Waste Management v. Transcontinental

A garbage truck loaded by Waste Management of Minnesota, Inc. ("WMCo"),
and driven by Chad Trenhaile jumped a highway median, rolled over, and struck the
car of Brian and Ellen Ross, injuring the Rosses and Trenhaile. The Rosses
commenced a state court damage action against WMCo, Trenhaile, and additional
parties we will refer to as the trucking defendants. WMCo's primary liability
insurance policy provided coverage of $1,000,000 for the accident, but the primary
insurer, Reliance Insurance Company, became insolvent. Other parties, including
WMCo's excess liability insurer, Transcontinental Insurance Company, settled the
Rosses' lawsuit with an appeal pending. As the settlement left a separate personal injury action by Trenhaile unresolved, the primary insurer's insolvency prompted this
declaratory judgment action to determine whether Transcontinental must indemnify
and defend WMCo in that action. Transcontinental now appeals the district court's1
adverse decision. The parties agree that Minnesota law governs the dispute and that
no contested issues of fact remain. Reviewing the interpretation of Transcontinental's
policy and the grant of summary judgment de novo, we affirm. See Travelers Indem.
Co. v. Bloomington Steel & Supply Co., 718 N.W.2d 888, 894 (Minn. 2006) (standard
of review).

I.

The parties to the Ross lawsuit agreed to binding arbitration. The arbitrator
found that Trenhaile and WMCo were each 50% at fault and that the Rosses were
entitled to damages of approximately $3,050,000. The Rosses sought confirmation
of the award. The Minnesota trial court entered judgment for the full amount against
Trenhaile and WMCo jointly and also decided priority of coverage issues between the
trucking defendants' liability insurer (Tri-State), the Rosses' underinsured motorist
insurer (MSI), Transcontinental, and the Minnesota Insurance Guaranty Association
("MIGA"), which was obligated by statute to pay certain claims against the insolvent
primary insurer, Reliance. See MINN. STAT. §§ 60C.01 et seq. Tri-State then paid the
Rosses its policy limit of $750,000 on account of Trenhaile's fault, leaving
approximately $2,300,000 unpaid. Three other parties appealed the trial court's
judgment -- WMCo, Transcontinental, and MIGA.

With the appeal pending, the parties entered into a settlement agreement, and
the Minnesota Court of Appeals dismissed the appeal. Pursuant to a Stipulation of
Dismissal, the trial court then entered an order dismissing all claims with prejudice.

The settlement agreement provided that no party admitted liability or coverage, and
the dismissal order left "unaffected" WMCo's statutory right to collect from Trenhaile
amounts WMCo paid to the Rosses in excess of its 50% share of the joint liability.
See MINN. STAT. § 548.19. One month after the dismissal, the Rosses filed a
satisfaction of judgment. As a result of these actions, the parties to the settlement paid
the portion of the Rosses' judgment not paid by Tri-State as follows:

MIGA $555,000

MSI 250,000

WMCo 150,000

Transcontinental 1,320,731

Ross Judgment Reduction 30,000

Total $2,305,731

Transcontinental's . . . obligation is triggered only when the obligation
of underlying insurers ceases solely through exhaustion of underlying
limits through payment of covered . . . settlement or judgments. Here,
Reliance . . . is the scheduled underlying insurer, with limits of $1
million. . . . [T]he payments of Waste Management and MIGA in the
Ross case total $705,000. MSI's payment of $250,000 does not count .
. . because it was . . . . the Rosses' own first-party coverage. . . . [N]o
portion of Tri-State's payment satisfies the $1 million . . . . At most, Tri-
State provided Waste Management with "unscheduled underlying
insurance."

This declaratory judgment lawsuit followed. The district court held that the payments
pursuant to the Ross settlement exhausted the Reliance policy limit, triggering
Transcontinental's duties to defend and indemnity WMCo in the Trenhaile lawsuit.

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