Rued Ins., Inc. v. Blackburn, Nickels & Smith, Inc.

• Decision Date: 13 February 1996
• Docket Number: No. 950204,950204
• Citation: 543 N.W.2d 770
• Court: North Dakota Supreme Court
• Parties: RUED INSURANCE, INC., Plaintiff and Appellant, v. BLACKBURN, NICKELS & SMITH, INC., Defendant and Appellee. Civil

Page 770

543 N.W.2d 770

RUED INSURANCE, INC., Plaintiff and Appellant, v. BLACKBURN, NICKELS & SMITH, INC., Defendant and Appellee.

Civil No. 950204.

Supreme Court of North Dakota.

Feb. 13, 1996.

Brent J. Edison, of Zuger Kirmis & Smith, Bismarck, for plaintiff and appellant.

Barry L. Blomquist, Jr., of Blomquist & Espeset, Minneapolis, for defendant and appellee. Appearance by Michael G. Sturdevant, of Kenner Sturdevant, P.C., Minot.

VANDE WALLE, Chief Justice.

Rued Insurance, Inc. (Rued) appealed from a summary judgment dismissing its tort action for damages against Blackburn, Nickels & Smith, Inc. (BNS). We hold there is a triable issue of fact whether the negligent failure of BNS to procure insurance coverage for one of Rued's clients was a proximate cause of Rued's damages. We reverse the summary judgment dismissal of Rued's claim against BNS and remand for a trial on the merits.

We detailed the facts underlying this litigation in Blackburn, Nickels & Smith, Inc. v. National Farmers Union Property & Casualty Co., 482 N.W.2d 600 (N.D.1992), and we will briefly restate only those facts necessary to an understanding of this appeal. On April 16, 1985, Scott Smith, d/b/a Smitty's Lawn Service (Smith), requested Rued to provide him with liability insurance coverage for his commercial lawn spraying business and for his vehicles. Smith gave Rued's agent a premium down payment and received a Certificate of Insurance showing that Smith had coverage with Aetna Casualty & Surety Company (Aetna) until April 1, 1986. A few days later Rued's agent contacted an Aetna underwriter, who told her Aetna would not provide commercial liability insurance for Smith because of the dangerous chemicals used in the business but that, as a courtesy to Smith, Aetna would provide temporary automobile liability insurance coverage for Smith, but not beyond June 1, 1985. Rued then submitted an application to BNS, a speciality insurance broker, requesting that BNS place insurance coverage with another carrier for Smith. However, Rued did not amend the Certificate of Insurance it had given Smith, nor did Rued give Aetna a copy of the insurance certificate or otherwise advise Aetna about the status of Smith's insurance coverage.

On October 7, 1985, one of Smith's business vehicles, while being driven by an employee, collided with another vehicle. The passengers in the other vehicle were injured and filed an action against Smith and the driver. Aetna denied coverage for the accident, and Smith then sued Rued, alleging Rued had breached its duty to procure liability insurance for Smith. As a consequence of settlement, all pending lawsuits were dismissed with prejudice except for Rued's action against BNS. That suit was dismissed without prejudice so BNS could bring a declaratory judgment action against Aetna. On appeal, this court held that Smith acquired liability insurance coverage with Aetna when Rued issued the Certificate of Insurance to Smith. We also held that Rued breached its contractual duty to keep Aetna informed about the insurance coverage issued to Smith, and, for that reason, had to indemnify Aetna for all amounts paid to Smith. Blackburn, 482 N.W.2d at 604-605.

Rued then sued BNS, alleging BNS negligently failed to procure insurance coverage for Smith, and sought, as damages, reimbursement of the amount Rued was required to indemnify Aetna. BNS moved for summary judgment dismissal, conceding for purposes of the motion that it had assumed a duty to procure insurance coverage for Smith and that it breached its duty. However, BNS asserted it was entitled to a dismissal of Rued's claim, because the failure to procure insurance coverage for Smith was not a proximate cause of Rued's damages. The trial court agreed, concluding, as a matter of law, that Rued's failure to keep Aetna informed about Smith's insurance coverage was the sole proximate cause of Rued's damages. The court summarily dismissed the action, and Rued appealed.

In its brief, BNS asserts, "Rued is estopped from denying that the sole reason it had to indemnify Aetna was because of its breach of its agency contract with Aetna." BNS argues the ultimate issue of who should bear the final responsibility for Smith's damages was resolved in the declaratory judgment action and, therefore, Rued is now estopped from litigating its negligence claim against BNS. We find BNS's assertion to be both misleading and unpersuasive. Rued initially sued BNS in negligence and, by agreement of the parties, that claim was dismissed, without prejudice, so BNS could bring a declaratory judgment action to determine potential liability of Aetna and of National Farmers Union Property and Casualty Company. During the proceedings for the declaratory judgment action, the trial court entered an order on April 15, 1991, stating in relevant part:

"That the trial of any claims by Rued Insurance, Inc. against Blackburn, Nickels & Smith, Inc. as originally asserted in Ward county Civil No. 54197 will be deferred until the completion of the trial on all other issues...."

In its ultimate resolution of the declaratory judgment action, the trial court made the following specific finding:

"Rued's claims against BNS were not litigated in this action. However, Aetna presented correspondence between Rued and BNS to support Aetna's counterclaim against BNS for contribution and indemnity. This correspondence did not establish the same degree of...