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Azcon Corp. v. Odyssey Re Limited12/7/2004
Appellant Sphere Drake Insurance Limited contends that the district court erred in (1) enforcing a loan-receipt agreement between respondents Azcon Corporation and National Union Fire Insurance Company of Pittsburgh; (2) awarding respondents attorney fees incurred in the prosecution of respondents' declaratory-judgment action; and (3) determining that appellant breached its duty to defend Azcon. We affirm.
DECISION
In November 1993, Azcon agreed to buy scrap metal from an explosives plant in Aurora, Minnesota. Azcon hired Holmes Enterprises to prepare and transport the scrap metal to Azcon's facility in Duluth. Azcon, already insured by National Union, required Holmes to obtain liability insurance of its own that designated Azcon as an additional insured. Appellant provided Holmes with such a policy. Three of Holmes's employees were killed in an explosion while removing the scrap metal, and Azcon was named as a defendant in wrongful-death and property claims.
Azcon first tendered the defense of the claims to National Union, and National Union accepted. Azcon next tendered the defense to appellant, and appellant initially declined to defend or indemnify Azcon. In November 1994, Azcon, later joined by National Union, brought a declaratory-judgment action against appellant, seeking a determination that Azcon was entitled to a defense and indemnification from appellant.
In March 2003, after several years of litigation and less than a month before the declaratory-judgment trial was scheduled to begin, Azcon and National Union entered into a loan-receipt agreement. The stated purpose of the agreement was to allow Azcon and National Union to "recover from [appellant] and/or others the defense fees and costs incurred and made by or on behalf of Azcon in the underlying cases." In their agreement, the parties identified National Union's prior payments on behalf of Azcon as a loan. The district court held that the loan-receipt agreement was valid and enforceable.
I.
On appeal from a declaratory-judgment action, we apply a clearly erroneous standard to the district court's factual findings but review its determination of questions of law de novo. Rice Lake Contracting Corp. v. Rust Env't & Infrastructure, Inc., 549 N.W.2d 96, 98-99 (Minn. App. 1996), review denied (Minn. Aug. 20, 1996).
Appellant does not dispute any of the facts material to the loan-receipt agreement, but does dispute its validity. Appellant asserts that the sole purpose of the loan-receipt agreement was to avoid the Iowa National rule. See Iowa Nat'l Ins. Co. v. Universal Underwriters Ins. Co., 276 Minn. 362, 365-68, 150 N.W.2d 233, 236-37 (1967) (holding that an insurer cannot recover from another insurer for the costs of defense of a mutual insured absent a contractual relationship between insurers). Appellant concedes that a loan-receipt agreement can be used to circumvent the Iowa National rule, but only if there is an actual transfer of funds and an adversarial relationship between the parties to the agreement. We disagree.
Appellant relies on Jostens v. Mission Ins. Co. for the proposition that there must be an actual transfer of funds between parties to a loan-receipt agreement. 387 N.W.2d 161 (Minn. 1986). Appellant cites the following language from Jostens to support its position:
Loan receipt agreements have long been recognized in this state and they are a useful device in disposing of insurance disputes. There is nothing improper or invalid about such a loan and, "so long as there was an actual transfer, the motives of the transfer [will] not be gone into."
Id. at 164 (quoting Blair v. Espeland, 231
Page 1 2 3 4 Minnesota Personal Injury Attorneys
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