This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1994).

STATE OF MINNESOTA

IN COURT OF APPEALS

C8-96-990

St. Paul Fire and Marine Insurance Company,

Appellant,

vs.

George Flynn, et al.,

Respondents.

Filed October 29, 1996

Affirmed

Klaphake, Judge

Ramsey County District Court

File No. C6-94-9176

Jeffrey J. Bouslog, Troy A. Wolf, Oppenheimer Wolff & Donnelly, 1700 First Bank Building, St. Paul, MN 55101(for Appellant)

Eric J. Magnuson, Jeanne H. Unger, Rider, Bennett, Egan & Arundel, LLP, 2000 Metropolitan Centre, 333 South Seventh Street, Minneapolis, MN 55402 (for Respondents)

Considered and decided by Peterson, Presiding Judge, Klaphake, Judge, and Davies, Judge.

U N P U B L I S H E D O P I N I O N

KLAPHAKE, Judge

St. Paul Fire and Marine Insurance Company, a Minnesota corporation (St. Paul), brought this declaratory judgment action against its insureds, Cosgrove, Flynn & Gaskins, a Partnership, and the individual partners, George Flynn, Hugh Cosgrove, and Steven Gaskins (collectively CF&G). St. Paul sought to establish its right to allocate defense costs incurred in defending CF&G in a suit brought by third party James O'Connor (O'Connor), between costs associated with a "potentially covered" defamation claim and costs associated with claims[1] allegedly not covered by its policy. St. Paul appeals from a grant of summary judgment to CF&G. Because the factual basis for the defamation claim permeates the other allegedly noncovered claims, we affirm.

D E C I S I O N

On appeal from a grant of summary judgment, this court must determine whether there are any genuine issues of material fact and whether the district court erred in applying the law. Wartnick v. Moss & Barnett, 490 N.W.2d 108, 112 (Minn. 1992). Insurance coverage issues generally present questions of law, and this court is not bound by, and need not defer to, legal determinations made by the district court. State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 65 (Minn. 1992).

Minnesota law requires an insurer to defend the entire action when a complaint alleges multiple claims, some of which are "arguably" covered and some of which fall outside of coverage. SCSC Corp. v. Allied Mut. Ins. Co., 533 N.W.2d 603, 613 (Minn. 1995). This duty to defend, however, is not unlimited. For instance, an insurer is not obligated to pay defense costs incurred before an insured has formally tendered defense of an action. See, e.g., id. at 316; Cellex Biosciences, Inc. v. St. Paul Fire & Marine Ins. Co., 537 N.W.2d 621, 623 (Minn. App. 1995); Pedro Cos. v. Sentry Ins., 518 N.W.2d 49, 51 (Minn. App. 1994). Nor is an insurer obligated to pay for fees related to an insured's assertion of affirmative claims. St. Paul Fire & Marine Ins. Co. v. National Computer Sys., Inc., 490 N.W.2d 626, 632 (Minn. App. 1992) (insurer not obligated to pay fees for preparing and asserting affirmative counterclaim when possible to separate those fees from other defense fees). The Minnesota Supreme Court has not yet ruled on the issue of apportionment of defense costs between covered and noncovered claims. To date, the court has merely noted that allocation or apportionment is not appropriate when it is unclear whether some of the claims "will be outside of policy coverage or outside the policy period[.]" Jostens, Inc. v. CNA Ins./Continental Casualty Co., 336 N.W.2d 544, 545 (Minn. 1983) (citation omitted).

Nevertheless, even if we assume that allocation may be appropriate in certain instances, we conclude that it is not warranted under the facts of this case. The covered and allegedly noncovered claims in this case arise out of the same set of operative facts. The incident which led to O'Connor's termination from employment with CF&G and which underlies all of his claims was Flynn's statement that O'Connor had lied. Thus, the truthfulness of Flynn's statement is a pivotal fact issue. Because all of O'Connor's claims arose in some fashion out of the same set of facts and depended in significant part on resolution of this common factual issue, we conclude that allocation of defense costs would not be appropriate.

St. Paul insists that because the parties agreed that the defamation claim was "potentially" covered under the policy, then CF&G "conceded" that the remaining contract-based claims were not covered. However, CF&G's silence on this point does not amount to an admission, and CF&G is not precluded from taking a position somewhat different from the position it may have taken in defense of the underlying action.

The grant of summary judgment to CF&G is affirmed.

Affirmed.

[ ]1 In addition to the defamation claim, O'Connor sued CF&G for breach of contract, breach of fiduciary duty, intentional interference with contractual relationships, violation of the partnership act, and "liability of partnership."