Illinois Farmers Ins. Co. v. Reed

Decision Date23 July 2002
Docket NumberNo. C2-02-123.,C2-02-123.
Citation647 N.W.2d 553
PartiesILLINOIS FARMERS INSURANCE COMPANY, Appellant, v. Janet Dawn REED, et al., Respondents, Richard Peschong, et al., Respondents, First Health, Defendant.
CourtMinnesota Court of Appeals

Timothy P. Tobin, Matthew H. Morgan, Gislason & Hunter LLP, Minnetonka, for appellant.

Michael A. Zimmer, Tewksbury, Kerfeld & Zimmer, P.A., Minneapolis, for respondents Reed.

Sharon L. Van Dyck, Mark H. Gruesner, Schwebel, Goetz & Sieben, P.A., Minneapolis, for respondents Peschong.

Considered and decided by KLAPHAKE, Presiding Judge, WILLIS, Judge, and HANSON, Judge.

OPINION

HANSON, Judge.

Respondents sued their son's daycare provider, who had been convicted of assault and malicious punishment of a child based on an incident in which the child suffered a severe brain injury. The daycare provider tendered the defense of respondents' action to appellant insurer, under her homeowner's policy. Appellant insurer filed a declaratory judgment action seeking a declaration that coverage for the occurrence was precluded by the policy's intentional-acts exclusion. Appellant insurer then moved for summary judgment, arguing that the daycare provider was collaterally estopped by her criminal conviction from denying that she intentionally injured the child. The district court denied the motion but certified as important and doubtful the question of whether Minnesota law permits criminal convictions to be used for collateral-estoppel purposes when the criminal defendant does not seek to profit from the crime in a subsequent civil proceeding. We answer the certified question in the affirmative, reverse the denial of summary judgment, and remand.

FACTS

J.P. was severely injured while at the home of Janet Reed, his daycare provider. Reed claimed that J.P. hurt himself when he fell headfirst on the kitchen floor while attempting to walk. She later admitted that she shook him. Reed was charged with first-degree assault, a violation of Minn.Stat. § 609.221 (1998), and malicious punishment of a child, a violation of Minn. Stat. § 609.377 (1998). At her criminal trial, Reed maintained that J.P's injuries resulted from a fall and not from being shaken. She also argued that even if the shaking caused J.P.'s injuries, the state could not prove intent because she did not intend to injure him, only to revive him after he fell. The state presented testimony from seven medical experts that eliminated a fall as the cause of J.P.'s injury and supported the conclusion that J.P.'s injuries were caused by shaken-baby syndrome.

The district court sitting without a jury found Reed guilty of both charges. In its 100-page order, the court specifically rejected Reed's claim that J.P. injured himself when he fell and found that his injuries were the result of being shaken. The court concluded beyond a reasonable doubt that Reed "caused [J.P.'s] injuries and did so by an intentional act." (Emphasis omitted.) This court affirmed Reed's convictions. State v. Reed, No. C4-00-779, 2001 WL 243248 (Minn.App. Mar.13, 2001), review denied (Minn. May 15, 2001).

After the conclusion of the criminal trial, respondents J.P. and his parents, Richard and Kimberly Peschong (the Peschongs), brought a negligence action against Reed to recover for J.P.'s injuries. Reed carried a homeowner's policy with appellant Illinois Farmers Insurance Company (Illinois Farmers), and she tendered the defense of the Peschongs' action to Illinois Farmers. Illinois Farmers filed a declaratory-judgment action naming the Reeds, the Peschongs and J.P.'s medical providers as defendants. Illinois Farmers then filed a motion for summary judgment.

Illinois Farmers argued that the judgment convicting Reed of first-degree assault and malicious punishment of a child should be used as collateral estoppel to conclusively establish the facts necessary to effectuate the policy's intentional-acts exclusion, which excludes coverage for injury that is either

a. caused intentionally by or at the direction of an insured; or
b. results from any occurrence caused by an intentional act of any insured where the results are reasonably foreseeable.

The policy defines an "occurrence" as an "accident * * * which results * * * in bodily injury." The policy does not define "accident."

Relying on the supreme court's opinion in Travelers Ins. Co. v. Thompson, 281 Minn. 547, 163 N.W.2d 289 (1968), the Peschongs countered that a criminal conviction cannot be used as collateral estoppel in a subsequent civil case unless the criminal defendant is attempting to profit from his or her crime, and that the issue of intent must be litigated in a coverage trial.

The district court, after a thorough discussion, denied Illinois Farmers' motion for summary judgment. The court observed that although Thompson involved a situation in which the convicted party was attempting to profit from his crime, Thompson did not specifically limit its holding to such a situation. Yet, the court found no Minnesota cases applying collateral estoppel in other situations. To the contrary, the court assumed that the use of a criminal conviction as collateral estoppel had been narrowed, since Thompson, by the decision in Glens Falls Group Ins. Corp. v. Hoium, 294 Minn. 247, 252, 200 N.W.2d 189, 192 (1972) (holding that a judgment of conviction based on a plea of guilty had no collateral-estoppel effect in a civil action).

The district court certified as important and doubtful the question set forth as the first Issue below. After framing the certified question, the district court proceeded to also answer the question, "If collateral estoppel applies generally, does it apply in this case?" The court concluded that it would. This appeal followed.

ISSUE

1. The question certified by the district court is:

When interpreting an intentional-acts exclusion of a common liability policy, does Minnesota law permit criminal convictions to be used for collateral estoppel purposes in a subsequent civil case in situations other than those envisioned in Travelers Ins. Co. v. Thompson, 281 Minn. 547, 552-57, 163 N.W.2d 289, 293-94 (1968) —namely, where the criminal defendant seeks to profit from the crime in a subsequent civil proceeding?

2. If we answer the certified question in the affirmative, do the undisputed facts supply all of the elements necessary for the application of collateral estoppel?

ANALYSIS
I

We first consider whether the certified question is properly before us. The denial of summary judgment ordinarily would not be appealable until the conclusion of the proceedings. Jostens, Inc. v. Federated Mut. Ins. Co., 612 N.W.2d 878, 883 (Minn.2000). This court may hear an appeal from a denial of a motion for summary judgment only "if the [district] court certifies that the question presented is important and doubtful." Minn. R. Civ.App. P. 103.03(h) (2000).1

The Minnesota Supreme Court recently reiterated the proper criteria for review of a certified question under rule 103.03(h). Jostens, 612 N.W.2d at 883-85. When determining whether a question is important, the reviewing court must consider whether:

(1) it will have statewide impact, (2) it is likely to be reversed, (3) it will terminate lengthy proceedings, and (4) the harm inflicted on the parties by a wrong ruling by the district court is substantial.

Jostens, 612 N.W.2d at 884 (citation omitted). A question is properly certified as doubtful if there is no controlling authority and "there is substantial ground for a difference of opinion." Id. at 884-85 (citation omitted).

The district court concluded that the question was important, in part, because "there is a high probability of reversal," stating:

This Court has denied summary judgment because the Thompson case has not expanded the exception to the general rule. However, nowhere in the Thompson decision does the Court limit the exception to the facts involved in that case. Furthermore, the stated reasons for the general rule do not apply in this case and the reasons for the exception apply to this case.

In concluding that the question was doubtful, the court stated:

Despite the findings in the criminal case, this trial judge doesn't feel that he has the authority to grant summary judgment in favor of Illinois Farmers based on Thompson. Granting summary judgment is analogous to a trial judge creating a new cause of action where it doesn't exist. This responsibility should be left to the Legislature or a higher Court.

The parties do not challenge the district court's decision to certify the question. Furthermore, we agree with the district court's determination that the question is important and doubtful.

II

We next review the rationale of the decision in Travelers Ins. Co. v. Thompson, 281 Minn. 547, 549, 163 N.W.2d 289, 291 (1968). Thompson purchased several life insurance policies, totaling $1,055,000, on his wife's life with himself named as beneficiary on each policy. Id. Thompson's wife was killed and Thompson was convicted of her murder. Id. at 548, 163 N.W.2d at 290-91. After his conviction, Thompson sought to collect on the insurance policies. Id. at 548, 163 N.W.2d at 290. The insurers brought a declaration judgment action and moved for summary judgment, contending that Thompson's conviction conclusively established the facts that disqualified him from being a beneficiary under Minn.Stat. § 525.87 (1967) (stating that "[n]o beneficiary of any policy of insurance * * * payable upon the death * * * of any person, who [feloniously] takes * * * the life upon which such policy * * * is issued, * * * shall take the proceeds of such policy.").

The district court denied the insurer's motion for summary judgment but certified as important and doubtful the question of whether Thompson's murder conviction barred his claim as a beneficiary of the policies. Thompson, 281 Minn. at 548, 163 N.W.2d at 290. The question before the supreme court was

whether a criminal conviction may be
...

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