Court Opinion

ID: 9594350
Source: CourtListenerOpinion
Date Created: 2023-08-22 00:29:20.54648+00
Date Added: 2024-06-11T14:58:03.884932
License: Public Domain

SIMONETT, Justice.
We granted the petition of St. Paul Fire & Marine Insurance Company (St. Paul F. & M.) to review an unpublished decision of the court of appeals reversing summary judgment entered in St. Paul F. & M.’s favor after a remand from this court in Buysse v. Baumann-Furrie & Co., 448 N.W.2d 865 (Minn.1989) (.Buysse I). We now reverse in part, affirm in part, and remand.
This complex accounting malpractice lawsuit was abruptly ended in the fourth week of trial, when plaintiffs Buysse and defendant Baumann-Furrie entered into a stipulation for entry of judgment. The parties stipulated that Baumann-Furrie was negligent; and that its negligence resulted in damages to plaintiffs of $1 million; that plaintiffs could only seek collection of the damages from Baumann-Furrie's liability *29insurance carrier, St. Paul Fire & Marine Insurance Company. The parties characterized the stipulation as a “Miller-Shu-gart” settlement. See Miller v. Shugart, 316 N.W.2d 729 (Minn.1982).
In an authentic Miller-Shugart settlement, the insurer has denied all coverage, and the abandoned insured, left on its own, agrees with the plaintiffs that judgment in a certain sum may be entered against it in return for the plaintiffs releasing the insured from any personal liability. In this case, however, St. Paul F. & M. had always acknowledged coverage and, indeed, was defending the insured at the trial then in progress. The fact that St. Paul F. & M. took the position that its policy limit for plaintiffs’ claim was $500,000 under its “each error” coverage and not $1 million under its “multiple unrelated errors” coverage did not give the insured license to enter into a Miller-Shugart settlement with plaintiffs.
The danger of using a Miller-Shu-gart settlement when it does not fit is that it exposes the insured to a claim that it has breached the cooperation clause in its policy. If that happens, then the entire policy coverage is voided. See Sargent v. Johnson, 551 F.2d 221 (8th Cir.1977). In Buysse I, we ruled that by admitting liability and damages of $1 million, the insured had deprived the insurer of its right to defend those claims at trial and was a serious breach of the cooperation clause. We reversed plaintiffs’ judgment for $1 million against St. Paul F. & M. as the garnishee.
The record in Buysse I was unclear, however, as to what the signatories to the stipulation had intended. In a Miller-Shu-gart settlement the insurer is not a party to the agreement, nor was St. Paul F. & M. named a party to this stipulation; nevertheless, defense counsel retained by St. Paul F. & M. had signed the stipulation even though the insured’s personal attorney had already signed. We commented that “[t]he tenor of the stipulation of settlement and the circumstances under which it was negotiated and presented to the trial judge” raised questions about St. Paul F. & M.’s role. Consequently, we went on to say:
Because we cannot determine on the record before us whether the insurer joined in an agreement to recognize the continued vitality of the insurance coverage to the $500,000 limit, we remand to the trial court for determination of that fact issue.
448 N.W.2d at 875.
On remand, plaintiffs and the garnishee filed cross motions for summary judgment with supporting affidavits. The trial court found that the insurance company had never agreed to the stipulation and granted summary judgment in favor of St. Paul F. & M. The court of appeals reversed, ruling that there were disputed issues of fact precluding summary judgment. The court of appeals interpreted our remand not to require an explicit agreement to the stipulation on St. Paul F. & M.’s part. However, the inquiry was whether there was an understanding that “entry into the stipulation would not jeopardize coverage to the extent of the conceded limit of $500,000.” Id.
All counsel were experienced trial attorneys, presumably familiar with Miller-Shugart. All knew that St. Paul F. & M. had retained attorney May to defend Bau-mann-Furrie, and that attorney May was St. Paul F. & M.’s agent to make any offers involving St. Paul F. & M.’s policy limits. Mr. May had previously conceded $500,000 coverage and, indeed, had tendered that sum in settlement on behalf of St. Paul F. & M. It now appears this authority to pay $500,000 at all times remained “on the- table.”- The subject of the stipulated judgment apparently arose about the time that Mr. Baumann, president of Baumann-Furrie, was complaining of illness and there was some concern about the trial being able to continue. Even though Mr. Baumann and his personally retained counsel had signed the stipulation for judgment, plaintiffs’ counsel insisted that Mr. May or his co-counsel Keenan sign too, stating that he wanted to know if St. Paul F. & M. objected. Plaintiffs’ counsel did know, however, that St. Paul F. & M. op*30posed such a settlement. Indeed, only the day before St. Paul F. & M. had rejected a somewhat similar proposal. Upon learning of the stipulated settlement from Mr. May, St. Paul P. & M. vehemently objected.
All counsel understood that Mr. May had St. Paul P. & M.’s authority to settle for up to $500,000, and, it seems clear to us, by having his co-counsel sign the stipulation, Mr. May was confirming at least this commitment which was not inconsistent with his actual authority. Forfeiture of coverage, especially conceded coverage, is a harsh sanction, and before it will be imposed something more in the way of evidence is required than was produced here. We have already held that the disputed claim for the additional $500,000 coverage had been voided; this, we think, is a sufficient sanction for the violation of the insurer’s rights and responds, fairly and proportionately, to the prejudice sustained by St. Paul. We are left, then, with a confessed judgment for which there is $500,000 of coverage.
As we held in Buysse I, the disputed second $500,000 of coverage for alleged multiple unrelated errors has been voided by the stipulated settlement. We now hold that the initial $500,000 for “each error” coverage remains available for the stipulated settlement, which settlement, we conclude, should remain binding between plaintiffs and defendant. Consequently, the only possible issue remaining on remand is whether the stipulated damages up to the sum of $500,000 are reasonable. In view of the fact that St. Paul was willing to pay $500,000 during trial, we hold as a matter of law that St. Paul, as garnishee, is liable to plaintiffs in the amount of $500,000.
Affirmed as modified and remanded for entry of judgment against garnishee St. Paul as indicated.