United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-3310

___________

Stan Koch & Sons Trucking, Inc., * 

*

Appellant, *

* Appeal from the United States

v. * District Court for the

* District of Minnesota.

Great West Casualty Company, *

* 

Appellee. *

___________

Submitted: September 27, 2007

Filed: February 28, 2008

___________

Before BENTON, BOWMAN, and SHEPHERD, Circuit Judges.

___________

SHEPHERD, Circuit Judge.

This appeal arises from a dispute over insurance coverage between an insured,

Stan Koch & Sons Trucking, Inc. (“Koch”), and its insurer, Great West Risk

Management, Inc. (“Great West”). Koch filed this action seeking a declaratory

judgment that Great West: (1) accepted coverage for a fatal motor vehicle accident not

covered by Koch’s Trucker’s Liability Insurance Policy (the “Policy”) and (2)

breached the fiduciary duty that it owed Koch by settling a personal injury claim

arising out of the accident, and that Koch is not obligated to pay Great West the

$500,000 that Great West requested pursuant to the Policy’s Retention Endorsement

(the “Retention”). Great West counterclaimed seeking a declaratory judgment that

Great West was obligated to provide coverage for the accident. Both parties moved
1

The Honorable Richard H. Kyle, United States District Judge for the District

of Minnesota.

2

“An insurance policy essentially shifts the risk of loss from the insured to the

insurer whereby the insurer assumes the risk of loss and undertakes to indemnify the

insured against such loss.” Goodyear Tire & Rubber Co. v. Dynamic Air, Inc., 702

N.W.2d 237, 244 (Minn. 2005). However, “[a] retention endorsement has the effect

of reversing the normal insurer-insured relationship.” Ill. Employers Ins. of Wausau

v. Rapco Foam, Inc., No. 83 C 3440, 1987 WL 11847, *6 (N.D. Ill. May 29, 1987).

According to the terms of the Retention at issue here, Koch agreed to reimburse Great

West for the first $500,000 of any claim under the Policy rather than paying Great

West to pay and absorb forever the total amount of a claim, the usual risk-shifting

associated with an insurance policy as articulated by the Minnesota Supreme Court

in Goodyear. See 702 N.W.2d at 244. 

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for summary judgment. Interpreting the Policy’s provisions and applying Minnesota

law, the district court1

 held that the Policy provided coverage for the accident and that

there was no evidence that Great West breached a fiduciary duty to Koch in accepting

coverage and in settling the personal injury claim. The court granted summary

judgment to Great West and declared that Koch is obligated to pay the $500,000

Retention. For the reasons discussed below, we affirm. 

I.

Great West and Koch entered into the Policy in July 2001, providing up to $3

million in liability coverage. However, under the Policy’s Retention, Koch “agree[d]

to reimburse [Great West] for the first $500,000 of any loss or claim for each

accident” covered by the Policy.2

 The Policy provided in pertinent part: 

A. COVERAGE

We will pay all sums an “insured” legally must pay as damages

because of “bodily injury” . . . to which this insurance applies,
3

The Policy defines “trucker” as “any person or organization engaged in the

business of transporting property by ‘auto’ for hire.” 

-3-

caused by an “accident” and resulting from the ownership,

maintenance or use of a covered “auto.”

. . . 

1. WHO IS AN INSURED

The following are “insureds”:

a. You for any covered “auto”.

b. Anyone else while using with your permission a

covered “auto” you own, hire or borrow . . . . 

The Policy’s “Definitions” section states that “[a]uto” means, among other things, a

“trailer.” Finally, the Policy’s “trucker” exclusion,3

 also relevant to this appeal,

provides that: 

[N]one of the following is an “insured”:

a. Any “trucker”, or his or her agents or “employees”, other than you

and your “employees”:

(1) If the “trucker” is subject to motor carrier insurance

requirements and meets them by a means other than “auto”

liability insurance.

(2) If the “trucker” is not insured for hired “autos” under an

“auto” liability insurance form that insures on a primary

basis the owners of the “autos” and their agents and

“employees” while the “autos” are being used exclusively

in the “truckers” business and pursuant to operating rights

granted to the “trucker” by a public authority. 

On March 22, 2002, Kelly Ann Kelly was killed in a car accident involving a

tractor-trailer rig driven by David White. White, the owner of the 1998 Freightline

tractor, was pulling a 1994 Trailmobile trailer for Supreme Transport Services, LLC

(together “Supreme/White”). Supreme leased the trailer from United Trailer Leasing,
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a division of Hargol Corporation, which in turn is a wholly-owned subsidiary of Koch.

Kelly Ann Kelly’s husband, Kevin Kelly (“Kelly”), brought a wrongful death action

in Minnesota state court against the driver of the car she was riding in, the driver of

a car that was driving next to the car she was in, and Supreme/White. Koch was not

a party to the Kelly litigation. Supreme/White tendered their defense in the Kelly

litigation to Sirius American Insurance Company (“Sirius”), which insured

Supreme/White for $1,000,000 in liability coverage. 

During the discovery phase of the Kelly litigation, Kelly obtained a copy of

Koch’s Policy with Great West. On June 4, 2003, with a trial scheduled for

September 2003, Kelly put Koch and Great West on notice of the Kelly litigation and

asserted that Great West’s coverage was exposed because Supreme/White qualified

as insureds under the Policy. On July 15, 2003, Great West notified Kelly of its

position that the Policy did not extend to Supreme/White. On July 21, 2003, Kelly’s

counsel wrote a letter to Great West, which it forwarded to Koch the following day,

stating that Kelly believed Koch’s Policy was implicated in the Kelly litigation

because: (1) the trailer involved was a “covered auto” pursuant to the Policy’s

definition of the term and (2) Supreme was an insured under the Policy as coverage

was afforded not only to the named insured, but also to permissive users of “covered

autos” including those subject to a contract or rental. The letter recognized Sirius as

the primary insurer for Supreme/White with the Great West policy providing excess

coverage. The letter also provided that, due to Great West’s position that coverage did

not exist, Kelly would attempt to mediate the claim against Supreme and then pursue

Great West directly for coverage. On July 22, 2003, Supreme/White tendered the

Kelly litigation to Great West “to the extent coverage is provided under [the Policy].”

In response to these developments, Great West retained an attorney, Ted

Smetak, to advise it of its obligations to Supreme/White. Smetak performed a lengthy

coverage analysis, and, on August 19, 2003, recommended that Great West deny

coverage for the Kelly accident. However, Smetak qualified his recommendation,
4

A Miller-Shugart settlement agreement, a product of the seminal case, Miller

v. Shugart, 316 N.W.2d 729 (Minn. 1982), arises where an insurer denies all coverage

for an accident, and the abandoned insured agrees with the accident victim that

judgment in a certain sum may be entered against it in return for the accident victim

releasing the insured from any personal liability and agreeing to seek coverage from

the insurer. Id. at 731-32. The Minnesota Supreme Court found that a Miller-Shugart

agreement is enforceable against the insurer so long as it receives notice of the

settlement, and the settlement is (1) reasonable and (2) not a product of fraud or

collusion. Id. at 733-35. In this instance, if Great West erroneously denied coverage

for the Kelly litigation, then Supreme/White could stipulate to a money judgment in

favor of Kelly in exchange for Kelly releasing Supreme/White from personal liability

and agreeing to seek the disputed liability coverage from Great West.

5

A Drake v. Ryan settlement agreement arises out of the Minnesota Supreme

Court’s decision in Drake v. Ryan, 514 N.W.2d 785 (Minn. 1994), holding that a

plaintiff may “fully release[] [a] defendant and his primary liability insurer up to the

limits of the primary liability coverage but expressly retain[] the right to pursue [his

or her] claims against the defendant for additional damages up to the limits of the

defendant’s excess liability coverage.” Id. at 790. Here, assuming the Great West

policy covers the Kelly accident, Kelly could fully release Supreme/White to the

extent of the Sirius policy limits, while preserving the right to pursue claims against

Great West for up to $3 million. 

-5-

acknowledging that there were arguments both for and against coverage such that the

position that the Policy did not cover Supreme/White, although valid, “might lose.”

Smetak also pointed out two settlement devices under Minnesota law that Kelly could

utilized to pursue Great West’s coverage (assuming the Policy covered the Kelly

accident), a Miller-Shugart settlement agreement4

 and a Drake v. Ryan settlement

agreement.5

 

On August 27, 2003, Smetak authored a follow up opinion, discussing an

intimation by Kelly’s counsel in his correspondence to Great West, that a hybrid

settlement agreement might be reached among the parties to the Kelly litigation which

combined the features of a Miller-Shugart settlement agreement with a Drake v. Ryan

agreement, which “if valid, might possibly allow the claimants to simultaneously settle
6

Prior to a May 19, 2003 amendment, Minnesota Statute section 604.02,

subdivision 1 provided that a person who was more than 15 percent causally liable

was jointly and severally liable for the whole award, 2003 Minn. Sess. Law Serv. ch.

71, § 1 (West) (amending Minn. Stat. § 604.02, subd. 1); the statute was amended to

require that a person be more than 50 percent at fault in order for joint and several

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(for some dollar sum) the Sirius layer and stipulate to another $3,000,000 in

damages.” Smetak suggested that if this was Kelly’s intention, Great West should

proceed with “more caution in denying coverage” because: (1) “denying coverage is

a necessary pre-requisite to a Miller Shugart stipulated judgment;” (2) Great West

“might not have another opportunity to step in and admit coverage;” (3) “the dollar

exposure after a Miller Shugart [settlement] [could] be a lot more than that which a

jury would assign after a trial;” and (4) “the risk that coverage can be found to exist

under the Great West policy” was “not an insignificant risk.” Thus, the bottom line,

as stated by Smetak, was that “the argument for coverage exists” and that “[t]he

defense theories against that argument [are] far from rock solid.” Accordingly, as of

late August 2003, Great West had serious concerns that the Policy extended to

Supreme/White for purposes of the Kelly accident. 

The trial in the Kelly litigation was to begin on September 29, 2003. On

September 11, 2003, Great West informed William Sullivan, Koch’s Risk Manager,

via fax, that Great West had not yet made a decision on whether the Policy provided

excess coverage for the Kelly accident, that Great West would keep Koch posted

about developments in the case, and that Sullivan could call Great West with any

questions. The fax also contained copies of two letters, both of that same date, from

Kelly’s counsel and Smetak. The Kelly letter provided that: (1) Kelly, as well as two

other plaintiffs in the Kelly litigation, had made a joint demand in all three cases for

the Sirius policy limits of $1,000,000; (2) that there was a substantial likelihood of the

jury finding Supreme/White more than 15% at fault, rendering Supreme/White jointly

and severally liable for all of the damages which would be far in excess of the Sirius

coverage;6

 and (3) as a result, Koch would be liable for the excess judgment. The
liability to attach. Minn. Stat. § 604.02, subd. 1 (1). 

-7-

Smetak letter addressed the information provided in the Kelly letter, noting that the

joint demand by the Kelly plaintiffs had removed some of the obstacles to settlement

with Sirius. 

On September 24, 2003, with the Kelly litigation approaching trial, Kelly’s

counsel notified Smetak of Kelly’s intention to pursue a Miller-Shugart agreement

with Supreme/White. On September 26, 2003, Great West provided Sullivan with

Smetak’s coverage opinion of that same date. There, Smetak acknowledged both that

“Great West does not wish to accept coverage” and that “coverage for this kind of

claim is illogical.” Smetak goes on to state that if Great West was “very confident that

there was ‘no coverage’ then [it] should not ‘admit’ coverage.” Then the issue would

be whether the Policy provided coverage for Supreme/White and, if a court found that

it did not, any settlement agreement involving a stipulated judgment against Koch

would be of no consequence. However, Smetak again cautioned Great West that if

it believed there was a risk that a court would construe the Policy to apply to

Supreme/White, then it is “a $3,000,000 risk. Because that is what Kelly’s attorneys

will try to put into the Miller Shugart. That is the balancing act. While I would like

to be able to guarantee you a declaration of ‘no coverage[,]’ the risk is greater than

that.”

Immediately before the trial began, Sirius entered into a Drake v. Ryan release

with Kelly, preserving Kelly’s right to proceed against Great West and further

increasing the likelihood that Supreme/White would enter into a Miller-Shugart

settlement with respect to the Policy. Based on Smetak’s observations, the

developments between Kelly and Supreme/White, Great West’s concern that it would

be unsuccessful in disproving coverage, and Great West’s belief that it was very likely

that there would be a defense verdict at trial exonerating Supreme/White and mooting
7

Based on the representations of counsel for Supreme/White to Great West that

Supreme/White “had excellent liability defenses” on the merits of the Kelly litigation

such that it was likely that the jury would return a defense verdict, Great West

believed that, in admitting excess coverage, the exposure was minimal because

Supreme/White’s potential liability was within the $1,000,000 in liability coverage

provided by the Sirius policy. Koch’s Risk Manager, William Sullivan, testified that,

as of mid-September 2003, he also believed that the Kelly litigation would result in

a defense verdict. 

8

The record is unclear as to the current status of the Kelly litigation.

-8-

the coverage issue,7

 Great West accepted coverage for Supreme/White on September

30, 2003. At that time, Koch had not issued a written objection to coverage.

However, Sullivan testified that he verbally objected to coverage when he learned that

Great West was planning on accepting coverage, which according to Sullivan, was

one to two weeks before the Kelly litigation went to trial. 

The Kelly litigation proceeded to trial, and the jury returned a $2.7 million

verdict, assigning 60% of the fault to Supreme/White. See Kelly v. Ellefson, 712

N.W.2d 759, 765 (Minn. 2006). Supreme/White appealed the judgment, and the

Minnesota Court of Appeals, citing a number of trial errors, reversed and remanded

for re-trial on the liability issues. Kelly v. Ellefson, 2005 WL 525548 (Minn. Ct. App.

Mar. 8, 2005) (unpublished). Though Kelly petitioned for review of all issues, the

Minnesota Supreme Court granted review and reversed only as to the court of

appeals’s finding that the trial court abused its discretion by denying admission of

Kelly’s pleadings, interrogatory answers, and expert’s affidavit. Kelly, 712 N.W.2d

at 766, 768-71. The court then remanded the case. Id. at 771.8

In May 2005, while the Kelly verdict was on appeal, the claims of Corbin

Ellefson, who was also injured in the accident, were being addressed in a mediation

session. Great West agreed to pay Ellefson $750,000 to settle his claims. In

accordance with the Retention, Great West paid the full settlement to Ellefson and
9

The district court acknowledged that “Great West argue[d] that Koch did not

allege a breach of fiduciary duty or bad faith claim in its Complaint, and the Court is

inclined to agree. However, for the sake of completeness, the Court will consider

Koch’s arguments . . . .” Stan Koch & Sons Trucking, Inc. v. Great W. Cas. Co., No.

05-1225, 2006 WL 2331181, *6 (D. Minn. Aug. 10, 2006) (unpublished).

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then requested reimbursement of $500,000 from Koch. Koch declined to pay the

Retention, asserting that it had “never acquiesced that coverage is applicable in this

case.” 

In June 2005, Koch filed this declaratory judgment action, seeking a declaration

that Supreme/White were not insureds under the Policy and that Great West had

breached the fiduciary duty it owed Koch by accepting coverage for the Kelly accident

and settling with Ellefson.9

 Great West counterclaimed, seeking a judgment that

Supreme and White were insureds under the Policy and that Great West had acted

properly in accepting coverage for the Kelly accident and settling the Ellefson claim.

The parties filed cross-motions for summary judgment. The district court granted

Great West’s motion and denied Koch’s motion, finding that Supreme/White were

insureds under the Policy and, even if Koch had raised a breach of fiduciary duty

claim in its complaint, there was no evidence that Great West had breached such a

duty by accepting coverage in the Kelly litigation or settling with Ellefson. Thus, the

district court found that Koch was obligated to pay Great West the $500,000

Retention. Koch brings this appeal.

II.

Koch contends that the district court erred in determining that Supreme/White

were insureds under the Policy for purposes of the Kelly accident because: (1) the

Policy’s “trucker” exclusion precludes coverage and (2) under the Minnesota No-Fault

Automobile Insurance Act (the “No-Fault Act”), Minn. Stat. §§ 65B.41-65B.71, Koch

did not “own” the trailer at the time of the accident. Koch further contends that the

court erred in granting summary judgment to Great West on the breach of fiduciary
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duty claim because (1) Great West breached its fiduciary duty by accepting coverage

without Koch’s consent and contrary to its express wishes and (2) genuine issues of

material fact preclude summary judgment for Great West. “We review the district

court’s grant of summary judgment de novo, viewing the evidence in the light most

favorable to the nonmoving party. We also review the district court’s interpretation

of an insurance policy provision de novo.” Source Food Tech., Inc. v. U.S. Fid. &

Guar. Co., 465 F.3d 834, 836 (8th Cir. 2006). We address each of Koch’s contentions

in turn.

A. 

Interpretation of an insurance policy is a matter of state law, Allstate Ins. Co.

v. Blount, 491 F.3d 903, 908 (8th Cir. 2007), and it is undisputed that the issues in this

case are governed by Minnesota law. Under Minnesota law,“[w]hen insurance policy

language is clear and unambiguous, ‘the language used must be given its usual and

accepted meaning.’” Wanzek Constr., Inc. v. Employers Ins. of Wausau, 679 N.W.2d

322, 324 (Minn. 2004) (quoting Lobeck v. State Farm Mut. Auto. Ins. Co., 582

N.W.2d 246, 249 (Minn. 1998)). Because the Policy’s terms are unambiguous, our

review of this appeal turns on the plain language of the Policy. 

“[T]he insured bears the initial burden of demonstrating coverage, [and] the

insurer carries the burden of establishing the applicability of exclusions.” Travelers

Indem. Co. v. Bloomington Steel & Supply Co., 718 N.W.2d 888, 894 (Minn. 2006).

However, “[e]xclusions are to be strictly interpreted against the insurer and an insurer

denying coverage because of an exclusion bears the burden of proof.” Agri. Ins. Co.

v. Focus Homes, Inc., 212 F.3d 407, 410 (8th Cir. 2000) (quoting Bob Useldinger &

Sons, Inc. v. Hangsleben, 505 N.W.2d 323, 327 (Minn. 1993)); see Am. Family Ins.

Co. v. Walser, 628 N.W.2d 605, 609, 613 (Minn. 2001) (providing that insurance

contract exclusions are construed narrowly and strictly against the insurer); see also

Wanzek Const., Inc., 679 N.W.2d at 325 (ambiguity is construed in favor of
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coverage). Thus, due to the role reversal in this case, where it is the insured, Koch,

who is contending that the Policy does not provide coverage, there is a corresponding

reversal of the burden of proof. Accordingly, it is Great West that bears the burden

of establishing that Supreme/White are insureds under the Policy, and Koch that must

prove the applicability of the exclusion. See Travelers Indem. Co., 718 N.W.2d at

894; see also Agri. Ins. Co., 212 F.3d at 410; Am. Family Ins., 628 N.W.2d at 609,

613. 

Great West contends that Supreme and White are insureds under the Policy

because it provides coverage for anyone permissibly operating a “covered” vehicle,

and there is no dispute as to either element: (1) Supreme leased the Koch trailer and

(2) the Policy defines a trailer as a “covered” auto. However, Koch argues that both

sections of the Policy’s “trucker” exclusion except Supreme/White from coverage

because: (1) Supreme and White are truckers, not Koch employees, and they are not

affiliated with Koch in any way; (2) the lease agreement for the trailer states that

Supreme/White are covered by their own “motor carrier insurance requirements”; (3)

Supreme/White were covered by their own insurance policy not Koch’s; and (4) other

courts have concluded that the “trucker” exclusion at issue here excludes coverage for

truckers like Supreme and White. 

We find that Supreme/White are insureds under the Policy for purposes of the

Kelly accident because the definition of an insured plainly extends to permissive users

of the Koch trailer which is undisputedly the case here. Moreover, Koch has failed

to demonstrate the applicability of either section of the “trucker” exclusion.

Supreme/White falls within the Policy’s definition of “trucker.” However, section

(a)(1) is inapplicable because it excludes truckers who are subject to motor carrier

insurance requirements and satisfy them in a way other than auto liability insurance,

and the record shows that Supreme/White, though subject to such requirements, met

them only through the Sirius policy, as Koch concedes. Koch has offered no

argument as to how this is not dispositive of its claim as to section (a)(1). 
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With regard to section (a)(2), it excludes coverage for truckers that operate

“hired ‘autos,’” here the Koch trailer involved in the Kelly accident, without obtaining

primary insurance for the “auto.” Koch contends that section (a)(2) applies here,

despite the fact that the Sirius policy provides primary coverage for the tractor

involved in the Kelly accident, because the record does not demonstrate that

Supreme/White obtained primary auto liability insurance for the Koch trailer. This

contention fails for a number of reasons. First, Koch did not raise this argument until

its reply brief, and we will not address it absent some explanation by Koch for its

failure to do so, which Koch has not provided. See Neb. Plastics, Inc. v. Holland

Colors Americas, Inc., 408 F.3d 410, 421 n.5 (8th Cir. 2005) (“This Court does not

consider issues first raised in a reply brief unless the appellant gives some reason for

failing to raise and brief the issue in his opening brief.”). Furthermore, even if we

were to address Koch’s contention, the allocation of the burden of proof on the

application of an exclusion under Minnesota law dictates that it is Koch, not Great

West, who must prove the applicability of section (a)(2) of the “trucker’s” exclusion.

Thus, Koch’s attempt to shift the burden to Great West to disprove the applicability

of the exclusion fails, and Koch’s failure to offer any evidence establishing that

Supreme/White did not procure insurance coverage for the trailer defeats Koch’s

argument with respect to section (a)(2). Finally, the record is devoid of any indication

that this point is in dispute. Rather, Sirius has conceded that it is primarily liable for

the damages caused by Supreme/White in the Kelly accident, and the record evinces

no attempt by Sirius to divide that liability based on whether it stems from the tractor

or the Koch trailer. 

In addition, the cases Koch relies on in support of its contention that the

“trucker” exclusion (with no reference to the specific sections of the exclusion)

applies to Supreme/White, Rebick v. Home Indem. Co., 878 F.2d 382, 1989 WL

72927 (6th Cir. July 5, 1989) (unpublished) and Saffel v. Bamburg, 540 So.2d 988

(La. Ct. App. 1989), do not prescribe such a result. Though Rebick is factually

analogous in that it involved an insurance policy with a similarly-worded “trucker”
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exclusion and an accident with a leased tractor-trailer rig, 1989 WL 72927, at *1, the

legal question was whether the lessor of the truck was primarily liable pursuant to

policy. Id. at *7. Thus, the Sixth Circuit’s determination that the lessor of the truck

was not primarily liable has no bearing on the issue here, whether Great West has

secondary liability for Supreme/White’s fault in the Kelly accident as Sirius is

undisputedly primarily responsible. See id. at *8. Saffel also involved an analogous

“trucker” exclusion; however, it did not involve a “covered auto” because, though the

driver involved in the accident did drive a tractor-trailer covered by the insurance

policy at issue, he was not driving that vehicle at the time of the accident. 540 So.2d

at 989-91. Accordingly, neither Rebick or Saffel stand for the proposition that the

Policy’s “trucker” exclusion excepts coverage for Supreme/White. 

Finally, Koch contends that, because Supreme/White leased the trailer from

Koch pursuant to a 24-month lease, the No-Fault Act renders Supreme/White the

owner of the trailer for purposes of the Kelly accident regardless of the Policy’s

provisions. The No-Fault Act provides the following definition for an “owner”:

If a motor vehicle [including a trailer] is the subject of a lease having an

initial term of six months or longer, the lessee shall be deemed the owner

for the purposes of sections 65B.41 to 65B.71, and 169.09, subdivision

5a, notwithstanding the fact that the lessor retains title to the vehicle and

notwithstanding the fact that the lessee may be the owner for the

purposes of chapter 168A.

Minn. Stat. § 65B.43(4); see id. § 65B.43(2) (“‘Motor vehicle’ . . . includes a trailer

with one or more wheels, when the trailer is connected to or being towed by a motor

vehicle.”). However, the impact of the No-Fault Act’s definition of “owner” is limited

to the Act’s provisions and does not bear on the construction of an insurance contract

for purposes of determining coverage. See U.S. Fire Ins. Co. v. Fireman’s Fund Ins.

Co., 461 N.W.2d 230, 234 (Minn. Ct. App. 1990) (“[T]he definition of ‘owner’ under

[Minn. Stat. § 65B.43(4)] relates only to the provisions of the No-Fault Act. The

intent of the [insurance] policy must be determined by the plain meaning of its
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words.”); see also Northland Ins. Co. v. Cont. W. Ins. Co., 550 N.W.2d 298, 302

(Minn. Ct. App. 1996) (stating that the No-Fault Act, which designates statutory

owner of vehicle, would not be used to determine priority of coverage under

commercial truckers’ insurance policies). Thus, the No-Fault Act’s definition of

“owner” for its purposes does not trump the Policy’s terms in determining coverage

for the Kelly accident. Moreover, the Act’s stated purpose is to address “[t]he

detrimental impact of automobile accidents on uncompensated injured persons,”

Minn. Stat. § 65B.42, by “reliev[ing] the severe economic distress of uncompensated

victims of automobile accidents . . . .” Id. § 65B.42(1). Accordingly, Koch’s reliance

on the No-Fault Act as a means of avoiding coverage for the Kelly accident is contrary

to the Act’s underlying policy.

In sum, Supreme/White, as permissible operators of Koch’s trailer, a “covered

auto,” at the time the Kelly accident occurred, are insureds under the Policy. Further,

Koch has failed to demonstrate that the “trucker’s” exclusion applies to

Supreme/White. Therefore, Great West was required to provide Supreme/White

coverage under the Policy, and Koch is obligated to reimburse Great West in the

amount of its Retention.

B.

Koch also claims that Great West breached the fiduciary duty it owed Koch by

putting its own financial interests ahead of Koch’s when, despite Koch’s express

objections and the recommendation of Great West’s coverage counsel, it accepted

coverage under the Policy and settled Ellefson’s claim, triggering Koch’s obligation

under the Retention to pay Great West $500,000. Alternatively, Koch argues that

genuine issues of material fact preclude summary judgment for Great West. 

As a threshold matter, we note that there is some doubt that Koch has raised a

breach of fiduciary duty claim; however, we, like the district court, proceed to the

merits of such a claim, assuming that it was properly pled. Concerning Koch’s
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contention arising out of Great West’s acceptance of coverage for the Kelly litigation,

we reject this assertion in light of the preceding analysis’s determination that

Supreme/White were insureds under the Policy for purposes of the Kelly accident.

We see no basis for finding a breach of fiduciary duty on the part of an insurer who

accepts coverage for a claim covered by the insurance policy’s terms. With respect

to Koch’s assertion that Great West accepted coverage despite Smetak’s

recommendation to the contrary, this is an inaccurate description of the record in this

case where Smetak’s opinion progressed over time to eventually express serious

concern that the Policy did provide coverage. Moreover, by characterizing Great

West’s risk in declining coverage as a $3 million risk, Great West took into

consideration the $500,000 Koch stood to lose such that Great West did not put its

financial interests ahead of Koch’s. See Short v. Dairyland Ins. Co., 334 N.W.2d 384,

387-88 (Minn. 1983) (holding that a liability insurer must exercise good faith in

settling a claim within policy limits which “includes an obligation to view the

situation as if there were no policy limits applicable to the claim, and to give equal

consideration to the financial exposure of the insured”). Finally, despite Koch’s

assertion that it raised an express objection to the acceptance of coverage prior to

Great West’s acceptance, we see no material issue of fact as to this issue because, as

previously stated, the Policy’s terms required the acceptance of coverage for the Kelly

accident. 

With regard to the settlement of Ellefson’s claims, the Policy provides that

Great West “will settle or defend, as we consider appropriate, [any] claim or ‘suit’

asking for damages which are payable under the terms of this Coverage Form.” Thus,

based solely on the Policy’s terms, Great West had the unfettered right to settle the

Ellefson claims, despite the presence of the Retention. This principle has been

affirmed by courts construing similarly-worded insurance contracts, see Caplan v.

Fellheimer Eichen Braverman & Kaskey, 68 F.3d 828, 836-38 (3d Cir. 1995) (holding

that insured did not have a likelihood of prevailing on its claim that its liability insurer

had no authority to make settlement because the policy expressly authorized insurer

to settle suits it deemed appropriate such that if the insured wished to control
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settlement of case, it should have purchased policy with that protection); Cas. Ins. Co.

v. Town & Country Pre-Sch. Nursery, Inc., 498 N.E.2d 1177, 1179 (Ill. App. Ct.

1986) (“The terms of the policy are clear and enforceable. [The insurer] had the right

to settle the case within the policy limits and its duty of good faith, therefore, was not

a material factual issue.”), and even where, as here, the settlement at issue involved

the commitment of the insured’s own funds. See United Capitol Ins. Co. v.

Bartolotta’s Fireworks Co., Inc., 546 N.W.2d 198, 200-01 (Wis. Ct. App. 1996)

(determining that liability policy giving insurer “discretion” to settle claims made

against insured did not require that insurer first obtain insured’s consent, even though

under terms of the retention endorsement the insured was responsible for first $25,000

of any settlement); Orion Ins. Co., Ltd. v. Gen. Elec. Co., 493 N.Y.S.2d 397, 401

(N.Y. Sup. Ct. 1985) (concluding that where a policy gives an insurer the right to

settle an action with or without the consent of the insured, the insurer may do so even

though the insured’s contribution in the form of the deductible is considerably larger

than the insurer’s contribution and the settlement is fully within the deductible at no

cost to the insurer). However, the Policy must be interpreted in accordance with

Minnesota law. 

The Minnesota Supreme Court has held an insurer owes its insured a duty of

good faith in settling a third-party claim that is within policy limits but requires the

insured to pay a “retrospective premium.” Transp. Indem. Co. v. Dahlen Transp., Inc.,

161 N.W.2d 546, 549 (Minn. 1968). In Transp. Indem. Co., the insurer sued for

additional premiums arising out of the settlement of claims under a retrospective

premium policy, and the insured denied liability for the premiums because the insurer

had acted unreasonably in settling the claims. Id. at 548. The insurer contended that

its good faith could not be challenged because the policy provided that it had the right

to make the sole and exclusive determination as to the appropriateness or propriety of

amounts paid for losses or expenses and thus the reasonableness of the payment at

issue. Id. The Supreme Court of Minnesota disagreed because, due to the

retrospective premium, the insurer was, in effect, settling claims with the insured’s

money, creating an inherent conflict of interest that entitled the insured “to have the
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insurer produce the information pertinent to the reasonableness and good faith of the

settlement and assume the burden of proof on the issue.” Id. at 549; see Transit Cas.

Co. v. Topeka Transp. Co., Inc., 663 P.2d 308, 311 (Kan. Ct. App. 1983) (holding

that, in insurer’s action to recover retrospective premiums, the insurer had the burden

of showing, as part of its case in chief, evidence of probable liability in each case it

settled, as well as evidence that the amounts paid were reasonable) (citing Transp.

Indem. Co., 161 N.W.2d at 549). Because the retrospective premiums at issue in

Trans. Indem. Co. are analogous to the Retention in this case, the same inherent

conflict of interest that the Supreme Court of Minnesota recognized in that case, exists

here. Thus, Great West owed Koch a duty of good faith in settling claims, despite the

contractual language providing Great West an unfettered right to settle, pursuant to

Minnesota law. 

However, Koch’s challenges to the settlement of the Ellefson claims mirror

those which we found insufficient with regard to Great West’s acceptance of coverage

for the Kelly accident. The appropriateness of the settlement is further demonstrated

by the fact that it followed the jury verdict in the Kelly litigation which found Great

West’s insureds, Supreme and White, substantially at fault for the underlying accident.

Thus, whatever the exact parameters of the duty of good faith Great West owed Koch

in settling the Ellefson claims, Great West has not crossed them. Rather, Great West

simply settled claims arising out of an accident covered by the Policy, and Koch

makes no contention that the settlement amount was unreasonable or in any way

improper. Accordingly, there are no questions of material fact precluding summary

judgment, and Great West is entitled to judgment as a matter of law on the breach of

fiduciary duty claim. 

III.

For the foregoing reasons, the district court’s decision is affirmed. 

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