Reinhardt v. Milwaukee Mut. Ins. Co.

• Decision Date: 06 December 1994
• Docket Number: No. C8-94-1326,C8-94-1326
• Parties: Leonard E. REINHARDT, Appellant, v. MILWAUKEE MUTUAL INSURANCE COMPANY, Respondent.
• Court: Minnesota Court of Appeals

Page 531

524 N.W.2d 531

Leonard E. REINHARDT, Appellant, v. MILWAUKEE MUTUAL INSURANCE COMPANY, Respondent.

No. C8-94-1326.

Court of Appeals of Minnesota.

Dec. 6, 1994.

Review Denied Feb. 14, 1995.

Syllabus by the Court

Where insurance policy has a litigation clause, rather than an arbitration clause, UIM insurer with notice of opportunity to intervene in tort action is bound by determination of damages in that action.

Charles E. Mertensotto, Jill Johnson Sholts, Rowland & Mertensotto, St. Paul, for appellant.

Marianne Settano, Roseville, for respondent.

Considered and decided by DAVIES, P.J., and AMUNDSON and THOREEN, ^* JJ.

OPINION

DAVIES, Judge.

Appellant, an underinsured motorist (UIM), argues that the district court erred in denying his motion for summary judgment when he had, with the insurer's knowledge, established by jury trial the amount he is "legally entitled to recover" from the tortfeasor. Appellant also claims postjudgment interest. We vacate the judgment and remand.

FACTS

In January 1988, appellant Leonard Reinhardt was driving a van owned by Supreme Electric, Inc., when the van was struck by a car driven by Joseph Kieffer. Kieffer was insured by Minnesota Mutual for $100,000 per accident. Supreme Electric had $300,000 of UIM coverage through respondent Milwaukee Mutual Insurance Company (Milwaukee). Appellant had another $300,000 of UIM coverage, also through Milwaukee, under his personal car policy.

Kieffer was killed instantly and his passenger later died from her injuries. Appellant and his seven passengers (four of them Reinhardts) were injured. The other Reinhardt family members individually sued Kieffer's personal representative, Supreme Electric, and appellant Reinhardt.

Reinhardt himself hired outside counsel and brought a motion for leave to assert a cross-complaint for personal injury damages against Kieffer's personal representative. Milwaukee received notice of the motion and did not object to the filing of the cross-complaint in one of the Reinhardt tort actions. Reinhardt's damages became an additional fact question in the consolidated trial that followed.

Milwaukee defended appellant Reinhardt and Minnesota Mutual defended Kieffer's estate through a seven-day trial, at which the jury found in favor of the plaintiffs, including Reinhardt. After deducting (as a collateral offset) medical benefits paid by Milwaukee, and adding costs and disbursements, Reinhardt's judgment against Kieffer was $274,311.78. This judgment exceeded the money available from Kieffer's insurer and estate, giving rise to a UIM claim against Milwaukee, apparently in the amount of $185,198.45. ¹

Milwaukee denied Reinhardt's UIM claim, alleging that the issue of its UIM liability must be determined in a separate trial; Reinhardt, therefore, brought this action against Milwaukee, asserting that the amount of his tort damages (and thus his UIM claim) had been established in the prior tort action. He moved for summary judgment, relying on Employers Mutual Companies v. Nordstrom, 495 N.W.2d 855 (Minn.1993). The district court denied Reinhardt's motion, stating that applying Nordstrom would deprive Milwaukee of its due process right to present the question of damages to a fact-finder.

The issue of UIM liability was then tried to the court, which found that Reinhardt had in fact sustained total damages of only $15,000, rather than $274,311.78, the amount of the earlier judgment. This left no tort damages unpaid, and resulted in no UIM liability. This appeal followed.

ISSUES

I. Did the district court err in determining that the judgment in the prior tort action did not conclusively establish the amount of damages Reinhardt was legally entitled to recover?

II. If the initial judgment determines appellant's damages, is appellant entitled to recover postjudgment interest from the date of that judgment?

ANALYSIS

Reinhardt challenges the district court's denial of his summary judgment motion. Appeal of a denial of a motion for summary judgment is properly taken from a subsequent judgment. Kronzer v. First

Nat'l Bank of Mpls., 305 Minn. 415, 417 n. 1, 235 N.W.2d 187, 189 n. 1 (1975).

I.

A. Is Second Trial Required?

The Milwaukee policy provides:

Determination whether an insured person is legally entitled to recover damages or the amount of damages shall be made by agreement between the insured person and us. If no agreement is reached, the decision will be made by litigation.

(Emphasis in original eliminated; new emphasis added.)

Milwaukee contends that the first trial did not establish the amount Reinhardt is "legally entitled to recover," arguing that the policy language "by litigation" entitles it to an additional trial on the issue of damages.

The parties' arguments center around the final paragraph of the supreme court's opinion in Employers Mutual Companies v. Nordstrom, 495 N.W.2d 855, 858 (Minn.1993):

One last comment is in order here. Claimant Nordstrom asserts that if a court trial results in a judgment in excess of liability policy limits, the amount of underinsured motorist benefits would still have to be arbitrated. She cites no authority for this proposition, and the proposition is incorrect. The typical underinsured contract provides, "We will pay damages which an insured is legally entitled to recover from the owner or operator of an [underinsured motor vehicle]." (Emphasis added.) The tort judgment establishes conclusively the damages to which the claimant is "legally entitled"; if such damages exceed the tort insurance limits, the excess is payable by the underinsurer to the extent of its coverage without the need for arbitration. The underinsurer pays, not because it is estopped by the judgment, but because it has contractually agreed to pay the judgment less the tort liability insurance recovery.

(Citation omitted.)

Milwaukee argues that this statement suggests a "substantial departure" from Minnesota UIM law and is only dictum. We agree the statement is dictum, but think, to the extent it may suggest a change in Minnesota law, the change is in arbitration practice and not directly applicable to this case. Thus, it is not bothersome for the purposes of this appeal either that the statement is dictum or that Nordstrom was released after trial in the original tort action here.

Milwaukee relies on Milwaukee Mut. Ins. v. Currier, 310 Minn. 81, 245 N.W.2d 248 (1976), to argue that the Nordstrom dictum represented a "substantial departure" from the way UIM law had previously been practiced in Minnesota. In Currier, the issue was whether a defendant could be enjoined from proceeding with arbitration after a prior jury verdict became conclusive as to Currier's damages. Id. at 82, 245 N.W.2d at 250. Currier held the insurer could not rely on the jury verdict because it was bound by its agreement to arbitrate the claim. Id.

It is decisive that the policy in this case gives the parties a right to litigation, not arbitration. Thus, the cases based on Currier are distinguishable because they involve arbitration, rather than litigation, clauses. See Liberty Mut. Ins. v. American Family Mut. Ins., 463 N.W.2d 750, 751 (Minn.1990) (insured entitled to arbitrate UIM claim even after jury trial); National Indemnity v. Farm Bureau Mut. Ins., 348 N.W.2d 748, 749 (1984) ("Arbitrators * * * are not bound by the factual findings of a jury in a prior tort action."); Arney v. American Family Ins., 429 N.W.2d 271, 273 (Minn.App.1988) (arbitration "must run its course" even where insurer's subrogation rights effectively eliminated by jury verdict); Benson v. Johnson, 392 N.W.2d 890, 898 (Minn.App.1986) (jury verdict "would be accorded whatever weight the arbitrators deem justified"); Eckblad v. Farm Bureau Mut. Ins., 371 N.W.2d 78, 79 (Minn.App.1985) ("A jury verdict does not bar the parties from proceeding to arbitration."), pet. for rev. denied (Minn. Sept. 26, 1985).

Significantly, in the only case citing Currier that involved a subsequent court action, rather than an arbitration proceeding, the court held that estoppel barred the right to Based on our reading of these cases, we do not agree with Milwaukee that Nordstrom represents a relevant departure from existing case law, though it may presage a "radical departure" from existing case law (Currier ) relating to arbitration practice, as we therefore conclude the insurer is not entitled to relitigate the issue of damages. The amount of damages has been determined by litigation; Milwaukee is bound by the first judgment and is not entitled to a second bite at the apple. ³

relitigate. Aufderhar v. Data Dispatch, Inc., 452 N.W.2d 648, 649 (Minn.1990). ²

B. Due Process

Milwaukee also argues that applying Nordstrom here would (1) deprive it of its constitutional rights to a jury trial and to be heard, (2) be contrary to public policy, and (3) conflict with established rules of insurance policy...