This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).






Abraha Kahsay,





Liberty Mutual Insurance Company,



Filed June 7, 2005

Reversed and remanded

Halbrooks, Judge



Hennepin County District Court

File No. PI 02-16349


Philip K. Jacobson, Kelly & Jacobson, 220 South 6th Street, Suite 215, Minneapolis, MN 55402 (for appellant)


Shari L. Lowden, Law Office of Susan K.H. Conley, 220 South Court International, 2550 University Avenue West, St. Paul, MN 55114 (for respondent)



            Considered and decided by Halbrooks, Presiding Judge; Lansing, Judge; and Minge, Judge.

U N P U B L I S H E D   O P I N I O N


            Appellant challenges the district court’s grant of summary judgment in favor of respondent insurance company, arguing that his failure to provide a Schmidt/Clothier notice did not prejudice respondent.  Because there is no evidence that the district court considered the issue of prejudice, we reverse and remand for further proceedings.


            Appellant Abraha Kahsay challenges the district court’s grant of summary judgment in favor of respondent underinsured motorist (UIM) carrier Liberty Mutual Insurance.  The material facts in this case are undisputed.  In August 1996, appellant suffered back injuries in an automobile accident caused by Matilda Robinson, who was driving a vehicle owned by her mother, Virginia Robinson.  Appellant subsequently settled his bodily-injury claim against the Robinsons and their insurer.  Respondent, appellant’s insurer, was notified of the accident and paid various no-fault benefits, but was not sent a Schmidt/Clothier[1] letter or otherwise notified of appellant’s settlement with the Robinsons.  

After the settlement, appellant began to suffer additional back problems ostensibly related to the 1996 accident.[2]  In January 2002, he underwent surgery on his lower back.  Appellant then filed a claim for UIM benefits, which respondent denied.  Appellant subsequently filed suit, alleging that respondent breached his insurance policy by refusing to pay benefits. 

Respondent moved for summary judgment and appellant opposed the motion, arguing that respondent had suffered no prejudice as a result of appellant’s failure to supply respondent with a Schmidt/Clothier notice.  The district court granted respondent’s summary-judgment motion.  This appeal follows.


“On an 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).  There is no genuine issue of material fact if “the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party.”  DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997) (quotation omitted).  The existence of a genuine issue of material fact must be established by substantial evidence.  Id. at 69-70.  On appeal, we review the evidence in the light most favorable to the party against whom summary judgment was granted.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). 

Both parties argue that this case presents a question of law that is to be reviewed de novo.  But 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 reasons offered by employer for firing employee presents a question of fact); Arneson v. Integrity Mut. Ins. Co., 344 N.W.2d 617, 618 (Minn. 1984) (noting that testimony offered to rebut a presumption of ownership raises a question of credibility, which is an issue for the trier of fact); Chickering & Son v. White, 42 Minn. 457, 461, 44 N.W. 988, 989 (1890) (noting that whether a presumption of fraud had been rebutted was a question of fact). 

Prior to settling any claims with tortfeasors, potential claimants of UIM benefits are required to provide their UIM carriers with a 30-day written notice of tentative settlement agreements.  Schmidt v. Clothier, 338 N.W.2d 256, 263 (Minn. 1983).  The consequences of a failure to supply the required notice were spelled out by the supreme court in Am. Family Mut. Ins. Co. v. Baumann, 459 N.W.2d 923, 927 (Minn. 1990). 

Absent the required 30-day written notice, release of the tortfeasor shall be deemed prejudicial to the underinsurer.  That presumption of prejudice shall be rebuttable, but the burden of demonstrating by a preponderance of the evidence the absence of prejudice shall be borne by the insured.  An insured’s failure to sustain that burden of proving a lack of prejudice to the insurer shall result in forfeiture.


Id. (emphasis added).  The financial status and assets of a tortfeasor are relevant to determining prejudice.  Behrens v. Am. Family Mut. Ins. Co., 520 N.W.2d 763, 768 (Minn. App. 1994), review denied (Minn. Oct. 14, 1994).  Evidence that the tortfeasors are “poor subrogation prospects” may be sufficient to rebut the presumption of prejudice.  Elwood v. Horace Mann Ins. Co., 531 N.W.2d 512, 516 (Minn. App. 1995). 

It is undisputed that appellant did not provide respondent with a proper Schmidt/Clothier notice.  The only question before this court is whether appellant rebutted the presumption that respondent suffered prejudice and thus created a genuine issue of material fact for trial.  Appellant contends that he rebutted this presumption by submitting certain evidence to the district court.  But the district court did not address the issue of whether appellant adequately rebutted the presumption of prejudice.  Instead, the district court cited Klang v. Am. Family Ins. Group, 398 N.W.2d 49, 52 (Minn. App. 1986), for the proposition that failure to provide a Schmidt/Clothier notice “results in a forfeiture of the insured’s rights to pursue an underinsured motorist claim.”  The court then concluded that appellant’s failure to provide such a notice precludes his UIM claim against respondent.  The district court did not mention or cite Baumann.

But Klang predates the supreme court’s decision in Baumann, which provides that UIM coverage is barred by failure to provide the insurer with a Schmidt/Clothier notice only if the insured fails to rebut the presumption of prejudice by a preponderance of the evidence.  See Baumann, 459 N.W.2d at 927 (providing that the “presumption of prejudice shall be rebuttable”) (emphasis added).  Under Klang, the failure to provide a Schmidt/Clothier notice was automatically fatal to the insured’s UIM claim; under Baumann, such a failure is fatal only if the insured is unable to demonstrate that the insurer was not prejudiced by the failure.  Compare Klang, 398 N.W.2d at 52, with Baumann, 459 N.W. 2d at 927. 

At oral argument, appellant suggested that he bears the burden only of demonstrating that respondent suffered no actual prejudice.  We disagree.  In Behrens, we noted that “Baumann did not indicate how much evidence is required to rebut the presumption of prejudice.”  Behrens, 520 N.W.2d at 768.  Appellant cites Fladager v. Farm Bureau Mut. Ins. Co., 414 N.W.2d 551 (Minn. App. 1987), in support of his assertion that he need only show that respondent would not have actually been able to collect from the tortfeasor.[3]  But in Fladager, we described the insurer’s loss of “its right to determine whether a subrogation action should be brought” as “substantial” in and of itself.[4]  Id. at 554.  More recently, in Elwood, we concluded that the insured had rebutted the presumption of prejudice where he demonstrated by a preponderance of the evidence that the insurer “was not prejudiced in any way by the loss of an opportunity to substitute its check.”  531 N.W.2d at 516 (emphasis added).  Accordingly, appellant bears the burden of demonstrating that respondent was not prejudiced, actually or otherwise.

Here, there is no evidence that the district court considered whether appellant’s proffered evidence was sufficient to rebut the presumption of prejudice to respondent.  Because the absence of findings or a conclusion regarding whether appellant presented evidence adequate to rebut the presumption of prejudice precludes reasonable review, we reverse and remand for additional findings on the issue of prejudice.

            Reversed and remanded.

[1] Schmidt v. Clothier, 338 N.W.2d 256 (Minn. 1983).

[2] According to appellant, at the time of the settlement, an MRI showed a bulging disk in appellant’s back, but he demonstrated few other symptoms and was “not deemed a surgical candidate.” 

[3] Appellant also cites Dairyland Ins. Co. v. Clementson, 431 N.W.2d 895 (Minn. App. 1988).  But Clementson was not a Schmidt/Clothier case; rather, it involved a six and one-half year delay in providing the insurer with notice of an accident.  Clementson, 431 N.W.2d at 897.

[4] We also note, however, that Fladager predates Baumann.