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Wangler v. Lerol11/13/2003
reement extinguished any damages the insured could suffer, even though the court observed the stipulated "judgment effectively liquidates defendants' personal liability." See J. Harris, Note, 47 Drake L. Rev. at 858 (noting "most recent decisions concerning the use of this procedure do not even address the question of whether the provider is `legally obligated to pay' under the terms of its policy"). The Minnesota Court of Appeals has indicated it is an open question whether a stipulated tort judgment eliminates damages and defeats assigned claims. See Peterson v. Brown, 457 N.W.2d 745, 748, 750 (Minn. Ct. App. 1990). Nevertheless, we believe the Minnesota Supreme Court's approval of Miller-Shugart settlements defeats any argument that a stipulated tort judgment accompanied by a covenant not to execute, rather than an actual release of liability, eliminates the fact of damages. A Miller-Shugart settlement agreement cannot coexist with a rule declaring an insured incurs no damage from an agreement to confess judgment accompanied by a covenant not to execute and an assignment of claims. If the district court's analysis were accepted, Miller-Shugart settlements would be invalid and useless because an abandoned insured would be precluded from settling within policy limits with injured third parties.
[ ] The Miller-Shugart agreement in this case was not a "release" of Pine Ridge's liability. Wangler only agreed to not seek to collect the stipulated judgment from Pine Ridge. Wangler also agreed that, if requested, he would deliver a "release or Quit Claim Deed" as to Pine Ridge's property "affected by the judgment," but specifically excluded from that promise "liability which may be found to attach to the policy of insurance issued by Farmers Union." The agreement is a contract, rather than a release, the underlying tort liability remains, and a breach of contract action lies in favor of Pine Ridge if Wangler seeks to collect the judgment against its assets. We conclude the agreement did not extinguish Pine Ridge's damages and the district court erred in dismissing Wangler's negligence action on this basis.
[ ] Although the Miller-Shugart agreement did not eliminate the fact of damages, the agreement itself is of no relevance to Wangler's negligence action against Lerol. In St. Michel v. Burns and Wilcox, Ltd., 433 N.W.2d 130 (Minn. App. 1988), the Minnesota Court of Appeals ruled a Miller-Shugart agreement between the injured plaintiff and an insured could not be enforced against insurance agents. The court noted that in a typical Miller-Shugart agreement, the rights and obligations between the insured and insurer are grounded on an insurance policy contract, and reasoned:
We agree with appellants that their situation is different from the circumstances in Miller. The agent's situation is not like the existing contractual relationship between an insured and insurer. The insurer's responsibilities under the contract exist at the time the claim arises between the plaintiff and the insured, but the agent's obligation to indemnify . . . arises only after . . . the agent's substitute liability is confirmed by agreement or litigation. During the interim, there is an inadequate relationship to justify the risk and eventual burden of a settlement.
It is evident that in Miller the supreme court undertook a delicate balancing of burdens and risks and resolved them against the interest of an insurer. Different questions are involved in applying the same rule of law to a case which does not involve existing contractual responsibilities between an insured and insurer, and Miller does not support this application.
Id. at 135. Consequently, the settlement agreement is not prob
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