This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2000).






Lorraine Berg, et al.,





Bruce B. Reimer, et al.,



Lincoln Benefit Life Ins. Co.,



Filed July 31, 2001


Harten, Judge


Hennepin County District Court

File No. 9913791


Richard I. Diamond, Richard I. Diamond, P.A., 601 Carlson Parkway, Suite 1050, Minnetonka, MN 55305 (for appellants)


David D. Alsop, Laura L. Myslis, Gislason & Hunter, L.L.P., 9900 Bren Road East, Suite 215E, Minnetonka, MN 55343-9666 (for respondent)


            Considered and decided by Harten, Presiding Judge, Kalitowski, Judge, and Peterson, Judge.

U N P U B L I S H E D   O P I N I O N




            Appellants sued defendants, who sold them speculative investments, and obtained a default judgment.  Appellants then sought to hold respondent insurance company liable, but the district court granted summary judgment dismissing appellants’ claims.  Appellants contend that under Minn. Stat. § 60K.15, defendants were respondent’s agent as a matter of law; that there were genuine issues of material fact as to whether respondent knew that defendants engaged in improper investment activities; and that the district court erred in determining that appellants could not prove causation or damages.  Because we see no error, we affirm.


Appellants, a group of individuals, most of whom are senior citizens, filed a complaint against defendants Bruce and Mangalika Reimer alleging fraud in providing investment advice and in the selling of securities.  In November 1999, the district court granted appellants a default judgment of about $3.6 million dollars against defendants.  Defendant Bruce Reimer was a licensed insurance agent who brokered various insurance policies and products for many insurance companies, including respondent Lincoln Benefit Life Insurance Company.  His license to sell insurance was revoked on November 24, 1997, apparently for selling securities without a license.  His wife, defendant Mangalika Reimer, was a licensed securities representative who marketed various investments in conjunction with her husband.  Her securities license was revoked on November 27, 1997, retroactive to October 1996.

On March 30, 2000, the district court granted appellants’ motion to serve and file a supplemental complaint against respondent because respondent paid renewal commissions to Bruce Reimer that could be garnished by appellants as judgment creditors.  However, the supplemental complaint appellants served on respondent alleged much more than garnishment claims.  Appellants also alleged breach of contract, implied covenant of good faith and fair dealing, consumer fraud, common law fraud, intentional infliction of emotional distress, and negligent infliction of emotional distress against Reimer, asserted that respondent was vicariously liable on all of those claims, and sought an additional civil penalty for senior citizens.  Appellants further asserted direct claims against respondent for negligent hiring, retention, and supervision, and breach of contract to supervise an independent agent. 

Although appellants alleged that Reimer sold them life insurance policies that were issued by numerous insurance companies, appellants claimed that, of the 19 groups of appellants who brought the action against Reimer, ten sets of appellants (14 people) had purchased respondent’s insurance products through Reimer.  Appellants maintain that the Reimers encouraged them to remove funds from safe, secure, and appropriate investments and/or retirement accounts, in some instances sold and represented by Reimer, to invest in other financial opportunities.  Apparently most of the investments were in a general partnership with Paramount Pay Phones, Inc. 

Intermittently from 1982 through February 19, 1998, Reimer contracted with respondent to act as a broker and independent contractor marketing various insurance products.  Reimer last contracted with respondent to act as a broker on January 14, 1993.  That contract provides in pertinent part:

Authority - * * * The relationship between LBL [respondent Lincoln Benefit Life] and you created by this Agreement is that of an independent contractor.  Neither you nor your employees or agents shall be deemed to be the employee or servant of LBL.  None of the benefits provided by LBL to its employees, including but not limited to workmen’s compensation insurance and unemployment insurance, are available to you, your employees and agents. 


* * * *


You shall assume full responsibility for, and indemnify LBL against, any liability in connection with the payment of all federal, state and local taxes or contributions imposed or required under unemployment insurance, social security, income tax, and related laws with respect to compensation received under this Agreement by you.


            * * * *


            Limitation of Authority – You shall not possess or exercise any authority on behalf of LBL other than expressly conferred by this Agreement.  Specifically, but not in limitation of the foregoing, you shall have no authority on behalf of LBL to:


(1)Make, alter or discharge any contract.

(2)Incur any indebtedness or liability, expend, or contract for the expenditure of any funds of LBL.

(3)Extend the time for payment of any premium, bind LBL to the reinstatement of any terminated policy or accept notes for payment of premiums.

(4)Waive or modify any terms, conditions or limitations of any policy.

(5)Adjust or settle any claim or commit LBL with respect thereto. 

(6)Issue or circulate any advertisement or literature unless the same shall have been first approved in writing by the compliance officer of LBL.

(7)Enter into any legal proceedings in connection with any matters pertaining to LBL’s business.

(8)  Deliver any policy issued by LBL until settlement has been made by the applicant for the first premium. 


* * * *


Expenses – You shall pay all expenses of every nature incurred in connection with the conduct of your business and LBL shall not be liable in any way therefor.


* * * *


Termination – Either party may terminate this Agreement by giving written notice. 


Reimer was issued a form 1099 each year for tax purposes reflecting the commissions paid to him that year.

The district court granted respondent’s motion for summary judgment, granted appellants’ garnishment motion to compel respondent to disclose and pay over to appellants any accrued commission due to Reimer, and denied appellants’ motions to compel discovery and for partial summary judgment.  This appeal followed. 



            On appeal from summary judgment, we ask 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, 4 (Minn. 1990).  “On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted.” Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted). 

1.         Vicarious Liability

            The district court found that appellants’ claim that respondent was vicariously liable for Reimer’s conduct failed to state a cause of action because Reimer was never an employee or agent of respondent.  Appellants assert that the district court improperly resolved disputed facts on a motion for summary judgment and inappropriately applied the law.

“Absent an agency relationship, an insurance company is not liable for the acts or omissions of an insurance salesperson.”  Frank v. Winter, 528 N.W.2d 910, 911 (Minn. App. 1995), review denied (Minn. Apr. 27, 1995).

While it is generally the rule that an insurance company is liable for the torts of its agents when they are acting within the scope of their employment, before that rule can be applied it is essential to determine whether the person claimed to be an agent was, in fact, acting in that capacity. * * *  A broker is independently liable to the insured in either contract or tort for failing to procure insurance as instructed.


Eddy v. Republic Nat’l Life Ins., 290 N.W.2d 174, 176-77 (Minn. 1980) (citations omitted).  In Frank v. Winter, the district court determined that an independent insurance agent was acting as a broker for the insured, rather than an agent for the insurer, and therefore, the insurer was entitled to summary judgment.  Id., 528 N.W.2d at 914-15.  In affirming the district court, we emphasized the district court’s findings that “the [a]gency [a]greement between the parties specifically provided that [the insurance salesperson] was not an employee of [the insurer],” and that the agreement placed limitations on the insurance salesperson’s authority.  Id. at 915.

            In Mikulay v. Home Indem. Co., 449 N.W.2d 464 (Minn. App. 1989), review denied (Minn. Feb. 21, 1990), an injured motorist brought a declaratory judgment action against an insurer to recover underinsured motorist coverage.  Id. at 466.  The plaintiff asserted that an insurance agency was an agent of the insurer, and therefore, she was entitled to reformation of the policy to include underinsured motorist coverage.  Id.  The district court rejected this claim, concluding that the agency acted as an independent contractor on behalf of the insured and not as an agent for the insurer.  Id.  We affirmed, stating:

An agency relationship exists where the purported principal manifests that the agent shall act for him and subject to his control, and where the purported agent consents to act for the principal.  Proof rests not with the acts or declarations of the alleged agent, but rather with the will of the principal.


In the present case, [the agency’s] representatives were specifically identified as independent contractors in an agreement signed by both [the insurer] and [the agency].  The agreement also defined [the agency’s] authority and expressly limited it * * * . 


Id. at 467. 

            The contract between Reimer and respondent expressly states:

The relationship between LBL and you created by this [a]greement is that of an independent contractor.  Neither you nor your employees or agents shall be deemed to be the employee or servant of LBL.


The record contains other undisputed facts demonstrating that Reimer was not an employee or agent of respondent, but an independent broker for the insureds.  Like the agreements in Frank and Mikulay, the contract between Reimer and respondent specifically limited Reimer’s authority to act on behalf of respondent in several ways.  Additionally, Reimer received commissions, not wages, from respondent, and was issued a form 1099 each year for tax purposes.   

Appellants claim that the district court erred in failing to consider Minn. Stat.        § 60K.15 (2000), which provides:  “Any person who solicits insurance is the agent of the insurer and not the agent of the insured.”  However, Minn. Stat. § 60K.15 is a licensing statute without application to the issues before us.

We conclude that the district court properly relied on the independent contractor agreement between Reimer and respondent and did not err in determining that Reimer was never an employee or agent of respondent.  Accordingly, respondent was entitled to summary judgment on appellants’ vicarious liability claims.

2.         Direct Liability

            The district court found that respondent was entitled to summary judgment dismissing appellants’ claims of negligent hiring, retention, and supervision, and breach of contract to supervise an independent agent.  Appellants contend that the district court erred in finding that respondent had no reason to know of, and did not know of, Reimer’s improper conduct. 

            Negligent hiring is the negligence of an employer in placing a person with known propensities, or propensities which should have been discovered by reasonable investigation, in an employment position which, because of the circumstances of employment, it should have been foreseeable that the hired individual posed a threat of injury to others. 


M.L. v. Magnuson, 531 N.W.2d 849, 857 (Minn. App. 1995) (quotation omitted), review denied (Minn. July 20, 1995).   

Negligent retention, although similar to negligent hiring, arises when, during the course of employment, the employer becomes aware or should have become aware of problems with an employee that indicated his unfitness, and the employer fails to take further action such as investigating, discharge, or reassignment.


Id. (quotation omitted).

            [N]egligent supervision is the failure of the employer to exercise ordinary care in supervising the employment relationship, so as to prevent the foreseeable misconduct of an employee from causing harm to other employees or third persons.  Negligent supervision derives from the doctrine of respondeat superior so the claimant must prove that the employee’s actions occurred within the scope of employment in order to succeed on this claim. 


Id. at 858 (quotation and citations omitted).

            Here, the district court found:

Even if Reimer was an employee or agent of [respondent], [appellants’] claims of direct liability are subject to dismissal because the element of knowledge on the part of [respondent] cannot be proven.  [Appellants] do not have evidence to demonstrate that [respondent] knew or should have known that Reimer was providing investment advice to his clients regarding products other than [respondent’s] products, and was providing advice regarding the sale of securities.  As indicated, these activities on Reimer’s part were far outside the parameters of Reimer’s contracts with [respondent], under which he had agreed only to market [respondent’s] insurance products.  Clearly, even if Reimer had been an agent or employee of [respondent], it had no reason to know of Reimer’s alleged misconduct, as it did not in any way involve the marketing or sale of [respondent’s] policies or annuities.


The district court also found that respondent was entitled to summary judgment on appellants’ allegations of breach of contract to supervise an independent agent “because Reimer’s activities had no relationship to the performance of his contracts with [respondent].”  The district court did not err in determining that respondent was entitled to summary judgment on appellants’ direct liability claims. 

3.         Failure to Prove Causation or Damages

In a claim for negligence, a plaintiff must prove:  (1) the defendant has a legal duty to the plaintiff to take some action; (2) there was a breach of that duty; (3) the breach of the duty was the proximate cause of the harm to the plaintiff; and (4) damage.


Gilbertson v. Leininger, 599 N.W.2d 127, 130 (Minn. 1999) (citation omitted).  The district court found that there was no evidence upon which to assert that respondent did anything to cause appellants to sustain damages.  The district court pointed out that, of the 14 appellants, eight held respondent’s policies or annuities upon which no loans or cash surrenders were taken.  The district court found that the remaining six appellants

cannot prove they suffered any damages as a result of anything [respondent] did or did not do.  To the extent that these [appellants] took loans on their * * * policies [with respondent], they clearly received the benefit of the bargain.  [Respondent] could not prevent these [appellants] from exercising their contractual right to take loans out on their policies, and [appellants] received money from [respondent] to spend, invest, or otherwise use however they saw fit.  The damage these [appellants] contend they have sustained relate not to [respondent’s] release of funds at their requests, but rather to Reimer’s conduct in providing them with unsound investment advice.


Appellants contend that an obligation to repay a policy loan constitutes damage.  Appellants also maintain that those who cashed out their policies to purchase investments on the advice of Reimer suffered damages by losing the money they invested.  We disagree.  These claims are properly against Reimer, not respondent.  The investments appellants made were not in respondent’s products; most of the funds for these investments came from sources other than respondent’s policies.  The district court correctly determined that respondent was entitled to summary judgment because appellants could not prove causation or damages.