Graff v. Robert M. Swendra Agency, Inc.
800 N.W.2d 112
Minn.2011Background
- Graff sued American Family for breach of contract and Swendra Agency for negligent procurement of $1,000,000 UIM coverage under an umbrella policy.
- Graff alleges Swendra advised purchase of umbrella with $1M UIM; endorsement creating the coverage was not obtained.
- Graff learned in 2005 that the umbrella policy did not provide the promised $1M UIM; February 2007 complaint pleaded breach against American Family and negligence against Swendra Agency.
- Graff and American Family entered a Pierringer release in 2008, releasing American Family but preserving claims against Swendra Agency; American Family later dismissed.
- Jury allocated 90% fault to Swendra Agency and 10% to American Family; damages awarded $753,000; collateral source offset reduced the award by $200,260, excluding attorney fees paid for workers’ compensation settlements.
- Court of Appeals affirmed; Minnesota Supreme Court affirms, rejecting theories that the release extinguished the Swendra Agency claim or that collateral-source attorney fees were includable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether negligent procurement of insurance is a valid claim against an insurance agent | Graff argues agent liability exists for negligent procurement. | Swendra Agency contends no direct agent liability; principal bears the risk. | Yes; agent may be liable for negligent procurement. |
| Whether the American Family release extinguishes Graff’s claim against Swendra Agency | Graff contends release does not bar claims against Swendra Agency. | Swendra Agency argues bound coverage or circular indemnity requires extinguishment. | Release does not extinguish the Swendra Agency claim; circular indemnity not present. |
| Whether attorney fees paid to Graff’s counsel in workers’ compensation matters are collateral sources to offset damages | Graff contends fees are collateral sources under Minn. Stat. § 548.251. | Swendra Agency argues fees are not related to the injury/disability and not collateral sources. | Attorney fees are excluded from collateral-source offset; fees not collateral sources. |
Key Cases Cited
- Booth v. Gades, 788 N.W.2d 701 (Minn. 2010) (contractual settlement construction; de novo review of contract terms)
- Karnes v. Quality Pork Processors, 532 N.W.2d 560 (Minn. 1995) (contract interpretation and settlement implications)
- Turner v. Alpha Phi Sorority House, 276 N.W.2d 63 (Minn. 1979) (contractual interpretation and settlement-related questions)
- Johnson v. Farmers & Merchants State Bank of Balaton, 320 N.W.2d 892 (Minn. 1982) (insurance agent duties; delivery of policy; liability limits)
- Paull v. Columbian Nat’l Fire Ins. Co., 171 Minn. 118, 213 N.W. 539 (Minn. 1927) (principle that an agent binds the principal; insurer liable for agent's actions)
- Eddy v. Republic Nat’l Life Ins. Co., 290 N.W.2d 174 (Minn. 1980) (agent vs broker distinction; insurer liable for agent torts within scope)