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Bassford Remele is a full service litigation firm located in Minneapolis, Minnesota. Founded in 1882, the firm represents local, national and international clients in all areas of civil litigation and dispute resolution.
Case Law Update
Date: Feb 8, 2008 — Minneapolis, MN
During the week of February 8, 2008, the Eighth Circuit Court of Appeals and Minnesota appellate courts released opinions on the following topics that may be of interest to our clients; coincidentally, Bassford Remele attorneys represented the prevailing party in each case:
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Insurance Policy - Enforceability of an Anti-Assignment Clause
1. INSURANCE COVERAGE - MILLER-SHUGART SETTLEMENT
After hiring Wanzek Construction to perform welding work on pipes that carry corn mash in its ethanol production plant, Corn Plus sued, alleging the work was defective resulting in a variety of damages, including bacterial contamination of the corn mash, economic losses such as decreased ethanol production, and repairs to the welding.
Wanzek’s CGL carrier defended under a reservation of rights and started a separate declaratory action seeking a determination of no coverage. Wanzek and Corn Plus then entered into a Miller-Shugart agreement for $2.5 million. The agreement included a waiver indicating Corn Plus would “have no further rights” against Wanzek even if Corn Plus failed to recover from insurance policies. An addendum also provided that if the settlement amount was determined to be unreasonable, a court should decide the largest reasonable amount and substitute it for the $2.5 million. Lastly, the agreement included a severability provision.
Corn Plus sought a determination that the policies afforded coverage and the Miller-Shugart agreement was reasonable. The district court rejected that contention on several grounds and the Eighth Circuit Court of Appeals upheld the district court’s conclusions in every respect. First, the Court concluded that the “your work” and “impaired property” exclusions barred coverage for repair of the faulty welding, loss of use of the facility and decreased ethanol production, but that coverage existed for damage to corn mash and certain losses causally related to contamination.
Next, the Court held the Miller-Shugart agreement was unenforceable as a matter of law for failure to allocate between covered and uncovered damages. The Court determined that without an allocation, the Court is unable to assess the reasonableness of a settlement for the covered damages, and that parties are not allowed to make post-hoc allocations once coverage has been determined. The Court also determined the addendum was contrary to public policy and was unenforceable, since Minnesota has rejected substituting a court’s determination of a reasonable settlement amount; instead, Minnesota law returns the parties to the status quo and reinstates the underlying action between the claimant and the policyholder when a Miller-Shugart agreement is unenforceable. Finally, the Court declined to reinstate the underlying action in this case because the agreement expressly waived any further rights against Wanzek; the agreement had a severability provision saving the waiver notwithstanding the finding that the agreement was otherwise unenforceable. Thus, although there were covered damages, the insurers had no liability under the unenforceable agreement, and Corn Plus was left without any further remedy against Wanzek due to the waiver provision.
Corn Plus Co-op. v. Continental Cas. Co. and Lumbermens Mut. Cas. Co., No. 07-1305, ___ F.3d ___, 2008 WL 323219 (8th Cir., February 7, 2008).
[Bassford Remele, A Professional Association, represented the prevailing insurer in this matter.]
2. MEDICAL MALPRACTICE – INFORMED CONSENT
- The duty to obtain informed consent is a non-delegable duty of a physician.
- Nurses have no legal duty to verify that a physician obtains informed consent.
At a prenatal visit, plaintiff completed a form indicating that she wanted her son to be circumcised. Following the baby’s birth, a physician performed the circumcision without consulting the baby’s mother or father. The defendant hospital had a patient-care policy that required physicians to obtain informed consent, with written verification by nursing staff, although the policy exempted circumcisions from the written verification requirement.
The district court granted the hospital’s motion for summary judgment, holding that the duty to obtain informed consent is a non-delegable duty placed solely on the treating physician. The physician settled his aspect of the claim and plaintiff pursued this appeal against the hospital. Relying on cases from across the country, the Court of Appeals affirmed the district court and held that there is no legal duty of a hospital to (1) obtain informed consent or (2) to confirm or verify that the physician had obtained informed consent. The Court of Appeals also affirmed the district court’s decision to dismiss plaintiff’s claims of consumer fraud and improper credentialing because there was insufficient evidence to support those claims.
D.N.N., individually and on behalf of her minor son, H.A.N. v. Dr. Steven Joseph Berestka, Minnesota Court of Appeals, No. 27-CV-04-001585, February 5, 2008.
[Bassford Remele, A Professional Association, represented defendant hospital in this matter.]
3. INSURANCE POLICY - ENFORCEABILITY OF AN ANTI-ASSIGNMENT CLAUSE
In Star Windshield Repair, Inc. v. Western National Insurance Co., --- N.W.2d ---, 2008 WL 314457 (Minn. Ct. App. 2008), the Minnesota Court of Appeals considered whether anti-assignment language in three motor vehicle insurance policies barred a purported assignee from disputing the amount of post-loss proceeds due under those policies. In two of the policies, the anti-assignment language precluded the assignment of the insured’s “rights and duties under the policy.” In the third policy, the anti-assignment language stated that “[n]o change of interest in this policy is effective” without the insurer’s consent.
Concluding that these anti-assignment clauses barred a purported assignee from disputing the amount of post-loss proceeds due under the policies, the court first reasoned that, absent ambiguity, provisions of an insurance policy are to be given their plain and ordinary meaning. To this end, the Court noted that “[a]ll the clauses here plainly have broad reach, precluding any transfer of a right or interest under the respective policies.” 2008 WL 314457 at *2. The Court continued, “on the face of each policy, the insured may not assign the right to receive insurance proceeds or the right to litigate a dispute over the amount of proceeds claimed to be due.” Id.
The Court also distinguished various cases cited by the assignee for the proposition that an anti-assignment clause precluding the assignment of “the policy” is ineffective to bar a post-loss assignment of proceeds. The Court reasoned that none of the insurance policies before it prohibited an assignment of “the policy” in the abstract. Rather, the anti-assignment clauses referred to rights, interests, and duties, and “[t]his prohibitory language is broad enough to reach loss proceeds.”
Finally, the Court concluded that the issue before it was governed by the Minnesota Supreme Court’s decision in Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267 (Minn. 2004), where the Court recognized that a contract to pay money may be assigned by the person to whom the money is payable, “unless there is something in the terms of the contract manifesting the intention of the parties that it shall not be assigned.” Id.at 272. Because the policies manifested the intention of the parties that contract benefits shall not be assigned, the purported assignments were barred.
Star Windshield Repair, Inc. v. Western National Insurance Co., ___ N.W.2d ___, 2008 WL 314457 (Minn. Ct. App. 2008).
[A Bassford Remele attorney represented defendant Western National Insurance Company in this matter.]
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