Board of Regents of University of Minnesota v. Royal Ins. Co. of America

• Decision Date: 06 July 1993
• Docket Number: C8-93-36 and C5-93-186,Nos. C1-93-24,s. C1-93-24
• Citation: 503 N.W.2d 486
• Parties: BOARD OF REGENTS OF the UNIVERSITY OF MINNESOTA, et al., Respondents, v. ROYAL INSURANCE COMPANY OF AMERICA, Appellant (C1-93-24), Defendant (C8-93-36, C5-93-186), Great American Insurance Company, Defendant (C1-93-24, C8-93-36), Appellant (C5-93-186), North River Insurance Company, et al., Defendants (C1-93-24, C8-93-186), Appellants (C8-93-36).
• Court: Minnesota Court of Appeals

Page 486

503 N.W.2d 486

62 USLW 2100

BOARD OF REGENTS OF the UNIVERSITY OF MINNESOTA, et al., Respondents, v. ROYAL INSURANCE COMPANY OF AMERICA, Appellant (C1-93-24) Defendant (C8-93-36, C5-93-186) Great American Insurance Company, Defendant (C1-93-24 C8-93-36), Appellant (C5-93-186) North River Insurance Company, et al., Defendants (C1-93-24, C8-93-186), Appellants (C8-93-36).

Nos. C1-93-24, C8-93-36 and C5-93-186.

Court of Appeals of Minnesota.

July 6, 1993.

Review Granted Aug. 16, 1993.

Syllabus by the Court

1. The trial court did not err by applying Minnesota law in a lawsuit arising from the installation of asbestos-containing materials in buildings in Minnesota.

2. The pollution exclusion clause at issue bars coverage for claims alleging property damage caused by the release of asbestos in buildings.

Michael R. Strom, Sieben, Polk, LaVerdiere, Jones & Hawn, P.A., Hastings, for Board of Regents of the University of Minnesota, et al.

Austin D. Ditzler, Minneapolis, for Royal Ins. Co. of America.

Stephen J. Foley, Foley & Mansfield, Minneapolis, for Great American Ins. Co.

Andrew W. Horstman, Robins, Kaplan, Miller & Ciresi, Minneapolis, for North River Ins. Co., et al.

Considered and decided by RANDALL, P.J., and SHORT and AMUNDSON, JJ.

OPINION

RANDALL, Judge.

The Board of Regents of the University of Minnesota (the regents) commenced an action against Asbestospray Corporation seeking damages associated with the abatement of asbestos-containing insulation in various buildings in the University of Minnesota and State University System. The complaint was subsequently amended to name H & A Construction, formerly known as Spraycraft Corporation, as a defendant. Before trial of the matter was completed, the parties entered into a Miller-Shugart settlement.

The regents then brought the present action to enforce the settlement against the insurance companies who denied coverage on several grounds. On cross-motions for summary judgment, the trial court granted the regents summary judgment, and the insurers have appealed. We affirm in part and reverse in part.

FACTS

Asbestos Products Manufacturing Corporation (APM) was incorporated in New York in 1946. Asbestospray Corporation, incorporated in New York in 1948, distributed the products manufactured by APM. These products included sprayable asbestos fireproofing and insulation materials.

In 1972, H & A Construction Corporation, formerly known as Spraycraft Corporation, purchased the assets and assumed the liabilities of Asbestospray Corporation. Spraycraft and H & A were both New York corporations.

Between 1970 and 1972, insulation that contained asbestos was installed in various buildings at the University of Minnesota-Twin Cities campus, the University of Minnesota-Morris campus, and Bemidji State University. In March 1985, the regents commenced a product liability action against numerous asbestos product manufacturers, contractors, and miners. The cost of cleanup and changeover is enormous. Asbestospray was one of the defendants in the action. Subsequently, the complaint was amended to name H & A Construction as a defendant.

Trial of the regents' action commenced in February 1989. Before completion of the trial, Asbestospray and H & A settled the claims against them on a Miller-Shugart ¹ basis. The regents then commenced the present action, seeking to recover the available insurance proceeds pursuant to the Miller-Shugart judgment.

The parties brought cross-motions for summary judgment. In moving for summary judgment, the insurers asserted New York law, rather than Minnesota law, should be applied.

The trial court granted summary judgment to the regents, finding the policies at issue provided coverage for the claims brought by the regents. The trial court declared the insurers liable to the regents, jointly and severally, for the full amount of the Miller-Shugart settlement. The insurers have filed three separate appeals, which have been consolidated. ²

ISSUES

1. Did the trial court err by granting summary judgment as to the existence of the Royal policy?

2. Did the trial court err by finding successor liability on the part of Spraycraft and H & A Construction?

3. Did the trial court err by concluding coverage was not barred by any of the named exclusions?

4. Did the trial court err by finding an occurrence resulting in property damage during the relevant policy periods?

5. Did the trial court err by applying Minnesota law?

6. Did the trial court err by finding the Miller-Shugart settlement reasonable?

7. Did the trial court err by finding the settlement did not render coverage void?

ANALYSIS

The trial court granted the regents' motion for summary judgment on all grounds. Summary judgment is appropriate when there is no genuine issue as to any material fact and a party is entitled to a judgment as a matter of law. Minn.R.Civ.P. 56.03. On review of a summary judgment, this court must determine whether there are any genuine issues of material fact and whether the trial court correctly applied the law. Offerdahl v. University of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn.1988). The facts must be viewed in the light most favorable to the party against whom summary judgment was granted. Grondahl v. Bulluck, 318 N.W.2d 240, 242 (Minn.1982).

In their appeals, the insurers have raised numerous issues and sub-issues; these have been condensed in this opinion. The parties have thoroughly briefed each issue raised. We conclude that under Minnesota law, the pollution exclusion clause is dispositive. Therefore, we address only that clause ³ and choice of law.

Choice of Law

The insurers contend the trial court erred in applying Minnesota, rather than New York, law. In analyzing a choice of law issue, the court must first determine whether there are sufficient contacts with the State of Minnesota to make application of Minnesota's law consistent with the requirements of due process. See Hime v. State Farm Fire & Cas. Co., 284 N.W.2d 829, 832 (Minn.1979), cert. denied, 444 U.S. 1032, 100 S.Ct. 703, 62 L.Ed.2d 668 (1980). In this case, the asbestos was applied in Minnesota to a building owned by the State of Minnesota. There is no due process problem in applying Minnesota law.

To resolve a choice-of-law issue, the court must apply the five factors set forth in Milkovich v. Saari, 295 Minn. 155, 203 N.W.2d 408 (1973). Those considerations are: (1) predictability of result; (2) maintenance of interstate and international order; (3) simplification of the judicial task; (4) advancement of the forum's governmental interest; and (5) application of the better rule of law. Id. at 161, 203 N.W.2d at 412.

Before applying the five factors of Milkovich, the court must first determine whether the choice of one state's law will be "outcome determinative," that is, whether there is an actual conflict. Myers v. Government Employees Ins. Co., 302 Minn. 359, 363, 225 N.W.2d 238, 241 (1974). Our conclusion that the pollution exclusion clauses bar coverage for the regents' claims is contrary to New York law. See Continental Cas. Co. v. Rapid-American Corp., 80 N.Y.2d 640, 593 N.Y.S.2d 966, 609 N.E.2d 506 (1993) (pollution exclusion clause inapplicable to claims alleging bodily injury caused by exposure to asbestos). Therefore, we must address the choice-of-law issue.

A. Predictability of Result

This case involves the interpretation of insurance policies issued to New York corporations and obtained in New York through a New York agent. However, the companies did business in all 50 states, a fact of which the insurers must have been aware. See Hague v. Allstate Ins. Co., 289 N.W.2d 43, 48 (Minn.1978), aff'd, 449 U.S. 302, 101 S.Ct. 633, 66 L.Ed.2d 521 (1981). The insurers' coverage followed the insured's products into all 50 states, making it predictable that the insured would be sued throughout the country, not only in New York. See United States Fire Ins. Co. v. Goodyear Tire & Rubber Co., 726 F.Supp. 740, 744 (D.Minn.1989), aff'd, 920 F.2d 487 (8th Cir.1990).

B. Maintenance of Interstate Order

This consideration requires that the state whose laws are ultimately applied have sufficient contacts with the litigation to meet the requirements of due process. Allstate Ins. Co. v. Hague, 449 U.S. 302, 313, 101 S.Ct. 633, 640, 66 L.Ed.2d 521 (1981). We find both New York and Minnesota have sufficient contacts with the present litigation to support application of either state's law.

C. Simplification of the Judicial Task

Most courts that have considered this factor have treated it summarily, stating that they are perfectly able to apply the law of either proposed jurisdiction. See Goodyear, 726 F.Supp. at 744-45; Hague, 289 N.W.2d at 49. In the present case, however, there is an additional factor to consider. The Minnesota Supreme Court, in orders of December 14, 1987 and October 27, 1988, has ordered that all "asbestos-related claims brought in Minnesota state courts" be heard and decided by a single judge. The supreme court has found that this system "has proven to be effective in providing a consistent, efficient and economical system for managing all phases of this litigation." It would be consistent with the supreme court's orders to apply a consistent body of law, i.e. Minnesota law, to all Minnesota asbestos-related claims brought before the judge assigned to hear those claims. See In re Minnesota Personal Injury Asbestos Cases, 481 N.W.2d 24 (Minn.1992).

D. Advancement of the Forum's Governmental Interest

This factor is intended to assure that Minnesota courts are not called upon to apply rules of law inconsistent with Minnesota's concept of fairness and equity. Hime, 284 N.W.2d at 833. In considering this factor, it may be necessary to take into account the public policy of the other state. See Gate City Fed. Sav. & Loan Ass'n v. O'Connor, 410 N.W.2d 448, 451 (Minn.App.1987), pet. for rev. denied (Minn. Oct. 21, 1987).

E. Better Rule of...