This opinion will be unpublished and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
Innsbruck Village Association,
Stock Roofing, Inc.,
Transcontinental Insurance Company,
Filed December 26, 2006
Hennepin County District Court
File No. CT 03-10042
David J. McGee, Debra M. Newel, Natalie R. Walz, Thomsen & Nybeck, P.A., 3300 Edinborough Way, Suite 600, Edina, MN 55435 (for appellant)
John R. Keena, Hullmuth & Johnson PLLC, 10400 Viking Drive, Suite 560, Eden Prairie MN 55344 (for respondent Stock Roofing, Inc.)
William Hart, Stacy A. Broman, Meagher & Geer, P.L.L.P., P.A., 33 South Sixth Street, Suite 4400, Minneapolis, MN 55402 (for respondents Transcontinental Insurance Co.)
Considered and decided by Klaphake, Presiding Judge, Worke, Judge, and Ross, Judge.
Because we conclude that Stock Roofing violated its duty of cooperation by entering into a Miller-Shugart settlement when respondents had not fully denied coverage, causing the settlement to be unenforceable, we affirm.
court makes a de novo review of the district court’s interpretation of case law.
of Hennepin v. Hernandez, 554 N.W.2d 618, 619 (
insured is permitted to unilaterally settle a claim covered by an insurance
policy without violating the insured’s duty to cooperate, if the insurer is
denying all liability for coverage. Miller v. Shugart, 316 N.W.2d 729,
authentic Miller-Shugart settlement, the insurer has denied all coverage[.]” Buysse
v. Baumann-Furrie & Co., 481 N.W.2d 27, 29 (
Here, respondents admitted in their reservation of rights letter that the policies covered negligence resulting in water damage, but simultaneously denied coverage for the breach of warranty and contract claims. At the same time, respondents stated that they were not waiving their right to deny coverage on “other grounds” or to clarify coverage issues with a declaratory judgment action. Respondents subsequently brought a declaratory judgment action in federal district court, asking that the court declare respondents were not liable for some or all of the damages because appellant’s claims did not fall within the scope of the policies or were barred by policy exclusions. Appellant asserts that this constitutes a complete denial of coverage. But respondents never denied their responsibility to cover Stock Roofing’s acts of negligence that were not outside the scope of the policies or otherwise excluded by the policies, and participated in settlement discussions with appellant and Stock Roofing.
purpose of Miller-Shugart settlements is to permit an insured to enter into a
favorable settlement while the issue of coverage is in doubt. See
Miller, 316 N.W.2d at 733-34. But a
Miller-Shugart settlement is not intended as a vehicle to shift liability for
all acts, covered or not, onto the insurer.
See Buysse v. Baumann-Furrie &
Co., 448 N.W.2d 865, 873 (
When a Miller-Shugartsettlement causes a breach of the
cooperation clause that is material and results in prejudice to the insurer,
the insurer can void coverage, even when the settlement does not bind the
insurer or prevent it from contesting coverage.
Steen, 442 N.W.2d at 162. An insurer can still successfully contest
coverage under a policy, even after a Miller-Shugart settlement.
The insured, Stock Roofing, breached its duty of cooperation and caused prejudice to respondents by entering into a Miller-Shugart settlement when respondents had not denied all coverage, and by stipulating that the basis for all damages was negligence covered under the policies. We conclude, therefore, that the Miller-Shugart settlement was unenforceable, and that the district court did not err by denying appellant’s request to serve a supplemental garnishment summons and complaint.