Legal Definitions - Miller v. Shugart agreement

A Miller v. Shugart agreement is a specific type of legal settlement, named after a Minnesota court case, that is used when an insured individual or entity is sued. In this agreement, the insured party agrees to allow a judgment to be entered against them in favor of the person suing (the plaintiff). However, a crucial condition of this agreement is that the plaintiff can only collect the money awarded in the judgment from the insured's insurance policy. The plaintiff explicitly agrees not to pursue any of the insured's personal assets or property to satisfy the judgment. This arrangement protects the insured from personal financial risk while allowing the plaintiff to pursue a claim against the insurance company, often in situations where the insurer is disputing coverage or refusing to settle.

Here are a few examples to illustrate how a Miller v. Shugart agreement might work:

• Car Accident Scenario: Imagine a driver, Sarah, causes a car accident that severely injures another driver, Mark. Sarah's auto insurance company disputes the extent of Mark's injuries and offers a very low settlement, or perhaps even denies coverage for some reason. Mark decides to sue Sarah. Sarah is worried about losing her personal savings or home if a large judgment is entered against her. To resolve this, Sarah and Mark might enter into a Miller v. Shugart agreement. Sarah would agree to a judgment being entered against her for a specific amount (e.g., $500,000). In return, Mark would agree that he will only seek to collect that $500,000 from Sarah's auto insurance policy and will not pursue any of Sarah's personal assets. This protects Sarah while allowing Mark to pursue the full claim against the insurance company.

• Professional Malpractice Scenario: Consider a dentist, Dr. Lee, who is sued by a former patient for alleged negligence during a procedure. Dr. Lee's professional liability insurance company claims that the specific incident is not covered under the policy or is refusing to offer a settlement that the patient finds acceptable. Dr. Lee is concerned about the potential for a large personal judgment that could jeopardize his practice and personal finances. Dr. Lee and the patient could agree to a Miller v. Shugart settlement. Dr. Lee would consent to a judgment against him for a set amount. The patient, in turn, would agree that they will only collect this judgment from Dr. Lee's professional liability insurance policy and will not attempt to seize Dr. Lee's personal assets, such as his home or retirement accounts. This allows the patient to proceed with a claim against the insurer without Dr. Lee facing direct personal financial ruin.

• Business Liability Scenario: A small landscaping company, "Green Thumb Inc.," accidentally causes significant damage to a client's property due to equipment malfunction. Green Thumb Inc.'s general liability insurance provider denies the claim, arguing that a specific exclusion in the policy applies. The client sues Green Thumb Inc. The owner of Green Thumb Inc. is worried that a large judgment could bankrupt the company or even affect their personal assets, as it's a small business. To manage this risk, Green Thumb Inc. and the client could enter into a Miller v. Shugart agreement. Green Thumb Inc. would agree to a judgment for the cost of the property damage. The client would agree to collect this judgment solely from Green Thumb Inc.'s general liability insurance policy, explicitly agreeing not to pursue the company's other business assets or the personal assets of the owner. This shifts the focus of collection entirely to the insurance company.