                         This opinion will be unpublished and
                         may not be cited except as provided by
                         Minn. Stat. § 480A.08, subd. 3 (2014).

                              STATE OF MINNESOTA
                              IN COURT OF APPEALS
                                    A16-0994

                                Tim Johnson, et al.,
                                     Appellants,
            Michael Johnson, Trustee for the Next of Kin of Karen Johnson,
                                      Appellant,

                                          vs.

                               Ironshore Indemnity, Inc.,
                                     Respondent.

                               Filed December 12, 2016
                                      Affirmed
                                     Reyes, Judge

                              Steele County District Court
                                 File No. 74CV16282

Mark M. Walbran, Walbran & Furness, Chtd., Owatonna, Minnesota (for appellants Tim
Johnson, et al.)

Keith L. Deike, Patton, Hoversten & Berg, P.A., Waseca, Minnesota (for appellant Michael
Johnson)

Paula Duggan Vraa, Anthony J. Novak, Larson  King, L.L.P., St. Paul, Minnesota; and

Lisa F. Mickley, Hall & Evans, L.L.C., Denver, Colorado (for respondent)

      Considered and decided by Reyes, Presiding Judge; Ross, Judge; and J. Smith,

Judge.*



*
 Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
                         UNPUBLISHED OPINION

REYES, Judge

       In this insurance-coverage dispute, Appellants Tim Johnson, Trevor Johnson, and

Michael Johnson, as trustee for the next of kin of Karen Johnson,1 challenge the district

court’s order granting summary judgment for respondent Ironshore Indemnity, Inc.

(Ironshore). Because the exclusion at issue in the Johnsons’ automobile insurance policy

(the Ironshore policy) is both enforceable and applicable under the facts of this appeal,

we affirm.

                                          FACTS

       At all relevant times, Tim and Karen were married and resided with their son,

Trevor, in Owatonna, Minnesota. Tim and Karen purchased the Ironshore policy, which

afforded liability coverage to the Johnsons for a number of their classic automobiles. The

Ironshore policy insures Tim and Karen as “named insureds,” and Tim, Karen, and

Trevor as “insureds.”

       Trevor was involved in a single-vehicle accident while driving a Ford Model T on

vacation in Utah. Karen sustained fatal injuries as a passenger. Tim and Karen owned

the Model T, which was insured under the Ironshore policy. Under a wrongful-death

theory, Michael, as trustee, demanded the $500,000 general-liability limit under the

Ironshore policy. Ironshore asserted that Exclusion A.13., a drop-down provision in the

Ironshore policy, reduces the generally available $500,000 liability limit to the minimum


1
  Because appellants share the same last name, this opinion will use first names when
referring to individuals and “the Johnsons” when referring to appellants collectively.

                                             2
limit required under Minnesota law, $30,000 per person and $60,000 per accident, when

an insured is liable for injuries to a “family member” as defined in the Ironshore policy.2

         The drop-down provision is included in an endorsement to the Ironshore policy’s

main form and provides:

                E.     The following Exclusion (A.13.) is added:
                       We do not provide Liability Coverage for any
                       “insured”:
                       13.    For “bodily injury” to you or any “family
                              member” to the extent that the limits of liability
                              for this coverage exceed the minimum limits of
                              liability required by the financial responsibility
                              law of Minnesota.

In addition, the endorsement containing the drop-down provision defines “minimum

limits” as follows:

                B.     The following definition is added:
                       Throughout the policy, “minimum limits” refers to the
                       following limits of liability, as required by Minnesota
                       law, to be provided under a policy of automobile
                       liability insurance:
                       a.      $30,000 for each person, subject to $60,000 for
                               each accident, with respect to “bodily injury[.]”

         Also, because the accident in question occurred in Utah, the parties dispute the

applicability and effect of the Ironshore policy’s “Out of State Coverage” provision (out-

of-state provision), which states:

                If an auto accident to which this policy applies occurs in any
                state or province other than the one in which “your covered
                classic” is principally garaged, we will interpret your policy for
                that accident as follows:
                A.     If the state or province has:
                       1.      A financial responsibility or similar law

2
    Karen is within the scope of the “family member” definition.

                                                3
                            specifying limits of liability for “bodily injury”
                            or “property damage” higher than the limit
                            shown in the Declarations, your policy will
                            provide the higher specified limit.
                     2.     A compulsory insurance or similar law requiring
                            a nonresident to maintain Insurance whenever
                            the nonresident uses a vehicle in that state or
                            province, your policy will provide at least the
                            required minimum amounts and types of
                            coverage.

       The Johnsons filed a declaratory judgment action against Ironshore to determine

the liability limit of the Ironshore policy. The parties filed cross-motions for summary

judgment. The district court granted summary judgment for Ironshore and determined

that: (1) the drop-down provision is not ambiguous and does not violate the reasonable-

expectations doctrine; (2) under the Ironshore policy’s terms and conditions, the correct

liability limit is Minnesota’s statutory minimum of $30,000; and (3) pursuant to

Minnesota and Utah law, Ironshore is required to provide Minnesota’s statutory

minimum coverage. This appeal follows.

                                     DECISION

I.     The drop-down provision is enforceable and does not violate the reasonable-
       expectations doctrine.

       The Johnsons argue that the drop-down provision is unenforceable because it

violates the reasonable-expectations doctrine and, therefore, Minnesota public policy.

“Whether an insurance policy exclusion is valid and enforceable is a question of law that

this court reviews de novo.” Frey v. United Servs. Auto. Ass’n, 743 N.W.2d 337, 341

(Minn. App. 2008) (citation omitted).

       “The doctrine of ‘reasonable expectations’ protects the ‘objectively reasonable


                                             4
expectations’ of insureds ‘even though painstaking study of the policy provisions would

have negated those expectations.’” Jostens, Inc. v. Northfield Ins. Co., 527 N.W.2d 116,

118 (Minn. App. 1995) (quoting Atwater Creamery v. W. Nat’l Mut. Ins., 366 N.W.2d

271, 277 (Minn. 1985)), review denied (Minn. Apr. 27, 1995). “In determining the

reasonable expectations of the insured, a court considers (1) ambiguity in the language of

the contract; (2) whether the insured was told of important, but obscure, conditions and

exclusions or the placement of major exclusions is misleading; and (3) whether the

particular provision is one known by the public generally.” Frey, 743 N.W.2d at 342-43

(citing Atwater, 366 N.W.2d at 278). “The doctrine does not automatically remove from

the insured a responsibility to read the policy.” Atwater, 366 N.W.2d at 278. “It does,

however, recognize that in certain instances, such as where major exclusions are hidden

in the definitions section, the insured should be held only to reasonable knowledge of the

literal terms and conditions.” Id.

       A.     Ambiguity

       Under the first Atwater factor, we must determine whether the drop-down

provision is ambiguous. Policy language “is ambiguous if it is susceptible to two or more

reasonable interpretations.” Carlson v. Allstate Ins. Co., 749 N.W.2d 41, 45 (Minn.

2008) (citation omitted). “When insurance policy language is clear and unambiguous,

‘the language used must be given its usual and accepted meaning.’” Lobeck v. State

Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn. 1998) (quoting Bobich v. Oja,

258 Minn. 287, 294, 104 N.W.2d 19, 24 (1960)). In Frey, we determined that the drop-




                                            5
down provision in dispute was not ambiguous.3 743 N.W.2d at 342-43. The Johnsons

argue that, unlike the provision in Frey, the specific dollar amount under the Minnesota

liability limits is not presented directly in the drop-down provision, which renders it

ambiguous. However, the Johnsons do not present any reasonable, alternative

interpretation of the drop-down provision.

         We rejected a similar argument in Agency Rent-A-Car, Inc. v. Am. Family Mut.

Auto. Ins. Co., 519 N.W.2d 483 (Minn. App. 1994), which involved a rental-car

company’s efforts to limit liability in rental contracts. The provision at issue in Agency

provided coverage to “settle or defend . . . up to the MINIMUM dollar amount

required . . . in accordance with the applicable motor vehicle financial responsibility laws

of the state [of execution.]” Id. at 485. We determined such language clearly limited

“coverage to the minimum required under Minnesota law.” Id. at 487.

         Because the Johnsons have not presented a reasonable, alternative interpretation,

and in light of our prior analysis of similar provisions, we conclude that the drop-down

provision is not ambiguous.

         B.    Hidden or misleading exclusions


3
    The drop-down exclusion at issue in Frey provided:

               C. There is no coverage for [bodily injury] for which a covered
               person becomes legally responsible to pay a member of that
               covered person’s family residing in that covered person’s
               household. This exclusion applies only to the extent that the
               limits of liability for this coverage exceed $30,000 for each
               person or $60,000 for each accident.

743 N.W.2d at 341.

                                              6
       The Johnsons argue that the drop-down provision’s two-part structure, where

(1) exclusionary language is located in the drop-down provision but (2) the minimum

dollar amounts under Minnesota law are found in the definition of “minimum limits,”

makes the provision hidden or misleading. In addition, the Johnsons argue that the drop-

down provision’s failure to place parentheses around “minimum limits” to indicate it as a

defined term is misleading. We disagree.

       Under the second Atwater factor, we consider “whether the insured was told of

important, but obscure, conditions and exclusions or [whether] the placement of major

exclusions is misleading.” Frey, 743 N.W.2d at 343. In Atwater, the supreme court

deemed the exclusion at issue, which was located within one of the policy’s definitions,

unenforceable because it was hidden. 366 N.W.2d at 276-79. However, in Frey, we

determined the drop-down clause at issue was not hidden or misleading. 743 N.W.2d at

343. We noted that, “[i]n order to fully understand what the provision means, the reader

of the policy must refer to the policy definitions” for multiple terms, but, “[m]ore

important[ly], the drop-down provision is in the section that is clearly labeled

‘exclusions;’ it is not hidden.” Id.

       Here, the Ironshore policy’s drop-down provision is identified as an exclusion, and

the language used is concise and accessible. And, as discussed above, we have

previously deemed a similar drop-down provision enforceable where reference was made

to Minnesota’s statutory minimum without presenting a specific dollar amount. Agency,

519 N.W.2d at 487. We conclude that the drop-down provision is not hidden or

misleading.


                                             7
       C.     General public awareness

       The third Atwater factor addresses whether the particular provision is one known

by the public generally. “We do not disagree with the district court that the drop-down in

liability coverage may be a surprise to most policy holders.” Frey, 743 N.W.2d at 343.

Therefore, because such a provision is not known by the public generally, this factor

weighs in the Johnsons’ favor.

       We have “previously held that in the absence of an ambiguity, a hidden major

exclusion, or other special circumstances, the doctrine of reasonable expectations is

inapplicable.” Id. (citing Levin v. Aetna Cas. & Sur. Co., 465 N.W.2d 99, 102 (Minn.

App. 1991), review denied (Minn. Mar. 27, 1991); Centennial Ins. Co. v. Zylberberg, 422

N.W.2d 18, 23 (Minn. App. 1988); Merseth v. State Farm Fire & Cas. Co., 390 N.W.2d

16, 18 (Minn. App. 1986), review denied (Minn. Aug. 13, 1986)). Such is the case here.

The drop-down provision is not ambiguous or hidden and no other special circumstances

apply. Therefore, we conclude that the district court did not err in determining that the

drop-down provision is enforceable and does not violate the reasonable-expectations

doctrine.

II.    The Ironshore policy’s out-of-state provision does not alter the application of
       the drop-down provision.

       The Johnsons next argue that they are entitled to the full $500,000 liability limit

under the Ironshore policy’s out-of-state provision. Specifically, with regard to the out-

of-state provision, the Johnsons argue the following: (1) Utah has a financial

responsibility law, which implicates paragraph A.1. of the out-of-state provision;



                                             8
(2) Utah’s financial-responsibility law specifies a liability limit for bodily injury; and

(3) the general liability limit of $500,000 under the Ironshore policy is higher than the

limit specified by Utah’s financial responsibility law. Since the parties previously agreed

that Ironshore would prevail under paragraph A.2., the Johnsons argue that paragraph

A.1. applies.

       “An insurance policy is a contract to which general principles of contract law

apply.” Terminal Transp., Inc. v. Minn. Ins. Guar. Ass’n, 862 N.W.2d 487, 489 (Minn.

App. 2015) (citation omitted), review denied (Minn. June 30, 2015). “This court reviews

the district court’s interpretation of a contract as a question of law subject to de novo

review.” Id. (citation omitted).

       Paragraph A.1. of the Ironshore policy provides that when an insured is involved

in an accident in another state, Ironshore will provide the greater of either (1) the amount

available under the Ironshore policy (“the limit shown in the Declarations”) or (2) the

amount required under the law of the state in which the accident occurred. In short, the

out-of-state provision is intended to ensure the Ironshore policy does not run afoul of

another state’s law in the event an accident occurs outside Minnesota.

       The Johnsons argue that paragraph A.1. refers to the $500,000 liability limit

presented in the Ironshore policy’s declarations table. But that table also incorporates

“ENDORSEMENTS MADE PART OF THIS POLICY AT THE TIME OF ISSUE” and

says “[s]ee attached endorsements.” “Endorsements . . . attached to an insurance contract

are part of the contract, and the endorsements and the policy must be construed together.”

Bobich, 258 Minn. at 294, 104 N.W.2d at 24. The Johnsons acknowledge this reference


                                              9
to the endorsements, which includes the drop-down provision. Because we conclude that

the drop-down provision is enforceable, paragraph A.1.’s reference to “the limit shown in

the Declarations” must implicate Minnesota’s $30,000 statutory minimum under the

drop-down provision. The Johnsons’ contrary assertion, that the $500,000 liability limit

is available under paragraph A.1., impermissibly renders meaningless the declarations’

reference to, and incorporation of, the drop-down provision. See id. (advocating holistic

contract construction and giving effect to all provisions).

       The final step is to determine which is greater: (1) Minnesota’s $30,000 statutory

minimum established under the drop-down provision or (2) the statutory minimum under

Utah law. Utah law provides: “Policies containing motor vehicle liability coverage may

not limit the insurer’s liability under that coverage below . . . $25,000 because of liability

for bodily injury to or death of one person, arising out of the use of a motor vehicle in any

one accident.” Utah Code Ann. § 31A-22-304(1)(a) (2014). As a result, the Ironshore

policy entitles the Johnsons to the $30,000 amount under the drop-down provision

because that amount is greater than the $25,000 limit established under Utah law.

       Therefore, we conclude that the district court did not err in determining that the

Ironshore policy’s out-of-state provision does not alter the application of the drop-down

provision.

       Affirmed.




                                              10
