This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. Â§ 480A.08, subd. 3 (2010).
STATE OF MINNESOTA
IN COURT OF APPEALS
Wolff Insurance Agency, Inc.,
Filed July 18, 2011
St. Louis County District Court
File No. 69DU-CV-09-3081
Bruce W. Larson, Wayzata, Minnesota (for appellant)
Rolf E. Sonnesyn, Aaron M. Simon, Tomsche, Sonnesyn & Tomsche, P.A., Minneapolis,
Minnesota (for respondent)
Considered and decided by Johnson, Chief Judge; Worke, Judge; and Muehlberg,
Appellant challenges the district courtâs determination that respondent insurance
agency was not negligent in failing to advise appellant that workersâ compensation
Retired judge of the district court, serving as judge of the Minnesota Court of Appeals
by appointment pursuant to Minn. Const. art. VI, Â§ 10.
insurance is mandatory in Minnesota. Specifically, appellant argues âspecial
circumstancesâ existed and created a heightened duty of care. Because the district court
did not clearly err by finding no special circumstances existed and because respondent
did not breach its ordinary duty of care, we affirm.
From 2002 to 2005, Philip Kraft was an independent owner and operator of a
semi-truck in North Dakota. Shortly after moving from North Dakota to St. Cloud,
Minnesota, Kraft incorporated his trucking business into appellant Philter, Inc., in
October 2005. Appellant is a Minnesota corporation, with its principal place of business
in Minnesota. In the fall of 2006, appellantâs insurance policies were set to expire, and
insurance agencies began soliciting appellantâs business. One of these agencies was
respondent Wolff Insurance Agency, Inc., which sent out mass mailings claiming to
specialize in selling insurance to trucking companies. Appellant had been working with a
North Dakota insurance agency but upon expiration of its policies in September 2006,
appellant decided to switch to respondent because it was local, Kraft had heard of it, and
it had solicited appellantâs business.
Appellant worked with respondentâs agent Doug Wolff. During the application
process, appellant gave respondent the names of its employees. Respondent knew that
appellant did not carry workersâ compensation insurance. Minnesota requires employers
to carry workersâ compensation insurance. Minn. Stat. Â§ 176.181, subd. 2 (2010). After
respondent submitted quotes, appellant purchased commercial liability insurance, cargo
insurance, and physical damage insurance from respondent. Appellantâs policies took
effect on September 17, 2006. Respondent contacted the American Interstate Insurance
Company (AIIC) on several occasions for the purpose of obtaining a workersâ
compensation insurance policy cost estimate for appellant after appellant inquired about
additional coverage. AIIC initially declined but respondent convinced AIIC to have a
risk agent meet with Kraft, which it did. Respondent provided appellant with a workersâ
compensation insurance policy premium quote from AIIC. But appellant declined this
coverage, telling respondent that the quote was too expensive and appellant could not
Appellant and respondent had numerous contacts with one another between
September 16, 2006, and December 22, 2007. However, appellant never met an agent of
respondent in person until trial. Neither respondent nor its agents ever advised appellant
that workersâ compensation insurance is mandatory in Minnesota. None of respondentâs
agents confirmed appellantâs declination of workersâ compensation insurance in writing.
Kraft did not know workersâ compensation insurance is mandatory in Minnesota.
On December 22, 2007, one of appellantâs trucks was in an accident that severely
injured two employees. Because appellant was an uninsured employer, Minnesotaâs
special compensation fund provided appellantâs injured employees with workersâ
compensation benefits pursuant to Minn. Stat. Â§ 176.183, subd. 1 (2010). The special
compensation fund then commenced an action against appellant for reimbursement of all
benefit payments it has made and will be required to make to appellantâs employees. The
special compensation fund also sought a penalty from appellant of 65% of all
compensation benefits paid, as provided in Minn. Stat. Â§ 176.183, subd. 2 (2010).
Appellantâs no-fault personal injury protection (PIP) insurance claim for the accident was
denied due to the primary nature of workersâ compensation insurance. Appellant sued
respondent alleging that the damages owed to the special compensation fund were a
direct result of respondentâs negligence. Prior to trial, the parties stipulated the damages
total $900,000 for past, present, and future workersâ compensation benefits to appellantâs
injured workers, including the 65% penalty assessed against appellant.
At a trial to the court held on September 2, 2010, appellant claimed that
respondent was negligent because it failed to advise appellant that workersâ
compensation insurance is required in Minnesota.
Appellant argued that âspecial
circumstancesâ existed, placing a heightened affirmative duty on respondent to advise
appellant of the mandatory nature of workersâ compensation insurance. The district court
found that no special circumstances existed; and thus concluded that respondentâs agent
was under no duty to inform appellant that workersâ compensation insurance is required
under Minnesota law. The district court also found that respondentâs agent fulfilled the
ordinary duty of care to offer insurance coverage as a reasonably prudent person engaged
in the insurance business would under similar circumstances. This appeal followed.
In an appeal from a bench trial, we do not reconcile
conflicting evidence. We give the district courtâs factual
findings great deference and do not set them aside unless
clearly erroneous. However, we are not bound by and need
not give deference to the district courtâs decision on a purely
legal issue. When reviewing mixed questions of law and fact,
we correct erroneous applications of law, but accord the
[district] court discretion in its ultimate conclusions and
review such conclusions under an abuse of discretion
Porch v. Gen. Motors Acceptance Corp., 642 N.W.2d 473, 477 (Minn. App. 2002)
(alteration in original) (quotation and citations omitted).
In a negligence action against an insurance agent, the plaintiff must show (1) the
existence of a duty; (2) a breach of the duty; (3) causation; and (4) damages. Johnson v.
Urie, 405 N.W.2d 887, 891 (Minn. 1987).
The primary issue in this case is whether respondent had a duty to inform
appellant that workersâ compensation insurance is mandatory in Minnesota. Generally,
an insurance agent has a duty to exercise the skill and care which âa reasonably prudent
person engaged in the insurance business [would] use under similar circumstances.â
Gabrielson v. Warnemunde, 443 N.W.2d 540, 543 (Minn. 1989) (alteration in original).
Absent an agreement to the contrary, the scope of this duty is limited to acting in good
faith and following the insuredâs instructions. Id. An insurance consumer is typically
responsible to educate himself concerning matters of insurance coverage. Louwagie v.
State Farm Fire & Cas. Co., 397 N.W.2d 567, 569 (Minn. App. 1986), review denied
(Minn. Feb. 13, 1987).
But a special circumstance or relationship may impose a heightened duty on the
agent to take some sort of affirmative action, rather than just follow the insuredâs
Gabrielson, 443 N.W.2d at 543-44; see Johnson, 405 N.W.2d at 889
(holding a duty to âoffer, advise or furnish insurance coverageâ may arise from the
âcircumstances of the transaction and the relationship of the agent vis-a-vis the insuredâ);
see also Osendorf v. Am. Family Ins. Co., 318 N.W.2d 237, 238 (Minn. 1982) (stating
that agentâs admitted obligation to update insurance contract supported finding of
negligence); Atwater Creamery Co. v. W. Natâl Mut. Ins. Co., 366 N.W.2d 271, 279
(Minn. 1985) (holding that facts may give rise to a duty to offer additional coverage).
Whether respondent had a duty to advise appellant that workersâ compensation
insurance is required in Minnesota is a question of law. See Johnson, 405 N.W.2d at 891
n.5. When the existence of a duty turns upon disputed facts, the fact-finder must
determine the underlying facts. Gabrielson, 443 N.W.2d at 543 n.1.
We note the meager findings by the district court on key issues in this case. In a
case tried without a jury, the district court must âfind the facts specially and state
separately its conclusions of law thereon.â
Minn. R. Civ. P. 52.01. âFindings are
necessary to support a judgment and to aid the appellate court by providing a clear
understanding of the basis and grounds for the decision.â
Moylan v. Moylan, 384
N.W.2d 859, 863 (Minn. 1986). But neither party raised this issue with the district court
or to this court on appeal. See Frank v. Ill. Farmers Ins. Co., 336 N.W.2d 307, 311
(Minn. 1983) (âWhere the [district] court fails in its duty to make a finding, the burden is
on the parties to alert the court by a motion for amended finding under Minn. R. Civ. P.
52.02.â); Anderson v. Petersonâs N. Branch Mill, Inc., 503 N.W.2d 517, 518-19 (Minn.
App. 1993) (declining to review adequacy of findings because appellant did not move for
amended findings). We also conclude remand for additional findings is not warranted
because it is clear from the record what findings the district court would make on remand.
See Grein v. Grein, 364 N.W.2d 383, 387 (Minn. 1985) (declining to remand for
additional findings because it was clear from record and district courtâs order what
findings the district court would make on remand).
At oral arguments, appellantâs attorney conceded that respondent did not breach its
ordinary duty of care to appellant. Thus, we turn our attention to whether respondent
owed a heightened duty to advise appellant that workersâ compensation insurance is
required in Minnesota.
When the standard-of-care issue goes beyond what an insurance agent should do
when clearly requested, to the broader issue of affirmative duties where no request has
been made, the issue centers around the professional judgment of the agent, requiring that
the standard of care be established by expert testimony. Atwater, 366 N.W.2d at 279.
Appellantâs request for coverage was broad and did not specifically demand
workersâ compensation insurance coverage. As in Atwater, the request went beyond
what respondent was explicitly asked to provide and instead goes to the broader issue of
respondentâs affirmative duties. Unlike Atwater, however, appellant presented expertwitness testimony about respondentâs duties as an insurance agency. Appellantâs expert
testified that in his opinion, an insurance agent in Minnesota, exercising the skill and care
of a reasonably prudent person engaged in the insurance agency business, would advise
an insured that workersâ compensation insurance is mandatory, if the issue of workersâ
compensation insurance arose. Respondentâs expert, on the other hand, testified that
respondentâs failure to notify appellant that workersâ compensation insurance was
mandatory did not constitute negligence. The district court recognized the discrepancies
in the testimony but only implicitly found respondentâs expert to be more credible, as it
ultimately concluded respondent did not have a duty to inform appellant that workersâ
compensation insurance is mandatory in Minnesota.
Appellant challenges the district courtâs determination that there were no special
circumstances imposing a heightened duty of care on respondent. Minnesota courts have
found special circumstances giving rise to a heightened duty of care in only a handful of
cases. In analyzing whether special circumstances exist, the supreme court considers
whether: (1) the agent knew the insured was unsophisticated in insurance matters; (2) the
agent knew the insured was relying on the agent to provide appropriate coverage; and
(3) the agent knew the insured needed protection from a specific threat. See Gabrielson,
443 N.W.2d at 544; Johnson, 405 N.W.2d at 889-90; Osendorf, 318 N.W.2d at 238.
Appellant argues these three factors have been met in the instant case.
Agent knew that the insured was unsophisticated in insurance matters
First, appellant claims it was unsophisticated in insurance matters because when
appellant initially sought respondentâs services, Kraft had only recently made the
transition from being the owner and operator of a semi-truck to an employer with drivers.
As a result, Kraft was knowledgeable about the insurance coverage needed for
commercial trucks but did not know the types of insurance an employer needed. At trial,
respondentâs agent testified that he knew appellant was a new employer and this was one
of the reasons he requested AIIC reconsider its original declination of workersâ
compensation coverage for appellant. But the agent also testified that with insureds âin
business for themselves, there is some expectationâ they would know workersâ
compensation insurance is mandatory in Minnesota.
Further, even though Kraft was a new employer, he graduated from high school,
attended North Dakota State University for approximately one-and-a-half years, and had
business-management experience. Appellantâs circumstances are much different from
those of the insured in Osendorf, a barely literate farmer who had difficulty reading the
insurance material and, as a result, had to rely on his agent to help select the appropriate
coverage. 318 N.W.2d at 238. Appellant was competent enough to determine the types
of insurance commercial trucks needed and was therefore capable of becoming educated
about what kinds of insurance employers are required to carry. The record indicates
appellant failed to do this.
Accordingly, appellant has not demonstrated special
circumstances based on a lack of sophistication in insurance matters.
Agent knew the insured was relying on the agent to provide appropriate coverage
Second, appellant claims respondent knew appellant was relying on the insurance
agent to provide appropriate coverage. Kraft stated that during his initial contact with
respondent, he asked respondent to âquote . . . coverage for [his] trucking companyâ and
that appellant was due for renewal of his policies. It appears the only specific coverages
mentioned at the initial meeting were the types of insurance appellant had previously
carried. Kraft testified that he wanted to purchase the minimum required insurance.
Further, when asked at trial if he understood appellant was looking for âjust the minimum
required coverages,â the agent answered in the affirmative.
In determining if the insured was relying on the agent for appropriate coverage,
this court may consider whether appellant purchased all of its insurance from respondent
or if it also used another insurance agent. See Gabrielson, 443 N.W.2d at 545 (stating
âgreat relianceâ not present where insured âdid not place all of his insurance needs into
the hands of [one agent] but rather, used another insurance agent as wellâ); see also
Carlson v. Mut. Serv. Ins., 494 N.W.2d 885, 886-88 (Minn. 1993) (finding special
circumstances where agent and insured had familial relationship, celebrated holidays and
family gatherings together, and insured relied on agent for all insurance needs and for
insurance advice). Appellant relied solely on respondent for its insurance needs. But
Kraft obtained personal insurance from a different agency even though respondent
procured personal insurance for many of its clients.
The record also does not reflect that appellant âdelegate[d] decision-making
authorityâ to respondent for its insurance needs. See Beauty Craft Supply & Equip. Co. v.
State Farm Fire & Cas. Ins. Co., 479 N.W.2d 99, 101-02 (Minn. App. 1992), review
denied (Minn. Mar. 19, 1992). ââSpecial circumstancesâ may arise when the insured
delegates decision-making authority to the agent and the agent acts as an insurance
consultant.â Id. In Beauty Craft, this court rejected the insuredâs contention that a
request for âfull coverageâ created an obligation on the part of the agent to recommend
and obtain all appropriate coverages. Id. at 101. Similarly, appellantâs request for the
minimum required insurance did not obligate respondent to recommend and obtain all
appropriate coverages. Consequently, any reliance appellant placed on respondent did
not rise to the level needed to create special circumstances.
Agent knew that the insured needed protection from a specific threat
It is undisputed that respondent knew appellant was statutorily required to have
workersâ compensation insurance. The agent testified that he knew appellant did not
have workersâ compensation insurance but did not know if appellant procured workersâ
compensation insurance from another agency after declining the quote respondent
provided. He explained that it is not uncommon for an insured in the commercial auto
industry to use multiple agentsâthat it was possible appellant declined the quote
respondent obtained and purchased workersâ compensation insurance from another
agency. It is also possible for trucking companies to lease the services of drivers who are
covered by another companyâs workersâ compensation insurance, relieving the hiring
company of the responsibility. In fact, after the December 22, 2007 accident, appellant
leased the services of independently covered drivers before purchasing its own workersâ
compensation insurance. But, the agent testified that he and appellant never discussed
appellant obtaining workersâ compensation insurance from a different agency or hiring
independently covered drivers.
Although respondent was aware that appellant did not have workersâ
compensation insurance when the agent obtained a quote for it, the record does not
indicate that respondent knew appellant did not have the required insurance going
forward. The agent testified about two plausible scenarios that the evidence does not
negate; first, appellant could have purchased workersâ compensation insurance from
another agency and second, appellant could have hired drivers already covered by other
companies. Because it is possible the agent believed appellant complied with the
workersâ compensation insurance requirement by alternative means, we cannot conclude
the agent knew appellant needed protection from a specific threat after obtaining a quote
For purposes of determining the legal duty of an insurance agent, a special
circumstance or relationship may also exist when the insured asks the agent to examine
the insuredâs exposure and advise the insured on potential exposure. Scottsdale Ins. Co.
v. Transport Leasing/Contract, Inc. 671 N.W.2d 186, 196 (Minn. App. 2003). There is
no evidence in the record indicating appellant asked respondent to examine its exposure
or advise on potential exposure.
The record does not support that the agent knew appellant needed protection from
the specific risk that resulted in the loss, and appellant never asked respondent to examine
its exposure. Because appellantâs lack of sophistication as to insurance matters and its
reliance on respondent also do not support the legal determination that special
circumstances existed, respondent did not owe appellant a heightened duty of care.
Although we affirm the district courtâs determination that respondent did not owe
a heightened duty of care, we reject the district courtâs conclusion that an insurance agent
informing a prospective or current client of the workersâ compensation insurance
requirement constitutes legal advice.
Insurance agents help clients select insurance
policies that provide the most suitable protection for the insured. Notifying a prospective
or current client that Minnesota law requires employers to carry workersâ compensation
insurance is relevant information that may aid in the clientâs selection of appropriate
Thus, this information is not legal advice and, contrary to respondentâs
contention, an insurance agent is not engaging in the unauthorized practice of law when
rendering such advice to a client.