UM/UIM Demand Letter - Minnesota

UM/UIM (UNINSURED/UNDERINSURED MOTORIST) DEMAND LETTER

State of Minnesota

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION — FOR RESOLUTION PURPOSES ONLY
PROTECTED UNDER MINN. R. EVID. 408 AND FED. R. EVID. 408

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [ADJUSTER_EMAIL]

Date: [__/__/____]

[INSURANCE_COMPANY_NAME]
[UM_UIM_CLAIMS_DEPARTMENT_ADDRESS]
[CITY], [STATE] [ZIP]

Attention: [ADJUSTER_NAME], [ADJUSTER_TITLE]

Re: UM/UIM POLICY LIMITS DEMAND — MINNESOTA NO-FAULT ACT
Insured/Claimant: [________________________________]
Policy Number: [________________________________]
Claim Number: [________________________________]
Date of Loss: [__/__/____]
UM/UIM Policy Limits: $[________________________________]
Tortfeasor: [________________________________]
Tortfeasor's Carrier: [________________________________]
Tortfeasor's Limits: $[________________________________]
Schmidt-Clothier Notice Date: [__/__/____]
Response Deadline: [__/__/____]

Dear [ADJUSTER_NAME]:

I. INTRODUCTION AND NATURE OF DEMAND

This firm represents [________________________________] ("our client") in connection with a claim for [UNINSURED / UNDERINSURED] motorist benefits under the Minnesota No-Fault Automobile Insurance Act, Minn. Stat. §§ 65B.41–65B.71, arising from a motor vehicle collision that occurred on [__/__/____] in [________________________________], Minnesota. This letter constitutes a formal demand for payment of the full UM/UIM policy limits of $[________________________________] issued by [INSURANCE_COMPANY_NAME] ("the Company").

Our client's damages substantially exceed the tortfeasor's liability limits and approach or exceed the available UM/UIM coverage. Minnesota law requires the Company to fairly evaluate this claim without unreasonable delay. Peterson v. Western National Mutual Ins. Co., 946 N.W.2d 903 (Minn. 2020). The Company's conduct in this claim will be measured against the standards of Minn. Stat. § 604.18 and Minn. Stat. § 72A.201.

II. MINNESOTA UM/UIM LEGAL FRAMEWORK

A. Mandatory Coverage Under Minn. Stat. § 65B.49, subd. 3a

Every automobile insurance policy issued or delivered in Minnesota must provide uninsured and underinsured motorist coverage with minimum limits of $25,000 per person / $50,000 per accident. Minn. Stat. § 65B.49, subd. 3a(1). Our client's policy provides limits of $[________________________________] per person / $[________________________________] per accident, which are applicable to this claim.

B. Minnesota Is an "Add-On" UIM State (Not a "Gap" State)

Unlike states that follow a "gap" or "limits-to-limits" approach, Minnesota is an add-on UIM jurisdiction under Minn. Stat. § 65B.49, subd. 4a. Under Minnesota's add-on methodology:

The maximum liability of an insurer for UIM benefits is the amount of damages sustained but not recovered from the insurance policy of the driver or owner of any underinsured at-fault vehicle.

This means UIM coverage is added on top of the tortfeasor's liability payment (up to the full UIM limit), rather than being reduced by the tortfeasor's payment. Broton v. Western National Mutual Ins. Co., 428 N.W.2d 85 (Minn. 1988).

C. Definition of "Underinsured Motor Vehicle" — Minn. Stat. § 65B.43, subd. 17

A motor vehicle is "underinsured" when "the limits of liability under a residual liability insurance policy applicable at the time of the accident are less than the amount needed to compensate the insured for actual damages."

D. Definition of "Uninsured Motor Vehicle" — Minn. Stat. § 65B.43, subd. 18

A vehicle is "uninsured" when: (1) no liability policy applies to the tortfeasor; (2) the liability insurer denies coverage; (3) the insurer is insolvent; or (4) the tortfeasor was an unidentified hit-and-run driver (subject to the physical contact or corroboration requirements of Minn. Stat. § 65B.43, subd. 18).

E. Stacking Under Minn. Stat. § 65B.49, subd. 3a(5)

Minnesota permits stacking of UM/UIM benefits across multiple vehicles insured under the same or separate policies, subject to the "priority of coverages" provisions. Primary UIM coverage follows the vehicle the insured was occupying; excess UIM follows the insured's own policy. Minn. Stat. § 65B.49, subd. 3a(5); Hoeschen v. South Carolina Ins. Co., 378 N.W.2d 796 (Minn. 1985).

F. Policy Exhaustion

Under Minnesota law, an insured need not formally exhaust the tortfeasor's liability limits by obtaining a judgment. Our client may settle with the tortfeasor's carrier for less than the limits and still pursue UIM benefits, provided Schmidt-Clothier notice is given to the UIM carrier. Employers Mutual Cos. v. Nordstrom, 495 N.W.2d 855 (Minn. 1993).

III. COVERAGE SUMMARY

IV. SCHMIDT-CLOTHIER NOTICE AND CONSENT TO SETTLE

A. The Schmidt-Clothier Procedure

Under Schmidt v. Clothier, 338 N.W.2d 256 (Minn. 1983), and as modified by Minn. Stat. § 65B.49, subd. 4a, before releasing the tortfeasor our client must provide the UIM carrier with written notice of the tentative settlement and afford the carrier 30 days to either:

1. Consent to the settlement (waiving subrogation against the tortfeasor), OR
2. Substitute its own draft in the amount of the tentative settlement, preserving its subrogation rights against the tortfeasor.

B. Status of Notice in This Claim

☐ Schmidt-Clothier notice was delivered to [CARRIER_SHORT_NAME] on [__/__/____].
☐ The 30-day period [EXPIRES / EXPIRED] on [__/__/____].
☐ Tentative settlement with [TORTFEASOR_CARRIER] is in the amount of $[________________________________].
☐ [CARRIER_SHORT_NAME] has [CONSENTED / SUBSTITUTED / NOT YET RESPONDED].

If the Company fails to substitute its draft within 30 days, it is deemed to have consented and waived subrogation. Malmin v. Minnesota Mutual Fire & Cas. Co., 552 N.W.2d 723 (Minn. 1996).

C. Preservation of All Rights

Nothing in this demand should be construed as a waiver of any right to pursue UIM benefits, to stack available coverages, to seek prejudgment interest under Minn. Stat. § 549.09, or to pursue first-party bad faith under Minn. Stat. § 604.18.

V. THE COLLISION AND LIABILITY

A. Facts of the Collision

On [__/__/____], at approximately [________], our client was [DESCRIBE_CLIENT_ACTIVITY — driving/occupying/a pedestrian near] [________________________________] in [CITY], Minnesota.

[DETAILED_DESCRIPTION_OF_COLLISION — include roadway conditions, weather, posted speed, direction of travel, point of impact, and what the tortfeasor did wrong.]

B. Tortfeasor's Negligence

The tortfeasor, [________________________________], breached duties owed under Minnesota law and common-law negligence principles:

☐ Failure to maintain proper lookout
☐ Failure to yield right-of-way (Minn. Stat. § 169.20)
☐ Following too closely (Minn. Stat. § 169.18, subd. 8)
☐ Unreasonable speed for conditions (Minn. Stat. § 169.14)
☐ Distracted driving / texting while driving (Minn. Stat. § 169.475)
☐ Running a red light or stop sign (Minn. Stat. §§ 169.06, 169.30)
☐ Improper lane change (Minn. Stat. § 169.19)
☐ Driving while impaired (Minn. Stat. § 169A.20)
☐ Violation of Minnesota's Hands-Free Law (Minn. Stat. § 169.475, subd. 2)
☐ [OTHER_NEGLIGENCE]

A violation of a safety statute constitutes negligence per se under Minnesota law. Alderman's Inc. v. Shanks, 536 N.W.2d 4 (Minn. 1995).

C. Evidence of Liability

1. Crash Report
Minnesota Motor Vehicle Crash Report ([POLICE_DEPARTMENT / MSP]) Report No. [________________________________]. The reporting officer [ASSIGNED FAULT / CITED THE TORTFEASOR / NOTED CONTRIBUTING FACTORS].

2. Witness Statements
[NUMBER] independent witnesses corroborate our client's account.

3. Physical Evidence
Point of impact, vehicle crush patterns, debris field, and downloaded Crash Data Retrieval (CDR / "black box") data.

4. Expert Analysis
[ACCIDENT_RECONSTRUCTIONIST_NAME] has concluded [SUMMARY_OF_OPINION].

D. Comparative Fault — Minn. Stat. § 604.01

Minnesota follows a modified comparative fault system with a 51% bar: a plaintiff whose fault is 50% or less may recover, reduced by his or her percentage of fault; a plaintiff whose fault is greater than the defendant's is barred from recovery. Minn. Stat. § 604.01, subd. 1.

Our client bears [0% / ____%] of the fault for this collision. Any effort to ascribe comparative fault to our client will be met with the factual and photographic evidence enclosed.

E. Tort Threshold — Minn. Stat. § 65B.51

Because Minnesota's No-Fault Act restricts tort recovery for non-economic damages, our client must satisfy at least one element of the tort threshold of Minn. Stat. § 65B.51, subd. 3:

☐ $4,000 in reasonable medical expenses (excluding diagnostic X-ray, CT, and MRI)
☐ 60 days of disability
☐ Permanent injury
☐ Permanent disfigurement
☐ Death

Our client satisfies the tort threshold as demonstrated by: [________________________________].

VI. OUR CLIENT'S INJURIES, TREATMENT, AND PROGNOSIS

A. Injury Summary

As a direct and proximate result of the collision, our client sustained:

• [PRIMARY_INJURY_1]
• [PRIMARY_INJURY_2]
• [PRIMARY_INJURY_3]

B. Treatment Timeline

C. No-Fault Benefits Paid (Minn. Stat. § 65B.44)

D. Current Condition and Prognosis

[DESCRIBE_CURRENT_CONDITION, functional limitations, work restrictions, future treatment recommended, and permanency.]

E. Permanent Impairment Rating

Rating provided by [PHYSICIAN_NAME, BOARD CERTIFICATION].

VII. DAMAGES

A. Economic Damages

1. Past Medical Expenses

Under the collateral source rule as modified by Minn. Stat. § 548.251, our client is entitled to present gross medical charges; any collateral source offset is for the court post-verdict.

2. Future Medical Expenses (Present Value)

3. Past Lost Income

$[________________] — verified by [EMPLOYER_NAME] wage records and tax returns.

4. Future Lost Earning Capacity (Present Value)

$[________________] — as projected by [VOCATIONAL_ECONOMIST_NAME].

B. Non-Economic Damages (Minn. Stat. § 65B.51, subd. 3)

Our client has satisfied the tort threshold and is entitled to recover non-economic damages for:

• Past pain, disability, embarrassment, and emotional distress
• Future pain, disability, embarrassment, and emotional distress
• Loss of enjoyment of life
• Loss of consortium (if spousal claim asserted)

[DESCRIBE_IMPACT_ON_CLIENT'S_DAILY_LIFE, relationships, hobbies, work capacity, and mental health.]

C. Damages Summary

VIII. UIM CALCULATION UNDER MINNESOTA'S ADD-ON FORMULA

Under Broton v. Western National Mutual Ins. Co., 428 N.W.2d 85 (Minn. 1988), and Minn. Stat. § 65B.49, subd. 4a, the UIM obligation is calculated as follows:

Because our client's shortfall meets or exceeds the per-person UIM limit, this is a policy-limits case.

IX. POLICY LIMITS DEMAND

We hereby demand payment of the full UIM per-person policy limits of $[________________________________].

This demand remains open until 5:00 p.m. Central Time on [__/__/____]. Failure to tender the policy limits by that date will be treated as: (1) a refusal to pay in the face of reasonably clear liability under Minn. Stat. § 72A.201, subd. 4(3); and (2) evidence of the absence of a reasonable basis for denial under Minn. Stat. § 604.18, subd. 2(a).

X. NOTICE OF POTENTIAL BAD-FAITH CLAIM — MINN. STAT. § 604.18

A. The Peterson Standard

In Peterson v. Western National Mutual Ins. Co., 946 N.W.2d 903 (Minn. 2020), the Minnesota Supreme Court held that an insurer acts in bad faith where it: (1) lacks a reasonable basis to deny benefits; and (2) knows of or recklessly disregards that lack of a reasonable basis. The Court affirmed bad-faith findings where the insurer:

• Delayed payment for nearly a year without justification;
• Ignored the insured's medical evidence;
• Prepared claim summaries containing factual misstatements; and
• Failed to evaluate competing medical opinions.

B. Remedies Under Minn. Stat. § 604.18, subd. 3

If bad faith is established, the insured recovers, in addition to policy benefits:

• "Taxable costs" equal to the lesser of one-half of the proceeds awarded in excess of the insurer's last pre-trial offer, OR $250,000; PLUS
• Attorney fees up to $100,000.

C. Procedural Requirements

Under Minn. Stat. § 604.18, subd. 4, a bad-faith claim may not be pleaded in the original complaint. Rather, after filing suit, the insured moves to amend, supported by affidavit establishing a prima facie case. Our firm routinely files such motions where, as here, the carrier has ignored clear evidence of damages and delayed payment.

D. Section 72A.201 Violations

Minnesota's Unfair Claims Practices Act, Minn. Stat. § 72A.201, is enforced administratively by the Minnesota Department of Commerce. While it does not create a private right of action (Morris v. American Family Mut. Ins. Co., 386 N.W.2d 233 (Minn. 1986)), violations are directly relevant to the "reasonable basis" prong of Minn. Stat. § 604.18.

XI. PREJUDGMENT INTEREST — MINN. STAT. § 549.09

Prejudgment interest on UIM benefits accrues from the earlier of: (1) the date suit or arbitration is commenced; or (2) the date of written notice of claim to the carrier — provided suit is commenced within two years of the written notice. Minn. Stat. § 549.09, subd. 1(b). This letter constitutes written notice of claim for purposes of § 549.09 interest accrual.

XII. ARBITRATION AND VENUE

Under Minnesota law, UM/UIM disputes involving limits at or below $100,000 are subject to mandatory, binding arbitration administered under the Minnesota No-Fault Arbitration Rules. Minn. No-Fault Arbitration Rule 5; Schmitt v. Anderson, 496 N.W.2d 53 (Minn. Ct. App. 1993). Disputes above $100,000 are arbitrable only if the policy so provides.

☐ This claim falls within mandatory no-fault arbitration ($100,000 or less).
☐ This claim exceeds $100,000 and will be litigated in [COUNTY] County District Court unless the Company agrees to binding arbitration.
☐ We hereby demand arbitration under the policy and Minn. No-Fault Arbitration Rules.

XIII. RESPONSE DEADLINE AND CONSEQUENCES

This demand expires at 5:00 p.m. Central Time on [__/__/____].

If [CARRIER_SHORT_NAME] fails to tender the policy limits by that date, our client will:

1. File suit in [COUNTY] County District Court or demand no-fault arbitration as appropriate;
2. Seek leave to amend to add a claim under Minn. Stat. § 604.18 for taxable costs and attorney fees;
3. Seek prejudgment interest from the date of this letter under Minn. Stat. § 549.09;
4. File a consumer complaint with the Minnesota Department of Commerce, Insurance Division, 85 7th Place East, Suite 280, Saint Paul, MN 55101 (telephone 651-539-1600); and
5. Preserve claims for punitive damages under Minn. Stat. § 549.20 where the Company's conduct demonstrates "deliberate disregard" for our client's rights as its own insured.

XIV. DOCUMENT PRESERVATION NOTICE

This letter serves as formal notice to preserve all documents and electronically stored information ("ESI") related to this claim, including but not limited to:

• Complete claim file (all versions)
• Adjuster diary, activity log, and internal communications
• Reserve history and reserve change documentation
• Claim handling guidelines, manuals, and training materials
• Medical records review notes and IME reports
• Coverage correspondence and policy interpretation memoranda
• All communications with [TORTFEASOR_CARRIER] regarding subrogation
• All documents evidencing compliance (or non-compliance) with Schmidt-Clothier procedures

Spoliation of ESI will be pursued under Minnesota spoliation doctrine. Patton v. Newmar Corp., 538 N.W.2d 116 (Minn. 1995).

XV. CONCLUSION

The facts are clear: our client is a blameless victim of a negligent driver; our client's damages vastly exceed the tortfeasor's liability limits; and our client is entitled to the full UIM policy limits under Minnesota's add-on formula. We urge [CARRIER_SHORT_NAME] to resolve this claim fairly and promptly. Minnesota law and Peterson make clear the cost of delay.

Respectfully submitted,

[LAW_FIRM_NAME]

By: _______________________________
[ATTORNEY_NAME]
Minnesota Attorney Reg. No. [________]
[ADDRESS]
[CITY], MN [ZIP]
Telephone: [________]
Email: [________]

Counsel for [CLIENT_NAME]

ENCLOSURES:

• Policy declarations and endorsements
• UM/UIM coverage provisions
• Minnesota Motor Vehicle Crash Report
• Complete medical records and billing
• No-fault payment ledger
• Employer wage verification and tax returns
• Impairment rating and IME reports
• Photographs of vehicles, scene, and injuries
• Expert reconstruction report
• Schmidt-Clothier notice correspondence
• Tentative settlement documentation with tortfeasor's carrier

CC:

• [CLIENT_NAME]
• [TORTFEASOR_CARRIER] (Schmidt-Clothier procedure)

SOURCES AND REFERENCES

• Minn. Stat. § 65B.41 et seq. — Minnesota No-Fault Automobile Insurance Act: https://www.revisor.mn.gov/statutes/cite/65B
• Minn. Stat. § 65B.44 — Basic economic loss benefits: https://www.revisor.mn.gov/statutes/cite/65B.44
• Minn. Stat. § 65B.49 — Required coverages: https://www.revisor.mn.gov/statutes/cite/65B.49
• Minn. Stat. § 65B.51 — Tort threshold: https://www.revisor.mn.gov/statutes/cite/65B.51
• Minn. Stat. § 604.01 — Comparative fault: https://www.revisor.mn.gov/statutes/cite/604.01
• Minn. Stat. § 604.18 — First-party bad faith: https://www.revisor.mn.gov/statutes/cite/604.18
• Minn. Stat. § 72A.201 — Regulation of claims practices: https://www.revisor.mn.gov/statutes/cite/72A.201
• Minn. Stat. § 549.09 — Prejudgment interest: https://www.revisor.mn.gov/statutes/cite/549.09
• Minn. Stat. § 549.20 — Punitive damages: https://www.revisor.mn.gov/statutes/cite/549.20
• Schmidt v. Clothier, 338 N.W.2d 256 (Minn. 1983)
• Peterson v. Western National Mutual Ins. Co., 946 N.W.2d 903 (Minn. 2020)
• Broton v. Western National Mutual Ins. Co., 428 N.W.2d 85 (Minn. 1988)
• Employers Mutual Cos. v. Nordstrom, 495 N.W.2d 855 (Minn. 1993)
• Malmin v. Minnesota Mutual Fire & Cas. Co., 552 N.W.2d 723 (Minn. 1996)
• Hoeschen v. South Carolina Ins. Co., 378 N.W.2d 796 (Minn. 1985)
• Minnesota Department of Commerce, Insurance Division: https://mn.gov/commerce/insurance/
• Minnesota No-Fault Arbitration Rules: https://www.mncourts.gov/

MINNESOTA UM/UIM QUICK REFERENCE