This opinion will be unpublished and

may not be cited except as provided by

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




Vernon Berg,



Jonas O. Sandberg, et al.,


Filed February 10, 1998

Affirmed in part, reversed in part

Toussaint, Chief Judge

Polk County District Court

File No. C4-92-521

Dwain E. Fagerlund, Johannson, Taylor, Rust & Fagerlund, P.A., 407 North Broadway, Crookston, MN 56716 (for respondent)

Britton David Weimer, Hagglund, Weimer & Speidel, 4000 Water Park Place, 5101 Olson Memorial Highway, Minneapolis, MN 55422 (for appellant)

Considered and decided by Randall, Presiding Judge, Toussaint, Chief Judge, and Foley, Judge.**

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


TOUSSAINT, Chief Judge

Appellant Vernon Berg argues the district court erred in refusing to order a new trial because respondents Jonas and Scott Sandberg, d/b/a the Erskine Agency, were liable for damages having admittedly failed to procure full insurance coverage for Berg's snowmobile or inform him that such coverage was not available. Because we conclude the Sandbergs failed to process Berg's request for full insurance coverage and because Berg's loan receipt agreement with Grinnell Mutual Reinsurance Company (Grinnell) was proper, we affirm as to negligence and the validity of the loan receipt agreement. We reverse, however, as to the determination of coverage because that issue was not before the district court.


When appealing the denial of a motion for new trial,

the verdict must stand unless it is manifestly and palpably contrary to the evidence, viewed in the light most favorable to the verdict.

Zumberge v. Northern States Power Co., 481 N.W.2d 103, 110 (Minn. App. 1992). A reviewing court is not bound by and need not give deference to a district court's decision on a purely legal issue. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984). Review of a case tried by the court without a jury is limited to determining whether the district court's findings are clearly erroneous and whether it erred in its conclusions of law. See Minn. R. Civ. P. 52.01.


Berg argues the district court erred in concluding that off-premises liability coverage from Grinnell was in full force on the date of his snowmobile accident. He contends that the Sandbergs, were negligent in failing to process his application for full-coverage and therefore, were liable in negligence. He claims that because Grinnell denied coverage and was dismissed from this action, the district court lacked standing to conclude that Grinnell was bound to provide coverage. Berg also argues the district court erred in dismissing the agency from the suit.

The Sandbergs concede that they were negligent in failing to process a full coverage application for full coverage. They argue, however, that even if their agency bound Grinnell, they are not liable for damages. They contend that Berg's claim is properly against Grinnell because the loan receipt agreement extinguished any liability claim against the agency.

a. Negligence

To maintain a negligence claim, the plaintiff must show (1) a duty; (2) breach of that duty; (3) a causal connection between the breach of duty and the injury; and (4) injury or damages. Schweich v. Ziegler, Inc., 463 N.W.2d 722, 729 (Minn. 1990). An insurance agent may be held liable under a negligence theory for a failure to procure insurance if the agent undertook such an obligation. Peterson v. Brown, 457 N.W.2d 745, 749 (Minn. 1990). An agent has a duty to inform the insured of the appropriate coverage. Louwagie v. State Farm Fire and Casualty Co., 397 N.W.2d 567, 570 (Minn. App. 1986), review denied (Minn. Feb. 13, 1987). Moreover,

[a]n insurance agent has the duty to exercise the standard of skill and care that a reasonably prudent person engaged in the insurance business will use under similar circumstances.

Peterson, 45 N.W.2d at 749.

Scott Sandberg testified that Berg contacted him and requested "full-coverage" insurance on his snowmobile; and under these circumstances, we conclude the Sandbergs (1) had a duty to complete and process the insurance applications to obtain the full coverage policy; (2) were negligent in assuring Berg that he had full coverage for his snowmobile without securing such coverage; and (3) verbally assured Berg that he had "full coverage" on his snowmobile, however failed to complete and process the additional application required by Grinnell to obtain the full coverage. Loan Receipt Agreement

Loan receipt agreements are useful in disposing of insurance disputes and have long been recognized in this state. Jostens Inc. v. Mission Ins. Co., 387 N.W.2d 161, 164 (Minn. 1986). There is nothing improper about such a loan and "so long as there was an actual transfer, the motives of the transfer [will] not be gone into." Id. (quoting Blair v. Espeland, 231 Minn. 444, 449, 43 N.W.2d 274, 277 (1950)); See Pacific Indemnity Co. v. Thompson-Yaeger, Inc., 260 N.W.2d 548, 556-7 (Minn. 1977)(loan receipt agreements allow the insured, "albeit fictitiously" to remain the real party in interest).

We conclude that Berg and Grinnell entered into a proper loan receipt agreement. Based on the agreement, Grinnell made a monetary payment in settlement of the claims against Berg, in exchange for Berg's pursuit of an action against the Sandbergs. Furthermore, we cannot say that the loan receipt agreement, in and of itself, changes anything here. The Sandbergs were informed that Berg and Grinnell entered into the agreement. An "actual transfer" occurred when Grinnell paid the monetary settlement. Under the circumstances, we conclude that the loan receipt agreement was proper and that Berg remains the real party in interest. See Jostens, Inc., 387 N.W.2d at 165 (loan receipt agreement doesn't change the fact that the insured remains the real party in interest).


Berg argues that the district court erred in dismissing the Sandbergs from the suit and determining that Grinnell was the real party in interest. Issues not raised by pleadings or litigated by the court below are not subject to appellate review. Komatz Const., Inc. v. Western Union Tel. Co., 290 Minn. 129, 142, 186 N.W.2d 691, 699 (Minn. 1971).

In his order, the district court judge concluded:

On December 4, 1989, defendant Scott Sandberg, acting under both his implied authority and apparent authority as a general agent for Grinnell Mutual Reinsurance Company, verbally bound Grinnell to provide off-premises liability coverage to plaintiff Vernon Berg covering a newly purchased 1990 Arctic Cat El Tigre snowmobile, * * *

Plaintiff's claim against defendants [Sandberg] should be dismissed * * *

However, Berg did not raise the issue of coverage in his complaint nor did the Sandbergs argue coverage at trial. Therefore, because the issue of coverage was not properly before district court, the court erred in deciding this issue.


The Sandbergs argue that the district court erred in failing to award attorney fees. An award of attorney fees is within the discretion of the district court. Knecht Bros. v. Ames Contr., Inc., 404 N.W.2d 859, 861 (Minn. App. 1987). Here, the Sandbergs conceded their error in verbally binding insurance coverage, then failing to make a proper application. Under the circumstances, it is likely they could have expected to have to defend a suit against either Berg or Grinnell. We cannot say, therefore, that the district court's failure to award attorney fees was in error.

Affirmed in part, reversed in part.