*1 UNDERWRITING LUMBERMEN’S

ALLIANCE, Appellant, INC.,

TIFCO, Respondent, Agencies,

Mid-Continent

Defendant, Marcelius, al., et Robert S.

Dana L.

Stevenson, Phelps, L. Steven

Respondents.

No. C2-90-1698. of Minnesota. Appeals

Court 22, 1991.

Jan. April

Review Denied Harder, Gillin,Thomas A. Jar- E.

Charles O’Brien, Paul, dine, for Lum- Logan & St. Underwriting Alliance. bermen’s O’Connor,Jr., Hart, Bruner & Patrick J. O’Brien, P.A., Minneapolis, for Klutho, Remele, Jr., A. A. Michael Lewis Lockhart, Bassford, Heckt, Truesdell & P.A., L. Minneapolis, for Dana Briggs, Marcelius, al. et *2 Singer, Singer change, Michael G. Peterson & MCA was to receive a fee based on agreement. Office, the value of the finance Minneapolis, for S. Ste- Law Robert venson. writing authority also had draft on MCA checking account. Once it sold a Daub, Sanford, Yost, Michael H. Daub & insured, agreement to an MCA Phelps. Minneapolis, for Steven L. generally prepare payable to would a draft itself. Tifco would confirm the existence PARKER, by and decided Considered draft, approve after of a FLEMING,* P.J., and FORSBERG and deposit the draft into its which MCA would JJ. doing By own account. so before company, miums were due to the insurance OPINION money MCA obtained the time value of the or the “float.” FLEMING, Judge. WILLIAM J. began experience In late MCA to Underwriting Appellant Lumbermen’s financial difficulties. It was unable to col- (LUA) against brought Alliance this action receivable, lect a of accounts lost a number (Tifco); respondent Inc. defendant accounts, authority of and its number (MCA); Agencies, re- Mid-Continent primary cancelled some of its carriers. Marcelius, spondents Dana L. Dennis L. telephone Tifco admits it received calls Hovanes, Edling, Daniel A. Steven L. regarding companies from other insurance ap- Phelps, and Robert S. Stevenson. This stability, which a MCA’s financial raised grant partial summary peal is from a of regarding ability Tifco concern in MCA’s

judgment dismissing claims LUA’s pay premiums companies. to insurance In accordance with Minn.R.Civ.P. having informed Tifco it was MCA also 54.02, the trial court determined there was financial difficulties and could not make just delay entry judg- of of no reason for Nevertheless, did payments. some Tifco entry judgment. directed ment and change investigate not further or otherwise trial court appeal, On LUA dealings its with MCA. granting summary judgment erred in approached LUA to early denying discretion in its re- abused its compensation policies underwrite worker’s quests complaint. agree, to amend its We customers, Packag- of its Advance two and reverse and remand. (Advance) Kitchens ing, Inc. and Medallion (Medallion). placed poli- a MCA had never FACTS cy before. with LUA is an insurance authorized LUA informed MCA it was a direct writ- LUA compensation insurance to write worker’s insurance, employed agents, no er of premi- an insurance in Minnesota. Tifco is pay a com- circumstances would it under no doing business um consented, and indi- mission to MCA. MCA was an insurance Minnesota. MCA management acting as a “risk cated it was in Minnesota until it termi- doing business on of the insureds consultant” behalf 30,May activity on or about nated business profit a from the insureds. would earn Marcelius, Hovanes, Phelps, Edling, 1987. poli- agreed writing consider LUA agents, were insurance offi- and Stevenson business, reviewing After Advance’s cies. cers, principals of MCA. employees, provide it cover- LUA informed MCA could giving approximately to this age premium quote to the events rise Prior at a $144,000. agreed coverage litigation, Tifco and MCA had entered into LUA to bind Understanding” in 1987. LUA sim- for Advance on March a “Memorandum business, sell, Medallion’s agreed ilarly market and ad- reviewed which MCA coverage provide it agreements. In ex- informed MCA would Tifco finance minister * Const, VI, judge 2. judge, Minn. art. as Retired district court by appointment pursuant Appeals the Court premium $244,000. for a agreed eventually changed position, coverage bind on the Medallion policy ef- however, agreed to extend coverage 1,May cases, fective In both LUA after it was contacted the Minnesota informed MCA the would not be Department of Commerce. LUA then policies due until the were issued and re- brought against Tifco, this action MCA, *3 ceived. LUA estimated the statements and individual MCA officers to recover the

would not be issued until approximately 45 premiums on the Advance and Medallion days coverage after was bound. policies. particular, In the complaint alleg- operated es that MCA agent, as Tifco’s and

MCA recommended to both Advance and negligently selected, directed, Tifco Medallion that they premiums finance their supervised and MCA. through doing, however, Tifco. In so failed to inform either Advance or Medal- separate answer, Tifco filed a counter- lion that LUA offered a 12-month interest- claim, and cross-claim. Apparently, upon free financing plan. Advance and Medal- recalculation premium, of Advance’s LUA they informed, lion claim that had premium $87,000, determined the was in- they would have elected to finance with stead of the original quoted premium of LUA. $144,945. Advance thereafter made no fur-

Advance and ther payments Medallion both installment entered into to Tifco on its agreements agreement. finance with Tifco. Under Tifco’s counterclaim agreements, terms of agreed $61,608.04 those Tifco seeks reimbursement of in un- 80%, approximately $200,080 premiums, or earned paid which it claims it $118,785 Medallion’s through Ad- LUA MCA. premium, vance’s with Medallion and Ad- LUA thereafter moved to amend its com- paying 20%, vance remaining $43,920 plaint to allegations joint include venture $26,160 respectively. Immediately af- joint enterprise against Tifco. The tri- policies ter effective, became MCA al court denied the motion. payable drew drafts to itself for the full brought Tifco a motion summary for premiums amount of the financed Tifco. judgment. opposed motion, approved Tifco the drafts. MCA then re- moved for a second amendment of the com- remaining ceived the premi- balance of the plaint allege a third-party beneficiary ums from Advance and Medallion. While theory of liability against Tifco. The trial LUA was aware were court denied LUA’s motion to amend its being through financed it claims it complaint, granted but Tifco’s motion for was not aware already MCA had received summary judgment. In doing, so the court the funds from both Tifco and the insureds. determined that (1986) Minn.Stat. 72A.03 LUA did not send an invoice to MCA for n governed, and that MCA was as the 26, 1987, the Advance May until with agent of LUA when it premi- collected the due June 1987. With re- Advance, Medallion, ums from and Tifco. spect to the policy, Medallion a bill was never sent to MCA because MCA had al- ISSUES ready operations ceased before LUA 1. Did the trial granting court err in pared an premium. invoice for the The summary judgment? record contains an invoice July dated 1987 that was sent to Medallion for its 2. Did the trial court abuse its discre- portion premium. in denying tion requests LUA’s to amend complaint? its

MCA went out of business on or about 30, 1987, May well before the policy. were due on either LUA received ANALYSIS none of the Tifco funds. When claims I subsequently made Advance and

Medallion, LUA initially refused to extend Summary judgment appropriate where coverage. moving party clearly has sustained

583 genuine no will be deemed to be the insurer’s proving that there is burden of collecting securing purpose fact that it is issue of material entitled addition, court supreme as a of law. Minn.R. judgment matter summary judg applied the version ruling specifically on a has current Civ.P. 56.03. motion, take the section to a Auto- ment the court must view of 72A.03 “broker.” See Sys., most favorable to the non- Indem. of the evidence mated Inc. National (Minn.1978). Equip v. Haar’s moving party. Vacura N.W.2d (Minn. ment, next 1985). purpose, a not intended has limited attached In the memorandum protect companies like judgment, tri granting summary order Again, disagree. must In Auto *4 proceeded to al court stated: “When MCA 5, Systems, 269 N.W.2d at 752 n. mated * * * Tifco, premiums it collect the from supreme “[ajbsent the court stated demon LUA, acting agent the of LUA. was as facts,[1] rea stration of further see no then, receipt of held to in those can be be why stand son the finance cannot having by virtue of MCA received monies purposes in the the insured” for of shoes of is on the same.” This conclusion based section 72A.03. also Markel Ins. See Serv. interpretation trial of Minn.Stat. court’s 401, Mass. Agency, Tifco, Inc. v. 403 (1986), perti in provides which 72A.03 § 408, 340, (1988)(“[W]e 530 344 held N.E.2d part: nent to equivalent that 169 § [Massachusetts’ acts Every agent insurance who for designed to insureds protect was 72A.03] § of in- negotiating in a contract agents another the insurers by making of brokers by an insurance shall is premiums. purpose surance That collecting for agent the for the company’s by be to be according held to clearly most served securing the purpose collecting of the paid premiums on behalf of who the insureds, miums. protection.”) 169’s § 72A.03, The to Minn. predecessor section applies section While we believe 72A.03 (1965), identical, with 72.05 was the Stat. § may by premium be used brokers “[ejvery applied it insur- exception that it companies, we do finance not believe for agent ance or broker who acts anoth- liability automatically protects Tifco from 1967, added.) section (Emphasis er.” agent provides an in this case. The statute repealed 72A.03 was 72.05 was and section agent may acting as an for the insurer be any reference broker. enacted without securing a This collecting premium. in Laws, 395, 12, art. 3 Minn. ch. See 1967 §§ makes recognized has section 72A.03 court and 40. agent agent an of the insurer an insurance "only scope activity: for for a limited of argues the version of the current of purpose negotiating a contract We the apply does not to brokers. statute collecting premiums.” insurance CU- operative language of The disagree. 790, PAG, Agency, 414 N.W.2d Daly who agent is “insurance acts for dis- “separate A (Minn.App.1987). 792 negotiating in a contract insur- another involving the may arise simply an tinct transaction” ance.” a broker is insur- Since insured, agent in financing premiums which the who acts for an agent ance the finance agent of cover a is as enough broad broker. 72A.03 is Budget clearly provides company. National Premium The that on whom- See statute Co., Casualty 81 acts, Corp. v. LaSalle agent Plan behalf insurance it soever’s enjoying 750, prevent may Systems, Tifco from at facts” which Automated protection be dis- financial condition was as the statute. As will broker's "shaky.” described the cussed, financing company’s than Other MCAexe- facts include that when those delay returning concern about broker’s in approved drafts for the and Tifco cuted account, an unearned in another there fully fi- of MCA’s premiums, Tifco was aware suggest no evidence finance premiums not condition and nancial company was aware of the broker’s financial yet due. Here, alleged condition. LUA has "further 584 466, 471, Ill.App.2d 400, See, 225 N.E.2d 403 denied. e.g., International Indem.

(1967). Acceptance, Inc., Co. v. Bakco Ga.App. 172 28, 31-33, (1984) (pre S.E.2d 81-82 premium financing activities MCA’s mium company’s allowing premature premiums may collection of agents to write drafts on its account made agency not be within limited estab possible perhaps agent’s facilitated by argues lished section 72A.03. LUA funds); misappropriation of National Pre by loss this case was caused not MCA’s Budget mium Corp. Plan v. National it, premiums collection of the for but N.J.Super. 238, 243-46, Fire Ins. MCA’s collection of the 254 A.2d (premium 821-23 they monies from Tifco before were due or company may negligent entrusting be owing to LUA. further Tif- monies to under circumstances in prepay co’s decision to “suspicion might which well have been MCA’sdecision to collect those aroused”), denied, cert. 54 N.J. scope outside created (1969). A.2d 113 contributory negli section 72A.03. A fact issue exists as to gence, any, may if ability affect its to re whether performed MCA’s actions were cover on its counterclaim LUA for pursuant premium financing activi premiums. unearned Similarly, LUA’s ties or its collection per If *5 negligence respect billing proce with to its pursuant formed financing to its dures, any, if may affect recovery on its activities, may then MCA be considered claim agent, performed pursuant if premiums, collection of then MCA was act II ing agent as LUA’s under section 72A.03. provides Minn.R.Civ.P. 15.01 “leave interpretation This of section 72A.03 is amend a pleading] freely given shall be [to consistent with Systems. Automated justice requires.” when so A trial court ease, the may deny preju such an amendment where automatically protection did not receive may dice result to opposing party jury of section 72A.03. The issue went to a where such an amendment would serve no scope to determine ap- of the broker’s legal purpose. Kellen, Pischke See parent authority. Systems, Automated 1986) N.W.2d 204 (Minn.App. (citing Ei appeal, 269 N.W.2d at 753. On su- Greenberg sert v. Roofing & Sheet Metal

preme court examined the “course of deal- (Minn. 1982)). 314 N.W.2d ing practices par- and commercial ties” before it concluded that the broker separate LUA filed two motions to was the insurer’s under section complaint. amend its requested The first Systems, 72A.03. Automated joint that it be allowed to add claims of Similarly, dealing at 750. the course of enterprise and venture. The second re practices parties commercial in quested third-party addition of a benefi this case should be examined to determine ciary theory liability against Tifco. authority scope of MCA’s and whether grant Since we have reversed the of sum authority MCA was within that mary judgment to Tifco and concluded a when it executed the Tifco drafts and de- liability, fact issue exists as to its on re posited them in its account. mand LUA should be able to amend its complaint to include its additional claims. determined that Since have prejudiced, Tifco will not be and the claims automatically preclude 72A.03 does not present degree legal viability. some liable, finding Tifco we need not address separate negli- whether a cause of action DECISION gence jurisdictions exists. other where adjudged grant partial The trial court’s summa- negligent ry judgment to have in the execution of to Tifco and its denials procedures thereby facilitating requests its loan complaint its LUA’s to amend its are loss, recovery against may an insurer The matter be reversed. is remanded for fur- this in accordance with proceedings ther

decision. remanded.

Reversed and

FORSBERG, Judge, (dissenting): I dissent. believe MCA respectfully

I “collecting securing” premiums, meaning of Minn.Stat.

within

(1986), deposited executed and when it account into its own from Tifco’s

drafts majority agree I with

account. separate transac- may have been two

there financing involving the ac-

tions: the first Tifco, and the MCA and

tivities between involving the collection of

second That first trans- MCA and LUA.

between however,

action, only involved MCA’s activ- processing pre- quoting, typing,

ities in forth in agreements, as set

mium Understanding.” “Memorandum suggest an is no evidence to

There Tifco and

relationship existed between respect to MCA’s collection of

MCA with *6 fully aware the

LUA was through Tifco. Under sec-

being financed 72A.03, is deemed to be LUA’s

tion to MCA

agent. Payment of principal, payment

thus constituted it has not cannot assert

LUA. LUA recovery of its loss from

paid and seek

Tifco. reasons, I would affirm the these

For summary judgment to grant of

trial court’s LaMOTT, Respondent,

Mary HEALTH CARE

APPLE VALLEY

CENTER, INC., Appellant.

No. C5-90-1436. Appeals of Minnesota.

Court 29, 1991.

Jan.