Hailey Elisabeth Steele Daberkow, a minor, by and through her parents and natural guardians John Daberkow and Bernadette Steele, Respondent,

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2018).

STATE OF MINNESOTA
IN COURT OF APPEALS
A18-0472

Hailey Elisabeth Steele Daberkow, a minor, by and through her
parents and natural guardians John Daberkow and Bernadette Steele,
Respondent,

vs.

Anne Remer, f/k/a Anne Hummel,
Respondent,

American Family Mutual Insurance Company, intervenor,
Appellant.

Filed February 19, 2019
Affirmed
Halbrooks, Judge

Mille Lacs County District Court
File No. 48-CV-16-2264

Grim Daniel Howland, Lindell & LaVoie, LLP, Minneapolis, Minnesota (for respondent
Hailey Daberkow by and through her parents)

Michael C. Rajkowski, Quinlivan & Hughes, P.A., St. Cloud, Minnesota (for respondent
Anne Remer)

Darwin S. Williams, Eden Prairie, Minnesota (for appellant American Family Mutual
Insurance Company)

Jennifer E. Olson, Schwebel, Goetz & Sieben, P.A., Minneapolis, Minnesota (for amicus
curiae Minnesota Association for Justice)

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Considered and decided by Halbrooks, Presiding Judge; Larkin, Judge; and Smith,
Tracy M., Judge.
U N P U B L I S H E D O P I N I O N
HALBROOKS, Judge
In this appeal after remand, appellant -insurer challenges the district court’s denial
of its motion to intervene as a matter of right under Minn. R. Civ. P. 24.01 in respondent-
personal-injury-plaintiff’s action to approve a settlement with respondent -insured.
Appellant also challenges the district court’s denial of appellant’s requ est to be heard on
the substance of the settlement agreement before it was approved. We affirm.
FACTS
In May 2012, four-year-old respondent Hailey Elisabeth Steele Daberkow sustained
injuries from a dog bite while in the care of respondent Anne Remer’s in -home childcare
center. Daberkow v. Remer, No. A17-0345, 2017 WL 5242609, at *1 (Minn. App. Nov.
13, 2017). Remer owned the dog. Id. The childcare center was insured under a childcare
insurance policy issued by a non-party insurer, which provided a defense and tendered its
$25,000 pol icy limits. Id. Remer was insured under a homeowner’s policy issued by
appellant American Family Mutual Insurance Company. Id. The American Family policy
contained an exclusion for bodily injury arising out of business pursuits, except “activities
which are normally considered non-business.” “Business” is defined to include “home day
care services.” On July 18, 2012, American Family denied coverage for the claim brought
by Hailey and her parents, John Daberkow and Bernadette Steele (collectively, the
Daberkows). Id. American Family did not provide a defense for Remer.

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Between July 2013 and October 2014, the Daberkows and Remer each notified
American Family of their intent to enter into a Miller-Shugart settlement agreement.1 See
Miller v. Shugart , 316 N.W.2d 729, 733 (Minn. 1982). In July 2016, the Daberkows
informed American Family that they had finalized a Miller-Shugart agreement that called
for a determination of damages through binding arbitration . Daberkow, 2017 WL
5242609, at *1. American Family appeared at the arbitration hearing but did not
participate. Id. The arbitrator valued damages at $510,000. Id.
In November 2016, the Daberkows filed a motion in district court to approve and
enter judgment on the settlement agreement. Id. American Family filed a motion to
intervene under Minn. R. Civ. P. 24.01 and asked the district court to continue the
settlement-approval hearing until after the intervention motion was resolved. See id. The
district court went forward w ith the settlement -approval hearing and declined to hear
American Family’s argument on the merits . See id. In its order approving the settlement
and ordering entry of judgment against Remer, the district court found that the settlement
was reasonable and prudent and “dismissed” American Family’s motion to intervene. Id.
American Family appealed, and we reversed and remanded for the district court to
consider whether American Family satisfied the test for intervention as of right under
Minn. R. Civ. P. 24.01. Id. at *2. On remand, the district court denied the motion to

1 “In a Miller-Shugart settlement, the insured, having been denied any coverage for a
claim, agrees claimant may enter judgment against him for a sum collectible only from the
insurance policy. To be binding on the insurer if policy coverage is found to exist, the
settlement amount must be reasonable.” Alton M. Johnson Co. v. M.A.I. Co., 463 N.W.2d
277, 278 n.1 (Minn. 1990).

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intervene, finding that American Family did not satisfy the four -part test. 2 American
Family appeals.
D E C I S I O N
I. The district court properly denied American Family’s motion to intervene as a
matter of right under Minn. R. Civ. P. 24.01.

Upon timely application anyone shall be permitted to
intervene in an action when the applicant claims an interest
relating to the property or transaction which is the subject of
the action and the applicant is so situated that the disposition
of the action may as a practical matter impair or impede the
applicant’s ability to protect that interest, unless the applicant’s
interest is adequately represented by existing parties.
Minn. R. Civ. P. 24.01. Under this rule, a non-party seeking to intervene as of right must
show (1) timely application for intervention; (2) an interest relating to the property or
transaction that is the subject of the action; (3) circumstances demonstrating that the
disposition of the action may as a practical matter impair or impede the applicant’s ability
to protect that interest; and (4) that the applicant is not adequately represented by the
existing parties. Id.; Minneapolis Star & Tribune Co. v. Schumacher , 392 N.W.2d 197,
207 (Minn. 1986). The district court ruled that American Family did not satisfy any of the
four factors. Our review is de novo. State Fund Mut. Ins. Co. v. Mead, 691 N.W.2d 495,
499 (Minn. App. 2005). Because the third factor resolves our inquiry, we begin and end
there.

2 Shortly after the district court denied American Family’s motion to intervene, Hailey’s
mother filed a declaratory -judgment action against American Family in federal court ,
seeking a declaration of coverage and an order directing American Family to satisfy the
judgment against Remer.

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American Family argues that, because the district court was “asked to determine
that the agreement at issue was a Miller-Shugart Agreement, its reasonableness, and to
enter Judgment against Remer, [the settlement -approval] hearing appears to be American
Family’s only opportunity to oppose such categorization, reasonableness, and [the] amount
of Daberkow’s damages.” American Family therefore argues that the disposition of the
action will impair its ability to protect its interests.
The district court found that American Family’s interests are protected without
intervention because a Miller-Shugart settlement is only enforceable if it is reasonable and
not the result of fraud or collusio n. The district court noted that coverage, fraud, and
collusion can be addressed in a declaratory -judgment action and that “further safeguards
are in place by which their agreement will be evaluated.” Counsel for both parties
nevertheless appear to be un der the impression that the district court’s determination of
reasonableness in the settlement-approval action may be binding on American Family in a
separate coverage or enforcement action. We disagree.
Under Minnesota law, after the district court approves a Miller-Shugart settlement,
an insurer may challenge—in a garnishment or declaratory-judgment action—coverage, as
well as the validity and reasonableness of the settlement and whether it was obtained
through fraud or collusion. Miller, 316 N.W.2d at 733-35 (establishing that insured has a
right to enter into settlement relieving personal liability, and insurer has right to challenge
coverage, reasonableness, and absence of fraud and collusion) ; see also Jorgensen v.
Knutson, 662 N.W.2d 893, 900, 904 (Minn. 2003) (reviewing coverage and reasonableness
of Miller-Shugart settlement in garnishment action); Emp’rs Mut. Co. v. Oppidan , 518

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N.W.2d 33, 37 (Minn. 1994) (commenting in declaratory -judgment action that Miller-
Shugart settlement may be invalid because insured had a defense and at least $500,000 in
coverage from a second insurer , but declining to rule on validity of settlement after
determining claim not covered); Alton M. Johnson Co. , 463 N.W.2d at 279 (addressing
reasonableness in garnishment a ction against insurer); Burbach v. Armstrong Rigging &
Erecting, Inc., 560 N.W.2d 107 , 108-09 (Minn. App. 1997) ( determining in garnishment
action that underlying settlement was not enforceable against insurer because “so-called
Miller-Shugart agreement” was not valid ), review denied (Minn. June 11, 1997); Indep.
Sch. Dist. No. 197 v. Accident & Cas. Ins. of Winterthur, 525 N.W.2d 600, 603, 607 (Minn.
App. 1995) (addressing coverage, reasonableness, and collusion in garnishment action
against insurer), review denied (Minn. Apr. 27, 1995); see also Corn Plus Coop. v. Cont’l
Cas. Co. , 516 F.3d 674, 678-81 (8th Cir. 2008) (determining coverage, validity, and
reasonableness of Miller-Shugart settlement in federal court declaratory -judgment action
after state court approval of settlement).
An insurer is entitled to challenge reasonableness in a separate action because the
judgment entered against the insured is not “an adjudication on the merits” and the insured
“would have been quite willing to agree to anything as long as plaintiff promised them full
immunity.” Miller, 316 N.W.2d at 735.
In these circumstances, while the judgment is binding
and valid as between the stipulating parties, it is not conclusive
on the insurer. The burden of proof is on the claimant, the
plaintiff judgment creditor, to show that the settlement is
reasonable and prudent. The test as to whether the settlement
is reasonable and prudent is what a reasonably pruden t person
in the position of the defendant would have settled for on the

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merits of plaintiff’s claim. This involves a consideration of the
facts bearing on the liability and damage aspects of plaintiff’s
claim, as well as the risks of going to trial.

Id.; see also Alton M. Johnson Co., 463 N.W.2d at 280 (“As we noted in Miller v. Shugart,
the exposed insured has no incentive to drive a hard bargain; to avoid personal liability, the
insured has no compunction to agreeing that judgment may be entered agains t him for the
policy limits, even if the claim is worth much less than the policy limits, if it is worth
anything.”).
An insurer may also challenge the validity of the settlement in a separate action.
See Emp’rs Mut. Co. , 518 N.W.2d at 37 (commenting that “circumstances to which one
looks for justification of the Miller-Shugart arrangement were not present here” but
declining to evaluate validity of settlement because coverage was lacking) ; Burbach, 560
N.W.2d at 109-10 (determining settlement was unenforceable against insurer because it
was not a valid Miller-Shugart settlement). Accordingly, the district court’s determination
here that the “Miller-Shugart Agreement” was “reasonable and prudent” is not binding on
American Family, and d isposition of the settlement-approval action does not impair
American Family’s ability to protect its interest.
Because under Minnesota law, American Family has the opportunity to challenge
the characterization of the settlement and its reasonableness in an action to recover under
the settlement in a separate action , the third factor for intervention as a matter of right in
this matter is not satisfied. Because American Family cannot satisfy the third factor for
intervention under rule 24.01, we need not add ress the other factors. The district court
properly denied American Family’s motion to intervene.

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II. The district court properly exercised its discretion by declining to hear
argument from a non-party.

American Family argues that the district court erred in declining to allow American
Family to participate in the settlement -approval hearing. As a threshold matter, t he
Daberkows contend that American Family forfeited this argument when it failed to petition
for further review of our earlier decision, in which we stated, “Because American Family
will now have an opportunity to present argument to the district court concerning the four
requirements of its motion to intervene, we need not decide whether the district court
abused its discretion by refusing to allow American Family to argue at the hearing.”
Daberkow, 2017 WL 5242609, at *2. We did not need to resolve this issue in the first
appeal because we reversed and remanded for a ruling on American Family’s motion to
intervene. The issue is now properly before us. The Daberkows’ assertion that American
Family failed to preserve this argument in the district court is also unfounded. American
Family attempted to argue at the settlement-approval hearing and was limited to making a
record of its objection.
“Generally, the trial court may establish the procedure for presentation of a case in
an unusual situation, absent an abuse of discretion.” Goswitz v. Fiedler, 435 N.W.2d 857,
859 (Minn. App. 1989) (citing Simon v. Carroll , 62 N.W.2d 822 (Minn. 1954)) . The
decision whether to permit a non -party to participate in a court hearing is discretionary.
See id. (reviewing district court’s ruling limiting participation by intervening party).
American Family cites no relevant legal authority in support of its argument that, as a non-
party to the settlement-approval action, it was entitled to participate. The district court did

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not abuse its discretion by refusing to hear argument from a non -party at the settlement-
approval hearing.3
Affirmed.

3 American Family also challenges cer tain factual statements in the district court’s
February 14, 2018 order as premature or unsupported by the record. The concern appears
to be that the challenged statements could bear on coverage. It is undisputed that the issues
of coverage and exclusions were not litigated at the settlement-approval stage and that these
issues would need to be resolved in a separate action. Any factual statements in the district
court’s February 14, 2018 order that could bear on coverage are simply extraneous.