasor was tried. Based on the jury's November 9, 1999 verdict, the district court entered an order for judgment for the Johnsons in an amount less than the policy limits of the tortfeasor's liability insurance coverage. Because the judgment
The petition for review in this case came before the court after the Johnson oral argument, but before the final determination that Johnson was moot. In order to preserve the claim accrual issue, we granted review in this case and stayed further proceedings pending final disposition in Johnson. Having dismissed the appeal in Johnson as moot, we now address the claim accrual issue here.
The substantive question that we must resolve is when an insured's action against its insurer for UIM benefits accrues and starts the statute of limitations running. Although we have not previously ruled on this issue in this precise context, we have addressed related aspects of the issue. We held that, an action to imply UIM coverage in a policy and then to recover benefits under that implied-in-law coverage accrues on the date of the accident. See O'Neill v. Illinois Farmers Ins. Co., 381 N.W.2d 439, 439 (Minn.1986). Next, we held that because of its tort character, a UIM claim does not survive the death of the injured claimant and in doing so explained O'Neill as holding that the statute of limitations for a UIM claim begins to run when the accident that caused the injury occurs. See Beaudry v. State Farm Mut. Auto. Ins. Co., 518 N.W.2d 11, 11, 13 (Minn.1994). We then held that a UIM insurer's subrogation action against the tortfeasor also begins to run on the date of the accident causing the injury. See Hermeling v. Minnesota Fire & Cas. Co., 548 N.W.2d 270, 275 (Minn.1996). Most recently, we held that the statute of limitations for an uninsured motorist ("UM") claim runs from the date of the accident that causes the injury. See Weeks v. American Family Mut. Ins. Co., 580 N.W.2d 24, 27 (Minn.1998). In reaching that conclusion, we stated that the rule of claim accrual announced in O'Neill was not limited to implied-at-law UIM claims and that our subsequent cases established that "the statute of limitations on a UIM claim begins to run when the accident occurs." Weeks, 580 N.W.2d at 26 (citation omitted). While we acknowledged in Weeks that in a majority of jurisdictions the statute of limitations for a UIM claim begins to run when the contract is breached, i.e., when the claim is denied by the insurer, we concluded that there was "no reason to abandon the rationale" adopted in O'Neill. See Weeks, 580 N.W.2d at 27. We reiterated our concern expressed in O'Neill that, if the UIM claim did not accrue until the contract was breached, the UIM claimant would be able to postpone indefinitely the commencement of the limitations period by not submitting the claim. See Weeks, 580 N.W.2d at 26, 27. Thus, in Weeks, we left the reasoning and decision in O'Neill undisturbed and expanded it to cover the accrual of UM claims.
Although none of these cases directly addressed the accrual date of a UIM claim, it is not surprising, especially given our language in Weeks, that the court of appeals and respondent interpret O'Neill and its progeny as establishing that a UIM claim accrues on the date of the accident. The issue before us is whether we should abandon that interpretation of O'Neill-Weeks and adopt the position taken by a majority of jurisdictions that a cause of action for the recovery of UIM benefits accrues not when the injury occurs, but when the insurance contract has been breached. As recently as 1998, we declined to adopt that position. See Weeks, 580 N.W.2d at 27.
Although the O'Neill line of cases appears to establish a rule for accrual of UIM claims, there is another line of our
These contradictory lines of cases can put a UIM claimant in an untenable position. The O'Neill-Weeks line tells the claimant that her claim must be brought within six years of the accident causing injury. The Nordstrom line tells her that settlement or adjudication of an action against the tortfeasor is a condition precedent to bringing the UIM claim. But there is no guarantee that the Nordstrom condition precedent will occur before the O'Neill-Weeks six-year statute has run. The disharmony between these two rules of law makes it possible for the statute of limitations on the UIM claim to run, as it did in Johnson and in this case, before it is known whether the tortfeasor is actually underinsured, and therefore, before a UIM claim could have been brought. Since our decision in Weeks, this court has received a number of petitions for review calling our attention to the resulting unfairness to UIM claimants who have paid a premium for UIM coverage and have diligently pursued the tortfeasor, but who are denied the benefit of that coverage through the operation of the two rules.
At the time of our decision in Weeks, the court did not have before it, and therefore did not consider, the interplay between the rule that the statute of limitations for UIM claims begins to run on the date of the accident that caused the claimant's injuries and the rule precluding a UIM claimant from proceeding with a claim until the underlying tort action has been resolved by settlement or judgment. In fact, our analyses in these two sets of cases has unfortunately proceeded as if on parallel but separate tracks that never intersect; neither line has been addressed in the consideration of the other. But the rules do intersect in real cases, and with potentially disastrous impact. This interplay between the two rules creates the possibility that the statute of limitations may run on a valid UIM claim before the claimant can determine whether the claim exists. That result is inconsistent with our sense of justice and one we cannot abide.
It has been suggested that this undesirable result can be avoided by the approach laid out by the court of appeals in Cattnach v. State Farm Insurance Co., 577 N.W.2d 251 (Minn.App.1998), rev. denied (Minn. June 17, 1998). The appellate court there suggested "that the Cattnachs could have commenced their UIM action within the six-year period and then requested that the trial be stayed until the tort action was either settled or litigated to completion." Id. at 254. Although this solution provides a vehicle for both rules to remain viable, it does so at a cost. That cost is the invitation to bring litigation,
Respondent argues that stare decisis should preclude abandonment of the O'Neill-Weeks claim accrual rule. The doctrine of stare decisis directs that we adhere to former decisions in order that there might be stability in the law. See Naftalin v. King, 257 Minn. 498, 509, 102 N.W.2d 301, 308 (1960). At the same time, "stare decisis is not an inflexible rule of law but rather a policy of the law." Johnson v. Chicago, Burlington & Quincy R.R. Co., 243 Minn. 58, 68, 66 N.W.2d 763, 770 (1954). Thus, while we are extremely reluctant to overrule our previous cases, stare decisis does not bind us to unsound principles. "[W]hen a rule, after it has been duly tested by experience, has been found to be inconsistent with the sense of justice or with the social welfare, there should be less hesitation in frank avowal and full abandonment." Benjamin N. Cardozo, The Nature of the Judicial Process 150 (1921). An early California Supreme Court decision may have stated it best: "[T]he mere fact that an error has been committed is no reason or even apology for repeating it, much less. for perpetuating it." Hart v. Burnett, 15 Cal. 530, 600-01 (1860). We concluded in Weeks that there was "no reason to abandon the rationale we adopted" in O'Neill. Weeks, 580 N.W.2d at 27. As explained above, a compelling reason is before us now and that reason is sufficient to override stare decisis concerns.
Accordingly, we reject the rule that a UIM claim accrues on the date of the accident that causes the injury. We overrule the O'Neill-Weeks line of cases to the extent that they articulate such a rule. We must now decide what is the appropriate alternative accrual event for UIM claims.
While we reject the O'Neill-Weeks rule of claim accrual at the time of the accident because of its inconsistency with the Nordstrom rule and its potentially harsh consequences for UIM claimants, we are not unmindful of the concerns we articulated in O'Neill and reiterated in Weeks that prompted us to adopt the date of the accident as the accrual date. Our concern in O'Neill and Weeks was that, if the accrual date was the date of the breach of the insurance contract, that is, the date the claim was denied, the insured would be able to postpone the operation of the statute of limitations indefinitely. Consistent with this concern, we again decline to adopt the rule that commences the statute of limitations when the contract is breached.
We instead adopt a third option for the time a UIM claim accrues and the statute of limitations begins to run. This option is the date of settlement with or judgment against the tortfeasor. See Wheeler v. Nationwide Mut. Ins. Co., 749 F.Supp. 660, 662 (E.D.Pa.1990) (holding that a UIM claim accrues when insured's rights have vested, which does not occur until the insured knows that the tortfeasor was an underinsured motorist; citing similar holding with regard to UM claim in Boyle v. State Farm Mut. Auto. Ins. Co., 310 Pa.Super. 10, 456 A.2d 156, 162 (1983)); see also North Carolina Ins. Guar. Ass'n v. State Farm Mut. Auto. Ins. Co., 115 N.C. App. 666, 446 S.E.2d 364, 369 (1994) (holding that the statute of limitations did not commence on UM claim until the tortfeasor's insurance company was declared insolvent and the UM claimant was then "at liberty to sue").
Designating the date of settlement with or judgment against the tortfeasor as the accrual date for UIM claims is also consonant with our concern expressed in O'Neill and Weeks that the claimant not be enabled to forestall the commencement of the limitations period indefinitely by failing to assert the UIM claim. With the date of settlement or judgment as the accrual date, that cannot happen.
Adopting the date of settlement or judgment as the accrual date protects the interests of both the insured and the insurer.
Reversed and remanded to the district court.