This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
IN COURT OF APPEALS
Jared W. Sachs, et al.,
Illinois Farmers Insurance Company,
Filed July 31, 2007
Hennepin County District Court
File No. 27-CV-05-011703
Ken D. Schueler, Dunlap & Seeger, P.A., 206 South
William M. Bradt, Hansen, Dordell, Bradt, Odlaug & Bradt, P.L.L.P., 3900 Northwoods Drive, Suite 250, St. Paul, MN 55112-6973 (for respondent)
Considered and decided by Halbrooks, Presiding Judge; Lansing, Judge; and Hudson, Judge.
U N P U B L I S H E D O P I N I O N
Jared Sachs, John Bauer, Ralph Stoeffel d/b/a Spiral Fence Company, and Grinnell Mutual Reinsurance Company (collectively Grinnell), appeal from the district court’s denial of Grinnell’s summary-judgment motion and grant of Illinois Farmers Insurance Company’s summary-judgment motion, in this insurance-benefits-recovery action. Grinnell argues that Farmers breached its duty to defend and indemnify, thereby causing Grinnell to pay benefits that it contracted to recover through loan-receipt agreements executed by the insureds. We affirm.
F A C T S
This dispute over insurance coverage developed from a July 1996 automobile accident in which Jared Sachs struck a vehicle driven by Christa Kramer. At the time of the accident, Sachs was driving John Bauer’s pickup truck while in the course of his employment with Ralph Stoeffel d/b/a Spiral Fence Company. Illinois Farmers Insurance Company insured Bauer’s truck, and its policy covered Bauer, Sachs, and Stoeffel. Stoeffel was also insured under a policy with Grinnell Mutual Reinsurance Company, which provided coverage for any liability he might incur as the result of a motor-vehicle accident. Farmers provided primary coverage up to $30,000, and Grinnell provided excess coverage up to $300,000.
brought a personal-injury action against Sachs, Bauer, and Stoeffel. Grinnell tendered defense of the claim to
Farmers on August 15, and Farmers accepted the defense on September 13. Farmers tendered the defense back to Grinnell
on September 24, claiming that
Between September 25 and the date of trial, the parties discussed a possible settlement. Because Farmers tendered its policy limit, Grinnell conducted the negotiations. Grinnell’s initial offer of $50,000 fell short of Kramer’s $100,000 demand. Grinnell’s offer gradually rose to $100,000, but Kramer rejected the offer for unstated reasons. The case proceeded to trial at which Farmers provided the defense. The jury returned a verdict of $88,015 in damages, and the court assessed costs and disbursements of $13,399.04 plus $2,223.11 in prejudgment interest.
Grinnell assumed responsibility for $58,015 of the damages, but contended that Farmers remained responsible for the prejudgment interest and the costs and disbursements. Grinnell requested that Farmers pay those amounts. When Farmers refused, Grinnell informed Farmers that it would pay the amounts and then seek recovery based on loan-receipt agreements with Sachs, Bauer, and Stoeffel.
In August 2004 Grinnell sued Farmers in the insureds’ names, seeking reimbursement for prejudgment interest, costs and disbursements, and attorneys’ fees expended in defense of the insureds. Grinnell alleged that it was entitled to reimbursement because Farmers breached its duty to defend and indemnify when it attempted to tender the defense back to Grinnell on September 24. Farmers counterclaimed that it was entitled to reimbursement because Stoeffel was statutorily obligated to indemnify his employees.
On cross-motions for summary judgment the district court found that (1) Farmers did not breach its duty to defend or indemnify; (2) Farmers did not owe prejudgment interest, attorneys’ fees, or costs and disbursements; and (3) the loan-receipt agreements were valid but would achieve an inequitable result. This appeal followed.
D E C I S I O N
On appeal from summary judgment we
assess whether there are any genuine issues of material fact and whether the
district court correctly applied the law.
Illinois Farmers Insurance Company asserts
as a threshold issue that Grinnell Mutual Reinsurance Company cannot seek
reimbursement because the loan-receipt agreements are invalid. A loan-receipt agreement is an instrument
under which an insurer “loans” its insured amounts covered under its policy in
exchange for the insured’s promise to seek recovery from a third party liable
for the costs and to apply any amount recovered toward the loan. Jostens,
Inc. v. Mission Ins. Co., 387 N.W.2d 161, 164 (
Farmers argues that the loan-receipt agreements used by Grinnell are invalid because they were signed after Grinnell paid the contested amounts on the insureds’ behalf. The district court found that the agreements were valid but inequitable. It is unnecessary, however, to address this issue, because its resolution does not affect our determination. Assuming, for the purpose of review, that the loan-receipt agreements are valid, Grinnell has not sufficiently demonstrated that Farmers breached any duty to defend or indemnify the insureds.
Grinnell argues that Farmers breached its duty to indemnify when Farmers refused to pay the costs, disbursements, and prejudgment interest added to the principal balance of the judgment. Grinnell first argues that statutory law requires Farmers to pay these amounts and, alternatively, that Farmers’ policy covered these amounts while its own policy did not. Grinnell’s interpretation of both the law and Farmers’ policy is unsustainable.
Minnesota law provides that when “judgment is entered against an insured,
the principal amount of which is within the applicable policy limits, the
insurer is responsible for their insured’s share of the costs, disbursements,
and prejudgment interest . . . even if the total amount of the judgment is in
excess of the applicable policy limits.”
Grinnell’s argument overlooks the text and purpose of the statute. See Minn.
Stat. § 645.16 (2006) (instructing that intent of legislature controls);
If Farmers were the sole insurer, these excess amounts would have shifted
to the insureds. See Larson v. Anchor Cas. Co., 249
This result is also required by the Farmers policy. Contractually, Farmers’ policy required it to pay, “All costs weincur in the settlement of any claim or defense of any suit.” Grinnell broadly interprets this provision to mean that “costs” includes the plaintiff’s costs, disbursements, and prejudgment interest. Again, Grinnell overlooks text that refutes its arguments.
Farmers’ policy defines “we” to mean “the Company named in the Declarations which provides this insurance.” When this definition is read into the cost-payment provision, the provision plainly refers to only those costs Farmers incurs and no others. As a result, Farmers was not contractually obligated to pay the costs, disbursements, and prejudgment interest. Farmers did not breach its duty to indemnify the insureds; thus Grinnell cannot collect on that basis.
also argues that it expended approximately $3,700 on attorneys’ fees in defense
of the insureds because Farmers breached its duty to defend. The duty to defend begins when the insured
formally tenders the defense to the insurer.
Home Ins. Co., 658 N.W.2d at 531. The duty “extends until it can be concluded
as a matter of law that there is no basis on which the insurer may be obligated
to indemnify the insured.” Meadowbrook, Inc. v. Tower Ins. Co., 559
N.W.2d 411, 416 (
Farmers acknowledges that, as the primary insurer, it had the duty to defend. See id. at 165 (discussing duty to defend). But Farmers argues that it is not responsible for Grinnell’s claimed attorneys’ fees because Grinnell failed to introduce sufficient evidence that it incurred the fees due to a breach of that duty by Farmers. We agree.
The only evidence Grinnell submitted in support of its expenditures on attorneys’ fees was an affidavit flatly stating an amount incurred after its tender of the defense to Farmers. Grinnell did not clarify what the fees were for, but it appears they arose out of pretrial settlement negotiations and postverdict costs-and-disbursements negotiations. The primary insurer is required to defend from tender to final resolution of arguably covered claims. Meadowbrook, 559 N.W.2d at 416. But there is no evidence that Farmers refused to provide the services for which Grinnell paid. Without evidence of refusal there is no evidence of breach, and Grinnell’s outlays are best described as voluntary payments made to protect its own interests.
sufficient evidence of breach or damages there can be no recovery. Although all inferences must be drawn in
favor of the nonmoving party, “the party resisting summary judgment must do
more than rest on mere averments.” DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (