## Facts

- Lynette Fitzgerald Miller was injured on June 19, 1976, when a car owned by Barbara Locoshonas and driven by Mark Shugart struck a tree; Miller was a passenger.
- Locoshonas had automobile liability coverage issued by Milbank Mutual Insurance Company.
- Milbank disputed that Shugart was covered and filed a declaratory judgment action; it provided separate counsel for Locoshonas and Shugart.
- The coverage court entered judgment that the policy covered both Locoshonas and Shugart; Milbank appealed.
- While the coverage appeal was pending, Miller sued Locoshonas and Shugart for personal injuries.
- Defendants’ counsel twice informed Milbank of settlement discussions and invited participation; Milbank declined, asserting it could not negotiate while coverage remained unresolved.
- Miller and the defendants entered a stipulation under which defendants confessed judgment for $100,000 (twice the policy limit) and agreed the judgment could be collected only from applicable insurance proceeds, with no personal collection against defendants.
- Judgment on the stipulation was entered, and after the coverage ruling was affirmed, Miller initiated garnishment proceedings against Milbank to collect.

## Issues

1. Whether a plaintiff may use garnishment to collect insurance proceeds based on a consent/confessed judgment entered without the insurer’s consent while the insurer is contesting coverage.
2. Whether the insurer is bound (up to policy limits) by the amount of the stipulated judgment, or may relitigate liability and damages.
3. Whether the insurer must pay interest on the entire confessed judgment or only interest tied to its contractual indemnity obligation.

## Decision

- The Minnesota Supreme Court affirmed in part and reversed in part.
- The court held garnishment could proceed and Miller could recover from Milbank up to the policy limits based on the stipulated judgment, provided the settlement was reasonable and not the product of fraud or collusion.
- The court rejected the insurer’s claim that the insureds forfeited coverage by settling; the insureds could protect themselves when coverage was disputed and the insurer refused to participate in settlement.
- The court reversed the award of interest to the extent it imposed interest on the portion of the confessed judgment exceeding Milbank’s policy obligation.

## Legal Principles

- When an insurer disputes coverage and declines to participate in settlement, the insured may enter a consent judgment that limits collection to insurance proceeds to avoid personal exposure.
- An insurer may be bound by such a stipulated judgment up to policy limits if the agreement is reasonable and made in good faith, and not tainted by fraud or collusion.
- In a subsequent garnishment action, the insurer may contest enforceability on limited grounds (e.g., unreasonableness, fraud, collusion), but not automatically relitigate the entire settled claim.
- An insurer’s duty to pay interest follows the insurance contract and does not extend to interest on amounts beyond the insurer’s indemnity limits absent a contractual basis.

## Conclusion

The court upheld the enforceability of an insurance-only consent judgment against a disputing insurer up to policy limits, conditioned on reasonableness and absence of fraud or collusion, while limiting the insurer’s exposure for interest to the scope of its contractual obligations.


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