Farmers Insurance Exchange v. Erik Hjelle, The Insurance Shop Services, LLC

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).

STATE OF MINNESOTA
IN COURT OF APPEALS
A14-0384

Farmers Insurance Exchange, et al.,
Respondents,

vs.

Erik Hjelle,
Appellant,

The Insurance Shop Services, LLC,
Defendant.

Filed January 26, 2015
Affirmed
Schellhas, Judge

Ramsey County District Court
File No. 62-CV-11-6258

Kelly A. Putney, Bassford Remele, P.A., Minneapolis, Minnesota; and

Melvin D. Weinstein (pro hac vice), Kegler, Brown, Hill & Ritter Co., L.P.A., Columbus,
Ohio (for respondents)

Diana Longrie, Maplewood, Minnesota (for appellant)

Considered and decided by Schellhas, Presiding Judge; Ross, Judge; and Smith,

Judge.
 UNPUBLISHED OPINION

SCHELLHAS, Judge

Appellant challenges the district court’s partial summary judgment to respondent

on the issue of appellant’s liability for breach of contract. We affirm.

FACTS

Appellant Erik Hjelle entered into an agent appointment agreement with

respondents Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance

Exchange, Mid-Century Insurance Company, Farmers New World Life Insurance

Company, and Illinois Farmers Insurance Company (respondents) in April 1997. Hjelle

formed The Insurance Shop Services LLC in 2007 or 2008 and thereafter switched

multiple policyholders of respondents to other insurance carriers. In September 2010,

Hjelle gave respondents notice of termination of his agent agreement, effective December

2010. Following termination, the agent agreement obligated respondents to pay Hjelle a

“Contract Value,” calculated to be a total of $85,545.45, payable in at least three

installments.

In November 2010, through an office assistant, Hjelle used confidential

policyholder information from respondents’ password-protected computer database—

respondents’ “Agency Dashboard”—to create mailing labels for letters that Hjelle sent to

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policyholders. One version of the letter was printed on respondents’ letterhead, and a

second, virtually identical version, was printed on The Insurance Shop letterhead.1

Following termination of his agent agreement in December 2010, Hjelle accepted

business from respondents’ policyholders whom he had serviced as respondents’ agent.

Respondents warned Hjelle by letter that he had violated the agent agreement and that

installment payments of his contract value were in jeopardy, pending an investigation of

his conduct. Although respondents paid Hjelle two contract-value installments in March

and June 2011, Hjelle continued to accept business from respondents’ policyholders

whom he had previously serviced as respondents’ agent. Respondents consequently

withheld Hjelle’s final contract-value installment and commenced suit against Hjelle and

The Insurance Shop, alleging, among other things, breach of contract and tortious

interference with prospective and existing business and contractual relations. Hjelle and

The Insurance Shop answered and counterclaimed for, among other things, bad faith

litigation, abuse of process, and tortious interference with existing business and

contractual relations.

The district court granted respondents a temporary injunction to prevent Hjelle and

The Insurance Shop from continuing to solicit, accept, or service respondents’

policyholders of record as of March 2011 and from using respondents’ confidential

1
Hjelle disputes that he sent any letters on respondents’ letterhead, but he admitted
during his deposition that he did not see the letters before they were mailed and he
answered questions about a letter that was printed on respondents’ letterhead.

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information until March 2012.2 The court subsequently granted respondents’ motion for

partial summary judgment on the issue of Hjelle’s liability for breaching the agent

agreement prior to its termination by switching respondents’ policyholders to other

insurance carriers, by using respondents’ confidential policyholder information to solicit

business of respondents’ policyholders for other insurance companies, and by “soliciting,

accepting and/or servicing” respondents’ policyholders following termination of the

agent agreement. The court also granted respondents summary judgment on Hjelle and

The Insurance Shop’s counterclaims for “bad faith litigation, abuse of process, and

tortious interference with contractual relations.”

Following a trial on the issues of damages for Hjelle’s breach of contract and of

liability and damages for The Insurance Shop’s tortious interference with contractual

relations, a jury returned a special verdict, awarding breach-of-contract damages in the

amount of $324,489 and tortious-interference damages in the amount of $171,872. The

district court entered judgment on both awards, reducing the breach-of-contract award by

the amount of the unpaid final contract-value installment of $28,486.81.

Hjelle appeals from the partial summary judgment on liability for breach of

contract.3

2
Hjelle and The Insurance Shop appealed the temporary injunction in March 2012. This
court dismissed the appeal as moot in October 2012, because the injunction already had
expired.
3
This court dismissed The Insurance Shop from the appeal after respondents challenged
The Insurance Shop’s status as a party to this appeal because the issues on appeal involve
only respondents and Hjelle.

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 DECISION

Hjelle argues that the district court erred by granting partial summary judgment to

respondents because (1) genuine issues of material fact exist regarding whether (a) Hjelle

switched eligible policyholders of respondents to other carriers and (b) Hjelle’s

November 2010 letter was a solicitation, and (2) the court erred in its interpretation and

application of Minn. Stat. § 72A.20.

“Summary judgment is appropriate when the evidence, viewed in the light most

favorable to the nonmoving party, establishes that no genuine issue of material fact exists

and that the moving party is entitled to judgment as a matter of law.” Citizens State Bank

Norwood Young Am. v. Brown, 849 N.W.2d 55, 61 (Minn. 2014); see also Minn. R. Civ.

P. 56.03. “The moving party has the burden of showing an absence of factual issues

before summary judgment can be granted.” Anderson v. State, Dep’t of Natural Res., 693

N.W.2d 181, 191 (Minn. 2005). “[W]hen the moving party makes out a prima facie case,

the burden of establishing that the facts raise a genuine issue falls to the opposing party.”

Citizens State Bank, 849 N.W.2d at 62. “To defeat a summary judgment motion, the

nonmoving party must do more than rest on averments or denials of the adverse party’s

pleadings.” Id. at 61–62 (citing Minn. R. Civ. P. 56.05). “[T]he nonmoving party must

present more than evidence which merely creates a metaphysical doubt as to a factual

issue and which is not sufficiently probative with respect to an essential element of the

nonmoving party’s case to permit reasonable persons to draw different conclusions.”

Valspar Refinish, Inc. v. Gaylord’s, Inc., 764 N.W.2d 359, 364 (Minn. 2009) (quotation

omitted). “No genuine issue of material fact exists when the record taken as a whole

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could not lead a rational trier of fact to find for the nonmoving party.” Frieler v. Carlson

Mktg. Grp., Inc., 751 N.W.2d 558, 564 (Minn. 2008) (quotations omitted).

Appellate courts “review de novo a district court’s grant of summary judgment.”

Dukowitz v. Hannon Sec. Servs., 841 N.W.2d 147, 150 (Minn. 2014). Appellate courts

“view the evidence in the light most favorable to the party against whom summary

judgment was granted to determine whether there are any genuine issues of material fact

and whether the district court correctly applied the law.” Id.

Hjelle’s switching of eligible policyholders of respondents to other insurance carriers

The agent agreement between Hjelle and respondents provides that the agent will

sell insurance to eligible applicants:

B. The Agent agrees in consideration of the
Companies’ agreements:

1. To sell insurance for the Companies and to
submit to the Companies every request or application
for insurance for the classes and lines underwritten by
the Companies and eligible in accordance with their
published Rules and Manuals. All business acceptable
to the Companies and written by the Agent will be
placed with the Companies.

The agent agreement also provides that if an agent switches insurance from respondents

to other carriers, the agreement is subject to immediate termination:

C. This Agreement terminates upon the death of the
Agent and may be terminated by either the Agent or the
Companies on three (3) months written notice.

If the provisions of this Agreement are breached by
either the Agent or the Companies, the Agreement may be
terminated by the other party on thirty (30) days written
notice. This Agreement may be terminated immediately by

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 mutual consent or by the Companies for the following
reasons:

....

2. Switching insurance from the Companies to
another carrier.

(Emphasis added.)

The district court concluded that Hjelle breached the agent agreement by

switching eligible policyholders of respondents to other insurance carriers. Paragraph C

of the agent agreement clearly prohibited Hjelle from switching respondents’

policyholders to other insurance carriers. The district court noted that, as to the eligibility

of existing policyholders, “Hjelle submitted no evidence to contradict the evidence

submitted by Farmers.” Respondents argue that, because this case focuses on existing

policyholders of respondents whom Hjelle switched to other insurance carriers, the

district court correctly determined that Hjelle “failed to meet his Rule 56.05 burden” to

produce evidence of ineligibility. We agree. See Citizens State Bank, 849 N.W.2d at 62

(“[W]hen the moving party makes out a prima facie case, the burden of establishing that

the facts raise a genuine issue falls to the opposing party.”).

Hjelle argues that he presented sufficient evidence to raise a genuine issue of

material fact regarding the eligibility of respondents’ policyholders whom he switched to

other insurance carriers. Hjelle points to his deposition testimony, in which he provided

some explanations about why certain of respondents’ policyholders became ineligible for

respondents’ policies. He also argues that his deposition testimony is supplemented with

evidence regarding the existence and implementation of underwriting advisories that

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helped agents determine which policies would qualify with respondents and discouraged

agents from writing ineligible policies and with evidence of bonuses that he received for

good risk selection. But Hjelle admits in his brief that he testified at his deposition that he

has no memory of the reason for various policyholder switches to other carriers. Hjelle

therefore did not raise a genuine issue of material fact regarding whether those switches

of policyholders to other insurance carriers violated his agent agreement.

We conclude that, based on the record as a whole, no reasonable person could

conclude that Hjelle did not switch eligible policyholders of respondents to other

insurance carriers. The district court therefore did not err by granting summary judgment

to respondents on their breach-of-contract claim.

Hjelle’s solicitation letter to respondents’ existing policyholders

The letter that Hjelle sent to existing policyholders of respondents in November

2010 reads:

Change is the only thing that we can be certain of
sometimes and change is coming to your Home Insurance and
my Agency. Farmers Insurance has changed its’ Home
Insurance effective your next renewal to exclude the
“Matching of Undamaged Property”. This change in your
Home policy affects roofing, siding, flooring, etc. when
replacement materials do not match existing materials. I have
included a copy of the actual endorsement change. This
change in your policy will not be effective until your current
Next Generation Home policy renews.

For 15 years, my primary obligation to you has been
honesty and advocacy. As a result of this change and other
factors, I have decided to leave Farmers effective
December 3, 2010 and continue my Insurance career as an
Independent agent. Having choice with 20+ Insurance

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 Companies and being able to offer better rates along with
comprehensive coverage is very important.

Last June I purchased a new office and want to grow
my business by serving clients with a diverse choice of
Insurance Companies. For the last 4 years, I have been an
Independent agent licensed in Wisconsin and have enjoyed
being an Insurance Broker. After December 3, I will be
changing my selling agreements with those Independent
companies to include Minnesota and will cancel my selling
agreement with Farmers. As a consumer, you have a right to
purchase insurance from any Company and any agent you
choose.

I want to THANK YOU for your business over these
many years. I can never adequately express my appreciation
and gratitude for such loyalty, especially when insurance is
available from so many sources. Thank you for that privilege!

The letter concluded with Hjelle’s contact information, including his phone number, e-

mail address, the website for The Insurance Shop, and Hjelle’s invitation to contact him

with “questions at any time.”

The district court determined on summary judgment that “Hjelle’s letter is a

business solicitation as a matter of law,” that Hjelle used the letter to the detriment of

respondents, and that Hjelle breached the agent agreement by sending the letter to

respondents’ policyholders using information found on the Agency Dashboard. Hjelle

argues that the court erred by concluding that his letter is a business solicitation as a

matter of law. Citing Rehabilitation Specialists, Inc. v. Koering, 404 N.W.2d 301 (Minn.

App. 1987), Hjelle argues that “the District Court had sufficient evidence to either

determine that the November 2010 letter was not a solicitation letter or that a genuine

issue of material fact existed as to if it was permissible preparation.” In Koering, this

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court stated that “[a]n employee has the right, . . . while still employed, to prepare to enter

into competition with her employer” and that “[t]here is no precise line between acts by

an employee which constitute prohibited solicitation and acts which constitute

permissible preparation.” Id. at 304−05 (quotations omitted).

Respondents argue that Hjelle waived his permissible-preparation argument

because he did not present it in district court. See Thiele v. Stich, 425 N.W.2d 580, 582

(Minn. 1988) (“A reviewing court must generally consider only those issues that the

record shows were presented and considered by the trial court in deciding the matter

before it.” (quotation omitted)). Although we reject respondents’ waiver argument

because Hjelle argued to the district court that his letter was not a solicitation, we

conclude that Hjelle’s permissible-preparation argument is unpersuasive.

A “solicitation” includes “[a]n attempt or effort to gain business.” Black’s Law

Dictionary 1520 (9th ed. 2009). Hjelle’s reliance on Koering and Sanitary Farm Dairies

v. Wolf, 261 Minn. 166, 112 N.W.2d 42 (1961), as support for his argument that his letter

was permissible preparation rather than prohibited solicitation is misplaced. Neither case

involves a breach-of-contract claim; both cases involve claims of breach of the duty of

loyalty only. See Koering, 404 N.W.2d at 304; Wolf, 261 Minn. at 168, 112 N.W.2d at

44.

Hjelle does not dispute that his office assistant used policyholder information,

including names, addresses, renewal dates, and other policy information, from

respondents’ Agency Dashboard to create mailing labels for his letter. This constituted a

violation of the agent agreement, which provides:

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 I. The Agent acknowledges that all manuals, lists and
records of any kind (including information pertaining to
policyholders and expirations) are the confidential property of
the Companies and agrees they shall not be used or divulged
in any way detrimental to the Companies . . . .

We agree with the district court that the letter is a “classic example of a business

solicitation.” No reasonable trier of fact could find that Hjelle’s letter was not an attempt

or effort to gain business. We therefore conclude that the district court did not err by

determining that Hjelle’s letter to policyholders of respondents constituted a solicitation

and that Hjelle violated his agent agreement. Hjelle breached the agent agreement by

using confidential information from the Agency Dashboard to mail a solicitation to

respondents’ existing policyholders to respondents’ detriment.

Interpretation and application of Minn. Stat. § 72A.20

The agent agreement includes the following noncompete clause:

H. The Agent agrees to . . . accept tender of Contract
Value and further agrees that for a period of one year
following the date of payment or tender of payment the Agent
will neither directly or indirectly solicit, accept, or service the
insurance business of any policyholder of record in the
agencies of this district as of the date of payment or tender of
payment.

The district court concluded that Hjelle breached the noncompete clause by accepting and

servicing business from respondents’ policyholders after he received the first contract-

value installment. Hjelle argues that the noncompete clause is unenforceable because

Minnesota Statutes section 72A.20, subdivision 14, “as a matter of law supersedes the

operation of a non-compete clause in an agent appointment agreement.” That statute

provides:

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 An insurance agent refusing to supply a requested application
form for homeowner’s insurance with any insurer whom the
agent represents or refusing to transmit forthwith any
completed application from the insurer, shall constitute an
unfair method of competition and an unfair and deceptive act
or practice.

Minn. Stat. § 72A.20, subd. 14 (2014).4

“[A] contract violating law or public policy is void.” Scheeler v. Sartell Water

Controls, Inc., 730 N.W.2d 285, 288 (Minn. App. 2007). Hjelle cites Grand Union Tea

Co. v. Dodds, 128 N.W. 1090 (Mich. 1910), Grand Union Tea Co. v. Lewitsky, 116 N.W.

1090 (Mich. 1908), and Wolf, 261 Minn. 166, 112 N.W.2d 42, to support his argument

that section 72A.20 supersedes the noncompete clause. As out-of-state cases, neither

Dodds nor Lewitsky is binding on this court. See Eng’g & Const. Innovations, Inc. v. L.H.

Bolduc Co., 825 N.W.2d 695, 707 n.8 (Minn. 2013) (citing foreign caselaw and stating

that “[t]hese decisions are not binding on us”). Moreover, those refer to a statute that

expressly prohibited agreements not to engage in business or trade, such as noncompete

agreements. See Dodds, 128 N.W. at 1091 (referencing Michigan statute discussed in

Lewitsky); Lewitsky, 116 N.W. at 1093 (quoting Michigan statute that provided that

“‘[a]ll agreements and contracts by which any person . . . promises or agrees not to

engage in any . . . trade, profession or business, whether reasonable or unreasonable, . . .

are hereby declared to be against public policy and illegal and void’”). And Wolf does not

involve a noncompete clause or a statute prohibiting noncompete agreements. See 261

4
We apply the most recent version of section 72A.20 because the statute has not been
amended in relevant part. See Interstate Power Co. v. Nobles Cnty. Bd. Of Comm’rs, 671
N.W.2d 566, 575 (Minn. 2000) (stating that, generally, “appellate courts apply the law as
it exists at the time they rule on a case”).

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Minn. at 174, 112 N.W.2d at 48. None of the cases is instructive, and Hjelle’s reliance

upon the cases is misplaced.

Respondents argue that section 72A.20 is an anti-redlining statute and does not

prohibit Hjelle from complying with the noncompete clause.5 “The goal of statutory

interpretation is to effectuate the intent of the Legislature.” Staab v. Diocese of St. Cloud,

853 N.W.2d 713, 716 (Minn. 2014). “If the Legislature’s intent is clear from the

unambiguous language of the statute, we apply the statute according to its plain

meaning.” Id. at 716–17. “But if a statute is susceptible to more than one reasonable

interpretation, the statute is ambiguous, and we will consider other factors to ascertain the

Legislature’s intent.” Id. at 717. We agree with respondents that section 72A.20 is not

ambiguous and that the plain meaning of the statute does not prohibit enforcement of

valid noncompete clauses in agent agreements.

Section 72A.20 contains numerous provisions identifying conduct that constitutes

unfair and deceptive trade practices. Our supreme court has referred to it as “the anti-

redlining statute.” See Schermer v. State Farm Fire & Cas. Co., 721 N.W.2d 307, 309

(Minn. 2006) (“More specific prohibitions against discrimination are contained in Minn.

Stat. § 72A.20 (2004), the anti-redlining statute.”).

Read in this context, subdivision 14 clearly is meant to prohibit insurance agents

from refusing to supply or transmit insurance applications as a method of redlining. See

Am. Family Ins. Group v. Schroedl, 616 N.W.2d 273, 278 (Minn. 2000) (“While statutory

5
“[R]edlining” means “[c]redit discrimination . . . by an institution that refuses to provide
loans or insurance on properties in areas that are considered to be poor financial risks or
to the people who live in those areas.” Black’s Law Dictionary 1391 (9th ed. 2009).

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construction focuses on the language of the provision at issue, it is sometimes necessary

to analyze that provision in the context of the surrounding sections.”). Section 72A.20,

subdivision 14, does not prohibit an insurance agent from complying with a valid and

enforceable noncompete clause.

Affirmed.

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