Austin P. Keller Construction Co. v. Drew Agency, Inc.
Docket: Nos. C0-84-1271, C6-84-1291 and C9-84-1320
Court: Court of Appeals of Minnesota; January 7, 1985; Minnesota; State Appellate Court
Three groups are appealing the denial of summary judgment in a declaratory judgment action regarding whether respondent insurers are obligated to defend and indemnify two construction companies and an employee against personal injury claims from a gas explosion. The explosion is claimed to be caused by negligence from a now-defunct joint venture between the companies. The insurers denied coverage based on joint venture exclusions in the policies. The trial court denied summary judgment and deemed the interpretation of the exclusion clause as significant and uncertain.
In 1970, Austin P. Keller Construction and Erwin Montgomery Construction formed a joint venture for a city project, which was completed in 1972. In 1982, a gas explosion injured several individuals, leading to a lawsuit against multiple parties, including the construction companies and an employee, alleging negligent backfilling by the joint venture. The joint venture's insurance only covered incidents during its policy period, which had expired prior to the explosion.
Seeking coverage, Keller Construction had policies with Maryland Casualty and Mission Insurance, while Montgomery Construction and Montgomery were insured by Great American Insurance Company. All insurers refused coverage due to joint venture exclusions in their policies, stating that the insurance does not cover injuries related to any partnership or joint venture not named in the policy. While Montgomery was a named insured under the Great American policy, the joint venture was not named in any policies.
The trial court determined that the policies did cover completed operations but flagged the disputed joint venture exclusions as a key issue. It denied summary judgment and certified a question for appellate review: whether insurers can deny completed operations coverage based on exclusions related to a joint venture when the insured were not members of that joint venture at the time the coverage was purchased or in effect. The appeals from Keller Construction, Montgomery Construction, Montgomery, and the Drew Agency have been consolidated for consideration.
Insurers cannot deny completed operations coverage based on policy language excluding liability for a “joint venture of which the insured is a partner or member” if the insureds were not members of such a joint venture at the time the coverage was purchased or in effect. The court emphasizes that insurance policies are contracts, and clear, unambiguous terms must be enforced as written, with any ambiguities favoring the insured. If any part of a claim falls within the scope of coverage, the insurer must defend the claim, and the burden is on the insurer to show that the entire claim falls outside the policy's coverage.
The exclusion in question, commonly used in insurance policies, is limited to current joint ventures and does not apply to ventures that have been terminated prior to the issuance of the policy. The court distinguishes between the present tense of “is” and the past tense of “was,” indicating that the exclusion does not encompass claims related to a terminated joint venture.
Additionally, while joint ventures and partnerships share similar legal principles, the liability of former members of a joint venture arises only post-termination of that venture, not as current members of an ongoing venture. The record did not show that the insurers inquired whether the construction companies had ever been part of a terminated joint venture, and since these companies dissolved their joint venture before the policies were issued, the exclusion does not apply to claims arising from the incident in question. The exclusion also does not affect Montgomery, a named insured and employee, who was not a member of the terminated joint venture.
The decision reverses the lower court's ruling and mandates that the insurers defend and indemnify the insured parties based on the exclusion's plain language, as it does not apply under the circumstances presented.
