author: RANDALL, Judge.

text:
    AMERICAN STATES INSURANCE COMPANY, Appellant, v. Lyle ANKRUM, et al., Respondents, and Tofte Cove Homeowner’s Association, Inc., Intervenor, Respondent.
    No. C7-01-2195.
    Court of Appeals of Minnesota.
    Oct. 1, 2002.

      Kay Nord Hunt, Lommen, Nelson, Cole & Stageberg, P.A., Minneapolis, MN; and William D. Paul, William D. Paul Law Office, Duluth, MN, for appellant.
    Christopher M. Daniels, Koepke & Daniels, P.A., Minneapolis, MN, for respondents.
    Considered and decided by ANDERSON, Presiding Judge, RANDALL, Judge, and PARKER, Judge.

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

   RANDALL, Judge.

OPINION

This appeal is from a declaratory judgment determining that respondents-insureds are entitled to coverage under individual commercial liability policies issued to them by appellant-insurer. The insurer argues that (a) the insureds were engaged in a joint venture and, therefore, are not entitled to coverage under their individual policies; (b) respondent-intervenor, the plaintiff in the underlying action, lacked standing to intervene and vacate the default judgment against the insureds; (d) the Miller-Shugart agreement was invalid because the insureds’ entitlement to coverage had already been judicially determined and the agreement was the result of collusion; and (e) the district court erred in awarding the underlying plaintiff attorney fees. We affirm in part and reverse in part; we deny respondents’ motion to strike.

FACTS

Procedural facts

In January 1995, a fire started in a Tofte Cove townhome and spread throughout the building, which contained six townhomes. The fire started when an employee of the Tofte Management Company was using a hot-air gun to thaw frozen pipes located in a townhome’s wall. As a result, Tofte Cove Homeowners Association (Tofte Cove) sustained $762,163 in property damage. Tofte Cove was compensated for the loss by its property insurer, St. Paul Companies.

In 1996, Tofte Cove, on behalf of St. Paul Companies, brought a breach-of-contract action against the subcontractors hired to construct the Tofte Cove town-homes, alleging that defective construction, specifically the failure to install fire stops, caused the fire to spread far more extensively than it would have if fire stops had been installed. Respondents Lyle Ankrum and Bill Ermatinger, who installed sheet-rock and performed drywall services on the townhomes, were brought into that action in January 1997 when they were served with the second amended complaint.

Both Ankrum and Ermatinger had commercial liability-insurance policies with appellant American States Insurance Company (ASI). Ankrum and Ermatinger in January and March 1997, respectively, tendered defense of the action to ASI. ASI retained Robert Magie to represent Auk-rum and Ermatinger.

In March 1997, ASI sent Ankrum a reservation-of-rights letter notifying him that ASI reserved its right to disclaim coverage if it was later determined that the allegations and damages claimed in the lawsuit fell outside of the policy coverage and that ASI might bring a declaratory-judgment action to determine the extent of coverage owed. Ermatinger testified that he did not receive any letter from ASI in 1997, and ASI did not produce a copy of a reservation-of-rights letter to Ermatinger. In April 1997, Magie filed an answer and cross-claim on behalf of Ankrum and Er-matinger, alleging that it was not their responsibility to install fire stops.

In July 1997, ASI commenced a declaratory-judgment action against Ermatinger and Ankrum, seeking a declaration that it was not obligated to provide a defense or coverage to Ermatinger or Ankrum in the underlying Tofte Cove action because Er-matinger and Ankrum were either partners or in a joint venture when they performed the drywall work on the Tofte Cove townhomes. Although the summons and complaint named and were served on both Ermatinger and Ankrum, the complaint referred only to policy number 01-CD-608242-1, the policy issued to Ank-rum, and to “the policy issued to defendant Ankrum” and to “the policy of insurance issued by [ASI] to Lyle Ankrum.” ASI had issued a separate policy to Ermatinger, policy number 01-CD-566779-1.

Neither Ermatinger nor Ankrum served or filed an answer in the declaratory-judgment action. Ermatinger testified that he probably “laid [the summons and complaint] aside and forgot about it.” Ankrum gave no reason for failing to answer. Ma-gie testified that Ermatinger and Ankrum came to see him about the declaratory-judgment action but declined, on confidentiality grounds, to disclose any information about those meetings.

Tofte Cove was not named as a party in the declaratory-judgment action. Tofte Cove’s attorney, Steve Pfefferle, testified that Magie told him about the declaratory-judgment action but that he did not seek to intervene because he was waiting for the formal notice required by law to be provided to interested parties.

In November 1997, ASI moved for a default judgment in the declaratory-judgment action based on Ankrum’s and Erma-tinger’s failure to answer. The district court granted ASI’s motion, ordering that ASI had

no duty to defend or indemnify defendants Lyle Ankrum and bill Ermatinger, or either of them in the separate litigation brought against them by [Tofte Cove].

On November 12, 1997, judgment was entered for ASI. The judgment states that more than 20 days had elapsed after the summons and complaint was served on Ankrum and Ermatinger and that neither one had served an answer or made any appearance in the action.

In November 1997, per ASI’s instructions, Magie withdrew from representing Ankrum and Ermatinger in the Tofte Cove action. Neither Ankrum nor Ermatinger hired another attorney to represent them.

A mediation was conducted, and the parties other than Ermatinger and Ankrum settled for a total of $300,000, with the carpenter contractor contributing $102,500; Rysdahl, Buntz contributing $145,000; and the architect contributing $52,500. The $300,000 settlement left about $450,000 in outstanding damages. Pfefferle testified that at the mediation, someone informed him of the default judgment for ASI in the declaratory-judgment action.

In June 1998, Pfefferle wrote a letter to ASI’s attorney, William Paul, stating that Tofte Cove intended to pursue its claim against Ermatinger and Ankrum through entering into Miller-Shugart agreements with them and moving to vacate the default judgment in the declaratory judgment action. The letter stated that a Miller-Shugart agreement was likely to be in the amount of $450,000; indicated that Tofte Cove would be willing to settle for an amount substantially less than $450,000; and invited ASI to enter into settlement negotiations. The letter stated that Tofte Cove held Ankrum and Ermatinger responsible for failing to install fire stops.

A jury trial in the Tofte Cove action was scheduled to begin on November 30, 1998. Tofte Cove had at least three experts prepared to testify against Ermatinger and Ankrum on the issues of liability, causation, and damages. The contractors who had settled with Tofte Cove had cross-claims pending against Ermatinger and Ankrum and experts prepared to testify that the drywall and sheetrock work had been performed negligently.

In October 1998, Ascher, substituted counsel for Tofte Cove, contacted Ankrum and informed him that Tofte Cove proposed entering into a Miller-Shugart agreement with Ankrum. Ascher explained to Ankrum that under a Miller-Shugart agreement, Ankrum would confess judgment in a certain amount, and Tofte Cove would only seek to satisfy the judgment against ASI. Ascher testified that he explained to Ankrum that he was not his attorney and could not give him legal advice. Ascher testified that he had basically the same conversation with Er-matinger. Both Ankrum and Ermatinger advised Ascher that they did not believe they were at fault for the fire loss.

On October 13, 1998, Ascher sent proposed Miller-Shugart agreements in the amount of $225,000 each to Ankrum and Ermatinger. Ascher indicated on the accompanying cover letter that he would like a response by October 20,1998.

Ermatinger signed the agreement on October 15, 1998, and returned it to Ascher, who signed it on October 22, 1998. Ermatinger testified that he signed the agreement because he had been told it would get him out of the lawsuit and protect his assets. Ermatinger testified that he did not understand that by signing the agreement, he was admitting liability in the amount of $225,000 and that Tofte Cove could attempt to collect that amount from his insurer.

Ascher did not receive a response from Ankrum by October 20, so he called him a second time. Ascher testified that he explained to Ankrum that Tofte Cove had information, evidence, and opinions that could result in Ankrum and Ermatinger or either one of them being legally liable for the full amount of $750,000 in damages. Ankrum signed the Miller-Shugart agreement on October 26, 1998, and returned it to Ascher, who signed it the next day.

On October 19, 1998, Tofte Cove filed a motion to intervene in the declaratory-judgment action pursuant to Minn. R. Civ. P. 24 and to vacate the default judgment pursuant to Minn. R. Civ. P. 60. ASI opposed Tofte Cove’s motion on grounds that it was untimely and that Tofte Cove could neither satisfy the test for intervention under Minn. R. Civ. P. 24.01 nor the test for vacating a default judgment.

Following a hearing, the district court granted Tofte Cove’s motion to intervene and vacated the default judgment in the declaratory-judgment action. On November 9, 1998, pursuant to the Miller-Shu-gart agreements, judgment was entered against Ankrum and Ermatinger in the amount of $225,000 each.

In November 1998, in the declaratory-, judgment action, Ascher filed a joint answer and counterclaim on behalf of Ank-rum, Ermatinger, and Tofte Cove. The answer denied that Ermatinger and Ank-rum had been engaged in a joint venture in their contract to perform the drywall work on the Tofte Cove townhomes. The counterclaim alleged that ASI had breached its insurance contract with Ermatinger by failing to defend and indemnify him in the underlying Tofte Cove action.

After the district court denied the parties’ cross-motions for summary judgment, the declaratory-judgment action proceeded to a two-phase trial. In phase one, a jury trial was held on the issue of whether Ankrum and Ermatinger were engaged in a joint venture or partnership. The district court denied ASI’s motion for a directed verdict. The jury found that Ank-rum and Ermatinger were not engaged in a joint venture or partnership. The district court denied ASI’s motion for a new trial or JNOV, and judgment was entered for Ankrum and Ermatinger on the coverage issue.

The remaining issues were tried to the court. The district court concluded that the Miller-Shugart agreements were valid, reasonable, and prudent, and not the product of fraud or collusion. Accordingly, judgment was entered against ASI and in favor of Tofte Cove in the amount of $450,000 together with costs, disbursements, and interest. Based on its conclusion that ASI wrongfully disclaimed coverage to Ankrum and Ermatinger, the district court awarded Tofte Cove attorney fees and expenses allocable to the coverage portion of the litigation. The district court denied ASI’s motion for a new trial, or amended findings of fact and conclusions of law.

Underlying facts

Ermatinger had operated his own drywall business as a sole proprietorship since 1970, sometimes using the business name North Country Drywall. Ankrum also operated his own drywall business as a sole proprietorship. Ermatinger and Ankrum sometimes worked together on projects, but each had his own equipment and tools.

Ermatinger and Ankrum contacted Rys-dahl, Buntz, Inc., the general contractor for the Tofte Cove townhomes, to inquire about drywall work on the project. They learned that a building was being constructed that would contain six three-bedroom townhomes. Because it was a large job, too much for either of them to handle alone, Ermatinger and Ankrum jointly submitted a bid to perform the drywall work

Ermatinger and Ankrum submitted a bid to provide labor to install 1,064 sheets of sheetrock on the townhomes’ walls and ceilings at' a cost of 12c per square foot, with an estimated total cost of $6,130, and to prime all drywall surfaces at a cost of $250 per townhome. Rysdahl provided the materials for the project and paid Erma-tinger and Ankrum in six installments.

Ermatinger and Ankrum agreed to equally divide profits and expenses. Expenses included gas, food, and the cost of laborers to hang sheetrock. They took turns driving to the job site. They agreed to contribute equal time, skill, and labor to the project. They assumed equal responsibility for completing the project, meaning that if one of them left the project, the other would complete it.

Rysdahl accepted Ankrum and Erma-tinger’s bid and presented them with a contract. Ermatinger testified that they were going to use their individual names on the contract but instead used the name Drywall Service because Rysdahl advised them that a business name was required. Ermatinger believed that Rysdahl required a business name for insurance or financing purposes. Ermatinger testified that he and Ankrum did not use the name Drywall Service on other projects. Erma-tinger testified that when he and Ankrum worked together on other projects,

[w]e just worked individually on the jobs. And if we worked any jobs at all, it was either made out in his name or my name as the checks.

In a recorded statement, Ankrum stated that he and Ermatinger used the name Drywall Services when they worked together on other projects and that he never used the name Drywall Services when he worked on projects alone.

The contract states that it is a subcontract between Rysdahl, Buntz & Inc., the contractor, and Drywall Service, Lyle Ank-rum, the subcontractor. Ankrum, Erma-tinger, and Rysdahl all signed the contract. Ermatinger testified that Rysdahl required both him and Ankrum to sign the contract. An addendum to the contract listed both Ankrum and Ermatinger under the name Drywall Service. Dennis Rys-dahl, president of Rysdahl, testified:

As I understood it, it really was a contract between Rysdahl-Buntz Incorporated and [Ankrum] and [Ermatinger], And the Drywall Services I understood to be a trade name, they used for this one venture that wasn’t really an entity. We assumed we were dealing with these two individual guys coming together to cooperate on this project.

Dennis Rysdahl testified that he did not know anything about the .agreement between Ankrum and Ermatinger to divide work, expenses, and profits.

Rysdahl advised Ankrum and Ermatinger that they needed to obtain insurance for the project. Ermatinger testified that he had never previously had to obtain insurance for his business. Ermatinger testified that he went to the Reliable Insurance Agency, through which he obtained his personal insurance, and spoke to one of its employees, Paula Mackai. Ermatinger testified:

I said, I need insurance ’cause I’m going to be doing a project up at Tofte and it’s townhouses or condominiums or something. I don’t recall exactly what I told her it was for, but — so I asked her approximately what kind of insurance I should have and * * * I think we settled on a sum of $600,000.

Ermatinger filled out an insurance application, listing himself after the heading “Insured Name” and North Country Drywall" after the heading “DBA.” Ermatinger indicated on the application that North " Country Drywall was an individual business and that he was the only employee.

ASI issued to Ermatinger an ultra contractor’s policy, a commercial liability policy for small contractors, including sole proprietorships and businesses with only a few employees. The premium is determined based on the type of contractor (e.g., siding, drywall, concrete) and the liability limit and then multiplied by the number of employees insured. Ermatinger paid $204, the premium for one insured, for $600,000 in liability coverage.

Like Ermatinger, Ankrum obtained an ultra contractor’s policy from ASI through Mackai and paid a $204 premium for $600,000 in liability coverage. On his insurance application, Ankrum listed himself after the heading “Insured Name,” left “DBA” blank, and indicated that he was the only employee of an individual business.

Before beginning work on Tofte Cove, Ankrum and Ermatinger hired Dale Johnson and Maze Keyport to hang the sheet-rock. Ermatinger testified that he and Ankrum checked Johnson’s and Keyport’s work and could have required them to fix any mistakes. Johnson and Keyport hung the sheetrock on the first two units. Er-matinger and Ankrum did the follow-up taping and priming work.

After completing their work on the first two units, Johnson and Keyport decided the work was too difficult for the money they were being paid and left the job. Because it was Ankrum’s and Ermatinger’s responsibility under the contract to hire and provide labor to install the sheet-rock and because they did not know any other sheetrockers in the Tofte area, they contacted Rysdahl to find out if he knew any. Rysdahl hired two replacement sheetrockers for a 3$ or 4$ per square foot over the contract price and paid them out of Ankrum’s and Ermatinger’s share of the contract price before paying Ankrum and Ermatinger. Those sheetrockers left the job after completing units three and four. Rysdahl hired a second set of two replacement sheetrockers to hang the sheetrock in units five and six. They were also paid more than the contract price and were paid out of Ermatinger’s and Ankrum’s share.

ISSUES

I. Did the district court err in denying ASI’s motions for summary judgment, a directed verdict, and JNOV on the issue of whether Ankrum and Ermatinger were engaged in a joint venture?

II. Did the district court err in vacating the default judgment?

III. Did the district court err in finding the Miller-Shugart agreements valid?

IV. Did the district court err in awarding attorney fees?

ANALYSIS

I.

An appellate court reviews de novo the denial of a motion for a directed verdict or JNOV. Pouliot v. Fitzsimmons, 582 N.W.2d 221, 224 (Minn.1998) (JNOV); Claflin v. Commercial State Bank, 487 N.W.2d 242, 247 (Minn.App.1992) (directed verdict), review denied (Minn. Aug. 4, 1992).

In reviewing an order denying a directed verdict, an appellate court will consider whether the evidence was sufficient to present a fact question to the jury. Claflin, 487 N.W.2d at 247. A directed verdict will be granted only when,

in light of the evidence as a whole, it would be the duty of the trial court to set aside a contrary verdict as manifestly contrary to the evidence or to the law.

Id. Similarly, JNOV will not be granted if the verdict can be sustained on any reasonable theory of the evidence. Pouliot, 582 N.W.2d at 224. The evidence must be practically conclusive .against the verdict so that reasonable minds can reach only one conclusion. Nadeau v. County of Ramsey, 277 N.W.2d 520, 522 (Minn.1979). The court must view the evidence in the light most favorable to the nonmoving party. Pouliot, 582 N.W.2d at 224 (JNOV); Claflin, 487 N.W.2d at 247 (directed verdict).

ASI also challenges the denial of its summary-judgment motion. See Reinhardt v. Milwaukee Mut. Ins. Co., 524 N.W.2d 531, 533-34 (Minn.App.1994) (“Appeal of a denial of a motion for summary judgment is properly taken from a subsequent judgment.”) (citation omitted), review denied (Minn. Feb. 14, 1995).

On appeal from denial of summary judgment, this court must determine whether any genuine issues of material fact exist and whether the district court erred in applying the law.

Zank v. Larson, 552 N.W.2d 719, 721 (Minn.1996).

Although in some circumstances whether a joint venture exists can be determined as a matter of law, the issue is generally a question for the fact-finder to determine. See Hansen v. St. Paul Metro Treatment Center, Inc., 609 N.W.2d 625, 628 (Minn.App.2000), review denied (Minn. July 25, 2000). The elements of a joint venture are:

(1) contribution, i.e., the parties must combine money, property, time, or skill in some common undertaking; (2) joint proprietorship and control, i.e., a proprietary interest and right of mutual control over the subject matter of the property engaged in the venture; (3) sharing of profits by express or implied agreement; and (4) a contract, express or implied, showing that a joint venture was entered into.

Powell v. Trans Global Tours, Inc., 594 N.W.2d 252, 256 (Minn.App.1999).

A reviewing court may not weigh the evidence or judge the credibility of the witnesses when determining if any competent evidence exists in the record to sustain the jury’s verdict. Conroy v. Book Automation, Inc., 398 N.W.2d 657, 662 (Minn.App.1987). In this case, Ankrum and Ermatinger each owned and operated a drywall business as a sole proprietorship. The record contains evidence that in working on the Tofte Cove project, Ankrum and Ermatinger operated their businesses in the same manner as they would have had each been the only drywall subcontractor on the project. Ankrum and Ermatinger each had his own tools, and each obtained his own insurance policy. They were paid in their individual names. There is no evidence that either one had control over the other’s work. Ermatinger described their relationship as separately working together on the project. See Powell, 594 N.W.2d at 256 (discussing joint control necessary to support a finding of joint venture). The fact that they may have shared employees is not conclusive on the issue of joint control. Hansen, 609 N.W.2d at 629 (Minn.App.2000). Viewing the evidence in the light most favorable to the verdict, as we must, the jury reasonably found that Ankrum and Ermatinger were not engaged in a joint venture. See id. (holding that whether two corporations operating a methadone clinic were engaged in a joint venture was a fact question); Walton v. Fujita Tourist Enterprises Co., Ltd., 380 N.W.2d 198, 202 (Minn.App.1986) (holding that when Northwest Airlines and Pacific Delight, a tour wholesaler, cosponsored trips, whether they were engaged in a joint enterprise was a fact question), review denied (Minn. Mar. 21, 1986).

ASI argues that the existence of a joint venture should not have been submitted to the jury but rather decided by the court in a bench trial. The record shows that just before the trial began, ASI expressly agreed that the issue of whether Ankrum and Ermatinger were engaged in a joint venture should be submitted to the jury. Having acquiesced in submitting the issue to the jury, ASI cannot object to it on appeal.'

II.

A court may grant relief from a final judgment, order, or proceeding for certain enumerated reasons such as mistake, inadvertence, surprise, excusable neglect, or any other reason justifying relief. Minn. R. Civ. P. 60.02(a), (f). In considering whether to grant relief from a default judgment under rule 60.02, courts require the party seeking relief to demonstrate that: (1) it has a reasonable defense on the merits of the case; (2) it has a reasonable excuse for its failure to act; (3) it acted with due diligence after the notice of entry of the default judgment; and (4) the opposing party will not be substantially prejudiced if the motion to vacate the default judgment is granted. Nguyen v. State Farm Mut. Auto. Ins. Co., 558 N.W.2d 487, 490 (Minn.1997). All four factors must be met to justify granting relief under rule 60.02. Nguyen, 558 N.W.2d at 490.

In reviewing orders concerning intervention as of right under Minn. R. Civ. P. 24.01, this court will independently assess the appropriateness of the order * * *. We are not held to a standard of review requiring a clear abuse of discretion before we may reverse a trial court’s denial of a motion to intervene as a matter of right.
Rule 24.01 establishes a four-part test that a nonparty must meet before being allowed to intervene as a matter of right: (1) a timely application for intervention; (2) an interest relating to the property or transaction which is the subject of the action; (3) circumstances demonstrating that the disposition of the action may as a practical matter impair or impede the party’s ability to protect that interest; and (4) a showing that the party is not adequately represented by the existing parties.

Erickson v. Bennett, 409 N.W.2d 884, 886 (Minn.App.1987) (citation omitted).

In granting the motion to intervene and vacate the default judgment, the district court stated:

Given the circumstances that precede Tofte’s motion, the Court considers its application for relief to have been timely. Contrary to the position of [ASI], the Court finds that Tofte clearly had an interest relating to the property or transaction that is the subject of the original action. Specifically, this Court finds such an interest in Tofte’s claim that it would have been entitled to payment for damages caused by [ASI’s] insured under the policy that has been the subject of the original dispute. * * * Within contemplation of Chapter 555 of the Minnesota Statutes, the Court therefore regards Tofte the as an interested party and one which should have been named in the first instance in [ASI’s] declaratory judgment proceeding.
Tofte seeks recovery of substantial sums of money from [ASI’s] insured and the likelihood of any recovery would be significantly adversely impacted should there not be coverage under [ASI’s] policy. Before these proceedings, Tofte had no opportunity to protect its interest in proceeds of the policy in the context of the dispute between [ASI] and Defendants in the underlying action.
The fourth test under Erickson, is the extent that the party seeking to intervene is not adequately represented by the current parties. The Court finds this to be demonstrated by the fact that [ASI’s] insured permitted a default judgment to be taken. •* * * Tofte further notes that it has been unable, prior to the date of the hearing on its application to intervene herein, to obtain from [ASI] a copy of the policy that is the subject of [ASI’s] action. As such, Tofte has been at a disadvantage in attempting .to more specifically indicate the grounds upon which it may believe coverage exists. The Court does not find it reasonable to require Tofte to make a detailed showing of the existence of the grounds of recovery on its behalf to support intervention herein under the circumstances. Conversely, permitting intervention'and a reopening of the underlying proceeding as between [ASI] and Tofte as as-signee of [ASI’s] insured will provide an avenue for discovery to be undertaken and the claim to be analyzed. Without a great deal of expense or effort the parties should be able to refine the issues and present any appropriate motions to dismiss or for summary judgment if the facts may warrant such.
Both parties recognize default judgments'are not favored in the law. The Court has reviewed the affidavits of the parties and concludes that' under the circumstances, Tofte’s application for a vacation of the default judgment is timely. It was only through happenstance that Tofte became aware the- default judgment had been entered in this matter. Tofte contacted [ASI’s] attorney, within a' reasonable' time thereafter, to resolve the issues arising from this discovery. Tofte’s representative contacted [ASI’s] attorney and expected to hear back concerning contacts [ASI’s] counsel was to have made with his principal. Due to the manner in which communications unfolded, counsel for Tofte was left in limbo — expecting to have some response but receiving none.- After it became clear [ASI’s] response was not forthcoming, Tofte, reasonably promptly, commenced these proceedings.
Thus far there has been no decision on the merits as to the question of the existence of coverage. [ASI] is not prejudiced by requiring it to litigate the claim- which it itself sought to litigate by commencing its original declaratory judgment action.

We agree with the district court’s well-reasoned analysis. ASI argues that Ank-rum and Ermatinger did not act with due diligence after notice of the entry of the default judgment and offered no reasonable excuse for their failure to answer. But the authorities cited by ASI do not show that it is Ankrum’s and Ermatinger’s conduct that is relevant rather than Tofte Cove’s. The evidence supports the district court’s findings on the timeliness of Tofte Cove’s motions to intervene and vacate the default judgment. See Erickson, 409 N.W.2d at 887-88 (upholding district court’s decision allowing insurer to intervene and vacating default judgment when insurer received a copy of the summons and complaint in personal-injury action but was not advised of lawsuit’s progress until it received a phone call about a default hearing scheduled for four days later).

ASI argues that it was substantially prejudiced by vacation of the default judgment because it withdrew from representation of Ankrum and Ermatinger in reliance on the default judgment, and, af-terwards, the Miller-Shugart agreements were executed. ASI cites Imperial Premium Finance, Inc. v. GK Cab Co. Inc., 603 N.W.2d 853 (Minn.App.2000), to support its position on prejudice. Imperial Premium is distinguishable from this case because the party seeking to vacate the default judgment had been served with the summons and complaint. Steen v. Those Underwriters at Lloyds, 442 N.W.2d 158 (Minn.App.1989), is also factually distinguishable because in Steen, the insured unilaterally fired the defense attorney provided by its insurer. Regarding the Miller-Shugart agreements, ASI had the opportunity to argue that they are invalid.

III.
While the defendant insureds have a duty to cooperate with the insurer, they also have a right to protect themselves against plaintiffs claim. * * * If * ⅜ * the insureds are offered a settlement that effectively relieves them of any personal liability, at a time when their insurance coverage is in doubt, surely it cannot be said that it is not in their best interest to accept the offer. Nor, do we think, can the insurer who is disputing coverage compel the insureds to forego a settlement that is in their best interests.

Miller v. Shugart, 316 N.W.2d 729, 733-34 (Minn.1982).

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 prudent person in the position of the defendant would have settled for on the merits of plaintiffs claim. This involves a consideration of the facts bearing on the liability and damage aspects of plaintiffs claim, as well as the risks of going to trial. This can be compared with the somewhat analogous situation in which a joint tortfeasor seeking consideration from a co-tort-feasor must prove the settlement made was reasonable.

Id. at 735.

In this case, the district court found:

Even absent a general rule regarding who must bear the risk, * * * special factors here render it appropriate that ASI bear it. Among them * * ⅞ are: 1) the failure to sue on both policies; 2) the failure to name [Tofte Cove] as a party; 3) the preclusion and lack of any decision of the coverage issue on the merits; 4) the failure to advise the insureds of the nature and importance of the coverage litigation; 5) the failure to serve the insureds with the default motion; 6) the failure to give its insureds notice of the default hearing; 7) the failure to notify [Tofte Cove] of the pendency of the coverage action; 8) the failure to notify [Tofte Cove] its insureds had not answered; 9) the failure to notify [Tofte Cove] of the intent to apply for a default; 10) the failure to notify [Tofte Cove] of the default hearing; 11) the failure, from the record before the Court, to serve notice of filing of the order on the default motion upon [Ank-rum] or [Ermatinger]; 12) ignoring the notice by its designated counsel in the underlying action of the questionable validity of the default order in connection with its decision to have him withdraw defense of [Ankrum] and [Ermatinger] therein; 13) and choosing to take no remedial action in the face of [Tofte Cove’s] advice, received before the releases were executed, that ASI’s procedure was flawed.

The district court also found that coverage was in doubt because the time to move for vacation of the default judgment had not expired.

The evidence supports the district court’s findings that the Miller-Shugart agreements were reasonable and prudent and not the product of collusion. We particularly note ASI’s failure to reference Ermatinger’s policy in the declaratory judgment action, which left Ermatinger essentially “hung out to dry.” He had no adequate notice that ASI sought to avoid providing coveragé under his policy.

IY.

In Morrison v. Swenson, 274 Minn. 127, 137-38, 142 N.W.2d 640, 647 (1966), the supreme court created a limited exception to the general rule that legal fees are ordinarily not recoverable absent contractual or statutory authority for the award. The court limited its holding to situations in which an insured incurs legal fees in a declaratory-judgment action instituted to compel an insurer to defend a case where the insurer wrongfully refused to defend the insured in the underlying litigation. Id. at 138, 142 N.W.2d at 647. Noting that a declaratory-judgment action to determine coverage is “in the nature of an action to recover damages for breach of contract,” the court explained

that the injured party in an action of this kind ought to be permitted to recover whatever expenses he has been compelled to incur in asserting his rights, as a direct loss incident to the breach of contract. •

Id. at 138, 142 N.W.2d at 647; see also Am. Standard Ins. Co. v. Le, 551 N.W.2d 923, 926 (Minn.1996) (reiterating that an insured is not entitled to recover attorney fees incurred in maintaining or defending a declaratory action to determine coverage unless the insurer has breached the insurance contract in some respect, typically by wrongfully refusing to defend the insured).

Thus, when an insurer retains an attorney to defend its insured in the underlying litigation, and at the same time brings a declaratory-judgment action to determine coverage, the insured is not entitled to attorney fees incurred to defend the declaratory-judgment action. Le, 551 N.W.2d at 928. Under Le, an insurer may contest coverage in a separate action and not be liable for its insured’s attorney fees in that action:

If an insurer faithfully fulfills its duty to defend its insured and also brings a declaratory judgment action to determine insurance coverage, then there will be no breach of the duty to defend [and] the insured is not entitled to attorneys’ fees and costs for the declaratory judgment action to determine coverage. Attorneys’ fees and costs are only awarded for the declaratory judgment action if there was a breach of the duty to defend in the underlying action.

Chicago Title Ins. Co. v. FDIC, 172 F.3d 601, 605 (8th Cir.1999).

In this case, Ankrum and Erma-tinger tendered defense of the Tofte Cove litigation to ASI, and ASI retained an attorney to defend them in that litigation. In April 1997, the attorney filed an answer and cross-claim on behalf of Ankrum and Ermatinger. In July 1997, believing that Ankrum and Ermatinger were not covered by their respective policies because it suspected that they had been engaged in a joint venture, ASI commenced a declaratory-judgment action to determine coverage. ASI did not instruct the attorney to withdraw from representing Ankrum and Er-matinger until after entry of the default judgment and district court order determining that ASI did not owe a duty to defend or indemnify Ankrum and Erma-tinger in the Tofte Cove litigation.

Therefore, the district court erred in finding that ASI breached the insurance contract by 'wrongfully refusing to defend Ankrum and Ermatinger. ASI properly relied on the default judgment and accompanying order determining that it did not owe a defense or coverage to Ankrum and Ermatinger. Therefore, Ankrum and Er-matinger would not have been entitled to attorney fees in the declaratory-judgment action. Accordingly, the district court erred in awarding attorney fees to Tofte Cove, Ankrum’s and Ermatinger’s assign-ee under the Miller-Shugart agreements.

Respondents moved to strike from the record on appeal a mediation statement and a recorded statement of Ankrum. The record on appeal “shall consist of the papers filed in the trial court, the exhibits, and the transcript of the proceedings, if any.” Minn. R. Civ.App. P. 110.01. Respondents correctly assert that Ankrum’s statement was not admitted into evidence at trial and that details of a mediation session are not admissible evidence. But Ankrum’s statement, the fact that a mediation occurred, and the mediation statement were part of the district court record. We deny respondents’ motion to strike.

DECISION

The evidence supports the jury’s finding that Ankrum and Ermatinger were not engaged in a joint venture; therefore, the district court properly denied ASI’s motions for summary judgment, a directed verdict, and JNOV. The district court did not err in granting Tofte Cove’s motion to intervene and vacate the default judgment or in finding that the Miller-Shugart agreements were reasonable and prudent and not the product of collusion. The district court erred in awarding Tofte Cove attorney fees.

Affirmed in part and reversed in part; motion denied.

      . Ankrum died in 2000, so there is no trial or deposition testimony by him.


source: Caselaw Access Project

author: STONEBURNER, Judge.

license: Public Domain

text:
    James Harvey ZASKE, a minor by Cathy Bratsch, his mother and natural Guardian and Cathy Bratsch, Respondents, v. Richard David LEE, Respondent, Robert Thomas Huro, Respondent, County of Kanabec, State of Minnesota, Appellant, Integrity Mutual Insurance Company, Respondent, and Western National Mutual Insurance Company, Respondent.
    No. C3-02-454.
    Court of Appeals of Minnesota.
    Oct. 1, 2002.

      L. Michael Hall, Francis E. Stephens, L. Michael Hall, P.A., St. Cloud, MN, for respondent Zaske.
    Thomas P. Carlson, Jennifer J. Duchscherer, Carlson & Soldo, P.L.L.P., St. Paul, MN, for appellant Kanabec County.
    Keith 0. Johnson, Wold, Jacobs & Johnson, P.A., Minneapolis, MN; and Michael J. Tomsche, Tomsche, Sonnesyn & Tomsche, P.A., Golden Valley, MN, for respondent Richard Lee.
    Clyde Miller, Jennings, DeWan, Miller & Anderson, P.A., Cambridge, MN; and Len Schweich, Askegaard, Robinson & Schweieh, P.A., Brainerd, MN, for defendant Robert Huro.
    Frank J. Rajkowski, Rajkowski, Han-smeier Ltd., St. Cloud, MN, for defendant Integrity Mutual Insurance Company.
    John Varpness, Edina, MN, for defendant Western National Mutual Insurance Company.
    Considered and decided by WILLIS, Presiding Judge, STONEBURNER, Judge, and KALITOWSKI, Judge.

       The Honorable Daniel F. Foley, one of the founding members of this court, who continued to serve by appointment order from the supreme court after his retirement, fully participated in the consideration of this appeal. Due to Judge Foley’s untimely death before the filing of the opinion, Judge Kalitowski has been assigned as a substitute, and now joins the panel in issuing this decision.

   OPINION

STONEBURNER, Judge.

Appellant county challenges the district court’s denial of its motion for summary judgment in which the county argued that statutory and vicarious official immunity protect it from liability for an accident allegedly caused by its failure to replace a stop sign that was knocked down four days before the accident. Because the evidence does not present a genuine issue of material fact about whether appellant had actual notice of the missing sign and because constructive notice constitutes a challenge to the county’s discretionary conduct, we reverse.

FACTS

On Thanksgiving Day, November 25, 1999, an unidentified driver hit the stop sign that controlled westbound traffic on Kanabec County Road 18, where it intersected with Kanabec County Road 11. The driver used a hacksaw to cut the signpost at its base to free his vehicle, which had gotten hung up on the sign. The driver laid the sign in the grassy ditch where it was not visible to motorists. Although several people stopped to help the driver free his vehicle from the signpost, no one reported the damage to the stop sign to appellant Kanabec County.

Respondent James H. Zaske, a minor and passenger in respondent Richard D. Lee’s vehicle, was injured in an early-morning collision at the intersection of County Roads 18 and 11, on Monday, November 29, 1999. The county, which had not detected the missing stop sign until this second accident occurred, replaced the stop sign immediately after this accident. Respondent Zaske sued the county for its alleged negligence in failing to detect and replace the missing stop sign.

The county encompasses more than 524 square miles and has more than 845 miles of state, county, and township roads. The county is responsible for the installation, maintenance, and repair of approximately 3,500 road signs throughout the county. There is an unwritten but acknowledged policy and practice for reporting and repairing defective or dangerous road conditions, including damaged traffic-control devices, that requires all county highway department employees and sheriffs deputies to look for and immediately report any dangerous or defective road conditions. All department vehicles have radio equipment that can be used to report such conditions, and the sheriffs dispatcher notifies the highway department of any reports it receives. If the department is closed at the time of the report, the county engineer or maintenance foreperson is immediately notified and steps are taken to correct the condition. The policy and procedures have been approved by the county engineer, based on safety, personnel, and budget considerations and, according to the engineer, are consistent with most other Minnesota counties’ policies.

It is undisputed that there is no evidence that the county had actual knowledge that the sign was missing before the November 29 accident occurred. Because of the Thanksgiving holiday, sheriffs deputies and dispatch personnel were the only county employees on duty during the period between when the stop sign was cut down and when the November 29 accident occurred. A maximum of two deputies were on duty during each work shift over this period. All other county offices were closed. The highway department’s maintenance foreperson did not receive a report that the sign was knocked down until after the accident occurred on November 29. The sheriffs department documents all the reports it receives with respect to traffic-control devices, and the chief deputy’s affidavit states that he reviewed the documents and the department did not receive a report concerning the sign. The chief deputy also reviewed the department’s radio logs and incident reports, and the patrol logs maintained by the deputies on duty, and none of these indicates that any deputy traveled through the intersection between November 25 and November 29, 1999. Also, the six deputies who worked during this period submitted affidavits. Two are certain they did not travel through this intersection at all during this period. Four do not believe they traveled through the intersection at all during this period and are certain that they did not travel westbound on County Road 18 through the intersection during this period.

The county, moved for summary judgment, arguing that it cannot be liable for a dangerous or defective condition of which it had no notice and that, to the extent the claims against the county challenge the policy and procedures for identifying, reporting, and repairing downed signs or other road hazards, the claims are barred by statutory and vicarious official immunity. The district court denied the county’s motion for summary judgment, stating only that it found that “there are genuine issues of material facts with regards to Kanabec County * * *.” The parties agree that constructive notice is the only possible question of fact. The county argues that submitting the issue of construe-tive notice to a jury under the facts of this case is equivalent to challenging the county’s policy and procedure for detecting and repairing traffic-control devices, which is protected by statutory and vicarious official immunity.

ISSUE

Did the district court err by denying appellant’s summary-judgment motion on the basis a genuine issue of material fact precludes a determination that appellant is immune from claims that challenge its policy and procedure for detecting and repairing traffic-control devices?

ANALYSIS

In reviewing summary-judgment appeals, we must determine “whether there are genuine issues of material fact and whether the district court erred in applying the law.” Gleason v. Metro. Council Transit Operations, 582 N.W.2d 216, 218-19 (Minn.1998). Whether immunity applies is a legal question, reviewed de novo. Id. at 219. The party asserting an immunity defense has the burden of demonstrating facts that show it is entitled to immunity. Gerber v. Neveaux, 578 N.W.2d 399, 402 (Minn.App.1998), review denied (Minn. July 16, 1998). In reviewing a denial of summary judgment based on an immunity claim, we presume the truth of the facts alleged by the nonmov-ing party. Burns v. State, 570 N.W.2d 17, 19 (Minn.App.1997).

Under the Minnesota tort-claims act, a county can be liable for the torts of its officers, agents, and employees. Minn. Stat. § 466.02 (2000); see Minn.Stat. § 466.01, subd. 1 (2000) (including counties in definition of municipalities). The statute, however, provides a number of exceptions. Minn.Stat. § 466.03 (2000); Angell v. Hennepin County Reg'l Rail Auth., 578 N.W.2d 343, 346 (Minn.1998).

In one such exception, the county is immune from liability for claims arising from its performance of or failure to perform a discretionary act, regardless of whether it abused its discretion. Minn. Stat. § 466.03, subd. 6 (2000). A county’s conduct is protected by statutory immunity only when the county meets its burden of showing that its conduct was of a policy-making nature, such as that involving a balancing of social, political, or economic considerations. Nusbaum v. County of Blue Earth, 422 N.W.2d 713, 722 (Minn.1988); Christensen v. Mower County, 587 N.W.2d 305, 307 (Minn.App.1998). In contrast, operational-level decisions, which involve the ordinary, day-to-day operations of the government, do not receive immunity. Holmquist v. State, 425 N.W.2d 230, 232 (Minn.1988).

The first step in analyzing a claim of immunity is to ascertain exactly what governmental conduct is being challenged. Watson by Hanson v. Metro. Transit Comm’n, 553 N.W.2d 406, 411 (Minn.1996); Steinke v. City of Andover, 525 N.W.2d 173, 175 (Minn.1994). In this case, respondents do not dispute that the county’s policy and procedure for detecting problems with traffic signs is protected by discretionary immunity. Instead, respondents argue that they are challenging the deputies’ or highway department employees’ failure to detect and replace the missing sign. They agree that there is no evidence of actual notice but contend that the county had constructive notice of the missing sign. Respondents rely of the following facts to support their argument:

1. The stop sign was down for a period of four days.
2. Six deputies, two for each shift, were on duty between November 25 and November 29. Deputy Steven Schulz testified in his deposition that, although the percentage of time on the road versus in the office varied by individual officer, “I would say across the board total, you’re probably looking at 60 percent- on the road and 40 percent in the office, somewhere in there.” The same deputy opined in his deposition that the deputies averaged 125 miles on the roads per shift.
3. County Road 11 is one of the most heavily traveled roads in Kanabec County.
4. The intersection involved is between three and four miles from the county highway-department offices, “about” the same distance from the sheriffs department and, depending on the route taken, only three to four miles from downtown Mora.
5. The person responsible for maintaining the county’s traffic signs admitted in his deposition that a stop sign down for a period of four days constitutes a hazard.
6. One highway-department employee lives only three-quarters of a mile from the intersection.
7. - The county engineer is not aware of another situation where a. stop sign had been down for as long as four days.
8. Citizens had noticed the problem with the stop sign before the November 29 accident.

Respondents contend that failure to replace the stop sign under these circumstances violates a duty that is “absolute, certain and imperative” operational conduct not involving any use of an employee’s judgment or discretion and not protected by discretionary immunity.

The county concedes that if there were any evidence that the county had actual knowledge of the missing sign before the November 29 accident, replacement of the sign would involve an operational-level decision not entitled to discretionary immunity. But there is no evidence of actual knowledge. The county asserts that imputation of knowledge through constructive notice in this ease is equivalent to challenging the county’s policy for inspecting the roads for defective traffic-control devices.

In analyzing this issue, we first set out the definition of constructive notice:

“[Cjonstructive notice” is, in point of fact, neither notice nor knowledge, and * * * “[t]he term ‘constructive’ is the mere trademark of a fiction” resorted to for the promotion of sound policy under certain circumstances by treating legal rights and interests of parties as though they had actual notice or knowledge.

Indus. Loan & Thrift Corp. v. Swanson, 223 Minn. 346, 351-52, 26 N.W.2d 625, 629 (1947) (emphasis added) (citation omitted).

The county relies on law-enforcement and highway department employees to watch for and report ■traffic-device problems encountered, and does not have an inspection schedule or inspection route. Imputation of notice to the county is an assertion that a county employee with reporting responsibilities should have inspected this intersection during the holiday period involved. Such an assertion is a direct attack of the county’s conduct in formulating its policy to detect problems with traffic-control devices in the county. We agree with the county that imputing knowledge to the county through constructive notice, under these facts, is a direct challenge to the county’s policy for discovering problems with traffic-control devices.

We also agree that the policy is entitled to statutory immunity under Minn. Stat. § 466.03, subd. 6, because it involved a balancing of budgetary, safety, and personnel considerations. Respondents assert that a jury could readily infer from the circumstantial evidence that a patrol officer (or county highway employee) drove by the downed sign without discovering its condition and requesting replacement, constituting negligence at the operational level. We disagree. While a jury may rely on circumstantial evidence so long as the inferencés are reasonably justified by the proof in the case, a jury may not rely on speculation or conjecture. Illinois Farmers Ins. Co. v. Brekke Fireplace Shoppe, Inc., 495 N.W.2d 216, 220-21 (Minn.App.1993). The inference respondents argue is not reasonably justified by the evidence and would call for the jury to engage in speculation and conjecture. Respondents’ challenge is to the county’s policy, of detection, for which the county is protected by statutory discretionary immunity. Because we have determined that the detection policy is entitled to statutory discretionary immunity, we decline to address the county’s alternative arguments that it is immune by operation of either Minn.Stat. § 466.03, subd. 5 (2000), or vicarious official immunity.

DECISION

The county is immune by operation of statutory discretionary immunity from liability based on its policy for detecting problems with traffic signs. The evidence is insufficient to create a genuine issue of material fact about whether a county employee with a duty to detect the missing stop sign drove through the intersection and failed to detect or report the missing sign. The district court erred by denying the county’s summary-judgment motion.

Reversed.

      . Deputy Schultz’s estimates were not limited to what occurred during the holiday period in question or any holiday period.


author: LANSING, Judge.

text:
    MINNESOTANS FOR RESPONSIBLE RECREATION, Respondent, v. DEPARTMENT OF NATURAL RESOURCES, Appellant (CX-02-404) Defendant (C8-02-420) Respondent (C5-02-441), All Terrain Vehicle Association of Minnesota, Defendant (CX-02-404, C8-02-420) Appellant (C5-02-441), Minnesota 4-Wheel Drive Association, Intervenor-Defendant, Appellant (C8-02-420).
    Nos. CX-02-404, C8-02-420, C5-02-441.
    Court of Appeals of Minnesota.
    Oct. 1, 2002.

      James P. Peters, Kama M. Peters, Peters & Peters, PLC, Glenwood, MN, for respondent.
    Mike Hatch, Attorney General, David P. Iverson, Joan Marie Eichhorst, Stephen B. Masten, Assistant Attorneys General, St. Paul, MN, for appellant, Dep’t of Natural Resources.
    Eric J. Magnuson, Patrick D. Robben, John R. Neve, Rider, Bennett, Egan <& Arundel, LLP, Minneapolis, MN, for appellant, All-Terrain Vehicle Ass’n of Minn.
    Cory J. Ayling, Douglas J. Franzen, McGrann Shea Anderson Carnival Straughn & Lamb, Chartered, Minneapolis, MN, for appellant Minnesota 4-Wheel Drive Association.

      Considered and decided by LANSING, Presiding Judge, RANDALL, Judge, and KLAPHAKE, Judge.
   OPINION

LANSING, Judge.

In a declaratory-relief action, the district court granted summary judgment for Minnesotans for Responsible Recreation (MRR) and ordered the Minnesota Department of Natural Resources (DNR) to complete environmental assessment worksheets (EAWs) on four off-highway vehicle (OHV) system plans developed by the DNR. The DNR and the two intervenors, the All Terrain Vehicle Association of Minnesota (ATVAM) and the Minnesota 4-Wheel Drive Association (M4WDA), argue on appeal that the system plans are not projects as defined by Minn. R. 4410.0200, subp. 65 (2001), and therefore are not subject to environmental review. We conclude that although the system plans themselves are not projects, eight individual trails identified in the affidavits attached to the petitions and discussed in the system plans are definite, site-specific actions that contemplate on-the-ground environmental changes and therefore constitute projects subject to environmental review. We affirm in part and reverse in part.

FACTS

MRR is a non-profit organization with the declared purpose to “advocate for the restoration, protection, and preservation of peace and quiet and a healthy environment on Minnesota’s trails and waterways for future generations.” ATVAM is a nonprofit corporation with the stated purpose of protecting “its interest in the successful and timely implementation of OHV trail systems.” M4WDA is a nonprofit organization that has a stated purpose “to promote responsible, safe, and enjoyable use of 4-wheel drive vehicles.” The DNR is the state administrative agency charged with protecting and managing Minnesota’s natural resources.

In June 2000, the DNR made available for review by the public four system plans for potential OHV trails in the forests of several Minnesota counties. The four plans were divided into one single and three aggregated county units: (1) Atkin; (2) Pine and Southern Carlton; (3) Wade-na, Southern Cass, and Crow Wing; and (4) Kanabec and Mille Lacs. Each system plan addressed several potential trails, extensions of existing trails, and connections of existing trails for off-road vehicles (ORV), all-terrain vehicles (ATV), and off-highway motorcycles (OHM). More than thirty potential trails, connections, and extensions were identified in the four plans. None of the system plans contained a detailed assessment of the potential environmental impact of developing the trails, extensions, or connections.

The system plans also proposed continuing a DNR-initiated, rule-based forest classification system that had been implemented on an interim basis in 1998 and made permanent in 2000. See Minn. R. 6100.1950 (2001). This forest classification system categorized all state forests as managed, limited, or closed, designating the degree to which motorized vehicle use is permitted on state forest roads and trails. Minn. R. 6100.1950, subps. 1, 2.

After the system plans were made available for public review, MRR filed four petitions under Minn.Stat. § 116D.04, subd. 2a(c) (2000) with the Minnesota Environmental Quality Board (EQB), requesting that the DNR complete EAWs for each of the system plans. An EAW is a brief document setting out “the basic facts necessary to determine” if further, more detailed environmental review is required for a proposed action. Minn.Stat. § 116D.04, subd. 1(c) (2000).

In its petitions, MRR stated that the OHV planning process detailed in the system plans had the potential for significant negative effects to soil, water, and air, and that all four system plans formed part of a “connected action” with numerous other plans for OHV use being developed around the state. MRR attached to its petitions the affidavits of an environmental scientist and a professor emeritus of fisheries and stream ecology at the University of Minnesota, who together identified nine trails, extensions, and connections that posed significant risks of adverse environmental effects. These nine trails and connections are: (1) the connection of the Yellow Birch to the Willard Munger and Gandy Dancer trails; (2) the connection of the Continental Divide trail to the Willard Munger and Gandy Dancer trails; (3) the development of the Chengwatana trail; (4) changes in the permitted use of the Willard Munger trail; (5) the development of the Snake River trail; (6) the development of the Woodland ORV trail; (7) changes in the permitted use of the Moose River trail; (8) the development of the Spider Lake trail; and (9) the development of a loop trail connecting to the Crosby trail.'

The EQB designated the DNR as the governmental unit responsible for determining if environmental review was warranted. The DNR issued four records of decision in which it concluded that because the system plans were not yet sufficiently developed to constitute projects as defined by Minnesota rules, no environmental review was required. The DNR stated that the system plans lacked site-level planning and imminent implementation, both of which are prerequisites to effective environmental review. The DNR indicated that it would keep on file for one year the petitions for Pine and Southern Carlton; Kanabec and Mille Lacs; and Wadena, Southern Cass, and Crow Wing counties and reactivate them in the event that a project is proposed that is identified in, or similar to, the projects identified in the petitions. See Minn. R. 4410.1100, subp. 9, .3100, subp. 1(A) (2001). The DNR also concluded that the Spider Lake trail in the Wadena, Southern Cass, and Crow Wing plan was substantially complete and consequently qualified for an exemption from environmental review under Minn.Stat. § 116D.04, subd. 2a(c).

MRR filed complaints in Aitkin, Cass, Crow Wing, Kanabec, and Pine counties challenging the DNR’s denial of its petitions for environmental review and seeking declaratory and injunctive relief ordering the DNR to complete EAWs for all four system plans. The Minnesota Supreme Court ordered that the five actions be consolidated and venued in one court; the Cass County district court subsequently granted MRR and the DNR’s joint motion for consolidation of the five complaints and venued the action in Cass County district court.

Within six weeks after the consolidation, ATVAM and M4WDA filed notices of intervention and answers in intervention to the consolidated lawsuit.

In August and September 2001, all four parties filed motions for summary judgment. The district court granted MRR’s motion for summary judgment and denied the DNR and ATVAM’s motions for summary judgment. The district court ordered the DNR to complete EAWs for all four of the system plans. In the memorandum accompanying the order, the district court noted that the affidavits in support of the petitions for environmental review were sufficient to show that the system plans may have the potential for significant environmental effects, that some of the proposed trails identified in the system plans were capable of implementation by a mere change in designation, and that physical manipulation of the land at any time could lead to implementation of the system plans. The court specifically addressed the Spider Lake project identified in the Wadena, Southern Cass, and Crow Wing plan, noting that although the project was substantially complete within the meaning of Minn. Stat. § 116D.04, subd. 2a(c), environmental review could still influence the remaining implementation or construction and was consequently warranted.

The DNR, ATVAM, and M4WDA all filed notices of appeal, and we have consolidated the cases for purposes of review.

ISSUES

Are the four DNR OHV system plans “projects” for purposes of the Minnesota Environmental Protection Act and consequently subject to the requirement that an EAW be prepared when at least twenty-five petitioners demonstrate a potential for significant environmental effects because of the nature or location of a project?

ANALYSIS

On appeal from summary judgment, we determine whether there exist genuine issues of material fact that preclude summary judgment and whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.1990). The interpretation of statutes and rules and the application of statutes and rules to undisputed facts are both questions of law that we review de novo. Brookfield Trade Ctr., Inc., v. County of Ramsey, 584 N.W.2d 390, 393 (Minn.1998); Reserve Mining Co. v. Herbst, 256 N.W.2d 808, 824 (Minn.1977).

Under the Minnesota Environmental Protection Act,

[a]n environmental assessment worksheet shall * * * be prepared for a proposed action whenever material evidence accompanying a petition by not less than 25 individuals, submitted before the proposed project has received final approval by the appropriate governmental units, demonstrates that, because of the nature or location of a proposed action, there may be potential for significant environmental effects.

Minn.Stat. § 116D.04, subd. 2a(c) (2000); Minn. R. 4410.1100, subp. 1 (2001) (referring to the same process). Minnesota rule 4410.0200, subpart 65 (2001), defines “project” as “a governmental action, the results of which would cause physical manipulation of the environment, directly or indirectly.”

The rules established by the EQB provide that a petition requesting an EAW must include a description of the project; a description of the potential environmental effects of the project; and material evidence demonstrating that, because of the nature or location of the project, there may be potential for significant environmental effects. Minn. R. 4410.1100, subps. 1, 2 (2001). If the evidence presented by the petitioners demonstrates that the proposed project may have the potential for significant environmental effects, then the responsible governmental unit “shall order the preparation of an EAW.” Minn. R. 4410.1100, subp. 6 (2001). The responsible governmental unit’s decision to order or to refrain from ordering the preparation of an EAW “may be reviewed by a declaratory judgment action in the district court.” Minn.Stat. § 116D.04, subd. 10 (2000); see also Pope County Mothers v. Minnesota Pollution Control Agency, 594 N.W.2d 233, 239 (Minn.App.1999) (affirming district court’s order requiring MPCA to complete environmental review despite MPCA’s decision that environmental review was not necessary).

On appeal, MRR and the DNR, AT-VAM, and M4WDA argue the significance of differing aspects of the definition of “project.” MRR argues that the district court was correct .when it held that environmental review was required for the four system plans because the implementation of the plans could result in the physical manipulation of the environment. The DNR, ATVAM, and M4WDA, on the other hand, argue that the district court erred in determining that the system plans are “projects” because there has not been sufficient governmental action within1 the scope of Minn. R. 4410.0200, subp. 65.

The district court was asked to resolve these competing contentions by applying statutes and rules that create a somewhat circular definition of “project.” The rules define “project” as “a governmental action, the results of which would cause physical manipulation of the environment, directly or indirectly” and provide that when determining whether an EAW should be prepared, the reviewing agency must look to “the physical activity to be undertaken and not to the governmental process of approving the project.” Minn. R. 4410.0200, subp. 65 (emphasis added). Minnesota statutes define “governmental action” for the purpose of environmental review determinations as “activities, including projects wholly or partially conducted, permitted, assisted, financed, regulated, or approved by units of government.” Minn.Stat. § 116D.04, subd. la(d) (2000) (emphasis added). Despite the circularity, both definitions imply that an “action” or “activity” — something more than just planning — -is required before a governmental action or project may be found to exist. See Minn.Stat. § 116D.04, subd. la(d) (using the term “activities”); Minn. R. 4410.0200, subp. 65 (mandating that reviewing agency look to “activity” to be undertaken). Consistent with this approach, the rule governing the contents of the petition requesting environmental review requires site-specific information, including the nature and location of the project. Minn. R. 4410.1100, subps. .1, 2.

The decisions of the federal courts, addressing ripeness and standing issues in challenges to federal environmental policies and plans, provide some guidance on what constitutes a project that is sufficiently advanced to be subject to environmental review. The United States Supreme Court, in holding that the action brought by environmental groups challenging a land resource management plan for a national forest was not yet ripe for judicial review, emphasized that “site-specific action” or “site-specific proposals” are prerequisites to judicial review. Ohio Forestry Ass’n v. Sierra Club, 523 U.S. 726, 735, 118 S.Ct. 1665, 1671, 140 L.Ed.2d 921 (1998). The court cautioned that review was only proper when “the consequences had been ‘reduced to more manageable proportions’ and where the ‘factual components [were] fleshed out, by some concrete action.’ ” Id. at 736-37, 118 S.Ct. at 1672 (quotation and citation omitted). The court noted that further factual development would significantly advance its ability to deal with- the legal issues presented. Id.

The Eighth Circuit has also provided guidance about when review of a forest plan is appropriate, noting that the plan must dictate a “particular site-specific action causing environmental injury” and must “effectuate on-the-ground environmental changes” before judicial review is appropriate. Sierra Club v. Robertson, 28 F.3d 753, 758 (8th Cir.1994) (holding that environmental groups did not show any current injury and therefore lacked standing to challenge a land and resource management plan for a- national forest); see also Wyo. Outdoor Council v. United States Forest Serv., 165 F.3d 43, 48-49 (C.A.D.C.1999) (noting that because there was not an “irreversible and irretrievable commitment of resources,” environmental organization’s challenge to the procedure for allocating oil and gas leases in forest was not ripe for judicial review).

Relying on the applicable language of Minnesota rules and statutes and the instructive analysis of related issues in federal court decisions, we hold that a “project” for purposes of the Minnesota Environmental Protection Act is a definite, site-specific, action that contemplates on-the-ground environmental changes, including changes in the nature of the use. Applying this definition, we conclude that the four system plans themselves are not projects that require environmental review. The system plans describe the proposal process, provide an assessment of the level of OHV use in the counties, describe current OHV system policies and procedures, recommend educational and enforcement procedures, and propose potential trail sites. But the system plans as a whole are not definite, site-specific actions and do not effectuate on-the-ground environmental changes or changes in the nature of the use. The system plans, rather, demonstrate “the governmental process of approving the project[s].” Minn. R. 4410.0200, subp. 65. Before the plans themselves are implemented, they must be approved by the Commissioner of the Department of Natural Resources. Even after this approval, many of the proposed trail sites will never be developed because of lack of funding, personnel, or feasibility. The system plans are too broad and speculative to provide the basis for meaningful environmental review.

Nevertheless, our analysis does not end here. Although the system plans themselves are not sufficiently definite to require environmental review, several of the trails identified in the system plans satisfy the definition of a project and consequently require the preparation of an EAW. The affidavits accompanying the petitions requesting the preparation of EAWs identify nine trails and connections that pose danger to the surrounding environment. We conclude that eight of these nine trails and connections are projects, and that the DNR must complete EAWs for these eight trails and connections.

In the Pine and Southern Carlton plan, both the Yellow Birch connection to the Willard Munger and Gandy Dancer trails and the Continental Divide connection to the Willard Munger and Gandy Dancer trails are sufficiently definite to allow for environmental review. Both of these trails currently ejdst, but the DNR proposes to construct 4.5 miles of new trail to connect these two trails to the two longer trails and to form loops. This proposed construction is a definite, site-specific action that contemplates an on-the-ground environmental change.

Also in the Pine and Southern Carlton plan, the proposed development of the Chengwatana trail and the proposed changes in the Willard Munger state trail are sufficiently definite to require environmental review. The change in the Willard Munger trail would allow ATV and OHM use in an area where it is currently prohibited, which would in turn introduce OHV-generated pollutants into the area. If this proposed change is implemented, then the DNR plans to develop the Chengwatana trail, which will constitute loop access trails connecting to the Willard Munger trail. Again, these two proposals demonstrate a definite, site-specific action, as well as proposing a physical change in the environment and a change in use.

Similarly, in the Wadena, Southern Cass, and Crow Wing System Plan, the proposed change in the Moose River trail to allow OHM use, and the proposed development of a loop ORV trail system on abandoned railroad trails and trust fund lands to create a longer Crosby trail, are sufficiently definite and represent on-the-ground environmental changes that require the preparation of EAWs.

In the Kanabec and Mille Lacs plan, the Woodland ORY site currently has two miles of undesignated trails and 300 to 400 acres of land for trail development. The DNR rated this site the most suitable for development and has immediate plans to develop it. This proposal is site-specific and contemplates the on-the-ground environmental changes that warrant environmental review. The affidavits attached to the petitions also identified the Snake River trail, referred to in the affidavits as the “loop site,” but this project will only be developed in the event that four other, more suitable trail sites are not developed. Although it is site-specific and envisions an on-the-ground environmental change, the development of this trail has not yet been proposed and, thus, is not sufficiently definite to require an EAW.

The final trail is the Spider Lake project identified in the Wadena, Southern Cass, and Crow Wing plan. In its record of decision, the DNR claimed that the Spider Lake project was substantially complete and therefore exempt from environmental review. See Minn. R. 4410.4600, subp. 2(D) (2001) (noting that a project is exempt from environmental review if a “substantial portion of the project is complete and [environmental review] would not influence remaining implementation or construction”). The district court required the DNR to complete an EAW for the Spider Lake project because environmental review may still “influence remaining implementation or construction.” Id. On appeal, the DNR. does not challenge the district court’s decision to require an EAW for Spider Lake, and the record demonstrates that the DNR intends to begin the EAW process for this project. Some of the parties continued to challenge .the district court’s Spider Lake determination in their briefs, but the DNR’s decision to proceed on the EAW renders this issue moot. Nothing in the record suggests that the DNR will abandon its intent to complete an EAW for this project.

We also note that additional trails identified in all four system plans may meet the definition of project and therefore warrant environmental review, but the affidavits and petitions fail to identify the specific location of these projects and to describe in detail the potential environmental effects. See Minn. R. 4410.1100, subps. 1, 2 (setting out facts that must be identified in the petition, requesting the preparation of EAWs). Because -the current- petitions and accompanying affidavits do not specifically identify or -describe any potential environmental effects, we cannot determine whether an EAW is required.

Finally, we address MRR’s argument that the system'plans are part of a connected or phased action. Under the applicable rules, “multiple projects and multiple stages of a single project that are connected actions or phased actions must be considered in total when determining the need for an EAW * * * [and] preparing the EAW.” Minn. R. 4410.1000, subp. 4 (2001). “Two projects are ‘connected actions’ if * * * they are related in any of the following ways: A. one project would directly induce the other; B. one project is a prerequisite for the other; or C. neither project is justified by itself.” Minn. R. 4410.0200, subp. 9b (2001). The system plans do not constitute a connected or phased action requiring environmental review because the system plans themselves are not projects. • Furthermore, the -record lacks sufficient development to permit us to determine the degree of interrelatedness of the system plans or the individual trails. Although several of the proposals are apparently connections between two or more existing trails, the simple fact that the trails connect is not sufficient to demonstrate that they constitute “connected actions” within the definition of the applicable rule.

DECISION

The four system plans developed by the DNR are not projects within the meaning of the Minnesota Environmental Protection Act for purpose of requiring an EAW. The eight trails specifically identified in the affidavits accompanying the MRR petitions are, however, definite, site-specific actions that contemplate on-the-ground environmental changes including changes in the nature of the existing use. These trails, therefore, constitute projects for which an EAW is required.

Affirmed in part and reversed in part.