Brenda Becker, et al., Appellants,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A21-0485

Brenda Becker, et al.,
Appellants,

vs.

Estate of Edward Schenatzki,
Defendant,

Dairyland Insurance Company,
Respondent.

Filed October 25, 2021
Affirmed
Connolly, Judge

Otter Tail County District Court
File No. 56-CV-18-764

Wilbur W. Fluegel, Fluegel Law Office, Minneapolis, Minnesota; and

Donald W. Teed, Jr., Law Off ices of Donald W. Teed , Minneapolis, Minnesota (for
appellants)

William P. Harrie, Nilles Law, Fargo, North Dakota (for respondent)

Considered and decided by Florey, Presiding Judge; Connolly, Judge; and Reyes,
Judge.
NONPRECEDENTIAL OPINION
CONNOLLY, Judge
Appellants-insureds challenge the grant of summary judgment in favor of
respondent-underinsured-motorist(UIM)-insurer, which refused appellants’ claims for the
amount of their policy because respondent had not waived its right to subrogation as to the
tortfeasor’s umbrella policy although it had waived its right to subrogation as to the
tortfeasor’s liability policy when it permitted appellants to settle with the tortfeasor’s
insurer for the amount of that policy. We affirm.
FACTS
In July 2016, appellants-insureds Brenda Becker and Troy Drewes were injured by
a car driven by Edward Schenatzki, an insured of American Family Insurance Company
(AF) with a $100,000 -per-person liability policy and a $1,000,000 umbrella policy. 1
Drewes held a $100,000 Underinsured Motorist (UIM) Policy with respondent Dairyland
Insurance Company; his policy also covered Becker.
Appellants received settlement offers of the liability policy limits from AF. They
provided respondent with Schmidt-Clothier notices giving the name of the tortfeasor, the
tortfeasor’s insurer, the limits of the tortfeasor’s liability policy, the amount agreed on in
settlement, and their intention to pursue claims under the tortfeasor’s umbrella policy.
Respondent replied to the notice by giving permission for the settlement s and waiving its
right to subrogation; the replies made no reference to the umbrella policy.2

1 Although it is listed as a respondent, the estate of Edward Schenatzki takes no part in this
appeal.
2 See Schmidt v Clothier , 338 N.W.2d 256 , 258 (Minn. 1983) (holding that “[a]n insured
must give the underinsurer written notice of a tentative settlement agreement, after which
the underinsurer has 30 days in which to either acquiesce in the settlement and lose its
potential right to subrogation or prevent the settlement by exchanging its draft for the
amount of the settlement offer for the tendered draft of the liability insurer”).

Drake-Ryan releases3 between appellants and Schenatzki/AF provided that: (1) AF
would pay appellants each $100,000 under S chenatzki’s liability policy; (2) appellants
would satisfy a ny judgments in their favor against Schenatzki to the full extent of the
$100,000 received from AF; (3) appellants would refrain from attempting to collect any
unsatisfied portion of the judgments from personal assets of Schenatzki other than his
umbrella policy and would release him when all proceedings under that policy were
concluded; and (4) i f any other parties sought subrogation for inde mnity because of
payment to appellants, appellants would indemnif y Schenatzki and AF from any such
claims against them. The agreement did not mention respondent except implicitly as a party
seeking subrogation. Appellants informed respondent of the Drake-Ryan releases and of
their action against Schenatzki, which respondent declined to join.
Schenatzki died in September 2018. A search revealed that his only asset at the
time of his death was a car worth about $12,000; he and his deceased wife had sold their
real property in 2009 and moved to an apartment.
The April 2019 jury trial of appellants’ claim against the umbrella policy resulted
in a verdict for appellants against Schenatzki of $2,580,000. In May 2019, appellants each
claimed $100,000 from respondent under Drew es’s UIM policy. R espondent refused

3 See Drake v. Ryan , 514 N.W.2d 785, 7 90 (Minn. 1994) (holding that “the defendan t is
not entitled to dismissal of the claims against him in a negligence action where the plaintiffs
have fully released the defendant and his primary liability insurer up to the lim its of the
primary liab ility coverage but hav e expressly retained the right to pursue their claims
against the defendant for additional damages up to the limits of the defendant’s excess
liability coverage”).

payment, and appellants brought this action against it. The parties stipulated that, if the
district court ruled that respondent did not waive its subrogation rights as to the umbrella
policy because it never received a Schmidt-Clothier notice of a settlement offer under that
policy, appellants would be obligated to indemnify Schenatzki and AF under the Drake v.
Ryan agreement, and respondent would seek subrogation/indemnity directly agai nst
appellants, and not against AF.
Agreeing that there were no genuine issues of material fact, both parties moved for
summary judgment on the issue of whether the Schmidt-Clothier notices and respondent’s
waiver of its subrogation right applied only to the $100,000 liability policy or also to the
$1,000,000 umbrella policy. The district court granted respondent’s motion and denied
appellants’ motion, concluding that, “There w as no notice of settlement provided to
[respondent] regarding the umbrella policy; therefore, [respondent] could not have waived
its right to subrogation of the policy.”
Appellants challenge the grant of summary judgment , arguing that respondent
waived its subrogation rights to both the liability and the umbrella policies.4
DECISION
“Where the facts are undisputed, this court applies a de novo standard of review to
determine whether the district court erred in its application of the law. The existence and
extent of subrogation rights is a question of law that we review de novo.” Com. Union Ins.
Co. v. Minn. School Bd. Ass’n, 600 N.W.2d 475, 478 (Minn. App. 1999) (citation omitted).

4 Appellants also argue issues not presented to or addressed by the district court, which we
do not address. See Thiele v. Stich, 482 N.W.2d 580, 582 (Minn. 1988).
Summary judgment is appropriate when a nonmoving party fails to make a showing
sufficient to establish the existence of an element essential to the party’s case. Bersch v.
Rgnonti & Assocs., 584 N.W.2d 783, 786 (Minn. App. 1998).
The requisite Schmidt-Clothier notices provided for the $100,000 AF liability
policy: identified the insureds, the tortfeasor, the tortfeasor’s insurer, the limits of the
policy, and the amount of the settlement ; they also stated that appellants, under Drake-
Ryan releases, preserved their right to make claims under Schena tzki’s $1,000,000
umbrella policy, would release Schenatzki from personal liability under such claims, and
would indemnify Schenatzki and A.F.
The district court wrote:
The purpose of the [Schmidt-Clothier] notice is to allow
the UIM insurance company [here, respondent] the option of
substituting its payment for the amount which the tortfeasor
has offered as settlement. See [American Family Mut. Ins. Co.
v.] Baumann, [459 N.W.2d 923, 927 (Minn. 1990)], Schmidt v.
Clothier, 338 N.W.2d 256 [(Minn. 1983). ] Logic would
dictate that in order for the purpose of the notice to be realized,
there would need to be a settlement offer.
Here, there was no settlement offer regarding the
[$1,000,000] umbrella policy. In fact, the notice explicitly
stated that [appellants] would be pursuing a claim under the
umbrella policy.
Because there was no settlement offer, [respondent] had
no opportunity to substitute payment on the umbrella policy
and did not waive [its] right to subrogation.
[Appellants] argue that even if there was no notice, that
[respondent] was not prejudiced because [respondent] had
already determined that Defendant Schenatzki was a poor
prospect for subrogation. Whether [respondent] thought that
the Defendant Schenatzki was a good candidate for
subrogation is irrelevant when the caselaw is so clear. Schmidt
v. Clothier, and its progeny, require a settlement offer. Where
there is no settlement offer, there can be no Schmidt-Clothier
notice. Therefore, [respondent] did not waive its right to
subrogation of the umbrella policy.

Appellants argue that, with this language, “[t]he district court ruled that UIM
benefits were not payable by [respondent] to [appellants], finding that [appellants] had
inadvertently waived them by entering into a Drake agreement with [AF] on the first layer
of liability coverage, which the district court felt [released] any obligation beyond the
liability and umbrella coverages because the Drake pledged to ‘indemnify’ Schenatzki.”
But the issue the district court addressed was whether, absent a Schmidt-Clothier notice of
a settlement offer on the umbrella policy , respondent had waived its subrogation right as
to the umbrella policy, not what rights appellants had inadvertently or otherwise waived
under the Drake agreement. Moreover, a Drake-Ryan agreement, “like any other
settlement document, is a contract, and we review the language of the contract to determine
the intent of the parties.” Booth v. Gades, 778 N.W.2d 701, 706 (Minn. 2010).5
There is no basis to overturn the district court’s clear and c oncise decision that
respondent did not waive its subrogation right to the umbrella policy.
Affirmed.

5 In a footnote in their reply brief, appellants state that whether the Schmidt-Clothier notice
applied to one policy or both policies is irrelevant because “[s]ubrogation is against the
tortfeasor,” citing Ronning v. State Farm Mut. Auto. Ins. Co., 887 N.W.2d 35 (Minn. App.
2016), rev. denied (Minn. Jan 17, 2017), in support. But Ronning does not address whether
a UIM insurer waives subrogation rights to all of a tortfeasor’s policies by declining to
substitute its payment for an insurer’s settlement payment on one of the policies, which is
the issue here.