Opinion
No. C0-96-434.
Filed September 4, 1996.
Appeal from the District Court, Mower County, File No. C0931241.
Eric D. Larson, Dunlap Seeger, P.A., (for Appellants)
Clarance E. Hagglund, William C. Weeding, Hagglund Weimer, P.A., (for Respondents)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § subd. 3 (1994).
UNPUBLISHED OPINION
On appeal from a judgment requiring payment of attorney fees and costs to an insurance agent who defended against a suit brought by a policyholder, insurance companies claim that (1) neither the agency contract nor Minnesota law requires them to pay agent's attorney fees and costs, (2) agent is not entitled to fees and costs because policyholder was not successful in his action, and (3) if fees are awarded, agent is only entitled to fees incurred in defending against the policyholder's suit and not those incurred in seeking indemnity for fees and costs. We reverse.
FACTS
Respondent Terry Stier worked as an independent insurance agent for First American Insurance Services. Stier, through First American, sold insurance policies issued by appellants Mower County Farmers Mutual Insurance Company and Grinnell Mutual Reinsurance Company (appellants).
The suit underlying Stier's claim against appellants arose when a grain storage unit collapsed on the farm of policyholder Laverne Sheely. Appellants denied coverage, after determining that the collapse occurred because of faulty workmanship and renovation and was thereby subject to a policy exclusion. Sheely sued Stier, First American, Farmers Mutual, and Grinnell, alleging that (1)breached their insurance contracts; (2)failure to obtain the insurance coverage he requested was the result of Stier's negligence, errors, and omissions; and (3)misrepresentations justified reformation of the insurance contracts. Stier cross-claimed for indemnity against appellants.
The district court dismissed Sheely's suit as barred by the statute of limitations. After a bench trial on Stier's cross-claim, the district court determined that Stier had not acted negligently and ordered appellants to pay Stier $20,507.79 for his attorney fees and costs both in defending against Sheely's suit and in seeking indemnity from appellants.
DECISION
Where the material facts are not in dispute, a reviewing court need not defer to the district court's application of the law. Hubred v. Control Data Corp. , 442 N.W.2d 308, 310 (Minn. 1989). Because neither party has challenged the district court's findings of fact, our review is de novo.
Because it was neither argued by the parties nor considered by the district court, we do not address the question of whether Stier was acting as an insurance broker and was thereby Sheely's agent.
Appellants argue that the district court erred in awarding attorney fees and costs to Stier because (1)is no statutory or contractual authority for such relief; (2)is no principal-agent exception to the rule that an award of fees and costs must be based on a statute or contract; (3)and Stier had no common liability to an injured third party; and (4)a minimum, Stier is not entitled to fees and costs incurred in seeking indemnification from appellants. We agree that the award of attorney fees and costs was error.
Attorney fees generally are not recoverable in the absence of a contract or statute. Lundeen v. Lappi , 361 N.W.2d 913, 917 (Minn.App. 1985) (stating general rule and noting exception where party is forced into litigation as a result of wrongful act of another), review denied (Minn. Apr. 18, 1985). The agency contract here has no indemnification provision, and Stier does not claim any statutory entitlement.
The district court, however, concluded that appellants have a common law duty to indemnify Stier, reflected in Restatement (Second) of Agency § (1958), which provides that a principal has a duty to indemnify its agent for
expenses of defending actions by third persons brought because of the agent's authorized conduct , such actions being unfounded but not brought in bad faith.
(Emphasis added.) The district court also noted that this court has stated:
the right to indemnity, whether based on common law principles or an expressed contractual provision, has been consistently held to include reasonable attorney's fees.
Koehnle v. M.W. Ettinger, Inc. , 353 N.W.2d 612, 616 (Minn.App. 1984). Finally, the district court recognized that a principal has no common law obligation to indemnify its agent if the agent has acted negligently or if the agent's acts are unauthorized. See Restatement (Second) of Agency § (1958). After finding that Stier was not negligent, the district court ordered appellants to indemnify Stier for his attorney fees and costs.
But the suit against Stier was not "brought because of [Stier's] authorized conduct." See id. § The suit was brought because of Stier's alleged unauthorized conduct. Sheely claimed that he was harmed by Stier's "negligence, errors and omissions," which, if proved, would be unauthorized acts relieving appellants of any indemnity obligation.
The supreme court has stated:
we know of no rule of law whereby, absent an express agreement to the contrary, a duty of indemnity is imposed upon a principal for losses incurred due to the agent's fault.
Shair-A-Plane v. Harrison , 290 Minn. 500, 503, 189 N.W.2d 25, 27 (1971). If, as here, there is no "express agreement to the contrary," insurance companies like appellants are not indemnitors of third-party claims of negligence brought against independent agents like Stier. That is precisely why errors and omissions insurance exists.
The record shows the attorney fees and costs for which Stier seeks indemnification were billed to an errors and omissions carrier.
Because, as a matter of law, appellants would have no duty to indemnify Stier for a recovery by Sheely, appellants did not owe Stier a duty of defense. State Farm Fire Casualty Co. v. Williams , 355 N.W.2d 421, 425 (Minn. 1984) ("If, as a matter of law, there is no duty to indemnify, there exists no duty to defend the main action."). Because they owed him no duty of defense, appellants are not responsible for Stier's attorney fees simply because the claim did not succeed. See Pfeifer v. Truck Crane Serv. Co. , 308 Minn. 279, 281, 242 N.W.2d 587, 588 (1976) (holding that because employer under borrowed servant rule had no duty to defend the employee, it was not liable for attorney fees incurred by general employer in defense of employee).
On similar facts, this court recently reversed a district court award of attorney fees and costs. Wurst v. Friendshuh , 517 N.W.2d 53, 54-55 (Minn.App. 1994), review denied (Minn. July 27, 1994). In Wurst , plaintiff Friendshuh, a dairy farmer, purchased a North Star policy through an independent insurance agency. When one of Friendshuh's farm laborers was injured on the job and sued him for negligence, North Star denied coverage on the ground that Friendshuh's policy excluded claims for personal injury that would be covered by the worker's compensation statute. Id. at 55. Friendshuh initiated a third-party declaratory judgment action against North Star for defense and indemnity and also sued the agency for negligent selection of an insurance contract. Id.
After a jury determined that the farm laborer was an independent contractor, the district court ordered North Star to indemnify the policyholder and to pay the insurance agency's attorney fees. Id. On appeal, this court reversed, holding that the worker's compensation statute protected the farm laborer and that North Star had properly denied coverage to Friendshuh. Id. at 57. This court also reversed the district court's award of attorney fees and costs that the insurance agency incurred in defending against Friendshuh's claim of negligent selection of an insurance contract, citing Farr v. Armstrong Rubber Co. , 288 Minn. 83, 97, 179 N.W.2d 64, 72-73 (1970) (holding that where party seeking indemnity must defend accusations of its own wrongful conduct as well as another's, the court may properly disallow attorney fees in the indemnity action). Id. at 58.
We find that Wurst and Farr control and accordingly reverse the district court's award of attorney fees and costs to Stier.
Because of our disposition of this case, it is not necessary to address appellants' remaining arguments. However, we note that in Diebold, Inc. v. Roadway Express , 538 N.W.2d 150 (Minn.App. 1995) and Seifert v. Regents of the Univ. of Minn. , 505 N.W.2d 83 (Minn.App. 1993), review denied (Minn. Oct. 28, 1993), this court determined that even where an indemnitee is entitled to attorney fees incurred in defending an indemnified claim, he is not entitled to fees and costs for prosecuting his right to indemnification unless there is an agreement with the indemnitor that expressly so provides.