Insurance Defense

Treating Phyisican Comments During Informal Conference in Question

May 1, 2017

By Laura Moehrle and Cally Kjellberg-Nelson

The Court of Appeals of Minnesota in Howard v. Svoboda recently held that a treating physician may comment on issues related to the standard of care and causation during a Minn. Stat. § 595.02 informal conference; however, the Supreme Court of Minnesota vacated that decision on procedural grounds.

While the Court of Appeals' reasoning in Howard is persuasive, the Supreme Court's recent order vacating that decision leaves some question as to whether the Court of Appeals' decision on the substantive issues relating to informal conferences is binding.

Here's the background:

In 2014, Appellant Howard filed suit for medical malpractice against a physician, who treated her following a back surgery, a physician's assistant, and the clinic (hereinafter "respondents"), based on allegations that they failed to diagnose and treat post-operative infection that caused patient to suffer a collapse of vertebrae and complete paraplegia.

Respondents requested appellant's authorization for an "informal discussion" with the surgeon, pursuant to Minn. Stat. § 595.02, subd. 5. Although initially authorizing the informal discussion, appellant revoked her authorization after respondents refused to limit questions regarding standard of care or causation. Both parties submitted cross-motions to the district court.

Appellant moved for a temporary injunction and/or a protective order to limit the scope of the informal discussion, and the respondents moved to compel appellant to sign an authorization to allow the informal discussion. The district court directed appellant to sign an authorization; however, the district court also granted a protective order to preclude respondents from using the informal conference under Minn. Stat. § 595.02, subd. 5, to request expert opinions by the surgeon about (a) the standard of care applicable to other medical providers who cared for appellant during periods of time when respondent was not the surgeon's patient; or (b) whether an alleged breach of the standard of care by medical providers other than the surgeon caused injury to respondent.

The respondents appealed the decision, contending that the district court erred by incorrectly interpreting Minn. Stat. § 595.02, subd. 5, and preventing them from asking about "any information or opinion" of the surgeon, including opinions he possessed on the standard of care and causation relating to periods when he was not treating appellant. Appellant contended the district court did not err because "[t]he plain, unambiguous language of the statute, taken in context, describes only information or opinions the doctor has acquired in attending the patient in a professional capacity and which was necessary to enable the professional to act in the capacity" and "[a]ny opinion outside his care is irrelevant."

The Court of Appeals of Minnesota agreed with respondents, and in its decision, referenced Minn. Stat. § 595.02, subd. 5. The statute was enacted to allow defendants in a medical malpractice suit an opportunity to conduct informal discussions with plaintiffs' treating physicians. The statute states:

A party who commences an action for malpractice...against a health care provider on the person's own behalf...waives in that action any privilege existing under subdivision [1(d)], as to any information or opinion in the possession of a health care provider who has examined or cared for the party....This waiver must permit all parties to the action, and their attorneys...to informally discuss the information or opinion with the health care provider if the provider consents....Appropriate medical authorizations permitting discussion must be provided by the party commencing the action upon request from any other party.

After interpreting the plain meaning of the statute, the Court of Appeals of Minnesota reversed the district court's decision. The court held that because the statute waived the patient-physician privilege, the appellant could inquire into any information or opinion the physician possesses, including opinions on the standard of care and causation relating to the periods when the physician was not caring for the patient. Thus, the district court abused its discretion by issuing a protective order preventing appellant from asking the surgeon about any opinions he may possess.

The respondent petitioned for review. The Supreme Court of Minnesota did not reach the issue. It, instead, vacated the court of appeal's decision, holding that the protective order was not an injunction, and, thus, not an appealable order under Minnesota Rule of Civil Appellate Procedure 103.03(b).


Supreme Court Decision Caps "Proceeds Awarded" at Policy Limit

April 22, 2017

By Laura Moehrle and Cally Kjellberg-Nelson

The Supreme Court of Minnesota issued a decision on April 5 clarifying whether the "proceeds awarded" to an insured are capped by the insurance policy limit.

The proceeds awarded are defined under Minn. Stat. § 604.18 (2016), which authorizes the award of "taxable costs" when an insurer denies benefits without a reasonable basis.

The court held that the "proceeds awarded" are capped at the policy limit.

Here's the background:

On January 10, 2009, the appellant, John Wilbur, was rear-ended by another driver, suffering permanent damage. The at-fault driver's liability insurance paid $100,000 to Wilbur, the full amount available under the policy. Wilbur's underinsured-motorist policy with the respondent, State Farm Mutual Automobile Insurance Company, also had a $100,000 coverage limit. State Farm made a settlement offer, but Wilbur declined it and served his complaint on State Farm. Wilbur alleged breach of contract and claimed that he was entitled to the full amount recoverable under his policy.

In 2011, a jury returned a verdict in Wilbur's favor in the amount of $412,764.63 as personal injury damages. State Farm moved to reduce the verdict for collateral source payments pursuant to Minn. Stat. § 548.251. After reducing the verdict, the district court determined Wilbur's underinsured loss was $255,956.59. Because his policy with State Farm provided only $100,000 of UIM coverage, and State Farm had previously paid $1,200 to Wilbur as UIM benefits, the district court ordered that judgment in the amount of $98,800 be entered in Wilbur's favor. He filed a motion to receive costs.

Prior to entry of judgment, Wilbur successfully moved to amend his complaint to add a claim against State Farm, pursuant to Minn. Stat. § 604.18, which provided that (1) after an insured receives an award for benefits under an insurance policy, a district court may also award the insured taxable costs; (2) if an insurer unreasonably denies benefits to an insured, the district court may award taxable costs of "an amount equal to one-half of the proceeds awarded that are in excess of an amount offered by the insurer at least ten days before the trial begins or $250,000, whichever is less"; (3) the district court may award reasonable attorney fees up to $100,000 against an insurer who unreasonably denies benefits to an insured; and (4) the district court may award pre-judgment and post-judgment interest and costs and disbursements allowed under other law in connection with the unreasonable denial of an insurance benefits claim.

A bench trial was held on the Minn. Stat. § 604.18 claim. State Farm argued the statute was ambiguous and the phrase "proceeds awarded" should be construed to be capped by the policy limit. Wilbur, on the other hand, did not argue "proceeds awarded" was ambiguous, but construed it to mean the jury's verdict for personal injury damages, adjusted for collateral source payments.

If the proceeds awarded to Wilbur were capped by his policy limit, State Farm's liability would be $36,000: one-half of the difference between its last settlement offer of $26,800 and $98,800 (Wilbur's policy limit minus State Farm's initial payment of $1,200); but if the proceeds awarded were not capped by the policy limit, the amount would be $114,578.30: one-half of the difference between State Farm's last settlement offer of $26,800 and $255,956.59 (jury's award of $412,764.63 minus $156,808.04 in collateral-source payments). The district court found that (1) State Farm was liable for unreasonably denying Wilbur's UIM benefits; (2) Wilbur was entitled to recover $36,000, consistent with State Farm's interpretation of "proceeds awarded"; and (3) Wilbur could move to recover reasonable attorney fees under subdivision 3(a)(2) and costs and disbursements allowed under other law in connection with the unreasonable denial of an insurance benefits claim.

Wilbur filed a motion to enter judgment. In his memorandum, he argued the district court incorrectly construed the statute because the term "proceeds awarded" in Minn. Stat. § 604.18, subdivision 3(a)(1), referred to the net jury verdict of $255,959.59 and that he was entitled to taxable costs of $113,978.29, one-half of the net verdict in excess of State Farm's last offer.

The district court determined Wilbur's argument regarding the meaning of "proceeds awarded" constituted an improperly brought motion to reconsider. Because Wilbur failed to follow the proper procedure for bringing a motion to reconsider, the district court did not address his argument and entered judgment in his favor in the amount of $36,000 for taxable costs, $100,000 for attorney fees, and $35,832.90 for reasonable disbursements. Wilbur appealed the decision, arguing the district court erred as a matter of law in construing the term "proceeds awarded" and therefore erred in calculating the taxable costs awarded to him for State Farm's violation of subdivision 2(a). He stated the meaning of "proceeds awarded" was ambiguous because it had more than one reasonable interpretation and that legislative history supported his position.

The Court of Appeals of Minnesota affirmed the district court's ruling. Given the ambiguity of the term "proceeds awarded," the legislative history, and that statutory provisions for a penalty are construed narrowly against the penalty, the term "proceeds awarded" means the amount of the judgment entered by the district court after applying the UIM policy limit; thus, the district court properly calculated its discretionary award of taxable costs to Wilbur under Minn. Stat. § 604.18, subd. 3(a)(1).

Wilbur appealed the court of appeal's decision, arguing that restricting "proceeds awarded" to the insurance policy limit would sometimes produce inadequate remedies; however, after noting that its job was to interpret the plain language of Minn. Stat. § 604.18, the Supreme Court of Minnesota affirmed the court of appeal's ruling. "Proceeds awarded" to an insured were to be capped by the insurance policy's limit.


Court Decision Helps Define "Prevailing Party" for Paying Disbursements

April 21, 2017

By Laura Moehrle and Cally Kjellberg-Nelson

The Court of Appeals issued an opinion that clarifies what constitutes a "prevailing party" for purposes of paying disbursements and whether the prevailing party is required to pay the opposing party's disbursements after service of the first offer of judgment or after the second.

The court held that a party has "prevailed" if the verdict is rendered in his or her favor, notwithstanding any pre-trial offers of settlement. The court also held that if more than one Rule 68 offer has been made, the later offers repeal and replace previous offers. The amount of costs to be paid, in the event of a verdict less favorable than the offer, is calculated based on the last offer.

Here's the background:

Appellant Steven Ernster brought a negligence action against respondents, Teddi and Terrance Scheele, seeking $500,000 in damages for injuries sustained in a motor-vehicle accident. The Scheeles admitted to liability, agreed to pay Ernster's past health-care expenses in the amount of $23,859.03, and served two total-obligation offers of judgment to the Ernster in accordance with Minn. R. Civ. P. 68.01. The first offer was for $50,000, and the second offer was for $100,000. Both offers were rejected by Ernster.

At trial, a jury awarded a total verdict of $43,859.03. A final judgment of $23,959.03 was entered in favor of the Ernster after collateral-sources received payment. Both parties applied for costs and disbursements.

In regard to the first issue, the district court determined that because Ernster obtained a judgment in his favor of more than $100, he was entitled to recover costs in the amount of $200. The court further determined that Ernster was not the prevailing party because the jury's verdict was less favorable than either of the offers of judgment. The court, therefore, required Ernster to pay the Scheeles for the disbursements they incurred after service of their first offer of judgment. Ernster appealed the decision, arguing that the district court erred in determining that he was not the prevailing party and not entitled to recover his disbursements.

The Court of Appeals of Minnesota reversed the district court's ruling, citing Borchert v. Maloney and Rush v. Jostoch in its decision. In both cases, the court held the appellant is the prevailing party if the verdict and judgment rendered are in the his or her favor, even if the verdict is less than the offer of judgments served on the appellant. Importantly, the court noted the prevailing party is determined by the general result of an action, not the parties' position or strategies that produce the result.

Applying the analysis in Borchert and Rush to this case, the court held that where there has been an offer of judgment under Minn. R. Civ. P. 68.01, an offeree who obtains a verdict and judgment against the offeror is allowed reasonable disbursements as the prevailing party, even if the judgment is less favorable to the offeree than the offer of judgment and less favorable to the offeree than the limit on relief that the offeror sought at trial.

In regard to the second issue, the district court awarded the Scheeles the disbursements they incurred after service of their first offer of judgment. The Court of Appeals of Minnesota reversed that decision, holding that because the Scheeles' second offer of judgment repealed and replaced the first, rejected offer of judgment, Ernster (as the prevailing party) must pay the Scheeles' disbursements incurred only after service of the second offer of judgment. Ernster was entitled only to the disbursements before service of the second offer of judgment.


No-Fault Economic Loss Benefits for Auto Accident Clarified

April 20, 2017

By Laura Moehrle and Cally Kjellberg-Nelson

The Court of Appeals issued an opinion clarifying what no-fault economic loss benefits individuals are entitled to following an automobile accident.

The question was whether an individual is entitled to $500 per week, as specified by the January 1, 2015 amendment, or the previous statutory maximum of $250 per week, if the insurance policy was in force before the amendment's effective date.

The Court of Appeals held that the Claimant was entitled to $500 for any wage loss incurred after the January 1, 2015 statutory amendment, according to the unpublished case of Platz v. Progressive Direct Insurance decided on April 17, 2017.

Here's the background:

On December 24, 2014, the plaintiff, Sue Platz, was injured in an automobile accident, and, subsequently, received economic loss benefits under her no-fault auto insurance policy in the amount of $250 per week for 5 months.

After an amendment to the Minnesota No-Fault Automobile Insurance Act raised the statutory maximum to $500 per week on January 1, 2015, the plaintiff petitioned for a no-fault arbitration, arguing she was entitled to the new statutory maximum.

The arbitrator disagreed, finding that Platz's insurance policy with defendant, Progressive Direct Insurance, was governed by the law in effect when the policy was issued and the amendment to the no-fault act does not apply to claims arising from accidents that occurred before January 1, 2015. Platz brought an action in district court seeking to partially vacate or modify the arbitrator's award, arguing the arbitrator "erroneously interpreted the no-fault act." The district court denied the motion and Platz appealed.

The Court of Appeals of Minnesota reversed the district court's ruling, citing Hoben v. City of Minneapolis in its decision. In Hoben, the court held that "basic economic loss benefits are payable monthly as loss accrues. Loss accrues not when injury occurs, but as income loss...is incurred."

Applying the Hoben court's analysis, the Court of Appeals concluded the district court erred by denying Platz's motion to partially vacate or modify the arbitrator's award; it further stated Platz was entitled to economic loss benefits of as much as $500 per week as of January 1, 2015, and thereafter.



Plaintiffs Can Seek Relief from Mandatory Dismissals After a Failure to File

September 1, 2016

By: Laura A. Moehrle

Laura Moehrle

Minnesota Supreme Court holds Rule 60.02 Motions to Vacate can revive cases dismissed under Rule 5.04 for failure to file within one year; District Courts have discretion under Rule 60.02

Yesterday, the MN Supreme Court issued a pair of decisions - Gams v. Houghton and Cole v. Wutzke - related to the one year filing deadline under Minn. R. Civ. P. 5.04. Specifically, the Court answered the question whether a party can seek relief from a dismissal by bringing a motion to vacate pursuant to Rule 60.02, and if so, how Rule 60.02 should be applied.

In Gams, the Minnesota Supreme Court held that where a case is deemed dismissed by Rule 5.04, a plaintiff may seek relief under Rule 60.02. The Court emphasized the "broad discretion" of the district court in evaluating whether the moving party has met the requirements of Rule 60.02 and in the case of excusable neglect, met the Finden factors. [Finden requires proof the moving party has (1) a reasonable claim or defense on the merits; (2) a reasonable excuse for the neglect; (3) acted diligently after notice of entry of judgment; and (4) demonstrated that no prejudice will occur to the opposing party.]

In Cole, the Court held that the moving party must prove all four Finden factors in connection with a motion to vacate a Rule 5.04 dismissal. The Court examined the Finden factors, notably including whether the "reasonable excuse" factor applies to the mistakes of a lawyer versus the mistakes of a client. While the Court noted the long standing proposition that clients should not be made to suffer for the mistakes of counsel, the Court also commented that not all mistakes, whether by a party or its attorney, are subject to relief. The Court did not establish a bright-line rule regarding how to apply the Finden factors and instead offered points on both sides, and seems to leave the decision of whether the failure to file is excusable solely in the hands of the district court, with a broad grant of discretion.

If you have any questions, please give us a call.


Minnesota Supreme Court Denies Review Case Against Progressive Insurance

July 20, 2016

By: Laura A. Moehrle, Dyan Ebert, Mike Lafountaine

Plaintiffs Cannot Avoid Swanson v. Brewster Offset by "Buying the Lien"

Laura Moehrle

Dyan EbertMike LaFountaine

Yesterday afternoon, the Minnesota Supreme Court issued an order denying the plaintiff's petition for further review of the Court of Appeals' decision in Auers v. Progressive Insurance Co., 878 N.W.2d 350 (Minn. Ct. App. 2016). As a result, the published decision by the Court of Appeals in favor of Progressive remains in force and prevents a plaintiff who "buys the lien" from obtaining a double recovery.

This is a significant decision for the defense bar because it rejects an argument that has been advanced by plaintiffs since the 2010 Supreme Court decision in Swanson v. Brewster - namely that a plaintiff can buy and assert a health insurer's subrogation right, and prevent both the amount paid and amount of the discount received by the health insurer, from offsetting a damages award as a collateral source.

This case concerns the application of Minnesota's Collateral Source Statute - Minn. Stat. § 548.251.The parties stipulated Mrs. Karen Auers incurred $178,083.44 in past medical expenses related to an automobile accident. The parties also stipulated that the total damages ought to be reduced by the $20,000.00 payment by Mrs. Auers no-fault carrier.

The remaining $158,083.44 was wholly satisfied by the Mrs. Auers health insurer BCBS, who paid $72,216.85 and received a discount of $85,869.59. BCBS asserted a subrogation right for $72,216.85. Respondent Auers purchased, and received an assignment of, BCBS's subrogation right. Respondent Auers then argued that the recoverable damages could not be reduced by the amount of the negotiated discount because Auers had purchased and asserted BCBS's subrogation rights and therefore the collateral source statute exempted both the amount paid by BCBS and the amount of the negotiated discount from reduction under the collateral source statute.

Progressive disagreed, arguing Respondent Auers was allowed to collect the amount BCBS paid, but the negotiated discount remained a collateral source to be deducted from the award.

The Court of Appeals agreed with Progressive, holding that a subrogation right is limited to the amount actually paid by a collateral source entity. The Court stated "the negotiated discounts remain collateral sources to be deducted from the injured party's verdict under Minn. Stat. § 548.251."

Plaintiff sought further review of this decision in the Minnesota Supreme Court, but the Supreme Court has denied plaintiff's request.

This case was handled by Dyan Ebert, Mike LaFountaine and Laura Moehrle of the Quinlivan & Hughes firm. If you have any questions, please feel free to contact us.


Plaintiffs Cannot Avoid Offset by "Buying The Lien"

April 25, 2016

By: Laura Moehrle, Dyan Ebert, Mike LaFountaine

Laura Moehrle

Dyan EbertMike LaFountaine

Earlier today, the Minnesota Court of Appeals issued its published decision in Auers v. Progressive Insurance Company (No. A15-1832) in favor of Progressive, holding (1) a subrogee that has negotiated a discount of medical expenses may not assert a subrogation right for that discount under Swanson v. Brewster, and (2) an injured Plaintiff who purchases the subrogation interest of a health insurance carrier is not entitled to recover the amount of the negotiated discount.

This is a significant decision for the defense bar because it rejects an argument that has been advanced by plaintiffs since the 2010 Supreme Court decision in Swanson v. Brewster - namely that a plaintiff can buy and assert a health insurer's subrogation right, and prevent both the amount paid and amount of the discount received by the health insurer, from offsetting a damages award as a collateral source.

This case concerns the application of Minnesota's Collateral Source Statute - Minn. Stat. § 548.251.The parties stipulated Mrs. Karen Auers incurred $178,083.44 in past medical expenses related to an automobile accident. The parties also stipulated that the total damages ought to be reduced by the $20,000.00 payment by Mrs. Auers no-fault carrier.

The remaining $158,083.44 was wholly satisfied by the Mrs. Auers health insurer BCBS, who paid $72,216.85 and received a discount of $85,869.59. BCBS asserted a subrogation right for $72,216.85. Respondent Auers purchased, and received an assignment of, BCBS's subrogation right. Respondent Auers then argued that the recoverable damages could not be reduced by the amount of the negotiated discount because Auers had purchased and asserted BCBS's subrogation rights and therefore the collateral source statute exempted both the amount paid by BCBS and the amount of the negotiated discount from reduction under the collateral source statute.

Progressive disagreed, arguing Respondent Auers was allowed to collect the amount BCBS paid, but the negotiated discount remained a collateral source to be deducted from the award.

The Court of Appeals agreed with Progressive, holding that a subrogation right is limited to the amount actually paid by a collateral source entity. The Court stated "the negotiated discounts remain collateral sources to be deducted from the injured party's verdict under Minn. Stat. § 548.251."

This case was handled by Dyan Ebert, Mike LaFountaine and Laura Moehrle of the Quinlivan & Hughes firm. If you have any questions, please feel free to contact us.


Court Rules: Recover No-Fault Benefits for Damages Recovered in a Prior Negligence Action

December 16, 2016

By: Laura Moehrle and James McAlpine

Laura Moehrle

Jim McAlpine

Earlier today, the Minnesota Supreme Court issued a decision holding that an insured may recover no-fault benefits for medial expenses and wage loss even if those expenses were previously recovered in a tort action. State Farm v. Lennartson and Foss, No. A14-0132; A14-0224.

In reaching this holding the Supreme Court determined that neither the No-Fault Act nor collateral estoppel (doctrine precluding re-litigation of issues determined in an earlier action) bars a plaintiff from collecting no-fault benefits for amounts awarded against and paid by a tortfeasor.

As a result of the Court's decision, we may expect to see plaintiffs/insureds waiting to bring a no-fault claim until after trial on the tort action. The potential impact of delaying the no-fault action until after the tort action includes:

- Decreasing the total amount of collateral source offsets available to a defendant (resulting in a higher net damages award)

- Increasing the amount of money a plaintiff can collect from a tortfeasor

- Allowing the Plaintiff to recover from the tortfeasor and the no-fault carrier for the same medical expenses or wage loss, resulting in a double recovery.

A concurring opinion was filed by two Justices, which emphasizes that the language of the law as written by the Legislature is in conflict with the statute's purpose of providing a prompt recovery of economic loss damages and saving litigation as a last resort. The minority seems to call for Legislative action to change the law to avoid this outcome.

If you have any questions about this decision or how it may impact pending claims, please feel free to give us a call


Rule 5.04: Does It Really Mean What It Says?

Tuesday November 24, 2015

By: Laura A. Moehrle and John A. Sullivan

Laura MoehrleJohn Sullivan

Civil Procedure professors liked to emphasize the distinction between how an action is commenced in federal court versus Minnesota state court. In law school, We understood the difference to be that an action commences in federal court when the summons and complaint are filed; and the action commences in Minnesota when the summons and complaint are served.

We never quite grasped the professor's astonishment that a lawsuit may be commenced and fully litigated--short of trial and assuming no motions requiring judicial involvement-- without a summons and complaint filed with the court. It should not be a surprise that Minnesota, North Dakota and South Dakota are the only states that permit actions to be commenced by "pocket filing" -- service of the complaint rather than by filing it with the court.

The amendment to Minnesota Rule of Civil Procedure 5.04 (Rule 5.04) has placed restrictions on this phenomenon known as "pocket filing." The rule does not change the practice regarding commencement of actions-- commencement is still accomplished by service, and filing is not required at that time. However, Rule 5.04 requires that after an action is commenced against a party, the matter must be filed with the court within one year or the matter will be dismissed against all parties, with prejudice.

The language in Rule 5.04 unequivocally states that unless the parties sign a stipulation extending the filing period, the action must be filed within one year of commencement or it is deemed dismissed with prejudice-- meaning on the merits. At the same time, recent district court decisions indicate the rule is not as clear-cut as counting 365 days from service of process or that July 1, 2014 really meant July 1, 2014. The first ten months of Rule 5.04's enforcement have seen a few district court cases releasing the one-year trap for the unaware attorney and disagreement with respect to the role of Rule 60.02 in relation to relief from Rule 5.04

THE INEVITABLE CREATION OF RULE 5.04

The goal of the amendment was not to create more dismissals of actions, but to require that each action be filed, and placed under court management and scheduling within the first year. In theory, the requirement for mandatory filing after one year curtails the problems caused by excessive delay, helps the court to know what cases are out there, and guarantees greater access to the courts for all litigants.

The Rules Subcommittee and the Minnesota Supreme Court Civil Justice Reform Task Force, which participated in creating the rule, wanted to curb the consequences of pocket filing, particularly issues of excessive cost and delay. Recommendations of the Minnesota Supreme Court Civil Justice Reform Task Force Final Report, December 23, 2011 (Task Force Report), p. 21. The Task Force did not believe abolishing service without filing was warranted or worth the confusion that would follow and the energy required to implement it. Id. at 22. However, maintaining the status quo meant the court was not able to effectively manage and expedite each action. The Task Force felt the one-year filing requirement was a happy medium for the problem. Id. This would give the parties one year to litigate, resolve any issues, or even settle the case without any judicial involvement, but if the case could not be resolved within a year, would require that the case be filed and subjected to judicial supervision and management.

The Task Force presented two alternatives to the Minnesota Supreme Court: 1) "Dismissal with prejudice after one year unless parties within that year sign a stipulation to extend the filing period" or; 2) "Dismissal without prejudice but filing is required to reinstate the case." Id. at p. 23. The Minnesota Supreme Court considered the rule for many months and decided on the dismissal with prejudice, with a small transition period for the implementation of Rule 5.04. Any action commenced at any time before July 1, 2013 had until July 1, 2014 to satisfy the rule requirements. Any complaint served after July 1, 2013 has to be filed with the court within one calendar year.

It is unknown to what extent Rule 5.04 will increase revenue to the courts, but it will have an impact. The Task Force cited statistics from New York. In 1991, New York replaced hip-pocket filing with a requirement to file within 30 days of service, and then in 1992, required filing to commence a lawsuit. It is estimated that the first year impact was an increase of $10 million in filing revenue, representing approximately a 20 percent increase. Id. at 21.

As this rule starts to be enforced, courts have been required to interpret the new rule's boundaries.

INTERPLAY BETWEEN RULE 5.04 AND RULE 60.02

The most important issue that needs to be decided is whether Minnesota Rule of Civil Procedure 60.02 (Rule 60.02) governing motions to vacate is a safety net to prevent a Rule 5.04 dismissal. Rule 5.04 does not discuss whether relief from the dismissal is available, but some district courts have suggested Rule 60.02 might be applicable to vacate a dismissal if the criteria of the rule are met. Other courts have suggested Rule 60.02 does not apply to Rule 5.04 dismissals.

Rule 60.02 provides that a final judgment can be vacated under certain circumstances. The relevant part of the rule states, "The court may relieve a party or the party's legal representatives from a final judgment...for the following reasons: (a) Mistake, inadvertence, surprise, or excusable neglect." Minn. R. Civ. P. 60.02. When determining whether to grant relief under Rule 60.02, the supreme court has outlined four factors that the court should consider, namely whether the moving party:

Has a meritorious claim or defense;

Has a reasonable excuse for failure to act;

Has acted with due diligence after the notice of the entry of judgment; and

Shows that no substantial prejudice will result to the other party if relief is granted.

Finden v. Klaas, 128 N.W.2d 748, 750 (Minn. 1964). The plaintiff must meet all four factors of the test. Nguyen v. State Farm Mut. Auto. Ins. Co., 558 N.W.2d 487, 490 (Minn. 1997).

For all practical purposes, the second factor -- reasonable excuse for failure to act -- is the most important for practitioners. They use it to show no excusable neglect is present. Rule 60.02 motions should be examined against the backdrop of the creation and implementation of Rule 5.04. First, practitioners should focus on the length of time the rule gave practitioners to file the complaint. Rule 5.04 provided a one-year time period for the plaintiff to act and file the lawsuit. The supreme court chose the harsher alternative but gave all cases commenced before July 1, 2013 a whole year to file the case. Arguably, one year is more than significant time, and it is tough to discern an excuse for not filing that would be "reasonable." Most of the cases that have been affected by the rule to date were commenced months or years before July 1, 2013, and were then given an additional year until after the July 1, 2014, deadline for filing. Also, most of the case law surrounding Rule 60 arose in the context of re-opening a default judgment, when a defendant failed to file an answer in a short 20-day period. In contrast, practitioners did not have days to file the complaint to avoid a Rule 5.04 dismissal but had an entire year.

Second, practitioners may have difficulty claiming s/he lacked knowledge of the intricacies of the rule, especially since the rule had been in effect since July 2013. It is important to note that all of the changes to the Minnesota Rules of Civil Procedure in 2013 and Rule 5.04, in particular, were widely publicized to the entire Minnesota bar. In a Bench & Bar article "Reducing Cost & Delay: Minnesota Courts Revise Civil Case Handling" posted June 5, 2013, Judge Louise Bjorkman and practitioner David Herr stated clearly that "[t]he new rules take effect on July 1, 2013, and apply to pending actions as well as those filed after the effective date." The article also stated that no dismissals will occur prior to July 1, 2014, giving those who had pending cases well over one year to comply with the new rule and file the case. The supreme court adopted the rule on February 4, 2013 and made clear it applied to pending cases and the timeline for each case.

In addition to Rule 60.02, a number of practitioners have made constitutional arguments to invalidate Rule 5.04 dismissal, but this argument seems to be without merit or authority. The Minnesota Supreme Court has the right to enact rules that goven the judicial handling of cases. A proponent of a Rule 5.04 dismissal may argue there was more than an adequate period of time to allow the practitioners and their clients to file their cases. Cases are dismissed for a variety of reasons on Rule 12, Rule 56, for insufficient process and service of process, for lack of jurisdiction, on statute of limitations grounds, etc., and now under Rule 5.04. The right to a jury trial has not historically served to trump these dismissals.

CURRENT CASES

On the next page are four recent Rule 5.04 cases considered by the district courts. The timeline is similar for all three but the outcomes vary slightly.

Mallan v. Dexter Township

In Mallan v. Dexter Township (50-CV-14-1695, Mower County District Court). the plaintiff was injured in a motorcycle accident and commenced the action on March 13, 2013. As fate would have it, plaintiff's counsel neglected to file the complaint. The parties conducted discovery. On July 17, 2014 (16 days after the deadline for unfiled complaints) defense counsel moved to have the case dismissed. The court dismissed the action and the plaintiff brought a motion to reopen pursuant to Rule 60.02.

Judge Kevin Siefken wrote a colorful opinion analogizing Rule 5.04 to Noah's Ark.

He states:

For many years, civil actions were commenced and the courts knew nothing of them. Litigants placed their complaints and answers in their hip pockets and proceeded to litigate their cases. But then the Supreme Court saw that many cases were not resolved. Years went by without action. Thousands of cases lay in the weeds, waiting to strike at any time. The Court had no way to purge them from the Earth. So the Court declared that it would send a flood. The flood would take the form of Rule 5.04.

The judge continued:

Time passed, and many actions were gathered. On the last day, those actions that were not gathered upon the boat, were washed away by the flood; well most of those actions. Some recognized that the best course of action when you miss the last boat out is to swim --very fast. With the help of a life preserver provided by Rule 60.02, these stragglers hope to catch the boat and be saved from the flood.

The court concluded that plaintiff satisfied the necessary factors under Rule 60.02 to reopen the action and vacate the Rule 5.04 dismissal order. The July 1, 2014 deadline became a July 17, 2014 deadline. The decision is now being appealed.

Gams v. Houghton

In Gams V. Houghton, (69VI-CV-14-478, St. Louis County District Court), plaintiff and defendant were in an altercation on January 14, 2012. Plaintiff suffered a broken femur and incurred medical bills. On March 22, 2013, plaintiff served the summons and complaint and the parties conducted discovery. Defendant sent plaintiff letter on July 15, 2014, stating "The new Rule 5.04 took effect July 1, 2014. Therefore, the case is deemed to be dismissed with prejudice and we consider the matter closed." Plaintiff filed the complaint in court on August 7, 2014 and the court entered an order for dismissal, with prejudice.

On August 27, plaintiff filed a motion to vacate the judgment under Rule 60.02, and on August 28, sought review from the court of appeals. The district court ruled that Rule 60.02 is not a life preserver for Rule 5.04 dismissals, and the proverbial flood had washed plaintiff's action to the deepest depths of the sea. Also, the court noted that even if Rule 60.02 did apply to the case, plaintiff did not prove all four Rule 60.02 elements. The court of appeals dismissed the appeal as premature, but the district court's October 1 order is now being appealed.

Cole v. Wutzke

In Cole v. Wutzke (02-CV-14-4474, Anoka County District Court), the plaintiff commenced the suit on June 5, 2013. Plaintiff and defendant participated in discovery from July 2013 to March 2014. The parties did not contact each other between April and July 2014. Plaintiff filed the complaint on July 23, 2014, and defendant moved to dimiss the action pursuant to Rule 5.04. On August 29, 2014, plaintiff filed a motion to vacate judgment under Rule 60.02, arguing that the failure to file the complaint in compliance with Rule 5.04 was the result of excusable neglect.

Judge Daniel O'Fallon dismissed the complaint with prejudice and stated:

The Court cannot find that ignorance of the law constitutes excusable neglect... Plaintiff's counsel failed to learn of the changes... As noted by the court, the changes were widely available on a number of websites. Further, if ignorance of the law is excusable neglect, then the exception would swallow the rule.

The district court's order is now being appealed.

Luce v. Spoden

Luce v. Spoden (86-CV-14-4194, Wright County District Court), was commenced on March 26, 2013. The action was not filed until August 7, 2014. On October 8, 2014, the court dismissed the case with prejudice and judgment was entered. Plaintiff filed a motion for relief from judgment under Rule 60.02.

Judge Michael Davis granted Plaintiff's motion and stated Rule 60.02 is a safety net for Rule 5.04. "[G]iven the supreme court's oft-cited statement that 'the goal of all litigation is to bring about judgment after trial on the merits,' it is highly unlikely that the Supreme Court would have used the language contained in Rule 5.04 if Rule 60.02 did not exist or was otherwise inoperable."

CONCLUSION

It remains to be seen whether district court judges are simply unclenching the teeth of the rule's trap until the rule is ubiquitous in practice, or whether judges are creating exceptions that entirely swallow the rule. The court of appeals will have the next word.

The impact of Rule 5.04 remains to be determined. If Rule 60.02 applies to Rule 5.04 motions, if liberally construed, it may eviscerate Rule 5.04. Alternatively, Rule 5.04 may be a "one-hit wonder" in the courts--get 15 minutes of fame but be applied as a true bar to delinquently filed claims, and then never resurface again. Assuming large exceptions are not created, the docket of district court Rule 5.04 cases may soon vanish and the one-year filing may become a standard practice.

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Laura Moehrle is a shareholder at Quinlivan & Hughes, P.A. located in St. Cloud, Minnesota. Her practice focuses on medical malpractice and insurance defense litigation primarily in the area of motor vehicle accidents. Laura is the current Co-Chair of MDLA's Medical Malpractice Committee.

John Sullivan is an associate attorney at Quinliven & Hughes, P.A. located in St. Cloud, Minnesota. He practices in civil litigation defense in the areas of medical malpractice and insurance defense litigation. John is a member of the MDLA's Medical Malpractice Committee and New Lawyers Committee.


Minnesota Supreme Court Extends UIM Excess Insurance Protection Coverage

August 6, 2015

The Minnesota Supreme Court on Aug. 5 handed down a decision providing UIM "Excess Insurance Coverage" - UIM coverage beyond that provided by an occupied vehicle's UIM insurance.


Defense Verdict: Minnesota Supreme Court Holds Defendent Must Pay Only Fair Share of Verdict

September 10, 2014

The Minnesota Supreme Court issued recently its decision in Staab v. Diocese of St. Cloud, holding that a defendant who is found to be 50% or less at fault cannot be ordered to pay more than its fair share of the total damages award.

In this case, a jury found the Defendant Diocese 50% at fault for the Plaintiff's injuries. The jury also found the Plaintiff's husband was 50% at fault, even though he was not a party to the lawsuit. Plaintiff argued the Diocese should be forced to pay 100% of the damages award under Minnesota's "reallocation" statute, arguing the judgment against the non-party husband was "uncollectible." Minn. Stat. Sec. 604.02 subd. (2). The Diocese argued it was severally, but not jointly, liable, and therefore could not be forced to pay more than its fair share (50%), regardless of whether the remainder of the judgment was collectible from the plaintiff's husband. The Minnesota Supreme Court agreed with the Diocese. A full copy of the court's opinion can be found here.

How this decision affects claim handling / evaluation: An at fault defendant who is found to be 50% or less at fault will only be required to pay in proportion to his or her percentage of fault. This is true regardless of whether the other tortfeasors are parties to the lawsuit. If you have a minimally (50% or less) at fault insured, your exposure for damages will be limited to the insured's percentage of fault. If, however, the insured is 51% or more at fault, the insured will be held "jointly liable" and could be responsible for up to 100% of the verdict.

The Diocese of St. Cloud was represented by Dyan Ebert, Laura Moehrle and Mike LaFountaine of Quinlivan & Hughes. If you have any questions about this decision, please give us a call: (320) 251-1414 or reach us by email: debert@quinlivan.com; lmoehrle@quinlivan.com; mlafountaine@quinlivan.com.