Opinion ID: 1973264
Heading Depth: 1
Heading Rank: 4

Heading: The Claim Against Minnesota Fire.

Text: A. Claims that may be disposed of without extended discussion. In considering Minnesota Fire's challenge to the district court's determination that its policy afforded liability coverage to Talen for Pearson's claims, there are several matters that may be disposed of without extended elaboration. We consider these matters briefly. 1. The breach-of-contract claim. The district court determined that Minnesota Fire had a duty to defend against Pearson's original breach-of-contract action. Minnesota Fire's policy contained an exclusion for damages assumed by a contract or agreement that was in legal effect the same as the exclusion in Employers' policy. Consequently, as was the case with Employers, the breach-of-contract claim was excluded from liability coverage. Minnesota Fire had no duty to defend Talen against that claim. 2. Alleged failure to give Minnesota Fire notice of the tort claims. Minnesota Fire has contended throughout this action that it was not given notice of the tort claims contained in Pearson's second action. The evidence presented concerning this issue was conflicting. We are satisfied that a preponderance of the credible evidence supports the district court's finding that Minnesota Fire received adequate notice of the second action and made a considered election to decline coverage with respect thereto. 3. The consent-to-settle clause. Minnesota Fire argues that it need not indemnify Talen with respect to the amount he contributed toward the Pearson settlement because its policy provides that any voluntary settlement of a claim without the consent of Minnesota Fire shall be the sole responsibility of the insured. We reject the insurer's effort to invoke that clause in the present case. Our cases are clear that, if an insurer provides liability coverage for a third-party tort claim and declines to defend its insured, it is liable to indemnify the insured for any reasonable settlement of the third-party claim, notwithstanding a consent-to-settle requirement in its policy. Kelly v. Iowa Mut. Ins. Co., 620 N.W.2d 637, 641 (Iowa 2000) (insurer's unjustified refusal to defend relieves the insured from his or her contract obligations not to settle, and insured is at liberty to make reasonable settlement or compromise without losing rights under the policy); Red Giant Oil Co. v. Lawlor, 528 N.W.2d 524, 531 (Iowa 1995) (same). 4. Alleged absence of injury. Minnesota Fire has contended throughout the litigation that it is not required to indemnify Talen for the amount he contributed to the settlement because he has been reimbursed for that payment by the bank holding company of which he is a majority stockholder. We find no merit in this contention. Pearson's action sought to collect damages from Talen and the Vinton bank, jointly and severally; Talen and the Vinton bank were the settling parties. Talen wrote a check on his personal account in satisfaction of that portion of the settlement not paid by Fidelity and Deposit and Farm Bureau Mutual. The settlement extinguished Talen's personal liability in the matter. If he was insured for that liability under the Minnesota Fire policy, he is entitled to seek indemnification for the amounts he expended to settle the claim against him. B. District court's findings of waiver and estoppel. The district court's decision purported to disallow Minnesota Fire's policy defenses based on a finding of waiver and estoppel. This conclusion was based on the insurer's initial response to Talen stating that Minnesota Fire would defend the Pearson claims under reservation of right, a decision that it later reversed. On this point, the district court stated: Minnesota Fire agreed to handle the defense in May 1996. The court rejects as implausible Minnesota Fire's attempt to characterize its agreement to handle the defense as a denial of coverage. Indeed, the very reason for giving an insured notice of claim is to provide the insurer the opportunity to handle the defense. Minnesota Fire did not fulfill its agreement to defend. Therefore as a result of this breach, Minnesota Fire has waived its right, or is estopped from asserting, coverage defenses. (Citations omitted.) The district court, accepting Talen's argument that this issue is governed by Minnesota law, relied on a decision of the Minnesota Court of Appeals in support of its finding of waiver and estoppel. [5] Although we accept the argument that Minnesota law is the most appropriate choice for a dispute between a Minnesota insurance company and a Minnesota resident over a policy sold in Minnesota, our inquiry does not end here. We must ascertain whether in advocating Minnesota law Talen sufficiently pled or proved the foreign law in question. If he did not, our conflicts-of-law rules require us to assume the foreign law is the same as Iowa law. Pa. Life Ins. Co. v. Simoni, 641 N.W.2d 807, 811 (Iowa 2002); EFCO Corp. v. Norman Highway Constructors, Inc., 606 N.W.2d 297, 300 (Iowa 2000). We are unable to discern from the present record that Talen has sufficiently pled and proved the law of Minnesota on this issue or on any other issue in the case, except one that is discussed later. Consequently, we will apply Iowa law in reviewing the district court's finding of waiver and estoppel. In Scheetz v. IMT Insurance Co., 324 N.W.2d 302 (Iowa 1982), we observed: [W]e may well keep in mind the somewhat elusive distinction between waiver and estoppel . . ., a distinction which appears to be that a `waiver' is a voluntary relinquishment of a known right, while an `estoppel' consists of a preclusion which in law prevents a party from alleging or denying a fact in consequence of his own previous act, averment, or denial. Hence, if a party relinquishes a known right, awarded him by contract, he cannot without the consent of his adversary, reclaim it. But the ban of an estoppel may be lifted by the party against whom it is invoked, by the giving of proper notice. Scheetz, 324 N.W.2d at 305 (quoting Gilbert v. Globe & Rutgers Fire Ins. Co. of New York, 91 Or. 59, 178 P. 358, 358 (1919)) (citation omitted). In considering Minnesota Fire's initial response to Talen indicating that it would defend the Pearson claims under reservation of right, we can discern nothing in that communication that suggests a waiver of policy defenses. The purpose of declaring an intention to defend under reservation of rights is to preserve those defenses and not waive them by the action that the insurer thereafter takes. Inghram, 178 N.W.2d at 304 (as a result of nonwaiver agreement, it is obvious insurer did not covenant to defend or indemnify). Minnesota Fire did not voluntarily relinquish a known right with respect to its policy defenses and those defenses may not be denied on the basis of waiver. With regard to estoppel, we have recognized that, when an insurer gives prompt notice to the party claiming to be insured that it is not waiving the benefit of any policy defenses, no estoppel arises. Id.; N.W. Nat'l Ins. Co. v. Kinney, 444 N.W.2d 107, 110 (Iowa Ct.App.1989). [6] The tentative nature of Minnesota Fire's response to the request that it assume the defense did not give rise to any obligation on its part to do so. C. Limitations as to who is insured. The insured under the Minnesota Fire policy, as stated on the declaration page, is: TALEN INVESTMENTS WILLIAM TALEN DBA PO BOX 535 NORTHFIELD MN 55057 In describing who is insured, the policy states: If you are designated in the Declarations as: An individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner. In describing the business being carried on, the policy states INVESTMENT/FINANCIAL ADVISOR. This corresponds to the manner in which the type of business was described in William Talen's application for the business protector insurance policy. The application also disclosed the following information: 1. a recital that gross sales for the previous year were $130,000. 2. a statement that the business would be carried out in Talen's personal residence. 3. an assurance that no customers would be coming on the insured premises (a requirement for insuring a personal dwelling against extended perils in a business policy in lieu of homeowner's insurance). 4. a recital that the insured had been in business for forty-five years. The application sought a business liability limit of $1,000,000, and the policy was issued with that limit in place. Minnesota Fire does not dispute that the defamation claim asserted against Talen in the Pearson litigation fell within the personal-injury coverage of its policy, which was in all material respects the same as that contained in the Employers' policy that we have previously discussed. Minnesota Fire, however, asserts that Talen's liability, if any, in the Pearson litigation was unrelated to any solely owned business in which he was engaged and therefore not within the coverage afforded. In this regard, Minnesota Fire points out that the Vinton bank was not owned by Talen. It was owned by a holding company in which Talen owned a controlling interest but less than all of the stock that had been issued. The district court found that the Minnesota Fire policy insures Mr. Talen, individually, for specified injuries or damage ( i.e., personal injury) arising out of his business activities. Mr. Talen uses the term Talen Investments to describe his investing activities. The court went on to state in its decision that Minnesota Fire's denial rests primarily on its contention that Mr. Pearson did not sue Mr. Talen in his individual insured capacity. . . . Mr. Casey, Minnesota Fire's claim supervisor, admitted that he does not know what activities constitute Talen Investments. Mr. Valen [a Minnesota Fire claims representative] agreed that the description of Talen Investments on the declarations page as Investment/Financial Advisor is inconclusive and does not specify or limit the scope of the insurance coverage provided. Further, Mr. Valen did not ascertain precisely in what capacity Mr. Talen acted regarding his telephone calls. The purpose of naming the insured on the declarations page is to designate the person intended to be insured, any designation which fulfills that purpose is sufficient. 3 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 40:3, at 45 (2000) (footnote omitted). As a leading text suggests: [W]hen the intent to cover a particular risk is clear, the name of the insured is not always important. Where a designation is not clear on its face, it will be interpreted in such manner as makes the most sense given the context in which it is used, and ambiguities will be resolved against the insurer. Id. (footnotes omitted). The issue before us does not present a question concerning the identity of the insured. Clearly, it is William Talen, individually. [7] The issue over the insuring clause involves the insurer's attempt to use the definition of who is insured to limit the source of the liability that the policy covers. Pearson's claims against Talen were, in each instance, based on conduct alleged to have been taken both individually and as an agent of the Vinton bank. Minnesota Fire does not insure the Vinton bank or its officers and employees acting in the conduct of banking business. It argues that Talen's communications to the Oelwein bank were taken in his capacity as an agent of the Vinton bank responding to a specific request for information that had been directed to the Vinton bank. Although it is true that the Oelwein bank's request for information was directed to the Vinton bank, Talen's communication was not made to the party at the Oelwein bank that requested the information. Instead, he undertook to contact Carl Pohlad, an acquaintance and business associate, who owned the Oelwein bank. He was communicating information that the Vinton bank was contractually bound not to discuss. His action in that regard did not benefit the Vinton bank, and served to place it at substantial risk of a costly lawsuit. We may and do infer from these circumstances that Talen's communications to officials at the Oelwein bank concerning Pearson's job performance were intended to satisfy his own business objectives separate from those of the Vinton bank. We must resolve two questions. Was Talen acting, at least in part, for business reasons in communicating with Pohlad and the Oelwein bank concerning Pearson's abilities or lack thereof; and, if so, was Talen's business pursuit undertaken in connection with a business solely owned by him? We are convinced that the answer to the first question is yes. It is apparent from the evidence presented that Talen was motivated by a wish to remain in the good graces of Mr. Pohlad, the owner of the Oelwein bank, who had been a confidante and advisor with respect to Talen's actions in the buying and selling of banks. This relationship had led to a strong friendship and social interaction between Talen and Pohlad and their respective families that was punctuated, at least once a year, by the delivery of a jar of Mrs. Talen's finest bread-and-butter pickles to their fellow Minnesotans, the Pohlads. But, the cultivation of Pohlad also served a substantial business purpose for Talen. With respect to the second question, as the district court found, Minnesota Fire's own claim representative conceded that the designation of the character of Talen's business as INVESTMENT/FINANCIAL ADVISOR is inconclusive and does not specify or limit the scope of the insurance provided. We agree with that conclusion. It appears from the record that one of Talen's principal business activities was the buying and selling of banks. Although the ownership of some of those banks was eventually placed in a bank holding company, this does not negate the possibility that his actions in acquiring the banks were undertaken in his individual capacity as an investor. The evidence revealed that Mr. Pohlad was a valued advisor with respect to Talen's activities in the buying and selling of banks. Viewing the evidence in its entirety, we find on our de novo review that Talen's conversations with Pohlad and other personnel at the Oelwein bank were undertaken pursuant to the conduct of a business of which he was the sole owner and thus were afforded protection against liability under Minnesota Fire's policy. The fact that he paid the additional money required to settle Pearson's claims, rather than directing the Vinton bank to do so, serves to reinforce that conclusion. [8] Minnesota Fire urges that, if this was a personal business activity of Talen, it did not fall within the activities described in the policy application and, consequently, is not covered by its policy. It seeks to portray the covered business activities as the giving of financial advice and nothing more. We do not view the extent of the covered business activities this narrowly. The words INVESTMENT/FINANCIAL ADVISOR are just as easily interpreted to mean that the business relates to both investing and the giving of financial advice. The meaning of the word investment is sufficiently broad as to include nearly any activity in which money is invested for financial gain. [9] Single-owner proprietorships may engage in many activities with which their liability insurers are not familiar, but if a particular activity is not excluded by the policy, it may be within the coverage that is afforded the insured. This situation was described by the North Dakota Supreme Court: Because we have concluded that Edwin Carlson is the named insured under the policy, it is irrelevant that he did not advise [the insurer] of his purchase of [an additional business] named Harrington Ranch. . . . Absent a specific exclusion limiting coverage, all of Carlson's business enterprises operated as sole proprietorships were covered by the . . . policy. Carlson v. Doekson Gross, Inc., 372 N.W.2d 902, 907 (N.D.1985). We reach a similar conclusion concerning Talen's activities in the present case. In reaching this conclusion, we have not overlooked two decisions relied on by Minnesota Fire. In Rayburn v. MSI Insurance Co., 240 Wis.2d 745, 624 N.W.2d 878 (Ct.App.2000), had a policy that, like the Minnesota Fire policy, purported to only make him an insured with respect to the conduct of a business of which you are the sole owner. The insured, who operated a residential carpentry business as a sole proprietorship, helped his father build a shed in his spare time. The court held that conduct was a personal pursuit in which he was not carrying on his carpentry business. The facts of the Rayburn case are easily distinguishable from the present case. Rayburn was not an instance in which the personal nature of the services performed overshadowed a business purpose; there simply was no business purpose in the insured's activities in that case. Another case relied on by Minnesota Fire is Dome Corp. v. Kennard, 172 F.3d 1278 (10th Cir.1999). The insured in Kennard also had a policy in which he was only named as an insured with respect to the conduct of a business of which he was the sole owner. The court held that no coverage existed because the liability of the insured arose out of his activities in an oil and gas venture of which he was not the sole owner. Kennard, 172 F.3d at 1283. That case did not determine that, if the insured had been acting for his own for business purposes separate and apart from those of his oil-and-gas-venture interests, his actions would not have been covered by the policy. D. The other insurance clause. Minnesota Fire contends that it is not liable to indemnify Talen with respect to the settlement of the Pearson action because its policy provides: If there is other insurance covering the same loss or damage, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. Minnesota Fire asserts that, because the Fidelity and Deposit and Farm Bureau Mutual policies each had liability limits of $1,000,000, and the insurance afforded by Minnesota Fire was excess over those amounts, it is entitled to a credit of $2,000,000 with respect to its obligation to indemnify Talen. The district court rejected this contention. The premise on which Minnesota Fire's argument is based is stated as follows in a leading insurance text: [I]f an insured settles with a primary insurer for less than that insurer's policy limits, an excess insurer will, assuming the primary insurer did, in fact, provide coverage, be entitled to a credit for the full amount of the primary insurance. The insured, therefore, may not recover the difference between the settlement amount and the primary coverage limit from the excess insurer. 1 Allan D. Windt, Insurance Claims & Disputes § 6.32 (4th ed.2005) (emphasis added) (citations omitted). The principle thus announced has been recognized and applied by several courts. E.g., Great W. Cas. Co. v. Canal Ins. Co., 901 F.2d 1525, 1527 (10th Cir.1990); Siligato v. Welch, 607 F.Supp. 743, 747 (D.Conn.1985); Smit v. State Farm Mut. Auto. Ins. Co., 207 Mich.App. 674, 525 N.W.2d 528, 533 (1994); Pub. Serv. Mut. Ins. Co. v. Fireman's Fund Am. Ins. Co., 82 A.D.2d 403, 404, 441 N.Y.S.2d 677, 678 (1981). For our present purposes, the key words of the black-letter principle that we have quoted from the insurance text are assuming the primary insurer did, in fact, provide coverage. We may not assume that either the Fidelity and Deposit policy or the Farm Bureau Mutual policy actually insured Talen against the liability embraced by the Minnesota Fire policy. The coverage of the other policies was a matter that Minnesota Fire was required to establish to the court's satisfaction in order to attain its alleged status as an excess insurer. It has done little to meet that burden. Although it raised the excess-insurance issue in a motion for summary judgment, placed the Fidelity and Deposit policy and the Farm Bureau Mutual policy in evidence at trial, and submitted proposed findings that would have established its status as an excess insurer, Minnesota Fire has made no argument either here or in its brief in the district court asserting a legal theory on which the court might find that these policies, or either of them, insured Talen against the claims that Pearson lodged against him, individually. Although Fidelity and Deposit and Farm Bureau Mutual each defended Talen against the Pearson claims under reservation of right, both of those insurers denied coverage throughout that litigation. The fact that they each contributed a sum of money to the settlement does not establish that their respective policies in fact covered the liability claims so as to make the policy limits available to Talen. There is good reason to conclude that these policies did not cover his liability. The insured under the Fidelity and Deposit policy was a bank in Traer, Iowa, owned by the same holding company that owned the Vinton bank. That policy insured the Traer bank and its officers and directors while acting for that bank. Minnesota Fire has not suggested how the Traer bank was in any manner involved in the Pearson litigation. Farm Bureau Mutual insured the holding company that owned the Vinton bank. It, too, would appear to insure a nonparty to the Pearson litigation. It is not necessary, however, to base our determination of the inapplicability of the Fidelity and Deposit and Farm Bureau Mutual policies on whom they insured. Both of these policies contained the same employment-related-practices exclusion that we have held excluded coverage on the part of Employers. In the face of that circumstance and without any argument by Minnesota Fire revealing the theory by which it contends these policies provided coverage to Talen, we must reject the argument that it has the status of an excess insurer.