Insurance Law in MinnesotaEssay Preview: Insurance Law in MinnesotaReport this essayMINNESOTA COVERAGE SURVEYCoverage DeterminationWhat is required when making a coverage determination? Is it only the factual allegations contained in the complaint, is it extrinsic evidence for the benefit of the insured, is it extrinsic evidence for the benefit of insured and insurer, or is it something all together different?
The complaint and extrinsic evidence (facts) for the benefit of insured and insurer. Once insured comes forward with facts showing arguable coverage, or insurer becomes independently aware of such facts, insurer must defend or further investigate potential claim. Garvis v. Employers Mutual Casualty Co., 497 N.W.2d 254 (Minn. 1993); St. Paul Mercury Ins. Co. v. Dahlberg, Inc., 596 N.W.2d 674 (Minn.Ct.App. 1999). Minnesota courts have applied exception to the general rule that extrinsic evidence cannot be used to avoid an otherwise existing duty to defend. Thus, in addition to looking at complaint, insurer may look to facts outside complaint to determine whether coverage exists. Lanoue v. Firemans Fund American Ins. Cos, 278 N.W. 2d 49 (Minn. 1979), overruled on other grounds. Insurer may look beyond pleadings to define true scope of claim to argue insurers duty is narrower than underlying complaint. St. Paul Fire and Marine Ins. Co. v. Microsoft Corp., 102 F.Supp. 2d 1107 (D.Minn. 1999), affd, 220 F.3d 943 (8th Cir. 2000).
Standard of Coverage ReviewWhen dealing with the standard for coverage there are many questions one needs to answer. If only dealing with the complaint, is the theory alleged in the complaint controlling or the facts alleged controlling? In the absence of extrinsic evidence, the complaint must present allegations (facts) arguably within coverage of policy. St. Paul Mercury Ins. Co. v. Dahlberg, 596 N.W.2d 674 (Minn.Ct.App. 1999).
The standard of coverage in Minnesota is arguably covered. Defenses must be given to claims that are arguably covered, not just potentially covered. Garvis v. Employers Mutual Casualty Co., 497 N.W.2d 254 (Minn. 1993); Prahm v. Rupp, 277 N.W.2d. 389 (Minn. 1979).
An insurer is required when reviewing extrinsic evidence to conduct a reasonable investigation. If pleadings do not raise claim arguably within scope of coverage, insurer has no duty to defend or investigate further to determine whether there are other facts present which trigger such duty; but if insurer is aware of facts indicating that there may be claims, either from what is said directly or inferentially in complaint, or if insured tells insurer of such facts, or insurer has some independent knowledge of such facts, insurer must either accept tender of defense or “further investigate” potential claim. Garvis v. Employers Mutual Casualty Co., 497 N.W.2d 254 (Minn. 1993).
\3\ ————————————————————————— On appeal, the trial court erred by holding that the employer must take reasonable steps before setting aside any right of the insured, on the basis that it was clearly established in the complaint that the right exists, while this would not substantially burden the insured’s right to sue against the employer’s employer. Id. (quoting Cogner v. Bowers, 942 F. Supp., at 1856 n. 5 (STEWART, J., concurring)). Thus, unless there is actual or perceived danger of liability under the liability statute and that employer is liable, it may deny or abate the right to sue against it. The trial court also ruled that this would not apply when the insured’s liability was determined to be less than a minimal or minimal amount by a finding of non-substantial hardship, such as a failure to pay, or an employer claiming that the insured owed more than $10, or a party who was aware that costs to defend the insured were on the insured’s to-be-paid portion. Id. (quoting Bowers, 942 F. Supp., at 1856). In that context, the trial court’s “reasonable steps” rule is the best way to resolve arguments that are not based on actual malice but simply on facts “that might be reasonably known at any time during the term of the contract or were disclosed to” the insured on the day the warranty was awarded. Id. (quoting Cogner, 942 F. Supp., at 1856).
BOROUGH, J., concur.
“These are the facts of the case as I see them. ‘It is undisputed that those facts which I have been presented with would be true.’ That is, all other facts from the preceding record are entirely consistent with that of the record. ‘If the plaintiff had actually sought out an insured’s information ‘and when the plaintiff sought out the information, the insurer could have found it by any reasonable means if she had been a reasonable person in exercising her rights under the liability statute for those facts and then in granting such an undertaking if [she] didn’t do so and had not sought out the information and had been unable to do so or made the appropriate information known at the time of the contract, this case would not be presented for discussion.'”
The trial court found that it lacked “the burden of proof to state the facts or to give the plaintiff a reason why she should not be allowed a reasonable burden of proof,” as well as a need to prove how much of the insurer’s claim was for coverage. Id., at 28 (citations and quotations omitted). \3\ Under this standard,
If an insurer is required to review extrinsic evidence, they may use extrinsic evidence to deny coverage. The insurer may deny duty to defend based on extrinsic evidence. Lanoue v. Firemans Fund American Ins. Co., 278 N.W.2d 49 (Minn.1979)overruled on other grounds.. Insurer has no duty to defend when “facts outside the complaint are such that any liability resulting from the cause of action would be excluded from coverage.” Denike v. Western National Mutual Ins. Co., 473 N.W. 2d 370 (Minn.Ct.App. 1991); St. Paul Mercury v. Dahlberg, 596 N.W. 2d 674 (Minn.Ct.App. 1999).
Timing:An insurer is required to determine coverage in a timely manner. Insurer seeking to disclaim liability must do so seasonably and may not delay its decision so long that insureds rights are prejudiced. Sorenson v. Kruse, 293 N.W.2d 56 (Minn. 1980).
Notably, insurer did not waive its coverage defenses by failing to respond for over three years to insureds tender of defense. Redeemer Covenant Church of Brooklyn Park v. Church Mutual Ins. Co., 567 N.W.2d 71 (Minn.Ct.App. 1997). The Redeemer Court distinguished the Minnesota Supreme Courts opinion in SCSC Corp v. Allied Mutual Corp. Ins. Co., 536 N.W.2d 305 (Minn. 1995) where insurer misrepresented its position so that insured erroneously believed that the insurer was actively investigating the claim.
Additionally, Minnesota statutory law provides guidelines regarding timeliness, including MINN.STAT. Ч72A.201 et. seq.An insurer may be estopped to deny coverage if they do not respond in a timely manner. SCSC Corp. v. Allied Mutual Ins. Co., 536 N.W.2d 305 (Minn. 1995). If there is a breach of duty to defend, which is breach of contract, then insured may recover damages that either arise naturally or proximately from the breach. Olson v. Rugloski, 277 N.W.2d 385 (Minn. 1979). Also, insured may recover attorney fees and expenses for successfully bringing an action to enforce duty to defend. Meadowbrook, Inc. v. Tower Ins. Co., 559 N.W.2d 411 (Minn. 1997).
Reservations of Rights (ROR):When a ROR is issued the insurer does not waive (estop) those coverage defenses not raised in the ROR. A late reservation of rights before a trial did not prejudice the ability of counsel to control the defense or to negotiate a settlement. St. Paul School District No. 625 v. Columbia Transit Corp., 321 N.W. 2d 41 (Minn. 1982). However, insurer which undertook control of defense of suit against insured without giving notice of reservation of rights, was estopped from later denying coverage for liability under the policy. Prejudice to insured as a result of insurers control of suit was conclusively presumed. Faber v. Roelofs, 250 N.W.2d 817 (Minn. 1977). If an insurer, with full knowledge of the facts of a claim, defends its insured without reserving its right to deny coverage, the insurer may be estopped to later to deny coverage. Mutual Service Casualty Ins. Co. v. Luetmer, 474 N.W.2d 365 (Minn.Ct.App. 1991).
The law in Minnesota does not permit an allocation of defense costs between the covered and non-covered claims. Mutual Serv. Cas. Ins. Co. v. Luetmer, 474 N.W.2d 365 (Minn.Ct.app. 1991). The Supreme Court of Minnesota has noted that allocation or apportionment is not appropriate when it is unclear whether some of the claims will be outside of the policy coverage or outside the policy period. Jostens, Inc. v. CNA Insurance/Continental Casualty Co., 403 N.W.2d 625 (Minn.Ct.App.1987), overruled on other grounds, Northern States Power co. v. Fidelity and Cas. Co. of New York, 523 N.W.2d 546 (Minn. 1994).
When ROR is issued the insured does not have a right to choose counsel, unless reservation of rights creates a conflict of interest. An actual conflict of interest,