Wangler v. Lerol

Decision Date13 November 2003
Docket NumberNo. 20030066.,20030066.
Citation2003 ND 164,670 N.W.2d 830
PartiesDean WANGLER, Plaintiff and Appellant, v. Ron LEROL and Farmers Union Mutual Insurance Company, Defendants and Appellees.
CourtNorth Dakota Supreme Court

Bryan L. Van Grinsven (argued) and Jennifer Neigum-Stanley (appeared), appearing under the Rule on the Limited Practice of Law by Law Students, McGee, Hankla, Backes & Dobrovolny, Minot, N.D., for plaintiff and appellant.

E. Thomas Conmy III (argued) and Mark R. Hanson (on brief), Nilles, Hansen & Davies, Ltd., Fargo, N.D. for defendant and appellee Ron Lerol.

Carlton J. Hunke (argued) and Leah Marie Warner (on brief), Fargo, N.D., for defendant and appellee Farmers Union Mutual Insurance Company.

SANDSTROM, Justice.

[¶ 1] Dean Richard Wangler appealed from a judgment awarding him $2,531.77 plus costs and disbursements from Ronald Orvin Lerol, but dismissing the remaining claims against Lerol and Farmers Union Mutual Insurance Company in his action arising out of an injury Wangler suffered during the course of his employment at Pine Ridge Company. We conclude the district court did not err in granting summary judgment dismissing Wangler's claim that Lerol and Farmers Union are equitably estopped from denying insurance coverage under the circumstances, and we affirm that part of the judgment. We further conclude the court erred in ruling Wangler's Miller-Shugart settlement agreement with the alleged tortfeasor, Pine Ridge, released Pine Ridge from any liability for Wangler's personal injuries, thus making an assignment of its negligence claim against Lerol and Farmers Union ineffective. We reverse the judgment insofar as it dismisses Wangler's negligence claim against Lerol and Farmers Union, and we remand for further proceedings.

I

[¶ 2] Wangler was employed by Pine Ridge, a corporation engaged in turkey farming, located near Rugby and partially owned by T.M. Snortland. The turkey farm was located on land owned by Snortland and his sister, Laura Fairfield. Lerol is an insurance agent who sold Farmers Union insurance policies to Pine Ridge, Snortland, and Fairfield.

[¶ 3] On August 5, 1998, Wangler was injured while working at Pine Ridge. In July 1999, Wangler brought a negligence action against Pine Ridge, which did not carry workers compensation insurance. Pine Ridge submitted a claim through Lerol to Farmers Union, and Farmers Union assumed the defense of Pine Ridge under a reservation of rights in a farm liability policy that had been purchased through Lerol. Although the farm liability policy included coverage for employee liability claims, only Snortland and Fairfield were named insureds, and not Pine Ridge. After determining that Pine Ridge was not covered under an additional farmowners property policy or a farm umbrella policy issued through Lerol, Farmers Union withdrew its defense of Pine Ridge in Wangler's action.

[¶ 4] After Farmers Union denied coverage, Pine Ridge sued Lerol and Farmers Union in October 1999 to recover damages it may have to pay as a result of Wangler's personal injury action. Pine Ridge claimed Lerol negligently failed to procure employee liability insurance for Pine Ridge and claimed Farmers Union was vicariously liable for the acts and omissions of its insurance agent, Lerol, under principles of respondeat superior.

[¶ 5] In March 2000, Wangler and Pine Ridge entered into a Miller-Shugart settlement agreement. In McPhee v. Tufty, 2001 ND 51, ¶ 10 n. 1, 623 N.W.2d 390, we explained a Miller-Shugart agreement:

Under Miller v. Shugart, 316 N.W.2d 729 (Minn.1982), an insured defendant may settle a plaintiff's claims and stipulate judgment may be collected only from the proceeds of an insurance policy. See Medd v. Fonder, 543 N.W.2d 483, 485 (N.D.1996)

. The stipulated judgment is not conclusive on the insurer, and the plaintiff judgment creditor has the burden of showing the settlement was reasonable and prudent. See Rebel v. Nodak Mut. Ins. Co., 1998 ND 194, ¶ 5 n. 1, 585 N.W.2d 811.

[¶ 6] The agreement here provided that Pine Ridge "stipulates to a judgment against it, and in favor of [Wangler], in the amount of $200,000.00"; Wangler "will in no way seek to collect this judgment from [Pine Ridge]"; the "judgment is explicitly not satisfiable by attachment nor shall it become a lien upon any of the assets of [Pine Ridge]"; Wangler "will only seek to satisfy this judgment from Farmers Union"; and "[i]f called upon by [Pine Ridge], [Wangler] will cause to be delivered a release or Quit Claim Deed or other document as to the property of [Pine Ridge] affected by the judgment, with the sole exception of liability which may be found to attach to the policy of insurance issued by Farmers Union." Pine Ridge agreed to "assign[] to [Wangler] its rights to pursue insurance coverage from Farmers Union... for the judgment either by garnishment, declaratory judgment action, or otherwise." In a separate document, Pine Ridge also assigned to Wangler "all of its right, title, interest, claim, and demand" in its negligence action against Lerol and Farmers Union. [¶ 7] In August 2001, the district court granted partial summary judgment in favor of Lerol and Farmers Union. The court ruled the Miller-Shugart agreement had released Pine Ridge from any monetary liability for Wangler's bodily injuries, resulting in a lack of necessary damages from Lerol's alleged errors and omissions in failing to procure insurance coverage to support the negligence action. The court also ruled, because Lerol could not be liable, Farmers Union could not be liable under a respondeat superior theory. The court concluded, however, that Wangler could recover the costs and expenses Pine Ridge incurred in defending his lawsuit. The court also allowed Wangler to be substituted as a party in Pine Ridge's action against Lerol and Farmers Union, and permitted Wangler to amend the complaint to allege Farmers Union was estopped from denying that it had issued an insurance policy to Pine Ridge providing coverage for Wangler's injuries because Lerol had represented to Pine Ridge that it had employee liability coverage.

[¶ 8] In January 2003, the district court granted summary judgment dismissing Wangler's remaining claim that Farmers Union was estopped from denying insurance coverage in this case. The court ruled "as a matter of law the statements made in this case are insufficient to create coverage which otherwise did not exist." The court awarded Wangler $2,531.77 plus costs and disbursements against Lerol for the costs and expenses incurred by Pine Ridge in defending Wangler's personal injury action, and dismissed the remainder of the claims.

[¶ 9] The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27-05-06. Wangler's appeal was timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, § 2, and N.D.C.C. §§ 27-02-04 and 28-27-01.

II

[¶ 10] Summary judgment is a procedure for the prompt and expeditious disposition of a controversy without trial if either party is entitled to judgment as a matter of law, if no dispute exists as to either the material facts or the inferences to be drawn from undisputed facts, or if resolving factual disputes would not alter the result. Grinnell Mut. Reinsurance Co. v. Center Mut. Ins. Co., 2003 ND 50, ¶ 9, 658 N.W.2d 363. On appeal, we review the evidence in the light most favorable to the party opposing the summary judgment motion. Ramey v. Twin Butte Sch. Dist., 2003 ND 87, ¶ 7, 662 N.W.2d 270. Factual issues become appropriate for summary judgment when reasonable minds can draw but one conclusion from the evidence. Jones v. Barnett, 2000 ND 207, ¶ 4, 619 N.W.2d 490.

A

[¶ 11] Wangler does not claim any of the Farmers Union insurance policies as written provide coverage for his injuries. Rather, Wangler argues Pine Ridge has an employee liability insurance contract with Farmers Union based on representations made by its agent, Lerol. Wangler argues the district court improperly granted summary judgment dismissing his claim that Farmers Union is estopped from denying coverage under the circumstances.

[¶ 12] This Court has said the doctrines of waiver and estoppel will not operate to create an insurance contract that never existed. See National Farmers Union Prop. & Cas. Co. v. Michaelson, 110 N.W.2d 431, 438-39 (N.D.1961)

; Conklin v. North Am. Life & Cas. Co., 88 N.W.2d 825, 831 (N.D.1958). This is the majority rule. See Annot., Doctrine of estoppel or waiver as available to bring within coverage of insurance policy risks not covered by its terms or expressly excluded therefrom, 1 A.L.R.3d 1139, 1144 (1965). Other courts have recognized exceptions to the rule, and Wangler relies on an exception requiring that he prove "(1) `a misrepresentation as to the fact or extent of coverage, innocent or otherwise, by the insurer or its agent, and (2) reasonable reliance by the insured thereon to his ultimate detriment.'" Countryside Oil Co., Inc. v. Travelers Ins. Co., 928 F.Supp. 474, 481 (D.N.J.1995) (quoting Martinez v. John Hancock Mut. Life Ins. Co., 145 N.J.Super. 301, 367 A.2d 904, 911 (Ct.App.Div. 1976)). Even if we were to recognize this exception to the general rule, we agree with the district court that Wangler has failed to raise a genuine issue of material fact to support his claim.

[¶ 13] Wangler relies on an affidavit of Snortland, one of the owners of Pine Ridge, who said it was "my understanding that Pine Ridge employees were covered under the liability policy as well as the umbrella policy in place." Snortland stated:

Mr. Lerol conducted an annual review of insurance policies with me. During those reviews we discussed my personal insurance as well as business coverage, including Pine Ridge. On each occasion, I asked Mr. Lerol, "Now, we're covered aren't we?" At no time did he indicate that there was no liability insurance coverage for Pine Ridge. Relying on Mr. Lerol's representations, no separate
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