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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: July 11, 2008 — Minneapolis, MN
During the week of July 11, 2008, the U.S. Court of Appeals for the Eighth Circuit and the Minnesota appellate courts released opinions on the following topics that may be of interest to our clients:
1.
Insurance Coverage - Errors and Omissions - Policy Exclusion
2.
1. INSURANCE COVERAGE - ERRORS AND OMISSIONS - POLICY EXCLUSION
- Insurer has no duty to defend when insured’s actions in part, are precluded by a policy exclusion, and are the “but for” cause of all claims.
Greenwich Insurance Company insured two real estate agents under a professional errors and omissions policy. The agents were sued by two former clients, alleging that the agents solicited them for a real estate venture and had wrongfully withheld a $175,000 deposit in connection with the venture which had been represented to be fully refundable upon demand. The clients’ claims included breach of implied duty of good faith and fair dealing, consumer fraud, rescission based on fraud in the inducement/intentional misrepresentation, negligent misrepresentation, deceptive trade practices, breach of fiduciary duty, promissory estoppel, and false advertising.
Greenwich refused to defend its insureds claiming coverage was precluded under a policy exclusion for claims “based on or arising out of: (1) the conversion, commingling, defalcation, misappropriation or improper use of funds or other property; [or] ... (3) the inability or failure to pay, collect or safeguard funds held for others.” In this declaratory judgment action the trial court had held that the exclusion did not negate the duty to defend because the negligent misrepresentation claim arose out of conduct separate from the improper use or failure to safeguard funds, i.e., this claim was for the wrongful inducement to deposit the funds, which were then later mishandled.
On appeal the Eighth Circuit disagreed, holding that the policy exclusion applied to preclude all of the causes of action and, therefore, Greenwich had no duty to defend. The court held that the phrase “arising out of” has been given a broad meaning by Minnesota courts, that this phrase only requires a “but for” causal connection and not proximate cause, and that the broad construction of this phrase applies equally to policy provisions granting coverage as well as to exclusions which preclude coverage. The court determined that “[e]ach of the claims asserted within the underlying complaint, either directly or by incorporation, allege an injury originating from, or having its origin in, growing out of, or flowing from the failure to return the deposited funds.” “But for” the failure to return the deposits as promised, there would have been no claims against the agents. Thus, had the funds not been mishandled, the claims alleged in the complaint would not have arisen.
Murray v. Greenwich Ins. Co., ___ F.3d ___, 2008 WL 2629958 (8th Cir. 7/8/08).
2. AUTOMOBILE INSURANCE - COLLATERAL-SOURCE RULE
- Injured party’s previous settlement amount with tortfeasor’s insurance carrier constitutes a collateral source, and can be deducted from an ultimate jury award encompassing no-fault damages.
Following an automobile accident, injured plaintiff recovered a portion of his damages through a settlement with tortfeasor’s insurance carrier. At trial to recover more damages from plaintiff’s no-fault insurer, the district court deducted the prior settlement amount from the jury’s award of damages to the plaintiff.
The Minnesota Court of Appeals upheld the decision based on the collateral-source rule, Minn. Stat. § 548.36 (2002), which reads in part, “collateral sources to be deducted from jury awards are *** payments made pursuant to automobile-accident insurance.” Because the settlement award derived from the tortfeasor’s “automobile-accident insurance” and the statutory collateral-source rule intends to prevent double recovery by injured parties, the court held that the settlement award constitutes a collateral source and offsets the jury’s damage award.
Do v. American Family Mutual Ins. Co., A07-1461 (Minn. Ct. App. 7/8/08).
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