Eustis v. David Agency, Inc., C3-87-1280
| Decision Date | 29 December 1987 |
| Docket Number | No. C3-87-1280,C3-87-1280 |
| Citation | 417 N.W.2d 295 |
| Parties | Nancy C. EUSTIS, Plaintiff, v. The DAVID AGENCY, INC., Defendant, v. HARTFORD CASUALTY INSURANCE COMPANY, Defendant and Third-Party Plaintiff, Appellant, v. Warren EUSTIS, Third-Party Defendant, Respondent. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
1. Trial court did not err in dismissing contribution claim brought by insurer against its adversary's attorney for alleged negligence.
2. Trial court did not err in finding insurer failed to substantiate its allegations of fraud and therefore properly dismissed insurer's indemnity claim based on fraud and denied insurer's motion to amend that claim in its third-party complaint.
John C. Goetz, Schwebel, Goetz & Sieben, P.A., Minneapolis, for Nancy C. Eustis.
Michael D. Hutchens, Meagher, Geer, Markham, Anderson, Adamson, Flaskamp & Brennan, Minneapolis, for David Agency, Inc.
Donald M. Jardine, Marie A. Darst, Jardine, Logan & O'Brien, St. Paul, for Hartford Cas. Ins. Co.
Gary J. Haugen, Justin H. Perl, Maslon, Edelman, Borman & Brand, Minneapolis, for Warren Eustis.
Heard, considered and decided by NORTON, P.J., and LOMMEN * and IVERSON, * JJ.
This appeal is from a summary judgment dismissing respondent as a third-party defendant in the underlying action. There, plaintiff brought suit against appellant to set aside a settlement and release agreement based on fraud, misrepresentation, mistake and improvidence. Appellant in turn joined respondent, plaintiff's husband and attorney, as a third-party defendant seeking contribution and indemnity based on his alleged fraudulent/negligent conduct in negotiating the settlement. Appellant claims the trial court misapplied the law in dismissing its contribution claim. Appellant also claims the court erred in summarily dismissing its indemnity claim and denying its motion to amend that claim in its third-party complaint by finding appellant failed to substantiate its allegation respondent committed fraud. We affirm.
This action arises out of an automobile accident on September 14, 1981, which rendered plaintiff Nancy Eustis, not a party to this appeal, a quadriplegic. The driver who struck plaintiff had only $25,000 in liability coverage. Because plaintiff's injuries greatly exceeded that amount, it became necessary to determine whether the plaintiff had any underinsured coverage available.
The plaintiff was initially represented by Gilmore, de Lambert, Eustis & Aafedt (the Gilmore firm), of which her husband, respondent Warren Eustis, was a member. One of the policies which provided potential coverage was issued by appellant Hartford Casualty Insurance Company, covering the Gilmore firm's automobiles. The policy did not mention "underinsured" but defined "uninsured motor vehicle" as a vehicle:
For which the sum of all liability bonds or policies at the time of an accident provides at least the amounts required by the applicable law where a covered auto is principally garaged but their limits are less than the limit of this insurance * * *.
After the accident a member of the Gilmore firm contacted an insurance agent from The David Agency, where the Gilmore firm purchased its policy. The David Agency is also a defendant in the underlying action but not a party to this appeal. When asked whether the policy provided underinsured coverage, the insurance agent stated that the Gilmore firm did not have underinsured coverage. The David Agency agent later contacted Hartford's representative, who eventually informed him there was underinsured coverage in the fine print with a limit of $500,000 on each of the firm's five vehicles. For some reason, the David Agency agent failed to inform the Gilmore firm of this fact.
In December 1981, respondent wrote to appellant, setting out the nature of the various coverages which he understood it provided. Respondent stated appellant's policy provided only personal injury protection (PIP) coverage and an umbrella liability policy on one of the Gilmore firm's vehicles. He did not state, as he did not recognize, the existence of underinsured coverage.
In March 1982, a settlement conference was held between respondent, acting on behalf of his wife, and a representative from another insurance company to negotiate a settlement of its underinsured coverage. Appellant's representative also attended. Respondent testified that throughout these negotiations, he believed there was no underinsured coverage in appellant's policy.
On May 3, 1982, a settlement and release agreement was reached with the other insurance company for its underinsured liability. As a part of that settlement, appellant provided $235,597.44. The check plaintiff received from appellant stated that sum was "in full settlement of uninsured motorist claims."
The May 3, 1982 settlement agreement specifically provided that appellant's policy "provided underinsured motorist coverage, among other coverages." (Emphasis added). The agreement contained a warranties section providing all parties warrant that they have "read this agreement and/or been fully advised of the terms * * *." The parties further warranted that "this release and agreement is executed without reliance upon any statement, promise, representation or inducement by any other party or agent."
The agreement also provided a general indemnification section wherein each party warranted to "indemnify and hold harmless every other party * * * in event of any breach of this agreement." Respondent advised plaintiff to sign the agreement and both plaintiff and respondent signed individually.
After the settlement agreement was executed, plaintiff's subsequent counsel, who was pursuing another aspect of her recovery, discovered the reference within the uninsured definition of appellant's policy incorporated a definition of underinsured coverage. As a result, plaintiff asserted a claim against the Gilmore firm for its negligence in advising her to settle for only a $235,000 payment and potentially giving up further claims against appellant. That claim against the Gilmore firm was settled for $900,000.
In September 1984, plaintiff commenced this action against appellant seeking equitable rescission of the May 3, 1982 settlement agreement as between her and appellant. She alleged appellant acted fraudulently by concealing and failing to disclose the policy coverage; the insurance agent at The David Agency negligently misrepresented the policy coverage to her attorneys and his conduct is attributable to appellant; appellant failed to correct her attorneys' mistake as to policy coverage; and the settlement was improvident as a matter of law.
In the course of discovery, appellant took respondent's deposition, in which he stated the only part of the agreement he ever recalled reading was the sum of amounts. He also stated he did not know appellant had underinsured motorist coverage.
Appellant then moved to join respondent as a third-party defendant. By order filed July 23, 1986, the trial court granted its motion. In its third-party complaint, appellant alleged:
That if plaintiff was induced to execute the settlement agreement on or about May 3, 1982, and if said agreement was improvident and obtained by mistake and/or fraudulent conduct, as alleged by plaintiff, said improvidence, mistake, fraudulent and/or negligent conduct was the conduct of plaintiff's attorney, Warren P. Eustis.
Based on these allegations, appellant asserted a claim of damages for contribution and/or indemnity from respondent.
In January 1987, respondent moved for summary judgment dismissing the third-party complaint. Appellant opposed the motion and moved to amend its third-party complaint to clarify its indemnity claim based on the alleged fraudulent conduct of respondent individually.
By order filed March 10, 1987, the trial court granted respondent summary judgment and dismissed respondent from the underlying action. The court also denied appellant's motion to amend its complaint by determining from the facts presented, appellant did not substantiate its allegation of fraud against respondent. The court found no just reason for delay and ordered judgment be entered on the order pursuant to Minn.R.Civ.P. 54.02. Appellant appeals the trial court's dismissal of the third-party action against respondent and denial of its motion to amend the third-party complaint reviewable under Minn.R.Civ.App.P. 103.04.
1. Did the trial court err in dismissing appellant's contribution claim against respondent for his alleged negligence in advising plaintiff as her attorney?
2. Did the trial court err in dismissing appellant's indemnity claim by finding appellant failed to substantiate its allegation respondent committed fraud?
1. Summary judgment is appropriate if the pleadings, affidavits and other documents before the court clearly show there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. Minn.R.Civ.P. 56.03. Regarding dismissal of its contribution claim, appellant claims the trial court erred in its application of law.
The trial court applied the well-established rule that an attorney will not be liable to a non-client third-party for negligence. Liability arises only if that attorney acted with fraud, malice, or has otherwise committed an intentional tort. Farmer v. Crosby, 43 Minn. 459, 461, 45 N.W. 866 (1890). The trial court stated there was no attorney-client relationship between respondent and appellant. Further, appellant did not establish respondent owed it a duty when entering into the settlement agreement. The court therefore reasoned the applicable law precludes appellant's claim for contribution based upon respondent attorney's alleged negligence.
Appellant concedes the trial court correctly stated the general rule as it relates to a direct claim for negligence. Appellant claims the court misapplied the rule...
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