This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
Westchester Fire Insurance Company, et al.,
Continental Casualty Company,
Hennepin County District Court
File No. CT 03-010121
Keith J. Kerfeld, Chad D. Dobbelaere, Tewksbury Kerfeld & Zimmer, 88 South Tenth Street, Suite 300, Minneapolis, MN 55403; and
Jonathan Schapp (pro hac vice), Lustig & Brown, LLP, 400 Essjay Road, Suite 200, P.O. Box 9077, Buffalo, N.Y. 14221-8228 (for respondents)
Eric J. Magnuson, Stephen O. Plunkett, Rider Bennett, LLP, 33 South Sixth Street, Suite 4900, Minneapolis, MN 55402 (for appellant)
Considered and decided by Minge, Presiding Judge; Randall, Judge; and Crippen, Judge.*
U N P U B L I S H E D O P I N I O N
On appeal from summary judgment finding that respondent company was an additional insured under policies issued by appellant insurer and that appellant’s coverage was primary, appellant argues that the district court erred in finding (a) respondent company was an additional insured under the lessor of leased equipment endorsement, where respondent was not the lessor of the cranes and where it failed to establish that the accident arose out of the general contractor’s use of the crane; (b) respondent was an additional insured under the blanket additional insured endorsement, where respondent failed to establish an agreement that it be made an additional insured and failed to present evidence that the general contractor was performing work for respondent at the time of the accident; (c) in finding that appellant’s coverage was primary to the coverage provided by respondent insured to respondent company; and (d) respondent was entitled to coverage under the umbrella policy. We conclude that respondent is entitled to coverage under the blanket additional insured endorsement. Affirmed.
In the spring of 1998, Ryan Companies U.S.,
Inc. (Ryan) was hired to act as the general contractor for the
On December 2, 1998, two employees of Hunt Electric Company (Hunt Electric), Darryl Hilgendorf and Steven Marschel, were accidentally killed while working on the project. At the time of the accident, Tim Dalzell, an employee of Sowles, was directing Don Vandermey, an employee of Ryan who was operating a crane, to lift to the eighth floor a several thousand pound bolt bin that had been designed by Sowles for the project. Because the building’s elevator core obstructed Vandermey’s view, limiting his ability to see the work area, Dalzell instructed Vandermey by radio where to place the bolt bin. Relying on Dalzell’s directions, Vandermey placed the bolt bin between the structural beams on the decking next to a decking seam, despite the fact that the bolt bin had been designed by Sowles to rest across two structural beams.
After the bolt bin was placed on the eighth floor, Dalzell instructed Vandermey to lift a steel column into position on the eighth floor. The column, which had previously been stored on the eighth floor in the horizontal position, was lifted into a vertical position. As the column was being lifted, its supporting structure, called dunnage, failed, allowing the column to puncture the decking. The column then damaged a beam, which caused the decking to fail and the bolt bin to fall through a separation in the decking. Hilgendorf and Marschel were working on the sixth floor of the building and were crushed by the falling bin.
As a result of the accident, Sowles and Ryan conducted investigations to determine what had occurred and what had caused the accident. Both companies determined that neither Vandermey nor any other Ryan employee had acted negligently. Instead, investigators determined that a combination of three things caused the accident: (1) the decking on the eighth floor had only been tack-welded; (2) there was inadequate dunnage, constructed by Sowles, to support the column as it was being lifted to an upright position; and (3) the bolt bin was improperly placed on the eighth floor at the direction of Dalzell.
The families of Hilgendorf and Marschel, as well as the workers’ compensation carrier, presented claims against Sowles, seeking payment and reimbursement for the accidental deaths. At the time of the accident, Sowles was insured by USF&G for general liability with a limit of $1 million per occurrence. Sowles also carried excess insurance with respondent Westchester Fire Insurance Company with a limit of $20,000,000 per occurrence. Ryan was insured at the time of the accident under insurance policies issued by appellant Continental Casualty Company (Continental) for both commercial general liability with limits of $1,000,000 per occurrence, and commercial umbrella liability with limits of $24,000,000 per occurrence.
In November 1999, Sowles and its carriers settled the
Hilgendorf claim for $2,075,000. A few
months later, Sowles and its carriers settled the Marschel claim for $2
million. USF&G assumed
responsibility for making all workers’ compensation payments on behalf of Hunt
Electric, and in return for USF&G’s payments, Hunt Electric and its insured,
Transportation Insurance Company (Transportation), assigned to Sowles and
Westchester their rights of subrogation pursuant to Minn. Stat. § 176.061
(2004). Sowles and
In March 2001, Sowles and
D E C I S I O N
Summary-judgment motions are granted
when the pleadings, depositions, answers to interrogatories, and admissions,
together with any affidavits, show that there is no genuine issue of material
fact and a party is entitled to judgment as a matter of law. Fabio v. Bellomo, 504 N.W.2d 758, 761 (
Continental argues that the district court erred in concluding that Sowles was an additional insured under the lessor of the leased equipment endorsement. Continental’s Commercial General Liability policy provides in relevant part:
COVERAGE A. BODILIY INJURY AND PROPERTY DAMAGE LIABILTY
1. Insuring Agreement
a. We will pay those sums that the insured becomes
legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies . . . .
The policy contains an endorsement entitled “ADDITIONAL INSURED – LESSOR OF LEASED EQUIPMENT,” which provides:
WHO IS AN INSURED (Section II) is amended to include as an insured the person(s) or organization(s) shown in the Schedule, but only with respect to their liability arising out of the maintenance, operation or use by you of equipment leased to you by such person(s) or organization(s), subject to the following exclusions:
This insurance does not apply:
1. To any “occurrence” which takes place after the equipment lease expires;
2. To “bodily injury” or “property damage” arising out of the sole negligence of the person or organization shown in the Schedule.
It is undisputed that neither party could produce a schedule, nor is there any evidence of record that a schedule ever existed.
At issue is the Crane Rental Agreement. The first page of the rental agreement identifies Northwest as the “lessor,” and Ryan as the “lessee.” The agreement goes on to provide in paragraph nine that:
INDEMNITY AND INSURANCE: Lessee shall defend, indemnify and hold forever harmless Lessor, L.H. Sowles Co. and their officers, agents, and employees from against all loss, liability and expense by reason of any violation of any rule, regulation or law, by reason of bodily injury including death, and property damage, sustained by any person or persons, including but not limited to Lessee’s employees, as a result of the maintenance, use, operation, and on site storage, of Equipment. In addition, Lessee shall maintain insurance covering the aforesaid risks in a company acceptable to Lessor protecting Lessor and Lessee to the limits of Five Million Dollars ($5,000,000.00) for each person and Five Million Dollars ($5,000,000.00) for each accident or occurrence, and One Million Dollars ($1,000,000.00) for property damage in each accident or occurrence, or Five Million Dollars ($5,000,000.00) Combined Single Unit. Lessee shall also maintain in effect insurance against all risks of physical damage to or loss of Equipment to the agreed value of Equipment (2d) naming lessor as a loss payee thereunder.
A. Leased Equipment Endorsement
Continental asserts that under the Lessor of Leased Equipment Endorsement, the insured is the person or entity that leases the equipment to the policyholder. Continental argues that because Northwest, and not Sowles, was the lessor of the crane, Sowles is not an insured under the Lessor of Leased Equipment Endorsement.
An insurance policy must be
construed as a whole, and unambiguous language must be given its plain and
ordinary meaning. Henning Nelson
Constr. Co. v. Fireman’s Fund Am. Life Ins. Co., 383 N.W.2d 645, 652 (
Here, the Crane Rental Agreement initially identifies Northwest as the lessor of the crane. But the first sentence of paragraph nine of the rental agreement states: “INDEMNITY AND INSURANCE: Lessee shall defend, indemnify and hold forever harmless Lessor, L.H. Sowles Co. and their officers, agents, and employees from against all loss, liability and expense . . . .” The next sentence of paragraph nine provides that “[i]n addition, Lessee shall maintain insurance covering the aforesaid risks in a company acceptable to Lessor protecting Lessor and Lessee . . . .” These two provisions are unambiguous. When read together, these two sentences establish that Sowles is an insured under the Lessor of Leased Equipment endorsement.
B. Ryan’s use of the crane
Continental also contends that under the Lessor of Leased Equipment Endorsement, coverage only exists “with respect to [lessor’s] liability arising out of the maintenance, operation or use by [Ryan] of equipment leased to [Ryan] by [lessor] subject to the following additional exclusions . . . .” Continental argues that because there is no evidence that the underlying incident arose out of Ryan’s operation or use of the crane, Sowles is not covered under the endorsement.
The record reflects that on the morning of the accident, Vandermey, an employee of Ryan, was operating the leased crane. The record also reflects that because Vandermey was operating the crane “blind,” Dalzell, an employee of Sowles, was directing Vandermey in the operation of the crane. Relying on Dalzell’s instructions, Vandermey set the bolt bin down on the eighth floor in an improper location, which ultimately set off a chain reaction of events that caused the two deaths.
Continental argues that, based on these facts, Sowles, rather than Ryan, was the negligent party. We disagree. Despite the fact that Dalzell was directing Vandermey in the operation of the crane, it cannot be ignored that Vandermey was Ryan’s employee. Consequently, it was one of Ryan’s employees who was operating the crane at the time of the accident. Moreover, Ryan was the general contractor in charge of the project, and was ultimately responsible for the construction of the project. The accident arose out of the use of the crane by Ryan.
Continental argues further that, even if Vandermey was
negligent in the operation of the crane, Sowles is not covered under the policy
because Vandermey was a loaned servant to Sowles. “The loaned-servant
doctrine provides that if an employer loans an employee to another for the
performance of some special service, then that employee, with respect to that
special service, may become the employee of the party to whom his services have
been loaned.” Danek v. Meldrum Mfg.
& Eng’g Co. Inc., 312
relied on two tests in determining when a worker becomes a
loaned servant. The first of these is
the ‘whose business’ test. It asks: At the time of the negligent act, which
employer’s business was being done or furthered?” Nepstad v. Lambert, 235
argues that because the facts in this case are analogous to the facts in Nepstad, Vandermey was a loaned servant
under the “right of control test,” and, thus, there is no evidence that the
underlying incident arose out of Ryan’s operation or use of the crane. In Nepstad, the plaintiff was employed by the L.G. Arnold Co. (“Arnold”),
which was a general contractor working on a project in
addition, the crane was used to move four steel truss sections from the north
side to the south side of the plant.
question in Nepstad was whether the crane operator was a loaned
servant. In concluding that the crane
operator was a loaned servant because he was taking orders from
movement of the crane while it was being used on the job was directed through
hand signals by an
There can be no doubt that these signals carried the force of command. The work of the crane involved moving heavy pieces of steel to within inches of workmen standing on narrow platforms 10 or 20 feet above the ground. A hesitant response or disobedience to a signal jeopardized their lives, and [the crane operator] was fully aware of it. In such a situation, the orders given, viewed realistically, must be considered authoritative.
Here, the record shows that Vandermey’s view of the work-site was blocked, and he was relying on Dalzell’s instructions regarding the operation of the crane. Upon relying on Dalzell’s instructions, Vandermey placed the bolt bin between the structural beams, which ultimately caused the accident to occur. The facts are almost analogous to the facts in Nepstad where the court found the crane operator to be a loaned servant. Although the district court categorized Dalzell’s commands as “instructions,” and stressed the fact that Vandermey was ultimately an employee of Ryan, we cannot conclude that these assertions are enough to distinguish the present case from Nepstad. Because of the amount of control exhibited by Dalzell over Vandermey, we conclude that Vandermey was a loaned servant at the time of the accident. Therefore, Sowles is not entitled to coverage under the Lessor of Leased Equipment endorsement.
Sowles argues that even if it is not entitled to coverage under the Lessor of Leased Equipment endorsement, it is entitled to coverage under the general policy by way of the Blanket Additional Insured endorsement. The “BLANKET ADDITIONAL INSURED ENDORSEMENT” provides in part:
WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization (called additional insured) whom you are required to add as an additional insured on this policy under:
1. A written contractor or agreement; or
2. An oral agreement or contract where a certificate of insurance showing that person or organization as an additional insured has been issued . . .
. . . .
The insurance provided to the additional insured is limited as follows:
1. That person or organization is only an additional insured with respect to liability arising out of:
a. Premises you own, rent, lease or occupy; or
b. “Your work” for that additional insured by or for you.
Continental argues that Sowles does not qualify as an additional insured under the blanket additional insured endorsement because (1) there is no evidence of a written or oral agreement that Sowles be made an additional insured, and (2) there is no evidence that Ryan was performing work for Sowles at the time of the accident.
A. Written or oral agreement
Despite Continental’s argument to the contrary, the Crane Rental Agreement constitutes a written agreement that Sowles be made an additional insured. Pursuant to the terms of the Crane Rental Agreement, Continental was to
defend, indemnify and hold forever harmless Lessor, L.H. Sowles Co. and their officers, agents and employees from against all loss, liability and expense by reason of any violation of any rule, regulation or law, by reason of bodily injury including death, and property damage, sustained by any person or persons, including but not limited to Lessee’s employees, as a result of the maintenance, use, operation, and on site storage, of Equipment.
The very next sentence adds “[i]n addition, Lessee shall maintain insurance covering the aforesaid risks in a company acceptable to Lessor protecting Lessor and Lessee . . . .” As stated above, this language is unambiguous. Consequently, the rental agreement provides evidence of a written contract between Ryan and Sowles to provide Sowles with insurance coverage.
B. Liability arising out of Ryan’s work
Continental argues that, even if Sowles could meet the written agreement requirement for coverage under the Blanket Additional Insured endorsement, coverage would not exist because there is no evidence that Sowles’s liability arose out of Ryan’s work for Sowles. We disagree. Ryan’s insurance policy provides that Sowles “is only an additional insured with respect to liability arising out of . . . (b) ‘Your work’ for the additional insured by or for you . . . .” Thus, for Sowles to be provided coverage there must be liability arising out of “‘[Ryan’s] work’ for [Sowles] by or for [Ryan].”
record reflects that Ryan’s employee was operating the crane at the time of the
accident. But, as we concluded above,
the employee was operating the crane as a loaned servant. Consequently, Continental is correct in that
Ryan was not performing the work.
However, “Your work” is defined under the policy as “[w]ork or
operations performed by you or on your behalf . . . .” (emphasis added). Because Ryan was the general contractor, the
steel erection work performed by Sowles was ultimately performed on Ryan’s
behalf. See Wanzek Constr., Inc. v. Employers Ins. of
argues that even if Sowles is covered as an additional insured under the
Blanket Additional Insured endorsement, the concluding paragraph of the
endorsement mandates that Sowles recover under its own primary insurance policy
Any coverage provided hereunder shall be excess over any other valid and collectible insurance available to the additional insured whether primary, excess, contingent or on any other basis unless a contract specifically requires that this insurance be primary or you request that it apply on a primary basis.
Sowles argues that its primary policy with Westchester
has a similar provision that states
Other insurance. If there is any other collectible insurance available to the “insured” (whether such insurance is stated to be primary, contributing, excess or contingent) that covers a loss that is also covered by this policy, the insurance provided by this policy will apply in excess of, and shall not contribute with such insurance. This Condition H does not apply to any insurance policy purchased specifically (and which is so specified in such insurance policy) to apply in excess to this policy.
“In determining priority coverage
among insurers, a court must first look to the ‘other insurance’ clauses of the
policies to determine if they are in conflict.”
Illinois Farmers Ins. Co. v. Depositors Ins. Co., 480 N.W.2d 657, 659 (
Here, both parties contend that the policies do not conflict, and that each policy is in excess to the other’s policy. Continental contends that under the Blanket Additional Insured endorsement, the coverage afforded to an additional insured is excess to all other insurance insuring that additional insured, absent a contract between the policyholder and the additional insured requiring that the coverage for the additional insured be primary. Continental argues that because there was no contract between Sowles and Ryan stating that Continental’s coverage was primary, Continental’s coverage is excess to Sowles’s other coverage. Sowles, on the other hand, argues that “other insurance” clauses which provide that coverage for an additional insured is excess unless the insurance procurement contract expressly states that coverage is to be primary, are to be construed as containing a specific requirement that such additional insured coverage be primary, notwithstanding the lack of the required express contractual language.
Because the two policies conflict,
the next step for us to determine is which policy is primary. See Auto
Owners Ins. Co. v. Northstar Mut. Ins. Co., 281 N.W.2d 700, 704 (
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?
Auto Owners Ins., 281 N.W.2d at 704. This court has acknowledged that the policy intent analysis is “‘broader’ only in the sense that it involves more than a mechanical application of the three factors set out in Auto Owners.” Richardson v. Ludwig, 495 N.W.2d 869, 874 (Minn. App. 1993), review denied (Minn. Apr. 20, 1993). We conclude that under the particular facts of this case, the more appropriate analysis to apply is that which determines which policy is “closest to the risk.”
Continental’s argument to the contrary, the first factor favors the conclusion
The second factor
contemplates which premium is reflective of the greater contemplated
exposure. A review of the policies
demonstrates that Continental’s premium was estimated at $239,051, including
$151,150 for Ryan’s contracting activities. This was for $1,000,000 per occurrence in
primary coverage. In contrast, Sowles
The third factor
discusses which policy contemplates the risk and use of the accident-causing
instrumentality with greater specificity.
As stated above, only Continental’s policy specifically described the
crane and the project. Moreover, only
Continental’s policy refers to (1) the leased equipment, and (2) coverage for
additional insureds, Sowles and Northwest.
Therefore, the third factor also appears to favor the conclusion that
Finally, Continental argues that Sowles does not qualify as an insured under the umbrella policy. Continental’s umbrella policy issued to Ryan identifies who is an insured under the policy. This section provides in relevant part:
Any other persons or organizations included as an insured under the provisions of the “scheduled underlying insurance” in Item 5 of the Declarations and then only for the same coverage, except for limits of liability, afforded under such “scheduled underlying insurance.”
The district court held that because Sowles was an additional insured and is entitled to coverage under Continental’s commercial general liability policy pursuant to the Lessor of Leased Equipment endorsement, Sowles is also an additional insured under the umbrella policy due to the provision in the umbrella policy that allows for coverage as long as Sowles is covered under the commercial general liability policy. Although Sowles is not entitled to coverage under the Lessor of Leased Equipment endorsement because Vandermey was a loaned servant at the time of the accident, Sowles is covered under the Blanket Additional Insured endorsement. Because Sowles is an additional insured under the general policy pursuant to the Blanket Additional Insured endorsement, Sowles is entitled to coverage under Continental’s umbrella policy.
judge of the Minnesota Court of Appeals, serving by appointment pursuant to
 The Minnesota Supreme Court in Nepstad stated that although the
determination of whether an employee is a loaned servant is “normally one of
fact for the jury, it is well established that where there is no dispute as to
controlling facts and no jury would be entitled to find that there was not a
loaned-servant relationship, the question becomes one of law for the
court.” Nepstad v. Lambert, 235