Coverage Analysis
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MINNESOTA

  ACCIDENTS OR OCCURRENCES

  "An accident is an unexpected or unforeseen happening."  Sage v. INA, 480 N.W.2d 695 (Minn. App. 1992), cited in Tschimperle v. Aetna Cas. & Sur. Co., 529 N.W.2d 421 (Minn. App. 1995).  Under Minnesota law, an accident is understood as "an unexpected happening without intention or design."  Weis v. State Farm Mutual Auto Ins. Co., 64 N.W.2d 366, 368 (Minn. 1954).  

  Minnesota courts construe the phrase "neither expected no intended" to mean that the injury must be both unexpected and unintended.  See Auto-Owners Ins. Co. v. Jensen, 667 F.2d 714 (8th Cir. 1981).  Injury is intended from the standpoint of the insured if a reason for the insured's act is to inflict injury or where the character of the act is such that an intention to inflict injury can be inferred as a matter of law.  Woida v. North Star Mut. Ins. Co., 306 N.W.2d 570, 573 (Minn. 1981) and Continental Western Ins. Co. v. Toal, 244 N.W.2d 121 (Minn. 1976)(accomplice to armed robbery).  See also State Farm Fire & Cas. Co. v. Williams, 355 N.W.2d 421 (Minn. 1984)(intent inferred as a matter of law where insured engaged in sexual contact with victim, who though an adult, was physically incapacitated and insured was apparent authority figure); Illinois Farmers Ins. Co. v. Judith G., 379 N.W.2d 638 (Minn. Ct. App. 1986)(fact that the insured was minor at the time he sexually assaulted two young victims was irrelevant for purposes of finding a per se intent to injure).

  Intent has also been inferred in cases of sexual assault where the perpetrator was an older child. B.B. v. Continental Ins. Co., 8 F.3d 1288 (8th Cir. 1993) and D.W.H. v. Steele, 512 N.W.2d Minn. 1994).

  However, even "expected" injuries require proof that the insured subjectively knew or understood, to a high degree of certainty, that injuries of the same general sort would result from its intentional acts.  Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724 (Minn. 1997).

  Injury is expected if the insured knew or should have known that there was a substantial probability that certain consequences will result from his actions; results cease to be expected, and coverage is present, as the probability that the consequences will follow decreases and becomes less than a substantial probability. Auto-Owners Ins. Co. v. Jensen, 667 F.2d 714, 719-20 (8th Cir. 1981)(quoting City of Carter Lake v. Aetna Cas. & Surety Co., 604 F.2d 1052 (8th Cir. 1979)).  A result is substantially probable if the indications are strong enough to lead the prudent man to conclude that not only is there a possibility of the results occurring, but they are highly likely to occur.  Id. at 720.  A result is reasonably foreseeable if there are indications which would lead a prudent man to conclude that particular results could follow from his actions.  Id.  However, the standard is "substantial probability", not mere "reasonable foreseeability."  Bituminous Casualty Corp. v. Tonka Corp., 9 F.3d 51, 53 (8th Cir. 1993).  Thus, in Diocese of Winona v. Interstate Fire & Casualty Co., 89 F.3d 1386, 1394-96 (8th Cir. 1996), the court ruled that the knowledge of a diocese that one of its priests had engaged in eight separate cases of pedophilic behavior prior to the instant one were sufficient to warrant a finding that the latest manifestation of the priest's problem was "expected."  More recently, the Court of Appeals ruled in American Family Mut. Ins. Co. v. M.B., 1997 Minn. App. LEXIS 560 (Minn. App. May 20, 1997) that an exclusion for "expected injuries" barred coverage for allegations that the insured modeling agency had recklessly allowed a fashion photographer to work with the plaintiffs despite being aware of prior incidents in which he had sexually molested models during photography sessions.

  Minnesota courts have applied an objective standard for measuring whether pollution was "expected or intended."  Sylvester Brothers Development Co. v. Great Central  Ins. Co., 480 N.W.2d 368, 372 (Minn. App. 1992); Auto Owners v. Jensen, 557 F.2d 714, 720 (8th Cir. 1981) and Bituminous Cas. Co. v. Tonka Corp., Civ. 4-87-392 (D. Minn. August 21, 1992), aff'd, 9 F.3d 51 (8th Cir. 1993)(Tonka and its employees knew or should have know that there was a substantial probability that its on-site dumping would cause property damage); Bell Lumber & Pole Co. v. U.S. Fire Ins. Co., 847 F.Supp. 738 (D. Minn. 1994), aff'd 60 F.3d 437 (8th Cir. 1995) (routine disposal of PCP waste by wood treatment operator).

  An insured intends an injury if he consciously desires the result of his act or knows with substantial certainty that the loss or damage will follow from his conduct regardless of his desire. Iowa Kemper Ins. Co. v. Stone, 269 N.W.2d 285 (Minn. 1978).  As a result, claims based on misrepresentations cannot be "accidents." Tschimperle v. Aetna Cas. & Sur. Co., 529 N.W.2d 421 (Minn. App. 1995).

   An insured will not be deemed to have expected or intended the resulting injury where, by reason of mental illness of incapacity, the insured is incapable of controlling its conduct or appreciating the consequences of its actions.  State Farm v. Wicka, 474 N.W.2d 324 (Minn. 1991).   However, a mistaken factual belief with respect to the consequences of intentional acts will not reinstate coverage.  Thus, the insured's claim that he burned a building in the mistaken belief that it was an abortion clinic did not create coverage since the act of arson was nonetheless expected or intended.  American Family Mutual Ins. Co. v. Mission Medical Group, 72 F.3d 645 (8th Cir. 1995).  

  If an insured undertakes a course of action, knowing of the substantial risks involved, and proceeds in light of this knowledge, the resulting injuries will not be an "occurrence."  Farmers Union Oil Co. v. Mutual Service Ins. Co., 422 N.W.2d 530, 533 (Minn. App. 1988)(insured's use of hazardous herbicide with foreknowledge that its spraying might kill crop was not an "occurrence").  

  Intent will be inferred as a matter of law where the insured's conduct is inherently injurious. Allstate Ins. Co. v. S.F., 518 N.W.2d 37, 40 (Minn. 1994)(non-consensual sexual battery);  Estate of Lehman v. Metzger, 355 N.W.2d 425, 426 (Minn. 1984)(sexual molestation); Firemans Fund Ins. Co. v. Hill, 314 N.W.2d 834, 835 (Minn. 1982)(sexual abuse of foster child) and Woida v. North Star Mut. Ins. Co., 306 N.W.2d 570, 573 (Minn. 1981)(intent assumed where insured shot armor-piercing bullets at truck that he knew was occupied by guards).  Thus, allegations that the insured’s son broke into a cemetery crypt, dismembered a corpse and dumped it into the river had been held to involve acts for which an intent to injure may be inferred as a matter of law and therefore preclude coverage in the absence of any covered “occurrence.”  Further, in State Farm Fire & Casualty Company v. Neises, 1999 WL 639240 (Minn. App. August 24, 1999), the Court of Appeals declared that these acts fell within the scope of an homeowners policy’s exclusion for “willful and malicious acts.”

  However, courts may only infer intent where the insured's acts are of a "calculated and remorseless character" such that they are substantially certain to cause injury.  Continental Western Ins. Co. v. Toal, 244 N.W.2d 121, 125-126 (1976); State Farm v. Wicka, 474 N.W.2d 324, 329 (Minn. 1991); Tower Ins. Co. v. Judge, 840 F.Supp. 679 (D. Minn. 1993). 

  The Minnesota Supreme Court has extended the "inferred intent" rule to "false imprisonment" claims where the insured's conduct was inextricably linked to a plan to sexually assault the plaintiff.  Auto-Owners Ins. Co. v. Todd, 547 N.W.2d 696 (Minn.  1996). 

  Injury may also be inferred, even absent criminal conduct or intentional torts, if the insured acted negligently but with the knowledge that there was a serious threat of injury from its conduct which did, in fact, eventually occur.  R.W. v. T.F., 528 N.W.2d 869 (Minn. 1995)(negligent transmission of herpes).

  However, an intent to injure will not necessarily be inferred in sexual harassment cases. Meadowbrook, Inc. v. Tower Ins. Co., 559 N.W.2d 411 (Minn. 1997)(permitting hostile work environment to exist not the same as intending injury to happen).  Earlier, the Court of Appeals ruled that an age discrimination case was not covered in Sage Co. v. INA, 480 N.W.2d 695 (Minn. Ct. App. 1992).

  Minnesota law with respect to whether there is coverage for “negligent supervision” claims is in a state of flux.  In 1996, the Eighth Circuit ruled that claims against a minor and his parents resulting from the minor's sexual assault failed to allege an "occurrence" under a homeowners policy as the claims against the parents "resulted from" intentional acts and were therefore also excluded from coverage  Allstate Ins. Co. v. Steele, 74 F.3d 878 (8th Cir. 1996).   Shortly, thereafter, however, the Minnesota Court of Appeals took a different view of the law, declaring in Mork Clinic v.  Firemans Fund Ins.  Co., 575 N.W.2d 598 (Minn.  App.  1998) that allegations of negligent hiring and supervision against the insured medical clinic were covered despite intentional sexual assault by an employee physician.  Relying on Mork, the Eighth Circuit has since disavowed Steele and ruled instead instead in   Ins.  Co.  v.  Doe, 1999 WL  42243 (8th Cir.  February 1, 1999) that negligence claims against employers are a separate causative occurrence and must be considered separately from the excluded conduct of employees.

  The same result will not obtain under policies that exclude losses “arising out of” such events.  For instance, the Minnesota Court of Appeals has ruled in Amos v National Union Fire Insurance Company of Pittsburgh, CX-98-1921 (Minn. App. May 11, 1999) that an assault and battery exclusion in a liability policy that National Union issued to the Minneapolis Public School District precluded coverage for allegations that the district had negligently hired and supervised a teacher who was accused of sexually assaulting a pupil.  While conceding that the allegations against the school district potentially described a “wrongful act” within the scope of this E&O policy, the court declared that what was important was the direct cause of the plaintiff’s injuries, not the conduct of the insured that formed the basis for the claim of liability.  Since the injuries plainly “arose out of” an assault, the exclusion applied.

  Intentional act exclusions will only be upheld if the insured acted with specific intent to cause harm.  State Farm Fire & Cas. Co. v. Wicka, 474 N.W.2d 394 (Minn. 1991) and German Mutual Ins. Co. v. Yager, 554 N.W.2d 116, 117 (Minn. Ct. App. 1996).  As above, however, intent may be inferred as a matter of law in certain types of cases.  An exclusion for intentional acts has been limited to situations in which the insured also expected or intended to cause injury. 

  An insured that has been criminally convicted of an intentional assault is collaterally estopped to claim that its conduct was accidental for purposes of insurance coverage.  American Family Mut. Ins. Co. v. M.B., 1997 Minn. App. LEXIS 560 (Minn. App. May 20, 1997)(jury finding that insured acted with "deliberate disregard" for plaintiff's safety precluded relitigation of whether injuries were "expected").  But see, Diocese of Winona v. Interstate Fire & Cas. Co., 89 F.3d at 1391 (8th Cir. 1996)(jury finding of recklessness pertained to issue of criminal culpability rather than likelihood of "occurrence"). 

  The state Court of Appeals ruled in Gopher Oil Co.  v.  American Hardware Mutual Ins.  Co., 588 N.W.2d 756 (Minn.  App.  1999) that an insured’s contemporaneous awareness that the surface disposal of certain substances could result in odor and visual problems or could cause surface runoff did not mandate a finding that the insured had expected or intended that groundwater contamination would also occur.
 

  ALLOCATION AND SCOPE ISSUES

  The Minnesota Supreme Court has not yet clearly addressed the extent to which defense costs may be apportioned in cases where only portions of the underlying claims are not covered.  In St. Paul Fire & Marine Ins. Co. v. Flynn, 1996 Minn. App. LEXIS 1231 (Minn. App. October 29, 1996), the court refused to permit an allocation between claims involving negligent and intentional conduct in a wrongful termination action, where both the covered and non-covered claims arose out of the same set of operative facts.  Under such circumstances, the court ruled that allocation was inappropriate where the factual basis for the covered claim permeated the other non-covered claims.  

  In Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724 (Minn. 1997) and Northern States Power Co. v. Fidelity & Cas. Co., 523 N.W.2d 657 (Minn. 1994), the Minnesota Supreme Court ruled that any policy for which the insured can establish that property damage has occurred must pay its pro rata share of damages on a "time on the risk" basis throughout the period of time that pollution occurred, even including years prior to the period for which the insured is able to document coverage and those after 1970, when exclusions defeat coverage.  However, this presumption is not absolute.  An insurer can overcome it by showing that there was, in fact, no injury during its policy.  Similarly, the persistence of pollution from earlier sources will not trigger coverage in later years if, as in SCSC Corporation v. Allied Mutual Ins. Co., 533 N.W.2d 603 (Minn. 1995), the pollution can be attributed to a single specific event.  See also Minnetonka Acres, LLP v. Minnesota Insurance Guaranty Association, Hennepin No. 92-002309 (Minn. Dist. Ct. November 6, 1996)(insured is responsible for earlier years when there was no insurance at all; allocation analysis is not limited to years for which insurance can be located).

  In Gopher Oil Co.  v.  American Hardware Mutual Ins.  Co., 588 N.W.2d 756 (Minn.  App.  1999), the Minnesota Court of Appeals ruled that a loss need only be allocated to the years in which an insured had shipped waste substances to a landfill, rejecting an insurer’s contention that later years might also be implicated.  The Court of Appeals also rejected the insurer’s contention that it should be entitled to diminish its defense payment obligation to reflect the fact that there were multiple defendants represented by common counsel, only one of which was its insured.  The court declared that there was no basis for contending that an equal share of defense costs should be allocated to each of these parties.  As with the Minnesota Supreme Court’s ruling in Domtar, the court held that it was not unreasonable to allocate all of the billing costs to American Hardware’s insured where the costs could not be segregated. 

  In First State Ins.  Co.  v.  Minnesota Mining and Manufacturing Co., No.  CX-97-9793 (Minn.  Dist.  Ct.  March 12, 1999), Judge Monahan ruled that breast implant losses should only be allocated to the period of the insured’s available “occurrence” coverage.  Despite the court’s prior ruling that a continuous trigger should be applied, thus implicating years after 1985, the court ruled that insurance was not “available” owing to evidence that the insured had only been able to purchase “claims made” coverage after that date.  The court predicted that the Minnesota Supreme Court would adopt the allocation analysis proposed by the New Jersey Supreme Court in Owens-Illinois and by the Second Circuit in Stonewall.  Judge Monahan noted that “there is no evidence that 3M ever understood, or should reasonably understood, that the availability of its occurrence policies’ would erode simply because of the passage of time.”

  In an earlier mass tort case, the Minnesota Supreme Court issued a pair of rulings construing a liability insurer's respective defense and indemnity obligation where only some of the plaintiffs in a class action had suffered injury during its policy period.  In Jostens, Inc. v. CNA Ins. Co., 403 N.W.2d 625 (Minn. 1987), the court ruled that, as an insurer is only responsible for occurrences within the scope of its coverage, it was entitled to pro-rate its indemnity obligation to reflect the claims that fell outside its period of coverage.  In view of the fact that the settlement formula compensated class members based upon the duration of their employment, the Minnesota Supreme Court ruled that a similar time-based formula might be applied to determine that portion of the settlement which alleged injury during the period of CNA's coverage.  Earlier, in the same case, the court had ruled that CNA could not pro-rate the cost of defending an employee class action suit for sex discrimination, even though some of the discrimination had occurred outside of its policy period.   Jostens, Inc. v. CNA Ins. Co., 336 N.W.2d 544 (Minn. 1983).   Accordingly, while the general rule is that an insured may be forced to pay defense costs relating to non-covered claims, pro-ration will not be required where there is no practical basis for apportioning legal work between covered and non-covered matters.

  Sexual molestation claims were also allocated on a "time on the risk" basis in Diocese of Winona v. Interstate Fire & Casualty Co., 89 F.3d 1386 (8th Cir. 1996).  While finding that the injuries suffered by a child for being sexually molested by a priest were a continuous occurrence triggering coverage in each year in which the sexual molestation occurred, the court declared that the insureds were responsible for that share of defense costs and indemnity attributable to years for which coverage was unavailable owing to the court's finding that the injuries had been "expected."  As a consequence, recovery was only permitted for that fraction of the molestation period prior to the date that the injuries had been expected.  

  The Court of Appeals refused to permit an insurer to allocate the costs of defending a covered count (defamation) from non-covered claims (wrongful termination/breach of contract).  St. Paul Fire & Marine Ins. Co. v. Cosgrove, Flynn, 1996 WL 622759 (Minn. Ct. App. 1996).  In evaluating whether apportionment was appropriate, the court considered both the pleadings and discovery that had been developed in the underlying case.

  The Court of Appeals has given effect to a "non-cumulation" clause in an employee dishonesty claim.  In Landico, Inc. v. American Family Mutual Ins. Co., No. C9-96-1727 (Minn. App. February 25, 1997), the court ruled that an employee dishonesty policy that contained a non-cumulation clause and which defined "occurrence" as "all loss caused by, or involving, one or more employees, which is the result of a single act or a series of acts" limited the scope of coverage to a single "occurrence" limit for claims arising out of the embezzlement of a Landico employee in 1993 and 1994.  Unlike a prior unpublished case, in which the court had refused to give effect to a non-cumulation clause, the Court of Appeals here ruled that the non-cumulation clause limited coverage to a single "occurrence" limit given the policy definition of "occurrence."  A dissenting judge argued that "occurrence" limit should apply to each policy period. 
 

  APPELLATE PROCEDURES

  Michigan has both an intermediate appellate court and a state Supreme Court.
 

  BAD FAITH

  Unfair or deceptive consumer practices are proscribed by Minn. Stat. Ann. §§ 8.31, 325D.43 (West 1981 & Supp. 1993).  Unfair claims handling by insurers is regulated under Minn. Stat. § 72A.20 (1980).

  The Court of Appeals has ruled in State of Minnesota v. American Family Mutual Insurance Company, C1-99-1705 (Minn. App. April 4, 2000) that the Minnesota Attorney-General could sue a property insurer for deceptive practices involving its handling of storm claims.  The court ruled that the authority to bring actions against insurance companies for consumer protection violations was not limited to the Insurance Commissioner, nor was the Attorney General required to consult with the Insurance Commissioner before suing. 

  A tort cause of action for bad faith has been rejected in the first-party context. Haagenson v. National Farmers Union Property & Casualty Co., 277 N.W.2d 648 (Minn. 1979). 

  Every contract (including an insurance policy) contains a covenant of good faith and fair dealing that is implied into the contract as a matter of law. In re Hennepin County 1986 Recycling Bond Litig., 540 N.W.2d 494, 502 (Minn. 1995). The implied covenant of good faith and fair dealing does not extend to actions or matters which are outside the scope of the contract, however.  In re Hennepin County 1986 Recycling Bond Litig., 540 N.W.2d 494 (Minn.1995). 

  Where a primary insurer assumes the defense of its policyholder, it has an obligation to exercise good faith on the conduct of that defense, including a duty to settle within policy limits where liability is clear.  Short v. Dairyland Ins. Co., 334 N.W.2d 384, 387 (Minn. 1983).  However, the insured's liability must be clear before the insurer itself is liable for negligently failing to settle within policy limits.  Northfield Ins. Co. v. St. Paul Surplus Lines Ins. Co., 545 N.W.2d 57 (Minn. App. 1996).  
  
  If an insurer fails to take advantage of an opportunity to settle a claim within policy limits where liability is clear and the possibility of an excess judgment is apparent, the insurer will be obliged to pay the full amount of the judgment, including interest.  Short, 334 N.W.2d at 387-89.  However, the insurer has no obligation to seek out the possibility of a settlement and is only obligated to accept a settlement if its insured's liability is clear and the amount demanded is not excessive in light of the facts.  Id.  See also Northfield Ins. Co. v. St. Paul Surplus Lines Ins. Co., 545 N.W.2d 57 (Minn. App. 1996)(no duty to accept even nuisance settlement demand where insured's liability was disputed). 

  Without determining whether an insurer might have a fiduciary obligation to notify its insured concerning potential alternative coverages available under a liability policy, the Eighth Circuit ruled in C.J. Duffy Paper Co. v. Liberty Mutual Ins. Co., 76 F.3d 177 (8th Cir. 1996) that no such obligation existed to third parties seeking coverage under a vendor's endorsement.
 

  "BODILY INJURY"

  Held not to encompass claims for mental distress in Hamiln v. Western National Mut. Ins. Co., 461 N.W.2d 395, 397 (Minn. App. 1990).  More recently, the Minnesota Supreme Court has stated that mental distress claims are not covered unless they are accompanied by physical symptomatology of injury.  Garvis v. Employers Mut. Cas. Co., 497 N.W.2d 254 (Minn. 1993).  However, in Meadowbrook, Inc. v. Tower Ins. Co., 559 N.W.2d 411 (Minn. 1997), the Supreme Court ruled that an insurer had a duty to defend, even if the injuries resulting from the insured's claimed sexual discrimination failed to rise to the Garvis standard of "appreciable physical injuries" where physical injuries were alleged.

     
  BREACH OF POLICY CONDITIONS

  Under Minnesota law, late notice will only defeat coverage if it (1) results in prejudice to the insurer or (2) notice is expressly stated to be a condition precedent to coverage.  Winthrop and Weinstine, P.A. v. Travelers Casualty and Surety Company, 98-1845 (8th Cir. August 19, 1999) and Knudson v. St. Paul Fire and Marine Insurance Company, 555 N.W. 2d 2125 (Minn. App. 1996).  

  A claim of late notice will not defeat coverage unless the insurer demonstrates prejudice from the delay.  Reliance Ins. Co. v. St. Paul Ins. Cos., 307 Minn. 338, 341, 239 N.W.2d 922, 925 (1976); Seaway Port Authority of Duluth v. Midland Ins. Co., 430 N.W.2d 242 (Minn. Ct. App. 1988). The burden of proving prejudice is on the insurer.  Reliance Insurance Company v. St. Paul Fire and Marine Insurance Companies, 239 N.W. 2nd 922, 925 (Minn. 1976).  An insurer must prove some but not an overwhelming degree of prejudice in order to sustain a defense to coverage on this basis.  Specifically, it is sufficient for the insurer to show that its exposure to liability was increased as a consequence of the insured’s delay.  Winthrop and Weinstine, P.A. v. Travelers Casualty and Surety Company, 98-1845 (8th Cir. August 19, 1999).
 
  Although prejudice may be presumed in cases of extraordinary delay, the length of delay is not so significant as what happens during that time.  Reliance Ins. Co. v. St. Paul Ins. Companies, 239 N.W.2d 922, 925 (Minn. 1976).  Thus, Minnesota courts have excused multi-year delays if there has not been any change of circumstances in the interim that would affect the insurer's ability to investigate or respond to the claim.  Dairyland Ins. Co. v. Cleementson, 431 N.W.2d 895, 899 (Minn. App. 1988) (six and one-half year delay held not prejudicial per se) and Noon Realty Co., Inc. v. Aetna Ins. Co., 387 N.W.2d 465, 467 (Minn. App. 1986) (seven year delay was prejudicial as certain documents and information were no longer available to the insured, thus prejudice against ability to investigate and respond to the claim).

  An insurer may not deny coverage on the basis of inadequate notice unless it investigates the claim and gives the insured an opportunity to correct the defect in notice.  St. Paul Fire & Marine Ins. Co. v. Metropolitan Urology Clinic, 537 N.W.2d 297 (Minn. App. 1995).  However, notice must be in the form specified. Hooper v. Zurich American Ins. Co., 552 N.W.2d 31 (Minn. App. 1996)(insurer's actual knowledge did not trigger duty to investigate under Metropolitan Urology where notice to broker was oral, whereas policy required written notice to insurer).

  An insurer is prejudiced as a matter of law when the defense of a suit is not tendered to it until after trial and the entry of judgment against its policyholder.  Hooper v. Zurich American Ins. Co., 552 N.W.2d 31 (Minn. App. 1996).
 

  BROAD FORM COVERAGES

  The Minnesota Courts have adopted a three-prong test to determine whether "advertising injury" coverage applies.  In Polaris Industries v. Continental Ins. Co., 539 N.W.2d 619, 621-23 (Minn. App. 1995), review denied (Minn. January 25, 1996), the Court of Appeals looked to (1) whether the advertising activity was the direct or proximate cause of the alleged injury; (2) whether the injury fell within the scope of the policy's definition of "advertising injury" and; (3) whether any policy exclusions apply.  See also Fluoroware, Inc. v. Chubb Group of Insurance Companies, 545 N.W.2d 678 (Minn. App. 1996).  

  Minnesota courts have generally restricted Broad Form coverages to claims alleging an enumerated “offense.”  Thus, in Hamlin v. Western National Mutual Insurance Co., 461 N.W.2d 395 (Minn. Ct. App. 1990), the court refused to find “defamation” coverage for a sexual harassment claim despire the insured’s argument that because the complaint contained statements which could be construed to be defamatory the insurer had a duty to defend under the personal injury section of the policy. 
  The Minnesota Supreme Court has ruled that mental distress resulting from a phone call was not a "wrongful entry" under current "personal injury" forms.  The court suggested, however, that such "constructive" invasions might have been covered under earlier forms that made reference to "invasion of the right of private occupancy."

  The Eighth Circuit has ruled that EMF claims against a property developer did not allege any "wrongful entry into or invasion of the right of private occupancy of a room, dwelling or premises," since there was no evidence that the insured was a "owner, landlord or a lessor" at the time of the injuries. TGA Development, Inc. v. Northern Ins. Co. of New York, 62 F.3d 1089 (8th Cir. 1995)

  More recently, a trial court has ruled in Hauenstein & Burmeister, Inc. v. Employers Ins. of Wausau, Anoka County District Court No. C6-93-7630 (Minn. August 30, 1995) that pollution liability claims are not for "personal injury."  the court noted that there was no indication that the insured had sought to interfere with the plaintiff's possession of their property, nor was it likely that this coverage was ever intended to extend to pollution claims since, if adopted, it would render the pollution exclusion meaningless.  Accord, Hawkins Chemical, Inc. v. Westchester Fire Ins. Co., CV 4-95-422 (D. Minn. June 27, 1996)(no claim unless insured was plaintiff's landlord or property owner).

       The Eighth Circuit ruled in Comsat v. St. Paul Fire  & Marine Ins Co., No. 00-2529 (8th Cir. April 10, 2001) that a Minnesota District Court did not err in ruling that Sherman Act claims arising out of Comsat’s efforts to monopolize global communications satellite services did not allege a covered “advertising injury” offense during the  St. Paul policy period, particularly as the underlying litigation was filed  prior to the date that the policy went into effect.  

  BURDEN OF PROOF

  Insured must establish right to coverage.  Boedigheimer v. Taylor, 178 N.W.2d 610, 287 Minn. 323 (1970) and Grinnell Mut. Ins. Co. v. Anderson, 427 N.W.2d 274 (Minn. App. 1988).  Thereafter, burden shifts to insurer to show that pleadings and known facts place entire cause of action outside its coverage.  Rulli v. State Farm Fire & Cas. Co., 479 N.W.2d 87 (Minn. App. 1992) and Milwaukee Mut. Ins. Co. v. City of Minneapolis, 239 N.W.2d 472, 307 Minn. 301 (1976)(homeowner's insurer must prove that police officer's conduct was not ordinarily incident to non-business pursuit) and The Queen's Revenge v. Northwestern National Cas. Co., C792-230 (Minn. App. June 20, 1992)(theft claim). 

  Whereas insureds have the burden of proving that bodily injury or property damage occurred during any policy for which they are claiming coverage, they need not prove the fact of injury with complete precision in order to avoid summary judgment against them.  Fairview Hospital v. St. Paul Fire & Marine Ins. Co., 533 N.W.2d 337 (Minn. 1995).

  Insureds have the burden of proving that discharges were "sudden and accidental" if insurers have made a prima facie showing that the pollution exclusion otherwise applies. SCSC Corporation v. Allied Mutual Ins. Co., 533 N.W.2d 603 (Minn. 1995); Bell Lumber and Pole Co. v. United States Fire Ins. Co., 60 F.3d 437 (8th Cir. 1995) and Dakhue Landfill, Inc. v. Employers Ins. of Wausau, CO-93-905 (Minn. App. November 23, 1993).  If a loss results both from covered and non-covered causes, the Minnesota Supreme Court ruled in SCSC, supra that the insurer must establish that the "overriding cause" was not covered.
 

  "BUSINESS PURSUITS"

 The Minnesota legislature has recently adopted legislation specifying that homeowners insurers do not owe coverage for day care liabilities except where care is being provided by a relative of the claimant or by an unrelated individual to persons from a single family.
 

  CHOICE OF LAWS

  Minnesota courts look to due process as an overall factor in determining choice of laws,  Johnson v. United Service Auto Ass'n, 493 N.W.2d 570 (Minn. 1992) and looks to Leflar's "choice influencing consideration": 1) predictability of results; 2) maintenance of interstate and international order; 3) simplification of the judicial task; 4) advancement of the forum state's governmental interest; 5) application of the better rule of law.  Gimmestad v. Gimmestad, 451 N.W.2d 662, 665-666 (Minn. 1990); United States Fire Ins. Co. v.  Goodyear Tire & Rubber Co., (D. Minn. 1989), aff'd 920 F.2d 487 (8th Cir. 1990).  

  The first factor, predictability of results, is intended to fulfill the parties’ “justified expectations” about what law they believed would be applied to a controversy.  Lommen v. City of East Grand Forks, 522 N.W.2d 148, 150 (Minn. Ct. App. 1994).  Under this factor the residency of the insured and the place where the insurance policy was entered into are seen as factors that would have affected the parties’ expectations about what law would be applied.  This first factor often weighs heavily towards applying the law of the insured’s domicile in a coverage declaratory judgment action.  Jepson v. General Cas. Co. of Wis., 513 N.W.2d 467 (Minn. 1994).

  The second factor, maintenance of interstate order, is concerned with respect for other states’ sovereignty such that the opportunity for forum shopping is kept to a minimum.  The court frequently looks to what state has the most significant contacts with the facts of the case and analyzes the issue of forum shopping under this factor.  Jepson v. General Cas. Co. of Wis., 513 N.W.2d 467 (Minn. 1994).  Again this factor frequently weighs in favor of applying the law of the insured’s domicile in a coverage declaratory judgment action.

  The third factor, simplification of the judicial task, addresses whether the law of either state could be applied more easily.  Id.  If one state’s law is decided on the issue, and the other state’s law is not, this factor will weigh towards applying the law of the state that has already decided the issue.

  The fourth factor, advancement of the forum’s governmental interests, considers which law best advances the forum state’s interests.   Lommen v. City of East Grand Forks, 522 N.W.2d 148, 150 (Minn. Ct. App. 1994).  The state’s interest in compensating victims, the state’s interests in uniform interpretation of contracts, and the forum state’s interest in applying its own law are often competing interests under this factor.  Jepson v. General Cas. Co. of Wis., 513 N.W.2d 467 (Minn. 1994). 
  The fifth factor, the better rule of law, is only to be applied when the other four factors do not dictate a result.  This factor is infrequently used by Minnesota courts and has little effect in determining what law will govern a coverage declaratory judgment action.  Lommen v. City of East Grand Forks, 522 N.W.2d 148, 150 (Minn. Ct. App. 1994).

 In cases where the other “choice influencing” factors are neutral, the Minnesota Supreme Court has ruled that the location where the accident occurs should determine which state’s law governs coverage for the accident.  In Nodak Mutual Ins. Co. v. American Family Mutual Ins. Co., C3-98-1792 (Minn. January 13, 2000), the court found that North Dakota law should control coverage issues involving a Minnesota resident covered by a Minnesota  policy who was injured in an automobile accident in North Dakota involving a North Dakota resident covered by a North Dakota policy.  

  In American States Ins. Co. v. Mankato Iron & Metal, Inc., 848 F.Supp. 1436 (D. Minn. 1993) Judge Kyle ruled that the insured had brought forward sufficient evidence to prove the terms of its missing policies.  Despite the fact that the sites in question were in Illinois and Nebraska, the District Court applied Minnesota law in view of Minnesota's interest in regulating the conduct of insurers issuing policies to insureds there.  
 

  CONFLICTS OF INTEREST

    Insurer has right to appoint defense counsel, even where it has reserved its rights on one or more coverage issues, unless an actual conflict of interest exists that would permit the manipulation of evidence towards non-covered bases for liability.  Mutual Service Cas. Ins. Co v. Luetmer, 474 N.W.2d 365 (Minn. App. 1991).  If an actual conflict of interest exists, an insurer is required to pay for independent defense counsel of the insured's choosing. Prahm v. Rupp Construction Co., 277 N.W.2d 389, 391 (Minn. 1979).
 

  "DAMAGES"

  Clean up costs held covered by Minnesota Supreme Court in Minnesota Mining & Manufacturing Corp. v. The Travelers Indemnity Corp., 457 N.W.2d 175 (Minn. 1990).  However, other forms of injunctive or equitable remedies have been held not to be "damages." See TJB Companies, Inc. v. Maryland Cas. Co., 504 N.W.2d 476 (Minn. 1993)("damages" does not extend to rescission action in sale of real estate). See also  City of Thief River Falls v. United Fire & Cas. Co., 336 N.W.2d 274 (Minn. 1983).

  In the absence of "as damages" language, a teacher's demand for reinstatement of his job was held to allege a claim for "loss" or "expense" in Independent School District No. 697 v. St. Paul Fire & Marine Ins. Co., No. C2-92-1625 (Minn. April 29, 1994).

  The Minnesota Court of Appeals has ruled in Northern States Power Co. v. Fidelity & Cas. Co., 504 N.W.2d 240 (Minn. App. 1993), aff'd in part, rev'd in part, 523 N.W.2d 657 (Minn. 1994) that all economic outlays resulting from pollution claims are not "damages" and remanded the case for further findings as to what portion of the claim was for preventive or prophylactic measures. 
  In City of Maple Lake v. American States Ins. Co., 509 N.W.2d 399 (Minn. App. 1993), review denied (Minn. February 24, 1994), the Court of Appeals held that MM&M  did not require coverage for a property owner's mandamus action to compel condemnation proceedings.

  Costs that an advertising agency incurred after Mattel and Disney demanded that it withdraw an ad campaign an infringement on their trademarks were in the nature of a claim for injunctive relief, not a suit for “money damages.”  Fallon McElligott, Inc. v. Seaboard Surety Company, C5-99-1562 (Minn. App. April 4, 2000).
 

  DECLARATORY JUDGMENT ACTIONS

  The Uniform Declaratory Judgments Act expressly provides that declaratory judgment actions are an appropriate mechanism for construing and interpreting contracts.  Minn. Stat. § 555.02 (“Any person interested under a * * * written contract or other writings constituting a contract, or whose rights, status, or other legal relations are affected by a * * * contract * * * may have determined any question of construction or validity arising under the * * * contract * * * and obtain a declaration of rights, status, or other legal relations thereunder.”) The Act further provides that, “A contract may be construed either before or after there has been a breach thereof.”  Minn. Stat. § 555.03.

  Minnesota courts have ruled that declaratory judgment actions can be used to resolve a variety of insurance coverage issues including, but not limited to, whether an insurer has a duty to defend,  St. Paul Fire & Marine Ins. Co. v. Seagate Tech., Inc., 570 N.W.2d 503 (Minn. Ct. App. 1997); the existence of coverage for a particular claim, Lenz v. Depositors Ins. Co., 561 N.W.2d 559 (Minn. Ct. App. 1997), whether a policy exclusion is applicable, German Mut. Ins. Co. v. Yeager, 554 N.W.2d 116 (Minn. Ct. App. 1996), or the priority of coverage between two or more insurers, State Farm Mut. Auto. Ins. Co. v. Budget Rent-A-Car Sys., Inc., 359 N.W.2d 673 (Minn. Ct. App. 1984).

  The general rule in Minnesota is that a party is not entitled to recover attorney's fees, except where provided for by contract or statute.  Garrick v. Northland Ins. Co., 469 N.W.,2d 709, 714 (Minn. 1991).  However, Minnesota courts have allowed policyholders to recover fees under the discretionary authority of Minnesota Statute §555.08 where they stem from an insurer's breach of the duty to defend, as where insureds are forced to bring suit against their insurers to compel coverage. Independent School District No. 697 v. St. Paul Fire & Marine Ins. Co., No. C2-92-1625 (Minn. April 29, 1994); Spicer, Watson v. Minn. Lawyers Mut. Ins. Co., 502 N.W.2d 400 (Minn. App. 1993); Economy Fire & Cas. Co. v. Olson, 445 N.W.2d 824 (Minn. 1989) and Morrison v. Swenson, 142 N.W.2d 640 (Minn. 1966).  As recently noted by the Supreme Court in American Standard Ins. Co. v. Le, 551 N.W.2d 923, 927 (Minn. 1996), fees are not recoverable in a case where the insurer has provided a defense under a reservation of rights subject to the outcome of the DJ.

  Further, such fees are only recoverable in cases involving the duty to defend. See Diocese of Winona v. Interstate Fire & Casualty Co., 89 F.3d 1386 (8th Cir. 1996)(no recovery where claims only involved indemnity obligation of excess insurers). 

  However, where an insured is entitled to attorneys' fees for obtaining a judgement against its insurer, it may also obtain fees for the cost of defending that judgment on appeal. Franklin v. Western National Mutual Ins. Co., 558 N.W.2d 277 (Minn. App. 1997).
 

  DIRECT ACTION CLAIMS

  The Minnesota Supreme Court has recognized the right of a policyholder to enter into a consent judgment in settlement of the underlying tort claims, against the wishes of its insurer, even though the judgment may only be satisfied through an assignment of its coverage claim to the tort claimant.  However, the settlement must be reasonable and free from collusion.  The test of whether the settlement is reasonable is what a reasonably prudent person in the position of the defendant would have settled for on the merits of the plaintiff's claim.  Miller v. Shugart, 316 N.W.2d 729, 735 (Minn. 1982).  The determination involves a consideration of the facts bearing on the liability and damage aspects of the plaintiff's claim, as well as the risks of going to trial.  The burden of proving the reasonableness of the settlement is on the insurer, as it was the insurer who elected not to participate in the defense of the underlying case.
 

  DISCOVERY ISSUES

   --Claims Manuals
 

   --Drafting History
 

   --Other Policyholder Claims
 

   --Reinsurance Information
 

   --Reserves
 

  DUTY TO DEFEND

  An insurer's duty to defend is generally determined by the language of its policy and the allegations in the complaint giving rise to the suit against its insured.  State Farm Fire & Cas. Co. v. Williams, 355 N.W.2d 421 (Minn. 1984). However, these allegations are not controlling when the actual facts clearly establish the existence or nonexistence of a duty to defend.  Bituminous Casualty Corp. v. Bartlett, 240 N.W.2d 310, 312 (Minn. 1976) and Fluoroware, Inc. v. Chubb Group of Insurance Companies, 545 N.W.2d 678 (Minn. App. 1996).  Thus, in Farmers & Merchants State Bank of Pierz v. St. Paul Fire & Marine Ins. Co., 242 N.W.2d 840, 843 (Minn. 1976), the Minnesota Supreme Court stated thathat "while the insurer must as a rule defend any suit which alleges a claim within coverage, if the insurer has knowledge from facts dehors the complaint that the acts giving rise to the suit are outside the coverage of the policy, there is no duty to defend.”

  The Minnesota Supreme Court has ruled that an insurer's defense obligation ceases once the covered claims in the suit against its insured are dismissed with finality.  However, the court made clear in Meadowbrook v. Tower Ins. Co., 559 N.W.2d 411 (Minn. 1997) that the entry of a partial summary judgment dismissing the covered claims will only terminate the insurer's defense obligations if it is a separate and final appealable judgment and the time for appealing has expired.  

  If any part of a complaint alleges facts that are arguably covered, the insurer must defend.  Economy Fire & Cas. Co. v. Olson, 445 N.W.2d 824 (Minn. 1989).  However, if there is no possible basis for indemnity, an insurer is relieved of any duty to defend.  Hink v. Imperial Casualty and Indemnity Co., 502 N.W.2d 605 (Minn. App. 1987).  Further, once the only potential basis for claiming coverage is dismissed, the insurer no longer has a duty to defend.  Williams, supra and Franklin v. Western National Mutual Ins. Co., 558 N.W.2d 277 (Minn. App. 1997).  However, the Supreme Court declared in Meadowbrook that it was permissible for a liability insurer to instruct appointed defense counsel to negotiate a settlement of the covered claims with the tort claimant and then to withdraw from the defense of the remaining claims, as all of the remaining causes of action were not covered under its policy.  
  
  An insurer has no affirmative obligation to look beyond the allegations in the complaint if the pleadings do not support a claim for coverage.  However, if the insurer is aware of facts that would support a claim or if it receives such information from its insured, it must consider it in evaluating whether there is any possibility that the claims are covered.  Garvis v. Employers Mut. Cas. Co., 497 N.W.2d 254 (Minn. 1993).  Accord Johnson v. Aid Ins. of Des Moines, 287 N.W.2d 663 (Minn. 1980).  Similarly, a court may go beyond the pleadings to determine whether the uncontradicted facts bring the case outside the coverage of the insurance policy since "there is no duty on the part of the insurer to defend `when it is established by the insurer that the facts are such that there is no coverage under the policy for any resulting liability.'"  Id. (quoting Farmers & Merchants State Bank v. St. Paul Fire & Marine Ins. Co., 309 Minn. 14, 21, 242 N.W.2d 840, 844 (1976)).  See also  Haarstad v. Graf, 517 N.W.2d 582 (Minn. 1994)(no duty to defend allegations of negligence where insurer's investigation confirmed that insured's assault was intentional).

  Notice of a suit has been determined to be a condition precedent to the duty to defend, such that the defense obligation does not arise until a claim for coverage is tendered to the insurer.  Cellex Biosciences, Inc. v. St. Paul Fire & Marine Ins. Co., 537 N.W.2d 621 (Minn. App. 1995) and Pedro Companies v. Sentry Ins., 518 N.W.2d 49 (Minn. App. 1994)(no duty to defend where only covered aspect of claim was dismissed prior to notice being tendered).  See also C.J. Duffy Paper Co. v. Liberty Mutual Ins. Co., 76 F.3d 177 (8th Cir. 1996)(rejecting contention that the insurer's actual notice of the underlying litigation constituted a "constructive tender" of the defense).  

  The duty to defend does not arise until an insured properly tenders a defense request.  Domtar v. Niagra Fire Insurance Company, 563 N.W.2d 724, 739 (Minn. 1997).

  Further, in Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724 (Minn. 1997), the Supreme Court ruled that an insured's delay due to the difficulty of identifying its earlier insurers was not a sufficient excuse to require the payment of pre-tender costs.   Accordingly, pre-tender costs may only be recovered in cases of bad faith.  Gopher Oil Co.  v.  American Hardware Mutual Ins.  Co., 588 N.W.2d 756 (Minn.  App.  1999).

  A liability insurer has no duty to reimburse an insured for attorneys' fees incurred for preparing and asserting affirmative defenses where it is possible to separate those fees from other defense costs.  St. Paul Fire & Marine Ins. Co. v. National Computer Systems, Inc., 490 N.W.2d 626, 632 (Minn. App. 1992).  

  The Minnesota Supreme Court has ruled that an environmental liability notice is a "suit" for purposes of triggering an insurer's duty to defend.  SCSC Corporation v. Allied Mutual Ins. Co., 533 N.W.2d 603 (Minn. 1995).

  The Minnesota Supreme Court ruled in Jostens, Inc. v. Federated Mutual Insurance Company, 612 N.W.2d 878 (Minn 2000)  that its holding in SCSC that an EPA claim letter constitutes a “suit” warrants a finding that an insurer also had a duty to defend a case in which no claim letter had been issued but the EPA had begun a site investigation and a neighboring property owner had demanded that the insured clean up the contamination as a “responsible party.”  In light of these facts, the court declared that Minnesota law was not “doubtful” with respect to the issue and that a trial court should not have certified this question for interlocutory appeal.  

  In Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724 (Minn. 1997), the Minnesota Supreme Court affirmed a ruling of the Court of Appeals that environmental site studies oversight costs mandated by an agency request for action should be presumed to be indemnity costs but may be shown to be defense costs where, as demonstrated here, the insurer has refused to defend and the expenses are incurred to avoid more onerous demands and not alone to comply with regulatory demands.  In Jostens, supra, the Supreme Court ruled that Domtar made clear what a “cost of defense” meant.
 

  ESTOPPEL AND WAIVER

  In order to sustain a claim of equitable estoppel, a policyholder must show that the insurer acted with an intention that the insured rely to its detriment upon the representation and, that in fact, the insured did so rely to its detriment.  Transamerican Insurance Group v. Paul, 267 N.W.2d 180, 183 (Minn. 1978).  

  The doctrine of estoppel may not be used to enlarge the coverage of an insurance policy.  “It would be wholly improper to impose coverage liability upon an insurer for a risk not specifically undertaken and for which no consideration has been paid.”  Shannon v. Great American Insurance Company, 276 N.W.2d 77, 78 (Minn. 1979).  In particular, an insurer’s mistaken acknowledgment of coverage and partial payment does not estop it from denying coverage for subsequent related claims.  Winthrop and Weinstine, P.A. v. Travelers Casualty and Surety Company, 98-1845 (8th Cir. August 19, 1999); Pedersen v. USAA, 383 N.W. 2nd 427, 430 (Minn. App. 1986).   However, an insurer may be estopped to assert an exclusion where its earlier conduct has caused prejudice to the insured or some third-party claimant entitled to assert a claim under the policy.  Murach v. Transamerica Ins. Co., 94 F.3d 1204 (8th Cir. 1996).  This is particularly the case where the insurer has undertaken the defense of its policyholder without reserving rights or disputing coverage.

 Generally, an insurer may not "waive into coverage."  Thus, an insurer that failed to raise a policy exclusion in its original denial was not estopped to litigate its application in a subsequent declaratory judgment action.  In Smit v. Kaechele, 525 N.W.2d 528 (Minn. App. 1994), the court ruled that it would be unfair to reform the policy to avoid the exclusion unless (1) it should have been raised and decided in the underlying action or (2) the inequity to the insurer was outweighed by the prejudice suffered by the policyholder because of the insurer's delay in raising the coverage defense.  

 
  EXCESS INSURERS

  In general, the purpose of umbrella liability insurance is both to provide excess insurance as well as coverage for areas that may not be covered under the insured's primary coverage.  Jostens, Inc. v. Mission Ins. Co., 387 N.W.2d 161, 165 (Minn. 1986).

  Ordinarily, an excess policy only comes into play upon exhaustion of the underlying insurance.  Seaway Port Authority of Duluth v. Midland Ins. Co., 430 N.W.2d 241 (Minn. App. 1988).  The Minnesota Court of Appeals ruled in American Hoist v. Employers of Wausau, 454 N.W.2d 462 (Minn. App. 1990) that policies that provided coverage "in excess of the insurance afforded" did not have to "drop down" when the underlying layer of insurance became insolvent.   The burden of establishing exhaustion is on the insured.  Id.  Excess insurers were also held not to have any duty to "drop down" over insolvent primary coverage in Seaway Port Authority, supra.

  Several Minnesota courts have also ruled that an excess insurer has an obligation to drop down and provide a defense for any case in which a primary insurer has refused to defend, without regard to the nature of the bases for the primary insurer's refusal.  Grossman v. American Family Mutual Ins. Co., 461 N.W.2d 489, 494 (1990) and Hawkins Chemical, Inc. v. Westchester Fire Ins. Co., 159 F.3d 348 (8th  Cir. 1998).

  An excess liability insurer is subrogated to the policyholder's rights against a primary insurer where the primary insurer fails to settle within policy limits.  Iowa National Mutual Ins. Co. v. Auto Owners Ins. Co., 371 N.W.2d 627, 628 (Minn. App. 1985); Northfield Ins. Co. v. St. Paul Surplus Lines Ins. Co., 1996 WL 132219 (Minn. App. March 26, 1996).

  No excess judgment is necessary for an excess insurer to bring a common law bad faith action against a primary insurer for failure to settle within limits. Continental Casualty Co. v. Reserve Ins. Co., 238 N.W.2d 862 (Minn. 1976). 

  In Northern States Power Co. v. Fidelity & Cas. Co., 504 N.W.2d 240 (Minn. App. 1993) aff'd as to this issue, 523 N.W.2d 657 (Minn. 1994), the Minnesota Court of Appeals ruled that an excess insurer for a coal gas manufacturer must act as a primary insurer and pay its proportionate share for pollution occurring during its policy period despite an "other insurance" clause requiring exhaustion of all other "valid and collectible" insurance.  The state Supreme Court affirmed, noting that such clauses do not apply to successive policies.

  In Nordby v. Atlantic Mutual Ins. Co., 329 N.W.2d 820 (Minn. 1983), the court also ruled that excess insurers have no obligation to share defense costs with primary carriers even if the loss is ultimately settled for more than the primary limits.
 

  KNOWN LOSS

  The Supreme Court ruled in Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724 (Minn. 1997) that Minnesota follows the "known loss" doctrine but limited its application to cases of misrepresentation and/or fraud.  Further, the court ruled that it is the insurers' burden to show that the insured was aware of its potential liability and had withheld this information from its insurers when it purchased the subject policies. The fact that the insured may have been aware of its prior conduct or even of the fact of pollution was not sufficient to meet this burden.

  The Minnesota Court of Appeals has ruled that a policyholder may not obtain coverage for calculated risks.  Farmers Union Oil v. Mutual Service Ins. Co., 422 N.W.2d 530, 533 (Minn. App. 1988) (where insured was subjectively aware of the substantial risks involved but nonetheless proceeded in light of this knowledge and disregarded the known hazard, there would be no coverage).  
 

  NUMBER OF OCCURRENCES

  As with many other jurisdictions, the finding of an occurrence may be influenced by the degree of coverage available to the insured depending on how an occurrence is construed.  Thus, in a situation involving multiple sales of contaminated nutrient medium and a $50,000 "per occurrence" deductible, the court found only one "occurrence" based on the theory that all the ensuing claims were caused by a change in the nutrient formula.  Cargill, Inc. v. Liberty Mut. Ins. Co., 488 F.Supp. 49 (D. Minn. 1979), aff'd, 621 F.2d 275 (8th Cir. 1980).   
  In Northern States Power Co. v. Fidelity & Cas. Co., 523 N.W.2d 657 (Minn. 1994) the Minnesota Supreme Court affirmed the Court of Appeals' holding that the on-going dumping of wastes at a site was one "occurrence" but required the insured to pay a full retention in each triggered policy year.

  The Minnesota Supreme Court has ruled that multiple acts of embezzlement by an employee nonetheless constituted only a "single occurrence" under a policy that permitted aggregation of a "series of related acts" for embezzlement.  American Commerce Insurance Brokers, Inc. v. Minnesota Mutual Fire & Casualty Company, 551 N.W.2d 224 (Minn. 1996).  Accord,  Landico, Inc. v. American Family Mutual Ins. Co., 559 N.W.2d 438 (Minn. App. 1997).
 

  "OTHER INSURANCE"

  Minnesota courts have ruled that "other insurance" disputes should be resolved based on which policy is "closer to the risk."  Illinois Farmers Ins. Co. v. Depositors Ins. Co., 480 N.W.2d 657, 659 (Minn. Ct. App. 1992).  The determination of which policy is closer to the risk contemplates (1) which policy specifically described the accident-causing instrumentality; (2) which premium is reflective of the greater contemplated exposures; and (3) does one policy contemplate the risk and use of the accident-causing instrumentality with greater specificity than the other.  Interstate Fire & Casualty Co. v. Auto-Owners Ins. Co., 433 N.W.2d 82, 86 (Minn. 1988).  
 

  POLLUTION EXCLUSION

  Under Minnesota law, the pollution exclusion unambiguously precludes coverage for gradual or intentional releases of pollutants into the ambient environment.  Board of Regents of the University of Minnesota v. Royal Ins. Co., 517 N.W.2d 888 (Minn. 1994).  In Regents, the court overruled Grinnell, holding that the exclusion should apply even to claims involving defective products, since the exclusion applies to the "activity of the pollutant, not the activity of the insured polluter."  However, the court held in Regents that releases of pollutants inside a "contained environment" such as a building, was not a release into the "atmosphere."  See also Independent School Districts v. W.R. Grace & Co., 525 N.W.2d 600 (Minn. App. 1995)(entering judgment for insurers that follow form to Lloyd's NMA exclusion).

  The Minnesota Supreme Court has also rejected efforts by policyholders to estop insurers from relying on the exclusion.  In Anderson v. Minnesota Ins. Guarantee Association, 520 N.W.2d 1255 (Minn. App. 1994), rev'd, 534 N.W.2d 706 (Minn. 1995) the Court of Appeals had ruled that the insured should be allowed to amend its complaint to add Morton-style "regulatory estoppel" argument.  However, the Supreme Court ruled that there could be no basis for "reasonable reliance" to sustain a claim for estoppel since the plain wording of "sudden" precluded any insured or insurance regulator from reasonably reaching any contrary interpretation, whatever was said to state regulators by insurers at the time that the exclusion was added in 1970.  See also Hauenstein & Burmeister, Inc. v. Employers Ins. of Wausau, Anoka County District Court No. C6-93-7630 (Minn. August 30, 1995)(even direct representations not a basis for estoppel claim where reliance would have been unreasonable).

  The exclusion has also been upheld by the Minnesota Court of Appeals in a succession of recent pollution cases.  In 1992, the court for the first time ruled that the exclusion was unambiguous and found "sudden" to have a temporal meaning in Sylvester Brothers Development Co. v. Great Central Ins. Co., 480 N.W.2d 368 (Minn. App. 1992), rev. den. (Minn. 1992).  However, the court held that it was the release of pollutants from the landfill to which the exclusion referred, not the original dumping.  On remand, the Superior Court ruled that the seepage from the landfill was not "sudden," even though the rate of seepage might vary depending on specific events, such as rainfall.  These findings were affirmed on appeal.  In Sylvester Brothers Development Co. v. Great Central Ins. Co., 503 N.W.2d 793 (Minn. App. 1993), the court rejected a "microanalytic" approach, holding that individual incidents could not create coverage since seepage over a twenty year period could not conceivably be "sudden."  The Minnesota Supreme Court declined to grant review.

  The Court of Appeals reaffirmed this "secondary discharge" view of the exclusion in Krawczewski v. Western Cas. & Sur. Co., 506 N.W.2d 656 (Minn. App. 1993), ruling that the accidental puncturing of sealed barrels that had been buried at the insured's landfill did not fall within the "sudden and accidental" exception to the pollution exclusion, since no liability arose until third party property was injured by releases from the landfill itself, which occurred over a period of time and were therefore not "sudden."   See also Bell Lumber and Pole Co. v. United States Fire Ins. Co., 60 F.3d 437 (8th Cir. 1995).

  Discharges over a 30 year period were held not to be sudden in City of Maple Lake v. American States Ins. Co., 509 N.W.2d 399 (Minn. App. 1993), review denied (Minn. February 24, 1994).  Accord, Dakhue Landfill, Inc. v. Employers Ins. of Wausau, 508 N.W.2d 798 (Minn. App. 1993)(twenty year period) and Bell Lumber & Pole Co. v. U.S. Fire Ins. Co., 847 F.Supp. 738 (D. Minn. 1994), aff'd, 60 F.3d 437 (8th Cir. 1995)(40 year period).  These courts have emphasized, however, that it is the period of time that pollutants enter the environment that is significant, not the period of the original dumping. 

  However, the Court of Appeals has ruled that it is the initial release that must be "sudden" if the discharge was not into a landfill or other area of "containment."  SCSC v. Allied Mut. Ins. Co., 515 N.W.2d 588 (Minn. App. 1994), aff'd in part, rev'd in part, 533 N.W.2d 603 (Minn. 1995).   By contrast, where the initial discharge is on the insured's property, the only pertinent discharges are those that cause damage to third-party property (ie. groundwater). Bell Lumber and Pole Co. v. United States Fire Ins. Co., 60 F.3d 437 (8th Cir. 1995)(rejecting insured's contention 15 discrete discharges on the property could be characterized as "sudden" since damage to groundwater was caused by subsequent, progressive and continuous release from the property).

  The scope of the exclusion was originally viewed as being limited in Minnesota to "environmental" claims based upon the Court of Appeals ruling that the exclusion was inapplicable and ambiguous as applied to UFFI claims in Grinnell Mutual Reinsurance Companies v. Lowell Wasmuth, 432 N.W.2d 495 (Minn App. 1988).  However, Grinnell was overruled by the Minnesota Supreme Court in its June 17, 1994 ruling in Regents.  Earlier, Grinnell had been rejected in several cases.  See City of Maple Lake v. American States Ins. Co.,  509 N.W.2d 399 (Minn. App. 1993)(discharges of sewerage effluent) and American States Ins. Co. v. Mankato Iron & Metal, Inc., 848 F.Supp. 1436 (D. Minn. 1993)(pollution at a scrap recycling center to which the insured had sold waste leaded products and batteries).

  However, the release of even radioactive materials will not be excluded unless the discharge has some contaminating or pollution effect on the surrounding soil, air or water.  Minnesota Mining and Manufacturing Co. v. Walbrook Ins. Co., 1996 Minn. App. LEXIS 36 (Minn. App. January 9, 1996)(unpublished). 

  The Eighth Circuit has also upheld the exclusion in several cases.  In Bureau of Engraving, Inc. v. Federal Ins. Co., 793 F.Supp. 209 (D. Minn. 1992), aff'd 5 F.3d 1175 (8th Cir. 1993), the Circuit Court rejected the insured's suggestion that each discharge should be examined individually to see whether it was "sudden," holding instead that coverage was clearly precluded where barrels have leaked over a period of almost 10 years.  Similarly, on site dumping over a period of more than twenty years was held not "sudden" as a matter of law in Bituminous Cas. Corp. v. Tonka Corp., 9 F.3d 51 (8th Cir. 1993).  See also  Modern Constructors, Inc. v. Continental Cas. Co., 38 F.3d 377 (8th Cir. 1994)(insured's shipments of waste oil "took place gradually over many years" and were therefore not "sudden"). 

  Insureds have the burden of proving that discharges were "sudden and accidental" if insurers have made a prima facie showing that the pollution exclusion otherwise applies.  SCSC, supra.

  The Minnesota Court of Appeals has upheld the "absolute" pollution exclusion in a variety of different cases.  In League of Minnesota Cities Ins. Trust v. City of Coon Rapids, the Court of Appeals held that this exclusion bars coverage for personal injury actions brought by individuals who were allegedly exposed to dangerously high levels of toxic nitrogen gas which had leaked from a negligently maintained Zamboni machine at the insured's hockey rink.  446 N.W.2d 419 (Minn. Ct. App. 1989), review denied.  The court explained that the exclusion was unambiguous and barred coverage for the personal injury claims since the nitrogen dioxide was hazardous and thus a "pollutant."  the court further suggested that the exclusion should apply since the insured's negligent failure to ventilate properly its rink to prevent gas build-ups was an operation to "remove, contain, treat, detoxify or neutralize pollutants."   Accord, Bureau of Engraving, Inc. v. Federal Ins. Co., 793 F.Supp. 209 (D. Minn. 1992); City of Maple Lake. supra; American States Ins. Co. v. Mankato Iron & Metal, Inc., 848 F.Supp. 1436 (D. Minn. 1993).

  A federal district court ruled that the exclusion barred coverage for claims arising out of a contractor’s application of chemical products inside a supermarket.  In American States Ins.  Co.  v.  Technical Surfacing, Inc., 50 F.Supp.2d 888 (D.  Minn.  1999), the court rejected the insured’s contention that it had not brought a “pollutant” onto the property since the damage was caused by xylene fumes, not the chemical product that it had brought on site.

  A state trial court ruled in Mutual Service Casualty Ins. Co. v. Teske, Hennepin No. 96-009627 (Minn. Dist. Ct. September 23, 1996) that the exclusion did not apply to lead poisoning claims.  More recently, however, the Court of Appeals ruled in Auto-Owners Ins.  Co.  v.  Hanson, 588 N.W.2d 777 (Minn.  Ct.  App. 1999), review denied No. C6-98-1480 (Minn. April 20, 1999) that the chipping and flaking of lead paint clearly involved the “discharge or release...of a pollutant” rejecting the insured’s argument that these were “terms of art” that should be given a technical construction.

  In Minnesota Mining and Manufacturing Co. v. Walbrook Ins. Co., C1-95-1775 (Minn. App. January 9, 1996), the court affirmed a lower court's ruling that the cost of recalling a defective static eliminator product was not excluded merely because the defect involved loose epoxy beads that emitted minute amounts of radioactive isotopes.  The court declared that such exclusions only apply to the release of dangerous substances if the releases cause "contamination" or pollution of the surrounding air, water or soil.

  Further, the Eighth Circuit refused to give effect to a "total" pollution exclusion in Hawkins Chemical, Inc. v. Westchester Fire Ins. Co.,159 F.3d 348 (8th Cir. 1998) where one insurer had not filed the endorsement form with the Insurance Commissioner or otherwise obtained approval for its use and the other hadn’t given adequate notice to the insured at the time of renewal that it was changing the wording of the exclusion to bar coverage for hostile fires.
  A federal district court has ruled that a wrongful death claim arising out of carbon monoxide poisoning on the insured’s premises falls within the “hostile fire” exception to the absolute pollution exclusion.  Schmid v. Fireman’s Fund Insurance Company, 97 F.Supp.2d 967 (D. Minn. 2000).  The court  ruled that a water heater flame, which burned three inches away from its intended location in the combustion chamber, constituted a fire which had broken out “from where it was intended to be.”
 

  PROFESSIONAL SERVICES

  A suit against the Lutheran Church based upon the sexual misconduct of its pastor in counseling parishioners was held subject to a GL policy exclusion for "professional services" in Houg v. State Farm, 509 N.W.2d 590 (Minn. App. 1993).
 

  PROPERTY DAMAGE

  Under pre-1973 policies, a reduction in property value resulting from the incorporation or installation of a defective product furnished by the insured constitutes "property damage"  whether or not it results in physical damage to the structure as a whole.  Hauenstein v. St. Paul Mercury Indemnity Co., 242 Minn. 354, 65 N.W. 2d 122 (1954)(defective plaster).  However, such claims will only trigger coverage under post-1973 policies if they result in physical harm to third party property. Federated Mut'l Ins. Co. v. Concrete Units, Inc., 363 N.W.2d 751 (Minn. 1985)

  A broker’s negligence in failing to procure a healthy dairy herd for a customer has been held not to allege a claim for “property damage.”  In Tower Ins. Co. v. Minnesota Holstein-Freisan Breeders’ Association, C2-99-1003 (Minn. App. February 28, 2000), the Court of Appeals ruled that the insured’s negligence was not the cause of the cows’ poor health and that such claims, if covered at all, would fall within the scope of an errors and omissions policy.

  The Minnesota Court of Appeals ruled in Western National Mutual Insurance Company v. IFP,  C8-98-1965 (Minn. App. May 18, 1999)(unpublished) that a liability insurer did not owe coverage for claims arising out of the failure of the insurer’s product to pass FDA clinical trials because of a mis-numbering of the soy bean lots used.  The court ruled that the claims in question were for economic loss and therefore not covered since CGL policies are intended to provide coverage for tort liability for physical damage to others and not for contractual liability of the insured for economic loss because the product or completed work is not that for which the damaged person bargained.
 

  PUBLIC POLICY

  In R.W. v. T.F., No. C7-93-819 (Minn. March 31, 1995), the Minnesota Supreme Court ruled that it was against the public policy of Minnesota to indemnify an insured against claims for negligent transmission of a sexually communicable disease.  Earlier, in Independent School District No. 697 v. St. Paul Fire & Marine Ins. Co., 495 N.W.2d 863 (Minn. 1994), the court ruled that requiring coverage for intentional acts was not against public policy, finding that the school district was not likely to discriminate against its employees merely because it had insurance coverage for any resulting claims.
 

  PUNITIVE DAMAGES

  Punitive damages that are awarded for the purpose of deterring conduct are not insurable under Minnesota law. Caspersen v. Weber, 214 N.W.2d 327, 331 (Minn. 1973); Wojciak v. Northern Package Corp., 310 N.W.2d 675 (Minn. 1981); State Fund Mut. Ins. Co. v. Enebo, 458 N.W.2d 161 (Minn. App. 1990) and U.S. Fire Ins. Co. v. Goodyear Tire & Rubber Co., 920 F.2d 487 (8th Cir. 1990).  However, a treble damage award for a retaliatory discharge or other awards that are partially compensatory are not per se excluded.  Convent of the Visitation School v. Continental Cas. Co., 707 F.Supp. 412 (D. Minn. 1989).
 

  STANDARDS FOR POLICY INTERPRETATION

  Minnesota recognizes that ambiguities contained in an insurance policy must be resolved in accordance with the reasonable expectations of the insured.  Auto-Owners Ins. Co. v. Jensen, 667 F.2d 714 (8th Cir. 1981).  The courts, however, have not gone so far as to extend the doctrine of reasonable expectation to cases which do not involve ambiguities in the terms of the policy.  See, e.g., Farmers Union Oil Co. v. Mutual Serv. Ins. Co., 422 N.W.2d 530 (Minn. Ct. App. 1988).  Moreover, even where an ambiguity exists, the doctrine is used as a rule of construction to be applied by the court to the insurance policy.  Columbia Heights Motors, Inc. v. Allstate Ins. Co., 275 N.W.2d 32, 36 (Minn. 1979).

  Under Minnesota law, an insurance policy is ambiguous if it is subject to more than one reasonable interpretation.  Brault v. Acceptance Indemnity Ins. Co., 538 N.W.2d 144 (Minn. App. 1995).  However, contrary interpretations of policy provisions that are unambiguous on their face are, as a matter of law, unreasonable.  Anderson v. MIGA, 534 N.W.2d 706 (Minn. 1995).  However, where language is itself confusing or ambiguous, it must be construed strictly against the insurer and in favor of the insured.  Safeco Ins. Co. v. Lindberg, 380 N.W.2d 219, 221 (Minn. App. 1986) and so as to honor the objectively reasonable expectations of the insured.  Atwater Creamery Co. v. Western National Mutual Ins. Co., 366 N.W.2d 271 (Minn. 1985).  

  Minnesota Supreme Court has ruled that courts should honor the "objectively reasonable expectations" of an insured, even when a "painstaking study of the policy provisions" would result in a contrary conclusion. Atwater Creamery, 366 N.W.2d at 273.  The reasonable expectations doctrine is not to be applied to all cases, however. The Supreme Court of Minnesota has ruled that it should only apply to "egregious" cases, such as when an exclusion is disguised in a policy's definition section.  Board of Regions, 517 N.W.2d at 891. See also Allstate Ins. Co. v. Steele, 74 F.3d 878 (8th Cir. 1996).

  Although ambiguous policy language is one factor to be considered in determining whether the insured has a reasonable expectation of coverage, the doctrine applies even if the provision in question is unambiguous. Hubred v. Control Data Corp., 442 N.W.2d 308, 311 (1989) and Bituminous Cas. Corp. v. Tonka Corp., No. 4-87-392 (D. Minn. December 3, 1991)(pollution exclusion).  Other factors to be considered are whether language is obscure or hidden, whether there were extrinsic communications to the insured explaining the meaning of obscure provisions and whether such language is commonly understood by laypersons.  Wessman v. Massachusetts Mutual Life Ins. Co., 929 F.2d 402 (8th Cir. 1991).

  Extrinsic evidence of contracting intent may not be used as a basis for finding ambiguity in language that is plain on its face.  Mesabi Regional Medical Center, Inc. v. City of Hibbing, 1995 Minn. App. LEXIS 310 (Minn. App. March 7, 1995)(unpublished); Kenko, Inc. v. Lowry Hill Construction Co., 392 N.W.2d 18 (Minn. App. 1986).

  Rule of "contra proferentum" has been held to apply even to large, sophisticated insureds unless the policyholder participated in the drafting of the policy.  Northwest Airlines, Inc. v. Globe Indemn. Co., 225 N.W.2d 831, 837 (Minn. 1975).

  Changes in coverage that were effected by an insurer after the policy had already been renewed were not effective unless the insurer was able to present evidence that the policyholder had given its assent to these changes.  Warrick v. Graffiti, Inc., 550 N.W.2d 303 (Minn. App. 1996).  

  While acknowledging that Minnesota law requires an insurer must give notice to its insured of any significant changes in existing insurance coverage, the U.S. Court of Appeals for the Eighth Circuit has rejected a challenge to the addition of a regulatory exclusion in a Directors and Officers policy, where the policy contained a "prominent, simply worded statement of the exclusion" on the front page of the application and the policy and where the insured had an opportunity to negotiate certain terms of the renewal policy.  Adams v. Greenwood, 10 F.3d 568 (8th Cir. 1993).

  Minnesota law does not require that policy forms be approved by the Insurance Commissioner.  The Commissioner’s approval is required, however, as to rates and premium structures.  Nevertheless, the Eighth Circuit has interpreted these general requirements as invalidating the effect of any forms that are utilized without the prior approval of the Commissioner.  See Hawkins Chemical v.  Westchester Fire Ins.  Co., No.  97-4028 (8th Cir.  October 21, 1998) and Miller v.  National Farmers Union Property & Casualty Co., 470 F.2nd 700, 704 (8th Cir.  1972).
 

  THEORIES OF ALTERNATIVE LIABILITY

  To date, Minnesota courts have resisted adopting alternative theories.  In Mason v. Spiegel, Inc., 610 F.Supp. 401 (D. Minn. 1985), a "market share" theory was rejected since the plaintiff could not identify the seller of the product and since the products at issue (cotton dresses) were not fungible goods.  Similarly, in Senart v. Mobay Chemical Corp., 547 F.Supp. 502 (D. Minn. 1984)  the court refused to impose liability on a conspiracy/concert of action theory against manufacturers of toluene diso-cyanate who worked in concert to persuade OSHA to reject a NIOSH proposal for a more stringent exposure standard, holding that persons combining to achieve goals which they have a legal right to seek, even if they are maliciously motivated, do not conspire.  See also Bixler v. Avondale Mills, 405 N.W.2d 428 (Minn. App. 1987)(flannel).
 

  TRIGGER OF COVERAGE

  Minnesota courts are agreed that the trigger of coverage is date that the injury occurs, not the time of the insured's original conduct that is alleged to have given rise to those injuries. Singaas v. Diederich, 238 N.W.2d 878, 880 (Minn. 1976).  This has been held to be so where a policy merely provided coverage for "occurrences" during the policy period without specifying that the "occurrence" must also result in damage during the policy to trigger coverage.  Jenoff, Inc. v. New Hampshire Ins. Co., 1997 Minn. LEXIS 26 (Minn. January 30, 1997)(installation of defective heat detection system was not trigger).

  In the pollution/toxic tort content, Minnesota courts have interpreted Singaas as "actual injury" trigger.  Northern States Power Co. v. Fidelity & Cas. Co., 523 N.W.2d 657 (Minn. 1994); Fairview Hospital v. St. Paul Fire & Marine Ins. Co., 533 N.W.2d 337 (Minn. 1995); SCSC v. Allied Mut. Ins. Co., 533 N.W.2d 603 (Minn. 1995); Industrial Steel Container Co. v. Fireman's Fund Ins. Co., 399 N.W.2d 156 (Minn. Ct. App. 1987), review denied, Nos. C8-86-1135 and C8-36-1197 (Minn. March 13, 1987). 

  Prior to Northern States, several trial courts had adopted a "continuous trigger" for asbestos building claims. Board of Regents of the University of Minnesota v. Royal Ins. Co., Dakota No. C9-90-7278 (Minn. Dist. Ct. October 14, 1992), rev'd on other grounds, 503 N.W.2d 486 (Minn. App. 1993), aff'd on other grounds,  517 N.W.2d 888 (Minn. 1994) and Independent School District v. W.R. Grace & Co., Dakota No. C4 88 7950 (Minn. Dist. Ct. November 20, 1992), reversed on other grounds, 525 N.W.2d 600 (Minn. App. 1995).

  A trial court ruled that no portion of damages had to be attributed to years after dumping ceased in Hauenstein & Burmeister, Inc. v. Employers Ins. of Wausau, Anoka County District Court No. C6-93-7630 (Minn. August 30, 1995).

  However, the Court of Appeals declared in an unpublished ruling in Milbank Ins. Co. v. J.T., 1997 Minn. App. LEXIS 50 (Minn. App. January 14, 1997) that coverage for the continuing mental distress and injuries suffered by the plaintiff as the result of his boyhood molestation by an uncle gave rise to coverage under an "actual injury" approach, both due to the continuing nature of the injuries and the fact that the plaintiff's cause of action had only recently arisen when he realized that his injuries had been caused by the insured's conduct so many years before.

  A "manifestation" trigger was adopted for first party claims for asbestos abatement in Sentinel Management Co. v. Aetna Casualty & Surety Co., Hennepin County District Court No. CT-94-01429 (Minn. March 14, 1995).

  Under Minnesota's "actual injury" trigger, the Eight Circuit ruled in Firemans Fund Ins. Co. v. Hartford Fire Ins. Co., 73 F.3d 811 (8th Cir. 1996), that it was not the gradual deterioration of the fire protection system during the policy period that triggered coverage but rather the collapse of the building following the policy's expiration.  The court noted that the insured had not sought coverage for periodic costs of repair to the system during the insurer's policy period and that the damages alleged were based upon water damage and flooding following the collapse of the building.  

  The Court of Appeals ruled in Gopher Oil Co.  v.  American Hardware Mutual Ins.  Co., 588 N.W.2d 756 (Minn.  App.  1999) that a corporate successor could claim coverage under its predecessor’s policies notwithstanding a non-assignment clause in the policies.  The court ruled that such clauses only pertain to the assignment of risk and that where the assignment does not increase the risk insured by the carrier and merely assigns rights for losses that have already occurred, such clauses do not preclude coverage.  The court also rejected the insurer’s contention that a “loss” did not occur until such time as CERCLA created legal liability for past acts.

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