This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2006).






Travelers Commercial Casualty Company,


Daniel Morales, et al.,
Railroad Salvage & Restoration, Inc.,


Filed February 6, 2007


Stoneburner, Judge


Hennepin County District Court

File No. 27CV0510249


Robert E. Kuderer, Stacey A. Nilsen, Johnson & Condon, P.A., Suite 600, 7401 Metro Boulevard, Minneapolis, MN 55439-3034 (for respondent)


Douglas E. Schmidt, Schmidt Law Firm, Suite 200, Fazendin Building, 1421 Wayzata Boulevard East, Wayzata, MN 55391 (for appellant)


            Considered and decided by Stoneburner, Presiding Judge; Halbrooks, Judge; and Huspeni, Judge.*

U N P U B L I S H E D  O P I N I O N




            In this declaratory-judgment action, appellant-insured challenges summary judgment granted to respondent-insurer, arguing that the district court erred in determining that, as a matter of law, exclusions in a workers’ compensation policy precluded coverage for appellant’s employee, who was allegedly injured in Minnesota.  We affirm.



            Appellant Railroad Salvage & Restoration, Inc. (Railroad Salvage) is a Missouri corporation that builds, maintains, removes, and salvages railroad track in several states.  Railroad Salvage’s only office is located in Missouri

            Daniel Morales was hired by the foreman at a Railroad Salvage jobsite in Arkansas.  Morales became part of a roving crew that went from jobsite to jobsite.  Morales worked in Arkansas, Illinois, and Minnesota.  Railroad Salvage’s payroll records indicate that Morales was in Missouri for no more than four days during the time that he worked for Railroad Salvage.[1]  Morales was allegedly injured while working for Railroad Salvage in Minnesota.

            At the time Morales was injured, Railroad Salvage was insured under a Workers Compensation and Employers Liability Policy (the policy) issued by respondent Travelers Commercial Casualty Company (insurer).  Railroad Salvage sought workers’ compensation coverage for Morales, and insurer brought this action seeking a declaration that it had no duty to defend or indemnify Railroad Salvage for Morales’s alleged injury under the policy. 

            The policy contains a “Missouri Limited Other States Endorsement” providing limited coverage “in situations when a Missouri employee is entitled to workers’ compensation benefits of a state other than Missouri.”  “Missouri [e]mployee” is defined in the policy as “an individual who is an employee of a Missouri employer[2] and who also physically works at or out of a physical Missouri location on a regular basis.”  The policy, in relevant part, excludes coverage for “[a]ny employee unless his/her employment was principally localized in Missouri [exclusion B(1)]; or . . . [a]ny out of state employees who are hired to perform work in a state other than Missouri [exclusion B(3)] . . . .”

            The district court granted insurer’s motion for summary judgment, concluding that, as a matter of law, exclusions B(1) and B(3) applied to exclude coverage.  This appeal followed.



            “On an appeal from summary judgment, we ask two questions: (1) whether there are any genuine issues of material fact and (2) whether the [district] court[] erred in [its] application of the law.”  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  If there are no material facts in dispute, we review de novo the district court’s interpretation of the insurance contract and its application to the facts.  Smith v. State Farm Fire and Cas. Co., 656 N.W.2d 432, 435 (Minn. App. 2003).  “In an action to determine coverage under an insurance policy containing an exclusion clause, the insurer bears the burden of proving the exclusion bars coverage.” 436.  “We construe insurance contracts as a whole and give unambiguous language its plain and ordinary meaning.”  State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 64 (Minn. 1992).  In reviewing summary judgment, we must view the evidence in the light most favorable to the party against whom judgment was granted.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).

            Railroad Salvage first argues that the district court erred in failing to view the facts in a light most favorable to Railroad Salvage, as evidenced by its ruling that Morales was an out-of-state employee.  We disagree and find no merit in Railroad Salvage’s argument that, as a matter of law, Morales was a “Missouri employee” as defined in the policy.[3]

            Railroad Salvage’s argument rests in part on its assertion that Morales was hired in Missouri as demonstrated by evidence that Morales’s employment contract was accepted in Missouri.[4]  But we find no merit in the argument that the location of the contract formation is determinative of whether Morales was a Missouri employee under the policy.  Even if Morales’s employment contract was formed in Missouri, Morales does not meet the policy definition of “Missouri employee” if he did not work “at or out of a physical Missouri location on a regular basis.”  And no evidence supports Railroad Salvage’s assertions that Morales worked “at or out of a physical Missouri location on a regular basis.”

            Railroad Salvage relies on cases relating to the application of the Minnesota Workers’ Compensation Act (MWCA) to employees of Minnesota corporations who were injured while working outside of MinnesotaSee Minn. Stat. § 176.041, subds. 2-3 (2006).  In Fitzgerald v. Eco. Lab., Inc., the supreme court determined that Fitzgerald was covered by the MWCA even though he lived and worked in a different state because he was employed by a company that was “localized in the state of Minnesota.”  216 Minn. 296, 298-303, 12 N.W.2d 621, 623-24 (1943).  The holding was based on a long line of cases holding that “where a business is localized in [Minnesota] it is the purpose of the [MWCA] to compensate for injuries in a service incidental to its conduct, though sustained beyond [Minnesota’s borders].” 299, 12 N.W.2d at 623 (citations omitted).  In Vaughn v. Nelson Bros. Const., the supreme court held that the MWCA applies to employees of Minnesota employers whose work is, by its very nature, transient.  520 N.W.2d 395, 397 (Minn. 1994).  The supreme court concluded that Vaughn’s situation was “reasonably within the scope of the statutory objective.”  Id. (quotation omitted).  These cases might be relevant to an argument about which state’s workers’ compensation law applies to Morales’s injuries, but that issue is not before us.  We do not find these cases at all relevant to our analysis of the unambiguous policy language as applied to the undisputed facts in this case.

            Applying the policy language to the facts of this case, Morales did not work out of a physical Missouri location on a regular basis.  He was, at most, in Missouri only four days.  Although it was argued to the district court, the district court did not reach the issue of whether Morales was a “Missouri employee” as defined in the policy.  But it is clear from the undisputed facts that he was not; therefore, Railroad Salvage’s argument that Morales could not have been an out-of-state employee because he was a Missouri employee is without merit.

            We conclude that the same undisputed evidence that demonstrates, as a matter of law, that Morales did not work “out of a physical Missouri location on a regular basis” also supports the district court’s conclusion that coverage is excluded under exclusion B(1) because Morales’s employment was not “principally localized in Missouri.”  

            Furthermore, Morales, who has never been a resident of Missouri, was not in Missouri when he was hired, and he was hired to work in a state other than Missouri.  Therefore, the district court also correctly concluded that coverage is excluded under exclusion B(3), which excludes coverage for “any out of state employees who are hired to perform work in a state other than Missouri.”

            Railroad Salvage additionally argues that the district court failed to appropriately require the insurer to meet its burden to establish the applicability of the exclusions.  See Domtar v. Niagara Fire Ins. Co., 563 N.W.2d 724, 736 (Minn. 1997) (stating that the insured has the initial burden of demonstrating coverage and the insurer has the burden of establishing the applicability of exclusions).  Railroad Salvage asserts that “the insurer has not offered any evidence that tends to show [that] Mr. Morales’ claim falls under one of the exclusions in the policy.”  But, as discussed above, the insurer established the applicability of the exclusions.


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

[1] The district court calculated four days to be 3% of the total time that Morales was employed by Railroad Salvage.

[2] It is undisputed that Railroad Salvage is a Missouri employer.

[3] “Out-of-state employee” is not defined in the policy, but Railroad Salvage argues that if Morales is a “Missouri employee,” he cannot simultaneously be an “out-of-state employee” under the policy.

[4] Railroad Salvage general superintendent Gaylon Jackson testified in his deposition that the hiring of employees at a jobsite is “left to the discretion of the job foreman.”  He stated that the workers “are hired right by the project superintendent [who] has the right to hire and fire them at his discretion.”  Jackson’s affidavit, however, states that “[e]mployees are hired and fired from the [Missouri] office.”