STATE OF MINNESOTA
IN COURT OF APPEALS
Minnesota Insurance Guaranty Association,
Integra Telecom, Inc.,
Filed June 7, 2005
Hennepin County District Court
File No. 03-14751
Stephen P. Lucke, Michelle S. Grant, Dorsey & Whitney LLP, Suite 1500, 50 South Sixth Street, Minneapolis, MN 55402-1498 (for respondent)
Dean A. LeDoux, Gray, Plant, Mooty, Mooty & Bennett, P.A., 500 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for appellant)
Considered and decided by Kalitowski, Presiding Judge; Lansing, Judge; and Minge, Judge.
S Y L L A B U S
2. Where the state is not a party, the rules of appellate civil procedure require a party challenging the constitutionality of a statute on appeal to timely notify the attorney general to afford an opportunity to intervene.
O P I N I O N
Appellant Integra Telecom, Inc. challenges the district court’s grant of summary judgment in favor of respondent Minnesota Insurance Guaranty Association (MIGA). Appellant argues that (1) the district court erroneously construed the Minnesota Insurance Guaranty Association Act to permit MIGA to maintain a reimbursement claim against appellant based on a settlement MIGA entered into without appellant’s consent; (2) the district court erred because Minn. Stat. § 60C.11, subd. 3, prohibits MIGA from bringing a cause of action against appellant; and (3) the court’s construction rendered the act unconstitutional by violating appellant’s due process rights.
2000, Laura Breid filed a workers’ compensation claim for injuries sustained in
the course of her employment with appellant Integra Telecom, Inc. Appellant submitted the claim to its insurer,
Reliance Insurance Company (Reliance). Prior
to any settlement being reached, Reliance went into receivership and in October
2001, Reliance was declared insolvent by
In August 2002, MIGA authorized a settlement of the Breid claim and the Stipulation for Settlement was submitted to the office of administrative hearings, which issued an Award on Stipulation in September 2002. Subsequently MIGA sought reimbursement from appellant for the $62,801 paid on the Breid claim in addition to amounts that will come due in the future under the stipulation. MIGA cited its right to “recover the amount of any covered claim . . . resulting from insolvencies which occur after July 31, 1996, on behalf of an insured who has a net worth of $25,000,000 . . . and whose liability obligations to other persons are satisfied in whole or in part by payments made under this chapter.” Minn. Stat. § 60C.11, subd. 7.
After appellant refused to pay, MIGA filed a complaint seeking reimbursement. Following discovery, the parties brought cross-motions for summary judgment. Appellant argued that MIGA did not have the authority to legally bind appellant to a settlement without first obtaining appellant’s consent. Appellant argued in the alternative that to the extent the Minnesota Insurance Guaranty Association Act (the Act) gives MIGA the authority to settle claims for which an insured will be liable without the insured’s consent, the statute is unconstitutional because it constitutes a taking without due process.
MIGA maintained that it did not need appellant’s consent, or alternatively, that it had appellant’s consent to settle the suit under the terms of appellant’s insurance policy with Reliance that was transferred to MIGA under the Act when Reliance became insolvent. MIGA also argued that even if it did not receive consent, because the settlement was reasonable and made in good faith, appellant cannot show that it was prejudiced by the settlement.
The district court granted summary judgment in favor of MIGA concluding that (1) MIGA is not required to obtain consent from the insured before MIGA pays a claim under the insured’s policy in order to maintain a reimbursement claim against the insured; and (2) the Act was constitutional.
1. Did the district court erroneously construe the Minnesota Guaranty Association Act to permit MIGA to maintain a reimbursement claim against appellant based on a settlement MIGA entered into without appellant’s consent?
2. Did the district court err by failing to properly reconcile conflicting provisions of the Minnesota Guaranty Association Act?
3. Did the district court’s interpretation of the Minnesota Guaranty Association Act render the Act unconstitutional?
appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of
material fact and (2) whether the lower courts erred in their application of
the law.” State by Cooper v.
French, 460 N.W.2d 2, 4 (
argues that the district court erred in its interpretation of the Act by
construing the statute to impermissibly expand the scope of authority conveyed
to MIGA in order to permit MIGA—when the underlying insurer becomes insolvent—to
settle claims in its discretion without consent from the insured, and to then
require the insured to reimburse MIGA for the full amount of the settlement. Appellant contends that if the legislature
intended such a harsh result, the legislature would have clearly expressed that
intent. Appellant maintains that MIGA
only has the authority expressly contained within its enabling act and that the
district court’s construction of the Act overlooked this threshold principle. See Peoples Natural Gas Co. v.
construction is a question of law that this court reviews de novo. See Brookfield
Trade Ctr., Inc. v. County of Ramsey, 584 N.W.2d 390, 393 (
[b]asic canons of statutory construction instruct that we are to construe words and phrases according to their plain and ordinary meaning. A statute should be interpreted, whenever possible, to give effect to all of its provisions; no word, phrase, or sentence should be deemed superfluous, void, or insignificant. We are to read and construe a statute as a whole and must interpret each section in light of the surrounding sections to avoid conflicting interpretations. Finally, courts should construe a statute to avoid absurd results and unjust consequences.
In addressing appellant’s argument, it is helpful to begin with the purposes of the Act as stated by the legislature:
[t]he purposes of this chapter are to provide a mechanism for the payment of covered claims under certain insurance policies and surety bonds, to the extent provided in this chapter, minimize excessive delay in payment and to avoid financial loss to claimants or policyholders because of the liquidation of an insurer, and to provide an association to assess the cost of the protection among insurers.
Minn. Stat. § 60C.02, subd. 2 (2002). Such protection is not absolute; the Act places financial limits on covered claims and excludes some claims. See Minn. Stat. § 60C.09, subds. 2, 3 (2002). The Act “shall be liberally construed to effect the purposes stated in subdivision 2.” Minn. Stat. § 60C.02, subd. 3 (2002).
Section 60C.05 delineates the powers and duties of MIGA. Following the insolvency of an insurer, MIGA “shall . . . [b]e deemed the insurer to the extent of its obligation on the covered claims and have the right to pursue and retain salvage and subrogation recoverables on covered claim obligations . . . .” Minn. Stat. § 60C.05, subd. 1(a) (2002). The statute also authorizes MIGA to “[n]egotiate and become a party to the contracts necessary to carry out the purpose of this chapter,” and to “[p]erform other acts necessary or proper to effectuate the purpose of this chapter.” Minn. Stat. § 60C.05, subd. 2(d), (e) (2002).
argues that because section 60C.05, delineating the MIGA’s powers and duties,
does not expressly vest MIGA with the authority to settle claims without the
consent of an insured against whom MIGA will be seeking reimbursement, MIGA has
no such authority. But statutory
authority may be either express or implied. In re Application of Minnegasco, 565
N.W.2d 706, 711 (
no dispute that under the Act as it existed in 2001-2002, the Breid claim was a
covered claim, and that MIGA was obligated to take over and pay the claim when
Reliance became insolvent. The language
of the Act vests MIGA with authority to negotiate claims as a party to the
underlying policy contract, and it obligates MIGA to take additional steps to
carry out the purposes of the statute, which includes minimizing delays in
payment to claimants.
conclude that in light of (1) the broad description of MIGA’s powers in section
60C.05, subdivision 2(d) and (e); (2) the absence of any consent requirement;
and (3) the remedial purpose of the statute; an implied authority to settle
covered claims without consent from the insured is inferred from the statutory
scheme. See Miklas v. Parrott,
684 N.W.2d 458, 461 (
Because we conclude that MIGA has authority to settle claims without appellant’s consent, we do not address MIGA’s alternative argument that it had consent to settle under the terms of appellant’s insurance policy with Reliance.
contends the district court failed to apply Minn. Stat. § 60C.11, subd. 3 (2002), which provides: “The association [MIGA] has no cause of action against the insured of the insurer for any
sums it has paid out except the causes of action the insurer would have had if
the sums had been paid by the insurer.” (Emphasis
added.) The district court instead based
its decision on Minn. Stat. § 60C.11, subd. 7 (2002), which provides: “The association [MIGA] may recover the amount of any covered claim paid, resulting from
insolvencies which occur after July 31, 1996, on behalf of an insured who has a
net worth of $25,000,000 . . . and whose liability obligations to
other persons are satisfied in whole or in part by payments made under this
chapter.” (Emphasis added.) Because it could reasonably be interpreted
that the two subdivisions are in conflict, we conclude that the statute is
ambiguous. See Minn. Stat. § 645.26 (2002) (providing rules of construction
for irreconcilable provisions); Am. Family Ins. Group, 616 N.W.2d at
277. The object of all statutory
interpretation is to ascertain the intention of the legislature.
interpreting clauses in the same law that are irreconcilable, the “clause last
in order of date or position shall prevail.”
Appellant asserts that subdivisions 3 and 7 can be reconciled by interpreting subdivision 7 to mean that MIGA has the authority to enter into enforceable contracts with high net worth insureds in cases where MIGA agrees to handle the insured’s claims in a manner and upon terms that MIGA and the insured agree to before the claim is settled, including a right of reimbursement by MIGA. Such an interpretation would not violate subdivision 3, according to appellant, because MIGA would still be prohibited from instituting a cause of action against an insured. But, as with section 60C.05, there is no language in subdivision 7 of section 60C.11 requiring MIGA to obtain agreement from the insured in order to settle a claim or recover the amount in claims paid out on the insured’s behalf.
legislative history makes clear that subdivision 7 was intended to allow MIGA
the right to recover amounts paid on behalf of a company with a net worth
greater than $25 million, who are presumably sophisticated insurance
purchasers, in order to ensure that the MIGA’s limited funds would go to pay
the claims of those insureds without substantial assets. Hearing on S.F. No. 1980 Before the Senate
Commerce & Consumer Protection Comm. (Feb. 7, 1996) (statement of Department
of Commerce spokesperson P. Peterson); Hearing on H.F. 2378 Before House Fin.
Institutions & Ins. Comm. (Feb. 14, 1996) (statement of Department of
Commerce spokesperson Charles Nettell). Earlier
agreement by the insured to a negotiated settlement with the claimant prior to
recovering from the insured was never contemplated by the legislature, and the
statutory language plainly does not require consent. Accordingly, and as stated above, because “the
statute has no language that would support [appellant’s] contention,
. . . this court may not add to the statute what the legislature
deliberately or inadvertently omitted.” Star
Tribune Co. v. Univ. of
Appellant also argues that use of the phrase “cause of action” in subdivision 3 demonstrates that the legislature knew how to allow or prohibit a cause of action by MIGA and that use of the less specific phrase “may recover” in subdivision 7 indicates that the legislature did not intend subdivision 7 to create a cause of action for MIGA against certain insureds. We disagree. To adopt appellant’s interpretation would read out of the statute the very explicit language permitting MIGA to recover amounts paid on behalf of high net worth insureds.
Appellant further argues that to permit an action against high net worth insureds essentially renders subdivision 3 superfluous. We disagree. MIGA is still prohibited from initiating any cause of action against an insured whose net worth is under $25 million. Minn. Stat. § 60C.11, subd. 3. We also reject appellant’s argument that because subdivision 7 does not explicitly state that it is an exception to subdivision 3, it should not be interpreted as an exception. Even if subdivision 7 is not an exception, it is a more specific provision than subdivision 3 and, therefore, it prevails. See Minn. Stat. § 645.26, subd. 1 (providing interpretation of statutes should attempt to give effect to all provisions but in event of irreconcilable provisions, specific controls over general).
also points out that subdivision 7 does not clearly state from whom or how MIGA
may recover such amounts. However, to
construe the statute to mean anything other than permitting MIGA to maintain a
reimbursement claim against a high net worth insured would be absurd. It is on behalf of the high net worth insured
that the claim was paid. “When the words
of a law are not explicit, the intention of the legislature may be ascertained
by considering . . . the object to be attained . . . [and]
the consequences of a particular interpretation.”
Appellant next argues that to construe subdivision 7 to permit MIGA to maintain a reimbursement claim against high net worth insureds makes no sense if the underlying Breid claim is a “covered claim” under section 60C.09 (as it existed at the time of the settlement), because such a construction essentially turns the covered claim into an excluded claim. See Minn. Stat. § 60C.09, subd. 1 (2002) (defining “covered claim”). That is to say, since the recoupment provision places appellant in the same position it would be if the Breid claim had been an excluded claim under the Act, then the legislature could have excluded claims from MIGA’s coverage by changing the definition of what constitutes a “covered claim,” which, appellant points out, the legislature did in 2003. First, we note that subsequent amendments are not relevant. Moreover, appellant’s argument fails to recognize that even if appellant is ultimately responsible for any payment to Breid, the legislature still had a rational basis for transferring the case to MIGA for handling to ensure prompt payment to the injured employee—one of the primary purposes of the Act. Thus, providing a recoupment provision to recover claims paid to injured employees helps to accomplish the purpose of the Act.
appellant argues that to construe subdivision 7 to not require consent creates
an absurd result because one of the purposes of the Act is to “avoid financial
loss to . . . policyholders because of the liquidation of an
Appellant argues that the district court’s interpretation of the Act violates its state and federal constitutional rights to due process because allowing MIGA to seek reimbursement without appellant’s consent constitutes a taking of property without due process.
party challenging the constitutionality of a statute on appeal must notify the
attorney general in time to afford an opportunity to intervene.
D E C I S I O N
Because the Minnesota Guaranty Association Act permits the Minnesota Insurance Guaranty Association to negotiate a settlement and recover the amount of any covered claim paid from an insured with a net worth exceeding $25 million, we affirm the district court’s grant of summary judgment in favor of Minnesota Insurance Guaranty Association.
Because MIGA is not a state agency and appellant failed to notify the attorney general of its constitutional challenge to the Minnesota Guaranty Association Act, we do not address this argument.
 The parties agree that Breid’s claim is a covered claim under the act and is not affected by the 2003 changes to the act. Minn. Stat. § 60C.09, subd. 2(3) (2002). See 2003 Minn. Laws ch. 74, § 6 (amending act to exclude from the definition of “covered claims” any claims, not just first-party claims, by an insured whose net income exceeds $25 million).
Section 60C.09 excluded any first-party claims resulting from insolvencies
occurring after July 31, 1996, by high net worth insureds. Minn. Stat. § 60C.09, subd. 2(3). First-party claims are claims where the
insured itself has a loss that is covered by a policy. In contrast, third-party claims are those
where the insured is covered for liability to third persons. See RLI Ins. Co. v. Pike, 556 N.W.2d
1, 3 (