In this insurance coverage case, the Minnesota Court of Appeals ruled that the insurer was required under Minn. Stat. § 72A.201 (the Minnesota Fair Claims Practices Act) to disclose all available insurance policies and insurance coverage that the client had when a loss occurred. The insurance company’s failure to disclose resulted in Engineering & Construction Innovations (“ECI”) waiting to file a claim under one of its policies with Western National Insurance and bring its lawsuit more than two years after the loss had occurred. The Court ruled that, because the insurance company failed to disclose in violation of the Fair Claims Practices Act, that the insurer could not raise the 2-year policy time limitation for bringing a lawsuit, in order to avoid its coverage obligations. As a matter of law, Western was estopped from doing so.
The Court also found that litigation under one policy (in this case a Commercial General Liability policy) did not prevent a later lawsuit by ECI under another policy (in this case an Inland Marine/Builders Risk policy), both of which were sold to ECI by Western National Insurance. As a matter of law, the legal defense of res judicata did not apply, and ECI was entitled to have its right to coverage under the Inland Marine/Builders Risk policy decided on the merits.
Finally, the Court held that “arising out of” and “caused by” policy language have different meanings. “Arising out of” has broader implications, while “caused by” is akin to proximate cause. Similarly, “resulted in” does not mean “caused by”. Again reversing the trial court and “(g)iven the dearth of evidence regarding the unknown cause of the grout infiltration…”, the Court of Appeals remanded the case back to the district court for a trial on what caused the loss. This factual finding will determine whether the workmanship exclusion of the policy applies in order for Western to avoid paying for the loss.