author: STONEBURNER, Judge

text:
    STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, et al., Respondents.
    No. C2-00-1851.
    Court of Appeals of Minnesota.
    April 24, 2001.
    Review Denied June 27, 2001.

      Line S. Deter, Brett W. Olander & Associates, St. Paul, MN, for appellant.
    Karen Melling van Vliet, Johnson & van Vliet, P.L.L.P., St. Paul, MN, for respondents.
    Considered and decided by STONEBURNER, Presiding Judge, KALITOWSKI and SCHUMACHER, Judges.
   OPINION

STONEBURNER, Judge

The district court granted summary judgment in favor of respondent Universal Underwriters Insurance Company, finding Minn.Stat. § 65B.49, subd. 3(3)(d) (2000) did not prohibit Universal from contracting to limit its liability coverage for a permissive driver to the minimum statutory limits while providing higher limits for liability of the vehicle owner. We affirm.

FACTS

On January 29, 1999, James Zeppelin caused an accident while driving a “loaner” vehicle, a 1995 pickup owned by Gilleland Chevrolet. The driver of the other vehicle was injured in the accident. Appellant State Farm Mutual Automobile Insurance Company insui-ed Zeppelin under an automobile liability policy. Respondent Universal Underwriters Insurance Company insured Gilleland under a garage policy that provided coverage to Gilleland and its agents and employees for direct or vicarious liability.

The Universal policy provides $500,000 in liability coverage for the named insureds, but contains a split-limit, step-down, or “most we will pay” provision limiting the liability coverage for permissive drivers. The policy defines “auto hazard” as “the ownership, maintenance, or use of any AUTO YOU own” and includes as insureds:

(4) Any other person or organization required by law to be an INSURED while using an AUTO covered by this Coverage Part within the scope of YOUR permission.

The policy then provides:

With respect to the AUTO HAZARD part (4) of WHO IS AN INSURED, the most WE will pay is that portion of such limit needed to comply with the minimum limits provision law in the jurisdiction where the OCCURRENCE took place.

The parties agree that Universal’s policy provides primary coverage for this accident, but State Farm claims the entire $500,000 limit of liability coverage for Gilleland is primary and Universal claims that $30,000 (the minimum required by Minnesota law) coverage for the permissive driver is primary, after which State Farm’s policy applies, and if the victim is still not fully compensated, Universal’s coverage for Gilleland is available. On cross-motions for summary judgment, the district court agreed with Universal, concluding that an insurer can contractually limit its liability coverage for permissive drivers to the minimum statutory limits while providing additional coverage to the vehicle’s owner. State Farm appeals.

ISSUES

1. Does Universal’s policy contractually limit liability coverage for a permissive driver to the statutorily required minimum amount while providing a higher limit of liability for the owner’s vicarious liability for such use?

2. Does Minn.Stat. § 65B.49, subd. 3(3)(d) (2000) prohibit an insurer from contractually providing different liability limits for a permissive driver and the owner of a motor vehicle?

ANALYSIS

On appeal from summary judgment, this court considers (1) whether there are any genuine issues of material fact, and (2) whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.1990) (citation omitted). Because the parties do not dispute the facts, this case involves “issues of statutory and contract interpretation, which are questions of law subject to de novo review.” Hertz Corp. v. State Farm Mut. Ins. Co., 573 N.W.2d 686, 688 (Minn.1998) (citing Garrick v. Northland Ins. Co., 469 N.W.2d 709, 711 (Minn.1991)).

1. The contract effectively provides for split limits

State Farm argues that the policy language is ineffective to reach the result argued by Universal because, by its terms, it purports to limit Universal’s obligation to $30,000 for any claims arising out of this accident and does not revive additional coverage for the owner after the driver’s own insurance coverage is exhausted. We disagree.

The policy language states that coverage for those who are insureds, as defined in (4) of “WHO IS AN INSURED * * * AUTO HAZARD” is limited to the minimum amounts required by law, but that limitation does not apply to sections (1), (2) or (3) of the definition of who is an insured in respect to auto hazard. Those sections include the named insured, partners, employees, contract drivers and others. The language of the policy effectively limits coverage for the class of insureds defined in (4) while preserving the higher limits for the owner and others defined in sections (1), (2), and (3) of the definition of insureds. The district court did not err in concluding that the policy clearly limits coverage for permissive drivers to the statutory minimum and that the higher limit continues to apply to the owner’s vicarious liability for such use.

2. The No-Fault Act does not preclude split limits

Relevant portions of the Minnesota No-Fault Act provide that every owner of a motor vehicle that is required to be registered or licensed or is principally garaged in this state shall maintain a plan of reparation security, and each plan shall contain state limits of liability of not less than $30,000 for bodily injury to one person in any one accident. Minn.Stat. §§ 65B.48, 65B.49, subd. 3(1) (2000). A vehicle owner’s liability policy is primary over a nonowned vehicle policy:

Except as provided in subdivision 5a, a residual liability insurance policy shall be excess of a nonowned vehicle policy whether the nonowned vehicle is borrowed or rented, or used for business or pleasure. A nonowned vehicle is one not used or provided on a regular basis.

Minn.Stat. § 65B.49, subd. 3(3)(d) (2000). State Farm argues that Minn.Stat. § 65B.49, subd. 3(3)(d) prohibits the owner’s residual liability policy from providing different liability limits for the permissive user and the owner. An insurance contract governs liability between the parties “only as long as coverage required by law is not omitted and policy provisions do not contravene applicable statutes.” Hertz, 573 N.W.2d at 689-90 (quoting Streich v. American Family Mut. Ins. Co., 358 N.W.2d 396, 399 (Minn.1984)). Consequently, if a contract provision conflicts with a statute, it is unenforceable. Id. at 689.

This court has previously held that a self-insured owner of a motor vehicle may contractually limit liability coverage for a permissive user to the statutory minimum, while providing a higher coverage limit for the owner. See Agency Rent-A-Car, Inc. v. American Family Mut. Auto. Ins. Co., 519 N.W.2d 483, 487 (Minn.App.1994). The decision in Agency involvéd a self-insured car-rental agency and the contractual limitation was contained in the rental agreement, but the analysis is not limited to self-insureds. See McClain v. Begley, 465 N.W.2d 680, 682 (Minn.1991) (stating self insurance is the functional • equivalent of an insurance policy). We noted in Agency that Minnesota does not have an “omnibus statute,” requiring coverage of the named insured to be coextensive with coverage of any other person using the insured’s vehicle, and that courts in states lacking such legislation have held that coverage for the named insured need not be coextensive with omnibus coverage. 519 N.W.2d at 487.

State Farm argues that Minn.Stat. § 65B.49, subd. 3(3)(d) prohibits the result reached in Agency. See 1994 Minn. Laws ch. 485, § 53 (adopting MinmStat. § 65B.49, subd. 3(3)(d) effective Aug. 1, 1994). We disagree. The statute only directs which policy is primary and does not negate unambiguous policy language that establishes the amount of coverage applicable to various risks covered in the policy.

State Farm argues that the priority statute is definitive, because a vehicle owner is required to maintain liability insurance to cover injury and property damage “arising out of the ownership, maintenance, operation or use of the vehicle,” and separating coverages for the owner and the user violates the purpose of the No-Fault Act. See Minn.Stat. § 65B.49, subds. 1, 3(2) (2000).

The stated purposes of the No-Fault Act include:

to relieve the severe economic distress of uncompensated victims; to prevent overcompensation; to assure prompt payment; to ease the burden of litigation; and to correct imbalances and abuses in the automobile accident liability system.

Hertz, 573 N.W.2d at 689 (quotations omitted). The No-Fault Act requires only a minimum amount of liability coverage to meet these purposes. See MinmStat. § 65B.49, subd. 3(1) (requiring minimum of $30,000/$60,000 coverage for personal injury and $10,000 coverage for destruction of property).

State Farm relies on decisions that, on the basis of MinmStat. § 65B.49, subd. 3(3)(d), found an attempt to provide liability coverage only to permissive drivers who did not have liability coverage arising from his or her own automobile policy violated the policy of the No-Fault Act. See Hertz, 573 N.W.2d at 690-91; Mutual Serv. Cas. Ins. Co. v. West Bend Mut. Ins. Co., 599 N.W.2d 585, 588 (Minn.App.1999). In those cases, the vehicle owner was “thrusting upon the renter its responsibility to provide liability coverage.” Hertz, 573 N.W.2d at 689; see Mutual Serv., 599 N.W.2d at 588 (stating limitation of coverage shifted the burden of providing primary insurance from the owner to the user). As discussed in Agency, the presumptive amount of liability insurance for the permissive driver, absent any evidence of limits, was the statutory minimum prior to McClain. Agency, 519 N.W.2d at 487. After McClain, the presumptive amount, absent any evidence of limits, was coextensive with coverage for the owner. Id. Here, however, the vehicle owner complied fully with its statutory responsibility to provide the required liability coverage for permissive drivers. The court was not required to presume the limits, because they were clearly stated in the policy to be the minimum amount required by applicable state law. The Universal policy complies with the No-Fault Act’s requirements for minimum coverage for permissive drivers.

Several states have found that, because of the freedom to contract, split limits do not violate public policy. See Bowers v. Estate of Feathers, 448 Pa.Super. 263, 671 A.2d 695, 700 (1995) (listing states which upheld split-limit provisions); see also Lehman Eastern Auto Rentals, Inc. v. Brooks, 370 So.2d 14, 16 (Fla.Dist.Ct.App.1979); Universal Underwriters Ins. Co. v. Hill, 24 Kan.App.2d 943, 955 P.2d 1333, 1339 (1998); Windsor Ins. Co. v. Lucas, 24 S.W.3d 151, 154-55 (Mo.Ct.App.2000); Yosemite Ins. Co. v. State Farm Mut. Auto. Ins., 98 Nev. 460, 653 P.2d 149, 150 (1982). States which prohibit split limits normally do so because of statutory requirements. See Smith, 205 N.W.2d at 368-69 (citing express statutory authority prohibiting split-limit provisions); see also Hardware Mut. Cas. Co. v. General Accident Fire & Life Assurance Corp., 212 Va. 780, 188 S.E.2d 218, 221 (1972) (noting statute’s remedial intent prohibited split-limit provisions). No state has prohibited split limits on the basis of a statute similar to Minn. Stat. § 65B.49, subd. 3(3)(d), that makes the owner’s liability insurance primary. Nothing in Minn.Stat. § 65B.49, subd. 3(3)(d) shows a clear intent by the legislature to restrict an insurer’s right to freely contract for different liability limits for permissive drivers and owners so long as the minimum statutory coverage is provided. See Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 251 (Minn.1998) (recognizing “nothing in the No Fault Act, either explicit or implicit, * * * prohibits insurance companies from including some restrictions on liability coverage in their contracts”).

The remedial purpose of the Minnesota No Fault Act is not impacted by allowing split limits. We find Agency controlling. Minn.Stat. § 65B.49, subd. 3(3)(d) does not void the split-limit coverages provided in Universal’s policy.

DECISION

The Universal policy language effectively provides a lower limit of coverage for the liability of a permissive driver than for the vicarious liability of the owner of a motor vehicle for such use. Minn.Stat. § 65B.49, subd. 3(3)(d) does not prohibit an insurer from contractually providing different limits on liability coverage for a permissive driver and the owner of a motor vehicle. The district court did not err in granting summary judgment to Universal.

Affirmed.

      . Prior to enactment of Minn.Stat. § 65B.49, subd. 3(3)(d) in 1994, priority was determined by a "closest to the risk” analysis. Hertz, 573 N.W.2d at 691 (citing Interstate Fire & Cas. Co. v.. Auto-Owners Ins. Co., 433 N.W.2d 82, 86 (Minn.1988)).

      . See McClain v. Begley, 465 N.W.2d 680, 684-85 (Minn.1991) (Simonett, J., concurring) (discussing whether omnibus coverage can ever be less than coverage limits for named insured and taking position that rental agency could limit omnibus coverage to statutory minimum in rental contract).

      . See Wis. Stat. § 632.32(3)(a) (2000); Smith v. National Indem. Co., 57 Wis.2d 706, 205 N.W.2d 365, 368-69 (1973) (applying statute to hold invalid car-rental contract limiting liability coverage for renters to less than coverage for rental agency).

      . Agency was published on August 2, 1994, one day after the effective date of Minn.Stat. § 65B.49, subd. 3(3)(d).

      .This court recently indicated that Minn.Stat. § 65B.49, subd. 3(3)(d) “would seem to trigger coverage of all policies and their respective liability limits which cover such ‘ownership’ risks.” Johnson v. Americar Rental Sys., 613 N.W.2d 773, 777 n. 1 (Minn.App.2000), review denied (Minn. Sept. 26, 2000). This was not the issue in Johnson, and the comment is dicta. We do not find it persuasive.

      . State Farm conceded at oral argument that public policy is not implicated.


source: Caselaw Access Project

author: KALITOWSKI, Judge

license: Public Domain

text:
    HARD TIMES CAFE, INC., Relator, v. CITY OF MINNEAPOLIS, et al., Respondents.
    No. C4-00-1060.
    Court of Appeals of Minnesota.
    April 24, 2001.

      Jordan S. Kushner, Law Office of Jordan S. Kushner, Minneapolis, MN; and Larry B. Leventhal, Larry B. Leventhal & Associates, Minneapolis, MN; and Robert Dildine, Law Office of Robert Dildine, Minneapolis, MN, (for relator).
    Jay Heffern, Minneapolis City Attorney, Timothy S. Skarda, Assistant City Attorney, Minneapolis, MN, (for respondent).
    Considered and decided by LANSING, Presiding Judge, CRIPPEN, Judge, and KALITOWSKI, Judge.
   OPINION

KALITOWSKI, Judge

Relator Hard Times Cafe, Inc., challenges the decision of respondent City of Minneapolis not to renew its business licenses for a period of one year. Relator contends (1) the city charter provision authorizing license revocation for “good cause” is unconstitutional; and (2) respondent’s decision should be modified because it was arbitrary and capricious, made upon unlawful procedure, unsupported by substantial evidence, and affected by error of law.

FACTS

Unless otherwise noted, the following facts and quotations are taken from the findings of the Administrative Law Judge (ALJ) who presided over the hearing regarding relator Hard Times Cafe’s business licenses. Hard Times Cafe, Inc., is a restaurant, sidewalk cafe, and tobacco merchant located at 1821 Riverside Avenue in Minneapolis, Minnesota. The cafe has been licensed by the City of Minneapolis since 1993 and operates as an employee-owned cooperative. Decisions concerning the cafe are made by majority vote of the members, much like a partnership. Although some members of the cooperative are considered officers such as president, vice president, or treasurer, these titles do not confer management responsibilities because

persons identified as officers of the cooperative hold those positions for the purpose of completing and signing forms and have no actual authority greater than other members.

In 1993 and 1995, complaints were lodged against the cafe regarding increased graffiti, fitter, and loitering in front of the cafe. The record indicates relator addressed these concerns by working with the Licenses and Consumer Services Technical Advisory Committee (TAC), which was made up of representatives of the Hard Times Cafe, local business associations, neighborhood groups, property owners, and the City of Minneapolis. As a result, a bus stop that encouraged loitering was moved away from the front of the cafe, and the cafe restricted its operating hours, installed security lighting, fenced in the parking lot behind the cafe, and removed a wall that was being used as a bench by people near the sidewalk.

In the spring of 1999, after receiving complaints from neighboring businesses about loitering and drug dealing occurring outside the Hard Times Cafe, the Minneapolis Police Department (MPD) organized an undercover operation to target “illicit activity occurring in the vicinity of the Hard Times Cafe.” From October 8, 1999, through January 14, 2000, officers visited the cafe to observe activity.

During October 1999, the MPD observed little suspicious conduct at the cafe. On one occasion, a man approached an officer outside the cafe and told her “he knew where to get good ‘weed.’ ” Later, the officer entered the cafe where an intoxicated male asked if she “liked to get high.”

In November 1999, an officer purchased $20 worth of marijuana from an individual inside the cafe. She negotiated this purchase at a “table that was obscured from the view of anyone at the service counter.” This officer also observed several individuals engaged in what she perceived to be hand-t'o-hand exchanges of controlled substances. On two occasions individuals asked an officer if she was interested in purchasing marijuana.

On three separate occasions in December 1999, an officer purchased marijuana from individuals inside the cafe, and once, an officer purchased $10 worth of marijuana from an apartment rented by relator above the cafe. In addition, Martin Johnson, vice president of the cafe, offered to sell marijuana to an undercover officer.

In January 2000, officers observed people smoking marijuana and an unknown substance in the apartment above the cafe and exchanging money for what appeared to be small bags. Officers purchased crack cocaine and hallucinogenic mushrooms inside the cafe. Also, Johnson took an officer to the apartment above the cafe and sold her marijuana.

On January 26, 2000, the MPD executed search warrants to search the cafe and the apartment above it. Patrons were also searched, and officers retrieved a marijuana pipe and a small bag of marijuana from one patron and an open bottle of vodka from another.

Near the time of the search, the MPD issued a press release that detailed the results of the undercover operation and indicated the involvement of “the apparent co-owner of the Hard Times Cafe, Martin Duane Johnson.” Johnson was charged with violating the sale of a controlled substance statute, but the cafe itself was not found to have engaged in illegal activity.

Also on January 26, 2000, the Minneapolis Environmental Health Department inspected the cafe and found several violations. But, many of the cleanliness violations “were the direct result of the disorder left behind by the police search and prevention of the employees from cleaning the premises.”

The Hard Times Cafe was closed after the police search. While closed, the cooperative initiated policy changes to address public concerns about safety and illegal conduct. For example,

[c]ustomers and former members [of the cooperative] were no longer allowed to go behind the counter or store any personal property on the premises. Only employees could use the telephone in the kitchen. The probation period for workers seeking to become members was extended from six months to eighteen months. Every person identified from police reports as being involved in drug transactions was banned from the Hard Times Cafe. Johnson was terminated from employment with the Hard Times Cafe. Rental of the apartment above the [cafe] was discontinued. New mirrors were installed to enable observation of the blind spots in the seating area. A door policy was instituted to restrict entry. To enter the premise, patrons exchange a dollar for a voucher that can be used for purchases in the Hard Times Cafe. An incident log has been instituted to record events occurring in the [cafe] and communicate any problems to all shifts.

Relator also entered into an agreement with its landlord to prohibit the presence of controlled substances and alcohol on its premises. In addition, the agreement prohibited persons from loitering without making a food purchase. After relator’s members corrected the violations reported by the health department, the cafe was reopened.

On February 15, 2000, relator’s officers submitted an application to renew its food license. On February 28, 2000, an attorney for the city issued a Notice of Complaint and Notice of Hearing to relator, informing its officers that evidence of the police investigation would be presented before an ALJ to demonstrate cause for adverse action against its licenses. Adverse action was described in the notice of complaint as “revocation, suspension, fines, and other penalties or conditions.” The attorney also informed relator that the hearing would be conducted pursuant to sections 14.57 to 14.62 of the Minnesota Administrative Procedure Act.

On March 28, 2000, a contested case hearing was held before an ALJ. On April 28, the ALJ issued findings of fact, conclusions of law, and a memorandum. The ALJ found that the police investigation and search “did not reveal evidence of involvement by the [cafe] in the selling of controlled substances.” The ALJ further explained that

[T]he layout of the premises makes observation of the activities in the seating area difficult, at best. Much of the conduct described as ‘narcotics-related activity’ is indistinguishable from persons having normal conversations. Movement by particular persons in and out of the premises is easily observable from the seating area by a person looking for that conduct. The same activity may go entirely unnoticed by a single employee who is taking orders for food, filling those orders, ringing up sales on the cash register, making change, and otherwise performing tasks required to [keep] the business operating.

Ultimately, the ALJ determined that because “[e]very business is responsible for illegal activity on its premises,” respondent had demonstrated good cause to subject relator to some level of discipline. But the ALJ went on to comment that

the drug transactions that occurred were not obvious to the employees of the Hard Times Cafe * * * [and that n]o one from the MPD (or any other agency of the City) ever informed the Hard Times Cafe that drug trafficking was suspected on its business premises.

The ALJ elected not to make a recommendation regarding any specific disciplinary action to be taken against relator by the city council.

The ALJ’s findings of fact and conclusions of law were delivered to Minneapolis City Council members and the matter was scheduled for presentation to the Public Safety & Regulatory Services Committee (PS & RS) on May 31, 2000. Because the presentation before the PS & RS was the first of its kind under the newly promulgated procedures contained in the License Adverse Action Procedures Manual (Manual), an attorney for the city sent a letter to the committee chair containing excerpts from this Manual. These excerpts, in part, instructed the committee to avoid ex parte contacts, base its decision solely on the record, and not make its final decision until after the hearing. The letter also warned that the procedures outlined in the Manual “should be strictly adhered to in order to minimize any subsequent legal challenges to the decision reached by the Committee and City Council.”

On May 15, 2000, relator filed exceptions to the ALJ’s findings of fact and conclusions of law. In part, it disputed the ALJ’s statement that it had not taken any steps to prevent illegal activity.

On May 31, 2000, the PS & RS considered whether to take adverse action against the licenses held by relator. After statements from the city attorney and counsel for relator, and comments from several committee members, the PS & RS, by a split vote, recommended that the city council deny renewal of relator’s licenses.

On June 9, 2000, the Minneapolis City Council considered whether to take adverse action against the licenses held by relator. There were no comments made by council members concerning why they opposed renewal of relator’s licenses. The only discussion was from members opposed to denying renewal of relator’s licenses. Several council members expressed concern that the proposed punishment was too harsh and two council members raised concerns that the council was improperly basing its decision on information outside the record. One of the council members stated:

What was really disconcerting to me was that yesterday during our Caucus, we basically got a lot of additional information about TAC Hearings, et cetera, and we’re not allowed to really include that in our decision, based on the rulings that we got from the ALJ.

Another member commented that “yesterday we were talking about 911 calls. There was nothing in the record about that.”

In response to a council member’s question about what information the council appropriately could consider in making its licensing decision, the Minneapolis City Attorney stated that

the City Council * * * must base its decision on the record. That’s the report of the Administrative Law Judge, that’s the written exceptions if any that were filed, that’s the testimony in front of the Committee and the arguments before the Committee, that’s the exhibits and documents that were submitted in this hearing process. * * * It’s my view that as you consider the appropriate adverse action in this situation, that you should be constrained by the facts that the Administrative Law Judge found in this matter.

After additional discussion by members opposed to adverse action against relator, the proposal to deny renewal of relator’s licenses for one year passed by a vote of seven to five.

Relator filed an appeal by writ of certio-rari on June 22, 2000. In August 2000, relator moved for correction of the record, asserting that the ALJ transcript should be excluded because it was not available to the city council at the time it made its decision, and that respondent failed to include certain materials in the record. On August 24, 2000, this court issued an order requiring respondents to make a decision regarding the proper contents of the record for appeal. Respondents filed their decision on September 8, 2000. Relator subsequently renewed its motion to correct the record. On October 17, 2000, this court ordered that the transcript of the proceedings before the ALJ was not properly part of the record.

In addition, relator presented materials to this court that were not part of the proceedings before the ALJ for the purpose of demonstrating that the council im-permissibly considered these materials in making its decision. This court deferred to the panel assigned to consider this appeal the issue of whether these extra-record materials submitted by relator should be considered.

ISSUES

1. Is the “good cause” standard which authorizes the Minneapolis City Council to revoke licenses constitutional?

2. Was the Minneapolis City Council’s decision not to renew relator’s business license unlawfully affected by irregularities in procedure?

ANALYSIS

I.

The Minneapolis charter at issue provides:

Any license issued by authority of the City Council may be revoked by the City Council at any time upon proper notice and hearing for good cause.

Minneapolis, Minn., City Charter eh. 4 § 16 (2001) (emphasis added). Relator contends that because the phrase “good cause” is not defined this provision authorizing the city council to revoke licenses is unconstitutional. We disagree.

“The constitutionality of an ordinance is a question of law” which this court reviews de novo. State v. Castellano, 506 N.W.2d 641, 644 (Minn.App.1993) (citations omitted). A municipal ordinance is presumed constitutional. City of St. Paul v. Dalsin, 245 Minn. 325, 329, 71 N.W.2d 855, 858 (1955). The burden of proving that an ordinance is unreasonable “rests on the party attacking its validity.” Id. (citation omitted); State v. Hyland, 431 N.W.2d 868, 872 (Minn.App.1988). Courts should exercise extreme caution before declaring a statute void for vagueness. Getter v. Travel Lodge, 260 N.W.2d 177, 180 (Minn.1977).

“Vague statutes are prohibited under the due process clause of the fourteenth amendment.” Hyland, 431 N.W.2d at 871 (citation omitted). A statute is void due to vagueness if it “defines an act in a manner that encourages arbitrary and discriminatory enforcement,” or the law is so indefinite that people “must guess at its meaning.” Humenansky v. Minnesota Bd. of Md. Exam’rs, 525 N.W.2d 559, 564 (Minn.App.1994) (citations omitted), review denied (Minn. Feb. 14, 1995); Ruzic v. Commissioner of Pub. Safety, 455 N.W.2d 89, 91 (Minn.App.1990), review denied (Minn. June 26, 1990). The use of general language in a statute does not make it vague. State v. Christie, 506 N.W.2d 293, 301 (Minn.1993). An entity challenging the constitutionality of a statute on vagueness grounds “must show the [ordinance] lacks specificity as to [its] own behavior rather than some hypothetical situation.” Ruzic, 455 N.W.2d at 92 (citation omitted).

In applying the ordinance language here, the ALJ found that multiple drug transactions occurred on and around relator’s business premises, and an employee and several patrons were arrested for selling drugs on premises. We cannot say that ordinary people would have to guess that such activity was of the type that constituted good cause for possible adverse action with regard to a license. Moreover, the charter specifically provides that a license may be revoked

upon conviction before any court of any person holding such a license for a violation of the provisions of any law, ordinance or regulation relating to the exercise of any right granted by such license.

Minneapolis, Minn., City Charter, ch. 4, § 16. Thus, reading the charter in its entirety, it is clear that a license holder’s violation of laws relating to the exercise of a right granted by the license could lead to revocation.

Here, although the cafe itself was not found to have violated any laws, illegal activity that arguably posed a threat to public safety occurred on its premises. Because of relator’s association with this illegal activity, it did not have to “guess” that it might be subject to license revocation. See City of Saint Paul v. Franklin, 286 Minn. 194, 198, 175 N.W.2d 16, 18 (1970) (finding that ordinance prohibiting keeping a disorderly house was not unconstitutionally vague as applied to appellant). In fact, relator concedes that if this court accepts the ALJ’s findings, at least minimal sanctions against it are justified. Thus, the “good cause” standard is definite enough so that relator knew it would be subject to adverse action. Relator simply disagrees with the severity of the sanction. We conclude that the “good cause” standard contained in chapter four of the Minneapolis City Charter does not render the statute constitutionally infirm.

We reject relator’s contention that Saxon Coffee Shop v. Boston Licensing Bd., supports its argument that the city charter at issue is unconstitutionally vague. Saxon Coffee Shop v. Boston Licensing Bd., 380 Mass. 919, 925, 407 N.E.2d 311, 316 (1980) (reversing licensing board’s decision to revoke a business’s license because court found the regulation permitting the board to revoke a license “[i]f a licensee * * * conducts his licensed business in an improper manner” was unconstitutional) (quotation omitted). Saxon is distinguishable. First, the court in Saxon treated the case as criminal in nature and thus, applied a stricter standard than is applicable here. Id. Second, the Saxon court noted that “[n]either party has incorporated into the record or called our attention to any regulation which might mitigate the vagueness of the phrase ‘improper manner.’ ” Id. at 926, 407 N.E.2d at 316. But here, as noted above, chapter 4, section 16, in its entirety, provides guidance as to the type of behavior that could lead to license revocation, thereby mitigating any alleged vagueness. Finally, the management of the coffee shop in Saxon was not found to have engaged in any illegal conduct. Id. at 928-29, 407 N.E.2d at 318 (stating that if management had knowingly allowed prostitution on its premises, the board would have had grounds for revocation). Although the ALJ found relator’s management was not directly involved in illegal activity, its employee-member vice president was arrested for selling marijuana and drug sales occurred on the premises. In conclusion, unlike the situation in Sax on, the ordinance at issue here is not unconstitutionally vague.

II.

In reviewing the procedures used by respondent in making its decision relator contends our review is governed by the Minnesota Administrative Procedure Act (MAPA). We agree. MAPA defines a contested case as

a proceeding before an agency in which the legal rights, duties, or privileges of specific parties are required by law or constitutional right to be determined after an agency hearing.

Minn.Stat. § 14.02, subd. 8 (2000). An “agency” is defined as

any state officer, board, commission, bureau, division, department, or tribunal, other than a judicial branch court and the tax court, having a statewide jurisdiction and authorized by law to make rules or to adjudicate contested cases.

Id., subd. 2 (2000). Under section 14.02, subdivision 2, the Minneapolis City Council is not considered an agency because it does not have statewide jurisdiction. See City of Mankato v. Mahoney, 542 N.W.2d 689, 693 (Minn.App.1996). But appellate cases often cite MAPA as the standard for reviewing city council decisions. In re License of West Side Pawn, 587 N.W.2d 521, 523 (Minn.App.1998), review denied (Minn. Mar. 30, 1999); Mahoney, 542 N.W.2d at 691-92. In addition,

some local units of government either incorporate by reference all or some of [MAPA’s] procedural provisions by official action, or statutes occasionally direct that certain portions of them apply to specified local proceedings.

21 William J. Keppel, Minnesota Practice, § 1.03 (1998). Here, communications from an assistant city attorney informed both the city council and relator that “[t]he hearing will be conducted in accordance with the requirements of Minnesota Statutes § § 14.57 to 14.62.” Sections 14.57 through 14.62 govern contested case procedures under MAPA. Because the city elected to be governed by MAPA, we conduct our analysis pursuant to MAPA.

Under MAPA,

[this] court may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the administrative finding, inferences, conclusion, or decisions are:
(a) In violation of constitutional provisions; or
(b) In excess of the statutory authority or jurisdiction of the agency; or
(c) Made upon unlawful procedure; or
(d) Affected by other error of law; or
(e) Unsupported by the substantial evidence in view of the entire record as submitted; or
(f) Arbitrary or capricious.

Minn.Stat. § 14.69 (2000); see West Side Pawn, 587 N.W.2d at 523. Review is limited to “the record before the city council at the time it made its decision.” West Side Pawn, 587 N.W.2d at 523 (citing Minn.Stat. § 14.68).

Relator argues respondent’s decision was improper because the city council utilized unlawful procedures in making its decision. Relator contends that the only way this court can determine whether the procedures were unlawful is to consider the extra-record materials submitted by relator. We agree. Ordinarily, our review is confined to the record. Minn.Stat. § 14.68 (2000). But in cases where “irregularities in procedure, not shown in the record” are alleged, this court “may transfer the case to the district court” so that it may determine whether there were any “irregularities in procedure.” Id. In order to determine whether transfer to the district court is appropriate, we will examine the extra-record materials to determine whether there is substantial evidence of irregularities.

The city council was to make its decision in accordance with its Manual. This Manual prohibited the council from allowing or initiating ex parte contacts, forming an opinion as to sanctions until after the close of all hearings, and considering material outside the record. Based on the materials submitted to us, it is undisputed that the city council violated both the procedures set forth in the Manual and the explicit instructions of the city attorney. Comments made during the June 9, 2000, city council hearing indicate that the council organized a caucus to discuss the matter of relator’s licenses. At this caucus, outside witnesses were brought in and information was presented regarding the volume of 911 calls made concerning the Hard Times Cafe. No evidence concerning 911 calls had been presented to the ALJ.

In addition, relator has presented considerable additional evidence of irregularities in procedure. Extra-record materials demonstrate that a council member sent an E-mail to a staff member stating that

we better plan on a foil-court press at the [DFL] caucus. Let[’]s have all of the police and SAFE people who worked on this issue there for resources AND to let [council members] see them. * * * [A]t the very least, we need [council members] NOT [to] vote again[st] the PSRS recommendation.

The contents of this E-mail suggest both that council members made up their minds before the license revocation process was completed, and that members promoted the consideration of information that was not presented to the ALJ. In another Email a council member stated to a constituent that the

[e]ity licensing staff tried numerous times to meet with the leadership of [the] Hard Times in the effort to resolve complaints * * * [but experienced] frustration at being able to accomplish this objective.

Not only was there no evidence before the ALJ that relator refused to cooperate with the city but to the contrary, the ALJ specifically documented the past and current efforts of relator to cooperate.

“Governmental bodies must take seriously their responsibility to develop and preserve a record that allows for meaningful review by appellate courts.” In re Livingood, 594 N.W.2d 889, 895 (Minn.1999). Confining our review solely to the record before us, we cannot determine with certainty whether the evidence supports respondent’s decision. Considering the harshness of the penalty exacted against relator compared with the ALJ’s positive findings, the absense of findings by respondent justifying its decision and the admission of one of the council members that respondent was exposed to prohibited information, we cannot avoid the conclusion that respondent’s decision may have been improperly influenced.

We conclude that it is impossible for us to untangle these improper influences from respondent’s final decision, and determine whether the evidence in the record supports the council’s decision. Therefore, based on relator’s extensive documentation of alleged irregularities in procedures, we are exercising our authority to transfer this case to the district court pursuant to section 14.68, so that it may “take testimony and * * ⅜ hear and determine the alleged irregularities in procedure.”

DECISION

We affirm respondent’s authority to revoke any license it issues upon proper notice and hearing for “good cause” because this standard is not so vague that it constitutes a violation of due process. We transfer this case to this district court so that it may investigate the alleged irregularities in procedures regarding respondent’s decision to revoke relator’s license.

Affirmed in part and transferred to the district court.


author: G. BARRY ANDERSON, Judge

text:
    STATE of Minnesota, Respondent, v. Thane John REIMER, Appellant.
    No. C5-00-1164.
    Court of Appeals of Minnesota.
    April 24, 2001.

      Mike Hatch, Minnesota Attorney General, St. Paul, MN; and Alan L. Mitchell, St. Louis County Attorney, Steven C. Cundy, Assistant St. Louis County Attorney, Virginia, MN, for respondent.
    Gordon C. Pineo, Deal & Pineo, Virginia, MN, for appellant.
    Considered and decided by LANSING, Presiding Judge, ANDERSON and HALBROOKS, Judges.
   OPINION

G. BARRY ANDERSON, Judge

Appellant challenges the district court’s pretrial order determining that the charges of driving with an expired driver’s license and gross misdemeanor DWI did not arise out of a single behavioral incident and could therefore be separately prosecuted. We affirm.

FACTS

Appellant Thane John Reimer was operating a motor vehicle when it went off the road into a ditch. Appellant’s motor vehicle driving record indicated that he had a prior conviction for driving while intoxicated (DWI), and his driving privileges had expired.

The investigating officer noted that appellant was unsteady on his feet, had slurred speech, bloodshot and watery eyes, and the odor of alcohol about his person, and appellant admitted he had been drinking. Appellant consented to a blood test, which was taken at a local medical center. Appellant received a citation from the officer for driving with an expired license, which he promptly paid.

The blood test results showed an alcohol concentration of .17. Based on the test results, the state charged appellant with two counts of gross misdemeanor Driving While Intoxicated (DWI) in violation of Minn.Stat. § 609.121 (1998).

Appellant brought a motion to dismiss the DWI charge pursuant to MinmStat. § 609.035 (1998), arguing that the DWI charges violated the state’s prohibition against serial prosecution. The district court concluded that the offenses of driving with an expired driver’s license and gross misdemeanor driving while intoxicated did not arise out of a single behavioral incident, and denied the defense motion. Appellant subsequently entered a plea to one count of gross misdemeanor DWI on June 22, 2000. This appeal followed.

ISSUE

Did the district court err in determining that the charges of driving with an expired driver’s license and gross misdemeanor DWI did not arise out of a single behavioral incident occurring on December 23, 1999?

ANALYSIS

Under Minn.Stat. § 609.035, subd. 1 (1998), a conviction for one offense bars prosecution for any other offense arising from the same incident. The material facts are not in dispute here, so we review de novo the district court’s application of the law. State v. Meland, 616 N.W.2d 757, 759 (Minn.App.2000).

The test for determining if

violations of two or more traffic statutes result from a single behavioral incident [is whether] they occur at substantially the same time and place and arise out of a continuous and uninterrupted course of conduct, manifesting an indivisible state of mind or coincident errors of judgment.

State v. Johnson, 273 Minn. 394, 405, 141 N.W.2d 517, 525 (1966). The question of whether multiple offenses arose out of the same behavioral incident “depends on the facts and circumstances of the particular case.” State v. Bookwalter, 541 N.W.2d 290, 294 (Minn.1995). The state bears the burden to establish that the conduct underlying the offenses are not part of a single behavioral incident. State v. Zuehlke, 320 N.W.2d 79, 82 (Minn.1982).

Here, it is undisputed that the offenses occurred at the same time and place. We are left with ascertaining whether the offenses of DWI and driving with an expired license constituted a “continuous and uninterrupted course of conduct, manifesting an indivisible state of mind or coincident errors of judgment.” Johnson, 273 Minn, at 405, 141 N.W.2d at 525. Respondent argues that his offenses were not separate and distinct, but rather constituted a single behavioral incident.

In State v. Meland, the defendant was stopped for driving a vehicle with expired license tabs. 616 N.W.2d at 758. After stopping the vehicle, police observed that defendant appeared intoxicated. Id. The defendant submitted to a urine test. Id. at 759. Police cited defendant for expired tabs and released him. Id. The defendant pleaded guilty to the license tab offense and paid the fíne. Id. The urine test results later revealed a blood alcohol concentration of .167, and a complaint was filed charging Meland with DWI. Id. The defendant filed a motion to dismiss pursuant to Minn.Stat. § 609.035 (1998). Id. After the district court granted the motion, we reversed, holding that

[cjaselaw distinguishes between continuing offenses and offenses limited in time and place.
* * * *
Meland’s DWI offense took place at a particular time and place. In contrast, driving with expired tabs is a continuing offense that recurs every time a driver drives or parks the subject vehicle on a public highway.

Id. at 759-60. We conclude that the Me-land analysis applies here.

Similar to driving with expired tabs, driving with an expired driver’s license is a continuing offense that recurs every time appellant drives. See Minn.Stat. § 171.02, subd. 1 (1998) (stating that “[n]o person, except those hereinafter expressly exempted, shall drive any motor vehicle upon any street or highway in this state unless such person has a fícense valid under the provisions of this chapter for the type or class of vehicle being driven”). Moreover, the offenses of DWI and driving with an expired license do not “manifest! ] an indivisible state of mind or coincident errors of judgment.” Meland, 616 N.W.2d at 760 (quoting Johnson, 273 Minn, at 405, 141 N.W.2d at 525). Appellant’s decision to drive with an expired license may be attributed to errors in judgment wholly independent of his decision to drink and drive.

Minnesota courts have reached similar results in a variety of factual situations involving one or more motor vehicle violations. In State v. Butcher, 563 N.W.2d 776 (Minn.App.1997), review denied (Minn. Aug. 5, 1997), the defendant was charged with transporting an uncased firearm and driving after cancellation, among other charges, all occurring in a single time frame. Id. at 779. We held that these offenses were independent of each other because they did not share “an indivisible state of mind or coincidental errors of judgment.” Id. at 784.

In State v. Bishop, 545 N.W.2d 689 (Minn.App.1996), the defendant was charged with driving after cancellation and aggravated DWI. Id. at 690. We held that the offenses, while occurring at different times and places, also involved distinct and dissimilar errors in judgment, and thus did not arise out of the same behavioral incident. Id. at 692.

In State v. Holland, 421 N.W.2d 382 (Minn.App.1988), we held that the offenses of driving after cancellation and unsafe equipment violations were continuing offenses which were committed the moment Holland started his car, and were not linked with the felony offense of aggravated criminal damage to property. Id. at 389. The criminal damage offense was found to be motivated by a criminal objective separate and distinct from that present in either the driving after cancellation or unsafe equipment violations. Id.

In State v. Wheat, 296 Minn. 97, 206 N.W.2d 655 (1973), the supreme court, relying on State v. Reiland, 274 Minn. 121, 142 N.W.2d 635 (1966), held that although acts leading to charges of operating a motor vehicle without a license and speeding occurred at the same time and place, the offenses were separate and distinct. Wheat, 296 Minn, at 98, 206 N.W.2d at 656. In State v. Reiland, the supreme court held that the offense of driving after revocation was separate and distinct from conduct constituting the offense of criminal negligence, and, therefore, a conviction for driving after revocation did not bar a subsequent prosecution for criminal negligence even though the offenses occurred at the same time and place. Id. at 124, 142 N.W.2d at 638. The offense of driving after revocation was found to be “continuous” in nature. Id. The court went on to hold that the violations did not manifest an indivisible state of mind or coincidental error in judgment. Id.

This is not to say, of course, that, as a matter of public policy, appellant’s argument is without merit. The logic behind distinguishing between driver’s license violations on the one hand, and moving violations on the other hand, thus avoiding the application of Minn.Stat. § 609.035 subd. 1 (1998), is not transparently clear. Nonetheless, as Meland acknowledges, case law in Minnesota does distinguish between continuing offenses and offenses limited in time and place, and based on that established precedent, we affirm the district court’s order determining that the statutory bar to prosecution found in Minn.Stat. § 609.035 (1998) does not apply here.

DECISION

The prosecution of Reimer for DWI did not violate the Minn.Stat. § 609.035 prohibition against serialized prosecution.

Affirmed.

      . Holland slammed his vehicle into a police squad car as he was attempting to get away. Id. at 384.

      . Reiland struck and killed a pedestrian with his automobile.


author: BERTRAND PORITSKY, Judge

text:
    ANDREW L. YOUNGQUIST, INC. d/b/a Birtcher Construction Services, Appellant, v. CINCINNATI INSURANCE COMPANY, Respondent.
    No. C8-00-1773.
    Court of Appeals of Minnesota.
    April 24, 2001.

      Mark A. Gwin, Andrea E. Reisbord, Cousineau, McGuire & Anderson, Chartered, Minneapolis, MN, (for appellant).
    William L. Moran, Patrick J. Kelly, Murnane, Conlin, White & Brandt, P.A., St. Paul, MN, (for respondent).
    Considered and decided by KALITOWSKI, Presiding Judge, SCHUMACHER, Judge, and PORITSKY, Judge.
   OPINION

BERTRAND PORITSKY, Judge

Following the district court’s grant of summary judgment in its favor, appellant insured contends that the district court erred in limiting its recovery of damages and attorney fees to $8,866.58. Respondent insurance company filed a notice of review challenging the district court’s grant of summary judgment in favor of the insured. Because the insurer breached its duty to defend and indemnify the insured, and the district court’s award of costs and attorney fees was proper, we affirm in part. Nonetheless, we remand for a factual finding as to whether the insured paid its insurance deductible before or after tendering its defense to the insurer.

FACTS

The parties do not dispute the material facts. Appellant Andrew L. Youngquist, Inc., d/b/a Birtcher Construction Services (Birtcher), contracted to build a movie theater in Coon Rapids. Birtcher entered into a subcontract with Comm-Tech Electrical Contractors, Inc. (Comm-Tech), to provide electrical work on the theater project. The subcontract required Comm-Tech to obtain primary commercial general-liability insurance covering Birtcher. Comm-Tech purchased an endorsement to its commercial general-liability insurance policy, naming Birtcher as an “Additional Insured”:

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
AUTOMATIC ADDITIONAL INSURED-CONTRACTOR
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY COVERAGE PART
1. Section II — Who is an insured is amended to include:
2.e. The person or organization shown in the Schedule but only with respect to liability arising out of your ongoing operations performed for that insured, HEREINAFTER REFERRED TO AS ADDITIONAL INSURED.
SCHEDULE
Any person or organization for whom you are required in a written contract * * * where there is a certificate of insurance showing that person or organization as an ADDITIONAL INSURED under this policy.

(Emphasis added.)

A provision in the subcontract stated that Comm-Tech would not indemnify Birtcher for such damages as were determined by a court of competent jurisdiction to be due either to Birtcher’s sole negligence or willful misconduct:

[Comm-Tech] shall not be obligated under this agreement to indemnify [Birtcher] with respect to damages which are ultimately determined by a court of eom-petent jurisdiction to be due to the sole negligence or willful misconduct of [Birtcher],

On November 16, 1997, an electrician employed by Comm-Tech was injured while working at the theater construction site. The electrician sued Birtcher and two other companies for his injuries. On August 4, 1998, Birtcher tendered defense of the Klitzke injury claim to respondent Cincinnati Insurance Company (Cincinnati), from whom Comm-Tech had purchased its commercial general-liability insurance policy. Cincinnati rejected Birtcher’s tender.

Birtcher brought a declaratory action against Cincinnati to compel it to defend and indemnify Birtcher. The district court heard cross-motions for summary judgment. In its order, the district court granted summary judgment in favor of Birtcher, but reserved the issue of Birtcher’s request for attorney fees, costs and disbursements, and directed Birtcher to file supporting affidavits.

Birtcher’s attorney submitted affidavits to the district court outlining Birtcher’s damages, attorney fees, and costs, accompanied by corroborating billing statements. Birtcher requested a total of $49,452.93. Cincinnati opposed reimbursement in this amount, arguing that Birtcher’s own insurer, Reliance Insurance Company (Reliance), paid virtually all of Birtcher’s costs and legal expenses. Birtcher countered by furnishing evidence that it had incurred a $5,000 out-of-pocket deductible and approximately $3,380 in unreimbursed fees and expenses. On August 15, 2000, the district court awarded Birtcher $8,866.58, reflecting Birtcher’s $5,000 deductible and $3,380.33 plus $250 in unpaid fees and expenses.

Birtcher contests the amount awarded by the district court, and Cincinnati challenges the district court’s grant of summary judgment in favor of Birtcher on the issue of coverage.

ISSUES

1. Did the district court err in granting Birtcher summary judgment on the issue of coverage?

2. Did the district court improperly limit Birtcher’s recovery to its out-of-pocket expenses incurred by Birtcher in the underlying claim?

3. Did the district court abuse its discretion in determining the amount of attorney fees?

4. Is Birtcher entitled to attorney fees on appeal?

5. Should Birtcher’s motion for appellate admission of evidence be granted?

ANALYSIS

On appeal from summary judgment, this court asks whether there are any genuine issues of material fact and whether the district court erred in its application of the law. O’Malley v. Ulland Bros., 549 N.W.2d 889, 892 (Minn.1996). In making this determination, we view the evidence in the light most favorable to the party against which summary judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993).

1. Duty to Defend

“[T]he interpretation of insurance contract language is a question of law as applied to the facts presented.” Meister v. Western Nat’l Mut. Ins. Co., 479 N.W.2d 372, 376 (Minn.1992) (citation omitted); see Iowa Kemper Ins. Co. v. Stone, 269 N.W.2d 885, 887 (Minn.1978). “Insurance coverage issues are questions of law for the court.” State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 64 (Minn.1992) (citation omitted). Where there is no dispute as to the material facts, this court independently reviews the district court’s interpretation of the insurance contract de novo. Haarstad v. Graff, 517 N.W.2d 582, 584 (Minn.1994).

The language of the policy must be given its ordinary and usual meaning so as to give effect to the intention of the parties as it appears from the contract. Dairyland Ins. Co. v. Implement Dealers Ins. Co., 294 Minn. 236, 244-45, 199 N.W.2d 806, 811 (1972) (citations omitted); see Fillmore v. Iowa Natl. Mut. Ins. Co., 344 N.W.2d 875, 877 (Minn.App.1984) (reviewing an insurance policy to ascertain and give effect to the parties agreement). Doubts as to coverage must be resolved against the insurer issuing the policy in favor of coverage, and the burden rests with the insurer to prove the claim is not covered. Prahm v. Rupp Constr. Co., 277 N.W.2d 389, 390 (Minn.1979); Columbia Heights Motors, Inc. v. Allstate Ins. Co., 275 N.W.2d 32, 36 (Minn.1979).

a. Coverage Under the Additional Insured Endorsement

The parties agree that Comm-Tech purchased an endorsement to its commercial general-liability insurance policy naming Birtcher as an additional insured. Cincinnati argues that the language “arising out of [Comm-Tech’s] ongoing operations performed for [Birtcher]” limits its liability to cover only cases in which Comm-Tech is primarily liable and Birtcher is vicariously liable for any fault of Comm-Tech. (Emphasis added.) The provision did not, Cincinnati argues, extend coverage to liability arising exclusively out of Birtcher’s own operations.

However, the phrase “arising out of’ has been given a broad meaning. Faber v. Roelofs, 311 Minn. 428, 436, 250 N.W.2d 817, 822 (1977), is instructive on this issue. In Faber, a school bus owned by Roelofs and hired by the school district ran over a student. Id. at 430, 250 N.W.2d at 819. The school district was listed as an additional insured under Roelofs’s auto-liability policy with his insurer, Mutual Service Casualty Insurance Company. Id. at 430-31, 250 N.W.2d at 819. The pertinent language of the insurance contract stated that the policy covered damages “arising out of the ownership, maintenance or use of the [school bus].” Id. at 436, 250 N.W.2d at 822. In the underlying negligence action, the driver and Roelofs, as owner, were both absolved of negligence, but the school district was found negligent based on its established bus routes and bus-loading procedures. Id. at 436, 250 N.W.2d at 822. Mutual argued that since neither the driver nor Roelofs were negligent and since the school district was found independently negligent, the student’s injuries did not “arise out of the use” of the school bus. Id.

The supreme court disagreed and held that a “ ‘[b]ut for’ causation, i.e., a cause and result relationship, is enough to satisfy the provision of the policy.” Id. at 436-37, 250 N.W.2d at 822 (quotation omitted). The court construed the phrase “arising out of’ as “comprehensive and broad in service,” extending to a causal connection with use or maintenance of the insured vehicle. Id. at 436, 250 N.W.2d at 822 (quotation omitted). Consequently, the Faber court ruled that the school district, as an additional insured, was covered by Mutual. Id. at 438, 250 N.W.2d at 823.

In Hormel Foods Corp. v. Northbrook Prop. & Cas. Ins. Co., 938 F.Supp. 555, 556 (D.Minn.1996), ajfd, 131 F.3d 143 (8th Cir.1997), Hormel leased a hog-processing facility to Quality Pork Products (QPP). The lease required QPP to include Hormel as an additional insured on QPP’s liability policy with Northbrook. 938 F.Supp. at 556. QPP’s liability policy covered losses “ ‘arising out of the ownership, maintenance or use’ of the leased premises.” Id. A QPP employee was fatally injured by a machine on the leased premises. Id. A wrongful-death action was brought against Hormel, alleging that the machine was negligently designed. Id. Northbrook argued that the underlying suit did not arise out of Hormel’s ownership, maintenance, or use of the premises. Id. at 556. Northbrook claimed that the additional-insured provision only protected Hormel from the negligence of QPP, much as, in the present case, Cincinnati claims its provision covers Birtcher only for liability arising from the fault of Comm-Tech. See id.

The court held that Northbrook’s policy covered Hormel’s liability for negligent design. Id. at 558. Citing Minnesota cases, the court construed the phrase “arising out of’:

This standard is not one of proximate causation. Rather, “but for” causation satisfies the requirements of an insurance policy which specifies that only liabilities “arising out of the use” are covered. Therefore, if there is a causal relationship between the place covered by insurance and the acts giving rise to legal liability, the liability is covered also.

Id. at 557 (citations omitted).

The phrase arising out of has also been described as meaning originating from, or having its origin in, growing out of, or flowing from. See, e.g., Associated Indep. Dealers, Inc. v. Mutual Serv. Ins. Cos., 304 Minn. 179, 182, 229 N.W.2d 516, 518 (1975) (citation omitted) (dicta).

No published case in Minnesota is exactly on point with respect to the circumstances before us, but this court’s unpublished decision, K-Mart Corp. v. Clean Sweep, Inc., No. C9-97-703, 1997 WL 666088 (MinnApp. Oct.28, 1997), is instructive. Although this court’s unpublished decisions are not precedential, they may have persuasive value. Dynamic Air, Inc. v. Bloch, 502 N.W.2d 796, 800 (Minn.App.1993). In the present case, the district court discussed K-Mart in reaching its determination, and both parties cited K-Mart in their briefs to this court. In K-Mart, Clean Sweep contracted to remove snow from K-Mart’s parking lot. K-Mart, 1997 WL 666088, at *1. As a result of an indemnity provision in its contract, Clean Sweep carried a liability policy with Milwaukee Mutual, which named K-Mart as an additional insured under Clean Sweep’s liability policy for liability “arising out of’ Clean Sweep’s “ongoing operations performed for K-Mart.” K-Mart, 1997 WL 666088, at *1. A customer sued Clean Sweep and K-Mart for injuries from a slip and fall in the parking lot. K-Mart, 1997 WL 666088, at *1. Milwaukee denied coverage to K-Mart, which sought and obtained a declaratory judgment against Milwaukee. K-Mart, 1997 WL 666088, at *1. We affirmed that K-Mart was covered under Milwaukee’s policy because the claimed liability arose out of Clean Sweep’s ongoing operations of snow removal, and coverage was not limited to vicarious liability for Clean Sweep’s acts. K-Mart, 1997 WL 666088, at *1. Cincinnati argues that K-Mart is distinguishable from the case before us because Klitzke never brought a negligence claim against Comm-Tech, whereas in K-Mart, the injured customer sued both Clean Sweep and K-Mart. Klitzke, however, did not sue Comm-Tech because of the exclusivity provisions under the Minnesota Workers’ Compensation Act. This distinction does not affect interpretations of the coverage provisions.

In short, on the undisputed facts there is a causal connection between Klitzke’s injuries and Comm-Tech’s ongoing operations: but for Comm-Tech’s operations, Klitzke would not have been injured.

b. Effect of the Subcontract

Cincinnati next argues that the indemnification provision in Birtcher and Comm-Tech’s subcontractor agreement removes Klitzke’s injury claim from the scope of Cincinnati’s endorsement coverage of Birtcher. The subcontractor agreement indemnification provision reads:

[Comm-Tech] shall not be obligated under this agreement to indemnify [Birtcher] with respect to damages which are ultimately determined by a court of competent jurisdiction to be due to the sole negligence or willful misconduct of [Birtcher].

(Emphasis added.) As conceded by Cincinnati at oral argument, however, no court determined that Birtcher was negligent, solely or otherwise, because Birtcher settled with Klitzke in the underlying negligence suit. Therefore, the above provision is not operative under the present circumstances. Moreover, our reasoning here has the effect of encouraging insureds like Birtcher, facing a negligence claim, to settle the dispute instead of litigating it.

We conclude that Cincinnati’s insurance coverage of Birtcher extended to include the Klitzke injury claim brought against Birtcher. Cincinnati breached its contractual obligation to defend and indemnify Birtcher, and the district court properly granted summary judgment in favor of Birtcher on the issue of coverage.

2. Recovery Limited to Birtcher’s Out of Pocket Expenses

Birtcher asserts that the district court erred in limiting its recovery to its out-of-pocket $5,000 deductible (and attorney fees, which will be discussed separately). See Westling Mfg, Co. v. Western Nat’l Mut. Ins. Co., 581 N.W.2d 39, 48 (Minn.App.1998) (“An insured may recover from an insurer ‘damages resulting from breach of contract by the insurer’s failure to defend.’ ” (citation omitted)), review denied (Minn. Sept. 22, 1998). We review this issue as a matter of law subject to de novo review. See Frost-Benco Elec. Ass’n v. Minnesota Pub. Utils. Comm’n, 358 N.W.2d 639, 642 (Minn.1984). Birtcher argues that the district court should have required Cincinnati to pay Birtcher the entire $10,000 paid to settle the Klitzke injury claim. We disagree.

It is not clear from Birtcher’s argument on this issue whether Birtcher asserts that it is entitled to recover and retain the full amount of the Klitzke injury settlement, or whether it is merely acting as a conduit by passing any recovery in excess of its deductible to its own insurer, Reliance. At one point in its brief, Birtcher refers to the district court’s conclusion that it (Birtcher) was the real party in interest; later in its brief, Birtcher argues that the district court’s “refusal to reimburse [Birtcher] for the settlement” should be reversed. However, elsewhere in its brief, Birtcher argues that the law does not “limit or preclude an insurer’s right to reimbursement from another insurer.” (Emphasis added.) Regardless of whether Birtcher intends to keep the amount recovered in excess of its deductible, or pass it on to Reliance, Birtcher’s arguments are not persuasive.

If Birtcher is to keep the amount recovered in excess of its deductible, the result will be an impermissible double recovery. It is a matter of basic insurance law that an insured is entitled to no more than its loss:

Almost all types of insurance are designed to provide no more than reimbursement for an insured. Moreover, it is now a generally accepted fundamental tenet of insurance law that opportunities for net gain to an insured through the receipt of insurance proceeds exceeding a loss should be regarded as inimical to the public interest.

Robert E. Keeton & Alan I. Widiss, Insurance Law § 3.1(a), at 135 (1988). The windfall that Birtcher would receive were it allowed to recover any amount in excess of its deductible would be particularly inappropriate since Birtcher did not pay any premium for the additional insured endorsement. Cf. Nordby v. Atlantic Mut. Ins. Co., 329 N.W.2d 820, 822 (Minn.1983) (indicating court looked at the payment of premiums in determining coverage).

If, on the other hand, Birtcher is urging that Reliance is entitled to the amount in excess of the deductible, its arguments run head-on into a line of Minnesota caselaw to the contrary.

Separate insurers with a mutual insured have an independent duty to cover the insured. See Jostens, Inc. v. Mission Ins. Co., 387 N.W.2d 161, 167 (Minn.1986) (“If either insurer undertakes the defense, it is responsible for its own defense costs and cannot later seek reimbursement from the other.”); Nordby, 329 N.W.2d at 824 (“An insurer has no right of action against another insurer to recover the cost of defending the insured, since there is no contractual obligation between insurers.”); St. Paul Sch. Dist. No. 625 v. Columbia Transit Corp., 321 N.W.2d 41, 48 (Minn.1982) (“No contractual obligation exists to make one insurer accountable to the other for a breach of its independent obligation to the insured.” (quotation & citation omitted)); Iowa Nat’l Mut. Ins. Co. v. Universal Underwriters Ins. Co., 276 Minn. 362, 367, 150 N.W.2d 233, 236-37 (1967) (“The obligation to defend is a separate undertaking from the duty to provide coverage and pay a judgment.”). In Jostens, the supreme court distilled the reasoning found in Nordby, St. Paul School District, and Iowa National:

The rationale is that there is no contractual relationship between the two insurers, and the insurer assuming the defense has no cause to complain because it * * * is only doing what it agreed and was paid a premium to do.

Jostens, 387 N.W.2d at 166.

Birtcher argues these cases are distinguishable because they involved one insurer seeking reimbursement from another insurer, whereas in this case Birtcher is an insured, not an insurer. Even though the supreme court has allowed recovery in actions between an insured and an insurer, in the present case, the insured did not have to defend itself. Cf. Jostens, 387 N.W.2d at 166-67. Unlike the insured in Jostens who “paid its own way,” and defended itself when its two insurers refused its tender, id. at 165, Birtcher incurred no costs beyond its $5,000 deductible because Reliance undertook Birtcher’s defense in the underlying claim. The district court properly limited Birtcher’s recovery to the out-of-pocket deductible.

Birtcher argues that public policy mandates that Cincinnati be held accountable for its breach of contract. Birtcher contends that Nordby and its predecessors serve to reward Cincinnati’s breach by punishing insurers, like Reliance, who live up to their contractual obligation. Birtcher cites caselaw from other jurisdictions, espousing the position that one insurer should not profit from its wrongful failure to defend while another insurer is punished for performing its duty. See, e.g., Farm & City Ins. Co. v. United States Fid. & Guar. Co., 323 N.W.2d 259, 261 (Iowa 1982); Farmers Ins. Group v. Progressive Cas. Ins. Co., 84 Mich.App. 474, 269 N.W.2d 647, 653 (1978); Church Mut. Ins. Co. v. Smith, 509 N.W.2d 274, 277 (S.D.1993). Birtcher’s public-policy argument, while appealing, cannot overcome Minnesota’s express preference that each insurer fulfill its independent duty to cover a mutual -insured. See, e.g., Iowa Nat’l, 276 Minn, at 367, 150 N.W.2d at 237 (expressing Minnesota’s preference for a contract-based approach because insurer’s obligation to defend “is a contractual right of the insured irrespective of other insurance and irrespective of primary or excess coverage” (citation omitted)).

In addition, although Minnesota recognizes that an insurer may recover defense costs paid on behalf of an insured pursuant to a “loan-receipt agreement,” no such agreement exists between Birtcher and Reliance. See Jerry Mathison Constr., Inc. v. Binsfield, 615 N.W.2d 378, 381 (Minn.App.2000) (“The purpose of the loan-receipt agreement between an insurer and its insured is to allow a subsequent action to be brought in the name of the insured even when the insurer has in effect fully indemnified the insured for the loss.” (citation omitted)). Had a loan-receipt agreement existed between Reliance and Birtcher, Reliance could have proceeded against Cincinnati in Birtcher’s name to recover the amounts Reliance had paid. At no time, however, did Birtcher and Reliance enter into an agreement for Reliance to loan Birtcher the funds needed to settle the underlying Klitzke injury claim. The district court properly limited Birtcher’s recovery to its out-of-pocket $5,000 deductible.

3. Attorney Fees

Birtcher argues that the district court should not have limited its recovery of attorney fees. A party may recover attorney fees and costs incurred in obtaining a declaratory judgment against an insurer for breach of its duty to defend. Morrison v. Swenson, 274 Minn. 127, 138, 142 N.W.2d 640, 647 (Minn.1966); see American Standard Ins. Co. v. Le, 551 N.W.2d 923, 927 (Minn.1996) (restating rule that attorney fees are recoverable in declaratory judgment action only if there is a breach of a contractual duty, “usually by wrongfully refusing to defend the insured”). An insured may recover attorney fees from its insurer if such fees are incurred defending itself against claims by a third party when the insurer has a contractual duty to defend the insured, but has refused to do so. SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 316 (Minn.1995). The district court determined that Birtcher could recover unreim-bursed attorney fees for (1) the declaratory judgment action against Cincinnati, and (2) the underlying Klitzke injury claim.

We review the district court’s award of attorney fees and costs under an abuse-of-discretion standard. Radloff v. First Am. Nat’l Bank, 470 N.W.2d 154, 156 (Minn.App.1991), review denied (Minn. July 24, 1991). The reasonable value of attorney fees is a question of fact, and we must uphold the district court’s findings on that issue unless they are clearly erroneous. Amerman v. Lakeland Dev. Corp., 295 Minn. 536, 537, 203 N.W.2d 400, 400-01 (1973). Here,, the district court calculated Birtcher’s attorney fees at $3,380.33, plus $250. Evidence from the record — in the form of affidavit testimony submitted by Birtcher’s attorney — supports the district court’s figure. In his affidavit, Birtcher’s attorney indicated that Birtcher had a total of $3,380.33 plus $250 in un-billed fees not paid by Reliance. Birtcher argues that the district court should have granted the remainder of its fees (approximately $33,000). The district court, however, found that these remaining attorney fees and costs were paid by Reliance, and therefore did not constitute proven damages. Applying the reasoning from the preceding section, we conclude that because Reliance already compensated Birtcher for all attorney fees incurred below, excluding $3,380.33 plus $250, the district court did not abuse its discretion in limiting Birtcher’s recovery of attorney fees to these amounts.

4. Attorney Fees on Appeal

In its brief, Birtcher argues that it is entitled to attorney fees and expenses incurred in connection with this appeal. A party seeking attorney fees on appeal must submit a separate, written motion. Minn. R. Civ.App. P. 139.06, subd. 1; see also Minn. R. CivApp. P. 139.03 (taxation of costs and disbursements). Because Birtcher fafied to submit a separate, written motion, we do not address the issue of attorney fees incurred on appeal.

5. Timing of Birtcher’s Deductible Payment

Respondent Cincinnati argues that the district court erred in awarding Birtcher $5,000 as reimbursement for the deductible, because the record contains no evidence of when Birtcher paid the $5,000 deductible. Amounts incurred prior to the tender of a defense are not recoverable. See Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724, 739 (Minn.1997) (“[A]n insurer cannot be held responsible for defense costs incurred prior to the tender of the defense request.”); cf. SCSC Corp., 536 N.W.2d at 316 (“[F]ormal tender of a defense request is a condition precedent to the recovery of attorney fees that a party incurs defending claims that a third party is contractually obligated to pay.”). Birtcher tendered its defense to Cincinnati on August 4, 1998. Cincinnati claims the district court erred because it ordered Cincinnati to reimburse Birtcher for the deductible without determining that Birtcher paid the deductible after the date of tender.

In his affidavit, Birtcher’s attorney stated that Birtcher paid the deductible, but did not indicate when Birtcher made the payment. Because the record fails to establish when Birtcher paid the deductible, we remand to the district court for a specific finding. If it was paid before the tender, Birtcher is not entitled to recover the deductible. Cf. SCSC Corp., 536 N.W.2d at 317 (remanding to district court to establish what portion, if any, of district court’s award of attorney fees was incurred before tender of defense).

6. Birtcher’s Motion to Admit Appellate Evidence

Birtcher moves for admission on appeal of its third-party complaint in the underlying Klitzke injury claim. The record on appeal consists of the “papers filed in the trial court, the exhibits, and the transcript of the proceedings, if any.” Minn. R. CivApp. P. 110.01. Here, Birtcher concedes that a copy of the third-party complaint was not made part of the record in the declaratory-judgment action. We will not base our decision on matters outside the record on appeal, and we refuse to consider matters not produced and received in evidence below. Thiele v. Stich, 425 N.W.2d 580, 582-83 (Minn.1988). Moreover, Birtcher fails to demonstrate how the third-party complaint on the underlying Klitzke injury claim is relevant to the issues on appeal. See Kersten v. Minnesota Mut. Life Ins. Co., 608 N.W.2d 869, 874 (Minn.2000) (refusing to consider document submitted for the first time on appeal that had minimal relevance to the issue before the court). We deny Birtcher’s motion to admit appellate evidence. Nevertheless, this result has no bearing on our ultimate determination of the issues.

DECISION

Cincinnati breached its duty to defend Birtcher in the Klitzke injury claim, and the district court properly granted summary judgment in favor of Birtcher. The district court did not abuse its discretion by limiting the award of damages and attorney fees to amounts not paid by Birtcher’s own insurer. If, on remand, Birtcher can establish that it paid the deductible after it tendered its defense to Cincinnati, an award of this out-of-pocket expense would be proper. Birtcher’s motion to admit appellate evidence is denied.

Affirmed in part and remanded.

       Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const, art. VI § 10.

      . The electrician, Milan Klitzke, did not name Comm-Tech in his suit, because Klitzke was precluded from doing so under the exclusivity provisions of the Minnesota Workers' Compensation Act. See Minn.Stat. § 176.031 (1998) (stating employer’s liability under workers' compensation statute is exclusive).

      . In its brief, Cincinnati asserts that Birtcher’s claim is $47,167.32, deriving this figure from the March 2, 2000, affidavit of Birtcher’s attorney. Birtcher’s attorney, however, filed a supplementary affidavit dated March 24, 2000, which gives a figure of $49,452.93.

      . The district court’s calculations appear to include Birtcher's $5,000 deductible, plus $3,380.33 in unpaid attorney fees, plus $250 stemming from costs incurred on March 24, 2000, the date Birtcher’s attorney signed his supplemental affidavit. Using these figures, the district court arrived at $8,704.85. The district court then reasonably factored in an interest rate of 5% per annum from March 24, 2000, through August 7, 2000, totaling $161.73. Adding this amount to $8,704.85 results in a total sum of $8,866.58. We are uncertain, however, as to how the district court arrived at its initial figure of $8,704.85, since $5,000 plus $3,380.33 plus $250 gives a sum of $8,630.33, not $8,704.85.

      . In October 1999, Birtcher reached a settlement with Klitzke, agreeing to pay Klitzke $10,000 plus $149.04 in interest, for a total settlement of $10,149.04.

      . The $3,380.33 was not billed to Reliance. The $250 stems from costs incurred on March 24, 2000, the date Birtcher's attorney signed his affidavit. The district court determined that Birtcher proved the amount of these fees. Arguing in the alternative, Cincinnati acknowledges that these amounts were not paid by Reliance, and Cincinnati does not assert that the district court abused its discretion in limiting Birtcher's recovery to these proven damages.

      . Birtcher also asserts that it should be reimbursed for what it characterizes as "[c]osts paid directly by Birtcher” in the amount of $1,763.40. Nevertheless, in his initial affidavit, Birtcher’s attorney notes that this amount was "paid directly by [Birtcher] and/or it's [sic] insurer [Reliance].” By virtue of this equivocation, the district court determined that Birtcher failed to prove that it was not reimbursed by Reliance for this amount. We agree.

      .Cincinnati failed to raise this argument in any of its written submissions below and the district court did not address the issue in its decision. Cincinnati briefly raised the issue during the summary-judgment hearing before the district court on May 16, 2000, however, and counsel for Birtcher conceded at oral argument that the issue had been raised below and therefore may be raised on appeal.