Minn. Supreme Court Rules Against Agent in Negligent Procurement Case

August 5, 2011

An insurance agent in Minnesota lost an appeal asking to the state Supreme Court to dismiss a case against him over “negligent procurement of insurance coverage.”

Robert M. Swendra with the Robert M. Swendra Agency Inc. representing American Family Insurance Group sold Curtis Graff, a police officer, an automobile policy from American Family that Graff believed contained $100,000 in UIM coverage and an umbrella policy that included an additional $1 million in UIM coverage.

Graff alleged that he bought the coverage on the Swendra’s advice. At court, Robert Swendra denied offering that advice.

The umbrella policy, however, “did not provide any additional UIM coverage because Robert Swendra had not arranged for the necessary endorsement that would have provided the additional UIM coverage,” according Justice Page, writing the opinion for the Minnesota Supreme Court.

After purchasing the policy, Graff injured his back in a traffic accident with an underinsured motorist. His career as a police officer was effectively ended and he underwent two surgical operations on his back. It was after the second surgery that he found “his umbrella policy did not contain the additional $1 million in UIM coverage.”

He sued, alleging breach of contract against American Family and negligent procurement of insurance coverage against the Swendra Agency.

Graff subsequently reached a settlement with American Family, releasing the insurer from liability for any future claims, and American Family was dismissed from the case.

“Upon learning of the release, the Swendra Agency sought to have Graff’s negligence claim against it dismissed, arguing that the release of American Family also released the Swendra Agency; or, in the alternative, that Graff’s claim failed because of circular indemnity,” the Court wrote.

At trial, the jury found both the Swendra Agency and American Family negligent. The jury assigned 90 percent of the fault to Swendra and 10 percent to the insurer and awarded $753,000 in damages.

The district court reduced the amount to $200,260, taking into consideration the settlements Graff previously made with American Family and two workers’ compensation insurers.

The district court, however, refused to dismiss the case against Swendra, finding “there was competent evidence reasonably tending to support the jury’s verdict that the Swendra Agency was negligent.” The Court of Appeals affirmed that decision.

Swendra had argued, among other things, that Graff’s release of American Family from further liability also released Graff’s claim against the Swendra Agency. Both the district court and the appeals court rejected that argument.

“The Swendra Agency argues that in this case, Robert Swendra, as an agent of American Family, bound American Family to provide UIM coverage through his representations to Graff,” Justice Page wrote. “Therefore, the Swendra Agency argues that American Family was contractually obligated to pay Graff’s claim and that any harm to Graff resulted from Graff’s decision to release American Family, not from the acts of the Swendra Agency.”

The problem with Swendra’s arugment, according to the Minnesota Supreme Court is that “although part of the same lawsuit, Graff brought separate claims against American Family and the Swendra Agency.” Specifically, Graff brought a breach-of-contract claim against American Family and a negligence claim against Swendra, and according to the Court they are not necessarily connected.

“In that the two claims are separate and distinct, we fail to see how, in this case, Graff’s settlement releasing American Family and dismissing the breach-of-contract claim against American Family would, by itself, preclude the ongoing viability of Graff’s negligence claim against the Swendra Agency, particularly when Robert Swendra denied that he had made any representations to Graff about the UIM coverage in the umbrella policy,” the Court wrote.

The decisions of the lower and appeals courts were affirmed.

Topics Legislation Agencies Claims Minnesota

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