Court Opinion

ID: 9732514
Source: CourtListenerOpinion
Date Created: 2023-08-26 16:23:51.317535+00
Date Added: 2024-06-11T18:26:28.640199
License: Public Domain

THOREEN, Judge,
dissenting.
I respectfully disagree with the majority’s holding that the company breached its duty to indemnify the insured. It is my opinion that by entering into the unilateral settlement in this case, the insured substantially violated his duty to cooperate and violated the policy.
The majority’s conclusion is based upon a finding that the insured is entitled to the benefit of the Miller v. Shugart, 316 N.W.2d 729 (Minn.1982), doctrine. However, this case differs in certain critical respects. First, in Miller a lawsuit had been commenced so the insured knew the exact nature of the claims being made. This also afforded the insurer the right to *646depose the claimants and access to medical and other records needed to determine liability and evaluate the claims. No case in Minnesota has been brought to our attention confirming a unilateral settlement made before a suit was started.
Second, in Miller, the settling insured protected himself completely from any personal liability. In this case, the insured had a $1,000,000 policy, so there was no chance of any economic loss because of damages awarded for “negligently transmitting herpes.” If the facts relating to the sexual contacts with the two claimants are as insured asserts, the possibility of the claimants recovering punitive damages in this case is so remote, that protection against such claims cannot justify the settlement. No case in Minnesota has been cited confirming a unilateral settlement that did not provide a substantial economic benefit to the insured. It is true, as the majority point out, that the settlement may have protected the insured from public exposure, but the insurance policy does not purport to protect his “reputation,” only his “pocketbook.”
Moreover, in this case, the company cannot be faulted for delay. Barely six weeks transpired between the first notice of claim and the settlement on February 20, 1989. The first direct notice from claimants (by letter from their attorney) that they were claiming negligent transmission of herpes was received by the company on February 15, 1989. On February 17, 1989, the company notified the insured that it would defend him on such claims. While the company did not specifically admit coverage, at no time did it deny coverage for a negligence claim. It did reserve its rights under the policy in the event a forthcoming complaint alleged an intentional tort or punitive damages, which was proper. See Steen v. Underwriters at Lloyds, 442 N.W.2d 158, 161 (Minn.App.1989), pet. for rev. denied (Minn. Aug. 15, 1989).
It appears from the record that the company began an investigation of the claims early in January, soon after first notice. However, their investigation was limited to what information the insured could or would reveal. He would not furnish the names of the claimants nor could he furnish their medical records. It would seem that in order to determine liability and evaluate these claims, the company was entitled to know, at the very least, whether the claimants had ever been infected with or exposed to herpes through other sexual partners. The only information available to the company in this regard on February 20, 1989 was the insured’s opinion and that was based on what the claimants had told him. The company’s repeated position that it could not participate in settlement discussions without further information was entirely reasonable.
The supreme court has refused to extend the Miller v. Shugart doctrine. In Buysse v. Baumann-Furrie & Co., 448 N.W.2d 865, 872 (Minn.1989), which involved a dispute as to applicable limits of liability, the court held that the unilateral settlement voided the contract of insurance and stated:
Only the insurer’s denial of the existence of any coverage for the claim and the resultant exposure of the insured to liability for the entire amount of any damage award provide a basis for requiring the insurer’s right to the insured’s cooperation to yield to the insured’s need to extricate himself or herself without the insurer’s agreement.

Id.

It is my opinion that in a case such as this where (1) the insurer has not denied coverage, and (2) the insurer has agreed to defend if a lawsuit is started, and (3) the insured has been unable to investigate the claims sufficiently to determine liability or evaluate the damages, due to insured’s failure to cooperate, it was not unreasonable for the insurer to refuse to participate in a settlement and that the unilateral settlement entered into by the insured voided the contract of insurance.