Opinion ID: 1862664
Heading Depth: 4
Heading Rank: 1

Heading: The defense costs issue

Text: The district court also certified as doubtful the question of whether Federated's duty to defend included paying all costs and fees reasonably necessary to reduce or minimize Jostens' eventual liability for damages to the State of Illinois and to Springwood. We addressed the extent to which incurred costs are defense costs in Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724, 738 (Minn.1997). Domtar operated a refining plant that was closed in 1948 and sold in 1955. See id. at 728-29. In 1987, the MPCA found that Domtar was responsible for hazardous substances found in the soil and groundwater. See id. at 729. As a result, the MPCA issued a RFRA to Domtar. See id. Domtar estimated that its liability would be $7 million, but its general liability insurers denied coverage and refused to defend. See id. Domtar filed suit against the insurers and the district court found that the insurers had breached a duty to defend and therefore owed Domtar defense costs. See id. at 730. On appeal, the insurer argued that the district court erred in concluding that investigation and compliance costs were defense costs and therefore not subject to policy deductibles or liability limits. See id. at 738. Instead, the insurer argued that such costs were required by the RFRA, were a necessary part of the remediation, and were therefore indemnity costs. See id. at 737-38. We affirmed the district court, stating that the better approach is to allow an insured to receive as defense costs those expenses reasonably necessary either to defeat liability or to minimize the scope or magnitude of such liability. Id at 738. We further stated that this approach encourages insureds to clean up contaminated property without fear that all investigation and compliance costs will thereafter be considered indemnity costs by default. Id. We concluded that while some defense costs may serve a dual purpose of complying with the RFRA, those costs are not necessarily indemnity costs. See id. Finally, because Domtar's investigation and compliance costs minimized the potentially staggering scope and magnitude of its liability, we held that the district court properly classified them as defense costs. See id. at 739. We conclude that Domtar provides a definition of defense costs sufficient to constitute controlling precedent. See Emme, 418 N.W.2d at 179. We therefore hold that the district court improperly certified the defense costs issue as doubtful under Rule 103.03(h). [4] Because we hold that the district court improperly certified both the suit and the defense costs issues as doubtful pursuant to Rule 103.03(h), we need not remand the case for specific findings in order to determine whether the questions were properly certified as important pursuant to Rule 103.03(h). Therefore, we affirm the result of the court of appeals and remand this matter to the district court for further action consistent with this opinion. Affirmed and remanded for further proceedings.