STATE OF MINNESOTA

IN COURT OF APPEALS

A05-1749

William Edward Bieloh, et al.,

Appellants,

vs.

First National Insurance Services,

Respondent.

Filed August 1, 2006

Reversed and Remanded

Ross, Judge

Cass County District Court

File No. C7-04-853

Nicholas Ostapenko and Roy J. Christensen, Johnson, Killen & Seiler, P.A., 230 West Superior Street, Suite 800, Duluth, MN 55802 (for respondent)

Susan Bowden, Crabtree Law Firm, P.A., 1901 Curve Crest Boulevard, Stillwater, MN 55082 (for appellants)

Considered and decided by Wright, Presiding Judge; Toussaint, Chief Judge; and Ross, Judge.

U N P U B L I S H E D O P I N I O N

ROSS, Judge

This case arises from a head-on automobile collision between a vehicle stolen from the “Moondance Jam” music festival and a vehicle heading to that festival. In this appeal from summary judgment on negligence and breach of contract claims, appellants argue that the district court erred by ruling that a Miller-Shugart agreement shields appellants from liability and prevents them, as a matter of law, from being able prove damages. Because we conclude that the district court’s decision that appellants cannot prove damages is based on an incorrect measure of damages, we reverse and remand.

FACTS

Appellants William and Kathy Bieloh own and operate appellant Northern J & B Enterprises, Inc. (collectively referred to as “appellants”). Appellants sponsor and host the Moondance Jam summer music festival in Walker. Vince Mikesh was driving to the festival in July 1997 when his car was struck by a vehicle driven by David Imgrund. Imgrund was driving rapidly from the festival in a vehicle he allegedly stole from appellants, when he collided with Mikesh. Mikesh sustained severe injuries.

Mikesh commenced a lawsuit against Imgrund and Northern J & B to recover damages from the collision. All but one of Northern J & B’s insurance providers denied coverage; Allstate Insurance paid $500,000. The parties to that lawsuit executed an agreement in which they stipulated that Mikesh suffered $3 million in damages and they agreed to the entry of judgment against Northern J & B and Imgrund for that amount. In a separate Miller-Shugart agreement, William Bieloh and Northern J & B assigned to Mikesh the right to prosecute any claims they may have against their insurance providers arising from the collision, including failure to provide coverage, and they agreed to cooperate fully with Mikesh in any proceeding against these insurance providers. As consideration for this cooperation with Mikesh in these potential lawsuits against Bieloh’s and Northern J & B’s insurance providers, Mikesh agreed to “not execute on [their] personal, individual, or business assets . . . , or on any judgment that may be or has heretofore been obtained” against them.

But the potential suit contemplated by the agreements was not merely theoretical; in addition to the usual terms of the Miller-Shugart agreement, Bieloh and Northern J & B agreed to bring a negligence action against their insurance agency for failing, among other things, to provide adequate coverage and to properly evaluate their insurance needs. Bieloh and Northern J & B assigned to Mikesh any proceeds, after fees and costs, from the litigation against their insurance agency. Based on the parties’ stipulation, the district court in the Mikesh lawsuit ordered the entry of a $3 million judgment against Northern J & B and Imgrund.

Consistent with their agreements, appellants filed this lawsuit against their insurance agency, respondent First National Insurance Services, in January 2003. The complaint alleges that First National negligently failed to inform appellants about optional business coverage, to acquire coverage, to properly evaluate appellants’ insurance needs, to choose a responsible carrier, and to avoid lapses in coverage. The complaint also alleges that First National’s failure to procure umbrella coverage and full insurance coverage constituted a breach of contract.

First National moved for summary judgment, arguing that because appellants have no liability by virtue of the Miller-Shugart agreement, they cannot show that they suffered damages as a result of First National’s alleged negligence. The district court ruled that the Miller-Shugart agreement prevents appellants, as a matter of law, from being able to establish damages, and it granted First National’s motion for summary judgment. This appeal follows.

D E C I S I O N

On appeal from summary judgment, this court determines whether the district court applied the correct legal standard and whether there are genuine issues of material fact. Gradjelick v. Hance, 646 N.W.2d 225, 231 (Minn. 2002). When reviewing a summary judgment ruling, this court considers the evidence in the light most favorable to the nonmoving party. Hoover v. Norwest Private Mortg. Banking, 632 N.W.2d 534, 542 (Minn. 2001). We do not defer to the district court’s conclusions on pure questions of law. Alsides v. Brown Inst., Ltd., 592 N.W.2d 468, 471 (Minn. App. 1999).

Appellants argue first that because a determination of the damages amount is a question of fact for the jury, the district court’s conclusion that appellants failed to show damages is erroneous. Generally, the amount of damages sustained by a plaintiff is a question of fact to be determined by the jury. Id. at 475. But a defendant in a negligence action is entitled to summary judgment if the plaintiff cannot establish the existence of damages. See Gilbertson v. Leininger, 599 N.W.2d 127, 130 (Minn. 1999) (noting that damage is an element in a negligence claim); Lubbers v. Anderson, 539 N.W.2d 398, 401 (Minn. 1995) (noting that summary judgment is appropriate when the record lacks proof of any element of a claim). Summary judgment is also appropriate in a breach-of-contract claim if, as a matter of law, the plaintiff cannot establish that the alleged breach damaged the plaintiff. Jensen v. Duluth Area YMCA, 688 N.W.2d 574, 578–79 (Minn. App. 2004). The district court appropriately considered whether appellants can establish damages by approaching the question as a matter of law.

Appellants next argue that the district court’s ruling that they cannot establish damages is based on an incorrect measure of damages. The district court concluded as a matter of law that appellants cannot prove damages because the Miller-Shugart agreement shields them from liability. The Miller-Shugart agreement prohibits Mikesh from executing the $3 million judgment against appellants. But in a claim against an insurance agent alleging negligent failure to obtain coverage, the right to damages is not determined on a separate agreement between the alleged tortfeasor and the injured person. Instead, damages are determined based on the amount of insurance coverage the plaintiff would have purchased but for the agent’s negligence. See Campbell v. Valley State Agency, 407 N.W.2d 109, 113 (Minn. App. 1987), review denied (Minn. July 22, 1987). Here, as in Campbell, the personally injured claimant in the preliminary dispute had agreed to accept as full satisfaction from the alleged tortfeasor the amounts already paid by the tortfeasor’s insurers in exchange for an agreement that the tortfeasor would pursue an action against the tortfeasor’s insurance agent. Id. at 110. Although the ancillary agreement shielded the alleged tortfeasor from personal liability, in reversing the district court’s denial of post-trial motions challenging the jury’s verdict of no negligence and zero damages, we advised that a jury on retrial must decide damages by determining “what amount of insurance [the tortfeasor] would have purchased but for [the insurance agent’s] negligence and what coverage he would have received.” Id. at 113. That appellants are shielded from liability on the $3 million judgment, therefore, does not prevent them from showing damages in that they would have secured more coverage but for First National’s alleged negligence.

Appellants did not submit any evidence showing how much coverage they would have obtained but for the alleged negligence. But nothing in the record indicates that the district court applied or considered the Campbellmeasure of damages. The district court did not grant summary judgment because the record lacked sufficient evidence of damages to raise a genuine issue of fact, but because it determined that, as a matter of law, appellants could not prove damages. As noted, this conclusion is based on an incorrect measure of damages.

The district court raised public policy concerns challenging the viability of appellants’ claims against First National in light of the Miller-Shugart agreement. The court opined that

[i]f the assignment of potential claims against an insurer were permitted, it would lead to a significant number of cases against insurers. The insured would be tempted to obtain a minimal amount of insurance coverage, then agree to allow a suit against the insurer. A standard part of any policy limit settlement would be to assign the right to sue the insurer. This type of settlement would encourage prolonged litigation and would not serve the public interest.

We do not find the district court’s public policy assessment to be persuasive. In any event, the Miller-Shugart agreement between appellants and Mikesh concerns the coverage litigation against appellants’ insurance providers. In contrast, this appeal concerns a separate lawsuit alleging different claims against a different party—the insurance agent. The Miller-Shugart agreement has no effect on appellants’ negligence claims against the agent. We therefore reject First National’s argument that allowing appellants to pursue this claim gives “a plaintiff two bites at the apple.” Allowing a plaintiff to pursue a coverage claim against an insurer and then to be assigned damages recovered in a negligence claim by tortfeasors against their insurance agency does not give that plaintiff a second bite at the same apple.

We conclude that the district court erred by ruling that appellants could not prove damages as a matter of law. Appellants raised alternative arguments on appeal, but our conclusion that the district court erred by applying the incorrect measure of damages renders discussion of those arguments unnecessary. We reverse the district court’s summary judgment decision and remand for further proceedings.

Reversed and remanded.