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Holidazzle plaintiffs can recover no-fault benefits

Author / Coordinator: Mark A. Cohen
Minnesota Lawyer
March 2002

Holidazzle plaintiffs can recover no-fault benefits Liability cap doesn't apply to claims for basic economic losses

In a lawsuit against the city of Minneapolis stemming from a December 1998 accident at the Holidazzle parade, the amount of basic economic benefits available to the accident victims under the No-Fault Act is not subject to the state’s municipal liability cap, the Minnesota Supreme Court has ruled.

The plaintiffs were injured when a city-owned police van crashed into a crowd of parade spectators. Acknowledging that the aggregate injuries surpassed the $750,000 per occurrence cap on municipal tort liability provided for in the Tort Claims Act, the city of Minneapolis placed $750,000 on deposit with the District Court and then sought a declaration that the deposited funds represented its maximum exposure for the accident. The District Court judge granted the city’s request, entering partial summary judgment in its favor.

In a decision last year, the Court of Appeals reversed, concluding that the city’s obligation to pay basic economic loss benefits under the No-Fault Act was not limited by the municipal tort liability cap.

The Minnesota Supreme Court agreed with the Court of Appeals, affirming its reversal.

“We believe that we can best give effect to both statutes ... by holding that the liability cap applies to tort damages separate from the basic economic loss benefits to which all persons injured in an accident as a result of the maintenance or use of a motor vehicle are entitled,” wrote Justice Russell A. Anderson. (Emphasis added.)
The eight-page decision is Loven v. City of Minneapolis, et al., Minnesota Lawyer No. SC-40-02.

City faulted over no-fault

Minneapolis attorney James R. Schwebel, who, along with James S. Ballentine, represented the plaintiffs, told Minnesota Lawyer: “There is no reason that a city, which already has very limited exposure because of the [municipal liability] cap, should be exonerated from paying basic economic loss benefits.” 

Schwebel said that the city should have to carry the same no-fault auto coverage as any other employer and should not be able to escape paying out the no-fault benefits merely because it caused an accident where the total liabilities exceed the municipal liability cap. (The cap was raised from $750,000 to $1 million subsequent to the Holidazzle accident.)

“It is very unfortunate that the city did not live up to its obligations,” he said, pointing out that his clients have waited nearly 2 1/2 years to be paid the economic loss benefits.

Schwebel estimated that the total claims for economic loss benefits that his clients will make (including interest) will be somewhere in the neighborhood of $90,000 to $100,000.

Minneapolis City Attorney James A. Moore said that municipal lawyers need to examine this case and take a second look at their municipality’s risk assessment for making insurance-related decisions.

|Whether a municipality purchases insurance or is self-insured, it should be conscious of the potential for liability for no-fault benefits — even if paying those benefits would mean that its total liability exceeds the cap for municipal tort liability, according to Moore.

Moore said that it is unclear at the present time exactly how much the city of Minneapolis will have to pay in no-fault benefits as a result of this decision.

Minneapolis attorney Wilbur W. Fluegel, who was on amicus for the Minnesota Trial Lawyers Association, said, “It is nice to see that the Supreme Court found an acceptable accommodation between the tort cap statute and its purpose and the basic economic loss benefits of the No-Fault Act. ... You think of medical bills differently from the compensation available from liability coverage. The Supreme Court’s decision tracks that [reasoning].”

Fluegel pointed out that the decision will only come to play in cases involving an auto accident that causes injury to many individuals or causes catastrophic injury.
However, “that is when you need [the benefits] the most,” he said, adding that the tort liability cap in general artificially restricts the compensation available to some “very injured” individuals.

“Today was a good day,” Fluegel stated.

Holidazzle tragedy

On the evening of Dec. 4, 1998, a city-owned van crashed into a crowd of spectators at the “Holidazzle Parade” in downtown Minneapolis. Two people were killed and several others seriously injured, including the plaintiffs in the present suit.

The plaintiffs brought an action against the city of Minneapolis seeking tort damages and basic economic loss benefits under the Minnesota No-Fault Automobile Act for their injuries.

The city acknowledged that the plaintiffs had reasonably incurred medical expenses as a result of the accident. All parties agreed that the damages from the Holidazzle accident would exceed the municipal tort liability cap of $750,000 for claims arising out of a single occurrence.

The city, which self-insurers for purposes of the No-Fault Act, deposited with the District Court $750,000. The city moved for partial summary judgment, seeking a ruling that the municipal tort liability cap of $750,000 includes any payments that the city can be required to pay under the No-Fault Act and that, therefore, the payment to the District Court was sufficient to cover all of its potential liability arising out of the accident.

The District Court judge granted the city’s motion, concluding that the no-fault benefits sought were in the nature of tort damages and were to be included in the tort liability cap.

The Court of Appeals reversed, finding that the city’s obligation to pay basic economic loss benefits under the No-Fault Act was not limited by the municipal tort liability cap.

Statutory language

The No-Fault Act provides for the prompt payment by the reparation obligor of basic economic loss benefits without regard to fault. Basic economic loss benefits include medical expense benefits, disability and income loss benefits, funeral and burial benefits, replacement service loss benefits, survivor’s loss benefits and survivor’s replacement services benefits.

The No-Fault Act includes an offset provision requiring that courts deduct any payment of no-fault economic loss benefits paid from the same kind of damages received as part of a negligence lawsuit.

At the time of the accident, the statute provided for a maximum coverage for basic economic loss benefits of $40,000 per automobile accident victim, including $20,000 for income and other losses.

At the time of the accident, the Tort Claims Act limited a city’s liability for torts (subject to certain exceptions) to $750,000 for any number of claims arising out of a single occurrence.

Interplay of statutes

“The issue this case presents is whether the tort liability cap includes basic economic loss benefit payments under the No-Fault Act, or whether the plaintiffs are able to collect under the No-Fault Act in addition to any damages they might receive within the tort liability cap,” wrote Anderson.

Considering the interplay of the Tort Claims Act and the No-Fault Act, Anderson stated: “[W]e recognize that the legislature had a legitimate purpose in limiting the liability of municipalities. ... However, in order to facilitate the underlying purposes and philosophy of tort law, we read the tort liability cap restrictively. ... Contrasted with our restrictive reading of the tort liability cap is the ‘over-arching policy of full compensation’ reflected in the No-Fault Act.”

Anderson said that the best way to give effect to both statutes consistent with their underlying policies was to find that economic loss benefits were not subject to the cap.