Western National Mutual Insurance Company v. Structural Restoration, Inc., No. A09-1598 (Minn. App. 5/4/2010)
| Decision Date | 04 May 2010 |
| Docket Number | No. A09-1598.,A09-1598. |
| Parties | Western National Mutual Insurance Company, Respondent, v. Structural Restoration, Inc., Appellant, Nationwide Agribusiness Insurance Company, a foreign insurance corporation, Defendant. |
| Court | Minnesota Court of Appeals |
Appeal from the District Court, Hennepin County, File No. 27-CV-08-31042.
James T. Martin, Gislason, Martin, Varpness & Janes, P.A., Edina, Minnesota, for respondent.
Peter A. Koller, Curtis D. Smith, Moss & Barnett, Minneapolis, Minnesota, for appellant.
Considered and decided by Lansing, Presiding Judge; Halbrooks, Judge; and Connolly, Judge.
UNPUBLISHED OPINION
Appellant challenges the district court's grant of judgment on the pleadings in favor of respondent, appellant's insurer. The district court entered a declaratory judgment that respondent had no duty to defend appellant in the underlying litigation due to the operation of the insurance policies' exclusions for professional services. Because the underlying litigation is based on professional services provided by appellant, the district court did not err in concluding that respondent did not owe a duty to defend appellant. We affirm.
Defendant Nationwide Agribusiness Insurance Company (Nationwide), as subrogee of Tri Oak Foods, sued appellant Structural Restoration, Inc., in the U.S. District Court for the Southern District of Iowa. Nationwide's complaint alleged that Nationwide paid Tri Oak Foods approximately $1.6 million for damages sustained as the result of a collapsed silo. The complaint stated that Structural Restoration is a corporation "dedicated to the maintenance and modifications of agricultural and commercial facilities, specializing in concrete repairs, masonry repairs, silo linings, bin bottoms, coatings, crack repairs, pressure injections, water proofing, silo inspection doors and roof repairs." The complaint alleged that Structural Restoration was retained by Tri Oak Foods to, and in fact did, conduct an inspection of four silos and that Structural Restoration then prepared a written report finding all of the silos acceptable for grain storage and recommending subsequent visual inspections every three to five years.
The record contains a copy of a letter written by estimator and field manager Charles Threet on behalf of Structural Restoration. The letter to Tri Oak Foods states that Structural Restoration inspected four silos in March 1997, observing "minor cracks" and "delaminations." It further states that in December 2003, Structural Restoration's repairs to one of the silos showed no identifiable failures or new delaminations and that the other silos and surface conditions appeared to be unchanged. Threet's letter notes that surface cracks are normal and stated, "I find the silos acceptable for grain storage service" and "I recommend a visual inspection being made every 3 to 5 years."
In its complaint in the underlying litigation, Nationwide asserted claims for negligence, breach of warranty, and breach of contract. The gravamen of the claims underlying every count in the complaint is that Structural Restoration inspected the silos and that this inspection was deficient and lacking in quality and that Tri Oak Foods was injured by relying upon the recommendation arising out of Structural Restoration's inspection of the silos.
Structural Restoration tendered the defense of the underlying litigation to its insurer, respondent Western National Mutual Insurance Company (Western National), which denied having a duty to defend Structural Restoration. Western National brought suit in Hennepin County, seeking a declaratory judgment that it had no duty to defend or indemnify Structural Restoration in the underlying litigation. At all times relevant to this appeal, Structural Restoration was insured by Western National. Western National issued commercial-general-liability (CGL) and umbrella policies to Structural Restoration, both of which contained coverage exclusions for professional services.
The relevant exclusion to the CGL policy provides that, "[w]ith respect to any professional services shown in the Schedule," the policy "does not apply to `bodily injury', `property damage' or `personal and advertising injury' due to the rendering or failure to render any professional service." Although otherwise blank, the schedule provides, "If no entry appears above, information required to complete this endorsement will be shown in the Declarations as applicable to this endorsement." The renewal declaration lists the following exclusion for professional services: "EXCLUSION— DESIGNATED PROFESSIONAL SERVICES: ALL SERVICES." The umbrella coverage also has a professional-services exclusion, which contains a nonexclusive list of enumerated professional services, including "[p]reparing, approving, or failing to prepare or approve maps, drawings, opinions, reports, surveys, change orders, designs or specifications" and "[e]ngineering services, including related supervisory or inspection services."
Western National moved for judgment on the pleadings pursuant to Minnesota Rule of Civil Procedure 12.03, requesting that the district court enter judgment declaring that Western National did not have a duty to defend Structural Restoration in the underlying litigation. The district court granted the motion, entering judgment in favor of Western National. In its opinion, the district court concluded that the professional-services exclusions barred coverage of the claims stated against Structural Restoration in the underlying litigation. It reasoned that viewing and providing an opinion as to the need for repair or maintenance work on a silo is a professional service. Structural Restoration now appeals. DECISION I. The district court did not err in granting judgment on the pleadings in favor of Western National.
We review de novo a district court's grant of judgment on the pleadings. Bodah v. Lakeville Motor Express, Inc., 663 N.W.2d 550, 553 (Minn. 2003). "Judgment on the pleadings is proper where the defendant relies on an affirmative defense or counterclaim which does not raise material issues of fact." Jacobson v. Rauenhorst Corp., 301 Minn. 202, 206, 221 N.W.2d 703, 706 (1974), overruled on other grounds by Farmington Plumbing & Heating Co. v. Fischer Sand & Aggregate, Inc., 281 N.W.2d 838, 842 n.4 (Minn. 1979). Judgment on the pleadings is proper when the dispute centers on the meaning of a contract and the contract language unambiguously entitles the moving party to judgment. McReavy v. Zeimes, 215 Minn. 239, 243-45, 9 N.W.2d 924, 926-27 (1943). The pleadings must be construed in favor of the nonmoving party, and a motion for judgment on the pleadings may only be granted if the pleadings create no fact issues. Ryan v. Lodermeier, 387 N.W.2d 652, 653 (Minn. App. 1986).
If "matters outside the pleadings are presented to and not excluded by the [district] court, the motion shall be treated as one for summary judgment and disposed of as provided for in Rule 56, and all parties shall be given reasonable opportunity to present all material" relevant to a summary-judgment motion. Minn. R. Civ. P. 12.03. But a district court is allowed to consider additional documents and statements incorporated by reference into the pleadings, such as copies of the underlying complaint and insurance policies. Piper Jaffray Cos. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 967 F. Supp. 1148, 1152 (D. Minn. 1997) (applying parallel Fed. R. Civ. P. 12(b)(6) standard).
The application and interpretation of an insurance policy presents a question of law, which we review de novo. Marchio v. W. Nat'l Mut. Ins. Co., 747 N.W.2d 376, 379 (Minn. App. 2008). "When interpreting an insurance contract, words are to be given their natural and ordinary meaning and any ambiguity regarding coverage is construed in favor of the insured." Am. Family Ins. Co. v. Walser, 628 N.W.2d 605, 609 (Minn. 2001). Whether a contract is ambiguous is a question of law, which we review de novo. Carlson v. Allstate Ins. Co., 749 N.W.2d 41, 45 (Minn. 2008). "Where an insurer asserts that coverage is precluded by an exclusion, the burden is upon the insurer to establish that the exclusion is applicable." Ministers Life v. St. Paul Fire & Marine Ins. Co., 483 N.W.2d 88, 90 (Minn. App. 1992).
An insurer's duty to defend is broader than its duty to indemnify its insured. Rechtzigel v. Fidelity Nat'l Title Ins. Co. of N.Y., 748 N.W.2d 312, 320 (Minn. App. 2008), review denied (Minn. July 15, 2008). Whether a duty to defend exists is a question of law. Id. The duty to defend is contractual. Wooddale Builders, Inc. v. Md. Cas. Co., 722 N.W.2d 283, 303 (Minn. 2006).
The duty to defend is broader than the duty to indemnify in three ways: (1) the duty to defend extends to every claim that "arguably" falls within the scope of coverage; (2) the duty to defend one claim creates a duty to defend all claims; and (3) the duty to defend exists regardless of the merits of the underlying claims.
Id. at 302. Because the insurer's duty to defend arises if any part of the claim against the insured is arguably within the scope of the protection afforded by the policy, the insurer "bears the burden of establishing that all parts of a cause of action clearly fall outside the scope of coverage." Franklin v. W. Nat'l Mut. Ins. Co., 574 N.W.2d 405, 407 (Minn. 1998).
Western National contends that its duty to defend must be determined solely by comparing the allegations contained within the four corners of the underlying complaint with the insurance policy. We disagree. "Generally, the insurer's obligation to defend is determined by comparing the allegations of the complaint with the relevant policy language." Garvis v. Employers Mut. Cas. Co., 497 N.W.2d 254, 256 (Minn. 1993) (emphasis added). "The complaint is not...
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