This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
Fortis Insurance Company,
Schiller Insurance Agency, et al.,
Stearns County District Court
File No. C805307
Doreen A. Mohs, Diane B. Bratvold, Rider Bennett, L.L.P, 33 South Sixth Street, Suite 4900, Minneapolis, MN 55402 (for respondent Fortis)
Clarance E. Hagglund, William C. Weeding, Hagglund Law
Considered and decided by Randall, Presiding Judge; Willis, Judge; and Stoneburner, Judge.
Appellants, an insurance agent and agency, challenge summary judgment enforcing an indemnity agreement between appellants and respondent insurer for the amount of a settlement paid by respondent on an insured’s claims against the agent, agency, and insurer. Appellants argue that (a) the settlement and release between the insured and insurer resolved all issues; (b) the district court misapplied controlling law; (c) the settlement was collusive; (d) the insurer failed to properly defend the case; (e) the indemnity agreement between appellants and respondent was a one-sided contract of adhesion; (f) appellants were free of wrong doing and were entitled to attorney fees; (g) the comparative fault of the insured and insurer raises material fact issues to be resolved at trial, and (h) the insurer breached the insurance contract and should be estopped from denying coverage. We affirm.
When appellants Steve Schiller and
the Schiller Insurance Agency (Schiller) became a general agent for respondent
Fortis Insurance, the parties entered into an agreement that provided that
Schiller “agree[s] to indemnify and hold [Fortis] harmless for any and all
claims, expenses, costs, and damages which may be asserted by any third party
. . . against [Fortis] arising from [Schiller’s] action or inaction.” Under the agreement, Schiller was responsible
to personally “ask all questions and correctly record all answers on all
applications for insurance [Schiller] personally completes . . . .” A choice-of-laws provision states that
Wendell Daluge met with Schiller to buy a short-term medical policy. At the time, Daluge was being treated for diabetes, but “No” was indicated on the insurance application in response to a question asking if Daluge had “received any medical consultation, diagnosis, or treatment, including medication for . . . diabetes . . . [.]” Schiller “field issued” a policy to Daluge. Coverage would not have been issued if the application indicated a “Yes” answer to the prior health questions.
About two months after the policy was issued, Daluge injured his hand in a snow-blower accident and submitted a claim to Fortis. Fortis made some payments on claims related to this injury, but then received a hospital bill for Daluge that included a secondary diagnosis of diabetes, triggering an investigation by Fortis. Daluge told Fortis that he had informed Schiller of his diabetes at the time of the application. Schiller could not recall the details of taking Daluge’s application and responded to Fortis’s inquiry that he could not dispute Daluge’s claim. Schiller later stated in his deposition that although he could not recall much about the application process, he believed that Daluge had picked up an application and returned it completed to Schiller. Schiller admitted that he had not reviewed the questions and answers on the application with Daluge. After Fortis concluded that the question on the application had been answered incorrectly, Fortis rescinded coverage based on misrepresentation.
Daluge sued Schiller and Fortis, asserting that Schiller was negligent by failing to accurately complete the application and that Fortis was responsible for Schiller’s negligence under the doctrine of respondeat superior. Daluge also asserted claims of misrepresentation against Schiller and breach of contract against Fortis. In an amended complaint, Daluge asserted an alternative claim for promissory estoppel against both Schiller and Fortis. Schiller denied liability and asserted as an affirmative defense that Daluge’s actions were the cause of any loss. Schiller and Fortis cross-claimed against each other, and each tendered its defense to the other, Fortis under the indemnity agreement and Schiller under common-law indemnity. Each denied the other’s tender of defense.
After mediation with all parties failed to result in settlement, Fortis entered into settlement discussions with Daluge. Fortis settled with Daluge, reserving its claim for indemnity against Schiller. Fortis then moved for summary judgment on its indemnity claim against Schiller and for dismissal of Schiller’s claims against Fortis. The district court granted summary judgment to Fortis on the indemnity agreement, concluding that the agreement required indemnity without a formal finding of liability, that each allegation in Daluge’s complaint could be traced to Schiller’s acts in the application process, and that Schiller failed to raise a fact issue regarding reasonableness of the settlement. The district court denied Fortis’s claim for attorney fees and, after further briefing by the parties, dismissed Schiller’s claims against Fortis. Schiller appeals summary judgment against him, and Fortis filed a notice of review regarding denial of attorney fees.
“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 (
I. Application of indemnity provision
Most of Schiller’s arguments on appeal are premised on his position that the indemnity provision of the agreement is not triggered until there has been a formal determination that Schiller caused any loss asserted by Daluge against Fortis. But the district court held that “[i]t is clear from the indemnity provision that [Schiller’s] duty to indemnify was not just for a formal finding of liability. It includes allegations and claims of harm. If it did not, the references to ‘claims’ and ‘asserted’ would make no sense.” We agree and conclude that the district court did not err by interpreting the plain language of the agreement to apply to claims asserted and not simply to determinations of liability arising from Schiller’s actions or inaction.
Additionally, based on the record before it at the time of summary judgment, the district court concluded that each of Daluge’s claims “can be traced to the process of taking [Daluge’s] information for the insurance policy application—an act performed by Schiller.” Schiller argues that the record does not support this conclusion, referencing his expert’s affidavit stating that Fortis’s improper underwriting practices, rather than any act of Schiller, was the “proximate cause” of Daluge’s damages. But, as stated above, a finding of proximate cause is not what triggers the indemnity provision. We conclude that the district court did not err in concluding that there are no genuine issues of material fact because all of Daluge’s claims stem from the application, for which Schiller was responsible under the agency agreement, and therefore arose out of Schiller’s actions or inactions.
II. Effect of settlement between Daluge and Fortis on Schiller’s duty to indemnify
Schiller argues that the settlement agreement between Daluge and Fortis precludes Fortis from pursuing indemnity against Schiller. Fortis argues that we should not address this issue because Schiller did not raise it in the district court until after the district court had granted summary judgment to Fortis on the indemnity issue.
The record confirms that Schiller first raised this issue in supplemental briefing requested by the court after it had granted summary judgment on Fortis’s indemnity claim. The issue was outside the scope of the supplemental briefing requested by the district court and was not addressed by the district court.
There is merit to Fortis’s claim
that because Schiller did not timely submit this issue to the district court,
we should not address it. See Thiele v. Stich, 425 N.W.2d 580, 582
III. Fortis’s entitlement to indemnity for amounts paid in settlement
Schiller argues that the district court erred in requiring Schiller to indemnify Fortis for the amount Fortis paid to settle Daluge’s claims. Again, Schiller’s primary argument is that the indemnity clause does not apply until there is a determination of whose conduct caused Daluge’s claims to be asserted against Fortis and that such a determination cannot occur due to the settlement. Schiller asserts that it is “axiomatic that Schiller cannot be made to pay indemnity to Fortis without an opportunity to defend against Daluge’s claims in order to prove that he was not at fault[.]”
On appeal, Schiller asserts that the
district court’s belief that Schiller refused to participate in settlement
efforts is “mistaken.” Schiller asserts that
Fortis and Daluge settled without Schiller’s knowledge or approval and that
Schiller did not see the release until it was fully executed. Fortis does not dispute that Schiller did not
see the release until it was fully executed, but
A. Evidence of Schiller’s potential liability
Based on the record of Schiller’s
limited recollection of the application process, Daluge’s detailed recollection
that he told Schiller during the application process that he had diabetes, and
Fortis’s expert affidavit, the district court concluded that Fortis
successfully established Schiller’s potential liability. The
B. Reasonableness of the settlement
Citing Deminsky v. Arlington Plastics Mach., 657 N.W.2d 411, 427 (
IV. Schiller’s additional claims
Schiller argues for the first time
on appeal that the agency agreement was an adhesion contract. Appellate courts “must generally consider only
those issues that the record shows were presented and considered by the trial
court in deciding the matter before it.”
Thiele, 425 N.W.2d at 582 (
Schiller also claims a violation of due process and equal protection, collusion, and “unlitigated defense.” Some of these claims were raised in Schiller’s supplemental brief to the court after summary judgment was granted on the indemnity provision, but none was raised before summary judgment was granted. Therefore, none of these claims is properly before this court. See Thiele, 425 N.W.2d at 582.
V. Schiller’s common law indemnification claim against Fortis
Schiller argues the district court erred in dismissing his common law indemnity claim against Fortis. “Recovery under a contract providing for indemnity obviates any right to recovery under the common law theory of implied indemnity since by such an express contract the parties have already themselves determined how and under what circumstances losses shall be allocated.” Rich Products Corp. v. Kemutec, Inc., 66 F. Supp. 2d 937, 981-82 (E.D. Wis. 1999), aff’d, 241 F.3d 915, 919 (7th Cir. 2001) (quotation omitted). In this case, the agreement between Schiller and Fortis explicitly assigns a right of indemnification to Fortis, and this provision obviates Schiller’s common-law indemnity claim. Furthermore, such a claim would arise only if Daluge recovered from Schiller, but Daluge recovered only from Fortis, not Schiller, so Schiller has no indemnity claim. Because Schiller has no common-law indemnity claim, his claim for attorney fees under common-law indemnity is without merit.
VI. Denial of Fortis’s claim for attorney fees
Fortis filed a notice of review
arguing that the district court erred in determining that Fortis is not
entitled to attorney fees under the indemnity provision of the agency
agreement. Generally, “attorney fees are
not allowable unless a statute or an agreement of the parties provides
otherwise.” Meas v. Young, 417 N.W.2d 55, 57 (
Fortis argues that the provision
that Schiller “indemnify and hold [Fortis] harmless for any and all claims,
expenses, costs and damages” includes attorney fees. But absent a specific reference to attorney
fees, the language is, at best, ambiguous as to whether attorney fees and costs
are included. Ambiguous language in a
contract is construed against the drafter of the contract, in this case,
Fortis also argues that it is
entitled to relief under
Fortis also argues that it is
entitled to attorney fees under an equitable exception. Although statutory and contract
interpretation are questions of law reviewed de novo, equitable determinations
of attorney fees are reviewed for abuse of discretion. See
Becker v. Alloy Hardfacing & Eng'g
Co., 401 N.W.2d 655, 661 (
 The supplemental briefs were to address only the issue of Schiller’s common law indemnity cross-claim against Fortis.
 Schiller argues that he was not required to accept Fortis’s tender of defense because he was, in fact, defending Fortis for all of the claims against Fortis that related to his conduct. Schiller cites no authority for the proposition that because he was defending the claims against him, he was excused from accepting Fortis’s tender of defense, and we fail to see the relevance of this argument to the application of Barrons.
 Schiller agues that the possible comparative fault of Fortis and Daluge would affect his liability, but under Barrons, Fortis only needs to show potential liability.