Hormel Foods v. NORTHBROOK PROPERTY & CAS. INS.

• Decision Date: 23 September 1996
• Docket Number: No. 3-96-135.,3-96-135.
• Citation: 938 F. Supp. 555
• Parties: HORMEL FOODS CORPORATION, Plaintiff, v. NORTHBROOK PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Minnesota

938 F. Supp. 555

HORMEL FOODS CORPORATION, Plaintiff, v. NORTHBROOK PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant.

No. 3-96-135.

United States District Court, D. Minnesota, Third Division.

September 23, 1996.

David Carl Forsberg and Karna A. Berg, Briggs & Morgan, St. Paul, MN, for plaintiff.

Brian Alan Wood and John M. Bjorkman, Rider, Bennett, Egan & Arundel, L.L.P., Minneapolis, MN, for defendant.

MEMORANDUM AND ORDER

DAVIS, District Judge.

INTRODUCTION

This is a declaratory judgment action pursuant to 28 U.S.C. § 2201, et seq. Presently before the Court are cross-motions for summary judgment respecting the rights and obligations of the parties under a contract of insurance. For the following reasons the Court GRANTS in part and DENIES in part both motions.

BACKGROUND

This case arises from a fatal accident sustained by an employee of Quality Pork Products (QPP), which is not a party to this action. Plaintiff Hormel leases a hog processing facility to QPP. The facility was constructed in 1982, and includes a carcass-splitting machine which is fixedly attached to the premises, and which was designed and manufactured by Hormel in 1985. The facility's sole function is the slaughter and processing of hogs, and the lease agreement executed between QPP and Hormel in 1989 provides that all machinery, equipment and fixtures are made a part of the lease, and are included in the definition of "Leased Premises." See Exh. A to the Affidavit of Richard C. Knight, at 1. As part of the lease agreement, QPP caused Hormel to be included as an Additional Insured on QPP's liability policy with Defendant Northbrook Insurance. This policy covered losses "arising out of the ownership, maintenance or use" of the leased premises. See Exh. C. to the Affidavit of John M. Bjorkman. The decedent was fatally compressed by the splitting machine. The ensuing wrongful death action charges Hormel with negligently designing the machine. It does not state a claim against Hormel in its capacity as owner of the premises.

Northbrook has rejected Hormel's tender of defense. Northbrook asserts several reasons why, despite the fact that it issued a policy covering Hormel, it is nevertheless free to do so. Northbrook argues that because the suit arises from Hormel's equipment, it does not arise out of Hormel's ownership, maintenance, or use of the premises. Northbrook refines this argument by also claiming that the additional insured provision only protects Hormel from the negligence of QPP, an issue not contemplated in the underlying products liability action. Finally, Northbrook takes the position that it has not provided primary insurance to Hormel, because Hormel has retained a $1,000,000 self-insured limit. Because of this retention, Northbrook concludes, Hormel itself should be considered the "primary insurance" to which Hormel should look for payment. At most, Northbrook suggests that it is required only to share in the defense costs pro-rata.

DISCUSSION

I. Summary Judgment Standard

Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to summary judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Unigroup, Inc. v. O'Rourke Storage & Transfer Co., 980 F.2d 1217, 1219-20 (8th Cir.1992). The Court determines materiality from the substantive law governing the claim. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Disputes over facts which might affect the outcome of the lawsuit according to applicable substantive law are material. Id. A material fact dispute is "genuine" if the evidence is sufficient to allow a reasonable jury to return a verdict for the non-moving party. Id. at 248-49, 106 S.Ct. at 2510-11.

II. "Arising Out Of"

Northbrook does not persuasively explain why, under the facts presented here, the claim against Hormel lies outside the scope of coverage provided. Northbrook relies on the "mere situs" rule, which precludes coverage for injuries which merely happen to occur on covered premises, as opposed to those which "arise" out of the premises:

Thus the premises must bear some causal relationship to the liability. Such a relationship is apparent when a claimant trips over improperly maintained steps. The fact that something occurs at a place is not sufficient by itself to imply causation as to that place.

Lanoue v. Fireman's Fund American Insurance Cos., 278 N.W.2d 49, 54 (1979).

This standard is not one of proximate causation. Progressive Casualty Ins. Co. v. Brockway, 411 N.W.2d 13, 16 (1987). Rather, "but for" causation satisfies the requirements of an insurance policy which specifies that only liabilities "arising out of the use" are covered. Id. Therefore, if there is a causal relationship between the place covered by insurance and the acts giving rise to legal liability, the liability is covered also. Two cases from the automobile context illustrate the reach of this doctrine.

In Waseca Mut. Ins. Co. v. Noska, 331 N.W.2d 917 (1983) an insured transported a load of smoldering embers in his truck. During his six-mile trip, and unbeknownst to him, the embers were fanned by the winds and alighted from truck, setting fires which eventually destroyed numerous farms and residences. Reversing a judgment in favor of the insurer, the Minnesota Supreme Court held that while the losses partly originated in the non-vehicular acts of the insured in loading the truck, they were also causally related to the use of truck to tow the embers. 331 N.W.2d at 920. Thus, the truck could be said to have been an "active accessory" to the injury sustained. Id. Noting that "each case presenting such a question must, to a great degree, turn on the particular facts presented," the court concluded that the fires had "arisen out of the use of a motor vehicle." Id.

Relying on Waseca, the Minnesota Court of Appeals reached the same conclusion in Jorgensen by Jorgensen v. Auto-Owners Ins. Co., 360 N.W.2d 397 (Minn.Ct.App.1985). The policyholder in Jorgensen had placed several cans of gasoline in his trunk. When his son opened the trunk, a frayed wire connected to the trunk light caused a spark or explosion which ignited the gasoline and severely burned the son. The court noted that but for the defective condition of the trunk wiring, the explosion would not have occurred. 360 N.W.2d at 400. The court further observed that Minnesota courts have uniformly held that where an injury is caused by the condition of the vehicle or because the vehicle itself malfunctions, the causal connection between the injury and the use of the vehicle is met. Id. Applying this standard, the court found that the vehicle was more than the "mere situs" of the accident; it was an "active accessory" to the injury sustained for which there was coverage under the policy. Id.

With these rules in mind, the Court must conclude that the carcass-splitting machine was so intimately and necessarily intertwined with the facility's operations as to make injuries flowing from it attributable to the "ownership, maintenance, or use" of the facility. The machine was hardly a stranger to the facility's business. Rather, it was literally part of the operation, set in concrete tubing and integrated into the facility's hydraulics. See Affidavit of Larry E. Helsene, para. 6(L). Even without the lease's designation, the machine which killed the decedent could hardly be considered anything other than part of the "leased premises".

Northbrook tries to evade these facts by suggesting that the machine was merely a "structural alteration" or "new construction" for which there is no coverage under the policy. This argument borders on the frivolous. The machine in question was fixedly incorporated into the facility by 1986, some eight years prior to the issuance of the policy. Northbrook's "mere situs" argument also rests on the fact that the underlying claim is a products liability claim against Hormel as manufacturer, rather than one sounding in premises liability. This does not aid Northbrook's cause. Northbrook has identified no exception in the sweeping language of the policy relating to products liability claims. While Hormel might conceivably have designed and manufactured equipment whose liability-causing presence at the facility would have been mere happenstance (a hand-held saw, perhaps), that is not the case here. Instead, Hormel designed and manufactured a machine which bolted into the floor and walls of the facility. It is unambiguously part of the premises. Because there is a clear causal connection between the premises (including the machine) and the injury, the injury "arises out of" the use of the premises under Minnesota law.

III. Direct Liability of Additional Insured

Northbrook's next argument regarding the asserted limitation of coverage to only those acts for which Hormel is vicariously liable is likewise unsupported. Northbrook relies on a line of cases which appear to hold that additional insured endorsements such as the one at issue here provide only limited coverage — that is, they do not cover acts for which the additional insured-lessor is directly liable, but only those for which it is vicariously liable for the acts of the primary insured-lessee. Noting that Hormel has not been sued for the negligence of QPP, but rather its own alleged failings in designing the machine, Northbrook concludes that Hormel is not entitled to coverage.

After carefully considering the authorities submitted by Northbrook, the Court concludes that they do not support Northbrook's position. Northbrook points to U.S.F. & G v. Drazic, 877 S.W.2d 140 (Mo.Ct.App.1994), in which a commercial tenant leased a portion of the premises from the landlord, and named the landlord as an additional insured. Both landlord and tenant operated separate businesses from their respective portion of the premises. An employee...