This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. 480A.08, subd. 3 (1994).




New Hampshire Insurance Company, et al.,



Horizon Agency, Inc.,


Filed June 4, 1996


Kalitowski, Judge

Dakota County District Court

File No. C3929449

Mark A. Fonken, Elizabeth B. Hayes, Jardine, Logan & O'Brien, P.L.L.P., 2100 Piper Jaffray Plaza, 444 Cedar Street, St. Paul, MN 55101-2160 (for Appellants)

Fred R. Jacobberger, Lisa R. Micallef, Jacobberger, Micallef & Associates, P.A., 1150 Capitol Centre, 386 North Wabasha, St. Paul, MN 55102 (for Respondents)

Considered and decided by Kalitowski, Presiding Judge, Randall, Judge, and Stone, Judge.*



Appellants New Hampshire Insurance Company (New Hampshire) and Granite State Insurance Company challenge the district court's judgment dismissing New Hampshire's indemnity action against respondents Horizon Agency, Inc. (Horizon) and Noel Totten, Jr. New Hampshire argues Totten and Horizon are liable under theories of negligence and fraud. We affirm.


Totten, an agent for Horizon authorized to sell New Hampshire insurance, sold the insured a New Hampshire policy. At the expiration of the policy, despite the insured's failure to pay any premiums, Horizon twice sent two-month binders to the insured. During the period covered by the second binder, Totten requested New Hampshire to cancel the insured's policy "flat," a term meaning the insured did not want insurance renewed. The other method of cancellation, "nonpayment of premiums," requires a 10-day notice to the insured. See Minn. Stat. 60A.36, subd. 2 (1990). In response to the "cancel flat" request, New Hampshire performed its internal procedures and believed the policy was canceled. During the period covered by the second binder, an injury occurred on the insured's premises and the insured filed a claim. New Hampshire settled the injury claim for $72,500 and sought indemnity from Horizon and Totten. The district court denied indemnity, concluding that no fraud occurred and that any negligent conduct by Horizon and Totten did not increase New Hampshire's risk of loss.


Where the material facts are not in dispute, a reviewing court need not defer to the district court's application of the law. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989). To the extent New Hampshire challenges the district court's findings of fact, we apply a clearly erroneous standard of review. See Minn. R. Civ. P. 52.01.

Indemnity is restitution of the amount paid by one party in satisfaction of an obligation of the other party. Samuelson v. Chicago, Rock Island & Pac. R.R. Co., 287 Minn. 264, 267, 178 N.W.2d 620, 623 (1970). An insurer is not entitled to indemnity for an agent's negligence unless such negligence has increased the insurer's risk of loss. Reserve Ins. Co. v. Netzer, 621 F.2d 314, 316-17 (8th Cir. 1980); Norby v. Banker's Life Co. of Des Moines, Iowa, 304 Minn. 464, 473-74, 231 N.W.2d 665, 671 (1975); Julien v. Spring Lake Park Agency, Inc., 283 Minn. 101, 104-05, 166 N.W.2d 355, 357 (1969); Cooney v. Milwaukee Mut. Ins. Co., 397 N.W.2d 352, 356-57 (Minn. App. 1986). An agent's negligence does not increase the insurer's risk of loss where the insurer was willing to insure the risk. Id.

The district court relied on the above cited line of cases and found New Hampshire "would have renewed insured's policy but for the cancellation request." No evidence was introduced that over the course of the initial one-year policy, the insured had difficulty paying premiums. This resulted in several cancellations and reinstatements of the policy. Despite these problems, New Hampshire continued to cover the insured and even discussed requoting a policy at the expiration of the first year of coverage. After finding New Hampshire was willing to insure, the district court denied indemnity based on the conclusion that New Hampshire's risk of loss was not increased by any negligence of Totten or Horizon. Because there is evidence in the record to support this finding, we conclude the court did not clearly err. In addition, we note that New Hampshire could have protected its rights by sending the statutory notice of cancellation after receiving Totten's cancellation request.


In a bench trial, the court is the trier of fact on the issue of fraud. Witzig v. Philips, 274 Minn. 406, 410, 144 N.W.2d 266, 269 (1966). Findings of fact will not be overturned unless clearly erroneous. Minn. R. Civ. P. 52.01.

To prove a prima facie case of fraud, there must be a showing of

a false representation by a party of a past or existing material fact susceptible of knowledge, made with knowledge of the falsity of the representation, or made as of his own knowledge without knowing whether it was true or false, with intention to induce another to act in reliance thereon, and that the representation caused the other party to act in reliance thereon to his pecuniary damage.

Dollar Travel Agency, Inc. v. Northwest Airlines, Inc., 354 N.W.2d 880, 883 (Minn. App. 1984) (quoting Burns v. Valene, 298 Minn. 257, 261, 214 N.W.2d 686, 689 (1974)), review denied (Minn. Dec. 21, 1984). Because fraud is an intentional tort, scienter (intent) is required. Florenzano v. Olson, 387 N.W.2d 168, 173 (Minn. 1986).

The district court's findings indicate Totten lacked scienter because a cancel flat would have been proper under the facts known to Totten. Totten testified the insured had not signed a contract, had not paid a premium, and had indicated the property would go back to its seller, all of which indicated the insured did not want coverage. The district court also found that Totten had no knowledge of the second binder at the time he requested a "cancel flat." The court's findings have record support and therefore are not clearly erroneous.

New Hampshire argues fraud existed because Totten had a financial interest in cancelling flat because if the policy was cancelled for "non-payment" Totten and Horizon would have been responsible for the unpaid premiums. As evidence of fraud, New Hampshire cites a letter, written by Totten a little over three months after the injury, in which Totten sought to amend the cancellation from "flat" to "non-payment." Because New Hampshire failed to establish all the elements of fraud, however, we conclude the district court did not err.



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