This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
STATE OF MINNESOTA
IN COURT OF APPEALS
American Family Mutual Insurance Company,
Natural Environments Corporation, et al.,
Filed July 24, 2007
Toussaint, Chief Judge
Robert E. Kuderer, Stacey A. Nilsen, Johnson & Condon, P.A., 7401 Metro Boulevard, Suite 600, Minneapolis, MN 55439-3034; and
Teresa M. Thompson, Fredrickson & Byron, P.A.,
Jeanne H. Unger, Mark R. Bradford, Jan M. Gunderson, Bassford Remele, 33 South Sixth Street, Suite 3800, Minneapolis, MN 55402; and
Diane B. Bratvold, Briggs & Morgan, 2200 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 (for respondent)
U N P U B L I S H E D O P I N I O N
TOUSSAINT, Chief Judge
Appellants Michael and Stacy Sullivan challenge the district court’s entry of summary judgment in favor of respondent American Family Mutual Insurance Company in a declaratory-judgment action to determine respondent’s defense obligations under the parties’ insurance contract in relation to an underlying lawsuit brought by a neighboring property owner against appellants. Because the district court did not err by determining that respondent’s duty to defend the appellants did not include bearing certain costs of permanent remediation, including affirmative cross-claims against third parties and attorney fees, we affirm.
On appeal from summary judgment, we must determine
whether there are genuine issues of material fact and whether the district
court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (
At issue here is the scope of respondent’s duty to defend appellants under the parties’ insurance contract, and, consequently, whether respondent must reimburse appellants for the costs associated with that defense. This requires a determination of whether the duty to defend extends to costs incurred in preventing liability for future harm, namely, the costs of implementing permanent remediation benefiting the appellants’ own land and pursuing affirmative cross-claims against third parties for indemnity and contribution for those costs.
of an insurance policy, including whether an insurer has a legal duty to defend
or indemnify its insured, is a question of law, which we review de novo. Auto-Owners
Ins. Co. v. Todd, 547 N.W.2d 696, 698 (
Defense costs are
expended to investigate and determine liability. Westling
Mfg. Co. v. W. Nat’l Mut. Ins. Co., 581 N.W.2d 39, 47 (
Here, the failure of a newly constructed retaining wall on appellants’ property resulted in a landslide that damaged a neighboring property. Appellants’ insurance policy provides personal-liability coverage for “compensatory damages for which an insured is legally liable because of bodily injury or property damage caused by an occurrence covered by this policy.” It obligates respondent to “defend any suit or settle any claim for damages payable under this policy as [it] think[s] proper,” but specifically excludes personal liability coverage for “property owned by any insured[.]” Respondent retained attorney David Oskie to defend appellants in the suit brought by the neighboring property owner against the appellants. Oskie filed an answer and a cross-claim against Natural Environments Corporation, the company hired to design and construct the retaining wall, requesting indemnity or contribution for the neighboring property owners’ claims and to further recover damages arising from the failure of the hillside, including costs of repair.
Appellants argue that respondent breached its duty to defend them because the costs associated with permanent remediation of the hillside, including affirmative cross-claims for indemnity and contribution, prevented future liability and were within the scope of the defense protections afforded by the policy. Respondent, conversely, argues that these costs were not expended to determine whether appellants were legally liable in the underlying action, but, rather, to determine potential indemnity obligations, which are not included in respondent’s duty to defend.
The district court, relying on Aetna Ins. Co. v. Aaron, 685 A.2d 858, 865, 867 (Md. Ct. App. 1996), found that remediation expenses incurred in connection with the insured’s own property are covered when (1) the insured property already caused damage to the property owned by a third party and (2) the insured is legally or contractually obligated to remediate the hazard. It further concluded that respondent did not wrongfully limit its defense by bearing the costs of temporary repairs to the hillside that are necessary to avoid harm to the neighboring property but not the costs that served to uniquely benefit appellants’ own land, including the cost of appellants’ affirmative cross-claims. We review for legal error the district court’s determination of the scope of respondent’s defense obligations. Auto-Owners, 547 N.W.2d at 698.
Appellants cite Domtar, Inc. v. Niagara Fire Ins. Co. in
support of their argument that all expenses intended to minimize an insured’s
liability are considered part of an insurer’s defense obligation. 563 N.W.2d 724, 738 (
distinguishable, however, because appellants did not contend that the costs for
permanent remediation were necessary to defeat or minimize their current
liability for damages to the neighboring property owner’s property. Rather, appellants made expenditures for
permanent remediation to the hillside when their current liability for those
damages had not been established. The
And because respondent’s duty to defend appellants did not include permanent remediation to their property to prevent future harm to the neighboring property, the fees incurred as a result of appellants’ affirmative cross-claims are also not included in this defense. Prosecuting claims for contribution and indemnity for damages unique to appellants’ own property did not reduce appellants’ current liability. Therefore, the district court did not err in its application of the law by determining that respondent was not responsible for funding the affirmative cross-claims.
also argue that they are entitled to attorney fees in this action and the
underlying litigation. We will not
reverse a district court’s decision on attorney fees absent an abuse of
discretion. Indep. Sch. Dist. No. 404 v. Castor, 670 N.W.2d 758, 763 (