Sellie v. North Dakota Ins. Guar. Ass'n

Decision Date22 December 1992
Docket NumberNo. 920118,920118
PartiesMildred SELLIE, Personally and as the personal representative of the Estate of Earl Sellie, Plaintiff and Appellant, v. NORTH DAKOTA INSURANCE GUARANTY ASSOCIATION, Defendant and Appellee. Civ.
CourtNorth Dakota Supreme Court

Steven E. McCullough (argued), of Ohnstad Twichell (West Fargo Office), West Fargo, for plaintiff and appellant.

Michael J. Morley (argued), of Morley & Morley, Ltd., Grand Forks, for defendant and appellee.

William D. Schmidt, Bismarck, for amicus curiae ND Trial Lawyers Ass'n. Submitted on brief.

JOHNSON, Justice.

Mildred Sellie, individually and as the personal representative of the estate of Earl Sellie, appeals from a district court judgment dismissing her action to enforce a stipulated judgment against the North Dakota Insurance Guaranty Association [NDIGA]. We reverse and remand with directions.

During September 1985, Mildred, age 74, and her husband, Earl, toured the New England states on a group bus trip operated by Senior Citizens Recreation, Inc. [SCR] to enjoy the fall color. Near the end of the tour on September 25, 1985, the group stopped to spend the night at the Treadway Inn in Saddle Brook, New Jersey. While standing in the lobby during a reception for the group, Mildred was injured when she was struck in the back and knocked over by a device being used by Arlo Oyen, the bus driver, to transport luggage from the bus to the rooms of the bus passengers. As Mildred recalled, she did not see the device that struck her, did not know what the device looked like, and did not know where the device was obtained. However, Mildred learned from other bus passengers that all 46 pieces of the passengers' luggage were piled on the device and that Oyen could not see over or around the device as he was moving it through the lobby. According to Oyen, the device he used "was a standard luggage cart with 4 wheels as opposed to a two wheel cart...." Unloading luggage from the bus and delivering it to the passengers' rooms was part of Oyen's work on SCR trips.

At the time of the accident, SCR was insured under a policy issued by the Transit Casualty Company [TCC]. The bus on which Mildred had been riding, and from which the luggage had been unloaded, was described in the policy as a covered auto. The policy contained the following exclusion from coverage:

"This insurance does not apply to:

* * * * * *

"8. Bodily injury or property damage resulting from the movement of property by a mechanical device (other than a hand truck) not attached to the covered auto."

On November 26, 1986, Mildred and Earl sued SCR and Oyen in Burke County District Court seeking damages for injuries caused when Mildred "was struck from behind by a luggage trolley operated by Arlo Oyen, the bus driver and employee of" SCR. SCR tendered the defense of the action to the NDIGA because TCC had become an insolvent insurer. See Chapter 26.1-42, N.D.C.C. NDIGA denied coverage under the TCC policy on January 28, 1987, and refused to provide a defense for SCR.

Earl died on July 23, 1987. Mildred, SCR, and Oyen began settlement negotiations. Mildred twice notified NDIGA that settlement negotiations were ongoing, but NDIGA chose not to participate. In June 1990, Mildred, individually and as personal representative of Earl's estate, entered into a settlement agreement with SCR and Oyen entitled "Stipulation for Entry of Judgment." In the stipulation Mildred agreed to dismiss the claims against Oyen without prejudice, and SCR agreed to entry of judgment against it for $128,000 to be satisfied "only by pursuing the proceeds" of the TCC insurance policy. The stipulation further recited that "[t]his judgment is intended to have the same effect as the judgment referred to in Miller v. Schugart [sic], 316 N.W.2d 729 (Minn.1982)." 1 On June 6, 1990, judgment was entered in Burke County against SCR as stipulated.

Also in June 1990, Mildred, individually and as personal representative of Earl's estate, commenced this declaratory judgment action against NDIGA, seeking a declaration that the TCC policy provides coverage for the damages awarded in the Burke County judgment and that NDIGA is estopped from contesting the issues of liability and damages. In December 1991, the trial court denied Mildred's motion for partial summary judgment. The court ruled that, as a matter of law, Chapter 26.1-42, N.D.C.C., allowed NDIGA to contest coverage under the TCC insurance policy. The court also ruled that the term "hand truck" in the TCC policy "is ambiguous as a matter of law and requires factual determinations when also used in the context of the sentence of exclusion." [Emphasis in original].

At trial, both parties presented expert opinion testimony about the reasonableness of the $128,000 settlement agreement. NDIGA also presented testimony of an insurance industry expert who stated that the term "hand truck" has an "intended meaning" in the insurance industry and that a "hand truck" "consists of two wheels and a handle in which ... you can push your baggage along the way, whatever you're carrying." The expert further testified that a "hand truck" was not intended in the insurance industry to include a "four-wheel luggage cart" because it has more than "two wheels, and it doesn't have handles that are readily usable."

The trial court dismissed Mildred's action. The court determined that the device that struck Mildred was not a "hand truck," reasoning:

"The policy provided an exclusion for any injury by a mechanical device not attached to the bus. The court finds the offending device here was not attached to nor a device integral to the function and purpose of the bus. The court finds the device was not a hand truck, a hand truck being an exception to the exclusion, i.e., at the time of Mrs. Sellie's injury, the offending transporting cart was an excluded device. From those facts and applying the policy provisions, the court concludes that the insolvent insurer's policy did not provide coverage for this injury."

The trial court also commented that the settlement agreement was merely a contract between the parties, that the parties were "free to adopt a choice of laws," and that "their adoption of the Minnesota approach is their decision." The court determined, however, that the Burke County judgment was voidable

"because the judgment purports to be for both claims of Mr. Sellie and Mrs. Sellie. No differentiation is made between the two claims; no denomination or award is made for two entirely distinct claims.

"Recall that no Rule 25 substitution was made after Mr. Sellie died. His cause of action survived under Section 28-01-26.1. The failure to substitute a party within 90 days of Suggestion of Death on the Record should result in a dismissal of the claim. 7c Wright and Miller, Federal Practice and Procedure, Sec. 1955. Apparently that process can be avoided by not filing the necessary document under Rule 25.

"But even if that be so, the judgment obtained here is voidable because it fails to differentiate the settled claims. Being so infirm, NDIGA had every right to challenge the judgment in this action.

"In answer the plaintiff attempted to prove that the whole $128,000 was a viable award to her. That may well be, but the question of the amount awarded on the consortium claim would be unresolved.

"Therefore, the court holds that the plaintiff, while substantiating her damages at $128,000 has failed to avoid the infirmities of the judgment itself as to Mr. Sellie's claim."

Mildred has appealed.

I

Mildred asserts that NDIGA should be estopped from contesting coverage because it had totally abandoned its insured, SCR, and breached its duty to defend. Under these circumstances, we do not believe principles of estoppel prevent NDIGA from contesting coverage under the TCC insurance policy.

The stipulation between Mildred and SCR specifically provided that the "judgment is intended to have the same effect as the judgment referred to" in Miller v. Shugart, 316 N.W.2d 729 (Minn.1982). In that case, the injured plaintiff settled with the insured car owner and driver and had a judgment entered for a stipulated sum while the insurer was litigating whether coverage existed for both the insured car owner and the driver. The stipulated judgment provided that it could be collected only from proceeds of any applicable insurance with no personal liability to defendants. After coverage was found to exist, the plaintiff started a garnishment action against the insurer to collect on the stipulated judgment. The Minnesota Supreme Court affirmed the recovery of the stipulated judgment up to the policy limits, concluding that such a settlement agreement reduced to judgment is enforceable against the insured if: (1) the insurer receives notice of the agreement; (2) the agreement is not the result of fraud or collusion; and (3) the agreement is reasonable.

Mildred asserts that NDIGA should be estopped from contesting coverage because, unlike the insurer in Shugart, NDIGA totally abandoned SCR in this case. It is true that in Miller v. Shugart, unlike here, the insurer commenced a declaratory judgment action shortly after the accident to determine the coverage question and also provided separate counsel, at its own expense, to represent the insured and the driver. In approving the procedure used by the insured, however, the court stated:

"This is not to say that Milbank's position is enviable. As the trial court observed, it had 'serious doubts about the propriety of the procedure whereby the insurer is placed in a "no-win" situation as was done here.' If the insurer ignores the 'invitation' to participate in the settlement negotiations, it may run the risk of being required to pay, even within its policy limits, an inflated judgment. On the other hand, if the insurer decides to participate in the settlement discussions, ordinarily it can hardly do so meaningfully without abandoning its...

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