Runia v. Marguth Agency, Inc.

• Decision Date: 17 March 1989
• Docket Number: No. C2-87-1433,C2-87-1433
• Parties: Beth Becker RUNIA, et al., Respondents, v. MARGUTH AGENCY, INC., et al., petitioners, Appellants.
• Court: Minnesota Supreme Court

Page 45

437 N.W.2d 45

Beth Becker RUNIA, et al., Respondents, v. MARGUTH AGENCY, INC., et al., petitioners, Appellants.

No. C2-87-1433.

Supreme Court of Minnesota.

March 17, 1989.

Syllabus by the Court

1. The trial court's finding that defendants' negligent misrepresentation of full coverage was a proximate cause of plaintiff's damages is not clearly erroneous.

2. Defendants in a second lawsuit are not bound by the judgment in the first lawsuit to which they were neither privy nor a party. A new trial on damages is ordered.

Marianne Settano, Minneapolis, for petitioners, appellants.

William R. Sieben, Minneapolis, for respondents.

Heard, considered and decided by the court en banc.

WAHL, Justice.

This is an appeal by Marguth Agency and Jack L. Smith from an order of the Redwood County District Court denying their motion for a new trial or amended findings of fact in a suit for negligent procurement of insurance. The court of appeals held the trial court did not err in its determinations on negligence, causation and damages, nor in its decision to admit expert testimony. The case was presented to this court as a challenge to the constitutionality of unconditional additur in Minnesota. We see the decisive question to be whether these defendants in a second lawsuit are bound by damages found in a first lawsuit to which they were neither privy nor a party. Holding they are not bound, but finding negligence properly attributed to defendants for misrepresenting coverage provided, we reverse in part and remand for a new trial on damages.

On January 13, 1983, respondent Beth Becker Runia was injured when the snowmobile on which she was riding as a passenger collided with a truck. The snowmobile was owned by her father, Robert Becker, and driven by her then-fiance, now husband, Roger Runia, a respondent in this action. ¹ Prior to loaning the snowmobile to his daughter for the winter, Robert Becker had contacted his insurance agent, Jack Smith of Marguth Agency, and requested coverage for himself, his daughter, and anyone else who might use the snowmobile. Smith was aware that Beth Becker Runia lived away from home, both because Robert Becker so informed him and because he had written the insurance on her mobile home in Granite Falls. Smith indicated that he could provide the requested coverage and attached an endorsement to Robert Becker's homeowner's policy.

After the accident Beth Becker brought a negligence action against Roger Runia and the truck driver, Larry Hills. Roger Runia tendered defense of the action against him to State Automobile and Casualty Underwriters under Robert Becker's homeowner's insurance policy, claiming he was an insured under that policy. State Auto commenced a declaratory judgment action to determine whether the homeowner's endorsement provided coverage for Roger Runia's liability to Beth Becker Runia. The trial court held that application of the Safety Responsibility Act, Minn.Stat. Sec. 170.54 (1988), to the policy definition of "insured" resulted in no coverage. The court of appeals affirmed the trial court's determination that the insurer had no duty to defend or indemnify Roger Runia. State Automobile & Casualty Underwriters v. Runia, 363 N.W.2d 818 (Minn.App.1985).

The personal injury suit then went to trial. The jury determined that Roger Runia was 100% at fault for the accident and assessed Beth Becker Runia's damages at $56,000. Beth Becker Runia's attorney moved for additur. The defendants each received notice of the motion. Hills, having been found 0% negligent, was not liable for any judgment and Roger Runia was unrepresented by counsel and was uninsured. Consequently, neither participated in the unrecorded telephone conference on the motion between Beth Becker Runia's attorney and the trial court. The trial court granted an unconditional additur raising the damage judgment to $250,000. Becker v. Runia, Dist.Ct. File No. C-83-172 (1985).

Subsequently, Beth Becker Runia, Roger Runia and Robert Becker filed this suit against Marguth Agency and Jack Smith, alleging that Smith and Marguth failed to provide adequate coverage to fulfill Becker's specific request for coverage and that they negligently failed to properly represent the coverage they did provide. ² A pre-trial motion was heard to determine whether the damage amount established in the personal injury suit should be adopted for this proceeding. The trial court found that the damage award could be collaterally attacked by the defendants but concluded that the unconditional additur was not unconstitutional in Minnesota. The court issued an order on April 22, 1987, adopting $250,000 as the proper measure of damages.

After a one-day bench trial on May 5, 1985, the trial court found Smith and Marguth negligent on two grounds: 1) in performing professional services in advising and counseling their client Becker without using the degree of skill, learning, and reasonable care normally possessed and used by insurance agents in good standing in a similar practice and under like circumstances; and 2) in negligently representing to Becker there was full coverage for his snowmobile under the recreational vehicle endorsement to the homeowners policy issued through them. The trial court then found the negligence of Smith and Marguth in failing to properly advise Becker regarding the insurance coverage on his snowmobile resulted in and was the proximate cause of Beth Becker Runia being unable to collect damages from Roger Runia for her injuries. The trial court ordered judgment against Smith and Marguth for $250,000.

The court of appeals affirmed the trial court's decision, finding the unconditional additur to be constitutional in Minnesota and within the trial court's discretion. Runia v. Marguth Agency, Inc., 420 N.W.2d 641 (Minn.App.1988). The appellate court rejected appellants' argued distinction between additurs and remitturs, concluding that each alters the jury's award and thereby deprives one party of the benefit of the jury's verdict. Id. at 644. The appellate court further noted that the determination of negligence was appropriate since the agent's representations led Robert Becker to lend the snowmobile and not to seek other coverage, and that expert testimony was properly taken at trial since the insurance policies introduced were ambiguous. Id. at 645. We granted further review.

The primary issue raised on appeal concerns damages--the propriety of appellants' being bound by the damages award in the prior personal injury suit and the constitutionality of the unconditional additur granted by the trial court in that case to raise the jury verdict of $56,000 to $250,000. Appellants also claim that the evidence does not support the trial court's findings of negligence and proximate cause.

I

We address first the sufficiency of the evidence to establish liability. If there is no liability, the issue of damages is moot. The case was tried to the court. The standard for review of a bench trial is broader than the standard for jury verdicts:

Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge the credibility of the witnesses.

Minn.R.Civ.P. 52.01.

The plaintiffs based their case, and tried it, on two separate and independent grounds: first, that Smith and Marguth failed to provide adequate coverage to fulfill Becker's specific request for coverage; and, second, that Smith negligently misrepresented the coverage that was provided. The trial court found liability on both grounds. Because we affirm the trial court's finding of liability on the ground of negligent misrepresentation, we need not reach the issue of whether Smith and Marguth's failure to provide adequate coverage to fulfill Becker's specific request was also a proximate cause of Beth Becker Runia's damages.

Negligent misrepresentation is grounds for liability in this state, even when the statement is the result of a mistake, Lewis v. Citizens Agency of Madelia, Inc., 306 Minn. 194, 198-199, 235 N.W.2d 831, 834 (1975). The evidence which supports the trial court's finding of negligent misrepresentation in this case shows that before he let his daughter take the snowmobile, Robert Becker met with Jack Smith to make sure it had adequate coverage. He informed Smith he was lending a snowmobile to his daughter Beth for her use in Granite Falls and he wanted full insurance coverage for the snowmobile. Smith, knowing of Beth's separate residence and knowing of her father's plans, assured Becker that the snowmobile had full liability coverage no matter who drove it.

Smith and Marguth argue that any misrepresentation found was not a proximate cause of Beth Becker Runia's inability to collect benefits from insurance. They assert that this case is controlled by Melin v. Johnson, 387 N.W.2d 230, 233 (Minn.App.1986), which requires plaintiffs to show the availability of more complete insurance coverage than was provided before collecting damages for misrepresentation. Reliance on Melin is misplaced under the facts and circumstances of this case.

Melin was an action against an insurance agent for failing to provide full medical coverage to a man who was uninsurable individually due to a pre-existing medical condition. The agent provided a group policy under which the plaintiff was partially covered, but failed to explain the limits on plaintiff's coverage. The court of appeals held that the agent had breached a duty to explain the coverage, but that since no more complete coverage was available it was not a proximate cause of plaintiff's loss. Melin, 387 N.W.2d at 232-33.

The case before us is distinguishable. Unlike the plaintiff in Melin, the plaintiffs here could elect not to engage in the uninsured activity. Had Jack Smith accurately represented the insurance coverage he sold to Robert Becker, Becker could, and testified he would, have refused to loan the snowmobile...