This opinion will be unpublished and

may not be cited except as provided by

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






Continental Casualty Co.,





Duckson-Carlson, LLC,



Ralph Mitchell,



Filed April 25, 2006


Randall, Judge


HennepinCounty District Court

File No. DJ 04-009851


Ralph V. Mitchell, Jr., Lapp, Libra, Thomson, Stoebner & Pusch, Chartered, One Financial Plaza, Suite 2500, 120 South Sixth Street, Minneapolis, MN 55402 (pro se attorney); and


Michael Thomas Etmund, The Gurstel Law Firm, P.A., 401 North Third Street, Suite 590, Minneapolis, MN 55401 (for respondent).

            Considered and decided by Minge, Presiding Judge, Randall, Judge, and Collins, Judge.*


U N P U B L I S H E D   O P I N I O N


This is an appeal from summary judgment finding appellant liable for $15,000 to respondent, the professional liability insurer of appellant’s former law firm, which sum is the amount of the deductible under the policy.  The insurer had defended and settled a lawsuit against appellant and his former law firm for more than the amount of the deductible.  Appellant challenges this determination, arguing that (a) a member of a limited liability company is not liable for its debts absent a written guaranty signed by the member; (b) appellant is not a party to the insurance contract; (c) there is no clear exception to the general rule of non-liability; (d) appellant did not implicitly agree to be liable on the policy; and (e) there was no evidence of malpractice.  We affirm.


Ralph Mitchell, appellant, joined the law firm of Duckson-Carlson, LLC, (Duckson) as a member/partner in August 1999.  Duckson provided professional liability insurance coverage to all of its attorneys through a policy issued by Continental Casualty Company, respondent. 

            The professional liability insurance policy contained the following language:


A.                 Coverage

The Company agrees to pay on behalf of the Insured all sums in excess of the deductible that the Insured shall become legally obligated to pay as damages and claim expenses because of a claim that is both first made against the Insured and reported in writing to the Company during the policy period by reason of an act or omission in the performance of legal services by the Insured or by any person for whom the insured is legally liable, . . . .

. . . .


II.                 DEFINITIONS


F.         “Insured” means the Named Insured and the persons or entities described below:


1.         any lawyer, partnership, professional corporation, professional association, limited liability corporation or limited liability partnership who is or becomes a partner, officer, director, stockholder-employee, associate, manager, member or salaried employee of the Named Insured during the policy period shown in the Declarations.            


2.         any lawyer previously affiliated with the Named Insured or a predecessor firm as a partner, officer, director, stockholder-employee, associate, manager, member or salaried employee but only for a legal services performed on behalf of the Named Insured or a predecessor firm at the time of such affiliation . . . .

                                    . . . .


I.                    “Named Insured” means the person and entities designated in the Declarations.


An endorsement to the policy states:


B.                 Deductible-Each Claim


The deductible amount stated in the Declarations for “each claim” applies to each and every claim made against an Insured.  It shall be paid by the Named Insured and applies to the payment of damages and claims expenses for claims both first made against the Insured and reported to the Company in writing during the policy period.  In the event the Named Insured fails to pay, the deductible shall be paid jointly and severally by all Insureds . . .


The deductible referred to in the policy is $15,000. 

            When appellant began working at Duckson, he was not given a copy of the professional liability insurance policy nor did he ask to see a copy of the policy.  He never read or signed the policy. 

            During his employment with Duckson, appellant and Duckson were named as defendants in a malpractice suit.  Respondent hired counsel and provided representation to both appellant and Duckson.  The case settled prior to trial.  As a result of the settlement, respondent paid in excess of the deductible.  Duckson eventually dissolved.     

              Respondent moved for summary judgment, arguing that the $15,000 deductible under the policy was due and owning, jointly and severely by appellant and Duckson (appellant agrees he has an indemnity/contribution claim against his defunct firm).

            The district court found that appellant was an insured as defined in the policy and that he was not shielded from liability under either Minn. Stat. §§ 322B or 319B (2004).  The district court reasoned that although limited liability company (LLC) provisions are generally meant to shield members from liability for the debts, obligations or liabilities of the LLC, this case presented a clear exception to that general provision.  The district court found that appellant was sued for alleged malpractice and he knowingly requested and benefited from the liability policy and its provision for costs of defense issued by respondent.  The district court granted respondent’s motion for summary judgment and found that appellant was responsible for the $15,000 deductible plus interest along with costs and disbursements.  This appeal followed.

            Appellant argues that he is not liable for the debts of Duckson because Minn. Stat. § 322B.303 provides that a member of a limited liability company is not liable for the debts of the company merely because of his status.  He argues he never personally agreed to guaranty the debt of Duckson, was not a party to the insurance contract, that respondent has no tort (because there was no verdict of malpractice) or subrogation claim against him, and that there is no “clear exception” to the general non-liability rule regarding limited liability companies.            



Appellant’s argument is that he is not liable for the $15,000 deductible because under Minn. Stat. § 322B.303, subd. 1 (2004), a member “of a limited liability company is not, merely on account of this status, personally liable for the acts, debts, liabilities, or obligations of the limited liability company.”  Appellant states he never agreed to guaranty any debts of Duckson, either orally or in writing.  Although there is a written insurance contract, he argues he was not a party to the contract.  Respondent argues that appellant was a party to the insurance contract even though he did not sign the policy.  

An insurance policy is a contract which sets forth terms establishing the rights and obligations of the insurer and insured.  London, Anderson & Hoeft, Ltd. v. Minnesota Lawyers Mut. Ins. Co. (London), 530 N.W.2d 576, 577 (Minn. App. 1995).  This court must construe the language of the policy, considering it as a whole, according to the terms the parties have used, giving the language its ordinary and usual meaning to ensure that the parties’ intentions stay intact.  Dairyland Ins. Co. v. Implement Dealers Ins. Co., 294 Minn. 236, 244-45, 199 N.W.2d 806, 811 (1972).  “[S]o long as coverage required by law is not omitted and policy provisions do not contravene applicable statutes, the extent of the insurer’s liability is governed by the contract entered into.”  American Fam. Mut. Ins. Co. v. Ryan, 330 N.W.2d 113, 115 (Minn. 1983).  The construction of an insurance policy is the process of determining the legal effect of the policy’s terms, while the interpretation of a policy is the process of ascertaining the meaning of the words used.  London, 530 N.W.2d at 577.  Both construction and interpretation are ordinarily questions of law and this court is not bound by and need not give deference to the trial court’s construction and interpretation.  Id.; see Frost-Benco Elec. Ass’n v. Minnesota Public Utils. Comm’n, 358 N.W.2d 639, 642 (Minn. 1984) (holding that where the issue before the court is legal as opposed to factual, “an appellate court need not give deference to a trial court’s decision”).

             Although appellant did not “personally” guaranty the debts of Duckson by entering into a contract stating that he was liable for the debts of Duckson, we agree with the district court that appellant is liable under the insurance policy for the deductible. 

            In London, this court held that an “attorney who is sued for malpractice remains personally liable under [the professional corporation’s] insurance policy for the deductible arising out of [respondent’s] defense of the malpractice lawsuit.”  530 N.W.2d at 579 (in so holding, the court held that the insurance policy “insofar as [it] purport[s] to hold employees and shareholders of a professional corporation not personally named in the malpractice suit liable for the deductible, is of no validity”).

            Appellant argues that the holding in London has been overruled by the repeal of Minn. Stat. § 319A.10 (2004) and the enactment of Minn. Stat. § 319B.06 (2004) and therefore he is not liable under the insurance policy.  We are not persuaded by appellant’s argument.  The general comments to Minn. Stat. § 319B.06 specifically state, “[Minn. Stat. § 319B.06, subd. 3] addresses the questions of liability . . . and intends no substantive change from Minn. Stat. § 319A.10.  Minn. Stat. Ann. § 319B.06 general comm. (West 2004).  The subdivision does, however, use a different approach in the hope of clearly producing the same result.”  Id.  (Emphasis added).  The comments specifically discuss the decision in London,explaining that the holding was a correct interpretation of the law.  The comments further explain that “Minn. Stat. § 319A.10 was never intended to go so far. . . .”  Id.  It is apparent that the comments intended to add weight to the Londonholding that members of a professional corporation can not be held liable for malpractice if they are not personally named in the suit.  The comments continue to clarify the Londondecision by explaining that a member can assume the debts of the professional corporation by contract “for some or all of the organizations debts.”  We interpret this statement to mean that each member must assume by contract personal liability for instances where they are not personally namedin a malpractice suit.   For instances where they are personally named in a malpractice suit, as here, no such contract is required.  This interpretation will ensure that Minn. Stat. § 319B.06, subd. 3 produces the same result as repealed Minn. Stat. § 319A.10.           

            The district court found that although LLC provisions are generally meant to shield members from liability for debts, obligations, and liabilities of the LLC, appellant was liable under a “clear exception” to this general provision. 

This case invites equitable estoppel.  Equitable estoppel is defined as the effect of a party’s voluntary conduct in which the party is absolutely precluded from asserting property, contractual, or remedial rights that might otherwise have existed, as against another person who has relied in good faith on the party’s conduct, who has been led by that conduct to change his position for the worse, and who acquires some corresponding property, contractual, or remedial right.  Moberg v. Commercial Credit Corp., 230 Minn. 469, 475-76, 42 N.W.2d 54, 58 (1950)  

Appellant intentionally took full advantage of respondent’s malpractice insurance coverage (why not – appellant knew that as a member of his firm that even though he did not personally negotiate the policy and sign off on it he was covered if someone sued him for malpractice – he expected that benefit from his law firm, and received it).  Appellant knew that he was required to have malpractice insurance and that respondent was providing him with the required insurance so that he could practice law.  Up until respondent sought reimbursement directly from appellant for the deductible (because Duckson had been dissolved), appellant took advantage of respondent’s malpractice coverage.  It is unequivocally safe to say that during the suit alleging malpractice appellant depended, expected, and relied upon respondent to provide him with his safety net of malpractice insurance.  He can not now claim that he “was not a party” to the insurance contract, and can have its benefits but no responsibility for the deductible. 

By accepting employment with Duckson, appellant was provided with and took advantage of respondent’s malpractice insurance coverage.  Respondent rightfully assumes that if it had not provided appellant with malpractice insurance during his malpractice suit, the case before us would be appellant suing respondent for failure to provide coverage. 

No professional policy that we know of withholds coverage unless the insured goes out on his own and tries his own case and loses!  One of the biggest benefits to insurance coverage (which all applicants for coverage know well) is the ability to tender the defense and its concomitant costs to your insurer even when the alleged lawsuit turns out to be as baseless and unfair as insureds usually start out telling their insurer that it is.  The insurance contract contains as an essential element the safety net of the costs of defense which are there for the insured whether the case is settled or tried and won or tried and lost.  It is an oxymoron for appellant to argue that he is not responsible for his malpractice liability insurance premium, because it was settled before trial and, thus, with no verdict of negligence/malpractice.

Coverage under the policy is initiated upon any claim of malpractice, not on a determination of liability.  The policy states:  “[Respondent] agrees to pay on behalf of Insured all sums in excess of the deductible that the Insured shall become legally obligated to pay as damages and claim expenses because of a claim that is both first made against the Insured . . . .”  (emphasis added).  In regards to deductions, the policy states that “[t]he deductible amount . . . is the total amount of the Insured’s liability for all claims and applies to the payment of damages and claim expenses for claims first made . . . .”  (emphasis added).  The policy defines damages as “judgments, awards and settlements . . .” and defines claim expenses as “. . . fees charged by attorneys designated by [respondent]. . .” and “all other reasonable necessary fees, costs and expenses resulting in the investigation, adjustment, defense and appeal of a claim . . . .”  The policy never mentions that liability must be determined before coverage under the policy takes effect.  No policy that mentions that would ever do anything but gather dust on the shelf and eventually find its way into an antiquities museum for legal relics.

Unfortunately for appellant, that is an unintended result and is not the fault of appellant.  But it cannot be the fault of respondent that undertook its responsibility to cover appellant, at appellant’s and his law firm’s request.  Someone has to pay.  See appellant.  With candor, appellant admits that he has a third-party action against his now dissolved former law firm.  At oral argument, appellant indicated that he was aware of that protection, and had already availed himself of that remedy in an unrelated district court lawsuit.  That his former law firm may be judgment-proof does not relieve appellant of his legal responsibility to respondent.

Because Duckson, the Named Insured, is no longer viable, the deduction liability falls on appellant. 


*  Retired judge of the district court, serving as judge of the Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.