Westchester Fire Insurance Company, et al., Respondents, vs. Continental Casualty Company, Appellant, Ryan Companies US, Ins., et al., Defendants.

Westchester Fire Insurance Company, et al., Respondents, vs. Continental Casualty Company, Appellant, Ryan Companies US, Ins., et al., Defendants. A05-556, Court of Appeals Unpublished, March 28, 2006.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-556

 

Westchester Fire Insurance Company, et al.,

Respondents,

 

vs.

 

Continental Casualty Company,

Appellant,

 

Ryan Companies US, Ins., et al.,

Defendants.

 

Filed March 28, 2006

Affirmed

Randall, Judge

 

Hennepin County District Court

File No. CT 03-010121

 

Keith J. Kerfeld, Chad D. Dobbelaere, Tewksbury Kerfeld & Zimmer, 88 South Tenth Street, Suite 300, Minneapolis, MN  55403; and

 

Jonathan Schapp (pro hac vice), Lustig & Brown, LLP, 400 Essjay Road, Suite 200, P.O. Box 9077, Buffalo, N.Y. 14221-8228 (for respondents)

 

Eric J. Magnuson, Stephen O. Plunkett, Rider Bennett, LLP, 33 South Sixth Street, Suite 4900, Minneapolis, MN  55402 (for appellant)

            Considered and decided by Minge, Presiding Judge; Randall, Judge; and Crippen, Judge.*

U N P U B L I S H E D   O P I N I O N

RANDALL, Judge

            On appeal from summary judgment finding that respondent company was an additional insured under policies issued by appellant insurer and that appellant's coverage was primary, appellant argues that the district court erred in finding (a) respondent company was an additional insured under the lessor of leased equipment endorsement, where respondent was not the lessor of the cranes and where it failed to establish that the accident arose out of the general contractor's use of the crane; (b) respondent was an additional insured under the blanket additional insured endorsement, where respondent failed to establish an agreement that it be made an additional insured and failed to present evidence that the general contractor was performing work for respondent at the time of the accident; (c) in finding that appellant's coverage was primary to the coverage provided by respondent insured to respondent company; and (d) respondent was entitled to coverage under the umbrella policy.  We conclude that respondent is entitled to coverage under the blanket additional insured endorsement.  Affirmed.

FACTS

            In the spring of 1998, Ryan Companies U.S., Inc. (Ryan) was hired to act as the general contractor for the Piper Jaffray Center Office Tower construction project (the project).  Ryan subcontracted the steel work to Lejeune Steel, who, in turn, subcontracted the steel erection work to respondent L.H. Sowles Company (Sowles).  Ryan also contracted with Northwest Tower Cranes (Northwest) for the rental of two cranes, which were to be used for the project.  The cranes were leased pursuant to the terms of a Crane Rental Agreement executed by Ryan and Northwest.  Notably, Northwest is a wholly owned subsidiary of Sowles. 

            On December 2, 1998, two employees of Hunt Electric Company (Hunt Electric), Darryl Hilgendorf and Steven Marschel, were accidentally killed while working on the project.  At the time of the accident, Tim Dalzell, an employee of Sowles, was directing Don Vandermey, an employee of Ryan who was operating a crane, to lift to the eighth floor a several thousand pound bolt bin that had been designed by Sowles for the project.  Because the building's elevator core obstructed Vandermey's view, limiting his ability to see the work area, Dalzell instructed Vandermey by radio where to place the bolt bin.  Relying on Dalzell's directions, Vandermey placed the bolt bin between the structural beams on the decking next to a decking seam, despite the fact that the bolt bin had been designed by Sowles to rest across two structural beams.

            After the bolt bin was placed on the eighth floor, Dalzell instructed Vandermey to lift a steel column into position on the eighth floor.  The column, which had previously been stored on the eighth floor in the horizontal position, was lifted into a vertical position.  As the column was being lifted, its supporting structure, called dunnage, failed, allowing the column to puncture the decking.  The column then damaged a beam, which caused the decking to fail and the bolt bin to fall through a separation in the decking.  Hilgendorf and Marschel were working on the sixth floor of the building and were crushed by the falling bin.

            As a result of the accident, Sowles and Ryan conducted investigations to determine what had occurred and what had caused the accident.  Both companies determined that neither Vandermey nor any other Ryan employee had acted negligently.  Instead, investigators determined that a combination of three things caused the accident:  (1) the decking on the eighth floor had only been tack-welded; (2) there was inadequate dunnage, constructed by Sowles, to support the column as it was being lifted to an upright position; and (3) the bolt bin was improperly placed on the eighth floor at the direction of Dalzell.   

            The families of Hilgendorf and Marschel, as well as the workers' compensation carrier, presented claims against Sowles, seeking payment and reimbursement for the accidental deaths.  At the time of the accident, Sowles was insured by USF&G for general liability with a limit of $1 million per occurrence.  Sowles also carried excess insurance with respondent Westchester Fire Insurance Company with a limit of $20,000,000 per occurrence.  Ryan was insured at the time of the accident under insurance policies issued by appellant Continental Casualty Company (Continental) for both commercial general liability with limits of $1,000,000 per occurrence, and commercial umbrella liability with limits of $24,000,000 per occurrence. 

            In November 1999, Sowles and its carriers settled the Hilgendorf claim for $2,075,000.  A few months later, Sowles and its carriers settled the Marschel claim for $2 million.  USF&G assumed responsibility for making all workers' compensation payments on behalf of Hunt Electric, and in return for USF&G's payments, Hunt Electric and its insured, Transportation Insurance Company (Transportation), assigned to Sowles and Westchester their rights of subrogation pursuant to Minn. Stat. § 176.061 (2004).  Sowles and Westchester state that all claims were settled for $4,784,180, inclusive of the workers' compensation claims. 

            In March 2001, Sowles and Westchester brought a declaratory judgment action against Continental, alleging (1) Sowles was an additional insured under two endorsements to Continental's CGL policy, the Lessor of Leased Equipment endorsement and the Blanket Additional Insured endorsement; and (2) Continental's coverage was primary.  Both parties moved for summary judgment, and, in granting summary judgment in favor of Sowles and Westchester, the district court determined that Sowles was an additional insured under the Continental policies pursuant to the terms of the Lessor of Leased Equipment endorsement and the Blanket Additional Insured endorsement.  The district court further held that the coverage afforded Sowles under the Continental policies was primary to the coverage afforded under the Westchester policy.  This appeal followed. 

D E C I S I O N

            Summary-judgment motions are granted when the pleadings, depositions, answers to interrogatories, and admissions, together with any affidavits, show that there is no genuine issue of material fact and a party is entitled to judgment as a matter of law.  Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).  On a motion for summary judgment, "a court may not weigh the evidence or make factual determinations."  State ex rel. Hatch v. Allina Health Sys., 679 N.W.2d 400, 406 (Minn. App. 2004) (quoting Fairview Hosp. & Health Care Servs. v. St. Paul Fire & Marine Ins. Co., 535 N.W.2d 337, 341 (Minn. 1995)).  "[T]he reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted."  Fabio, 504 N.W.2d at 761.  A reviewing court need not defer to a district court's decision on a pure question of law.  Frost-Benco Elec. Ass'n v. Minn. Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984).  Interpretation of an insurance policy and application of the policy to the facts in a case are questions of law that this court reviews de novo.  Am. Family Ins. Co. v. Walser, 628 N.W.2d 605, 609 (Minn. 2001).

I.

            Continental argues that the district court erred in concluding that Sowles was an additional insured under the lessor of the leased equipment endorsement.  Continental's Commercial General Liability policy provides in relevant part:

COVERAGE A.  BODILIY INJURY AND PROPERTY DAMAGE LIABILTY

 

1.                  Insuring Agreement

 

            a.         We will pay those sums that the insured becomes

                        legally obligated to pay as damages because of                             "bodily injury" or "property damage" to which                              this insurance applies . . . .

 

The policy contains an endorsement entitled "ADDITIONAL INSURED LESSOR OF LEASED EQUIPMENT," which provides:

            WHO IS AN INSURED (Section II) is amended to include as an insured the person(s) or organization(s) shown in the Schedule, but only with respect to their liability arising out of the maintenance, operation or use by you of equipment leased to you by such person(s) or organization(s), subject to the following exclusions:

 

This insurance does not apply:

1.         To any "occurrence" which takes place after the equipment lease expires;

2.         To "bodily injury" or "property damage" arising out of the sole negligence of the person or organization shown in the Schedule.

 

It is undisputed that neither party could produce a schedule, nor is there any evidence of record that a schedule ever existed.  

            At issue is the Crane Rental Agreement.  The first page of the rental agreement identifies Northwest as the "lessor," and Ryan as the "lessee."  The agreement goes on to provide in paragraph nine that:

            INDEMNITY AND INSURANCE:  Lessee shall defend, indemnify and hold forever harmless Lessor, L.H. Sowles Co. and their officers, agents, and employees from against all loss, liability and expense by reason of any violation of any rule, regulation or law, by reason of bodily injury including death, and property damage, sustained by any person or persons, including but not limited to Lessee's employees, as a result of the maintenance, use, operation, and on site storage, of Equipment.  In addition, Lessee shall maintain insurance covering the aforesaid risks in a company acceptable to Lessor protecting Lessor and Lessee to the limits of Five Million Dollars ($5,000,000.00) for each person and Five Million Dollars ($5,000,000.00) for each accident or occurrence, and One Million Dollars ($1,000,000.00) for property damage in each accident or occurrence, or Five Million Dollars ($5,000,000.00) Combined Single Unit.  Lessee shall also maintain in effect insurance against all risks of physical damage to or loss of Equipment to the agreed value of Equipment (2d) naming lessor as a loss payee thereunder.

 

            A.         Leased Equipment Endorsement

            Continental asserts that under the Lessor of Leased Equipment Endorsement, the insured is the person or entity that leases the equipment to the policyholder.  Continental argues that because Northwest, and not Sowles, was the lessor of the crane, Sowles is not an insured under the Lessor of Leased Equipment Endorsement.

            An insurance policy must be construed as a whole, and unambiguous language must be given its plain and ordinary meaning.  Henning Nelson Constr. Co. v. Fireman's Fund Am. Life Ins. Co., 383 N.W.2d 645, 652 (Minn. 1986).  Language is ambiguous if it is reasonably subject to more than one interpretation.  Hammer v. Investors Life Ins. Co. of N. Am., 511 N.W.2d 6, 8 (Minn. 1994).  When language in an insurance contract is ambiguous, it will be construed in favor of the insured.  Progressive Specialty Ins. Co. v. Widness ex rel. Widness, 635 N.W.2d 516, 518 (Minn. 2001).  This court may not create an ambiguity where none exists.  Bobich v. Oja, 258 Minn. 287, 294, 104 N.W.2d 19, 24 (1960).

            Here, the Crane Rental Agreement initially identifies Northwest as the lessor of the crane.  But the first sentence of paragraph nine of the rental agreement states:  "INDEMNITY AND INSURANCE:  Lessee shall defend, indemnify and hold forever harmless Lessor, L.H. Sowles Co. and their officers, agents, and employees from against all loss, liability and expense . . . ."  The next sentence of paragraph nine provides that "[i]n addition, Lessee shall maintain insurance covering the aforesaid risks in a company acceptable to Lessor protecting Lessor and Lessee . . . ."  These two provisions are unambiguous.  When read together, these two sentences establish that Sowles is an insured under the Lessor of Leased Equipment endorsement.

            B.         Ryan's use of the crane

            Continental also contends that under the Lessor of Leased Equipment Endorsement, coverage only exists "with respect to [lessor's] liability arising out of the maintenance, operation or use by [Ryan] of equipment leased to [Ryan] by [lessor] subject to the following additional exclusions . . . ."  Continental argues that because there is no evidence that the underlying incident arose out of Ryan's operation or use of the crane, Sowles is not covered under the endorsement.   

            The record reflects that on the morning of the accident, Vandermey, an employee of Ryan, was operating the leased crane.  The record also reflects that because Vandermey was operating the crane "blind," Dalzell, an employee of Sowles, was directing Vandermey in the operation of the crane.  Relying on Dalzell's instructions, Vandermey set the bolt bin down on the eighth floor in an improper location, which ultimately set off a chain reaction of events that caused the two deaths. 

            Continental argues that, based on these facts, Sowles, rather than Ryan, was the negligent party.  We disagree.  Despite the fact that Dalzell was directing Vandermey in the operation of the crane, it cannot be ignored that Vandermey was Ryan's employee.  Consequently, it was one of Ryan's employees who was operating the crane at the time of the accident.  Moreover, Ryan was the general contractor in charge of the project, and was ultimately responsible for the construction of the project.  The accident arose out of the use of the crane by Ryan.

            Continental argues further that, even if Vandermey was negligent in the operation of the crane, Sowles is not covered under the policy because Vandermey was a loaned servant to Sowles.[1]  "The loaned-servant doctrine provides that if an employer loans an employee to another for the performance of some special service, then that employee, with respect to that special service, may become the employee of the party to whom his services have been loaned."  Danek v. Meldrum Mfg. & Eng'g Co. Inc., 312 Minn. 404, 407, 252 N.W.2d 255, 258 (1977).  "[I]f the employee is a loaned servant, the liability for his negligent acts shifts from the general employer to the borrowing employer."  Ismil v. L.H. Sowles Co., 295 Minn. 120, 123, 203 N.W.2d 354, 357 (1972).

            "[C]ourts have relied on two tests in determining when a worker becomes a loaned servant.  The first of these is the ‘whose business' test.  It asks:  At the time of the negligent act, which employer's business was being done or furthered?"  Nepstad v. Lambert, 235 Minn. 1, 11, 50 N.W.2d 614, 620 (1951).  The second test, the "so-called ‘right of control or direction' test, [places] the responsibility for the servant's negligence upon the employer having the right to control his actions at the time the negligent act occurs."  Id. at 12, 50 N.W.2d at 620.  "The theoretical basis for this test is probably the desire to impose the liability upon the employer who was in the best position to prevent the injury."  Id.  "The question is . . . whether, as to the act in question, [the special employee] is acting . . . under the direction of the borrowing employer."  Ismil, 295 Minn. at 124, 203 N.W.2d at 357.

            Continental argues that because the facts in this case are analogous to the facts in Nepstad, Vandermey was a loaned servant under the "right of control test," and, thus, there is no evidence that the underlying incident arose out of Ryan's operation or use of the crane.  In Nepstad, the plaintiff was employed by the L.G. Arnold Co. ("Arnold"), which was a general contractor working on a project in Wisconsin.  235 Minn. at 5, 50 N.W.2d at 617.  In order to perform certain work on the project, Arnold rented a crane, and two crane operators, from one of the Defendants, J.M. Lambert ("Lambert").  Id. at 5-6, 50 N.W.2d at 617.  The crane was first employed to install prefabricated trusses and, since the crane operator, who was employed by Lambert, could not hear oral instructions over the noise of the crane, his movements were directed entirely by hand signals, which were given by Arnold's employees.  Id. at 6, 50 N.W.2d at 617. 

            In addition, the crane was used to move four steel truss sections from the north side to the south side of the plant.  Id. at 7, 50 N.W.2d at 618.  Although there was a discussion as to the route and procedures that would be used to move the trusses, the crane operator was not a part of that discussion and only knew what he was supposed to do when he was provided with appropriate signals.  Id. at 9, 50 N.W.2d at 619.  While backing along the road, the crane operator, who was not able to see what was behind him, again took signals from the general contractor's foreman, or from the plaintiff.  Id.  At some point during the movement of the trusses, a portion of the crane came into contact with a power line, and caused injuries to the plaintiff.  Id. at 10, 50 N.W.2d at 619.

            The question in Nepstad was whether the crane operator was a loaned servant.  In concluding that the crane operator was a loaned servant because he was taking orders from Arnold, the court stated:

Every movement of the crane while it was being used on the job was directed through hand signals by an Arnold company employee.  Signals were given indicating when and how far to swing the boom of the crane, when to stop the movement, when and how far to raise or lower the boom, and when and how far to slacken or tighten the hoisting cable.  Without these signals, [the crane operator] lacked the knowledge or authority to make a move, because only Morris, the Arnold company's steel foreman, with the aid of his blueprints, knew the pattern and progress the work was to take.  More detailed control can hardly be conceived.  The crane operator was virtually an automatic eye which caused the machinery of the crane to respond to signals given by the Arnold company's employees.

            There can be no doubt that these signals carried the force of command.  The work of the crane involved moving heavy pieces of steel to within inches of workmen standing on narrow platforms 10 or 20 feet above the ground.  A hesitant response or disobedience to a signal jeopardized their lives, and [the crane operator] was fully aware of it.  In such a situation, the orders given, viewed realistically, must be considered authoritative.

 

Id. at 16, 50 N.W.2d at 622-23.

            Here, the record shows that Vandermey's view of the work-site was blocked, and he was relying on Dalzell's instructions regarding the operation of the crane.  Upon relying on Dalzell's instructions, Vandermey placed the bolt bin between the structural beams, which ultimately caused the accident to occur.  The facts are almost analogous to the facts in Nepstad where the court found the crane operator to be a loaned servant.  Although the district court categorized Dalzell's commands as "instructions," and stressed the fact that Vandermey was ultimately an employee of Ryan, we cannot conclude that these assertions are enough to distinguish the present case from Nepstad.  Because of the amount of control exhibited by Dalzell over Vandermey, we conclude that Vandermey was a loaned servant at the time of the accident.  Therefore, Sowles is not entitled to coverage under the Lessor of Leased Equipment endorsement.

II.

            Sowles argues that even if it is not entitled to coverage under the Lessor of Leased Equipment endorsement, it is entitled to coverage under the general policy by way of the Blanket Additional Insured endorsement.  The "BLANKET ADDITIONAL INSURED ENDORSEMENT" provides in part:

            WHO IS AN INSURED (Section II) is amended to include as an insured any person or organization (called additional insured) whom you are required to add as an additional insured on this policy under:

 

1.      A written contractor or agreement; or

2.       An oral agreement or contract where a certificate of insurance showing that person or organization as an additional insured has been issued . . .

 

            . . . .

 

            The insurance provided to the additional insured is limited as follows:

 

1.       That person or organization is only an additional insured with respect to liability arising out of:

 

a.       Premises you own, rent, lease or occupy; or

b.      "Your work" for that additional insured by or for you.

 

            Continental argues that Sowles does not qualify as an additional insured under the blanket additional insured endorsement because (1) there is no evidence of a written or oral agreement that Sowles be made an additional insured, and (2) there is no evidence that Ryan was performing work for Sowles at the time of the accident.

            A.         Written or oral agreement

            Despite Continental's argument to the contrary, the Crane Rental Agreement constitutes a written agreement that Sowles be made an additional insured.  Pursuant to the terms of the Crane Rental Agreement, Continental was to

defend, indemnify and hold forever harmless Lessor, L.H. Sowles Co. and their officers, agents and employees from against all loss, liability and expense by reason of any violation of any rule, regulation or law, by reason of bodily injury including death, and property damage, sustained by any person or persons, including but not limited to Lessee's employees, as a result of the maintenance, use, operation, and on site storage, of Equipment.

 

The very next sentence adds "[i]n addition, Lessee shall maintain insurance covering the aforesaid risks in a company acceptable to Lessor protecting Lessor and Lessee . . . ."  As stated above, this language is unambiguous.  Consequently, the rental agreement provides evidence of a written contract between Ryan and Sowles to provide Sowles with insurance coverage.   

            B.         Liability arising out of Ryan's work

            Continental argues that, even if Sowles could meet the written agreement requirement for coverage under the Blanket Additional Insured endorsement, coverage would not exist because there is no evidence that Sowles's liability arose out of Ryan's work for Sowles.  We disagree.  Ryan's insurance policy provides that Sowles "is only an additional insured with respect to liability arising out of . . . (b) ‘Your work' for the additional insured by or for you . . . ."  Thus, for Sowles to be provided coverage there must be liability arising out of "‘[Ryan's] work' for [Sowles] by or for [Ryan]." 

            The record reflects that Ryan's employee was operating the crane at the time of the accident.  But, as we concluded above, the employee was operating the crane as a loaned servant.  Consequently, Continental is correct in that Ryan was not performing the work.  However, "Your work" is defined under the policy as "[w]ork or operations performed by you or on your behalf . . . ."  (emphasis added).  Because Ryan was the general contractor, the steel erection work performed by Sowles was ultimately performed on Ryan's behalf.  See Wanzek Constr., Inc. v. Employers Ins. of Wausau, 679 N.W.2d 322, 329-30 (Minn. 2004) (stating that where a subcontractor's performance of its obligations to the general contractor contributed to the general contractor's performance of its obligation to the owner, the subcontractor, as a matter of law, performed work on behalf of the general contractor).  Accordingly, the underlying accident did arise out of "[Ryan's] work for [Sowles] by or for [Ryan]," and Sowles is entitled to coverage under the Blanket Additional Insured endorsement.        

III.

            Continental argues that even if Sowles is covered as an additional insured under the Blanket Additional Insured endorsement, the concluding paragraph of the endorsement mandates that Sowles recover under its own primary insurance policy with Westchester.  This paragraph provides:

            Any coverage provided hereunder shall be excess over any other valid and collectible insurance available to the additional insured whether primary, excess, contingent or on any other basis unless a contract specifically requires that this insurance be primary or you request that it apply on a primary basis.

 

            Sowles argues that its primary policy with Westchester has a similar provision that states Westchester's policy is excess to Continental's policies.  Westchester's policy "other insurance" clause provides:

Other insurance.  If there is any other collectible insurance available to the "insured" (whether such insurance is stated to be primary, contributing, excess or contingent) that covers a loss that is also covered by this policy, the insurance provided by this policy will apply in excess of, and shall not contribute with such insurance.  This Condition H does not apply to any insurance policy purchased specifically (and which is so specified in such insurance policy) to apply in excess to this policy. 

 

            "In determining priority coverage among insurers, a court must first look to the ‘other insurance' clauses of the policies to determine if they are in conflict."  Illinois Farmers Ins. Co. v. Depositors Ins. Co., 480 N.W.2d 657, 659 (Minn. App. 1992).  If the court determines that the "other insurance" clauses do not conflict, the court need not analyze which policy is closest to risk, and the policy held to be excess will be placed on a lower priority and not be called on to provide coverage unless and until the polices held to be primary have exhausted their limits.  Id. 

 

            Here, both parties contend that the policies do not conflict, and that each policy is in excess to the other's policy. Continental contends that under the Blanket Additional Insured endorsement, the coverage afforded to an additional insured is excess to all other insurance insuring that additional insured, absent a contract between the policyholder and the additional insured requiring that the coverage for the additional insured be primary.  Continental argues that because there was no contract between Sowles and Ryan stating that Continental's coverage was primary, Continental's coverage is excess to Sowles's other coverage.  Sowles, on the other hand, argues that "other insurance" clauses which provide that coverage for an additional insured is excess unless the insurance procurement contract expressly states that coverage is to be primary, are to be construed as containing a specific requirement that such additional insured coverage be primary, notwithstanding the lack of the required express contractual language. 

            Both parties rely on New York caselaw in support of their claims.  But a review of the New York caselaw on the issue reveals that the issue is unsettled.  In fact, in its reply brief, Continental concedes that New York courts are split on the issue of "other insurance."  See, e.g., Hartford Fire Ins. Co. v. Lo Brutto, 275 A.D.2d 525, 526 (N.Y. App. Div. 2000) (holding underlying contract's lack of specific reference to primary insurance renders the insurance excess); Maxwell v. Toys "R" Us, N.Y. Ltd. P'ship., 269 A.D.2d 503, 503 (N.Y. App. Div. 2000) (holding that "other insurance" clauses that provide that coverage for an additional insured is excess unless the insurance procurement contract expressly states that coverage is to be primary, are to be construed as containing a specific requirement that such additional insured coverage be primary, notwithstanding the lack of the required express contractual language).  In light of the fact that New York courts have not definitively decided the issue, the New York caselaw on the issue is not persuasive.  Based on the language of the insurance policies, we conclude the two policies conflict. 

            Because the two policies conflict, the next step for us to determine is which policy is primary.  See Auto Owners Ins. Co. v. Northstar Mut. Ins. Co., 281 N.W.2d 700, 704 (Minn. 1979).  In so doing, we may analyze the total policy insuring intent by considering "the primary policy risks upon which each policy's premiums were based and as determined by the primary function of each policy."  Integrity Mut. Ins. Co. v. State Auto. & Cas. Underwriters Ins. Co., 307 Minn. 173, 175, 239 N.W.2d 445, 446 (1976).  In the alternative, we may consider the following criteria to determine which policy is closest to the risk:   

(1) Which policy specifically described the accident-causing instrumentality?
(2) Which premium is reflective of the greater contemplated exposure?
(3) Does one policy contemplate the risk and use of the accident-causing instrumentality with greater specificity than the other policy--that is, is coverage of the risk primary in one policy and incidental to the other?

 

Auto Owners Ins., 281 N.W.2d at 704.  This court has acknowledged that the policy intent analysis is "‘broader' only in the sense that it involves more than a mechanical application of the three factors set out in Auto Owners."  Richardson v. Ludwig, 495 N.W.2d 869, 874 (Minn. App. 1993), review denied (Minn. Apr. 20, 1993). We conclude that under the particular facts of this case, the more appropriate analysis to apply is that which determines which policy is "closest to the risk."

            Despite Continental's argument to the contrary, the first factor favors the conclusion that the Westchester policy is excess.  Although both policies generally cover the risk, the certificate of insurance duly issued by Ryan's insurance agent specifically names the accident-causing instrumentality, i.e., both the project and the crane.  Moreover, only Continental's policy specifically refers to the leased equipment, the crane.  Finally, the Continental policy specifically mentions coverage for additional insureds, while Westchester's policy contains no such specificity.  Thus, the first factor weighs in favor of Sowles.   

            The second factor contemplates which premium is reflective of the greater contemplated exposure.  A review of the policies demonstrates that Continental's premium was estimated at $239,051, including $151,150 for Ryan's contracting activities.  This was for $1,000,000 per occurrence in primary coverage.  In contrast, Sowles paid Westchester premiums of $58,000 for $20,000,000 in excess coverage.  Thus, the coverage paid under Continental's policy reflects a greater contemplated risk of exposure to the accident causing instrumentality. 

 

            The third factor discusses which policy contemplates the risk and use of the accident-causing instrumentality with greater specificity.  As stated above, only Continental's policy specifically described the crane and the project.  Moreover, only Continental's policy refers to (1) the leased equipment, and (2) coverage for additional insureds, Sowles and Northwest.  Therefore, the third factor also appears to favor the conclusion that the Westchester policy is excess.  Because the three factors favor a conclusion that Westchester's policy is excess, the district court did not err in concluding that Blanket Additional Insured endorsement is primary.

IV.

            Finally, Continental argues that Sowles does not qualify as an insured under the umbrella policy.  Continental's umbrella policy issued to Ryan identifies who is an insured under the policy.  This section provides in relevant part:

            Any other persons or organizations included as an insured under the provisions of the "scheduled underlying insurance" in Item 5 of the Declarations and then only for the same coverage, except for limits of liability, afforded under such "scheduled underlying insurance."

 

            The district court held that because Sowles was an additional insured and is entitled to coverage under Continental's commercial general liability policy pursuant to the Lessor of Leased Equipment endorsement, Sowles is also an additional insured under the umbrella policy due to the provision in the umbrella policy that allows for coverage as long as Sowles is covered under the commercial general liability policy.  Although Sowles is not entitled to coverage under the Lessor of Leased Equipment endorsement because Vandermey was a loaned servant at the time of the accident, Sowles is covered under the Blanket Additional Insured endorsement.  Because Sowles is an additional insured under the general policy pursuant to the Blanket Additional Insured endorsement, Sowles is entitled to coverage under Continental's umbrella policy. 

            Affirmed.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.

[1] The Minnesota Supreme Court in Nepstad stated that although the determination of whether an employee is a loaned servant is "normally one of fact for the jury, it is well established that where there is no dispute as to controlling facts and no jury would be entitled to find that there was not a loaned-servant relationship, the question becomes one of law for the court."  Nepstad v. Lambert, 235 Minn. 1, 10, 50 N.W.2d 614, 619 (1951).  Here, like Nepstad, the question of whether the crane operator was a loaned servant is a question of law for this court to decide.