Ziegler v. Meadowbrook Insurance Group, Inc.

• Decision Date: 17 November 2009
• Docket Number: No. 20090141.,20090141.
• Citation: 774 N.W.2d 782,2009 ND 192
• Parties: James ZIEGLER, d/b/a Lake Region Livestock, Plaintiff and Appellee v. MEADOWBROOK INSURANCE GROUP, INC. and Star Insurance Company, Defendants and Appellants.
• Court: North Dakota Supreme Court

774 N.W.2d 782

2009 ND 192

James ZIEGLER, d/b/a Lake Region Livestock, Plaintiff and Appellee v.MEADOWBROOK INSURANCE GROUP, INC. and Star Insurance Company, Defendants and Appellants.

No. 20090141.

Supreme Court of North Dakota.

November 17, 2009.

Daniel Mack Traynor, Devils Lake, N.D., for plaintiff and appellee.

Gary R. Wolberg, Bismarck, N.D., for defendants and appellants.

CROTHERS, Justice.

[¶ 1]Meadowbrook Insurance Group, Inc. and Star Insurance Company appealed from an order for partial summary judgment: (1) denying Meadowbrook's motion to dismiss an action for a declaratory judgment by James Ziegler, doing business as Lake Region Livestock; (2) determining Star had a duty to defend and indemnify Ziegler in an underlying lawsuit under an insurance policy issued by Star; and (3) granting Ziegler's request for further discovery to determine whether Meadowbrook was a real party in interest.We hold the order is not appealable, and we dismiss the appeal.

I

[¶ 2] Star issued Ziegler a Stockyard Services insurance policy providing Ziegler with coverage for the "sale and/or purchase by [Ziegler] of livestock consigned for sale and sold by him upon which there was a valid mortgage or lien, where the payment of the net proceeds of such sale was diverted to use other than the application as payment of such valid mortgage or lien."Dakota West Credit Union sued Ziegler, alleging that Ziegler was a middleman in a "sham" cattle sale transaction involving Todd Horob and Horob's businesses, H & J Livestock, LLC, and Horob Livestock, Inc. Dakota West claimed Ziegler's participation in the sham transaction as a middleman between Horob Livestock and H & J Livestock resulted in Dakota West's inability to recover on a $950,000 loan to H & J Livestock for the purchase of the cattle.Dakota West alleged Ziegler's conduct constituted negligence, fraud, constructive fraud, deceit and civil conspiracy.

[¶ 3] Ziegler asked Star and Meadowbrook to defend and indemnify him in Dakota West's lawsuit.After his request was denied, Ziegler brought this declaratory judgment action against Star and Meadowbrook, alleging they had a duty to defend and indemnify him in Dakota West's action.Ziegler also alleged Star and Meadowbrook had a duty to defend and indemnify Ziegler for claims by a Montana Bankruptcy Trustee in Horob's bankruptcy proceeding.Ziegler further alleged Star and Meadowbrook breached an implied covenant of good faith and fair dealing and their conduct constituted an anticipatory breach or repudiation of the insurance contract.

[¶ 4] Star and Meadowbrook answered, claiming no duty existed to defend or indemnify Ziegler under the Stockyard Services insurance policy because coverage under the policy was not triggered by a sale or consignment.Star and Meadowbrook also claimed that Star had denied Ziegler's request for coverage and that Meadowbrook was not a real party in interest.According to a Star senior claims representative, Star is a wholly-owned subsidiary of Meadowbrook, Meadowbrook does business only through its wholly-owned subsidiaries, Meadowbrook does not itself insure any person or companies, and Star issued the Stockyards Services policy to Ziegler.

[¶ 5] Star and Meadowbrook sought summary judgment dismissal of the declaratory judgment action, claiming no coverage existed under the policy because there was not a bona fide consignment sale of livestock.Ziegler sought partial summary judgment, claiming Star and Meadowbrook had a duty to defend and indemnify Ziegler under the Stockyard Services policy.Ziegler's attorney submitted an affidavit stating that "[i]n order to bring the coverage issue to the Court before any trial in the underlying claim against Ziegler brought by Dakota West Credit Union, the parties have informally agreed to delay discovery on the issues of bad faith and other claims made in the above matter."Ziegler's attorney further stated he had "not examined the relationship between the insurer, Star, and the company that handled the claim, Meadowbrook," and he asked the court to withhold any decision on the bad-faith claim and to deny the motion to dismiss Meadowbrook pending further discovery.

[¶ 6]The district court granted partial summary judgment for Ziegler, concluding Star had a duty to defend and indemnify Ziegler in Dakota West's underlying action.The court denied the motion to dismiss Meadowbrook, concluding further discovery was necessary to determine whether Meadowbrook was a real party in interest.The court did not resolve Ziegler's other claims against Star and Meadowbrook.Star and Meadowbrook appealed.

II

[¶ 7] Ziegler moved to dismiss this appeal, arguing the district court's order granting partial summary judgment is not appealable.Star and Meadowbrook concede there are issues remaining to be decided in this action and the district court's order is interlocutory.They argue, however, this Court should allow direct appeals of insurance coverage decisions because the unique nature of the decision makes it particularly important for immediate appellate review.They argue the expense, time and judicial resources devoted to cases involving insurance claims justify direct appeals of coverage decisions.They claim N.D.C.C. § 32-23-06 evinces a legislative intent for prompt determination of coverage issues.

[¶ 8]Chapter 32-23, N.D.C.C., authorizes a "court of record within its jurisdiction" to issue a declaratory judgment.N.D.C.C. § 32-23-01.Section 32-23-06, N.D.C.C., provides:

"The court may refuse to render or enter a declaratory judgment or decree where such judgment or decree, if rendered or entered, would not terminate the uncertainty or controversy giving rise to the proceeding.However, the court shall render or enter a declaratory judgment or decree in an action brought by or against an insurance company to determine liability of the insurance company to the insured to defend, or duty to defend, although the insured's liability for the loss may not have been determined."

(Emphasis added.)

[¶ 9] In Blackburn, Nickels & Smith, Inc. v. National Farmers Union Prop. & Cas. Co.,452 N.W.2d 319, 321-23(N.D.1990), this Court considered the effect of the 1983enactment of the underscored language on declaratory judgments involving an insurer's duty to defend.We said the 1983enactment reversed this Court's decisions in United Pac. Ins. Co. v. Aetna Ins. Co.,311 N.W.2d 170(N.D.1981), andAberle v. Karn,316 N.W.2d 779(N.D.1982), which held that neither coverage, nor duty to defend could be judicially resolved until the insured's liability had been determined.Blackburn, Nickels,at 323.We construed the 1983enactment to require a district court"to render a declaratory judgment to determine both coverage and duty to defend, whether or not the insured's liability has been determined."Id.(footnote omitted).

[¶ 10] Under N.D.C.C. ch. 32-23, the provisions of N.D.C.C. § 32-23-06 apply to courts acting within their jurisdiction, but nothing in the language of that statute nor the legislative history for the 1983amendment to that statute makes that provision applicable to appeals.Rather, N.D.C.C. § 32-23-07 explicitly provides that "[a]ll orders, judgments, and decrees under [N.D.C.C. ch. 32-23] may be reviewed as other orders, judgments, and decrees."We have said that "[o]n appeal, declaratory judgment actions are reviewed under the same standards as other cases."Ramsey County Farm Bureau v. Ramsey County,2008 ND 175, ¶ 5, 755 N.W.2d 920.We reject the appellants' argument that this Court should allow immediate appeals of interlocutory decisions about insurance coverage under N.D.C.C. ch. 32-23 because the plain language of N.D.C.C. § 32-23-07 requires "review[] as other orders, judgments, and decrees."Words in a statute are given their plain, ordinary and commonly understood meaning.N.D.C.C. § 1-02-02.Statutes are construed as a whole and are harmonized to give meaning to related provisions.SeeN.D.C.C. § 1-02-07.We construe the related provisions of N.D.C.C. ch. 32-23 together according to their plain, ordinary and commonly understood meaning, and we hold that appeals in declaratory judgment actions are governed by jurisprudence for appeals of other orders, judgments and decrees.

[¶ 11]"The right of appeal is governed solely by statute in this state."Mann v. North Dakota Tax Comm'r,2005 ND 36, ¶ 7, 692 N.W.2d 490.We follow "a well-established, two-prong inquiry ... when analyzing the jurisdiction of this court to consider appeals from orders in cases where there are unadjudicated claims remaining to be resolved by the trial court."Central Power Elec. Coop., Inc. v. C-K, Inc.,512 N.W.2d 711, 714(N.D.1994).In Mann,we explained:

"First, the order appealed from must meet one of the statutory criteria of appealability set forth in NDCC § 28-27-02.If it does not, our inquiry need go no further and the appeal must be dismissed.If it does, then Rule 54(b), NDRCivP, must be complied with.If it is not, we are without jurisdiction."

Mann,at ¶ 7(quotingDietz v. Kautzman,2004 ND 164, ¶ 6, 686 N.W.2d 110).

[¶ 12]The appellants have not cited any provisions of N.D.C.C. § 28-27-02, which they claim authorizes their appeal.Section 28-27-02, N.D.C.C., provides:

"The following orders when made by the court may be carried to the supreme court:

1.An order affecting a substantial right made in any action, when such order in effect determines the action and prevents a judgment from which an appeal might be taken;

2.A final order affecting a substantial right made in special proceedings or upon a summary application in an action after judgment;

3.An order which grants, refuses, continues, or modifies a provisional remedy, or grants, refuses, modifies, or dissolves an injunction or refuses to modify or dissolve an injunction, whether such injunction was issued in an action or special proceeding or pursuant to the provisions of ...