This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).




Faye Annette Rehm,



Lutheran Social Services of Minnesota, Inc.,


Filed May 26, 1998


Huspeni, Judge

Crow Wing County District Court

File No. C7-96-1029

Patrick M. Krueger, Borden, Steinbauer & Krueger, P.A., 302 S. Sixth St., P. O. Box 411, Brainerd, MN 56401 (for appellant)

Victor E. Lund, Richard P. Mahoney, Mahoney, Dougherty and Mahoney, P.A., 801 Park Ave., Minneapolis, MN 55404 (for respondent)

Considered and decided by Shumaker, Presiding Judge, Huspeni, Judge, and Schumacher, Judge.



Appellant, an accident victim, challenges the district court's dismissal of her claim against respondent, the tortfeasor's employer, on the ground that appellant's release of the tortfeasor severed respondent's vicarious liability. Because we see no error of law in the district court's decision, we affirm.


Appellant Faye Rehm was injured when her vehicle was struck by a vehicle owned and driven by Diane Tinklenberg. Tinklenberg had a $30,000 policy with American Family Insurance Company (AF). At the time of the accident, she was acting within the scope of her employment with respondent Lutheran Social Services (LSS). LSS had a policy with Preferred Risk Insurance Company (PR) with a $1,000,000 limit that excluded "[y]our employee if the covered `auto' [here, Tinklenberg's vehicle] is owned by that employee * * *." Therefore, Tinklenberg was not covered by the PR policy.

Appellant was not aware of this fact when she settled with Tinklenberg and AF by signing a document entitled "AGREEMENT FOR RELEASE OF INSURER, SATISFACTION OF FUTURE JUDGMENT, ELIMINATION OF PERSONAL LIABILITY OF DIANE K. TINKLENBERG AND RECEIPT OF ADVANCE PAYMENT." Except for the names of the parties and the amounts of money, both the title and the ten paragraphs of the agreement are identical to the agreement described in Drake v. Ryan, 514 N.W.2d 785, 786-87 (Minn. 1994), which was modeled on Loy v. Bunderson, 320 N.W.2d 175 (Wis. 1982), and Teigen v. Jelco of Wisconsin, Inc., 367 N.W.2d 806 (Wis. 1985): the document is therefore known as a Loy-Teigen release.

This document first recites that:

(1) AF wishes to pay appellant $25,000 in exchange for her agreement to satisfy any future judgment against Tinklenberg up to $30,000 and to collect any future judgment over $30,000 only from the PR policy;

(2) "[I]t is believed" that Tinklenberg "may be an insured" under respondent's PR policy;

(3) PR representatives have "verbally indicated" to appellant's counsel that its policy "may provide additional automobile liability coverage" to Tinklenberg;

(4) PR representatives have indicated to appellant's counsel that PR "is at this time evaluating the claim * * * and the scope of coverage provided * * *"; and

(5) Counsel for appellant has notified PR representatives that appellant is negotiating a settlement with AF and intends to preserve her claim against PR "for further compensation from the excess liability insurance which may be available."

The document then sets forth the parties' agreement that:

(1) AF will pay and appellant will accept $25,000 as partial satisfaction of appellant's claims against Tinklenberg to the extent of the first $30,000 judged against her;

(2) Tinklenberg will have no personal liability to appellant and the $25,000 payment will operate as a satisfaction of all claims against Tinklenberg in excess of the $30,000 limit;

(3) AF is released from all further obligations under its policy;

(4) Appellant reserves claims against Tinklenberg "up to the limit of [PR]'s policy, if any" and agrees to satisfy any judgment against Tinklenberg "in excess of $30,000, only out of the proceeds of the policy issued by [PR], if any";

(5) The agreement will be governed by and construed according to Teigen v. Jelco of Wisconsin and Loy v. Bunderson;1

(6) The agreement will not be construed as a Pierringer release; and

(7) Appellant forever forgoes any action arising out of the accident against AF and Tinklenberg "except to the extent of coverage provided to * * * Tinklenberg through her employer, Lutheran Social Services * * *, by Preferred Risk * * *."[2]

After releasing Tinklenberg, appellant sued LSS to assert claims against PR.[3] LSS was granted summary judgment on the ground that Tinklenberg was not an insured under the LSS policy and that the parties had intended in signing the Drake/Ryan, i.e., Loy-Teigen agreement to release Tinklenberg from any personal liability except to the extent of coverage provided by the LSS policy.

Appellant challenges the summary judgment, arguing that the vicarious liability of LSS was not severed by the release.


"On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law." State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). "The construction and effect of a contract are questions of law for the court * * *." Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979). "Insurance coverage issues are questions of law for the court." State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 64 (Minn. 1992).

A Loy-Teigen agreement releases all claims against a defendant-insured except claims recoverable from the proceeds of an excess insurance policy, if any.[4] Appellant argues that the agreement in this case did not eliminate LSS's vicarious liability. Before answering the question of LSS's vicarious liability, we must consider the effect of our answer on Tinklenberg. If she were an insured under the PR policy, a determination that LSS remained vicariously liable would not violate the provisions of a Loy-Teigen-type release. Because an insurer cannot maintain an indemnification action against its own insured, Tinklenberg, if she were an insured, would be protected from any indemnificiation claim by LSS. But Tinklenberg is not an insured under the LSS policy. Thus, if LSS remains vicariously liable and appellant is permitted to recover, Tinklenberg would be subject to indemnification claims from LSS for amounts paid to appellant.

Appellant argues that the agreement in this case was not intended to be a full release of Tinklenberg and that the district court erred in characterizing the agreement as a "Drake/Ryan [i.e., Loy-Teigen] release."[5] We disagree. The release states that it "shall be governed and construed in accordance with the principles and rules established in the case of Teigen v. Jelco of Wisconsin, 367 N.W.2d 806 (Wis. 1985) and Loy v. Bunderson, 320 N.W.2d 175 (Wis. 1982) * * *." Holding that LSS remains liable despite the absence of excess insurance would contravene the rationale of Loy and eliminate advantages the Drake court found in Loy-type settlements.

[The vicariously liable car owner] is no longer a party; [the primary insurer] is no longer involved; [and the tortfeasor's] assets, except for the insurance contract with [the excess insurer], are no longer available for collection from a judgment * * *.

Drake, 514 N.W.2d at 790. The agreement here produced the very result anticipated in Loy and Drake: LSS was no longer a party, AF, the primary insurer, was no longer involved, and Tinklenberg's assets were no longer available for collection.[6] Denying summary judgment would have the opposite result: LSS would still be a party, AF would be asked to defend, and Tinklenberg's assets would be sought for indemnification of any judgment against LSS.

By settling all claims except those recoverable from the proceeds of the PR policy, appellant retained the right to pursue only claims recoverable from those proceeds. There are no such claims. The district court did not err in declaring that "[a]t the time the agreement was signed, the parties clearly intended it to be a `Drake/Ryan [i.e., Loy-Teigen] release'" and in holding that appellant has no right to pursue a vicarious liability claim against LSS.


1 See Loy, 320 N.W.2d at 429-30 (holding that a plaintiff who had released a defendant and the defendant's primary insurer could pursue a claim of amounts in excess of the primary insurer's policy against the defendant's employer's insurer as an excess insurer); Teigen, 367 N.W.2d at 810 (holding that a primary insurer's liability is exhausted by a Loy release). In Drake, Minnesota adopted the Loy release but modified it because Minnesota, unlike Wisconsin, does not have a direct action statute so a claim must be pursued against the insured rather than the insurer. Drake, 514 N.W.2d at 787-90.

[2] Like the agreement here, the agreement in Drake acknowledged the possibility that there may be no coverage under the excess policy. See id. at 786 ("the limit, if any, of the [excess] Policy"; "up to the limit of [the excess insurer's] policy, if any" and "the proceeds of the policy issued by [the excess insurer], if any.").

[3] See Drake, 514 N.W.2d at 787-88 (holding that "[b]ecause insurance contracts in Minnesota are contracts of indemnity, the plaintiff must obtain a judgment against the insured on the issue of liability in order to reach the excess liability insurer and the insurance proceeds.").

[4] Appellant attempts to distinguish Drake on the obvious basis that the defendant there was an insured under the excess policy, while Tinklenberg was not an insured under the excess policy here. This is a difference without a distinction: both here and in Drake, plaintiffs agreed to release defendants from all claims except those recoverable from the proceeds of an excess insurance policy, if any. The different circumstances do not make Drake distinguishable.

[5] Appellant's reliance on Thompson v. Brule, 37 F.3d 1297 (8th Cir. 1994), to argue that she did not intend to release Tinklenberg, is misplaced. Thompson involved indemnification of a settling defendant "except any indemnity or contribution suit by or on behalf of [the vehicle owners or their insurers]." Id. at 1300. Thus, the owner remained vicariously liable and the release in Thompson was deemed to be not a Pierringer release. Because the release in this case is also not a Pierringer release, appellant argues that LSS remains vicariously liable. However, the fact that a Pierringer release eliminates vicarious liability does not mean that every non-Pierringer release preserves vicarious liability. The release in Thompson was not a Pierringer release because the plaintiff explicitly declined to indemnify the settling defendant from claims brought by the nonsettling defendant; a Loy-Teigen release concerns not multiple defendants but multiple insurers of the settling defendant. We agree that appellant did not indemnify Tinklenberg against claims of nonsettling defendants as would have happened with a Pierringer release, but we do not share appellant's view that this has any connection to the vicarious liability of LSS.

[6] The parties' agreement does not contain express language protecting Tinklenberg's personal assets. We infer this protection from the title language "Elimination of Personal Liability of Diane K. Tinklenberg" and the language of paragraph 2 "Diane Kay Tinklenberg will have no personal liability * * *." We note, further, that the release in Drake, while indicating that the parties intended that their agreement be construed according to Loy, also had no language explicitly protecting the personal assets of the tortfeasor.