Denike v. Western National Mutual Insurance Co.

Citations: 473 N.W.2d 370; 1991 Minn. App. LEXIS 777Docket: No. C9-91-171

Court: Court of Appeals of Minnesota; August 6, 1991; Minnesota; State Appellate Court

Lead Opinion SummaryLead Opinion OriginalCytator Case TreatmentBackward CitatorLead Opinion AnalysisLead Opinion SummaryLead Opinion AnalysisLead Opinion Original

EnglishEspañolSimplified EnglishEspañol Fácil

An appeal was made regarding a judgment favoring Jeffrey M. Denike, asserting that Western National Mutual Insurance Company (Western National) had a duty to defend him in a lawsuit stemming from an auto accident involving a vehicle insured by them. In 1984, Denike loaned his 1978 Chevrolet Suburban to St. Luke’s Lutheran Church informally, charging $250 for its use without any formal agreement or prior rental experience. While the church possessed the vehicle, a member caused an accident injuring a passenger, leading to a third-party complaint served to Denike in December 1986. After Western National refused to defend him, Denike hired private counsel and sought a declaratory judgment regarding the insurer's duty to defend him. A settlement in the liability action occurred in February 1987, with no financial judgment against Denike. Following unsuccessful negotiations for attorney fees, both parties filed for summary judgment. The trial court ruled in favor of Denike on the duty to defend but ruled against him concerning insurance coverage for the underlying liability claim. Subsequently, Denike moved to vacate the original judgment to specify attorney fees, which the court granted, awarding him fees for both the defense and the declaratory judgment action. The appeal raised four issues: the propriety of vacating the initial judgment, the correctness of the finding regarding Western National's duty to defend, the validity of the November 14, 1990 judgment, and Denike's entitlement to attorney fees on appeal.

Western National contends that the trial court improperly vacated the May 16 judgment under Minn.R.Civ.P. 60.01, while the respondent claims the court had the authority to revise the judgment under Minn.R.Civ.P. 54.02. The court concludes that vacating the judgment under rule 60.01 is inappropriate since it does not involve a clerical error; instead, the court changed the prevailing party from Western National to Denike. Rule 60.01 is limited to correcting clerical mistakes and cannot be used to alter the original decision, as established in Gould v. Johnson.

However, the May 16 judgment is subject to revision under rule 54.02, which applies when multiple claims are involved, and no final judgment is declared for all claims. The court did not specify the amount of attorney fees awarded to Western National, indicating that not all claims were resolved, thus the action was not terminated. The trial court failed to make the necessary express determination that there was no just reason for delay and did not direct a final judgment, allowing for the revision of the judgment under rule 54.02.

On appeal from a summary judgment, the court assesses whether genuine material facts exist and whether the trial court applied the law correctly, favoring the party against whom the motion was granted. The insurer's duty to defend is broader than its duty to indemnify, and it does not rely on the merits of the underlying claim. If any part of a claim potentially falls within the insurance coverage, the insurer must defend all claims. However, an insurer is not obligated to defend if external facts indicate that any liability would be excluded from coverage.

In *Lanoue v. Fireman’s Fund Am. Ins. Co.*, the court established that ambiguities in insurance policies are resolved in favor of the insured, placing the burden on the insurer to demonstrate that a claim is not covered. Western National denied a duty to defend Denike based on his written statement that he rented his automobile to St. Luke’s Lutheran Church, arguing this placed the claim within the policy's exclusion for vehicles used for a fee. The policy specifically excludes liability coverage for vehicles used to carry persons or property for a fee.

Denike's intent regarding whether he intended to charge a fee for the use of his vehicle is crucial. Although he received money, he claimed he did not intend to rent the vehicle for profit, suggesting he loaned it as a favor. This creates ambiguity regarding whether the vehicle was used for a fee or lent gratuitously. The court concluded that the ambiguity necessitated a defense by Western National, as it could not be established that Denike's actions unequivocally fell outside the policy coverage.

The court also addressed a separate issue raised by Western National concerning the validity of a judgment, ultimately deeming it moot since the coverage issue had already been decided in favor of Western National and Denike had not contested it. Furthermore, Denike, having prevailed, is entitled to attorney fees and costs for both the underlying liability action and the declaratory judgment action against Western National. Denike is instructed to file an affidavit for the requested fees, with a subsequent response period for Western National. The court affirmed the trial court's decision regarding the duty to defend and the award of attorney fees.