Minnesota Arguably Expands Coverage for Additional Insureds in the Construction Context

The Minnesota Court of Appeals issued an unpublished decision in May, 2012 which trends towards an expansion of coverage for additional insureds in the construction context by extending coverage to claims of direct, as well as vicarious liability. In Nor-Son, Inc. v. Western National Mut. Ins. Co., No. A11-2016, 2012 WL 1658938 (Minn. Ct. App. May 14, 2012), the Court reversed the trial court’s grant of summary judgment in favor of the insurer, in which the trial court held the insurer had no duty to defend or indemnify third-party plaintiff Nor-Son as an additional insured under a policy issued to two third-party defendants, Select Carpenters & Components, Inc. and SCC Carpenters, LLC (collectively “SCC”).   

This case arose from injuries sustained on a construction site by an employee of SCC when he suffered a seizure and fell from a roof.  He suffered from a pre-existing seizure disorder and was not wearing safety equipment recommended by his physician. Plaintiff received workers’ compensation benefits from SCC and sued Nor-Son (he could not sue SCC because of workers’ compensation exclusivity).  He alleged negligence, breach of contract and failure to warn based on Nor-Son’s retention of control over the worksite. 

Nor-Son tendered the lawsuit to SCC’s insurer, Western National. Western National refused the tender because its insured, SCC, was not named in the underlying complaint.  Nor-Son then commenced a third-party action against SCC and provided the third-party complaint to Western National.  Minnesota appellate courts had not previously ruled on the propriety of using a third-party complaint to establish a duty to defend. 

 Relevant policy language extending coverage to Nor-Son states (with “you” and “your” referring to SCC): 

only with respect to liability for “bodily injury,” “property damage” or “personal and advertising injury” cause, in whole or part by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf, in the performance of your ongoing operations for the additional insured(s) at the location(s) designated above…

Id. at *2. 

 Western National took the position that it had no duty to Nor-Son under this clause for liability arising out of Nor-Son’s own negligence and that because only Nor-Son, not SCC was alleged to be negligent in the underlying complaint that the insurer had no duty to defend.  The Court of Appeals acknowledged that while the underlying complaint did not allege negligence by SCC, it also did not allege Nor-Son’s negligence, but instead premised Nor-Son’s liability on the fact that Nor-Son “retained control of the work site.”  Id.  The Court determined that the underlying complaint set forth a claim for vicarious liability through its allegations that Nor-Son was responsible for unsafe conditions on the site [including those created by SCC] because it retained control of the site.  Id. 

 The Court also held that the additional insured coverage could extend beyond claims for vicarious liability, stating that the policy provided “coverage for liability incurred by Nor-Son if ‘caused…in whole or in part by [SCC’s acts or omissions].’”  Id. at *3 (emphasis in original).  The Court concluded that if “SCC’s negligent safety practices were at least at part the cause of the liability,” that Nor-Son’s negligent acts might be covered.  Id. Finally, the Court determined that allegations in both the third-party complaint and the underlying complaint as least arguably fell within coverage and triggered Western National’s duty to defend.   

 Though unpublished, this case reaffirms that additional insureds are entitled to broad coverage under CGL policies and demonstrates a shift by extending additional insured coverage to claims of direct as well as vicarious liability.