This opinion will be unpublished and

may not be cited except as provided by

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








Kootenia Homes, Inc.,





Federated Mutual Insurance Company,

d/b/a Federated Insurance,



The Cincinnati Insurance Company,




Filed January 31, 2006


Toussaint, Chief Judge


Washington County District Court

File No. C0-03-4872



Vernle C. Durocher, Jr., Katie C. Pfeifer, Dorsey & Whitney LLP, 50 South Sixth Street, Suite 1500, Minneapolis, MN 55402 (for respondent Kootenia Homes)


Eric J. Strobel, Jennifer S. Kenney, Hinshaw & Culbertson LLP, 222 South Ninth Street, Suite 3100, Minneapolis, MN 55402 (for appellant Federated Mutual)


Douglas R. Archibald, Michael S. Rowley, Terhar, Archibald, Pfefferle & Griebel, 600A Butler Square Building, 100 North Sixth Street, Minneapolis, MN 55403; and


Daniel G. Litchfield, Litchfield Cavo LLC, 303 West Madison, Suite 200, Chicago, IL 60606 (for respondent Cincinnati Insurance)


Timothy J. Hassett, Eric J. Riensche, Felhaber, Larson, Fenlon & Vogt, P.A., 444 Cedar Street, Suite 2100, St. Paul, MN 55101-2136 (Amicus Builders Association of Minnesota)



            Considered and decided by Toussaint, Chief Judge; Stoneburner, Judge; and Huspeni, Judge.*

U N P U B L I S H E D   O P I N I O N

TOUSSAINT, Chief Judge

            Appealing from summary judgment in this insurance-coverage dispute, the Federated Mutual Insurance Company argues that (1) there are disputed issues of material fact concerning whether continuing damages to homes built by respondent Kootenia Homes, Inc., began while Federated insured Kootenia and (2) the district court erred by refusing to allocate damages between Federated and respondent the Cincinnati Insurance Company, Kootenia’s successor insurer.  We affirm.


            Kootenia is a Minnesota corporation that builds homes in the greater Minneapolis area.  Since its inception in 1996, Kootenia has constructed at least 200 homes, including over 100 homes with stucco exteriors.  Kootenia’s primary stucco subcontractor was Lusian Stucco.  The litigation giving rise to this appeal concerned moisture-intrusion damage caused by improper stucco installation in 31 Kootenia homes built between 1996 and 2000. 

From April 1, 1996, through April 1, 2002, Kootenia held commercial general liability (CGL) policies from Federated.  The policy in effect from April 1, 1996 through April 1, 2001, provides, in relevant part, that Federated “will pay those sums that the insured becomes legally obligated to pay as damages because of . . . ‘property damage’ to which this insurance applies.”  “Property damage” is defined, in part, as “[p]hysical injury to tangible property.”  An amendment to the policy in effect from April 1, 2001 through April 1, 2002, entitled “Coverage Limitation – Continuous or Progressive Injury or Damage,” provides: 

This policy does not apply to, and the Company shall have no duty to defend, any claim seeking . . . “property damage” that occurred before the policy period, regardless of whether that . . . “property damage” is also deemed to have occurred during the policy period of this policy.


Federated cancelled the Kootenia policy as of April 1, 2002, at which point Cincinnati became Kootenia’s CGL insurer. 

Between April and December 2002, after Federated’s CGL policy period, Kootenia received reports of moisture intrusion in 12 of the stucco-sided homes it had built.  Because the homes were constructed during Federated’s policy period, Kootenia tendered the complaints to Federated, which hired structural engineer Charles Lane to investigate the homes and determine the presence and provenance of any covered property damage.  Lane concluded that each of the twelve homes was damaged by moisture intrusion, the primary cause of which was “the use of improper materials and improper application of the stucco wall system by the stucco contractor.”  Lane informed Federated that the property damage began shortly after completion of each home, during Federated’s policy periods, and would continue until repaired.  Lane recommended removal of all exterior stucco from each home and replacement pursuant to applicable code and construction criteria.  Adopting Lane’s conclusions, Federated determined that the homes had been damaged within the meaning of the CGL policies and arranged to pay the full cost of repair.

In March 2003, Federated informed Kootenia that as to all pending and future claims, it would henceforth “only provide coverage for repair of property damage that is allocated to periods [Federated] covered [Kootenia],” that is, between April 1, 1996, and April 1, 2002.  Specifically, Federated stated that where “the [water-intrusion] damage began the calendar month after completion [of construction] and continued until the defect was rectified,” it would pay only those repair costs associated with damage occurring between completion of construction and April 1, 2002, and was not liable for any subsequent damages.  Federated suggested that Kootenia contact Cincinnati – as its successor CGL insurer – to obtain coverage for that portion of the repair costs allocated to periods not covered by Federated. 

After March 2003, Kootenia received an additional 19 moisture-intrusion claims concerning homes constructed during the Federated policy period.  In its subsequent investigation of these claims, Federated concluded, as it had done with respect to the 12 previous claims, that the damage due to water intrusion “began to occur shortly after [each] home was closed” and would continue until the repairs were completed.  Federated made this admission in its communications with Kootenia; with the homeowners; to Cincinnati; with stucco subcontractors who were targets of subrogation claims filed or contemplated by Federated; and in internal communications.  Claim records prepared by Federated for its own use designate the date of loss, for the purpose of triggering the damage claim, as the date on which each home closed.  On at least one occasion, in the context of a subrogation claim against a stucco-installation subcontractor, Federated represented to a Minnesota District Court that “the damages described [in the complaint against the subcontractor] occurred from the time the stucco system was installed . . . until repairs were completed.” 

In May 2003, Federated informed Kootenia that because of the April 1, 2001 continuous-coverage-limitation amendment to the CGL policy, it would no longer pay for any damages it allocated to the period after April 1, 2001.  Federated explained its view that the amendment “specifically excludes coverage for the policy period of April 1, 2001 to April 1, 2002, if it is determined that the loss began prior to this policy period, even though it may have continued to run into this policy period.” 

In June 2003, Cincinnati informed Kootenia that it would not indemnify or defend Kootenia for any claims related to moisture intrusion in Kootenia Homes constructed prior to Cincinnati’s policy period.  In refusing the claims, Cincinnati cited policy provisions requiring immediate notice of loss and excluding coverage for claims concerning fungi, bacteria, or exterior wall systems. 

In July 2003, Kootenia filed a declaratory-judgment and breach-of-contract action against both Federated and Cincinnati, seeking defense and indemnification for the moisture-intrusion damage claims.  In February 2004, the district court ordered that discovery proceed solely on the issue of allocation of damages.  All parties moved for summary judgment.  Federated argued that Kootenia could not show that any actual damage to the homes occurred during Federated’s policy period.  In support of this position, it included with its motion the affidavit of Charles Lane taken in June 2004, stating that “there is no way I can opine, with a reasonable degree of scientific certainty, when property damage occurred at the Kootenia homes.” 

The district court granted summary judgment to Kootenia and Cincinnati.  The court first concluded that there were no issues of material fact regarding whether the actual damage to Kootenia homes began within Federated’s policy period, and that Federated’s policy was therefore activated under Minnesota’s actual-injury trigger rule.  Concerning the timing of the damage, the court observed that the record contained numerous admissions by Federated—in the form of internal communications, communications with Cincinnati, Kootenia, homeowners, and potential subrogation targets, as well as reports prepared by Charles Lane—that the property damage began to occur when the homes were completed, well within Federated’s policy period.  The court ruled that Lane’s June 2004 affidavit did not raise any specific facts sufficient to counter Federated’s prior undisputed admissions.  

The court next considered whether the losses should be allocated between Federated and Kootenia, observing that under Minnesota law, if a continuous injury arises from a discrete and identifiable event, the policy on the risk at the time of that event is liable for all the damages.  The court concluded that because the only evidence before it was that the property damage arose from a discrete and identifiable event—the improper application of the stucco—allocation was not appropriate, and Federated must be held solely liable for all damages arising from the improper installation.  This appeal follows.


“On an appeal from summary judgment, [this court asks] two questions:  (1) whether there are any genuine issues of material fact and (2) whether the lower courts erred in their application of the law.”  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  “The district court’s function on a motion for summary judgment is not to decide issues of fact, but solely to determine whether genuine factual issues exist.”  DLH, Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997).  We view the evidence in the light most favorable to the party against whom summary judgment was granted.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).


Federated challenges the district court’s conclusion that the record presented no genuine issues of material fact concerning whether the property damage to Kootenia homes began to occur within Federated’s policy period.  Initially, Federated contends that whether actual damages occurred during a policy period is an “intensely factual issue” that cannot properly be resolved in the context of a motion for summary judgment.  In support, Federated cites Westfield Ins. Co. v. Kroiss for the proposition that whether property damage actually occurred during a policy period is a question of fact to be determined at trial.  694 N.W.2d 102 (Minn. App. 2005), review denied (Minn. June 28, 2005).  But Kroiss does not clearly support this proposition.  In Kroiss, we held that a commercial general-liability insurer owed its insured builders a duty to defend against defective-construction complaints even though the complaints did not specifically allege or provide any evidence that damage occurred during the policy period.  Id. at 106.  On the issue of timing, we concluded that “[w]hether damages in this case actually occurred within the policy coverage period is a question of fact that would have to be determined at a trial.”  Id. at 106-07 (emphasis added). 

            But our observation in Kroiss that the timing of property damages can, in some cases,  present a disputed issue of material fact does not support Federated’s assertion that summary judgment is categorically precluded where the timing of damages is an issue.  And this is not a case, as was Kroiss, in which there is no record evidence tending to establish whether the damage occurred during the policy period.  Indeed, as the district court observed, Federated and its agents, including Charles Lane, have repeatedly and consistently admitted and represented, in internal memoranda, correspondence with other parties, and court filings, that the property damage began shortly after completion of the homes, within the time frame of Federated’s policy.  Federated provides no legal support for its argument that these admissions are without weight because expert testimony is required to demonstrate the timing of damage for the purpose of triggering coverage.   

Federated argues that the district court made an improper factual determination concerning the timing of the damage despite the absence of any evidence to support its fact intensive conclusion that property damage must have occurred at the time of construction.  It is true that “[a] district court's determination of the timing of an . . . injury is a question of fact.”  In re Silicone Implant Ins. Coverage Litigation, 667 N.W.2d 405, 415 (Minn. 2003).  But it does not follow, as Federated asserts, that a district court may never determine that there are no genuine factual issues concerning timing.  This is particularly true where, as here, the record is replete with an insurer’s own admissions concluding that the damage began to occur within its policy periods.  We agree with the district court’s conclusion that Charles Lane’s June 2004 affidavit, in which he stated his inability to “opine, with a reasonable degree of scientific certainty, when property damage occurred at the Kootenia homes,” was not sufficient to counter Federated’s admissions or to create a material issue of fact concerning timing. 


            Federated argues that the district court erred in its application of the law by rejecting the actual-injury rule and by concluding that “‘actual injury’ occurred not when the party was ‘actually injured’ but instead when the negligent act occurred.”  We disagree.

            Where, as here, the policy at issue provides occurrence-based liability coverage, Minnesota applies the “actual-injury” or “injury-in-fact” coverage-trigger rule to determine whether an occurrence activates insurance coverage.  In re Silicone, 667 N.W.2d at 415.  Under that rule, “the time of the occurrence is not the time the wrongful act was committed but the time the complaining party was actually damaged.”  Singsaas v. Diederich, 307 Minn. 153, 156, 238 N.W.2d 878, 880 (1976).  “Thus, under the actual-injury trigger rule, only those policies in effect when the bodily injury or property damage occurred are triggered.”  In re Silicone, 667 N.W.2d at 415.  To trigger a policy, “the insured must show that some damage occurred during the policy period.”  N. States Power Co. v. Fidelity and Casualty Co. of N.Y., 523 N.W.2d 657, 663 (Minn. 1994) (NSP).  “For purposes of the actual-injury trigger theory, an injury can occur even though the injury is not ‘diagnosable,’ ‘compensable,’ or manifest during the policy period as long as it can be determined, even retroactively, that some injury did occur during the policy period.  In re Silicone, 667 N.W.2d at 415 (quotation omitted).   

The district court did not state, as Federated maintains, that the actual injury occurred at the time of the negligent act—the improper installation of the stucco.  Rather, the court, correctly stating the actual-injury rule as applied in Minnesota, wrote that “the time of the occurrence is not the time that the stucco was applied, but when the homeowners were actually damaged.”  The court concluded that the property damage—the moisture intrusion—“began shortly after completion of the homes” (emphasis added); cf. In re Silicone, 667 N.W.2d at 409 (stating that the “actual-injury trigger, for purposes of determining coverage liability, began at or around the time of implantation when silicone first leaked and came in contact with body tissue stimulating the immune system”).  We observe that the district court’s determination that actual damage began to occur shortly after completion of construction was based primarily, if not exclusively, upon Federated’s admissions.

In support of its assertion that the district court erred in applying the actual-injury trigger rule, Federated compares this matter to Singsaas, which held that an insurance policy did not provide coverage where negligent repair of the lift in an elevator occurred during the policy period, while the resulting injury occurred after policy was canceled.  307 Minn. at 155, 238 N.W.2d at 880-81.  Singsaas is inapposite.  In that case, it was undisputed that the actual injury occurred after the policy period; the issue was whether the policy was triggered despite that fact, and the supreme court held that it was not.  Id.  Here, the opposite is true:  the district court concluded that the evidence demonstrated as a matter of law that the actual injury occurred during Federated’s policy period

Finally, the court correctly rejected, as contrary to the actual-trigger rule, Federated’s argument that no damage can be deemed to have occurred before the homeowners learned of the moisture intrusion by means of inspections conducted after Federated’s policy period.  See In re Silicone, 667 N.W.2d at 417 (concluding that injury occurred, and occurrence-based insurance policies were triggered, “at or about the time of implantation,” regardless of whether the injury was diagnosable or even evident during the policy period).



            Federated argues that the district court erred as a matter of law by refusing to apply the doctrine of allocation pro rata by time on the risk to the facts of this case.  Time-on-the-risk allocation was developed in the context of continuous-injury environmental-contamination cases and intends to allocate loss among consecutively liable insurers where the continuous injury cannot be attributed to a discrete and identifiable occurrence.  In re Silicone, 667 N.W.2d at 417-18.  “[A]llocation is meant to be the exception and not the rule because it is only in those difficult cases that allocation is appropriate.”  Id. at 421 (quotation omitted).    

In determining the propriety of applying allocation, we must first determine whether the plaintiff’s injuries are continuous; if they are, we ask “whether the continuous injury arose from some discrete and identifiable event.  If it does, the policies on the risk at the time of that event are liable for all sums arising from the event.  If not, allocation may be appropriate.”  Id.   The “issue of allocation should be raised only if the triggering injury does not arise from discrete and identifiable events.”  Id. at 420 (quotation omitted).  “If we can identify a discrete originating event that allows us to avoid allocation, we should do so.”  Id. at 421-22.  

Here, it is undisputed that the property damage was ongoing and continuous from the time it began.  The determinative issue as to allocation is therefore whether the continuous injury arose from a discrete and identifiable event, that is, whether the injury’s origin can be clearly established.  The district court correctly concluded that it could.  The faulty installation of the stucco here, in a manner analogous to the silicone implantation in In re Silicone, involved “an application of the classic actual-injury trigger rule applied to a continuing injury whose origin can be clearly established.”   Id. at 421.  As the district court observed, the “only evidence before the court is that the moisture intrusion was caused by the improper application of the stucco.”  Similarly, in In re Silicone, the court held that “[t]he implantation . . . is a readily identifiable discrete event from which all of the plaintiffs' alleged injuries arose.”  Id. at 422.   

Federated argues that the damage in this case is analogous to the uncertain, indivisible, continuous damage in environmental-contamination cases.  We disagree, and observe that the indivisibility and indeterminacy of the injury’s origin is the critical issue to allocation, and not the incremental progression of the ongoing damage.  See Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724, 733 (Minn. 1997) (observing that allocation is proper “when it is difficult to determine when an event or occurrence or damage giving rise to legal liability has occurred”) (quotation omitted).  The district court correctly concluded that the installation of the stucco was a discrete and identifiable event, that allocation of losses was not appropriate, and that Federated was liable for all damages resulting from the improper installation of the stucco. 


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