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Forsman v. Blues Brews & Bar-B-Ques, Inc.

Supreme Court of North Dakota

November 16, 2017

Carol Forsman, Creditor and Appellee
Blues, Brews and Bar-B-Ques, Inc., dba Muddy Rivers, and Amanda Espinoza, Debtors and United Fire & Casualty Company, Garnishee and Appellant

         Appeal from the District Court of Grand Forks County, Northeast Central Judicial District, the Honorable Donald Hager, Judge. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

          Craig E. Johnson (argued) and Jared J. Hines (appeared), Fargo, ND, for creditor and appellee.

          Kendra E. Olson (argued) and H. Morrison Kershner (appeared), Fergus Falls, MN, for garnishee and appellant.


          Crothers, Justice.

         [¶ 1] United Fire & Casualty Company appeals from a district court judgment awarding Carol Forsman $249, 554.30 in her garnishment action against United Fire, commenced after she settled claims in the underlying suit against Blues, Brews and Bar-B-Ques, Inc., d.b.a. Muddy Rivers. We conclude the court erred in granting summary judgment because material fact issues exist on whether exclusions for "assault and battery" and "liquor liability" in the commercial general liability ("CGL") policy exclude coverage of Forsman's negligence claim against Muddy Rivers. We further conclude the court properly granted summary judgment to Forsman holding United Fire had a duty to defend Muddy Rivers under the CGL policy in the underlying suit. We affirm in part, reverse in part and remand for further proceedings.


         [¶ 2] Muddy Rivers is a bar in Grand Forks that was insured by United Fire under a CGL policy. In 2010, Forsman sued Muddy Rivers and Amanda Espinoza seeking damages for injuries to her leg allegedly sustained while a guest at a February 2010 private party at Muddy Rivers. Muddy Rivers notified United Fire of the suit and requested coverage. United Fire denied defense and indemnification based on the policy's exclusions for assault and battery and liquor liability. In 2011, the district court held a trial on Forsman's claims. After Forsman rested her case, the district court granted Muddy Rivers' motion for judgment as a matter of law, dismissing Forsman's claims. Forsman appealed.

         [¶ 3] In Forsman v. Blues, Brews and Bar-B-Ques, Inc., 2012 ND 184, ¶¶ 1, 19, 820 N.W.2d 748 ("Forsman I"), we reversed and remanded, concluding Forsman presented sufficient evidence on her dram shop and premises liability claims to defeat Muddy Rivers' motion for judgment as a matter of law. We summarized relevant facts adduced at trial as follows:

"At trial, Forsman called several witnesses who were present at the party. Forsman presented evidence that Muddy Rivers provided an open bar for its off-duty employees and guests, including a 'shot-drinking' contest that was primarily participated in by off-duty employees. Solberg, the bar manager, testified he was at the party and participated in the contest. Solberg also testified Muddy Rivers used three bartenders at the party, including a regular customer and his son, but Solberg did not supervise the bartenders.
" Forsman testified she was helping Richard Martin, a Muddy Rivers' employee attending the party, care for an intoxicated person, Rose Christianson, when Espinoza's actions resulted in Forsman being pushed to the ground. Christianson was a Muddy Rivers' employee and had invited Espinoza to the party. Forsman testified she was 'one hundred percent sure' Espinoza pushed her off her chair to the ground, resulting in a leg fracture. According to Forsman, she was not able to get up and two Muddy Rivers' employees thereafter grabbed Espinoza. Martin testified he heard a 'voice say something to the effect of "What are you doing to my friend?"' and heard a commotion but did not see what happened. Martin testified he then heard Forsman ask for help and saw her on the floor. Forsman testified she saw Espinoza earlier at the party when there was some 'commotion' and Solberg asked Espinoza to leave the party, but she did not leave. Forsman also testified she saw Espinoza drinking beer at Muddy Rivers earlier that night and 'notice[d]... signs that would suggest that [Espinoza] was obviously intoxicated.' Forsman testified she filed a complaint against Espinoza with the Grand Forks Police Department and two police officers, Detective Travis Benson and Officer Holweger, investigated the incident. However, the Grand Forks County State's Attorney's Office declined to pursue aggravated assault charges against Espinoza."

Forsman I, at ¶¶ 4-5 (emphasis added).

         [¶ 4] We reversed and remanded, holding Forsman's testimony raised disputed fact issues under N.D.C.C. § 5-01-06.1 (dram shop law) about whether Muddy Rivers knowingly provided alcoholic beverages to an obviously intoxicated Espinoza and whether Espinoza caused Forsman's injuries. Forsman I, 2012 ND 184, ¶ 11, 820 N.W.2d 748. We also declined to hold as a matter of law, "on the record in this case, " that Forsman failed to establish Muddy Rivers breached a duty of care for premises liability under N.D.C.C. § 9-10-06 (requiring a person to exercise ordinary care or skill in the management of the person's property). Forsman I, at ¶¶ 12-14. We specifically held Forsman could pursue her negligence claim for premises liability against Muddy Rivers on remand. Id. at ¶ 14. Before a new trial was held on remand, Forsman and Muddy Rivers settled the case with a Miller-Shugart agreement, in which Muddy Rivers admitted negligence and liability but limited collection on the judgment to Muddy Rivers' insurer, United Fire. See Miller v. Shugart, 316 N.W.2d 729 (Minn. 1982); Sellie v. N.D. Insur. Guar. Ass'n., 494 N.W.2d 151 (N.D. 1992) (recognizing Miller-Shugart settlements in North Dakota). The district court entered judgment against Muddy Rivers based on the agreement. Forsman subsequently obtained a default judgment against Espinoza.

         [¶ 5] In April 2016, Forsman moved the district court for leave to file a supplemental complaint seeking garnishment against United Fire, which was granted. She moved for partial summary judgment, asserting the United Fire CGL policy provides coverage for her premises liability claim against Muddy Rivers. United Fire made a cross-motion for summary judgment on its duty to defend and indemnify under the CGL policy, arguing no coverage exists based on the policy's assault and battery exclusion. Forsman responded, contending coverage was not precluded under either the assault and battery exclusion or the liquor liability exclusion.

         [¶ 6] The district court granted partial summary judgment in favor of Forsman, concluding the CGL policy provided coverage for Forsman's claims against Muddy Rivers and obligating United Fire to defend Muddy Rivers. The court based its coverage decision on this Court's earlier decision in Forsman I that held Forsman could pursue her negligence claim for premises liability against Muddy Rivers. 2012 ND 184, 820 N.W.2d 748. In November 2016, the court held a trial on the reasonableness of the Miller-Shugart settlement. The court ruled in Forsman's favor, finding the settlement amount was reasonable and entering judgment against United Fire for $249, 554.30.


         [¶ 7] At the outset, we discuss the effect of the parties' Miller-Shugart agreement and judgment establishing Muddy Rivers' liability on the present garnishment proceedings against United Fire. In Medd v. Fonder, 543 N.W.2d 483, 485 (N.D. 1996), we explained:

"Under Miller v. Shugart, 316 N.W.2d 729 (Minn. 1982), an insured defendant may stipulate for settlement of a plaintiff's claims and stipulate judgment may be collected only from the proceeds of any insurance policy, with no personal liability to the defendant. The stipulated judgment is not conclusive on the insurer. The plaintiff judgment creditor must show the settlement was reasonable and prudent."

(Emphasis added.) As the court in Nelson v. Am. Home Assur. Co., 702 F.3d 1038, 1041 (8th Cir. 2012), explained:

"While a Miller-Shugart judgment settles the issue of the underlying defendant's liability to the plaintiff, it does not resolve the question of whether the insurance policy provides coverage for that liability. Rather, coverage is a threshold issue that the court must address before deciding whether the stipulated judgment is enforceable. Corn Plus Coop. v. Cont'l Cas. Co., 516 F.3d 674, 678-79 (8th Cir. 2008); Alton M. Johnson Co. v. M.A.I. Co., 463 N.W.2d 277, 279 (Minn. 1990) ('[I]f there is found to be no coverage for the Miller-Shugart judgment, that ends the matter.')."

         [¶ 8] Even though Forsman and Muddy Rivers stipulated to the underlying judgment resolving Forsman's negligence claim against Muddy Rivers, this determination is not conclusive on United Fire. See McPhee v. Tufty, 2001 ND 51, ¶ 10 n.1, 623 N.W.2d 390; Rebel v. Nodak Mut. Ins. Co., 1998 ND 194, ¶ 5 n.1, 585 N.W.2d 811. On appeal, United Fire contends the CGL policy does not provide coverage for Forsman's underlying claims, and United Fire has not specifically raised any other issues regarding the reasonableness of the settlement. Although United Fire has not raised other issues about the settlement's reasonableness, Forsman still must establish the CGL policy provides coverage for her negligence claim against Muddy Rivers.


         [¶ 9] Our standard for reviewing summary judgment is well-established:

"Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record."

K & L Homes, Inc. v. Am. Family Mut. Ins. Co., 2013 ND 57, ¶ 7, 829 N.W.2d 724 (quoting Tibert v. Nodak Mut. Ins. Co., 2012 ND 81, ¶ 8, 816 N.W.2d 31).

         [¶ 10] Insurance policy interpretation is a question of law, which is fully reviewable on appeal. K & L Homes, 2013 ND 57, ¶ 8, 829 N.W.2d 724. This Court independently examines and construes the insurance contract to decide whether coverage exists. Id.; see also Grinnell Mut. Rein. v. Thies, 2008 ND 164, ¶ 7, 755 N.W.2d 852. As with other contracts, this Court construes insurance policy language to give effect to the parties' mutual intention at the time of contracting:

"We look first to the language of the insurance contract, and if the policy language is clear on its face, there is no room for construction. If coverage hinges on an undefined term, we apply the plain, ordinary meaning of the term in interpreting the contract. While we regard insurance policies as adhesion contracts and resolve ambiguities in favor of the insured, we will not rewrite a contract to impose liability on an insurer if the policy unambiguously precludes coverage. We will not strain the definition of an undefined term to provide coverage for the insured. We construe insurance contracts as a whole to give meaning and effect to ...

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