This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2002).







Soo Line Railroad Company,

d/b/a Canadian Pacific Railway,





Brown’s Crew Car of Wyoming, Inc.,

d/b/a Armadillo Express,

Defendant (C1-02-1263),

Appellant (C4-02-1340),


Progressive Casualty Insurance Company,

an Ohio corporation,

Appellant (C1-02-1263),

Respondent (C4-02-1340).


Filed March 11, 2003

Reversed and remanded

Gordon W. Shumaker, Judge


Ramsey County District Court

File No. C7012516



Timothy K. Masterson, Spence, Ricke, Sweeney & Gernes, 600 Degree of Honor Building, 325 Cedar Street, St. Paul, MN 55101 (for respondent Soo Line Railroad Company, d/b/a Canadian Pacific Railway)


Dawn M. Parsons, 4651 Nicols Road, Suite 103, Eagan, MN 55122 (for Brown’s Crew Car of Wyoming, Inc., d/b/a Armadillo Express)


Dale M. Wagner, Bassford, Lockhart, Truesdell & Briggs, P.A., 33 South Sixth Street, Suite 3550, Minneapolis, MN 55402 (for Progressive Casualty Insurance Company)

            Considered and decided by Minge, Presiding Judge, Lansing, Judge, and Shumaker, Judge.

U N P U B L I S H E D   O P I N I O N


In cross-appeals from summary judgments in this declaratory-judgment action, appellant Progressive Casualty Insurance Company challenges the district court’s ruling that insurance-policy exclusions do not apply to preclude coverage for respondent Soo Line Railroad Company.  Appellant Brown’s Crew Car of Wyoming, Inc. challenges the district court’s application of collateral estoppel to bar litigation of an insurance-coverage issue.  Because we hold that a policy exclusion precludes coverage for the Soo Line and that collateral estoppel does not apply, we reverse and remand.


This is a declaratory-judgment action brought by a railroad against an insurance company and a motor-transportation company.  The railroad incurred costs in defending two third‑party lawsuits arising out of personal-injury actions brought by railroad employees.  The railroad contends that both a liability-insurance policy and a separate contract with the transportation company entitle it to reimbursement for costs of defense.

Respondent Soo Line Railroad Company hired Crew Transport Services, Inc. (CTS) to transport train-crew employees as they traveled between railroad yards.  CTS designated Brown’s Crew Car of Wyoming, Inc. to provide motor vehicles and drivers.

Brown’s agreed to obtain automobile-liability insurance covering its transportation services and to include CTS and the Soo Line as additional insureds.  Brown’s also agreed

to indemnify and hold harmless CTS and [the Soo Line] from all claims, demands, costs and expenses including attorney and court costs for any accidents [or] injury * * * [to Soo Line] or their employees.


Brown’s purchased a policy of business automobile-liability insurance from appellant Progressive Casualty Insurance Company.  Through this policy, Progressive agreed to pay all sums an insured legally must pay because of bodily injury caused by an accident resulting from the use of a Brown’s automobile.  Progressive also agreed to defend claims for damages against an insured, but provided that it would “have no duty to defend any ‘insured’” on a claim “to which this insurance does not apply.”  

Progressive’s policy contained exclusions that became issues in this action.  Excluded from coverage and defense obligation were (1) liability that an insured assumed under another agreement, unless the agreement was an “insured contract”; (2) injuries to railroad employees arising out of their employment, unless the employees were domestic employees not entitled to workers’ compensation or benefits under an “insured contract”; and (3) any obligation for which the insured may be held liable under workers’ compensation or “any similar law.”

On August 13, 1997, Soo Line employees Erin Geng and Kaythrine Cooper were passengers in a Brown’s automobile when it was struck by a vehicle driven by Joseph Thielke.  Thielke and his passenger were killed, and Geng and Cooper were injured.

In separate personal-injury lawsuits, Geng and Cooper sued Brown’s, Thielke’s personal representative, and two restaurants at which Thielke had consumed alcohol prior to the accident.  One of the restaurants, Applebee’s, impleaded the Soo Line and Brown’s, seeking contribution or indemnification.

The Soo Line tendered the defense of the third-party actions to Progressive under the liability policy and to Brown’s under the indemnity agreement.  Ultimately, both refused the tender.  The Soo Line defended and incurred legal expenses.  After the personal-injury actions were settled, the Soo Line brought this declaratory-judgment action.

Progressive contended that the policy did not provide coverage for the Soo Line and hence the insurer had no duty to defend the railroad or to pay the railroad’s costs of defense. In a cross-claim against Progressive, Brown’s alleged that Progressive was required to defend the Soo Line in the third-party actions and to defend Brown’s in the declaratory-judgment action.

Progressive moved for summary judgment against both the Soo Line and Brown’s.  Ruling that the Soo Line was an additional insured under Progressive’s policy and that no exclusion applies, the district court denied the motion as to the Soo Line.  As to Brown’s contention that coverage was available under the “insured contract” provision of the liability policy, the court ruled that Brown’s was collaterally estopped from relitigating a prior court ruling that Brown’s indemnification agreement was not an “insured contract.”   Accordingly, the court granted Progressive’s summary-judgment motion against Brown’s.

The Soo Line then moved for summary judgment.  The court granted the motion as to Progressive, holding that the insurer is liable for the expenses the Soo Line incurred in defending the third-party actions and for expenses incurred in the declaratory-judgment action.  The court denied the Soo Line’s motion as to Brown’s.


An appeal from summary judgment raises two questions: (1) are there issues of material fact for trial, and (2) did the district court err in its application of the law?  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  The facts of this action are not in dispute.  Both Progressive and Brown’s dispute the district court’s application of the law.  We review the district court’s interpretation of an insurance policy de novo.  Metro. Prop. & Cas. Ins. Co. v. Miller, 589 N.W.2d 297, 299 (Minn. 1999).  “The question of whether a legal duty to defend or indemnify arises is a legal question subject to de novo review.”  Id. The applicability of collateral estoppel is a mixed question of law and fact that we review de novo.  In re Trusts Created by Hormel, 504 N.W.2d 505, 509 (Minn. App. 1993), review denied (Minn. Oct. 19, 1993).  If collateral estoppel applies, the district court’s application of the doctrine is reviewed for an abuse of discretion.  Saudi Am. Bank v. Azhari, 460 N.W.2d 90, 92 (Minn. App. 1990).

Progressive’s Duty to Defend

An insurer has a duty to defend an insured when the contract “arguably” provides that duty.  Franklin v. W. Nat’l Mut. Ins. Co., 574 N.W.2d 405, 406-07 (Minn. 1998) (citation omitted).  When there is no coverage because of a policy exclusion, the insurer has no duty to defend.  Bobich v. Oja, 258 Minn. 287, 293, 104 N.W.2d 19, 24 (1960).

Progressive does not challenge the district court’s determination that the Soo Line is an additional insured under the liability policy.  Rather, Progressive argues that two exclusions that apply to the Soo Line negate coverage and any duty to defend.

One exclusion in the policy is labeled “Employee Indemnification and Employer’s Liability.”  Under this provision, coverage is excluded for bodily injury to the insured’s employee that arises “out of and in the course of employment by the ‘insured’ * * * .”  It is undisputed that Geng and Cooper were Soo Line employees and were being transported in the scope and course of their employment when they suffered bodily injuries.

The policy provides an exception to the exclusion for certain employees:

But this exclusion does not apply to “bodily injury” to domestic employees not entitled to workers’ compensation benefits or to liability assumed by the “insured” under an “insured contract.” 


Employee exclusions in liability-insurance policies are ordinarily enforceable.  Utica Mut. Ins. Co. v. Emmco Ins. Co., 309 Minn. 21, 29, 243 N.W.2d 134, 139 (1976); Minneapolis, St. Paul & Ste. Marie R.R. Co. v. St. Paul Mercury Indem. Co., 268 Minn. 390, 396, 129 N.W.2d 777, 782 (1964).  The insurer has the burden of showing the applicability of an exclusion.  SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 313 (Minn. 1995).  But the insured has the burden of demonstrating entitlement to an exception to an exclusion.  Id. at 313-14. 

The Progressive insurance policy does not define the term “domestic employees.”  The district court interpreted the term to mean employees within the United States.  Progressive argues that the term refers to household servants and workers.

When interpreting insurance-policy provisions, we must “apply ordinary and usual meanings unless the parties use some other meaning in the contract.”  Polaris Indus. L.P. v. Cont’l Ins. Co., 539 N.W.2d 619, 622 (Minn. App. 1995), review denied (Minn. Jan. 25, 1996).  Ambiguities in insurance policies are to be resolved in the insured’s favor.  Prahm v. Rupp Constr. Co., 277 N.W.2d 389, 390 (Minn. 1979). 

An ambiguity exists if a word or phrase has more than one possible meaning.  Dictionaries define “domestic” as referring to either a household worker or to a resident of a particular country.  See, e.g., The American Heritage Dictionary of the English Language 550 (3d ed. 1992).  But we conclude that the former meaning is the one reasonably intended and understood by the policy language.  The policy language does not limit the exception to “domestic employees,” which would be ambiguous, but rather extends it to “domestic employees not entitled to workers’ compensation benefits * * * .”  This description of a class of employees cures any ambiguity.

In Minnesota, domestic workers, that is, people employed in households, are excluded from workers’-compensation benefits.  See Minn. Stat. § 176.041, subd. 1(n) (2002).  Thus, the sense of the term “domestic employee” is clear when we realize that this type of employee is not entitled to workers’-compensation benefits and therefore needs to rely on coverage under the automobile-liability policy.  To use the term in the sense of a resident or citizen of the United States does not provide clarity, but rather leaves us to speculate as to the meaning and the purpose of the exception.

Furthermore, cases throughout the United States have interpreted the term “domestic employee” to mean household worker.  See United Fire & Cas. Co. v. Gravette, 182 F.3d 649, 655 (8th Cir. 1999) (holding that “domestic” refers to a person who performs services in a private household); Richoux v. Callais & Sons, Inc., WL 10457, at *3 (E.D. La. 1987) (holding that the term “domestic employee” is not an ambiguous term and means a person who works for a private household); Dakota, Minn., & E. R.R. Corp. v. Heritage Mut. Ins. Co., 639 N.W.2d 513, 516 (S.D. 2002) (holding that “domestic servant” means a person whose “labor is directed to the construction, maintenance or repair of the master’s private properties or care of the master’s family.”). 

A few Minnesota cases have defined “domestic employee” in the context of workers’-compensation cases.  The supreme court has held that

the object of the compensation act was to place upon industry, operated for profit, the burden of loss from injuries to employees engaged therein;  that as such it was considered a part of the expense of operating the industry but that the act was not intended to place such burden and expense upon owners of homes not maintained for pecuniary gain.


State v. Cooper, 205 Minn. 333, 335-36, 285 N.W. 903, 904 (Minn. 1939).  In Anderson v. Ueland, the supreme court addressed whether a man who cared for and maintained a home for another person was covered under the workers’-compensation act or was considered a “domestic servant.”  Anderson v. Ueland, 197 Minn. 518, 522, 267 N.W. 517, 519 (1936).  The court held that he was a “domestic servant” because he cared for another’s home.  Id.  In Berger v. Church of St. Patrick, the issue was whether a woman who maintained the priest’s house and church linens/supplies was a domestic servant.  Berger v. Church of St. Patrick, 212 Minn. 345, 348, 3 N.W.2d 590, 592 (1942).  The court found that the woman was a housekeeper and a domestic servant.  Id. at 347, 3 N.W.2d at 592  Also in Eichholz v. Shaft, the court held that “employees who are employed exclusively in the care of the family home and on serving the members” are not intended to be covered by workers’ compensation action.  Eichholz v. Shaft, 166 Minn. 339, 342, 208 N.W. 18, 19 (1926). 

Because Geng and Cooper were not “domestic employees,” the exception to the exclusion does not apply.  As railroad employees who sustained bodily injuries in the scope and course of their employment, Geng and Cooper are excluded from coverage under Progressive’s policy, and the district court’s ruling to the contrary was error and must be reversed.

Because the employee exclusion applies, we need not address the second exclusion on which Progressive relies.  Nor do we need to address the district court’s ruling that the third‑party claims were not asserted by employees and thus cannot be excluded under employee exclusions.  No party argued that ruling on appeal or cited any authority for it.  See Melina v. Chaplin, 327 N.W.2d 19, 20 (Minn. 1982) (holding issues not argued in briefs must be deemed waived).  Furthermore, the third‑party plaintiff did allege that the Soo Line was negligent and that the negligence caused the employees’ injuries.  Thus, the third‑party claims were inextricably tied to the employees’ claims.

Applicability of Collateral Estoppel

Progressive’s policy contains an exclusion from coverage for liability that an insured has assumed under a separate contract or agreement.  However, the policy provides an exception to the exclusion for an “insured contract,” namely, a contract pertaining to the insured’s business “under which you assume the tort liability of another to pay for ‘bodily injury’ * * * to a third party or organization.”

Brown’s contends that its agreement to indemnify CTS and the Soo Line for “all claims, demands, costs and expenses including attorney and court costs” for accidents and injuries to Soo Line employees is an “insured contract” and is excepted from the exclusion.

The district court ruled that Brown’s indemnity agreement “is a qualifying ‘insured contract’,” and, therefore, “Brown’s Crew Car’s duty to reimburse Soo Line’s defense costs is covered under Progressive’s Policy.”  But then the court ruled that, because the issue of whether Brown’s agreement is an insured contract previously had been decided against Brown’s, Brown’s is collaterally estopped from relitigating that issue in the present action.

In a prior federal declaratory-judgment action, the district court was asked to determine whether Brown’s indemnity agreement was an insured contract under Progressive’s policy.  Progressive Cas. Ins. Co. v. Brown’s Crew Car of Wy., Inc., 27 F. Supp.2d 1288, 1293 (D. Wy. 1998).  Brown’s, CTS, and Progressive were parties to that action, but the railroad involved was the Union Pacific.  The district court ruled that the issue in dispute was Brown’s contractual obligation to pay defense costs and that such an obligation does not come within the definition of insured contract.  The court noted, however, that if the issue were that of Brown’s assumption of the railroad’s tort liability, “the Court may very well find that the CTS/Brown Contract was an ‘insured contract’ under the Policy’s terms.”  Id.

In its complaint in this declaratory-judgment action, the Soo Line alleged that Brown’s was required to indemnify the railroad for the injured employees’ claims, which were tort claims.  Holding that Brown’s indemnity agreement was an “insured contract,” the Minnesota district court in its summary-judgment order stated: “It is an agreement by Brown’s Crew Car to ‘assume the tort liability’” of the Soo Line for bodily-injury claims.

Collateral estoppel applies when four factors are present:

1.         The issue is identical to the issue in a prior adjudication.


2.         There was a final judgment on the merits.


3.         The estopped party was a party in the prior action or.

was in privity with such a party; and


4.         The estopped party was given a full and fair opportunity

to be heard on the adjudicated issue.


Nelson v. Am. Family Ins. Group, 651 N.W.2d 499, 511 (Minn. 2002).

The only question now is whether the issues regarding the insured contract were identical in both actions.  The federal court drew a distinction between a contractual obligation to pay defense costs and an agreement to assume another’s tort liability, and ruled that the former was not, but the latter would likely be, an insured contract.  Progressive Cas. Ins. Co., 27 F. Supp.2d at 1293.  The Minnesota district court seemed to focus its decision on Brown’s agreement to assume the Soo Line’s tort liability.

Although the issues are similar and arise out of the same indemnity contract, the respective courts’ legal perspectives were different.  We cannot conclude from the record that the courts were deciding identical issues, and we are guided by the supreme court’s pronouncement about applying collateral estoppel to bar litigation:

Courts do not apply collateral estoppel rigidly and focus instead on whether an injustice would be worked upon the party upon whom the estoppel is urged.


Nelson, 651 N.W.2d at 511.

Other Minnesota courts have addressed the “identical issue” element of collateral estoppel.  In Am. Hoist & Derrick Co. v. Employers’ of Wausau, this court was asked to interpret the coverage of American Hoist’s insurance policy with Employers’ of Wausau. Am. Hoist & Derrick Co. v. Employers’ of Wausau, 454 N.W.2d 462, 464-65 (Minn. App. 1990), review denied (Minn. June 26, 1990).  Employers’ of Wausau argued that American Hoist was not covered by the policy; American Hoist argued that Employers’ of Wausau was collaterally estopped from arguing this issue because Employers’ of Wausau had already litigated the meaning of this specific provision in a Kentucky litigation.  Id. at 468.  This court held that Employers’ of Wausau was not collaterally estopped from arguing this specific policy-coverage provision because the policy in the Kentucky case contained the language “the amount available” while this case’s provision stated “the amount afforded” and that these different words create different issues.  Id.  Thus, collateral estoppel did not apply.

            In Haavisto v. Perpich, the supreme court found that collateral estoppel did not apply because different issues were raised.  Haavisto v. Perpich, 520 N.W.2d 727, 732 (Minn. 1994).  In Haavisto, a prisoner had claimed that a seven-month delay in diagnosing his tuberculosis constituted cruel and unusual punishment.  In a previous federal class-action suit involving the prisoner, the class of prisoners claimed that the prison’s negligent response to a tuberculosis outbreak in the prison violated the inmates’ constitutional rights.  Id.  The supreme court found that the issues in the federal class action and Haavisto case were not identical because in the class action the federal court did not address the issue of the individual officials’ constitutional wrongdoing.  Id.

Finally, Brown’s argues that the district court has already decided that the indemnity agreement is an insured contract, and, thus, if collateral estoppel does not apply, Brown’s is entitled to coverage.  This conclusion appears to be supported by the court’s summary-judgment order, but, because the court did apply collateral estoppel, the ruling necessarily was dictum.  Accordingly, this matter must be remanded to allow the court to determine whether or not there has been full litigation of the question of whether the agreement is an insured contract.  If that issue has been fully litigated, the court can order summary judgment consistent with the ruling that would have been dispositive but for the estoppel.  If it has not, the parties must be given an opportunity to fully litigate the issue.

Reversed and remanded.