Remodeling Dimensions, Inc. v. Integrity Mutual Insurance Co.
2012 Minn. LEXIS 404
| Minn. | 2012Background
- RDI tendered a homeowners arbitration demand to Integrity; Integrity appointed defense counsel under a reservation of rights.
- Arbitrator awarded homeowners $45,000 for basic repairs, $2,000 for flat roof, $1,000 for cleaning, and $3,000 for management; nothing for windows/inspection/design.
- RDI sought a written explanation of the award under AAA Rule 43(b); the arbitrator denied as untimely.
- Integrity denied coverage, and RDI paid the award and sued for indemnification under the policy.
- The district court granted summary judgment for RDI; the court of appeals reversed; this Court reverses and remands.
- The key dispute centers on whether any part of the arbitration award was for covered property-damage claims and whether Integrity is vicariously or directly liable for the attorney’s actions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether any arbitration award portion is a covered claim | RDI argues some claims (original house) were covered. | Integrity contends the claims are not covered or are excluded. | Partial coverage possible; allocation needed. |
| Whether Integrity is vicariously liable for the attorney’s failure to obtain a written explanation | RDI asserts agency-based vicarious liability for the attorney. | Integrity argues no attorney-agent duty to seek explanation against RDI. | Insufficient record to prove an attorney–Integrity agency relationship; vicarious liability not established. |
| Whether Integrity has direct liability for a vague award due to defense-issuer duties | RDI contends insurer must indemnify for covered portions despite vague award. | Integrity argues allocation is improper without a timely written explanation. | Duty to notify and allocate governs; remand to determine notice and prejudice. |
| Duty to notify insured of allocation rights when defending under reservation of rights | Insurer must inform insured of right to an allocated award. | No duty specified beyond reservation; allocation burden unclear. | Insurer must notify; if prejudiced by lack of notice, burden shifts to insurer to show noncovered portions; remand for record development. |
Key Cases Cited
- Hauenstein v. Saint Paul-Mercury Indem. Co., 242 Minn. 354 (Minn. 1954) (definition of accident as an occurrence concept)
- Pine Island Farmers Coop v. Erstad & Riemer, P.A., 649 N.W.2d 444 (Minn. 2002) (dual representation with consent when no conflict; insurer–insured relationship nuances)
- Faber v. Roelofs, 311 Minn. 428 (Minn. 1977) (reservation-of-rights estoppel in defense of claims)
- Oehme v. Johnson, 181 Minn. 138 (Minn. 1930) (estoppel from defense without reservation of rights)
- Meadowbrook, Inc. v. Tower Ins. Co., 559 N.W.2d 411 (Minn. 1997) (duty to defend when covered claims exist; allocation principles)
- Prahm v. Rupp Constr. Co., 277 N.W.2d 389 (Minn. 1979) (allocation and indemnification principles under policy terms)