This opinion will be unpublished and

may not be cited except as provided by

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







Diane J. Willert, as trustee for the heirs and

next of kin of Dale J. Willert, deceased, et al.,





Stockwell Construction, Inc., et al.,



Grinnell Mutual Reinsurance Company,

an Iowa corporation,




Filed February 7, 2006

Affirmed in part, reversed in part, and remanded

Halbrooks, Judge



Ramsey County District Court

File No. CX-03-3650



John P. Sheehy, Michael C. Snyder, Pamela J. Spaulding, Meshbesher & Spence, Ltd., 1616 Park Avenue, Minneapolis, MN 55404 (for respondents)


Kay Nord Hunt, Barry A. O’Neil, Lommen, Nelson, Cole & Stageberg, P.A., 2000 IDS Center, 80 South 8th Street, Minneapolis, MN 55402 (for appellant)



            Considered and decided by Halbrooks, Presiding Judge; Klaphake, Judge; and Wright, Judge.

U N P U B L I S H E D   O P I N I O N


            On appeal from the district court’s grant of summary judgment for respondents on a bad-faith claim, appellant argues that respondents are not entitled to summary judgment because respondents did not allege this claim in their complaint.  Because appellant had notice of the claim, which another party initially alleged, we affirm on this issue.  Appellant also contends that there are genuine issues of material fact regarding (1) its failure to settle the claims within the policy limits, (2) whether it adequately informed the insured of a potential conflict of interest, (3) whether it adequately informed the insured of the risk and consequences of an excess verdict, and (4) whether it adequately informed the insured, post-verdict, of the value of a bad-faith claim.  Because we conclude that there are genuine issues of material fact on theses issues, we reverse and remand.


            In September 1998, Dale Willert and Shane Zvorak were working in a barn in Steele County, when the barn door collapsed on them, killing Willert and injuring Zvorak.  Stockwell Construction, Inc. (Stockwell) had installed the door.  Following the accident, respondents Diane Willert, Willert’s widow, and Zvorak and his wife made a joint settlement demand of $1.225 million to appellant Grinnell Mutual Reinsurance Company (Grinnell Mutual), Stockwell’s liability insurer.   

            Grinnell Mutual informed Stockwell of the settlement demand, of its policy limits of $1 million, and of the potential for, and consequences of, an excess judgment.  Because Grinnell Mutual valued the claims at an amount considerably less than the respondents’ demand, Grinnell Mutual rejected respondents’ demand and issued a counteroffer in the amount of $120,000.  Respondents filed wrongful-death and personal-injury claims against Stockwell, and Grinnell Mutual hired Peter Sandberg to serve as Stockwell’s defense counsel.  During the course of his representation, Sandberg generally communicated with Lawrence Stockwell, president of Stockwell, and Mike Stockwell, Lawrence’s son and Stockwell’s accountant.

            Following the commencement of the litigation, Grinnell Mutual again informed Stockwell of respondents’ settlement demand of $1.225 million and of the potential for, and the consequences of, an excess judgment.  At the time of Lawrence Stockwell’s deposition in October 2000, Sandberg explored with respondents’ attorney whether they would be agreeable to a settlement range of $500,000-750,000, but Sandberg did not make a formal offer.  Respondents’ attorney advised Sandberg that they were not willing to settle for anything less than the policy limits.  Sandberg so advised Grinnell Mutual and Stockwell. 

            Following the depositions, Sandberg discussed with Lawrence Stockwell whether to admit liability and only try the issue of damages.  Sandberg believed that this strategy would remove the emotional aspect of the litigation, and, therefore, lower the damage award.  Lawrence Stockwell agreed.

            Following Stockwell’s admission of liability, Sandberg’s valuation of the claims decreased from his earlier assessment of $500,000-$750,000 for the wrongful-death claim and $35,000-$40,000 for the personal-injury claim to a combined total of $250,000-$500,000.  At mediation, Sandberg inquired as to whether respondents would accept $500,000.  Respondents indicated that they would not settle for anything less than $1 million and that there would be no more movement.  As a result, the mediator declared an impasse.  Following mediation, respondents formally submitted a settlement demand for the $1 million policy limits.  Sandberg and Grinnell Mutual informed Stockwell of respondents’ settlement demand, and Grinnell Mutual, for the third time, informed Stockwell in correspondence of the potential for, and consequences of, an excess verdict.

            Trial occurred in July 2001, and the jury awarded $225,000 in past and future economic loss and $3.25 million for past and future loss of counsel, guidance, aid, advice, comfort, assistance, protection and companionship on the Willert wrongful-death claim.  The jury awarded $65,000 in past and future pain, disability, embarrassment and emotional distress, as well as $5,400 in lost wages and $29,072.30 in past and future health-care expenses on the Zvorak claim.  In addition, the jury awarded Zvorak’s wife $3,000 for loss of consortium.  The total verdict for the combined claims was $3.5 million.  Sandberg filed a motion for a new trial and remittitur, which the district court denied.

            In October 2001, Mike Stockwell filed articles of dissolution, and the Secretary of State issued a certificate of dissolution.  While Lawrence Stockwell had sold the assets of the corporation at the end of 2000 (months before trial), the corporation was not dissolved until October 2001 when Lawrence Stockwell became eligible for health insurance through a new employer.  The articles of dissolution signed by Lawrence Stockwell required Stockwell to affirm that the corporation had no outstanding debts. 

            In December 2001, respondents advised Sandberg that they believed that a conflict of interest existed between him, Stockwell, and Grinnell Mutual.  In addition, respondents indicated that they might accept an assignment of Stockwell’s bad-faith claim against Grinnell Mutual as full satisfaction of the excess verdict, and they requested that Sandberg advise Stockwell to retain an independent lawyer.  Sandberg sent respondents’ letter to Lawrence Stockwell, along with his assessment that he did not believe that he had a conflict with Stockwell. 

            In April 2002, respondents served Stockwell with postjudgment discovery requests, and Grinnell Mutual informed Lawrence Stockwell that, as a courtesy, it would continue to pay Sandberg’s legal fees throughout the course of the post-verdict representation.

            In December 2002, respondents again contacted Sandberg and alleged a conflict of interest.  In addition, respondents accused Sandberg of facilitating mail fraud by forwarding Stockwell’s certificate of dissolution, as they contended that Stockwell fraudulently obtained the certificate by not reporting the judgment against it when it filed the articles of dissolution.  Sandberg responded, copying Lawrence Stockwell, that he did not believe a conflict of interest existed and that there was no evidence to support an allegation of a facilitation of fraud. 

According to Sandberg, he once again discussed with Lawrence Stockwell the concept of assigning its bad-faith claim to respondents as full satisfaction of the excess verdict, but he refused.  Sandberg stated that he informed Lawrence Stockwell that respondents could force Stockwell into involuntary bankruptcy and obtain the assignment that way, but that he still refused to voluntarily assign the claim.  In contrast, Lawrence and Mike Stockwell testified that Sandberg never told them that a bad-faith claim was an asset of the corporation or that they could assign the claim to respondents as full satisfaction of the excess judgment.

            In February 2003, respondents initiated an action against Grinnell Mutual, Stockwell, Lawrence Stockwell, Mike Stockwell, Stockwell Accounting, Sandberg, Minnesota Secretary of State, and K-H Construction, Inc.  In April 2004, the parties stipulated that the Secretary of State should rescind the certificate of dissolution because, at the time Mike Stockwell filed it, the company had outstanding debts that it denied in the articles of dissolution.  The district court dismissed the Secretary of State from the litigation with prejudice.  Shortly thereafter, Stockwell agreed to assign its bad-faith claim to respondents, and respondents dismissed Stockwell from the litigation with prejudice.

            Respondents then moved for summary judgment on the bad-faith claim, despite never amending the complaint to reflect that cause of action.  The district court held two hearings on the summary-judgment motion and other motions filed by both parties, and granted respondents’ motion for summary judgment on the bad-faith claim.  This appeal follows.


I.          Did the district court err by granting respondents’ motion for summary judgment on a cause of action that respondents did not plead?


“It is fundamental that a party must have notice of a claim against him and an opportunity to oppose it before a binding adverse judgment may be rendered.”  Folk v. Home Mut. Ins. Co., 336 N.W.2d 265, 267 (Minn. 1983).  Thus, the district court must “base relief on issues either raised by the pleadings or litigated by consent.”  Id.  Minn. R. Civ. P. 15.02 states that when a party does not raise an issue in its pleadings, the parties may litigate the issues by express or implied consent, and the district court will treat those issues as if they were raised in the pleadings. 

Consent is commonly implied either where a party fails to object to evidence inadmissible with respect to issues raised by the pleadings or where he puts in his own evidence relating to nonpleaded issues.  There is a presumption that evidence is offered and received with reference to issues framed by the pleadings and consent is not implied where evidence is actually pertinent to such issues regardless of its other probative value.  Consent is not implied by mere failure to claim surprise or request a continuance.


Folk, 336 N.W.2d at 267; see also Roberge v. Cambridge Coop. Creamery Co., 243 Minn. 230, 233-34, 67 N.W.2d 400, 403 (1954).  It should be noted that “fair notice remains essential, and pleadings will not be deemed amended to conform to the evidence because of a supposed ‘implied consent’ where the circumstances were such that the other party was not put on notice that a new issue was being raised.”  Hohenstein v. Goergen, 287 Minn. 512, 514, 176 N.W.2d 749, 751-52 (1970) (quotation omitted).

            It is undisputed that respondents did not allege in their complaint a claim of bad faith on the part of Grinnell Mutual.  But Stockwell, initially a defendant below, did assert a claim of bad faith against Grinnell Mutual and subsequently assigned that claim to respondents.  Respondents do not contend that Grinnell Mutual either expressly or impliedly consented to litigate this issue, but, rather, that because it stipulated to the entry of judgment, it waived the issue. 

            In a memorandum to the district court, Grinnell Mutual raised the argument that respondents had only recently received the assignment of the bad-faith claim from Stockwell and had not amended their complaint to reflect that change.  In addition, Grinnell Mutual asserted that, before being required to defend against the bad-faith claim, it had the right to have the issues “properly framed” and that the district court should have allowed it time for discovery regarding the assignment and “expected obligations created by the assignment.”   

            But because Stockwell pleaded the bad-faith claim, it was not a new issue about which Grinnell Mutual lacked notice.  As a result, Grinnell Mutual should have prepared to defend against it, regardless of which party litigated it.  The fact that Stockwell assigned the claim to respondents does not change the merits or the notice of the claim to Grinnell Mutual.  The factual basis supporting that claim remained the same upon assignment.  Therefore, we affirm on this issue.

II.        Did the district court err by granting respondents’ motion for summary judgment?


“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).  The reviewing court must “view the evidence in the light most favorable to the nonmoving party.”  Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 345 (Minn. 2003).  No genuine issue for trial exists “[w]here 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). 

[T]here is no genuine issue of material fact for trial when the nonmoving party presents evidence which merely creates a metaphysical doubt as to a factual issue and which is not sufficiently probative with respect to an essential element of the nonmoving party’s case to permit reasonable persons to draw different conclusions.


Id. at 71.  “[T]he party resisting summary judgment must do more than rest on mere averments.”  Id.

Here, the district court found that

[t]here are no genuine issues of material fact in dispute regarding Grinnell Mutual’s breach of its fiduciary duty of good faith.  Grinnell Mutual did not negotiate a settlement in good faith and did not keep the interests of its insured paramount.  It did not materially inform its insured of a potential conflict of interest, nor did it adequately inform its insured of the potential or consequences of a deficiency judgment.  Finally, it acted in bad faith in failing to inform its insured of the conflict of interest between itself and the insured regarding the value of a bad faith claim.


A.        Are there genuine issues of material fact concerning whether Grinnell Mutual breached its duty of good faith by refusing to settle the claims within the policy limits?


                        In Minnesota, a liability insurer, having assumed control of the right of settlement of claims against its insured, may become liable in excess of its undertaking under the terms of the policy if it fails to exercise “good faith” in considering offers to compromise the claim for an amount within the policy limits.


Short v. Dairyland Ins. Co., 334 N.W.2d 384, 387 (Minn. 1983).  “This duty to exercise ‘good faith’ includes an obligation to view the situation as if there were no policy limits applicable to the claim, and to give equal consideration to the financial exposure of the insured.”  Id. at 387-88.  The supreme court has stated that

[t]he insurer’s duty of good faith is breached in situations in which the insured is clearly liable and the insurer refuses to settle within the policy limits and the decision not to settle within the policy limits is not made in good faith and is not based on reasonable grounds to believe that the amount demanded is excessive.


Id. at 388. 

It is also established law in Minnesota that “[a] mere mistake in judgment does not, standing alone, constitute bad faith.  No mortal has the gift of prophecy.”  Peterson v. Am. Fam. Mut. Ins. Co., 280 Minn. 482, 486, 160 N.W.2d 541, 544 (1968) (quotation omitted).  Components of this factor include whether the insurer gave equal consideration to the financial exposure of the insured and the insurer, Lange v. Fid. & Cas. Co., 290 Minn. 61, 65, 185 N.W.2d 881, 884 (1971); whether the insurer kept the insured informed about the proceedings, Short, 334 N.W.2d at 389; whether the insurer informed the insured of any potential conflicts of interest between the insured and the insurer; and whether the insurer informed the insured of the consequences of an excess verdict, Lange, 290 Minn. at 67-68, 185 N.W.2d at 886.

The district court determined as a matter of law that Grinnell Mutual breached its good-faith duty to Stockwell.  But on appeal, Grinnell Mutual raises multiple factual disputes concerning its conduct in this matter.

                        1.         Claim evaluation

            Both parties produced evidence to the district court regarding their respective evaluation of potential damages in this matter.  Respondents introduced evidence of five previous wrongful-death verdicts in Steele and Olmsted Counties that exceeded $1 million and the fact that Sandberg had defended four of them.  Thus, respondents argued that the previous verdicts put Grinnell Mutual on notice of the possible range of verdicts for a claim of this type and that their demand of $1 million was not excessive.   

Grinnell Mutual does not dispute that some previous verdicts on wrongful-death claims had exceeded $1 million.  But that does not end our analysis.  The record reflects that Grinnell Mutual utilizes an internal claims committee to evaluate the claims and establish settlement “reserves.”  The committee, which reviewed this claim on more than one occasion, was composed at various points of Wendy Munyon, Assistant General Counsel; Peter Lahn, counsel for Grinnell Mutual; Todd Smith, Claims Manager; W.B. McDonald, Senior Vice-President of Claims; and Kristin Borchert, legal-department counsel. 

Munyon, an attorney, joined Grinnell in 1983 after working in private practice.  Lahn, also an attorney, joined Grinnell Mutual in 1995, after working for State Farm Insurance.  Smith has been employed by Grinnell Mutual for 16 years.  In 1999, McDonald was responsible for non-litigated claims, and he established the procedures and policies for establishing reserves for all claims exceeding $200,000—both litigated and non-litigated.  McDonald has more than 30 years experience in claims handling and adjusting, directly and in a supervisory capacity. 

            The claims committee met twice on this case, once in October 1999 and once in November 2000.  In 1999, after assessing factual circumstances, the committee placed 70% liability on Stockwell and 30% liability on others.  The committee placed Grinnell Mutual’s reserves at $250,000 and approved a settlement range between $120,000 and $200,000.  At the November 2000 meeting, the committee increased the reserves to $500,000 for the Willert claim and $40,000 for the Zvorak claim.

The record also contains an affidavit from Thomas Eppenauer, who, over the course of 30 years, has held various positions, including Claims Vice-President with Farm Bureau Mutual Insurance Company, stating that Sandberg and Grinnell Mutual’s valuations of the claims in this instance were reasonable and that he would have valued the claims at a range of $400,000-$600,000. 

Regarding the issue of the previous wrongful-death verdicts in Steele and Olmsted Counties, Sandberg testified that he informed Lawrence Stockwell and Grinnell Mutual about the previous cases that he tried.  The record reflects that Sandberg estimated that he had tried 10-15 wrongful-death cases over his 31-year career.  Sandberg testified that he spoke with Lawrence Stockwell about how the instant case differed from his prior cases in an attempt to explain his opinions regarding the value of the instant claims.  Sandberg further testified that he relied on his years of experience practicing law in the area, as well as networking with other area lawyers, in order to arrive at his valuation of the claims.

Grinnell Mutual also submitted a post-verdict affidavit from attorney Owen Sorenson, which stated:

Valuation of wrongful death claims is not an exact science.  Each wrongful death claim turns significantly on the particular factual circumstances of the case.  As a result, efforts to evaluate a specific claim based upon other particular jury verdicts or results are not particularly useful. . . .  The question of whether one wrongful death verdict may have any relevance to evaluating a claim would be a professional judgment.


Finally, we note that prior to trial, respondents’ own economist estimated the value of Willert’s past and future economic loss at a figure between $132,000 and $225,000.  Based on this record, we conclude that there are genuine issues of material fact that preclude summary judgment on this issue.

                        2.         Consideration of corporate assets

            Respondents contend that by considering Stockwell’s assets, or lack thereof, when evaluating the claims, Grinnell Mutual did not act in good faith.  In support of that proposition, respondents cite Lange:

A judgment-proof insured suffers injury from a judgment against him in excess of policy limits because such a judgment will potentially impair his credit, place a cloud on the title to his exempt estate, impair his ability to successfully apply for loans, and may eventually require him to go through bankruptcy.  Further, if the rule were that a judgment-proof insured suffers no injury from an excess judgment, an insurer’s responsiveness to its well-established duty to give equal consideration to an insolvent insured’s interests would tend to become meaningless.


290 Minn. at 66-67, 180 N.W.2d at 885.

            Respondents point to Lahn’s deposition as proof as a matter of law that Grinnell Mutual improperly considered Stockwell’s assets.  Lahn testified that he asked Sandberg about Stockwell’s assets because he thought that if Stockwell had no assets, it might insulate it from liability.  Lahn stated that he considered it only because Sandberg had previously told him that Lawrence Stockwell was selling, or had sold, all of the corporation’s assets and was in the process of dissolving the corporation. 

According to Lawrence Stockwell’s testimony, he sold all of the corporation’s equipment in 2000 because his son, Steve Stockwell, did not wish to buy out his interest in the corporation.  Lawrence Stockwell then informed Sandberg that the corporation was dissolved and that there were no assets.

Based on Lahn’s testimony that he considered Stockwell’s lack of assets as only one factor in his decision to proceed to trial, Munyon’s testimony that she never considered Stockwell’s assets or lack thereof when evaluating these claims and that to do so would be inappropriate, and Sorenson’s affidavit stating that “[i]t would be reasonable to consider a client’s financial situation as one of the factors in discussing and making recommendations on settlement offers and demands,” we conclude that there are genuine issues of material fact that preclude summary judgment on this issue.

                        3.         Communication of settlement offers

The supreme court in Short stated that when making good-faith determinations, “an important question is whether the insurer informed the insured of all proceedings, including communication of settlement offers.”  334 N.W.2d at 389 (emphasis omitted) (quotation omitted).   

Throughout Lawrence Stockwell’s post-verdict deposition, he testified that Sandberg never kept him informed of the settlement offers and counteroffers, never informed him of what the policy limits were, never sufficiently explained to him Sandberg’s reasoning for doing certain things, and saw virtually none of the correspondence from Grinnell Mutual and Sandberg.  Lawrence Stockwell further testified that he did not want to admit liability because he did not believe he was solely responsible for the accident, and he stated that Sandberg did not tell him why it was beneficial to admit liability, other than that the trial would be over more quickly as a result.  In addition, Lawrence Stockwell stated that he wished to settle the claim for respondents’ settlement demand of the $1 million policy limits but that Sandberg just kept ensuring him that “this will no way go to a million dollars.” 

But the record also evidences that Grinnell Mutual instructed Sandberg, at the time he was retained to represent Stockwell, that “[b]ecause of the potential excess exposure, it is essential that the insured be kept informed of all settlement negotiations.  I ask that whenever a settlement demand is received, you inform the insured of such demand and your intended action, and forward a copy of that letter to me.”

Sandberg testified that he had a conversation with respondents’ attorneys, where he “floated” a settlement range of $500,000-$750,000, to see if respondents would be receptive.  It was not a formal settlement offer but, rather, an attempt to gauge respondents’ willingness to negotiate.  Based on respondents’ reaction, Sandberg testified that he informed Grinnell Mutual and Lawrence Stockwell that respondents indicated that they would accept nothing less than $1 million. 

Based on the disputed state of the record, we conclude that there are genuine issues of material fact that preclude summary judgment.

B.        Did Grinnell Mutual breach its duty of good faith by not materially informing Stockwell of a potential conflict of interest?


The supreme court clearly articulated the intricacies of insurance defense and the potential for conflicts in Pine Island Farmers Coop. v. Erstad & Reimer, when it stated that “[t]he problems caused by conflicts of interest are particularly acute in the insurance defense context, where the potential for conflict exists in every case and actual conflicts are frequent.”  649 N.W.2d 444, 450 (Minn. 2002) (emphasis added).  To remedy this potential for conflicts of interest, the supreme court held that defense counsel hired by an insurer to represent the interests of the insured, “has an attorney-client relationship with the insured, [and] defense counsel owes a duty of undivided loyalty to the insured and must faithfully represent the insured’s interests.”  Id. at 449. 

            Minnesota law does not preclude defense counsel from representing the insurer as well as the insured, but, in order to do so, there must be an “absence of a conflict of interest between [the] insured and insurer and . . . [the] insured [must] expressly consent[] to the dual representation after consultation with counsel.”  Id. at 451 (citing Shelby Mut. Ins. Co. v. Kleman, 255 N.W.2d 231, 235 (Minn. 1977)).  Furthermore, “[w]ithout consultation and the express consent of the insured, the insured remains defense counsel’s sole client.”  Id. (emphasis added).


an attorney retained by an insurer to defend its insured, as long as he represents the insured, is under the same obligations of fidelity and good faith as if the insured had retained the attorney personally.  The relationship of client and attorney exists the same in one case as in the other.


Id. at 449 (quoting Crum v. Anchor Cas. Co., 264 Minn. 378, 391-92, 119 N.W.2d 703, 712 (1963)).

            Here, Sandberg represented Stockwell and not Grinnell Mutual.  The law presumes that Sandberg represented Stockwell faithfully, in accordance with the Rules of Professional Conduct, and with Stockwell’s sole interest in mind.  The district court found otherwise, stating that “Grinnell Mutual considered Sandberg its ‘instrument,’” seemingly finding that Sandberg lacked independence in his judgment and with respect to his loyalty to Stockwell.  But that finding is not borne out by the record. 

To the contrary, Munyon testified that “Sandberg would be the instrument of our evaluating the claim as the trial progressed,” referring to whether a claims agent of Grinnell Mutual attended the trial in order to continue to evaluate the potential damages award as trial progressed.  Further, Eppenauer stated in his affidavit that “it would not be the usual practice to have claims personnel attend a trial under the circumstances of the underlying case.”

            Grinnell Mutual sent Lawrence Stockwell three letters providing him with certain information, including information about potential conflicts of interest.  Each of the letters stated the following:

It is possible that a judgment or judgments could be entered in excess of your $1,000,000 liability limits.  If this were to happen, Stockwell Construction, Inc. would be responsible for any portion of the judgment that exceeded the limits of the policy.  To this extent, Stockwell Construction, Inc. has an uninsured interest and an unprotected liability.  Under these circumstances, you may desire to employ a personal attorney, at your expense, to represent this uninsured and individual interest, although you are not required to do so.


            The district court found that because Grinnell Mutual’s letters did not use the phrase “conflict of interest,” Grinnell Mutual breached its duty of good faith.  It is undisputed that Grinnell Mutual did not include those words in the letters sent to Lawrence Stockwell.  But there is no Minnesota caselaw, cited by either respondent or the district court, that suggests that the phrase “conflict of interest” must be used verbatim or that the failure to use it constitutes bad faith.  Taking the evidence in a light most favorable to Grinnell Mutual, we conclude that there is a genuine issue of material fact as to whether Grinnell Mutual sufficiently advised Lawrence Stockwell of the existence of a potential conflict of interest.

C.        Did Grinnell Mutual breach its duty of good faith by failing to adequately inform Stockwell of the potential for, and consequences of, an excess verdict?


            The supreme court in Lange stated that the


obligation of counsel retained by the insurer is not fulfilled merely by an explanation which amounts to no more than assurances to the insured that his interests are being zealously and faithfully protected by experienced counsel, but rather by laying bare the truth—not only of the potential consequences of a deficiency judgment but of the potential conflict between the interests of the carrier and the insured—in the manner in which the insured would be advised if he consulted private counsel.


290 Minn. at 68, 182 N.W.2d at 886.


            We note that the procedural posture in Lange was quite different than the posture of this case.  In Lange, there was already a verdict that was $4,000 in excess of the insured’s policy limits.  Id. at 63, 180 N.W.2d at 883.  The plaintiff was willing to enter into a post-verdict settlement whereby it would accept the policy limits as full satisfaction of his claim, but the insurer refused to pay the policy limits of $25,000 and settle the claim.  Id.  Consequently, the court held that the insurer acted in bad faith by not settling the claim post-verdict for the policy limits.  Id. at 69, 180 N.W.2d at 886.

            Mike Stockwell testified in his post-verdict deposition that he understood that the three letters Grinnell Mutual sent communicated that there was a potential for a jury verdict that was in excess of the policy limits and that if that occurred, Stockwell would be responsible for that amount.

            In his affidavit, Eppenauer averred that the three letters that Grinnell Mutual sent to Stockwell advising it of the potential for, and consequences of, an excess judgment was “consistent with the expected industry standard in communicating with an insured.”

Taking the evidence in a light most favorable to Grinnell Mutual, the letters from Grinnell Mutual, Mike Stockwell’s testimony, and Eppenauer’s affidavit create a genuine issue of material fact regarding whether the information provided to Lawrence Stockwell and Mike Stockwell was sufficient to inform them of the risk and consequences of an excess verdict.

D.        Did Grinnell Mutual breach its duty of good faith by failing to inform Stockwell of the value of a bad-faith claim?


            The district court found that “Sandberg refused to advise Stockwell that it had an asset in the form of a bad faith claim that might relieve the deficiency judgment.”  Neither party contends that Stockwell was unaware of this, and, in fact, even respondents acknowledge that Sandberg did forward their letters to Stockwell.    

But respondents assert that, as a result of this bad-faith claim, a conflict of interest arose between Stockwell, Sandberg, and Grinnell Mutual, partly as a result of Grinnell Mutual’s decision to continue paying for Sandberg’s representation after the verdict as a courtesy to Stockwell.  Respondents state that Sandberg should have required Stockwell to retain an independent attorney who, respondents assert, would have advised Stockwell to assign the bad-faith claim.  The district court agreed. 

            Both Lawrence Stockwell and Mike Stockwell testified, in their post-verdict depositions, that Sandberg never informed them of the value of a bad-faith claim and that Stockwell could assign the claim to respondents for full satisfaction of the excess judgment.  But Sandberg contends that he advised both Lawrence and MikeStockwell of the bad-faith claim and that respondents were requesting that Stockwell assign the claim to them for satisfaction of the excess judgment.  Sandberg testified that neither Lawrence nor MikeStockwell wished to voluntarily assign the claim because they had negative feelings toward respondents’ attorneys.  And Sandberg sent copies to Lawrence Stockwell of respondents’ letter alleging a conflict of interest regarding the bad-faith claim and his post-verdict representation of Stockwell.  Sandberg also sent Lawrence Stockwell copies of his replies to respondents’ letters stating Sandberg’s opinion that no conflict existed.  Thus, Lawrence Stockwell was aware of the differences in opinion as to this issue.

            The district court further found that “Sandberg encouraged Michael Stockwell to dissolve the company.”  There is no support in the record for the proposition that Sandberg encouraged Lawrence or Mike Stockwell to dissolve the corporation or had anything to with the dissolution.  In fact, Lawrence Stockwell testified that he had planned his retirement date years before the instant litigation and had sold the company’s assets in 2000.  Some months later, after Lawrence Stockwell obtained health insurance through a new employer, Mike Stockwell filed the articles of dissolution with the Secretary of State and dissolved the corporation.  Mike Stockwell testified that it was his understanding that it would be beneficial if the corporation did not exist, but that no one told him to dissolve it.  There is no evidence that Sandberg or Grinnell Mutual had anything to do with the dissolution. 

Because it is disputed whether Grinnell Mutual adequately informed Lawrence Stockwell regarding assigning the bad-faith claim and the alleged conflict of interest, taking the evidence in a light most favorable to Grinnell Mutual, a genuine issue of material fact exists, making summary judgment inappropriate.

            Affirmed in part, reversed in part, and remanded.