IN COURT OF APPEALS
American Family Mutual Insurance Company,
Filed December 20, 2005
Hennepin County District Court
File No. CT-04-3744
Wilbur W. Fluegel, Fluegel Law Office,
Gary L. Manka, Katz, Manka, Teplinsky, Due & Sobol, Ltd.,
Michael F. Barg,
Considered and decided by Shumaker, Presiding Judge; Kalitowski, Judge; and Hudson, Judge.
S Y L L A B U S
I. When an insured fails
to give its underinsurer timely notice of commencement of suit as required by Malmin v.
II. When an insured fails to give 30 days’ notice of its intent to reach a settlement with the tortfeasor as required by Schmidt v. Clothier, 338 N.W.2d 256 (Minn. 1983), the insured must put forth specific evidence of the tortfeasor’s limited financial worth to rebut the presumption that the underinsurer has been prejudiced by the insured’s untimely notice.
O P I N I O N
On appeal from summary judgment in which the district court ruled in favor of the respondent underinsured motorist (UIM) insurer, appellant argues the district court erred in concluding that: (a) respondent’s “timely notice” clause was enforceable under Malmin, when respondent failed to demonstrate prejudice from its lack of ability to intervene; and (b) appellant’s Schmidt notice was fatally defective when appellant put forth sufficient evidence to create a genuine issue of material fact precluding summary judgment on the issue of prejudice. We affirm.
Kluball’s claim for UIM coverage arises from a two-vehicle accident in
At the time of the accident, Craven’s automobile liability insurance policy was with MetLife Auto & Home (MetLife). Craven’s liability coverage was $50,000. On June 25, 2003, appellant and Craven executed an agreement for voluntary binding arbitration.
Appellant had an automobile policy with respondent American Family Mutual Insurance Group which included UIM coverage of $100,000/$300,000. The insuring agreement stated in part:
You must notify us of any suit brought to determine legal liability or damages. If any lawsuit is brought to determine liability or damages, the owner or operator of the underinsured motor vehicle must be made a defendant and we must be notified of the lawsuit at the time it is commenced. We are not bound by any resulting judgment where we have not received timely notice of the commencement of the lawsuit.
not notify respondent of the claim against Craven for a number of years. On September 11, 2003, appellant’s attorney
sent a letter to respondent notifying respondent that appellant had commenced a
lawsuit against Craven. The letter
purported to be notification of commencement of suit as required by Malmin v.
Appellant and Craven resolved their lawsuit in a binding arbitration on September 16, 2003. One week after the hearing, on September 23, 2003, the arbitrator found appellant’s damages to be roughly $120,000 and awarded that amount to appellant.
On October 3, 2003, appellant’s attorney again wrote to respondent informing respondent that Craven’s liability insurance was capped at $50,000 and that appellant had agreed to a binding high/low arbitration. Referring to his letter of September 11, 2003, the attorney stated that he had previously provided Malmin notice of the pending suit. He enclosed a copy of the arbitration award and made a demand for payment of the award that exceeded Craven’s liability coverage.
Pursuant to the arbitration agreement and the arbitrator’s award, appellant executed a complete release and satisfaction of award on October 15, 2003. Following execution of the release, appellant’s attorney wrote another letter to respondent on October 23, 2003. In that letter, he characterized MetLife’s payment of Craven’s $50,000 policy limit as a “settlement” and purported to give notice of a tentative settlement agreement pursuant to Schmidt v. Clothier, 338 N.W.2d 256 (Minn. 1983). He also advised that respondent had 30 days in which to substitute its draft for the draft of MetLife. Appellant’s attorney concluded by stating, “Assuming I hear nothing, the appropriate releases will be executed, forwarded and we will then turn our attention to collecting the arbitration award pursuant to the underinsured motorist endorsement.”
Respondent declined appellant’s request for UIM benefits by letter dated November 3, 2003. Appellant commenced a suit in contract against respondent for the remainder of the arbitration award. Respondent moved for summary judgment. Appellant filed a cross motion for summary judgment. The district court granted respondent’s motion for summary judgment and denied appellant’s motion. The district court did not determine if appellant provided notice under Malmin or Schmidt, reasoning that appellant failed to provide sufficient notice regardless of how the award is ultimately characterized. The court administrator entered judgment on January 13, 2005. This appeal follows.
I. Did the district court err in concluding that appellant’s claim was barred under Malmin, when respondent failed to demonstrate that it was prejudiced by the insufficient notice?
II. Did the district court err in granting summary judgment under Schmidt, when appellant introduced sufficient evidence to rebut the presumption of prejudice and create a genuine issue of material fact?
On an appeal
from summary judgment, this court asks two questions: (1) whether there are any
genuine issues of material fact, and (2) whether the district court erred in
its application of the law. State by Cooper v. French, 460 N.W.2d 2,
Both parties agree that this appeal presents primarily legal questions to be reviewed de novo. Appellant argues, however, that there is a genuine issue of material fact regarding whether she rebutted a presumption of prejudice. Whether a presumption has been rebutted is generally a question of fact. See, e.g., Feges v. Perkins Rests., Inc., 483 N.W.2d 701, 711 (Minn. 1992) (noting that whether an employee rebutted response offered by an employer for firing the employee presents a question of fact).
Appellant challenges the district
court’s conclusion that appellant’s claim was barred under Malmin v.
Before an injured claimant can pursue a UIM-benefits claim, she
must first recover from the tortfeasor’s liability-insurance policy. Employers
Mut. Cos. v. Nordstrom, 495 N.W.2d 855, 858 (
Here, the district court did not determine whether appellant’s arbitration award constituted a settlement or a conclusion of a tort action in lieu of a jury verdict. Instead, the court concluded that appellant was prohibited from seeking UIM benefits under either characterization. If the arbitration award was characterized as the conclusion of a tort action, appellant’s claim failed because appellant failed to provide sufficient “timely notice” of commencement of suit as required by respondent’s policy. If the arbitration award constituted a “best settlement,” appellant failed to provide the requisite 30-day notice of appellant’s intention to settle.
We note that an insured must characterize an arbitration award as either a settlement or a conclusion of a tort action and may not rely on both characterizations when pursuing UIM benefits. But because the district court did not determine the appropriate characterization, and because appellant’s arguments fail under either characterization, we will address appellant’s arguments under both characterizations.
Assuming that appellant’s arbitration award was obtained in lieu of a jury verdict and the issue is appropriately examined under Malmin, appellant argues that (1) the “timely notice” provision of respondent’s UIM policy is void as against public policy, and (2) public policy supports binding respondent to the results of a good faith liability arbitration that was secured at arm’s length when respondent has not demonstrated prejudice.
In Malmin, the insured obtained a judgment
against an underinsured motorist and sought UIM benefits from his insurer. 552 N.W.2d at 724. The insurer denied coverage because the
insured had not complied with provisions in the policy that required both
notice to the insurer of a potential UIM claim and the insurer’s written
consent to sue the tortfeasor.
[W]hile a “consent to sue” clause is invalid under the No-Fault Act, a provision within an insurance contract which requires the insured to notify his or her insurer of the commencement of a lawsuit against a tortfeasor within a limited period of time (i.e., 60 days) after service of process comports with due process principles and does not raise the same concerns under the No-Fault Act. Such a provision would permit the insurer to consider the nature of the tort claim and the tortfeasor’s liability limits, and thereby determine whether to attempt to intervene in the litigation in order to protect its own financial interests.
Appellant argues that “[b]y requiring written notice of suit commencement, [respondent] is essentially requiring that it ‘consent’ to the suit in order to be bound by its damages determination.” Appellant’s argument lacks merit. The Malmin court clearly distinguished between notification and consent clauses; the former are permissible, the latter are not.
does not fully address appellant’s second argument, however, that respondent
failed to demonstrate that it was prejudiced by the lack of sufficient
notification. According to appellant,
respondent’s interests were adequately protected because MetLife employed
qualified counsel whose interests were identical to respondent’s. “As a general rule, an insured’s breach of a
policy provision . . . will not lead to a forfeiture of insurance benefits
absent a showing that the insurer has been prejudiced.”
American Fam. Mut. Ins. Co. v.
Baumann, 459 N.W.2d 923 (
As in Baumann, when an insured fails to provide notice of commencement of suit per Malmin, the underinsurer loses the opportunity to protect its financial interests by intervening. Accordingly, the burden is shifted to the insured to demonstrate by a preponderance of the evidence that either the underinsurer had sufficient opportunity to intervene despite the untimely notice, or the underinsurer’s financial interests were not prejudiced by the resulting judgment. Otherwise, the insured forfeits UIM benefits.
Here, there is no record evidence supporting appellant’s suggestion that respondent was not prejudiced by appellant’s untimely notice. Although MetLife may have qualified counsel, respondent’s financial interest is the amount of damages beyond the liability cap of the tortfeasor’s policy and, thus, MetLife’s counsel did not protect respondent’s financial interests. Appellant therefore failed to rebut the presumption of prejudice and there is a forfeiture of UIM benefits.
Assuming that appellant’s arbitration award
constituted a “best settlement” and is appropriately analyzed under Schmidt v. Clothier, 338 N.W.2d
256 (Minn. 1983), appellant argues that she put forth sufficient
evidence rebutting the presumption of prejudice to create a genuine issue of
material fact precluding summary judgment.
As noted above, the supreme court in Baumann held that, when the insured fails to
provide the 30-day written notice of a pending settlement as required by Schmidt, release of the tortfeasor
creates a rebuttable presumption that the underinsurer has been prejudiced by
its inability to protect its subrogation rights. Baumann,
459 N.W.2d at 927. The burden of
demonstrating by a preponderance of the evidence the absence of prejudice shall
be borne by the insured.
It is undisputed that appellant did not provide Schmidt notice until after appellant executed the release. Attached to appellant’s motion for summary judgment was an affidavit from her attorney stating that an “investigation conducted by your Affiant fails to disclose the availability of any meaningful assets of the tortfeasor which would have been available to [respondent] to seek subrogation against.” Appellant introduced no additional evidence of the tortfeasor’s financial worth.
The statement in appellant’s attorney’s affidavit alone
does not create a genuine issue of material fact on the issue of
prejudice. In opposing summary judgment,
“general assertions” are not enough to create a genuine issue of material
fact. Nicollet Restoration, Inc. v. City of
Appellant failed to introduce any specific evidence of the tortfeasor’s financial worth to rebut the presumption of prejudice. Therefore, the district court did not err in granting respondent’s motion for summary judgment. Because we are affirming the district court’s judgment, we decline to address whether appellant’s arbitration agreement unambiguously evidenced appellant’s intent to be satisfied by the tortfeasor’s policy limits and not seek UIM benefits.
Finally, appellant moved to strike an affidavit from respondent’s appendix,
referring to that affidavit as not properly before this court. The record on appeal consists of the papers
filed in the district court, the exhibits, and the transcript of
D E C I S I O N
Because appellant did not present any evidence that respondent was not prejudiced by appellant’s untimely notice under Malmin, and because appellant failed to rebut the presumption that respondent was prejudiced by appellant’s insufficient notice under Schmidt, the district court did not err in granting respondent’s motion for summary judgment.
Affirmed; motion granted.