This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
STATE OF MINNESOTA
IN COURT OF APPEALS
Ronda J. Mill,
Farm Bureau Mutual Insurance Company,
Steven M. Lawson, et al.,
Independent School District No. 535,
Filed December 27, 2005
Olmsted County District Court
File No. C5-02-4009
Michael B. Goodman, Goodman & Guzinski, P.A., 300 First Avenue Northwest, #306, P.O. Box 277, Rochester, MN 55903-0277 (for respondent)
Mark R. Azman, Chad H. Gabert, Johnson & Condon, P.A.,
Considered and decided by Kalitowski, Presiding Judge; Toussaint, Chief Judge; and Halbrooks, Judge.
Appellant Independent School District No. 535 challenges the district court’s order granting the insurer’s motion for subrogation against the school district for the amount of no-fault benefits the insurer paid to its insured. The school district and the plaintiff (insured) in the underlying action entered into a post-verdict settlement agreement that excluded the amount of no-fault benefits that the insured had received from the insurer. Because the insured did not receive a double recovery and an insurer’s right of subrogation is only valid against its insured, we reverse.
motor vehicle accident involving Ronda Mill and Steven Lawson occurred on
December 7, 2000, resulting in personal injury to Mill. Prior to the accident, Lawson, a high school
student who suffers from Down’s Syndrome, had left school without
permission. He then stole a car from J.
Kinsella Auto Sales, Inc. (Kinsella) and drove the wrong way on Highway 52,
ultimately colliding with Mill. Mill
sued Lawson, Kinsella, and appellant
school district and Lawson moved to offset Farm Bureau’s no-fault payments from
the verdict under Minn. Stat. § 65B.51, subd. 1 (2004), and
The district court denied the school district’s motion for offset (albeit after Mill and the school district entered into the settlement agreement), but granted Farm Bureau’s motion for subrogation against the school district. The district court found that if it did not order reimbursement, the settlement agreement would “eviscerate” Farm Bureau’s subrogation right. Thus, the district court ordered the school district to reimburse Farm Bureau for the amount of the no-fault benefits that Mill and the school district had excluded from the settlement agreement. This appeal follows.
case involves the interpretation and application of various statutes. Statutory construction is a question of law,
which we review de novo.
A reparation obligor paying or obligated to pay basic economic loss benefits is subrogated to a claim based on . . . negligence other than negligence in the maintenance, use, or operation of a motor vehicle. This right of subrogation exists only to the extent that basic economic loss benefits are paid or payable and only to the extent that recovery on the claim absent subrogation would produce a duplication of benefits or reimbursement of the same loss.
Mill’s claim against the school district was based on its alleged negligent supervision of Lawson. Because Mill’s claim was a claim of “negligence other than negligence in the maintenance, use, or operation of a motor vehicle,” Minn. Stat. § 65B.53, subd. 3, is the appropriate statutory section to resolve this issue.
The district court, in granting Farm Bureau’s motion, stated:
In this case the post-verdict settlement agreement between the District and Mill seeks to preclude Farm Bureau’s subrogation right by setting up a payoff with a built-in collateral source deduction. Notwithstanding the parties’ authority to structure a post-verdict settlement agreement, Farm Bureau cannot now be bound to an outcome where its subrogation rights are eviscerated. That is, Farm Bureau’s otherwise valid, post-verdict right of subrogation cannot now be purged simply because the no-fault plaintiff settles with other defendants in the case. . . . Here with the application of § 65B.53, subd. 3, being requested by Farm Bureau, Mill’s verdict devoid of offset will nevertheless evade the double recovery conundrum because a right of subrogation exists.
Appellant asserts that resolution of this issue is controlled by the Minnesota Supreme Court’s decision in Milbrandt v. Am. Legion Post of Mora, 372 N.W.2d 702 (Minn. 1985). We agree. In Milbrandt, the plaintiff brought a dram-shop claim following her husband’s death. Prior to trial, the plaintiff settled with the defendants on a Pierringer basis. Because the plaintiff had received basic-economic-loss benefits, her insurer moved to intervene in the suit and brought a separate action for subrogation against the tortfeasors. The district court denied the motion to intervene and entered summary judgment against the insurer on the subrogation claim. The court of appeals affirmed. On review, the supreme court affirmed, stating in part:
Appellant asks the court to find a general policy in the No-Fault Act favoring subrogation claims against tortfeasors by reading the first sentence of subdivision 3 broadly, and then seeks a narrow interpretation of the explicit limitation on subrogation rights in the second sentence of subdivision 3. The statute, however, means exactly what it says: a reparation obligor may assert a subrogation claim to recover basic economic loss benefits paid only when the insured has received a double recovery. Because the insurer’s right to recover benefits paid its insured exists only when the insured obtains double recovery, the right of recovery recognized in subdivision 3 may be asserted only against the insured. When seeking to recover under subdivision 3, the burden is on the insurer to show that the insured has been overcompensated.
Milbrandt, 372 N.W.2d at 705 (footnote omitted).
subrogation rights have a direct impact on the no-fault insurance system, the
This case is
factually similar to Ketterling, in
that Ketterling received uninsured-motorist benefits, then brought her
personal-injury lawsuit, received damages, and entered into a posttrial
settlement that reflected a compromise in the amount of damages. 415 N.W.2d at 107. The settlement agreement explicitly stated
that it was excluding the amount that Ketterling had received in basic-economic
loss and uninsured-motorist benefits, thereby avoiding a double recovery and
frustrating the insurer’s subrogation claim.
Farm Bureau characterizes the settlement agreement as “collusive” and the
district court stated that the agreement “eviscerate[s]” Farm Bureau’s
subrogation rights. This court has
recognized that an insured has a right to “structure the settlement to include
only non-duplicative losses.” Mueller v. Theis, 512 N.W.2d 907, 911
(Minn. App. 1994) (citing Principal Fin.
Group v. Allstate Ins. Co., 472 N.W.2d 338, 342 (Minn. App. 1991)), review denied (
[a]pplication of Milbrandt to all subrogation claims . . . means that the insured has full control over the litigation and settlement of the kinds of tort claims that are covered in those subdivisions. No reimbursement right arises if the settlement or judgment does not result in duplicative recovery of losses for which basic economic loss benefits have been paid.
472 N.W.2d at 342 (emphasis added) (citing 2 M.
Consequently, because Minn. Stat. § 65B.53, subd. 3, states that subrogation is available for an insurer only against its insured and only to prevent double recovery and because an insured has the right to structure settlement agreements to include only non-duplicative losses, the district court erred in ordering that the school district reimburse Farm Bureau for the no-fault benefits that Farm Bureau paid to its insured.