United States Fidelity & Guarantee Insurance v. Commercial Union Midwest Insurance , 430 F.3d 929 ( 2005 )


Menu:
  •                      United States Court of Appeals
    FOR THE EIGHTH CIRCUIT
    ________________
    No. 04-1826
    ________________
    United States Fidelity & Guarantee         *
    Insurance Company; Catherine L.            *
    Rootness, Trustee for the Heirs and        *
    Next of Kin of Brent A. Hincher,           *
    deceased; Payless Cashways, Inc.,          *
    d/b/a/ Knox Lumber Company,                *
    *
    Appellants,                   *       Appeal from the United States
    *       District Court for the
    v.                                   *       District of Minnesota.
    *
    Commercial Union Midwest                   *            [PUBLISHED]
    Insurance Company; American                *
    Employers' Insurance Company,              *
    *
    Appellees.                    *
    ________________
    Submitted: March 18, 2005
    Filed: December 7, 2005
    ________________
    Before MURPHY, HANSEN, and SMITH, Circuit Judges.
    ________________
    HANSEN, Circuit Judge.
    This case involves a dispute between insurance companies over whose policy
    covers Payless Cashways, Inc.'s (Payless) liability related to the tragic death of Brent
    A. Hincher, who was killed during a work accident on Payless's premises. The district
    court granted summary judgment to Commercial Union Midwest Insurance Company
    (CU) and American Employers' Insurance Company (AE), finding that Payless was
    not insured under AE's policy and that CU's policy provided only excess insurance
    after United States Fidelity and Guarantee Insurance Company's (USF&G) primary
    coverage was exhausted. The plaintiffs appeal the district court's judgment granting
    summary judgment to CU, and we reverse and remand for further proceedings.1
    I.
    Payless contracted with KamCo Inc. to install lighting displays and to perform
    re-merchandising work at Payless's stores, including one in Newport, Minnesota. The
    late Mr. Hincher worked for KamCo and was performing re-merchandising work in
    Payless's Newport store when a display fell, killing him. Catherine L. Rootness,
    Hincher's widow and trustee for the heirs and next of kin of Hincher, commenced a
    wrongful death action on behalf of Hincher's estate against Payless in 1998. Payless
    filed a third-party claim against KamCo, asserting that KamCo was liable under the
    Payless-KamCo re-merchandising contract to defend and indemnify Payless for any
    liability related to the accident. KamCo had a commercial general liability (CGL)
    policy with AE and an umbrella policy with CU. Payless carried its own excess
    liability policy with USF&G.
    Payless and KamCo disagreed about whether their contract included an
    indemnity agreement, the terms of which were contained in an unsigned
    Supplementary Terms and Conditions Agreement (Supplementary Agreement). In
    addition to the indemnity provisions, the Supplementary Agreement required KamCo
    to provide and maintain $2 million worth of CGL insurance and to name Payless as
    an additional insured. In June 1999, Payless and KamCo entered into a stipulation,
    1
    The appellants do not appeal the district court's ruling that Payless was not
    insured under AE's policy.
    -2-
    in which they agreed to allow the district court to determine whether their agreement
    included the Supplementary Agreement. The court ultimately found that the
    Supplementary Agreement was part of the contract between Payless and KamCo.
    Payless agreed in the stipulation to waive its claim against KamCo for Payless's
    defense costs in the underlying wrongful death suit. The parties also agreed that
    KamCo was obligated to indemnify Payless under the indemnity agreement only for
    fault attributable to KamCo; KamCo was not obligated to indemnify Payless for
    Payless's own negligence.
    After the court determined that the Supplementary Agreement was part of the
    re-merchandising contract, Payless's insurer, USF&G, tendered Payless's defense of
    the wrongful death lawsuit to KamCo's insurers, CU and AE, pursuant to Payless's
    status as an additional insured under KamCo's CGL policies. Both insurers refused
    the tender. Rootness settled the claim with KamCo, whereby AE paid $500,000 to
    Rootness on KamCo's behalf under the CGL policy that AE had issued to KamCo.
    The case proceeded to trial where a jury awarded total damages of $1.2 million,
    apportioning fault as follows: 22% to KamCo, 60% to Payless, and 18% to the
    decedent, Mr. Hincher. Rootness received a judgment against Payless for $720,000
    based on Payless's 60% share of the fault. During Rootness's appeal of the jury
    verdict to this court, Rootness settled the claims with Payless and its insurer, USF&G,
    for $950,000, which was paid as $750,000 in cash from USF&G and $200,0002 in
    Payless stock. CU and AE refused to participate in the settlement negotiations on
    Payless's behalf or contribute toward the settlement.
    2
    As discussed in more detail infra, Payless had a $350,000 self-insured retention
    (SIR) under the USF&G policy, obligating Payless to cover the first $350,000 of any
    claim under the policy. Payless filed for bankruptcy protection during the pendency
    of this case, and the bankruptcy court apportioned $200,000 of the $350,000 SIR
    toward this litigation, with the remaining SIR apportioned to another employee injured
    in the same incident.
    -3-
    Following the settlement, Rootness, Payless, and USF&G commenced this
    action to recover the amounts paid by or on behalf of Payless, as well as the defense
    costs, from CU and AE.3 The parties filed cross motions for summary judgment, and
    the district court granted summary judgment to AE and CU. The district court found
    that Payless was not insured under AE's policy because, even though KamCo was
    contractually obligated to add Payless as an additional insured under its CGL policies,
    KamCo had failed to notify AE and pay the required $50 premium for adding
    additional insureds to AE's policy.
    CU's policy definition of additional insureds was broader than AE's policy,
    extending insured status to "any person or organization with whom or with which
    [KamCo] ha[d] agreed in writing prior to any loss, 'occurrence' or 'offense' to provide
    insurance such as is afforded by this policy, but only with respect to [KamCo's]
    operations or facilities [KamCo] own[ed] or use[d]." (Appellants' App. at 172,
    Section II.) The policy defined an "insured" as "any person or organization qualifying
    as such under SECTION II–WHO IS AN INSURED." (Id. at 175.) For purposes of
    summary judgment, CU agreed that Payless was an additional insured under this
    provision of CU's policy. The district court determined that CU and USF&G both
    provided excess insurance, that their "other insurance" provisions conflicted, and that
    USF&G's policy should provide primary coverage as it was closer to the risk. In the
    district court's view, because USF&G's policy limits exceeded the $750,000 it had
    paid to the estate, CU's "secondary" excess coverage was never triggered. The district
    court also concluded that Payless was self-insured to the extent of the $200,000 SIR
    in the USF&G policy and that the self-insurance was "other insurance" that was
    primary to CU's excess coverage, such that CU was not liable for the first $200,000
    of liability not covered by the USF&G policy. Finally, the district court found that
    3
    The lawsuit initially named KamCo as a defendant on the theory that KamCo
    breached its contractual duty to name Payless as an additional insured on the AE
    policy. Those claims were resolved, and KamCo was released from the case prior to
    the district court's ruling on the motions for summary judgment.
    -4-
    CU was not obligated to pay the defense fees for either the underlying wrongful death
    lawsuit or the current lawsuit. The plaintiffs appeal the district court's ruling to the
    extent that it dismissed their claims against CU.
    II.
    We review the district court's grant of summary judgment de novo. Summary
    judgment is appropriate if there are no genuine issues of material fact to be decided,
    and the moving party is entitled to judgment as a matter of law. Dowdle v. Nat'l Life
    Ins. Co., 
    407 F.3d 967
    , 970 (8th Cir. 2005); Fed. R. Civ. P. 56(c). The parties agree
    that Minnesota law applies to this diversity action. The interpretation of insurance
    policies is a legal issue for the court to determine. 
    Dowdle, 407 F.3d at 970
    .
    The parties agree that Payless is insured under CU's policy as an additional
    insured. The CU and the USF&G policies both provide coverage for Payless's own
    liability resulting from Mr. Hincher's accident. When two policies provide coverage
    for the same incident, the question of which policy provides primary coverage is a
    legal determination that we make by looking to the language of the policies at issue.
    See Christensen v. Milbank Ins. Co., 
    658 N.W.2d 580
    , 587 (Minn. 2003). Minnesota
    courts determine the order of coverage by looking to the priority rules contained in
    each policy, generally found in the policies' "other insurance" provisions. See N. Star
    Mut. Ins. Co. v. Midwest Family Mut. Ins. Co., 
    634 N.W.2d 216
    , 222 (Minn. Ct. App.
    2001). If the "other insurance" clauses contained in the applicable policies conflict,
    then the court looks beyond the language of the policies and assigns primary coverage
    to the policy that more closely contemplated the risk. 
    Christensen, 658 N.W.2d at 587
    . Where the policies equally contemplate the risk, Minnesota courts pro rate the
    loss among the applicable policies. See Cargill, Inc. v. Commercial Union Ins. Co.,
    
    889 F.2d 174
    , 179-80 (8th Cir. 1989) (applying Minnesota law and apportioning
    liability based on the proportion that each insurer's policy limit bears to the total
    available insurance limits).
    -5-
    The district court first determined that the "other insurance" clauses conflicted,
    and then went on to determine that USF&G's policy was closer to the risk of loss
    stemming from Mr. Hincher's death. The CU policy contained an "other insurance"
    clause which provided in part: "If there is other insurance, other than as provided
    above, which applies to the loss, we pay only for the excess of the amount due from
    such other insurance, whether collectible or not." (Appellants' App. at 180.)
    USF&G's policy likewise contained an "other insurance" clause that provided: "This
    insurance is excess over other insurance whether primary, excess, contingent or on
    any other basis, except other such insurance purchased specifically to apply in excess
    of this insurance." (Id. at 208.) "Other insurance" provisions contained in two
    different policies conflict if "'the apportionment among the companies cannot be made
    without violating the other insurance clause of at least one company.'" 
    Christensen, 658 N.W.2d at 587
    (quoting Integrity Mut. Ins. Co. v. State Auto. & Cas.
    Underwriters Ins. Co., 
    239 N.W.2d 445
    , 446 (Minn. 1976)). The clauses at issue here
    conflict as both policies purport to provide excess coverage where another policy
    applies to the loss, and application of each policy's "other insurance" provision would
    preclude coverage by either. See N. Star Mut. Ins. 
    Co., 634 N.W.2d at 222
    ("Because
    each policy's 'other insurance' clause provided for coverage only after all other
    applicable insurance coverage was exhausted, the clauses conflict."). We, like the
    district court, proceed to determine which policy more closely contemplated the risk.
    Minnesota courts apply two different tests in apportioning liability between
    insurers when the other insurance clauses conflict: the "total policy insuring intent"
    analysis or the "closer to the risk" analysis. The "total policy insuring intent" analysis
    is a broader test and "examines the primary policy risks upon which each policy's
    premiums were based and the primary function of each policy." CPT Corp. v. St. Paul
    Fire & Marine Ins. Co., 
    515 N.W.2d 747
    , 751 (Minn. Ct. App. 1994). In assessing
    which policy is closer to a given risk, Minnesota courts consider three specific
    questions:
    -6-
    (1) Which policy specifically described the accident-causing
    instrumentality? (2) Which premium is reflective of the greater
    contemplated exposure? (3) Does one policy contemplate the risk and
    use [of] the accident-causing instrumentality with greater specificity than
    the other policy–that is, is coverage of the risk primary in one policy and
    incidental to the other?
    Ed Kraemer & Sons, Inc. v. Transit Cas. Co., 
    402 N.W.2d 216
    , 222 (Minn. Ct. App.
    1987) (internal marks omitted). The tests are similar, though application of the total
    policy insuring intent analysis is less mechanical than the closer to the risk analysis.
    The district court found that USF&G's policy was closer to the risk primarily
    because Payless paid a premium to USF&G specifically to cover Payless's negligence,
    whereas CU received no additional premium to cover Payless's negligence. The
    district court also made much of the fact that the liability at issue was solely that of
    Payless as determined by the jury's apportionment of 60% of the fault to Payless, and
    the parties agreed that KamCo was obligated to indemnify Payless under the
    Supplementary Agreement only for any fault attributed to KamCo. We respectfully
    believe the district court erroneously relied on these facts in applying the closer to the
    risk analysis.
    Although KamCo's liability under the indemnity agreement was limited to the
    fault attributable to KamCo, CU's insurance policy does not so limit CU's policy's
    coverage of Payless. The CU policy covers "any . . . organization with . . . which
    [KamCo] ha[s] agreed in writing . . . to provide insurance such as is afforded by this
    [CU] policy, but only with respect to [KamCo's] operations." (Appellants' App. at
    172.) Minnesota courts have held in similar circumstances that as long as there is a
    but-for causation between the loss and the named insured's operations, the "additional
    insured" coverage provides coverage for the additional insured's own liability,
    irrespective of any limitations of liability between the named insured and the
    additional insured. See Andrew L. Youngquist, Inc. v. Cincinnati Ins. Co., 
    625 N.W.2d 178
    , 183-84 (Minn. Ct. App. 2001). The loss at issue here clearly has a but-
    -7-
    for connection to KamCo's operations; Mr. Hincher, a KamCo employee, would not
    have been killed on Payless's premises if KamCo had not been performing its
    obligations under the contract. Having satisfied the contingencies of the policy, CU's
    policy provides coverage for Payless's liability arising from its own fault regardless
    of KamCo's indemnity agreement. The district court erred in relying on the allocation
    of fault by the jury because "[t]he closeness to the risk test is separate from any
    dispute among defendants as to whose actions negligently contributed to the accident."
    See Ed Kraemer & Sons, 
    Inc., 402 N.W.2d at 222
    (reversing district court's allocation
    of the risk and noting that it was "disturbed by this focus on Kraemer's potential
    negligence").
    Considering the closer to the risk analysis, we find the test to be of little
    guidance. Neither policy specifically describes the accident-causing instrumentality,
    in this case, the display being installed at Payless's store. USF&G's policy is an
    "excess general liability" policy and provides that it "will pay 'ultimate net loss' . . .
    because of 'bodily injury' . . . to which this insurance applies caused by an 'occurrence'
    that takes place in the 'coverage territory.'" (Appellants' App. at 189.) "Ultimate net
    loss" is defined as "those sums that the insured [Payless] becomes legally obligated
    to pay as damages." (Id. at 200.) As it is titled, the USF&G policy provides excess
    general liability coverage to Payless for its "Building Supplies" business. (Id. at 188.)
    The loss at issue occurred in the course of Payless's business of "Building Supplies"
    to the extent that Payless was changing the display of those building supplies.
    CU's policy is equally general. CU agreed to "pay those sums that the 'insured'
    becomes legally obligated to pay as damages . . . because of 'bodily injury' . . . to
    which this insurance applies." (Id. at 168.) Thus, the CU policy covers those sums
    that Payless becomes legally obligated to pay because of bodily injury. The insurance
    applies to Payless as an "additional insured," "but only with respect to [KamCo's]
    operations" (id. at 172), which include hanging display services (id. at 166). The loss
    -8-
    at issue here was incurred with respect to KamCo's operations of hanging displays.
    Thus, the risk was also contemplated by CU's policy, but not with any specificity.
    Although KamCo paid a flat-rate premium for CU's coverage, the policy clearly
    contemplated that CU would be providing coverage to other entities with which
    KamCo contracted to provide coverage as additional insureds without requiring an
    additional premium to cover the additional insured. The Supreme Court of Minnesota
    has noted the "long-standing practice in the construction industry by which the parties
    to a subcontract . . . agree that one party would protect 'others' involved in the
    performance of the construction project." Holmes v. Watson-Forsberg Co., 
    488 N.W.2d 473
    , 475 (Minn. 1992) (explaining the Minnesota legislature's actions in
    prohibiting indemnity agreements in construction contracts that indemnify a party
    from its own negligence, Minn. Stat. § 337.02, but allowing one party to provide
    insurance that covers the other party's negligence, Minn. Stat. § 337.05). That CU did
    not charge an additional premium to add additional insureds under its policy does not
    change the clear import of its policy that provides coverage to additional insureds.
    Presumably, CU considered the risk posed by including additional insureds within its
    policy coverage when it set its rate and issued the policy at the flat-rate premium. Cf.
    Presley Homes, Inc. v. Am. States Ins. Co., 
    108 Cal. Rptr. 2d 686
    , 691 (Cal. Ct. App.
    2001) ("If, as defendant asserts, it simply provided the additional insured
    endorsements without increasing the amount of the subcontractors' premiums, that still
    would not affect a covered party's reliance on the policies' language and the nature of
    the activity covered by them.").
    Although Payless paid a much larger premium for its policy with USF&G
    ($614,000) than KamCo paid for its policy with CU ($3,736), those are the total
    premiums paid for two policies that covered widely divergent risks. Neither policy
    required or stated a premium specifically for the loss at issue here. KamCo's premium
    was a one-year flat-rate premium, and its coverage explicitly contemplated "additional
    insureds" similar to Payless for risks stemming from KamCo's operations. Payless's
    -9-
    premium was based on a percentage of Payless's receipts over a two-year period,
    which were estimated at $5.2 billion dollars, and appeared to cover all of Payless's
    stores throughout the country. Thus, the premium sizes do not reflect that USF&G
    contemplated the specific risk of Mr. Hincher's death, an employee of a subcontractor
    installing displays at one of Payless's stores, any more than CU's policy contemplated
    that risk, which involved an employee of CU's named insured injured in the course of
    the named insured's business. The third factor of the closer to the risk test adds little
    to our analysis, as neither policy specifically contemplated the risk or the
    instrumentality at issue here, so neither one can be said to have provided primary
    rather than incidental coverage for the loss. Cf. Nat'l Union Fire Ins. Co. of
    Pittsburgh, PA v. Republic Underwriters Ins. Co., 
    429 N.W.2d 695
    , 697 (Minn. Ct.
    App. 1988) (concluding that a liability policy issued to a daycare provider for her
    business provided primary coverage for an injury to a child in the daycare over the
    daycare provider's homeowner's policy because the liability policy specifically
    described the type of risk involved).
    We turn then to application of the "total policy insuring intent" analysis, which
    focuses on the primary risks and functions of each policy. Our review of each policy
    under this analysis convinces us that the loss here should be shared pro rata. Both
    policies provide general liability coverage rather than coverage for a specific risk or
    instrumentality. Cf. Redeemer Covenant Church of Brooklyn Park v. Church Mut.
    Ins. Co., 
    567 N.W.2d 71
    , 80-81 (Minn. Ct. App. 1997) (holding that a professional
    liability policy provided primary coverage over a general liability policy for acts
    committed by a pastor during counseling sessions); Interstate Fire & Cas. Co. v.
    Auto-Owners Ins. Co., 
    433 N.W.2d 82
    , 86 (Minn. 1988) (holding that a school's
    excess policy was primary over a student's homeowner's policy for injuries to the
    student during physical education class). The primary risks contemplated by the
    USF&G policy are broad, covering all of Payless's stores nationwide for any liability
    Payless incurs related to its business of supplying building supplies. The risk that a
    subcontractor will get injured installing displays for the building supplies is
    -10-
    contemplated by that policy, though it is by no means expressly contemplated. CU's
    policy provides general liability coverage to KamCo for liability arising from
    KamCo's operations of providing hanging display services, including providing
    coverage to additional insureds for which KamCo provides these services. We believe
    that each policy provides broad coverage, and each policy equally contemplated the
    loss at issue here.
    Having decided that each policy provides pro rata coverage, we must address
    the issue of the first $200,000 of liability, as Payless's policy with USF&G contains
    a self-insured retention of that amount applicable to this claim. The district court
    concluded that Payless was self-insured for that amount, and that the self-insurance
    was "other insurance" within the meaning of CU's "other insurance" clause, such that
    Payless's self-insurance was primary over CU's excess coverage for the first $200,000
    for which USF&G is not liable. Although Minnesota courts have found certificates
    of self-insurance4 to constitute "insurance" in the context of automobile insurance and
    compulsory liability insurance statutes, see McClain v. Begley, 
    465 N.W.2d 680
    , 682
    (Minn. 1991) (holding that "[t]he certificate [of self-insurance] filed with the
    commissioner is the functional equivalent of an insurance policy" for purposes of
    Minnesota's no-fault statutes, Minn. Stat. § 65B.49, subd. 3(1) (2002)), we do not
    believe that those cases dictate a finding that Payless's SIR under its USF&G policy
    is "other insurance" for purposes of allocating coverage for Payless's liability. The
    self-insurance involved in those cases was approved by the Minnesota legislature as
    an alternative to statutorily-mandated automobile insurance coverage. The plan of
    self-insurance must meet statutory requirements before it is approved and a certificate
    is issued. See Minn. Stat. § 65B.48, subd. 1 (2002) (requiring every automobile
    owner to maintain "a plan of reparation security under provisions approved by the
    commissioner"); § 65B.48, subd. 3 (listing requirements for self-insurance); § 65B.43,
    4
    CU does not contend that Payless has a "certificate of self-insurance" issued
    by the Minnesota Department of Commerce.
    -11-
    subd. 9 (defining "Reparation obligor" as "an insurer or self-insurer obligated to
    provide the benefits required by [Minnesota's No-Fault Automobile Insurance Act]"
    (emphasis added)); Hertz Corp. v. State Farm Mut. Ins. Co., 
    573 N.W.2d 686
    , 688
    (Minn. 1998) (noting that Minnesota's no-fault automobile statute requires a self-
    insurer to obtain authorization from the commissioner of commerce to operate as a
    self-insurer). Self-insurance in that context is statutorily-defined to equate to
    insurance only because the Minnesota legislature has decided to allow entities to meet
    their statutory obligation to provide no-fault automobile insurance with self-insurance
    if specific requirements are met. No Minnesota case suggests that self-insurance is
    the equivalent of insurance outside the context of no-fault legislation.
    "The interpretation of an insurance contract is a question of law as applied to
    the facts presented. . . . When insurance policy language is clear and unambiguous,
    'the language used must be given its usual and accepted meaning.'" State Farm Mut.
    Auto. Ins. Co. v. Tenn. Farmers Mut. Ins. Co., 
    645 N.W.2d 169
    , 175 (Minn. Ct. App.
    2002) (internal citations omitted). The term "insurance" generally does not include
    a SIR under an insurance policy. Compare Black's Law Dictionary 814 (8th ed. 2004)
    (defining "insurance" as "[a] contract by which one party (the insurer) undertakes to
    indemnify another party (the insured) against risk of loss, damage, or liability arising
    from the occurrence of some specified contingency") with Black's Law Dictionary
    1391 (8th ed. 2004) (defining "self-insured retention" as "[t]he amount of an
    otherwise-covered loss that is not covered by an insurance policy and that usually
    must be paid before the insurer will pay benefits"). "A majority of jurisdictions across
    the nation subscribe to the . . . view of self-insurance as 'not insurance' in, inter alia,
    an 'other insurance' context." Consolidated Edison Co. of N.Y., Inc. v. Liberty Mut.,
    
    749 N.Y.S.2d 402
    , 404 (N.Y. Sup. Ct. 2002) (collecting cases). If CU intended its
    "other insurance" clause to apply to self-insurance or self-insured retentions included
    within other insurance policies, it could have so stated in its "other insurance" clause,
    but it did not. Cf. Redeemer Covenant Church of Brooklyn 
    Park, 567 N.W.2d at 79
    (construing policy that stated that its coverage was "excess over and above any other
    -12-
    valid and collectible insurance (including any deductible portion) or agreement of
    indemnity, available to the insured" (emphasis added)); Nabisco, Inc. v Transp.
    Indem. Co., 
    192 Cal. Rptr. 207
    , 208-09 (Cal. Ct. App. 1983) (finding self-insurance
    to be "other insurance" where policy explicitly stated that its coverage was excess if
    there was "other insurance or self-insurance" (emphasis added)).
    The SIR in this case is nothing more than a large deductible. Payless did not
    hold itself out to the world as a self-insurer but merely contracted with USF&G for
    a reduced premium by agreeing to a larger SIR. If Payless had no insurance at all it
    could be said to be "self-insured" in that it would be responsible for its own liability.
    CU does not purport that in that circumstance Payless's actual uninsured but allegedly
    "self-insured" status would be "other insurance" within the meaning of its "other
    insurance" clause. Rather, CU would be liable for the full amount of Payless's liability
    as the only insurer. In fact, during oral argument, CU's counsel agreed that if we
    determined that CU provided primary coverage and USF&G provided excess
    coverage, then the $200,000 SIR was no longer at issue. If the SIR truly was self-
    insurance as CU wants to define that term, then the SIR would arguably be primary
    regardless of what we determined USF&G's coverage to be. CU's concession cements
    our conclusion that the SIR is nothing more than a deductible contracted between
    Payless and USF&G. Because the SIR contained in the USF&G policy is not "other
    insurance" within the meaning of CU's "other insurance" clause, CU's policy provides
    the only insurance coverage for the first $200,000 of Payless's liability (subject of
    course to the $10,000 SIR in CU's own policy). See Cargill, 
    Inc., 889 F.2d at 180
    (applying Minnesota law and holding that, up to the higher deductible contained in
    one of two applicable insurance policies, only one insurance policy provided coverage
    so that its "other insurance" clause was not triggered); cf. Wallace v. Tri-State Ins. Co.
    of Minn., 
    302 N.W.2d 337
    , 340-41 (Minn. 1980) (holding that the excess carrier was
    liable only for the insured's deductible, which was not covered by the primary
    insurer).
    -13-
    The district court determined that CU was not obligated to pay any defense
    costs because USF&G provided primary coverage and CU's excess policy was never
    required to contribute toward the settlement, as the settlement was less than USF&G's
    policy limits. CU's policy included a "duty to defend any claim or 'suit' seeking
    damages to which this insurance applies, but only with respect to damages . . . [n]ot
    covered by 'underlying insurance' or by any other valid and collectible insurance."
    (Appellants' App. at 168.) Having determined that CU's insurance applies to the
    underlying lawsuit and that a portion of the damages from the lawsuit are "[n]ot
    covered by any other valid and collectible insurance," we leave to the district court to
    address issues of defense costs in the first instance on remand.5
    III.
    We hold that because the self-insured retention under the USF&G policy is not
    "other insurance," Commercial Union's policy provides coverage for the first
    $200,000 of Payless's liability, and further, that the policies equally contemplated the
    risk. Accordingly, the insurers should pro rate the balance of the settlement. The
    district court's judgment granting summary judgment in favor of Commercial Union
    is reversed, and the case is remanded to the district court for further proceedings not
    inconsistent with this opinion.
    ______________________________
    5
    Given the intricacies involved with Payless's bankruptcy and the lack of a
    developed appellate record on the issue, we also leave to the district court to address
    on remand CU's argument that Payless is not entitled to recoup $200,000 from CU
    because Payless tendered stock in lieu of cash in the settlement of its $200,000
    obligation. (See Appellees' Br. at 23-24.)
    -14-
    

Document Info

Docket Number: 04-1826

Citation Numbers: 430 F.3d 929, 2005 U.S. App. LEXIS 26647

Judges: Murphy, Hansen, Smith

Filed Date: 12/7/2005

Precedential Status: Precedential

Modified Date: 11/5/2024

Authorities (16)

Ed Kraemer & Sons, Inc. v. Transit Casualty Co. , 1987 Minn. App. LEXIS 4160 ( 1987 )

National Union Fire Insurance Co. of Pittsburgh v. Republic ... , 1988 Minn. App. LEXIS 935 ( 1988 )

Andrew L. Youngquist, Inc. v. Cincinnati Insurance Co. , 2001 Minn. App. LEXIS 435 ( 2001 )

McClain v. Begley , 1991 Minn. LEXIS 36 ( 1991 )

Redeemer Covenant Church of Brooklyn Park v. Church Mutual ... , 1997 Minn. App. LEXIS 850 ( 1997 )

CPT Corp. v. St. Paul Fire & Marine Insurance Co. , 1994 Minn. App. LEXIS 424 ( 1994 )

State Farm Mutual Automobile Insurance Co. v. Tennessee ... , 2002 Minn. App. LEXIS 598 ( 2002 )

Interstate Fire & Casualty Co. v. Auto-Owners Insurance Co. , 1988 Minn. LEXIS 285 ( 1988 )

Holmes v. Watson-Forsberg Co. , 1992 Minn. LEXIS 236 ( 1992 )

North Star Mutual Insurance Co v. Midwest Family Mutual ... , 2001 Minn. App. LEXIS 1101 ( 2001 )

Nabisco, Inc. v. Transport Indemnity Co. , 192 Cal. Rptr. 207 ( 1983 )

Wallace v. Tri-State Insurance Co. , 1980 Minn. LEXIS 1644 ( 1980 )

Presley Homes, Inc. v. American States Insurance , 90 Cal. App. 4th 571 ( 2001 )

John A. Dowdle, Jr., M.D. v. National Life Insurance Company , 407 F.3d 967 ( 2005 )

Hertz Corp. v. State Farm Mutual Insurance Co. , 1998 Minn. LEXIS 35 ( 1998 )

Integrity Mut. Ins. v. S. AUTO. & CAS., ETC. , 239 N.W.2d 445 ( 1976 )

View All Authorities »