Kissoondath v. US Fire Ins. Co.

Decision Date23 January 2001
Docket NumberNo. C4-00-698.,C4-00-698.
Citation620 N.W.2d 909
PartiesDipchan KISSOONDATH, Ann Kissoondath and Michael Heinonen, as assignees of James LaBosco, J.D. Sandstone, and J.D. Sandstone, Inc., Appellants, v. UNITED STATES FIRE INSURANCE COMPANY, d/b/a Crum & Forster Commercial Insurance Company, a foreign corporation, Respondent.
CourtMinnesota Court of Appeals

Michael Lewis Weiner, Christopher J. Moreland, Yaeger, Jungbauer, Barczak, Roe & Vucinovich, PLC, Minneapolis, MN, for appellants.

William M. Hart, Richard L. Pemberton, Jr., Melissa Dosick Riethof, Erica Gutmann, Strohl, Meagher & Geer P.L.L.P., Minneapolis, MN, for respondent.

Considered and decided by TOUSSAINT, Chief Judge, STONEBURNER, Judge, and FOLEY, Judge.

OPINION

DANIEL F. FOLEY, Judge.1

Appellants assert that the district court committed reversible error in their bad faith claim against respondent insurer by not instructing the jury on the fiduciary duty owed by an insurer to the insured and by giving the jury an erroneous instruction on "good faith." Appellants also argue the district court committed prejudicial error when it: (1) excluded this court's opinion affirming the verdict in the underlying case; (2) admitted evidence of appellants' underinsured motorist benefits; (3) admitted evidence of an edited videotape of one of the appellants; and (4) permitted respondent's expert to impeach this court's opinion that the evidence supported the damages awards in the underlying case. Lastly, appellants argue that the district court committed reversible error when it failed to grant a new trial on the basis that the evidence did not justify the verdict. Because the district court committed reversible and prejudicial error in several respects, we reverse and remand for a new trial.

FACTS

James LaBosco d/b/a J.D.Sandstone, Inc. (insured) was insured by respondent United States Fire Insurance Company d/b/a Crum & Forster Commercial Insurance Company in July 1990 when a taxi owned by J.D. Sandstone, Inc. ran into a parked pickup truck occupied by appellants Dipchan Kissoondath and Michael Heinonen. Appellants (and Kissoondath's wife, who claimed loss of consortium) sued the taxi driver and J.D. Standstone, Inc. for injuries they allegedly sustained in the accident. Respondent accepted the defense of the claims against insured.

Respondent knew insured would most likely be found liable, but the extent of appellants' damages was hotly contested. Respondent offered the Kissoondaths $35,000 and $12,000 to Heinonen. Appellants were willing to settle for the $350,000 policy limits. The consolidated cases went to trial. A jury found the taxi driver 100 percent at fault and awarded $1,675,868.00 to Dipchan Kissoondath, $175,000 to Ann Kissoondath, and $432,758.14 to Heinonen. On appeal the verdict was affirmed and we stated: "Although the verdict is large, totaling more than $2 million, the evidence, when viewed in the light most favorable to [appellants], supports the amounts awarded." Kissoondath v. Ammerman, Nos. C0-95-1346, C7-95-128, 1995 WL 756840, at *2, ___ N.W.2d ___, ___ (Minn.App. Dec.26, 1995), review granted (Minn. Feb. 12, 1996) and order granting review vacated (Minn. June 19, 1996) (Kissoondath I).

Insured assigned his "bad faith" cause of action against respondent, for failure to protect him from personal liability by settling within policy limits, to appellants. Thereafter, appellants sued respondent, alleging that respondent had breached the fiduciary duty of good faith owed to its insured.

Before trial, respondent moved to exclude evidence of this court's decision in Kissoondath I, which affirmed the underlying verdict for appellants. Appellants moved to exclude evidence regarding appellants' underinsured motorist benefits (UIM). Both motions were granted.

At trial, over appellants' objections, the district court allowed respondent's expert, Peter Grottodden, to testify that "[t]he [underlying] jury verdict is not supported by the evidence * * *." Respondent was also allowed to question appellants' expert witness with respect to the availability and amount of UIM benefits. In addition, over appellants' objection, the district court allowed the jury to see an edited surveillance video of Heinonen that showed him working. This video had not been shown to the jury in the underlying trial because it consisted of only about 40 minutes edited from five hours of tape. In the underlying trial, the district court had ruled that the jury should see all five hours or nothing, whereupon counsel for insured opted not to introduce the tape.

Appellants submitted a proposed jury instruction on "good faith" that included (1) language concerning the insurer's fiduciary duty to an insured; (2) a definition of a fiduciary relationship and a fiduciary duty; and (3) a list of the insurer's specific obligations. The instruction concluded with, "[respondent] failed to act in good faith towards its insureds if it failed to perform any of the above duties." The district court denied the requested instruction. The "good faith" instruction given by the district court omitted any reference to fiduciary duty, listed the specific duties of the insurer, and concluded:

No one factor in and of itself is determinative of a breach. All factors taken together must lead you to believe that the insurance company breached its duty of good faith in order to answer question number 1 on the jury verdict form "yes."

By special verdict, the jury concluded that respondent did not breach its duty of good faith by failing to settle appellants' claims within the policy limits of the insured.

Appellants moved for a new trial arguing that the district court erred (1) in its instruction with regard to an insurer's duty to its insured under Minnesota law; (2) by admitting the edited surveillance video; (3) by excluding the court's underlying decision stating that there was substantial evidence supporting the damages award; and (4) by allowing evidence of appellants' UIM benefits and amounts. Lastly, they argued that the evidence did not justify the verdict. The district court denied appellants' motion for a new trial and this appeal followed.

ISSUES

I. Did the district court commit reversible error by failing to instruct the jury on "fiduciary duty" in connection with instructing the jury on "good faith" and by implying that an insurer must fail to perform more than one of its obligations to an insured before it can be found not to have acted in good faith?

II. Did the district court commit prejudicial error by permitting respondent's expert to impeach this court's opinion affirming the verdict in the underlying case, excluding evidence of this court's opinion affirming the verdict in the underlying personal injury case, admitting evidence of appellants' UIM benefits and amounts, and admitting the edited surveillance video?

III. Did the district court commit reversible error by failing to grant a new trial on the basis that the evidence did not justify the verdict in the instant case?

ANALYSIS

We are mindful that a district court's discretion to grant a new trial will not be disturbed absent a clear abuse of that discretion. Halla Nursery, Inc. v. Baumann-Furrie & Co., 454 N.W.2d 905, 910 (Minn.1990). However, for the reasons stated in this opinion, we hold that the district court abused its discretion by denying appellants' motion for a new trial. Accordingly, we reverse and remand for a new trial.

I.

Appellants argue that the district court committed reversible error in making certain evidentiary rulings and selecting the language in the jury instructions because the district court failed to follow established case law. Generally, a district court has broad discretion in making evidentiary rulings and selecting language in jury instructions. See Kroning v. State Farm Auto. Ins. Co., 567 N.W.2d 42, 45-46 (Minn.1997)

(question of whether to admit or exclude evidence is within district court's discretion); Alholm v. Wilt, 394 N.W.2d 488, 490 (Minn.1986) (allowing trial court's considerable latitude in determining jury instructions). Nevertheless, a trial court is bound to follow established case law in rendering decisions with regard to the admission or exclusion of evidence and selecting the language in jury instructions. See Greenbush State Bank v. Stephens, 463 N.W.2d 303, 306 n. 1 (Minn.App.1990),

review denied (Minn. Feb. 4, 1991) (district courts must decide issues in manner consistent with case law).

A. Fiduciary Duty

Appellants argue that the district court committed reversible error when it (1) failed to instruct the jury that an insurer has a fiduciary duty to its insured, and (2) made evidentiary rulings that failed to take into consideration the fiduciary relationship between an insured and its insurer. An "insurer owes a fiduciary duty to the insured to represent his or her best interests and to defend and indemnify." Short v. Dairyland Ins. Co., 334 N.W.2d 384, 387 (Minn.1983). More importantly, an

insurer's right to control the negotiations for settlement must be subordinated to the purpose of the insurance contract—to defend and indemnify the insured within the limits of the insurance contract.

Id.

Here, the district court stated that the term "fiduciary duty" in Short was dicta and, therefore, the term was excluded from all aspects of the trial, including expert testimony and jury instructions. See Pecinovsky v. AMCO Ins. Co., 613 N.W.2d 804, 808 (Minn.App.2000),

review denied (Minn. Sept. 26, 2000) (dicta not controlling). We disagree with the district court.

Dicta are expressions in a court's opinion that go beyond the facts before the court and therefore are the individual view of the author of the opinion and not binding in subsequent cases.

Id. (quoting K.R. v. Sanford, 588 N.W.2d 545, 548 (Minn.App.1999), aff'd, 605 N.W.2d 387 (Minn.2000)). The statement in Short that an insurer has a fiduciary duty is more than mere dicta because (1) the issue...

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