1. Supreme Court
1. Improvement To Real Property
2. Insurance
3. Malpractice
2. Court of Appeals
1. Civil Procedure
2. Contract
3. Governmental Immunity
4. Insurance
5. Medical
6. Torts
7. Unemployment Compensation
3. Federal Court
1. Contract
2. Insurance
3. Products Liability
4. Torts

4. Minnesota Workers' Compensation
1. Arising Out Of And In The Course Of
2. Notice
3. Temporary Total Disability
4. Work-Related Physical Or Mental Injury
5. Wisconsin Workers' Compensation
1. There were no updated cases for review as of the printing of this Newsletter.
6. Michigan Workers' Compensation
1. There were no updated cases for review as of the printing of this Newsletter.

In affirming this summary judgment appeal, the Minnesota Supreme Court further defined an "improvement to real property" under Minn. Stat. § 541.051, subd. 1(a) (2004). On December 11, 1998, the installation of a utility pole anchor pierced a gas line causing an explosion. The appellants brought suit in late 2001 and early 2002. The district court granted the defendants' motions to dismiss because the plaintiffs' injuries were caused by an improvement to real property and the claims were, therefore, barred by the statute of limitations in Minn. Stat. § 541.051.

The Court of Appeals affirmed as did the Supreme Court. The Supreme Court, noting that it had previously held that errors during an installation can create a "defective and unsafe condition of an improvement to real property," held that an object need not be completely installed in order to qualify as an "improvement to real property" under Minn. Stat. § 541.051, subd. 1(a) (2004). The court further held that negligence during the installation process can lead to the "defective and unsafe condition of an improvement to real property" under the same statute. Finally, the court held that while it may not be necessary to show proximate cause between a defective and unsafe condition and an injury, in order to show the injury arose out of the defective and unsafe condition, such a causal condition is sufficient to meet the requirements of section 541.051. In concluding, the Minnesota Supreme Court held that the appellants' alleged injuries arose out of the defective and unsafe condition of an improvement to real property and were thus barred under the two-year statute of limitations under Minn. Stat. § 541.051.

The Minnesota Supreme Court reversed the court of appeals and held that the installation of a new natural gas polyethylene pipeline system to replace an older system is an "improvement to real property," not an ordinary repair, for purposes of applying the applicable statute of repose. The statute of repose thus barred claims that arose because a natural gas pipeline was accidentally pushed through a sewer line. An auger used to clear the sewer line struck the gas line, allowing gas to escape and explode in several residences. The burden of proving an exception to the statute of repose belonged to the party seeking to benefit from the exception. Although an exception exists for negligence in the maintenance, operation, or inspection of an improvement to real property, here the party seeking to benefit from the exception failed to establish a prima facie case of negligence.

In this personal injury case, the Minnesota Supreme Court addressed whether the intent or knowledge of a corporation's agent may be imputed to the corporation to show that the corporation expected the agent would injure a third party.

The corporation's insurance policy obligated the insurer to pay sums the corporation was legally obligated to pay for bodily injury, but excluded any injury expected or intended from the insured's standpoint. The policy treated each named insured as the only named insured. The agent, who had fractured a third party's skull with a piece of wood, was the sole shareholder, officer, and director of the corporation. The court determined that the language of the insurance policy did not require the agent's intent to be automatically imputed to the corporation and remanded for a finder of fact to determine whether the corporation, which was separate and distinct from the agent, expected the assault to occur.

The Minnesota Supreme Court, in a divided opinion, reaffirmed its previous adoption of the "damage" rule of accrual in legal malpractice cases which holds that the cause of action accrues and the statute of limitations begins to run when "some" damage has occurred as a result of the alleged malpractice. The court ruled that the statute of limitations in a legal malpractice claim for negligent preparation of an antenuptial agreement accrued when the agreement took effect upon the marriage of the parties. The ruling affirmed the district court decision and reversed the court of appeals decision. This malpractice claim arose out of an antenuptial agreement drafted by the plaintiff's attorney in 1986. Plaintiff claimed that the agreement failed to provide that he would have sole ownership of any appreciation and value of his nonmarital property in the event the parties divorced.

The parties divorced; and in 2003, the Supreme Court held that any appreciation in the property was partly marital and that the marital portion had to be divided between the spouses. The court determined that the plaintiff suffered compensable damage after he signed the antenuptial agreement and entered into the marriage since he had passed the point of no return with respect to the loss of marriage and nonmarital property and did not have the protection of the anti-nuptial agreement. This damage occurred although the exact amount of the damage was not fixed when the parties married since at the time of his marriage the plaintiff lost his legal right to unfettered ownership in his premarital property.

Three justices dissented on the grounds that when liability is contingent on a future event that is not certain to occur, no compensable damage can occur unless and until that future event occurs. In this case, the dissent argued that the plaintiff suffered compensable damage when the antenuptial agreement became operative or when he had to incur legal fees to defend against the liability that the agreement should have prevented and that both of those events occurred within the six years of the commencement of the legal malpractice action.

In this unpublished decision, the court of appeals ruled that an Iowa corporation's contacts with Minnesota were insufficient for the exercise of specific or general personal jurisdiction. VIAD Corp. has offices in Minnesota. It contracted with McCormick, an Iowa corporation, to design a trade show exhibit and install and dismantle a tent structure at trade shows in Nebraska and Illinois. McCormick representatives did not travel in Minnesota to negotiate or sign a contract; the tent was manufactured in Canada and shipped from Canada to Nebraska. Although McCormick had ten authorized dealer locations in Minnesota, it sells directly to those authorized dealers and does not keep an inventory in Minnesota. The corporate sales in Minnesota account for less than 1% of its total sales volumes and, therefore, the court concluded that McCormick's contacts with Minnesota were insufficient for exercising specific or general personal jurisdiction.

City of Minneapolis v. Architectural Alliance,
Court of Appeals, 8/16/06 (unpublished)      Reviewed by David Wikoff

In this unpublished decision, the court of appeals reversed and remanded the district court's ruling that the City of Minneapolis' property damage claim was barred by the two-year statute of limitations period of the improvement to real property statute. Architectural Alliance provided services for the construction of a service garage for heavy-duty city vehicles. The City presented evidence of damage to a concrete floor in 2000 that was caused by activities within the garage. In 2002, the City complained of delamination and spalling of the concrete floor caused by rebar corrosion attributed to inadequate concrete cover over the rebar. Architectural Alliance raised the statute of limitations defense, but the appellate court ruled that a genuine issue of material fact existed as to whether the chipping and cracking observed in 2000 arose out of a defective and unsafe condition of an improvement to real property or was caused by activities inside the facility.

Contract
Iverson v. Chicilo Homes, Inc.,
Court of Appeals, 7/11/06      Reviewed by Tory J. Langemo

Even though Iverson first noticed seepage of effluent in his back yard in 2001, Iverson's Complaint against the Chicilo Homes, Inc., the builder, filed in August, 2004, was timely because the two-year statute of limitations began to run in September, 2003, when the city inspector advised Iverson that the septic drain field did not comply with the building code. Iverson earlier relied upon the representations of Chicilo Homes, which told him the conditions he was experiencing were due to weather. It was not until September, 2003, that Iverson confirmed that a building-code violation actually existed. Iverson thereafter promptly gave notice of the violation to Chicilo Homes. Under Minnesota law, the seller of a completed new dwelling warrants to the buyer that the home will be free from defects caused by faulty installation of plumbing systems due to noncompliance with building standards. Minn. Stat. § 327A.02, subd. 1(b) (2004). Home-warranty actions based on section 327A.02 must be brought within two years of the discovery of the breach. Because Iverson brought the present action within two years of the date he confirmed the breach, the court ruled his action timely.

Collins v. Buus,
Court of Appeals, 7/18/06      Reviewed by Amber R. Koth

IThe court of appeals held that plaintiffs did not satisfy the written notice requirement of Minn. Stat. § 327A.03(a) because they only provided an oral claim for damages against defendant contractor's insurance company for certain defects in the construction of their home. The homeowners discovered damage to their home and contacted the builder and told him about the damage. An adjuster for the builder's insurer and an engineer came to the homeowners' home and the homeowner described the damage to his home. During his description, the insurance adjuster recorded the statement and transcribed it. The court noted that the statute requires not only that a damage report be reduced to writing by someone but also that it requires that a vendee report damage in writing.

Johanns v. Minn. Mobile Storage, Inc.,
Court of Appeals, 8/15/06      Reviewed by David Wikoff

The court of appeals held that an unambiguous exculpatory provision limiting liability in a rental agreement for a self-storage facility is enforceable unless the damages are caused by the facility owner's willful violation of law. In addition, the court ruled that under the Minnesota Liens on Personal Property and Self-Service Storage Act, a rental agreement between the self-storage facility owner and an occupant may limit, but may not totally exempt, liability for damages caused by an owner's negligence.

In this case, the plaintiffs stored their property in PODs, self-contained storage units. The defendant did not receive any further payments after the initial payment so it enforced its lien rights and sold the property at a public auction. Plaintiffs denied that they ever received any notice of the defendant enforcing its lien rights. The court of appeals reversed and remanded the case to the district court for determination of whether the plaintiffs' loss was directly caused by the defendant's intentional acts.

Governmental Immunity
Feuling v. City of Plymouth,
Court of Appeals, 8/1/06 (unpublished)      Reviewed by Christopher K. Iijima

In this case, the court of appeals affirmed the district court and held that the plaintiffs could not prevail against the city on claims of negligent employment, negligent maintenance, negligent development, nuisance, trespass, negligent design, negligent failure to assure compliance, and inverse condemnation because the doctrine of discretionary immunity and applicable statute of limitation barred the claims.

When the city modified a road along the plaintiffs' properties, the plaintiffs experienced flooding beginning in 1988 and continuing intermittently until an extraordinary rainfall in 2003. The city's efforts to alleviate the problem failed. But the doctrine of discretionary immunity provides immunity from any claim based upon the performance or the failure to exercise or perform a discretionary function or duty, whether or not the discretion is abused. Thus, all claims fell away except inverse condemnation. That claim was invalid because the city could not reasonably anticipate the rainfall and because the statute of limitation had run on plaintiffs' claims. Although the plaintiffs argued that the statute of limitation was tolled due to various city assurances that the problem would be solved, the court held that plaintiffs knew the city's efforts were inadequate.

Insurance
Bloom v. Western National Mutual Ins. Co.,
Court of Appeals, 7/3/06 (unpublished)      Reviewed by David A. Wikoff

In a certified question to the court of appeals following the denial of summary judgment to Western National, the court affirmed that when water enters a home due to defective design, faulty workmanship or faulty materials furnished in connection with construction or remodeling and causes damage, the damage is excluded from coverage under either the "errors, omission and defects" exclusion or the "wear and tear" exclusion and is not an ensuing loss. The plaintiffs discovered the presence of moisture deterioration and rot and mold affecting their home which was caused by defective construction. They filed a claim under their homeowner's insurance policy for coverage. The court found that the plaintiffs were not able to establish that the damage came from any other source other than from construction defects and, therefore, no coverage was available because of the various policy exclusions.

Physicians Neck & Back Clinics, P.A. v. Allied Insurance Co.,
Court of Appeals, 7/25/06 (unpublished)      Reviewed by Melody M. Pederson

In this case, the court addresses the assignability of insurance proceeds. Mary Shervheim, insured through respondent Allied Insurance Company, was injured in an automobile accident and subsequently sought treatment from Physicians Neck & Back Clinics ("PNBC"). Prior to receiving treatment from PNBC, Shervheim signed a private insurance information form provided by PNBC, which stated "I authorize payment directly to Physicians Neck & Back Clinic of medical benefits otherwise payable to me from (Allied)." Shervheim's policy with Allied, however, included a nonassignment provision, which stated that an insured's "rights and duties under the policy may not be assigned without (Allied's) written consent." When PNBC later billed Allied for its services to Sheverheim, Allied paid Shervheim directly. Shervheim, however, did not pay PNBC. PNBC sued Allied for damages equal to the value of the services provided Shervheim plus interest. On cross-motions for summary judgment, the district court granted Allied's motion. On appeal PNBC argued that, despite the insurance policy language barring assignment of the "rights and duties under the policy," Shervheim was not prohibited from assigning the payments to PNBC. PNBC principally relied on Windey v. N. Star Farmers Mut. Ins. Co., 231 Minn. 279, 43 N.W.2d 99 (1950) which argued that Minnesota law supports the assignment of insurance proceeds despite any policy language to the contrary. The court, however, was more persuaded by Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267 (Minn. 2004), which held that "when a contract prohibits assignment in very specific and unmistakable terms, any purported assignment is void."

Bieloh v. First National Insurance Services,
Court of Appeals, 8/1/06 (unpublished)      Reviewed by Christopher K. Iijima

In this negligence and breach of contract automobile accident case involving a Miller-Shugart agreement, the court of appeals reversed and remanded the district court's grant of summary judgment.

William and Kathy Bieloh own Northern J & B Enterprises, Inc. ("Northern"). David Imgrund stole a vehicle from the Bielohs and collided with Vince Mikesh. Mikesh commenced a lawsuit against Imgrund and Northern. William Bieloh and Northern entered a Miller-Shugart agreement with Mikesh. As part of the agreement, Bieloh and Northern were to bring a negligence action against their insurer for failing to provide adequate coverage and to properly evaluate their insurance needs. The insurer moved for summary judgment, arguing that Bieloh and Northern's negligence claim failed because the Miller-Shugart agreement shielded them from liability and they could not show damages. The district court granted the motion.

The court of appeals concluded that the district court relied on an incorrect measure of damages. Although Bieloh and Northern were shielded from Mikesh's judgment, they could still show damages in that they would have secured more coverage but for the insurer's negligence. The court added that the Miller-Shugart agreement had no effect on the negligence claims, which was a separate lawsuit alleging different claims against a different party.

Illinois Farmers Ins. Co. v. Anderson,
Court of Appeals, 8/16/06 (unpublished)      Reviewed by David Wikoff

The court of appeals, in this claim for insurance proceeds, affirmed the district court's summary judgment ruling that the insured intentionally caused the death of his brother thereby invoking the intentional-act exception under the insured's policy which precluded recovery. The insured fatally stabbed his brother and pled guilty to second-degree manslaughter. The insured's homeowner's policy excluded coverage for intentional acts. The court found that the insured's actions constituted intent because it could infer an intent to injure based on the circumstances wherein the insured removed a knife from a sheath, held it in his raised hand and then lunged toward the decedent. The court also ruled that the insured's actions did not constitute a reflexive action which could be inferred as unintentional.

Medical
Larson v Wasemiller,                                                                                HOT TOPIC
Court of Appeals, 7/25/06      Reviewed by Melody M. Pederson

Respondents brought a medical malpractice action against the appellants Drs. James and Paul Wasemiller, and later amended the Complaint to add claims against appellant St. Francis Medical Center for negligent credentialing of Dr. James Wasemiller and negligence in a joint venture. In denying St. Francis Medical Center's motion to dismiss, the district court certified two questions for the appellate court: (1) Does the State of Minnesota recognize a common-law cause of action of negligent credentialing or privileging of a physician against a hospital or other review organization? (2) Does Minn. Stat. §§ 145.63-.64 grant immunity from or otherwise limit liability of a hospital or other review organization for a claim of negligent credentialing or privileging of a physician?

In answer to the certified questions, the appellate court found that Minnesota does not recognize a common-law cause of action for negligent credentialing or privileging of a physician against the hospital or other review organization. The court further held that Minn. Stat. § 145.64 does not grant immunity from liability of a hospital or other review organization for a claim of negligent credentialing or privileging of a physician; however, the statute does limit liability for acts relating to credentialing or privileging.

Torts
Dawley and Mane v. Tuchek
Court of Appeals, 7/25/06 (unpublished)      Reviewed by Melody M. Pederson

Appellants brought this consolidated action for personal injuries and economic damage incurred after the police chief of the City of Lanesboro set a fire outside his ex-girlfriend's apartment, which destroyed several downtown buildings. The district court dismissed the claims against the City regarding vicarious liability for the police chief's intentional torts, including assault, negligence and negligent infliction of emotional distress, as well as the City's direct liability for negligent hiring, supervision and retention. The appellate court upheld the district court's ruling regarding vicarious liability, finding that there was insufficient evidence to infer that the police chief's acts were motivated by a desire to further the interests of the City, and thereby satisfy the scope of employment requirement for respondeat superior. On the issue of negligent hiring, retention and supervision, however, the appellate court reversed and remanded for trial, finding that there were issues of material fact as to whether the City had failed to perform its duty toward the appellants by failing to follow professional standards for supervision, evaluation and a thorough background search. The court also found that there was an issue of fact of whether the breach caused the appellants' damages.

Duffy v. American Standard, Inc., et al.,
Court of Appeals, 8/8/06 (unpublished)      Reviewed by Sandra P. Barnes

The court of appeals affirmed the district court's denial of summary judgment on behalf of defendants as the court did not find that the defendants were engaged in a common enterprise. Plaintiff worked as a welding repairman and foreman at the Austin Hormel plant from 1948 to 1986. Plaintiff was diagnosed with mesothelioma, and he brought a personal injury action against numerous defendants who manufactured, sold and/or distributed materials containing asbestos. One of the defendants, Scheid Plumbing, moved for summary judgment claiming that it was engaged in a common enterprise with Hormel, plaintiff's employer and, therefore under Minn. Stat. § 176.061, subds. 1, 4 (2004) plaintiff had to elect between collecting workers' compensation benefits or suing a third party for damages. The court found that Scheid failed to show that plaintiff participated in common activities with Scheid employees since Scheid employees worked on new construction only and Hormel employees performed maintenance on existing systems. The court concluded that Scheid failed to establish that Hormel and Scheid employees were engaged in a common enterprise because even though the employees were exposed to the same risks, the employees did not participate in common activities and the employers were not engaged in the same project.

Unemployment Compensation
Van Hee v. Dominium Management Services, Inc.,
Court of Appeals, 8/1/06 (unpublished)      Reviewed by Christopher K. Iijima

In this unemployment case, the court of appeals reversed an unemployment-law judge's denial of benefits. Van Hee had a broad range of duties as a property manager for Dominium Management Services. He repeatedly failed to collect an early-lease-termination fee from tenants and was eventually terminated. His request for unemployment benefits was denied. The court of appeals determined that the comprehensive nature of Van Hee's job description evinced a good-faith belief that he had authority to manage the complex according to his best judgment. Van Hee believed that waiving the fees would result in a high occupancy rate, and his job evaluations stated that he needed to focus on enforcing policy. Because Van Hee believed he was acting in his employer's best interest, and the employer knew of the problem and failed to terminate him in the past, the court of appeals concluded that Van Hee was not terminated for employment misconduct.

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FEDERAL COURT
(Edited by Jo Ann Strauss)


Contract
Dave's Cabinets, Inc. v. Komo Machine, Inc., et al.,                          HOT TOPIC
U.S. District Court, District of Minnesota, 7/6/06      Reviewed by Tory J. Langemo

A quotation constitutes a valid contract when it is sufficiently detailed, such as listing a particular machine's features, its price and the terms and conditions of the sale, and indicates that acceptance is all that is needed to ripen the offer into a contract, and when signed under the phrase "Accepted By," a valid contract is formed. If a dispute arises as to which of two companies is bound by the contract with a third party, the company whose letterhead is used, whose "Terms and Conditions" are mentioned and who is referred to throughout the contract is the company bound by the contract.

Having identified the parties to the contract, the Court next addressed the enforcebility of a provision which excluded consequential damages. An exclusion of consequential damages set forth in advance in a commercial agreement between experienced business parties represents a bargained-for allocation of risk that is conscionable as a matter of law. A business that maintains multiple large buildings with over fifty woodworking machines, produces a catalog, has its own trucks and whose representative has worked in the woodworking industry over fifteen years, supervises almost all manufacturing and has purchased many machines in the past is an "experienced business" with substantially equal bargaining power, as evidenced by extensive negotiation of the contract. Therefore, the damages exclusion provision was not unconscionable and was enforceable. Plaintiff's claims for consequential damages, which included injury to property proximately resulting from a seller's breach of warranty, business interruption damages and lost profits were barred by the damage exclusion.

Insurance
Allianz Insurance Company of Canada v. Sanftleben, et al.,
Eighth Circuit Court of Appeals, 7/21/06      Reviewed by Melody M. Pederson

In affirming the district court's summary judgment ruling in favor of Allianz, the Eighth Circuit Court explored SEF 44 benefits, the Canadian equivalent of UIM coverage. While driving in Minnesota, Richard and Carolyn Sanftleben were in an accident wherein Carolyn was seriously injured. Richard, then a Canadian citizen, carried a policy of insurance from Allianz with a limit of $1,000,000 in both liability and "SEF 44 benefits." Carolyn filed a personal injury action against Richard in Hennepin County District Court, which was settled later by entering into a Miller-Shugart settlement agreement. Allianz later sought a declaratory judgment in federal district court that Carolyn was not entitled to liability or UIM benefits under Richard's Allianz policy. Carolyn conceded that she was precluded from recovering liability benefits but contended that she was entitled to UIM benefits under the Allianz policy. After determining that this case must be decided under Canadian law, the court interpreted that under the Allianz policy, an inadequately insured motorist exists only if the liability limit of the driver of the vehicle involved in the accident and that vehicle's owner is less than the SEF 44 benefits provided under the Allianz policy. Here, the vehicle's owner, Carolyn, carried a $50,000 liability limit under a Farmers policy covering the vehicle; and Richard, the driver, carried a $1,000,000 liability limit under the Allianz policy. The total liability limit under the policies for the owner and the driver, therefore, was $1,050,000. Since the SEF 44 benefits limit under the Allianz policy was $1,000,000, Carolyn was not entitled to recover SEF 44 benefits (UIM benefits) because she was not a "inadequately insured motorist" as that term was defined under the Allianz policy.

Stan Koch & Sons Trucking, Inc. v. Great West Casualty Co.,
U.S. District Court, District of Minnesota, 8/10/06      Reviewed by Melody M. Pederson

In this case, with a retention endorsement motivating them, Koch brought a declaratory judgment action against Great West, arguing that Great West wrongfully accepted coverage in the context of a wrongful death action. On March 22, 2002, Kelly Ann Kelly was killed in a car accident when the car in which she was a passenger crashed into the side of a trailer being pulled by a tractor-trailer rig. David White was the owner-operator of the tractor, and he was pulling the trailer for Supreme Transport Services, LLC (collectively "Supreme/White"). Supreme leased the trailer from United Trailer Leasing, a division of Hargol Corporation, which in turn is a wholly-owned subsidiary of Koch. The litigation for Ms. Kelly's wrongful death proceeded to trial and, despite projections to the contrary, the jury returned with a $2.7 million verdict, and assigned 60% of the fault to Supreme/White. In May 2005, while the Kelly verdict was on appeal, the claims of Corbin Ellefson, who was also injured in the accident, were being addressed in a mediation session and Great West agreed to pay Ellefson $750,000 to settle his claims. Great West paid the full settlement to Corbin Ellefson and then requested reimbursement of $500,000 from Koch, in accordance with the retention endorsement. Koch declined to pay the retention, asserting that it had "never acquiesced that coverage is applicable in this case." The retention endorsement at issue provided "Koch agrees to reimburse Great West for the first $500,000 of any loss or claim for each accident which this insurance policy applies to. This amount shall be Koch's retention." In its claim for declaratory judgment, Koch argued that it did not own the tractor, that Supreme/White were not insureds under the policy, and that retention was not obligated because Great West did not have the authority under the policy to unilaterally offer coverage or negotiate a settlement without Koch's consent and Koch did not consent to the coverage for that matter. Great West filed an Answer and Counterclaim against Koch seeking a declaratory judgment determining that Great West, under the facts and circumstances of this case, was obligated to provide coverage to the operator of the accident vehicle in connection with the claims made against him. The court determined that Supreme/White were insureds under the policy, holding that the plain meaning of the policy applied to Supreme/White as permissive users of Koch's trailer. The court further held that there was no evidence that Great West breached its fiduciary duty to Koch in accepting coverage in the Kelly litigation and settling with Ellefson and that Koch was obligated to pay Great West the $500,000 retention under the policy.

Source Food Technology, Inc. v. U.S. Fidelity & Guaranty Co.,
Eighth Circuit Court of Appeals, 8/22/06      Reviewed by Melody M. Pederson

In reversing the grant of summary judgment to the insurer on a claim for coverage under the business interruption policy, the Eighth Circuit Court of Appeals explored the issue of "direct physical loss" under Minnesota law. On May 20, 2003, the U.S. Department of Agriculture (USDA) closed the border to Canadian beef and beef products based on concerns related to bovine spongiform encephalopathy (Mad Cow disease). The USDA's action resulted in a shutdown of Source Food's business while it secured an alternative beef supplier. Due to the shutdown, Source Food lost one of its primary customers, which canceled its contract seven months early. Source Food filed a claim with USFG for the costs and loss of revenue related to the business interruption caused by the Canadian beef embargo. USFG, then, denied Source Food's claim on the basis that the loss sustained did not result from a "direct physical loss." The district court granted USFG's motion for summary judgment, rejecting Food Source's claim that it suffered a "direct physical loss" under the policy. In reversing, the district court's grant of summary judgment, the appellate court noted that the policy was a business interruption policy meant to cover the loss of business income when Source Food's business was suspended because of loss of property. Whether Source Food's beef was actually tainted was not controlling; it was treated as tainted by the U.S. Government and was thus "functionally impaired." As Source Food was denied the use of its product due to circumstances beyond its control, the court held that it had suffered a direct physical loss of its beef.

Waste Management of Minnesota, Inc. v. Transcontinental Ins. Co.,
U.S. District Court, District of Minnesota, 8/23/06      Reviewed by Melody M. Pederson

Is liability for an umbrella policy triggered when the limits of the underlying policy are reached through adjudication on the merits and/or settlement, or is it triggered upon the actual payment of those underlying policy limits? In this case, the court held that a plain reading of the policy language stated that the umbrella policy was triggered by the liability for the policy limits, rather than the actual payment of those limits.

Waste Management's underlying insurer declared bankruptcy, while Waste Management was defending a negligence suit involving a motor vehicle accident. A judgment of $2.3 million was awarded against Waste Management and its driver Trenhaile. When Trenhaile subsequently sued Waste Management for negligently loading his truck, Waste Management went to its umbrella policy carrier, Transcontinental, to tender defense. Transcontinental refused, and Waste Management brought a declaratory judgment action seeking declarations that (1) Transcontinental must pay for any judgment in the Trenhaile action, (2) Transcontinental must defend Waste Management in the Trenhaile action, and (3) Transcontinental is liable for Waste Management's defense costs to date. Transcontinental argued that the $1 million underlying policy limits had not been reached, because in the settlement that was reached prior to the appeal of the $2.3 million judgment, Waste Management had to actually pay only $150,000 rather than the $1 million limit of the underlying policy. The court determined that the plain language of the policy stated that the umbrella policy was triggered when the $2.3 million judgment was awarded. Therefore, the court ruled that (1) Transcontinental must pay any final judgment in the Trenhaile litigation, (2) Waste Management was not required to defend itself in Trenhaile, and (3) Transcontinental was not liable for Waste Management's defense costs to date. The costs were not awarded because under Minnesota law, equitable relief is not available where the rights of the parties are governed by a valid contract.

Products Liability
Wagoner v. Black & Decker (US), Inc.,
U.S. District Court, District of Minnesota, 8/8/06      Reviewed by Christopher K. Iijima

In this negligence and strict liability action, the United States District Court granted the Wagoners' motion to supplement the record with disclosures that were made too late to be included with their original motion papers. The court also excluded testimony from the Wagoners' inspection expert after finding that the Wagoners acted in bad faith and prejudiced Black & Decker by demolishing their kitchen, which allegedly caught fire from a Black & Decker toaster, before inspection of the fire site could be completed.

Torts
Salschneider v. Kohl's Department Store, et al.,
U.S. District Court, District of Minnesota, 7/17/06      Reviewed by Melody M. Pederson

Does an eight to twelve inch deep pothole that is the circumference of an automobile tire satisfy the open and obvious exception to the duty to warn? In denying the third-party defendants' motion for summary judgment, the court said that it was not. Here, the plaintiff's view of the pothole was obstructed by her car door upon exiting her vehicle, and her view of the pothole was obstructed upon approaching her car by the cement base of a light pole. The court concluded, therefore, that a reasonably prudent person in the same circumstances would not have seen the pothole until it was too late to react. Therefore, the court determined that the danger of harm was not known or obvious so as to relieve defendants of their duty to guard invitees against dangers that are reasonably anticipated.

Wu v. Sorenson,
U.S. District Court, District of Minnesota, 7/17/06      Reviewed by Melody M. Peterson

In granting the defendant's motion for summary judgment, the court held that Sorenson, a student golfer, did not owe a care of duty to the plaintiff because, under the undisputed facts of the case, the duty of care for the plaintiff's safety was shifted to the golf class instructor. Sorenson had hit a ball that struck Wu, who had walked into the zone of danger to retrieve balls while other players were practicing. Because the instructor was guiding and coaching Sorenson at every stage of his swing, as well as telling Sorenson when to hit the ball, the court held that under the unique facts of this case, the duty towards Wu was entirely shifted to the instructor.

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WORKERS' COMPENSATION
(Edited by Craig A. Larson)

MINNESOTA

Arising Out Of And In The Course Of
Lewin v. Aspen Medical Group,
WCCA, 6/21/06      Reviewed by Jessica J. Theisen

In this matter, the WCCA was faced with the question of whether an employee's fall arose out of her employment with the employer. As she was walking from the nurse's station to an examination room the employee, a LPN, fell injuring her right knee. The employee produced no explanation for her fall. The employer and insurer initially admitted liability for the injury and paid medical and wage loss benefits. Subsequently, they filed a Petition to Discontinue Benefits based on an allegation that the employee's injury did not arise out of her employment. The Petition came on for hearing and the compensation judge determined the employee's knee injury was work related and denied the employer and insurer's Petition. The WCCA reversed the decision of the compensation judge and determined the employee failed to establish the fall was a natural incident of her work activity as a nurse and any causal connection between her work activity and the fall as she did not provide any evidence on that issue.

Notice
Adams v. DSR Sales, Inc.,
WCCA, 6/28/06      Reviewed by Jessica J. Theisen

This case addressed the intersection between workers' compensation and third-party actions. The employee sustained serious injuries when he was involved in a motorcycle accident. The employee brought both a third-party action and filed a Claim Petition in connection with his injuries. While his workers' compensation claim was pending, the employee settled his third-party claim. The workers' compensation insurer was not notified of and did not take part in the third-party settlement negotiations. The employee's workers' compensation matter eventually came on for hearing and the compensation judge determined that the employee sustained a work-related personal injury and awarded medical expenses. The compensation judge also found the employee failed to give proper notice to the employer and insurer of third-party settlement negotiations as required by case law, that the employee failed to rebut the presumption of prejudice resulting from his failure to give the required notice, and that the entire net proceeds of the third-party settlement were available to the insurer for purposes of a credit against its workers' compensation liability. As to past benefits paid, the compensation judge ruled that the workers' compensation insurer was entitled to a dollar-for-dollar setoff to be taken against its subrogation interest. As to future benefits payable to the employee, the compensation judge ordered that the cost of collection ratio be applied which resulted with the insurer liable to pay 37.3 cents per every dollar and workers' compensation benefits otherwise owed while reducing their remaining available subrogation credit by one dollar. The insurer was also ordered to pay contingent attorney's fees. On appeal, the WCCA affirmed the decision of the compensation judge on all issues, however, slightly modified the calculation of the setoff. Judge David Stofferahn dissented, indicating he would reverse the compensation judge and order the distribution of the third-party settlement pursuant to Minn. Stat. § 176.061, subd. 6. Additionally, he noted the employer and insurer's notice defense was not raised as an issue at hearing. As to attorney's fees, he would vacate the compensation judge's award and not award any contingent fees.

Temporary Total Disability
Groth v. Ryan Contracting Company,
WCCA, 6/5/06      Reviewed by Jessica J. Theisen

At issue in this matter was the employee's entitlement to temporary total disability and medical benefits. The employee sustained an admitted strain injury to his right hand on September 4, 2002. Nearly two years after this injury the employee was diagnosed with pain disorder with psychological factors and a general medical condition secondary to the September 4, 2002 injury. The employee continued to work with his date-of-injury employer until he was laid off in December 2002. The employee filed a Claim Petition seeking temporary total disability and medical benefits from May 1, 2003, due to his physical and resultant psychological injury. The compensation judge denied the employee's claim for wage loss benefits from May 1, 2003, through July 23, 2004, but ordered the employer and insurer to pay temporary total disability benefits thereafter. Additionally, the compensation judge found the employee did not sustain a psychological injury and denied his claims for medical treatment expenses.

On appeal, the WCCA found the compensation judge's decision that the employee did not sustain a psychological injury was supported by substantial evidence. As to the claimed medical expenses, the WCCA found the compensation judge's findings inadequate as they did not address whether the claimed medical expenses were reasonable and necessary. As such, this issue was remanded to the compensation judge for further findings. On the issue of the employee's entitlement to temporary total disability benefits, the WCCA also affirmed the decision of the compensation judge denying benefits between May 1, 2002, and July 23, 2004 as the employee did not engage in a diligent job search, had no written documentation of any job search, and failed to identify any specific contacts at that time. Further, the WCCA affirmed the award of temporary total disability benefits on and after July 23, 2004, as substantial evidence supported the conclusion that the employee had engaged in a diligent job search. Lastly, the WCCA affirmed the compensation judge's finding that the employee was not at maximum medical improvement at the time of hearing as there was evidence that supported the conclusion that further treatment may significantly improve the employee's condition.

Work-Related Physical Or Mental Injury
Williams v. Twin Cities Stores, Inc.,
WCCA, 6/7/06      Reviewed by Jessica J. Theisen

This case addressed whether a mental injury in the absence of a physical injury was compensable under the Minnesota Workers' Compensation Act. At the time of the claimed injury, the employee was working as a cashier at a convenience store when a driver of a car crashed into the window of her store. The employee heard the noise of the crash and immediately felt back pain, neck pain and headaches. The employee was not hit by the car or any debris from the crash but was presented with what she described as a "great force" from the crash. Thereafter the employee obtained chiropractic and other medical treatment and later began treating for depression. The matter came on for hearing and the compensation judge found that the employee did not sustain a work-related physical or psychological injury as the employee was not struck by the vehicle when it crashed through the window. While the compensation judge found the employee did sustain a psychological disability as a result of the December 11, 2004 injury, this disability did not result from a physical injury and therefore was not compensable under the Act. On appeal, the WCCA affirmed the findings of the compensation judge noting that the Act has not been construed to allow compensation for mental disability caused by a work-related stress without physical stimulus, trauma or injury. The WCCA concluded that there was no evidence the employee's physical contact with flying glass or a "great force" resulted in any medical condition or bodily reaction. As such, the WCCA affirmed the decision of the compensation judge denying workers' compensation benefits.

WISCONSIN
(Edited by Craig A. Larsen)

There were no updated cases for review as of the printing of this Newsletter.

MICHIGAN
(Edited by Craig A. Larsen)

There were no updated cases for review as of the printing of this Newsletter.

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