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Bassford Remele is a full service litigation firm located in Minneapolis, Minnesota. Founded in 1882, the firm represents local, national and international clients in all areas of civil litigation and dispute resolution.
Case Law Update
Date: June 4, 2010 — Minneapolis, MN
During the week of June 4, 2010, the Minnesota appellate courts released an opinion on the following topic that may be of interest to our clients:
CONSTRUCTION - SPECIFIC-COVERAGE EXEMPTION IMPOSES DUTY TO DEFEND
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A subcontract’s indemnification provision within the specific-coverage exemption created by Minn. Stat. § 337.05 imposes a duty to defend regardless of fault.
Mavo Systems, Inc. (“Mavo”), a sub-subcontractor hired by subcontractor Egan Companies, Inc. (“Egan”), appealed the district court’s summary judgment ruling that enforced an indemnification provision, imposed a duty to defend, and awarded attorneys’ fees for an injury arguably caused by Egan’s negligence. Litigation arose when a Mavo construction worker sued Egan and two of its employees for injuries sustained on the work site. The Court of Appeals affirmed the lower court’s finding that Mavo owed a duty to defend and indemnify Egan according to the subcontract and insurance policy, regardless of fault.
The Court held that the subcontract’s specific language plainly imposed indemnification obligations for injuries arising from Egan’s negligence because the contract extended its indemnification obligation to claims for which Egan “may be or [is] claimed to be liable” and also required Mavo to purchase insurance to cover this obligation. While Minn. Stat. § 337.02 renders a subcontractor’s agreement to indemnify a contractor unenforceable when the liability is caused by the contractor’s negligence, § 337.05 permits agreements in which a promisor agrees to provide specific insurance coverage for the benefit of others. The Court noted that the contract’s indemnity provision was contained in the standard AGC subcontract agreement, and that it was substantially identical to that which had been enforced by the Minnesota Supreme Court in Holmes v. Watson-Forsberg Co., 488 N.W.2d 473, 475 (Minn. 1992). The Court rejected Mavo’s argument that the indemnification provision was unenforceable because there was no agreement to provide specific insurance. The contract specifically required Mavo to “obtain, maintain, and pay for such Commercial General Liability insurance, including contractual liability and completed operations coverage, as will insure the provisions of this paragraph, to the fullest extent available.” Moreover, the parties expressly stated their intention that the required insurance would be applicable to damages caused in whole or in part by the fault of Egan.
The decision also stated that Mavo’s duty to defend was not contingent on an apportionment of fault. The Court reasoned that the indemnification and insurance obligations warranted the § 337.05 exception to unenforceability of certain indemnity obligations and concluded that the contract’s explicit language required Mavo to defend Egan.
Finally, the Court affirmed the award of Egan’s attorneys’ fees even though Egan had rejected Mavo’s offer to take over Egan’s defense. While a party owing a duty to defend may usually select the lawyer to provide that defense, the Court held that the conflict of interest among the parties, Mavo’s initial refusal to accept tender of defense, and the prejudicial effect of changing counsel so close to trial justified Egan’s rejection of the counsel selected by Mavo.
Christenson v. Egan Cos. Inc., A09-1539 (Minn. Ct. App. 6/1/10) (unpublished).
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C. Lundberg, C. Morris, K. Putney, R.A. Williams, J.S. Andresen, M. Covin, S. Gustad, B. Sande, C. Hund, S. Sitek, T. Quick, D. Camarotto, K. Burke, J. Marquet, D. Turner, L. Pugh, M. Bradford, P. Semrow, and S. Pearson |
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