Insurance Law in Minnesota

MINNESOTA COVERAGE SURVEY

I. Coverage Determination

What is required when making a coverage determination? Is it only the factual allegations contained in the complaint, is it extrinsic evidence for the benefit of the insured, is it extrinsic evidence for the benefit of insured and insurer, or is it something all together different?

The complaint and extrinsic evidence (facts) for the benefit of insured and insurer. Once insured comes forward with facts showing arguable coverage, or insurer becomes independently aware of such facts, insurer must defend or further investigate potential claim. Garvis v. Employers Mutual Casualty Co., 497 N.W.2d 254 (Minn. 1993); St. Paul Mercury Ins. Co. v. Dahlberg, Inc., 596 N.W.2d 674 (Minn.Ct.App. 1999). Minnesota courts have applied exception to the general rule that extrinsic evidence cannot be used to avoid an otherwise existing duty to defend. Thus, in addition to looking at complaint, insurer may look to facts outside complaint to determine whether coverage exists. Lanoue v. Fireman's Fund American Ins. Cos, 278 N.W. 2d 49 (Minn. 1979), overruled on other grounds. Insurer may look beyond pleadings to define true scope of claim to argue insurers duty is narrower than underlying complaint. St. Paul Fire and Marine Ins. Co. v. Microsoft Corp., 102 F.Supp. 2d 1107 (D.Minn. 1999), aff'd, 220 F.3d 943 (8th Cir. 2000).

II. Standard of Coverage Review

When dealing with the standard for coverage there are many questions one needs to answer. If only dealing with the complaint, is the theory alleged in the complaint controlling or the facts alleged controlling? In the absence of extrinsic evidence, the complaint must present allegations (facts) arguably within coverage of policy. St. Paul Mercury Ins. Co. v. Dahlberg, 596 N.W.2d 674 (Minn.Ct.App. 1999).

The standard of coverage in Minnesota is arguably covered. Defenses must be given to claims that are arguably covered, not just potentially covered. Garvis v. Employers Mutual Casualty Co., 497 N.W.2d 254 (Minn. 1993); Prahm v. Rupp, 277 N.W.2d. 389 (Minn. 1979).

An insurer is required when reviewing extrinsic evidence to conduct a reasonable investigation. If pleadings do not raise claim arguably within scope of coverage, insurer has no duty to defend or investigate further to determine whether there are other facts present which trigger such duty; but if insurer is aware of facts indicating that there may be claims, either from what is said directly or inferentially in complaint, or if insured tells insurer of such facts,