Recent Minnesota Supreme Court Case May Limit Additional Insured’s Rights And Indemnity Obligations In Construction Contracts

In Engineering & Constr. Innovations, Inc. v. L.H. Bolduc Co., Inc. et al., No. A11-0159 (Minn. Jan. 23, 2013), the Minnesota Supreme Court reversed the court of appeals, and found no coverage for Engineering & Construction Innovations (ECI) as an additional insured under the insurance policy issued to its subcontractor, Bolduc Co., Inc.

Frontier Pipeline, LLC was a general contractor for the installation of a sewer pipeline. It contracted with ECI to install a lift station and access points along the pipeline. ECI, in turn, subcontracted with Bolduc to construct cofferdams along the sewer line. Bolduc was to drive metal sheeting into the ground around the line to act as wall for the pits used during excavation and construction. During its work Bolduc drove a sheet into the sewer line.

ECI's contract with Bolduc included an agreement whereby Bolduc agreed to indemnify ECI from all claims related to Bolduc's acts and omissions. Specifically, it stated in part that "[Bolduc] agrees to protect, indemnify and hold harmless ECI . . . from and against . . . all claims . . . arising out of . . . damages to property caused or alleged to have been caused by any act or omission of [Bolduc]." Furthermore, Bolduc was to procure insurance covering the indemnity obligations in the contract and to add ECI as an additional insured. The agreement stated "[Bolduc] agrees to procure and carry . . . insurance that specifically covers the indemnity obligations under this paragraph." Bolduc obtained insurance from the Travelers Indemnity Company of Connecticut. The policy included those entities who Bolduc agreed to add as additional insureds by written contract, but limited the definition of additional insureds as follows:

1. Only with respect to liability for "bodily injury", "property damage" or "personal injury"; and

2. If, and only to the extent that, the injury or damage is caused by acts or omissions of you or your subcontractor in the performance of "your work" to which the "written contract requiring insurance" applies. The person or organization does not qualify as an additional insure with respect to the independent acts or omissions of such person or organization.

After the accident, ECI sought indemnification from Bolduc and sought coverage as an additional insured under the Travelers policy. When indemnity and insurance were not forthcoming, ECI sued. The trial was bifurcated between liability and insurance coverage, and a jury found that Bolduc...