Source: http://mn.gov/law-library-stat/archive/ctapun/0409/opa040204-0928.htm
Timestamp: 2017-10-17 05:35:41
Document Index: 615505414

Matched Legal Cases: ['art, 701', '§ 572', '§ 572', '§ 1', '§ 1', '§ 13', '§ 13']

St. Paul Fire and Marine Insurance Company, Respondent, vs. API, Inc., defendant and counter-claimant, Respondent, and API, Inc., third-party plaintiff, Respondent, vs. The Home Insurance Company, third-party defendant, Respondent, Fireman's Fund Insurance Company, third-party defendant, Appellant, Great American Insurance Company, third-party defendant, Respondent, One Beacon American Insurance Company, as successor to General Accident Insurance Company, third-party defendant, Respondent, Continental Casualty Company, third-party defendant, Respondent, and Transportation Insurance Company, intervenor, Respondent, United States Fire Insurance Company, intervenor, Respondent. A04-204, Court of Appeals Unpublished, September 28, 2004.
A04-204
API, Inc., defendant and counter-claimant,
API, Inc., third-party plaintiff,
The Home Insurance Company, third-party defendant,
Fireman’s Fund Insurance Company, third-party defendant,
Great American Insurance Company, third-party defendant,
One Beacon American Insurance Company,
as successor to General Accident Insurance Company, third-party defendant,
Continental Casualty Company, third-party defendant,
Transportation Insurance Company, intervenor,
United States Fire Insurance Company, intervenor,
Charles E. Spevacek, Meagher & Geer, P.L.L.P., 33 South Sixth Street, Suite 4200, Minneapolis, MN 55402 (for respondent St. Paul Fire and Marine Insurance Co.)
John H. Faricy, Jr., Craig M. Roen, James R. Harries, Rebecca L. Kassekert, Faricy & Roen, P.A., 333 South Seventh Street, Suite 2320, Minneapolis, MN 55402; and
William M. Beadie, Moore, Costello & Hart, 701 Fourth Avenue South, Suite 1350, Minneapolis, MN 55415 (for respondent API, Inc.)
Jerome B. Abrams, Abrams & Smith, P.A., 12th Floor Pillsbury Center South, 220 South Sixth Street, Minneapolis, MN 55402 (for respondent The Home Insurance Co.)
William L. Davidson, Lind, Jensen, Sullivan & Peterson, P.A., 150 South Fifth Street, Suite 1700, Minneapolis, MN 55402 (for appellant Fireman’s Fund Insurance Co.)
Eric Strobel, Hinshaw & Culbertson, 222 South Ninth Street, Suite 3100, Minneapolis, MN 55402-3389 (for respondent One Beacon American Insurance Co.)
John Bjorkman, Rider Bennet, LLP, 333 South Seventh Street, Suite 2000, Minneapolis, MN 55402 (for respondents Continental Casualty Co. and Transportation Insurance Co.)
John M. Anderson, Bassford Remele, P.A., 33 South Sixth Street, Suite 3800, Minneapolis, MN 55402-3707 (for respondent United States Fire and Insurance Co.)
Appellant Fireman’s Fund Insurance Company challenges a district court order denying its motion to compel API, Inc. to arbitrate its disputes pursuant to an arbitration clause contained in the Claims Handling and Settlement Agreement. Because API was not a party to that agreement, we affirm.
API was a contractor and distributor of building insulation products that, until 1972 or 1973, contained asbestos. Since the mid-80s, API has been sued in more than 2,000 cases in several states by claimants alleging asbestos-related injuries. API, which tendered these cases to its insurers, expects that many more such lawsuits will be filed.
Over the years, API has been insured by a number of carriers, including St. Paul Fire and Marine Insurance Company (St. Paul), The Home Insurance Company (Home), Fireman’s Fund Insurance Company (Fireman’s Fund), Great American Insurance Company (Great American), One Beacon American Insurance Company (One Beacon), Continental Casualty Company (Continental), Transportation Insurance Company (Transportation), and United States Fire Insurance Company (U.S. Fire). In 1993, four of these insurers—St. Paul, Home, Fireman’s Fund, and Great American—signed a Claims Handling and Settlement Agreement (Agreement) that contains an arbitration clause. Although the Agreement states that it is entered into by the four insurers and API as the insured, the Agreement further defines parties as those who are signators. There is no copy signed by API or containing a blank signature line for API in the record.
The Agreement was created to
establish under a complete reservation of rights the procedures to be followed with respect to the administration, defense and indemnification of the Bodily Injury Asbestos-Related Cases and the administration and defense of the Asbestos Building Cases as respects Insured only and to do so without altering, amending or waiving any of the terms, conditions, exclusions or provisions of any applicable policy of insurance and without waiving any rights against parties or non-parties to the Agreement.
The insurers that were parties to the Agreement made payments on behalf of API pursuant to “products-completed work” or “products/completed operations” coverage, which contain aggregate limits. When the aggregate limits were nearing exhaustion, API began to assert that “premises operations” coverage, which had no aggregate limits, might apply. St. Paul brought a declaratory-judgment action against API, seeking a determination that the premises-operations coverage does not apply. API then filed an answer and a combined counterclaim and third-party complaint against its insurers, seeking declaratory relief regarding coverage under its policies, as well as bringing breach-of-contract, misrepresentation, breach-of-fiduciary-duty, consumer-fraud, and equitable-reapportionment claims. Fireman’s Fund moved to compel arbitration under the arbitration provision in the Agreement and to stay litigation pending arbitration. None of the other insurers joined in the motion. The district court denied the motion, and this appeal followed.
An appellate court will review de novo a district court’s decision denying a motion to compel arbitration. Johnson v. Piper Jaffray, Inc., 530 N.W.2d 790, 795 (Minn. 1995). “Determining whether a party has agreed to arbitrate a particular dispute is a matter of contract interpretation.” Id.
In general, a written agreement to arbitrate controversies “is valid, enforceable, and irrevocable.” Minn. Stat. § 572.08 (2002). When a party shows that an arbitration agreement exists and that the opposing party refuses to proceed or denies the existence of such an agreement, the court shall summarily decide the issue. Id. § 572.09(a). “When considering a motion to compel arbitration, the court’s inquiry is limited to (1) whether a valid arbitration agreement exists, and (2) whether the dispute falls within the scope of the arbitration agreement.” Amdahl v. Green Giant Co., 497 N.W.2d 319, 322 (Minn. App. 1993).
Arbitrators derive their authority to resolve disputes from the parties’ agreement to do so. Johnson, 530 N.W.2d at 795-96. “The arbitration agreement must be entered into voluntarily by all parties involved.” 1 Larry E. Edmondson, Domke on Commercial Arbitration § 1.2 (2003). Parties may choose which controversies they agree to arbitrate. Michael-Curry Cos. v. Knutson Shareholders Liquidating Trust, 449 N.W.2d 139, 141 (Minn. 1989). They cannot be required to submit to arbitration to which they did not agree. Johnson, 530 N.W.2d at 795; 1 Edmondson, supra, § 1.2.
Fireman’s Fund, alone among the insurers, argues that API’s claims in this lawsuit must be submitted to arbitration under the arbitration provision of the Agreement. That provision states that: “Any disputes arising under this Agreement or concerning its meaning or application shall be submitted to arbitration for resolution.” Fireman’s Fund asserts that the coverage issue is a dispute properly raised under the Agreement provision that all indemnity payments shall count toward the exhaustion of the appropriate policy. API contends that this lawsuit raises issues concerning the policies, not the Agreement. The dispositive issue is whether API is bound by an arbitration provision in an agreement it did not sign.
We first examine the Agreement, which defines “party” as “a signatory to this Agreement whose obligations hereunder have not terminated; ‘parties’ means all such signatories.” “Insured” is defined to mean API, Inc. and Asbestos Products, Inc. We next look at the document to see who the signatories are. At the end of the Agreement are several pages on which are printed the names of the four insurers who are signatories, as well as blank lines for the insurers’ representatives to sign and to fill out their titles, the dates, and their addresses. These were signed and completed by the representatives for Fireman’s Fund, Home, St. Paul, and Great American. There is no page for API and there is no evidence that it signed the Agreement. We agree with the district court that because API did not sign the Agreement, under its terms, it was not a party.
The district court emphasizes that not only is API not a party to the Agreement, but also that API has not made efforts to become a party. If API asserted a claim for breach of the Agreement, API would have to move to amend its complaint to assert such a new claim. The district court further noted that such a motion would surely be opposed by all of the insurers who are parties to the Agreement. Finally, the Agreement provides that “[a]ny party may terminate its obligations under this Agreement by giving sixty (60) days written notice to all other Parties.” API asserts that if it were found to be a party, it would immediately give notice of termination.
Fireman’s Fund argues that API’s signature is not necessary for API to be bound by the arbitration clause. It cites Minnesota decisions providing that “[a]ll that is required by the [Uniform Arbitration Act] is that the agreement to arbitrate be in writing. It need not be recorded, or acknowledged, or verified, or even signed.” Anderson v. Federated Mut. Ins. Co., 465 N.W.2d 68, 72 (Minn. App. 1991) (emphasis added) (quotation omitted) (noting that act has minimal technical requirements and holding that uniform act supersedes common-law arbitration), aff’d on other grounds, 481 N.W.2d 48 (Minn. 1992) (holding common-law arbitration still exists but that oral agreement to arbitrate was revoked). By the terms and definitions contained in the Agreement in this proceeding, if API did not sign, it is not a “party.” If API is not a party to the Agreement, it is not a party to the arbitration provision in the Agreement.
Fireman’s Fund persists and argues that the signature aspect is not dispositive and that the Agreement must be considered as a whole to determine whether API is a party. See Kauffman Stewart, Inc. v. Weinbrenner Shoe Co., 589 N.W.2d 499, 502 (Minn. App. 1999) (holding that when a contract is ambiguous, words and phrases must be considered in accordance with the contract as a whole). Fireman’s Fund cites other language in the Agreement to support its argument that API is a party, arguing that at least some portions of the Agreement should be understood to create a contract between API and its insurers. We recognize that API is identified at the beginning of the Agreement as a participant, that at another point API is referred to as the insured, and that there is an implication that API was to be a party. However, this is only an implication; API did not sign and there is no evidence that API participated in drafting the Agreement or was aware it may have been considered a party at the time the Agreement was signed. One reference to API as a participant is too thin a basis to establish a contractual relationship and to mandate arbitration. More is needed.
Fireman’s Fund further argues that under the doctrine of practical construction, API’s conduct under the Agreement showed that it was intended to be bound as a party and thus was subject to the arbitration clause. “A contract implied in fact is one inferred from the circumstances and conduct of the parties.” Gryc v. Lewis, 410 N.W.2d 888, 891 (Minn. App. 1987) (citation omitted). The question of whether there is an implied-in-fact contract is usually a question of fact to be determined by the fact-finder. Bergstedt, Wahlberg, Bergquist Assoc., Inc. v. Rothchild, 302 Minn. 476, 480, 225 N.W.2d 261, 263 (1975). Fireman’s Fund relies on Cornell v. N.F.C. Eng’g Co., 274 Minn. 391, 144 N.W.2d 369 (1966). But in that case, the court acted as fact-finder, and appeal was taken from the order denying a motion for a new trial or amended findings. Id. at 392-93, 144 N.W.2d at 370-71. When a party does not present “sufficient evidence to raise a fact issue on the existence of an implied-in-fact agreement,” the court may decide it as a matter of law. Williams v. Dow Chem. Co., 415 N.W.2d 20, 24-25 (Minn. App. 1987). That is the case here and Fireman’s Fund has failed to show that it is entitled to raise this fact issue as a matter of law.
Fireman’s Fund finally contends that API is required to arbitrate based on its status as a third-party beneficiary and under the theory of equitable estoppel. A nonsignatory third-party beneficiary to a contract may, in some circumstances, enforce an arbitration clause, “if the contracting parties intended the third party to directly benefit from the contract.” 1 Edmondson, supra, § 13.9 (footnote omitted); Onvoy, Inc. v. SHAL, LLC, 669 N.W.2d 344, 356 (Minn. 2003) (citing earlier edition of Domke for same proposition). This reasoning is based on a theory that if a third-party beneficiary wishes to accept the benefits of the contract, it must abide by the terms of the contract, including a legally enforceable arbitration clause. Id. Similarly, the equitable-estoppel theory “allows a nonsignatory to the arbitration agreement to compel arbitration, even though no written agreement exists, where the circumstances allow the inference that the signatory and the nonsignatory have agreed to submit to arbitration.” 1 Edmondson, supra, § 13.8. The arguments of Fireman’s Fund under both theories fail because API, the nonsignatory, is not seeking to compel arbitration.
The district court order denying the motion of Fireman’s Fund to compel arbitration pursuant to the Agreement is affirmed.