Peterson v. Kludt

• Decision Date: 07 May 1982
• Docket Number: 81-256.,No. 81-247,81-247
• Parties: Denton PETERSON, et al., Respondents, Shelby Mutual Insurance Company, Respondent, v. C. W. KLUDT, Special Administrator of the Estate of Joseph Lyczewski, deceased, Respondent, Burlington Northern Railroad, Respondent, Western National Mutual Insurance Company, Respondent, General Casualty Company of Wisconsin, Appellant (81-256)-Respondent (81-247), State Farm Mutual Insurance Company, Appellant (81-247)-Respondent (81-256). BURLINGTON NORTHERN, INC., third-party plaintiff, Respondent, v. CITY OF MENTOR, third-party defendant, Respondent.
• Court: Minnesota Supreme Court

317 N.W.2d 43 (1982)

Denton PETERSON, et al., Respondents, Shelby Mutual Insurance Company, Respondent, v. C. W. KLUDT, Special Administrator of the Estate of Joseph Lyczewski, deceased, Respondent, Burlington Northern Railroad, Respondent, Western National Mutual Insurance Company, Respondent,

General Casualty Company of Wisconsin, Appellant (81-256)-Respondent (81-247),

State Farm Mutual Insurance Company, Appellant (81-247)-Respondent (81-256).

BURLINGTON NORTHERN, INC., third-party plaintiff, Respondent, v. CITY OF MENTOR, third-party defendant, Respondent.

Nos. 81-247, 81-256.

Supreme Court of Minnesota.

March 19, 1982.

Rehearing Denied May 7, 1982.

Brink, Sobolik, Severson & Vroom, Robert K. Severson and Roger C. Malm, Hallock, for Peterson, et al.

Rufer, Hefte, Pemberton, Schulze, Sorlie, Sefkow & Kershner, and Richard L. Pemberton, Fergus Falls, for Shelby Mut. Ins. Co.

C. W. Kludt, pro se.

Thomas W. Spence, St. Paul, for Burlington Northern Railroad.

Joyce & McHaffie and Richard T. McHaffie, St. Paul, for Western National Mut. Ins. Co.

O'Grady & Morley and Patrick R. Morley, Grand Forks, N. D., for General Casualty Company of Wisconsin.

Cahill, Gunhus, Grinnell, Jeffries, Klinger Vinje & Swenson, Moorhead, for State Farm Mut. Ins. Co.

Thysell, Gjevre, McLarnan, Hannaher, Vaa & Skatvold and Alden H. Gjevre, Moorhead, for City of Mentor.

Heard, considered, and decided by the court en banc.

Rehearing and Rehearing En Banc Denied May 7, 1982.

YETKA, Justice.

This is an appeal of summary judgment motions granted and denied in a declaratory judgment action. The underlying action, now in abeyance pending this appeal, is a personal injury suit by one co-employee against the estate of another co-employee and others. This declaratory judgment action was brought to establish the extent of coverages afforded by various insurance companies with regard to the underlying negligence action. The case was tried in Polk County District Court and involves solely statutory and insurance policy constructions.

Various motions for summary judgment were filed by the parties. For simplicity, we have summarized the rulings of the district court.

1. Western National Mutual Insurance Company (Western National) and General Casualty Insurance Company (General Casualty) have no duty to defend nor to pay any judgment against the estate of Joseph Lyczewski, the deceased co-employee.

2. Shelby Mutual Insurance Company (Shelby Mutual) may not recover from Western National the amount of workers\' compensation benefits paid to Peterson by Shelby Mutual.

3. Shelby Mutual has a right of subrogation against General Casualty for the workers\' compensation benefits paid to Peterson by Shelby Mutual.

4. Denton and LaDonna Peterson may recover from State Farm Mutual Insurance Company (State Farm) under the uninsured motorist coverage portion of their policy with State Farm.

We affirm the rulings of the trial court with two exceptions: (1) the trial court is reversed on its finding that Shelby Mutual has a right of subrogation against General Casualty; and (2) the trial court is reversed on its finding that the State Farm insurance policy lends uninsured motorist coverage to the Petersons.

For the purpose of this declaratory judgment action, the facts of the underlying personal injury action are not disputed. On November 23, 1977, Joseph Lyczewski and Denton Peterson, co-employees of Crookston Coca-Cola Bottling Company, were acting within the course and scope of their employment. Salesperson Lyczewski was driving the company-owned delivery truck provided him for business use; Peterson was his passenger. The vehicle collided with a Burlington Northern Railroad train within the city limits of Mentor, Minnesota. Lyczewski was killed and Peterson, the passenger, seriously injured.

Peterson applied for and received workers' compensation benefits from the workers' compensation insurance carrier for Crookston Coca-Cola, Shelby Mutual. As of January 1, 1980, these payments totaled $48,004.21. Peterson, his wife LaDonna, and Shelby Mutual commenced an action against Burlington Northern Railroad and the estate of Lyczewski seeking damages and reimbursement of workers' compensation benefits paid by Shelby Mutual to Peterson. Defendant insurers and third-party defendant City of Mentor were later joined in the suit.

Defendants Western National, General Casualty, and State Farm asserted that the policies they had issued did not provide coverage for the claims made by the plaintiffs. Plaintiffs asserted that Western National (insurer of the employer's truck) should bear the primary risk, General Casualty (insurer of Lyczewski's personal auto) any excess liability, and State Farm (insurer providing Peterson's uninsured motorist coverage) the liability only if recovery were not allowed against Western National and General Casualty. Plaintiffs also claim that Shelby Mutual has neither subrogation rights against Peterson if Peterson collects uninsured motorist benefits from State Farm nor against LaDonna Peterson if she settles with the Lyczewski estate for her claims of loss of consortium, loss of support, and loss of services.

The issues raised on this appeal are: (1) does the Western National policy, insuring the employer's truck in this case, provide liability coverage to plaintiffs and require Western National to defend Crookston Coca-Cola Bottling Company and the estate of Lyczewski; (2) does the General Casualty policy, insuring the personal vehicle of Lyczewski, provide plaintiffs with liability coverage beyond that of Western National and require General Casualty to defend the estate of Lyczewski; and (3) does the State Farm policy, providing Peterson with uninsured motorist coverage, provide plaintiffs with coverage under the facts of this case in the event that the Western National and General Casualty policies do not provide coverage.

The district court's order was directed only towards the potential liability coverages and uninsured motorist coverages afforded the Petersons and, by subrogation, Shelby Mutual. It did not address other coverages such as personal income protection. Also, Mrs. Peterson's claims for loss of support, loss of consortium, and loss of services were held to be only derivative of her husband's claims, a holding not disputed by the parties.

At the time of the truck-train collision, Western National had in force a policy of general automobile liability insurance on the truck, Crookston Coca-Cola Bottling Company being the named insured. The policy provided bodily injury coverage, property damage coverage, and mandatory no-fault coverage. The policy also contained a "cross-employee" exclusion.¹ On the basis of the "cross-employee" exclusion and plaintiff Peterson's "election of remedies" under the workers' compensation statutes, the district court held that Western National had neither liability coverage with respect to plaintiffs nor a duty to defend Crookston Coca-Cola and the estate of Lyczewski.

As to Peterson's "election of remedies," the arguments of the parties focus on Minn. Stat. § 176.061 (1980) ("Third Party Liability"), which provides in part:

Subdivision 1. Election of remedies. Where an injury or death for which compensation is payable occurs under circumstances which create a legal liability for damages on the part of a party other than the employer and at the time of such injury or death that party was insured or self-insured in accordance with this chapter, the employee, in case of injury, or his dependents, in case of death, may proceed either at law against that party to recover damages or against the employer for compensation, but not against both.

* * * * * *

Subd. 4. Application of subdivisions 1, 2, 3. The provisions of subdivisions 1, 2, and 3 apply only where the employer liable for compensation and the other party legally liable for damages are insured or self-insured and engaged in the due course of business, (a) in furtherance of a common enterprise, or (b) the accomplishment of the same or related purposes in operation on the premises where the injury was received at the time thereof.

This general elections scheme, requiring under certain circumstances that the injured worker seek only one means of compensation, has been in force in Minnesota since 1913. Act of Apr. 24, 1913, ch. 467, § 33, 1913 Minn.Laws 675, 691. See McCourtie v. United States Steel Corp., 253 Minn. 501, 504-06, 93 N.W.2d 552, 555-56 (1958); Tevoght v. Polson, 205 Minn. 252, 253-54, 285 N.W. 893, 894 (1939). Since that time most cases have focused on the factual issue of whether a "common enterprise" existed so as to allow the "election of remedies" defense. This court has held that the defense is applicable only when three requisites are met:

(1) the employers must be engaged in the same project; (2) the employees must be working together (common activity); and

(3) in such fashion that they are subject to the same or similar hazards.

Newland v. Overland Express, Inc., 295 N.W.2d 615, 620 (Minn.1980) (footnote omitted) (citing McCourtie v. United States Steel Corp., 253 Minn. 501, 506, 93 N.W.2d 552, 556 (1958)). For the purpose of this appeal, the...