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Cascades Development of Minnesota LLC v. West Bend Mutual Insurance Co.

Court of Appeals of Minnesota

June 17, 2013

Cascades Development of Minnesota, LLC, d/b/a Anytime Fitness, et al., Appellants,
West Bend Mutual Insurance Company, et al., Respondents, Jade Janina Benson, and her legal guardians Jeffrey Arthur Benson and Janina Faye Benson, Respondents.


Dakota County District Court File No. 19HA-CV-09-6278

Rolf E. Sonnesyn, Matthew R. Smith, Tomsche, Sonnesyn & Tomsche, Golden Valley, Minnesota (for appellants)

Andrea E. Reisbord, David A. Wikoff, Peter G. Van Bergen, Cousineau McGuire Chartered, Minneapolis, Minnesota (for respondents)

Considered and decided by Hudson, Presiding Judge; Schellhas, Judge; and Stauber, Judge.


Appellants challenge the district court's summary judgment and dismissal of their claims seeking reformation of a workers' compensation policy with respondent insurer to reflect a policy date before an employee's accident, arguing that appellant insurance agent had apparent authority to orally bind coverage on the earlier date. Because the district court did not err by concluding that no genuine issue of material fact existed on the issue of the agent's apparent authority, we affirm.


Appellant Cascades Development of Minnesota, LLC (Cascades), was formed for the purpose of opening a fitness club in Inver Grove Heights. Before the fitness club's opening date, which was set for late September 2006, Wayne Newton, a principal of Cascades, sought help in obtaining bonding and insurance for the club from his brother, appellant Nicholas Newton, the surety bond manager at appellant Associated Insurance Agents, Inc. (AIA). Nick Newton's primary background was selling surety bonds. He was also a licensed agent for property and casualty insurance, but that business made up only about ten percent of his work.

A fitness club, as a high-risk business, would generally be required to obtain insurance from a surplus lines insurer, [1] but respondent West Bend Mutual Insurance Company, a licensed insurance company in Minnesota, was able to offer fitness-club insurance through one of its divisions, respondent National Specialty Insurance (NSI). In April 2006, AIA entered an agreement with West Bend to act as an agent selling West Bend's policies, including those for fitness clubs. The NSI agents' manual provided that, except for certain specified programs, which did not include fitness-club insurance, agents did not have authority to rate and bind coverage unless they had received a prior quote and approval from NSI. West Bend's fitness-club coverage also required completion of a health-club questionnaire, which was intended to provide additional information beyond a standard ACORD[2] insurance application.

The brothers met on August 30, 2006 at Wayne Newton's home office to discuss obtaining insurance for the fitness club. In preparation for that meeting, Nick Newton learned that West Bend would write insurance for fitness clubs. He had orally bound new insurance with other carriers, but had not yet placed insurance with West Bend. Nick Newton either sent the health-club questionnaire to Wayne Newton or brought it to the meeting, as well as bringing ACORD applications for specific lines of insurance, including workers' compensation insurance.

Before the meeting, the brothers had discussed insurance requirements for the fitness club. Wayne Newton testified in his deposition that he told Nick Newton that the club had hired an employee who was starting on September 1, required coverage for her needed to be in place before her start date, and he understood that his brother would procure timely coverage for that employee. He also told Nick Newton that the remaining coverage needed to be effective before the club was scheduled to open in late September. Nick Newton recalled that he was told of the club's projected opening date, but that he became confused about the dates that different coverages were needed and forgot that workers' compensation insurance was required by the earlier date.

At the meeting, the brothers at least partially filled out West Bend's health-club questionnaire. That questionnaire stated in boldface, immediately above the signature line: "IF A QUOTE FOR WORKER'S COMPENSATION COVERAGE IS BEING REQUESTED PLEASE COMPLETE AN ACORD WORKER'S COMPENSATION APPLICATION." The signature block also states that the person signing the questionnaire "understand[s] completion of this questionnaire does not compel the company to provide coverage." Both brothers signed the document on August 30. Because the ACORD workers' compensation application required Wayne Newton to obtain additional information, such as federal tax and unemployment identification numbers, it was not completed at the meeting.

After Nick Newton received that information and completed the required ACORD applications, an AIA employee submitted them online to NSI on September 7, requesting a quote and an effective policy date of September 21. An NSI underwriter told AIA that the completed health-club questionnaire, which had not yet been submitted, was also required. When the underwriter received the completed questionnaire, West Bend bound coverage to become effective September 21. Unfortunately, respondent ...

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