This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).







Acceptance Insurance Company,





Ross Contractors, Inc.,

Respondent (A04-2102), Appellant (A04-2226),


Charles D. Nolan & Sons, Inc.,



Century Surety Company,



Evanston Insurance Company,



Filed August 9, 2005

Reversed and remanded

Gordon W. Shumaker, Judge


Hennepin County District Court

File No. 04-00879



Richard J. Chadwick, Chadwick & Mertz, P.S.C., 600 West 79th Street, Suite 210, P.O. Box 623, Chanhassen, MN 55317 (for respondent Acceptance Insurance Company)


Richard P. Mahoney, Victor E. Lund, Mahoney, Dougherty & Mahoney, P.A., 801 Park Avenue, Minneapolis, MN 55404 (for appellant Ross Contractors)


Thomas H. Boyd, John C. Holper, Winthrop & Weinstine, P.A., 225 South Sixth Street, Suite 3500, Minneapolis, MN 55402-4629 (for appellant Charles D. Nolan & Sons, Inc.)


Dale M. Wagner, Matthew J. Franken, Bassford Remele, P.A., 33 South Sixth Street, Suite 3800, Minneapolis, MN 55402-3707 (for respondent Century Surety Company)


Jeffrey M. Thompson, Erica Gutmann Strohl, Meagher & Geer, P.L.L.P., 33 South Sixth Street, Suite 4200, Minneapolis, MN 55402 (for respondent Evanston Insurance Company)


            Considered and decided by Shumaker, Presiding Judge; Minge, Judge; and Crippen, Judge.*

U N P U B L I S H E D   O P I N I O N


            Appellant Charles D. Nolan & Sons, Inc., the plaintiff in the underlying action, and appellant Ross Contractors, Inc., the defendant-insured in the underlying action, argue that the district court erred in this declaratory-judgment action by granting summary judgment in favor of respondents Acceptance Insurance Company and Century Surety Company.  Because there are genuine issues of material fact, we reverse and remand.


A.         Underlying action

            Charles D. Nolan & Sons, Inc. (Nolan) owns and operates the E-Z Mini Storage facility in Minneapolis.  Ross Contractors, Inc. (Ross) is a California corporation.  In 1998, Charles Nolan, Jr. decided that the facility’s flat deck roof needed replacement and he contacted Ross, which had previously repaired roofs for Nolan.  Ross agreed to replace the roof by installing a new roof over the existing roof.  The parties did not have a written contract.

            Duane Jones, who was characterized by the parties as either Ross’s employee or a subcontractor, and his crew performed most of the work on the roof.  Work began in December 1998 and proceeded intermittently because of bad weather.  As a result of the construction, the old roof leaked, causing damage that Nolan remedied.  The new roof was completed in fall 1999.

            In February 2000, Nolan discovered that the new roof was leaking and contacted Ross.  By March 2000, the leaks had increased and Nolan again contacted Ross.  Nolan took steps to correct the roof defects and remedy damage to the facility and to its tenants’ belongings.  Nolan ultimately decided that the roof had to be replaced because of the construction defects.

            Nolan sued Ross, alleging breach of contract and negligence, and the case was tried to a jury.  The jury rendered a verdict in favor of Nolan, finding breach of contract and negligence by Ross.  It awarded damages as follows:  (1) $13,365.58 for damages related to leaks through the old roof during construction; (2) $119,707.79 for amounts Nolan spent in an effort to salvage the new roof and mitigate damages; (3) $800,000 for the costs of repair or replacement of the roof; and (4) $174,619.34 for Nolan’s lost profits.

B.         Insurance

            Acceptance Insurance Company insured Ross under a commercial general-liability policy from May 5, 1998, to May 5, 2000.  Century Surety Company insured Ross under a commercial general-liability policy from May 5, 2000, to May 5, 2001, as well as under a commercial excess-liability policy from September 20, 2000, to May 1, 2001.  Evanston Insurance Company insured Ross under a commercial general-liability policy from May 5, 2001, to May 5, 2003.

            Acceptance brought this declaratory-judgment action to determine coverage under the policies issued to Ross by Acceptance, Century, and Evanston.  The district court granted summary judgment in favor of the insurers, concluding that there was no coverage.  Ross and Nolan appeal the decision as to Acceptance and Century.  They do not challenge the decision granting summary judgment to Evanston.


            On appeal from summary judgment, a reviewing court asks whether there are any genuine issues of material fact and whether the district court erred as a matter of law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).

                        Summary judgment is a “blunt instrument” and should not be employed to determine issues which suggest that questions be answered before the rights of the parties can be fairly passed upon.  It should be employed only where it is perfectly clear that no issue of fact is involved, and that it is not desirable nor necessary to inquire into facts which might clarify the application of the law.


Donnay v. Boulware, 275 Minn. 37, 45, 144 N.W.2d 711, 716 (1966) (citation omitted).  “The interpretation of an insurance policy is a question of law reviewed de novo.”  Wanzek Constr., Inc. v. Employers Ins. of Wausau, 679 N.W.2d 322, 324 (Minn. 2004).

            “General principles of contract interpretation apply to insurance policies.”  Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn. 1998).  Absent ambiguity, the language must be given its usual and accepted meaning.  Bobich v. Oja, 258 Minn. 287, 294, 104 N.W.2d 19, 24 (1960).  Contracts must be construed to give effect to the intent of the parties.  Id.  Endorsements and the policy must be construed together to give full effect to all provisions.  Id. at 294-95, 104 N.W.2d at 24.  “Exclusions in a policy or endorsements are as much a part of the contract as other parts thereof and must be given the same consideration in determining what is the coverage.”  Id. at 295, 104 N.W.2d at 24-25 (footnote omitted).

            The policies at issue are commercial general-liability (CGL) policies.  Under a CGL policy, the insurer provides coverage “for tort liability for physical damages to others and not for contractual liability of the insured for economic loss because the product or completed work is not that for which the damaged person bargained.”  Roger C. Henderson, Insurance Protection for Products Liability and Completed Operations -  What Every Lawyer Should Know, 50 Neb. L. Rev. 415, 441 (1971), quoted in Wanzek, 679 N.W.2d at 325.  The extent to which a CGL policy covers a business risk “must be determined by the specific terms of the insurance contract” rather than the general principles of the business-risk doctrine.  Wanzek, 679 N.W.2d at 327.

1.         Occurrence

            To establish coverage, Ross, the insured, had to show that there was an “occurrence” resulting in “property damage” within a particular policy period.  The district court ruled that the property damage sustained in Nolan’s building constituted an occurrence under Ross’s CGL policies.[1]

            Century argues that there was no occurrence under the policy, but it did not file a notice of review.  A respondent may obtain review of issues decided adversely to it by filing a notice of review.  Minn. R. Civ. App. P. 106.  But a respondent is barred from presenting such issues if it does not file a notice of review.  Arndt v. American Family Ins. Co., 394 N.W.2d 791, 793 (Minn. 1986).  Consequently, the issue is not properly before this court.  Olson v. Lyrek, 582 N.W.2d 582, 584 n.1 (Minn. App. 1998) (providing that issue not raised in notice of review not properly before court), review denied (Minn. Oct. 20, 1998).

2.         Exclusion b

            We next analyze the contractual liability exclusion b, which reads as follows:

                        “Bodily injury” or “property damage” for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement.  This exclusion does not apply to liability for damages:


                                    (1)  That the insured would have in the absence of the contract or agreement . . . .


(Emphasis added.)

            The district court found that Ross entered into an agreement with Nolan to provide a new roof, including designing and installing it in a workmanlike manner.  The district court ruled under exclusion b that, to the extent that Nolan’s damages resulted from Ross’s breach of contract, Century and Acceptance had no indemnification obligation.

            Exclusion b does not preclude coverage for liabilities arising out of the underlying contract into which the parties entered.  2 Allan D. Windt, Insurance Claims and Disputes:  Representation of Insurance Companies and Insureds § 11.7 at 379 (4th ed. 2001).  That interpretation would render the term “by reason of the assumption of liability in a contract or agreement” superfluous.  American Family Mut. Ins. Co. v. American Girl, Inc., 673 N.W.2d 65, 80-81 (Wis. 2004).  Instead, as is generally agreed, “the contractually-assumed liability exclusion applies where the insured has contractually assumed the liability of a third party, as in an indemnification or hold harmless agreement.”  Id. at 81.  Here, there is nothing in the record to show the existence of such an agreement, and the district court erred as a matter of  law in ruling that exclusion b applies.

3.         Exclusion j(5)

            The next issue concerns exclusion j(5), which excludes “‘property damage’ to . . . [t]hat particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations . . . .”  (Emphasis added.)  “As a general rule, this exclusion has been applied to preclude coverage for damages to particular real property resulting from or arising out of the insured’s operations.”  4 Philip L. Bruner & Patrick J. O’Connor, Jr., Bruner and O’Connor on Construction Law, § 11:43, at 136 (2002). 

            The district court ruled that this clause includes all property damage incurred while the roof was under construction.  The court held that “[t]o the extent Nolan’s damages are ‘property damage’ due to Ross’s construction work or any related work performed incorrectly,” the insurers had no indemnification obligation.  The district court did not specify the precise damages to which it applied this exclusion.

            The phrase “are performing operations” applies only to damages that occurred while the defendant worked on the property of the plaintiff.  Action Auto Stores, Inc. v. United Capitol Ins. Co., 845 F.Supp. 428, 435 (W.D. Mich. 1993).  As Nolan and Ross acknowledge and Acceptance and Century assert, exclusion j(5) precludes Acceptance and Century’s indemnification obligation to Ross with respect to the $13,365.68 in damages for property damage that Nolan sustained during construction as a result of the failure to properly secure the old roof.

            Apart from those damages, the parties dispute the reach of the district court’s order and the extent to which it applies to the other damages assessed by the jury.  Nolan argues that the district court improperly disregarded the timing of the property damage and applied exclusion j(5) to exclude the indemnification obligation for the damages, including the costs of replacing the new roof, the lost rent, and the mitigation costs to prevent damage to the facility, which occurred after the completion of the project.  Ross contends that exclusion applied only to the $13,365.68 and that the district court failed to determine the extent to which the exclusion applied.  Acceptance argues that the damages of $119,707.79, the amount spent by Nolan in an effort to salvage the new roof and mitigate damages, were caused by design and installation defects during construction and thus are excluded under j(5), although the amount was paid after the completion of the construction.  We hold that while it is undisputed that exclusion j(5) excludes liability for the damages of $13,365.68, there is a genuine fact question as to which additional damages, if any, the exclusion applies.

4.         Exclusion j(6)

            The next issue concerns the application of exclusion j(6), which excludes property damage to “[t]hat particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it.”[2]  The purpose of “exclusion j(6) is to preclude coverage for the costs to repair or replace particular work discovered while the insured is still performing its work.”  See 4 Bruner & O’Connor, supra, § 11:44, at 145 (footnote omitted).  The district court held that “[t]his clause would include all ‘property damage’ incurred while the roof was under construction,” and that “[t]o the extent Nolan’s damages are ‘property damage’ due to Ross’s construction work or any related work performed incorrectly,” the insurers have no indemnification obligation.  The district court did not rule on the applicability of the products-completed operations hazard exception. 

            Nolan and Ross assert that exclusion j(6) does not apply because an exception to the exclusion for “products-completed operations hazard” applies.  The district court did not rule on the applicability of the exception, which necessarily must be resolved.  This exception includes all bodily injury and property damage “occurring away from premises you own or rent and arising out of ‘your product’ or ‘your work,’” with the exception of products still in the insured’s possession or work not yet completed.  See, e.g., Am. Girl, 673 N.W.2d at 82 (concluding exception to exclusion applied where damage to property occurred after work had been completed on project).  “Thus, if the claim arises from defective work that is discovered after the contractor has completed its work, exclusion j(6) does not apply.  The industry, instead, relies upon other exclusions to address situations involving latent defective work.”  4 Bruner & O’Connor, supra, § 11:44, at 145.

            The “products-completed operation hazard” exception to the exclusion could apply because (1) the damage to the facility occurred away from the premises owned or rented by Ross; (2) the damage arose out of Ross’s work on the roof; (3) the product is no longer in Ross’s possession; and (4) work on the roof was completed before the defects were discovered.  But, again, we determine that summary judgment is precluded because there must be a factual context to address the applicability of this exception to exclusion j(6).  See Donnay, 275 Minn. at 45, 144 N.W.2d at 716 (holding that summary judgment is not appropriate when it is desirable or necessary “to inquire into facts which might clarify the application of the law”).

5.         Exclusion l

            We now address exclusion l, which excludes coverage for:

                        “Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.”


                        This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.


(Emphasis added.)  “Your work” is defined as “(a) Work or operations performed by you or on your behalf; and (b) Materials, parts or equipment furnished in connection with such work or operations.”  The term “subcontractor” is not defined in the policies.

            At issue is whether Duane Jones, who, with his crew, performed the work that resulted in the damage, is a subcontractor or Ross’s employee.  The district court ruled that, apart from mere assertions that Jones was a subcontractor, the facts surrounding his tenure with Ross Construction were undisputed, and the court determined that, as a matter of law, he was a Ross employee.  The court concluded that, because the work was not performed by a subcontractor, the insurers had no indemnification obligation under exclusion l.

            The subcontractor exception to exclusion l applies “to damages to the insured’s own work that arise out of the work of a subcontractor.”  O’Shaughnessy v. Smuckler Corp., 543 N.W.2d 99, 104-05 (Minn. App. 1996) (meaning of subcontractor not in dispute), review denied (Minn. Mar. 28, 1996).  When there is no statutory or regulatory definition of subcontractor in the exclusion or policy, the term is ambiguous and must be liberally construed in favor of coverage.  Wanzek, 679 N.W.2d at 329 (holding that custom supplier who fabricated materials to owner’s specifications and provided on-site service met definition of subcontractor).

            Here, Nolan and Ross argue that Jones was not an employee because he was an independent contractor.  The question of whether a worker is an employee or an independent contractor may present a fact issue; if the facts are undisputed, the question becomes one of law. Wise v. Denesen Insulation Co., 387 N.W.2d 477, 479 (Minn. App. 1986) (raising issue in unemployment-compensation context).  The generally accepted test in Minnesota to determine whether an employee agreement exists or whether the worker is an independent contractor is as follows:  “(1) The right to control the means and manner of performance; (2) the mode of payment; (3) the furnishing of material or tools; (4) the control of the premises where the work is done; and (5) the right of the employer to discharge.”  Guhlke v. Roberts Truck Lines, 268 Minn. 141, 143, 128 N.W.2d 324, 326 (1964) (addressing issue in worker’s compensation context) (footnote omitted).  “[T]he most important factor considered in light of the nature of the work involved is the right of the employer to control the means and manner of performance.”  Id. (footnote omitted).

            While the district court found the dispositive facts undisputed and ruled that Jones was an employee as a matter of law, we cannot agree.  Admittedly, the most persuasive facts do support a determination that Jones was an employee.  But to arrive at that conclusion, contrary facts must be rejected, and that is not properly the function of the district court in resolving a summary-judgment motion.

6.         Exclusion cc and independent-contractors’ insurance

            Century next argues that even if Jones were not an employee of Ross, coverage would be excluded under Century’s policy by exclusion cc, which provides:

                                    cc.       Independent Contractors.  It is agreed that this insurance does not apply to . . . “property damage” arising out of:

                                    (1)  the acts or omission of independent contractors while working on behalf of any insured . . . .


The district court did not rule on the applicability of exclusion cc.  This court will not consider issues not decided by the district court, even if the issue was raised below.  Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (holding that reviewing court will not consider issues raised below if not decided by district court).

            Century also argues that under endorsement 1504, the insured can avoid applicability of the independent-contractor exclusion by requiring its independent contractors to provide evidence that they have their own insurance.  It argues that, had Ross truly considered Jones to be a subcontractor, it could have merely required that Jones provide such proof of insurance.  Then the subcontractor exception would apply and exclusion cc would be inapplicable.  While Century raised this in its summary-judgment motion, the district court did not rule on it and, consequently, we will not address it.  Id. 

            Likewise, Acceptance argues that under the contractors’ special-conditions endorsement, certificates of insurance must be provided by independent contractors.  That provision states that while failure to comply does not alter coverage, in that event independent contractors will be considered employees and a premium charge will be assessed accordingly.  The district court did not apply this provision either, and we decline to reach it.

7.         Exclusion m

            Exclusion m excludes coverage for damage to impaired property.  It provides that the following is excluded from coverage:

                        “Property damage” to “impaired property” or property that has not been physically injured, arising out of:


                        (1) A defect, deficiency, inadequacy or dangerous condition in “your product” or “your work”; or


                        (2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.


                        This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to “your product” or “your work” after it has been put to its intended use.


Impaired property is defined as:

                        [T]angible property, other than “your product” or “your work,” that cannot be used or is less useful because:


                        a.  It incorporates “your product” or “your work” that is known or thought to be defective, deficient, inadequate or dangerous; or


                        b.  You have failed to fulfill the terms of a contract or agreement;


                        if such property can be restored to use by:


                        a.  The repair, replacement, adjustment or removal of “your product” or “your work”; or


                        b.  Your fulfilling the terms of the contract or agreement.


The district court held:  “To the extent that Nolan’s property has been impaired by the deficiencies in Ross’ design and construction of the new metal roof, such damage is excluded from coverage” and the insurers do not have indemnification obligations.  Although we believe this exclusion may apply, there is a fact issue as to precisely which property was impaired, making summary judgment inappropriate.

8.         Exclusion n

            Exclusion n refers to recall of products, work, or impaired property.  It excludes:

                        Damages claimed for any loss, cost or expense incurred by you or others for the loss of use, withdrawal, recall, inspection, repair, replacement, removal or disposal of:


                        (1) “Your product”;


                        (2) “Your work”; or


                        (3) “Impaired property”;


                        if such product, work, or property is withdrawn or recalled from the market or from use by any person or organization because of a known or suspected defect, deficiency, inadequacy or dangerous condition in it.


The district court ruled that, “[t]o the extent Ross’ work on the Project must be replaced, removed, disposed of or has been the cause of claims for loss of use because of defects, deficiencies and inadequacies, such damages are excluded from coverage.”

            Neither Acceptance nor Century addressed exclusion n in their summary-judgment submissions.  A district court may sua sponte grant summary judgment if it could do so on a motion from a party, unless the objecting party can show prejudice from lack of notice or lack of a meaningful opportunity to oppose it.  Estate of Riedel v. Life Care Retirement Cmtys. 505 N.W.2d 78, 81 (Minn. App. 1993).  When the insurers did not assert this exclusion and when Nolan and Ross would have opposed it buthad no opportunity to do so, to their prejudice, the district court should not have granted summary judgment on exclusion n.

9.         Exclusions a and w

            The district court made several rulings applicable to Century’s policy only.  First, it ruled that because the Century policy did not go into effect until May 5, 2000, and Ross received written notice of the construction defects in February 2000, the Century policy excluded coverage under its policy exclusion a for “[e]xpected or intended injury.”  Exclusion a states that the policy’s coverage does not apply to “‘property’ damage expected or intended from the standpoint of any insured.”  The district court further ruled that expected or preexisting damages were also excluded from coverage under Century’s exclusion w, which provides for the exclusion of coverage for any damages of which the insured had knowledge prior to the effective date of the policy even if the “occurrence” or “property damage” continues during the policy period.  The court determined that Ross was on notice that the property damage was occurring before the commencement of the Century policy and that because such damage was expected by Ross, it was not covered.

            Although these exclusions appear to apply, fact issues remain as to what Ross knew and when he knew it.  Consequently, summary judgment is inappropriate.

10.       Exclusion x

            Century policy exclusion x, the professional-liability exclusion, excludes coverage for property damage that would not have occurred but for the rendering or failure to render certain professional services, including “preparing, approving, or failing to prepare or approve maps, plans, drawings, opinions, reports, surveys, soil reports, change orders, designs or specifications” or “[i]nspection, construction management, or engineering services.”  The district court ruled that to the extent that Nolan’s damages were the result of Ross’s design of the roof system, or its failure to provide proper construction-management, inspection, or engineering services, such damages are not covered by the policy.

            Nolan argues that Century did not cite or address this exclusion and that the district court erred in relying on exclusion x.  Century did, however, raise exclusion x in its summary-judgment motion.  Nolan argues that even if Century had addressed the exclusion, it did not limit coverage because the Century policy did not define professional services and the exclusion should be construed liberally in favor of Ross.  We hold that the applicability of this exclusion again raises fact issues as to what the professional services were.

            The district court’s grant of summary judgment as to Acceptance and Century is reversed, and the matter is remanded to the district court for further proceedings as may be appropriate.

            Reversed and remanded.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[1] The language of the policy provisions that Acceptance and Century assert is identical.

[2] Although the district court applied exclusion j(6) to both insurers, Century did not assert it, and this analysis will be applied only to Acceptance.