This opinion will be unpublished and

may not be cited except as provided by

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





Lawrence P. Ferrier, et al.,



Harry Behling,


Minnesota Laborers Health and Welfare Fund,


Filed June 2, 1998


Short, Judge

Washington County District Court

File No. C896130

Patrick K. Horan, Meshbesher & Spence, Ltd., 8360 City Centre Drive, Suite 100, Woodbury, MN 55125 (for respondents Ferrier, et al.)

Thomas E. Peterson, Peterson & Hecker, Ltd., 450 Paramount Plaza III, 7831 Glenroy Road, Minneapolis, MN 55439 (for respondent Behling)

Richard L. Evans, McGrann Shea Franzen Carnival Straughn & Lamb, Chtd., 2200 LaSalle Plaza, 800 LaSalle Avenue, Minneapolis, MN 55402-2041 (for appellant)

Considered and decided by Short, Presiding Judge, Willis, Judge, and Holtan, Judge.[*]


SHORT, Judge

Lawrence P. Ferrier and his wife sued Harry Behling (landlord) for injuries and loss of consortium resulting from Ferrier's slip and fall. Minnesota Laborers Health and Welfare Fund (Fund) intervened in the action to protect its first-priority right of subrogation to $37,313.30 expended on Ferrier's medical expenses. Prior to trial, the landlord and the Ferriers entered into an agreement that provided: (1) a loan from the landlord of $135,000 on the loss of consortium claim, that Ferrier's spouse agreed to pay back dollar-for-dollar from any recovery Ferrier received on the underlying negligence claim; and (2) an agreement by Ferrier to limit the landlord's total liability to $135,000 and permitted Ferrier's spouse to keep the entire $135,000 amount if Ferrier failed to collect on his negligence claim. This agreement was not fully disclosed to the Fund, and was formally adopted by the Ferriers and the landlord in a writing at the end of trial. When the trial court found the landlord not negligent, the Fund filed post-trial motions. The trial court granted the Fund's motion for a new trial on the nature and effect of the agreement. After taking two days of testimony about the agreement, the trial court issued findings of fact, conclusions of law and judgment in the landlord's favor. On appeal from that judgment, the Fund argues the agreement constitutes a settlement, and the landlord is not entitled to costs, fees, and disbursements. We reverse.


The findings of a trial court sitting without a jury will not be set aside unless clearly erroneous. Minn. R. Civ. P. 52.01. A finding is clearly erroneous if it has no substantial evidentiary support or was induced by an erroneous view of the law. Reserve Mining Co. v. State, 310 N.W.2d 487, 490 (Minn. 1981). The construction of an insurance policy and the interpretation of a contract present questions of law, which we review de novo. Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (Minn. 1979) (contract interpretation); Iowa Kemper Ins. Co. v. Stone, 269 N.W.2d 885, 886-87 (Minn. 1978) (insurance policy).

A multi-employer ERISA benefit plan, such as the Fund, consists of contributions of more than one employer and is maintained pursuant to one or more collective bargaining agreements. See 29 U.S.C. § 1002 (37)(A) (West Supp. 1998) (defining multi-employer benefit plans). Such a plan is established for the purpose of providing benefits to its participants. See Wickman v. Northwestern Nat'l Ins. Co., 908 F.2d 1077, 1082 (1st Cir. 1990) (discussing elements of an ERISA employee welfare benefit plan). The Fund provides health and welfare benefits to laborers in the construction trade, and participants agree those payments will be reimbursed if the participant receives payment from another source.

The Fund argues the Ferriers/landlord agreement constitutes a settlement of the claims, not a loan-receipt agreement, and the failure to disclose the terms of that settlement substantially prejudiced its first-priority subrogation rights. See Liberty Mut. Ins. Co. v. American Family Mut. Ins. Co., 463 N.W.2d 750, 757 (Minn. 1990) (holding subrogor's interest not defeated by tortfeasor and its insurer's willful disregard of subrogation claim). Although we have long recognized the utility and validity of loan receipt agreements, we examine their legitimacy on a case-by-case basis. See Jostens, Inc. v. Mission Ins. Co., 387 N.W.2d 161, 164 (Minn. 1986) (stating courts view loan receipt agreements as a useful way to dispose of insurance disputes); Pacific Indem. Co. v. Thompson-Yaeger, Inc., 260 N.W.2d 548, 558 (Minn. 1977) (stating courts must examine settlement agreements case-by-case and assess their validity and effect). In examining such agreements, we consider whether the agreement was disclosed to the trial court and whether counsel was permitted to address the agreement's effect on the adversary nature of the proceeding. See id. at 557 (examining agreement's disclosure to court and effect of agreement on adversary nature of proceeding). Adverseness must be maintained at trial, and the intervenor must know of the absence of an adversarial relationship so that the adversary process is not so subverted as to deny a fair trial. See id. (stating court must examine whether agreement was disclosed and whether there was adequate opportunity to cross-examine, which insured adversary process and fair trial).

The record demonstrates: (1) the Fund paid $37,313.30 for medical expenses incurred by Ferrier as a result of the accident, and in exchange for payment, Ferrier signed a document affirming the Fund's first priority right of reimbursement; (2) a few weeks before trial, the Ferriers and their landlord settled their differences, and the Ferriers' attorney told the Fund's attorney that the subrogation issues would proceed to trial, but the Ferriers' counsel would no longer take the "laboring oar" in presentation of the damage or liability phase; (3) five days before trial, attorneys for the landlord and the Ferriers told the Fund that they had stipulated to the Ferriers' damages, but this agreement would not affect the Fund's damages; (4) when questioned about the agreement at trial, the Ferriers' counsel provided equivocal responses to questions from the Fund and the trial court; (5) the agreement guaranteed the Ferriers a $135,000 recovery regardless of the outcome of the case; and (6) Ferrier failed to recover, and his spouse received a check for $135,000 from the landlord. Under these circumstances, we conclude the Ferriers/landlord agreement was not a loan receipt agreement, but constituted a settlement of both claims because it destroyed the adversarial nature of the proceeding.

Although courts encourage settlement agreements, we will not tolerate creative characterizations conducted under a veil of secrecy that prejudice non-contracting parties' rights. See Pacific Indem. Co., 260 N.W.2d at 557 (discussing court's displeasure with secret settlements and unfairness they promote). Because we conclude the parties settled their claims prior to trial, we reverse the trial court's award of fees. See Minn. Stat. § 549.04 (1996) (allowing reasonable costs to prevailing party); Haugland v. Canton, 250 Minn. 245, 254, 84 N.W.2d 274, 280 (1957) (concluding court uses its discretion to determine which party prevailed when it awards fees).


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