American Compensationv.Blue Cross Shield

Minnesota Court of AppealsJan 30, 2001
Nos. C1-00-1209, C5-00-1214, C4-00-1401, (Minn. Ct. App. Jan. 30, 2001)

Nos. C1-00-1209, C5-00-1214, C4-00-1401,

Filed January 30, 2001.

Appeal from Hennepin County District Court, File Nos. PI002022, PI982295

Steven L. Theesfeld, Lawrence M. Baill, (for American Compensation)

Eric J. Magnuson, Max C. Ramsey III, Stephen O. Plunkett, (for Blue Cross Blue Shield)

William M. Hart, Kenneth W. Dodge, Jennifer E. Ampulski, (for Crum Forster, Park `N Go, and David Bailly)

Theodore M. Stone, (for Bradley and Katherine Schulz)

Considered and decided by Schumacher, Presiding Judge, Kalitowski, Judge, and Amundson, Judge.

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).


American Compensation Insurance Company contends the district court erred in dismissing its complaint in intervention and denying its motion to amend. In a separate proceeding, the district court certified as important and doubtful the question of whether American can bring an unjust enrichment claim against appellant Crum Forster Insurance Company and appellant Blue Cross Blue Shield (BCBS) for benefits mistakenly paid. We affirm the district court with regard to the complaint in intervention and answer the certified question in the negative.


These three consolidated appeals arise out of two district court proceedings. In the first action, American appealed from the district court's order denying its motion to amend its complaint and dismissing its complaint in intervention. BCBS and Crum Forster separately appealed from an order in the second action wherein the district court denied their motion to dismiss American's common law claim of unjust enrichment and certified the question as important and doubtful. This court consolidated the appeals since they arose from the same incident and involve related issues.

In the first action, respondent Katherine Schulz brought a negligence claim for personal injuries on behalf of her son respondent Bradley Schulz, a minor, against his employer respondents Park `N Go of Minnesota, a limited partnership, and David H. Bailly, as special administrator of the Estate of Randall L. Carlson. Bradley Schulz was injured and his supervisor Randall Carlson killed in an accident involving a company vehicle driven by Carlson. American, Park `N Go's workers' compensation carrier, paid $114,477.94 to Bradley Schulz in benefits and intervened in the lawsuit. This court upheld a district court judgment that found Bradley Schulz's injuries did not arise out of his employment. Schulz v. Park `N Go, No. C0-98-1846 (Minn.App. Mar. 2, 1999).

On remand, American filed a motion to amend its complaint in intervention. Among other things, American sought to add as defendants Park `N Go's no-fault insurer, Crum Forster, and Bradley Schulz's health insurer, BCBS, under the theory that, but for American's payment of benefits, Crum Forster and BCBS would have had to pay to Bradley Schulz the benefits mistakenly paid by American. Park `N Go moved to dismiss American's complaint in intervention. After a hearing on the motions, the district court denied American's motion to amend and granted Park `N Go's motion to dismiss. American appealed.

In a second action, American brought a claim for indemnification and unjust enrichment against BCBS and Crum Forster. Crum Forster and BCBS sought rule 12 dismissal for failure to state a claim on which relief could be granted. The district court denied the motion to dismiss, concluding that although there was no case for indemnity under Minn. Stat. § 176.061, subd. 10 (2000), American had a common law claim of unjust enrichment. In a subsequent order, the district court certified as important and doubtful the following question:

Can a workers' compensation insurance carrier that mistakenly pays benefits bring a claim for unjust enrichment?


1. American argues that it was wrong for the district court in the first lawsuit to prevent American from recovering workers' compensation benefits paid to Schulz where it was later determined that Schulz's injuries were not work related. Specifically, American asserts that (a) the district court erred when it dismissed American's subrogation claim against Park `N Go and (b) the district court abused its discretion when it refused to allow American to amend its complaint to assert unjust enrichment and indemnification claims against Crum Forster and BCBS.

a. American argues that the district court erred by dismissing its subrogation claim against Park `N Go and the Carlson estate. In reviewing cases dismissed for failure to state a claim on which relief can be granted, the only question is whether the complaint sets forth a legally sufficient claim for relief. Barton v. Moore, 558 N.W.2d 746, 749 (Minn. 1997). Under Minn. Stat. § 176.061 (2000), a workers' compensation insurer has a subrogation right against a negligent third party. See Opal Corp. v. American Family Ins. Group, 518 N.W.2d 642, 644 (Minn.App. 1994). But "[u]nder general principles of insurance law, an insurer cannot subrogate against its own insured." St. Paul Cos. v. Van Beek, 609 N.W.2d 256, 257 (Minn.App. 2000) (citing United States Fire Ins. Co. v Ammala, 334 N.W.2d 631, 634 (Minn. 1983)), review denied (Minn. June 27, 2000).

American asserts the district court erroneously relied on a case limited to shared property interests for authority that an insurer cannot subrogate against its insured. See United Fire Cas. Co. v. Bruggeman, 505 N.W.2d 87 (Minn.App. 1983) , review denied (Minn. Oct. 19, 1993). But as this court recently recognized in Van Beek, Bruggeman simply extended into the context of shared property interests the general principle that an insurer cannot subrogate against its own insured. 609 N.W.2d at 257. The general principle that an insurer cannot subrogate against its own insured is not limited to shared property interests. The district court did not err in dismissing American's subrogation claim against its insured.

b. American argues that the district court abused its discretion when it refused to allow American to amend its complaint to assert claims of unjust enrichment and indemnification against Crum Forster and BCBS. Crum Forster responds that this court should consider this issue moot, because American subsequently brought their claims against Crum Forster and BCBS by initiating the second lawsuit. Under the doctrine of mootness, appellate courts should only decide actual controversies and should refrain from issuing opinions when, pending appeal, an event occurs that makes a decision on the merits unnecessary. In re Application of Minnegasco, 565 N.W.2d 706, 710 (Minn. 1997). We conclude that, because American has since brought its claims against Crum Fortster and BCBS in a separate proceeding, whether in the initial proceeding the district court erred in denying the motion to amend is moot.

But were we to reach the merits of the issue, we would find no abuse of discretion. "Absent a clear abuse of discretion, a district court's denial of a motion to amend a complaint will not be reversed." Benson v. Northwest Airlines, Inc., 561 N.W.2d 530, 540 (Minn.App. 1997) (citing Hunt v. University of Minn., 465 N.W.2d 88, 95 (Minn.App. 1991)), review denied (Minn. June 11, 1997). Minn. Stat. § 176.061 does "not give the employer/insurer an independent right of indemnity against a tortfeasor for benefits mistakenly paid by the employer for a non-work-related injury." Kubiszewski v. St. John, 518 N.W.2d 4, 7 (Minn. 1994). Accordingly, American has no statutory right of indemnification against Crum Forster and BCBS.

2. Under Minn.R.Civ.App.P. 103.03(h), an appeal may be brought to this court "if the trial court certifies that the question presented is important and doubtful, from an order which denies a motion to dismiss * * *." Witso v. Overby, 609 N.W.2d 618, 620 (Minn.App. 2000) (quoting rule). "A certified question is an issue of law, which an appellate court reviews de novo." State v. Sater, 588 N.W.2d 512, 513 (Minn.App. 1998) (citing In re Butler, 552 N.W.2d 226, 229 (Minn. 1996)), review denied (Minn. Feb. 18, 1999). Here, the district court certified as important and doubtful the question of whether a workers' compensation insurance carrier that mistakenly pays benefits can bring a claim for unjust enrichment.

The workers' compensation statute plainly does not allow an insurer a refund for mistaken payments. See Minn. Stat. § 176.179 (2000) (when workers' compensation insurer voluntarily pays benefits to injured employee received in good faith they shall not be refunded to insurer "in the event that it is subsequently determined that the payment was made under a mistake in fact or law"). Nor does the insurer have a statutory right of indemnity for benefits mistakenly paid. See Kubiszewski, 518 N.W.2d at 7. Accordingly, American asserts that it is entitled to a common law equitable remedy in order to recover benefits mistakenly paid.

"Unjust enrichment is an equitable claim that `arises when a party gains a benefit illegally or unlawfully,' and there is no valid contract completely governing the rights of the parties." Stein v. O'Brien, 565 N.W.2d 472, 474 (Minn.App. 1997) (quoting Midwest Sports Mktg., Inc. v. Hillerich Bradsby of Canada, Ltd., 552 N.W.2d 254, 268 (Minn.App. 1996), review denied (Minn. Sept. 20, 1996)). American faces two problems in asserting an unjust enrichment claim. First, it must identify some illegal conduct by the opposing party that benefited that party. Second, the opposing party's rights and obligations must be something other than contractual.

American does not allege any illegal or unlawful conduct on the part of Crum Forster or BCBS by which they benefited.

An unjust enrichment claim does not lie merely because one party benefits from another's efforts or obligations; rather "it must be shown that a party was unjustly enriched in the sense that the term `unjustly' could mean illegally or unlawfully.'

Custom Design Studio v. Chloe, Inc., 584 N.W.2d 430, 433 (Minn.App. 1998) (quoting First Nat'l Bank v. Ramier, 311 N.W.2d 502, 504 (Minn. 1981)), review denied (Minn. Nov. 28, 1998). To sustain an action for unjust enrichment, a plaintiff must provide evidence of fraudulent or illegal acts by the defendants. See id.

Further, to the extent Crum Forster and BCBS would be required to make payments toward Schulz's injuries, their obligations would be purely contractual. Unjust enrichment is an action for equitable relief and "cannot be granted where the rights of the parties are governed by a valid contract." Midwest Sports Mktg., Inc., 552 N.W.2d at 268 (citation omitted).

Unlike an action for fraudulent misrepresentation on the contract, an action for unjust enrichment is not based on contract, but is a quasi-contractual agreement implied by law.

Hollywood Dairy, Inc. v. Timmer, 411 N.W.2d 258, 260 (Minn.App. 1987) (citation omitted).

We conclude that a workers' compensation insurance carrier that mistakenly pays benefits cannot recover in a common law claim for unjust enrichment against the insured's liability or health insurance carrier. This conclusion is consistent with a prior case in which this court was confronted with a similar issue. See Backhauls, Inc. v. Thake, 393 N.W.2d 427, 430 (Minn.App. 1986) (workers' compensation carrier is not entitled to reimbursement from no-fault carrier for payments made to injured employee by mistake), review denied (Minn. Nov. 19, 1986).

Affirmed; certified question answered in the negative.