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State Farm Fire and Casualty v. Aquila Inc.

August 3, 2006

STATE FARM FIRE AND CASUALTY, ET AL., RESPONDENTS,
v.
AQUILA INC. D/B/A PEOPLE'S NATURAL GAS, F/K/A UTILICORP UNITED INC., D/B/A PEOPLE'S NATURAL GAS/ENERGY ONE, APPELLANT, NORTHERN PIPELINE CONSTRUCTION COMPANY, DEFENDANT, ROBERT SAUER, ET AL., DEFENDANTS, GEORGE RUCKER, ET AL., NOMINAL DEFENDANTS.



SYLLABUS BY THE COURT

1. An underground natural gas pipeline system qualifies as "an improvement to real property" under Minn. Stat. § 541.051, subd. 1(a) (2004), where the evidence shows that the gas company installed the system to permanently replace an existing gas system in a hazardous location.

2. Where, after viewing the evidence in the light most favorable to respondents, the record does not establish that the gas explosion experienced by respondents was the result of the gas company's negligence, Minn. Stat. § 541.051, subd. 1(c) (2004), does not apply to respondents' claims.

Reversed.

The opinion of the court was delivered by: Anderson, G. Barry, Justice

Took No Part, Gildea, J.

Heard, considered, and decided by the court en banc.

OPINION

Respondents, State Farm Fire and Casualty (State Farm), Auto Owners Insurance Company (Auto Owners), and Joan Hernlem brought suit against appellant, Aquila, Inc. (Aquila), defendant Northern Pipeline Construction Company (Northern Pipeline), and other defendants for damages that were caused by a natural gas leak from a pipeline system that is owned and operated by Aquila and was installed by Northern Pipeline. The district court granted summary judgment in favor of Aquila and Northern Pipeline, concluding that Minn. Stat. § 541.051 (2004) barred respondents' claims. Respondents appealed, and the court of appeals, in a split decision, affirmed summary judgment for Northern Pipeline, reversed summary judgment for Aquila, and remanded the matter to the district court. State Farm Fire & Casualty v. Aquila Inc., 697 N.W.2d 636 (Minn. App. 2005). We reverse and reinstate summary judgment for Aquila.

Aquila owns and operates natural gas pipelines in the United States. Hallmark Terrace Trailer Park (Hallmark Terrace) is a mobile home park located in Rochester, Minnesota. Prior to 1990, Aquila owned and operated a steel pipeline-gas system that serviced the residences at Hallmark Terrace.

In 1990, Aquila decided to replace the gas system. Aquila hired Northern Pipeline to build and install the new natural gas system using polyethylene pipelines. The work order for the project stated that the new system was to be installed because of the hazardous location of the existing steel pipelines. The cost of installing the new system exceeded $21,000 and was completed in December 1990. Unknown to the parties, during the installation a section of the new polyethylene pipeline was mistakenly pushed through a section of an existing clay tile sewer line. Aquila abandoned the steel pipeline system upon the completion of the new system. No maintenance or repairs were performed on the natural gas system prior to the incident that prompted this lawsuit.

In early 2002 Hallmark Terrace hired Robert Sauer to repair sewer drains that were blocked by tree roots. On February 13, 2002, Sauer used a trap-and-drain auger to unclog the sewer pipes. During the process, the auger struck and ruptured the intersecting natural gas line, causing natural gas to escape through the sewer pipes and into several homes. The gas accumulated and ignited, resulting in an explosion and ensuing fire that damaged the real and personal property of several Hallmark Terrace residents.

Respondents brought an action, claiming that Aquila and Northern Pipeline "failed to exercise reasonable care and [were] negligent in the inspection, maintenance, repair and/or installation of the natural gas system at Hallmark Terrace." Respondents also claimed that Aquila and Northern Pipeline were negligent per se for violating "applicable codes and standards regarding the inspection, maintenance, repair and/or installation of the natural[-]gas system."

Following discovery, Aquila and Northern Pipeline filed motions for summary judgment, arguing that respondents' claims were barred by Minn. Stat. § 541.051, which imposes a 10-year repose period on all causes of actions "arising out of the defective and unsafe condition of an improvement to real property." Minn. Stat § 541.051, subd. 1(a) (2004). Respondents filed a cross-motion for summary judgment, arguing Minn. Stat. § 541.051 did not apply to their claims because the natural gas pipeline system was merely an addition to the existing natural gas distribution system, and not an improvement to real property. Respondents further argued that, even if the natural gas pipeline system was an improvement to real property, Aquila and Northern Pipeline were not entitled to the protections afforded by the statute because Minn. Stat. § 541.051, subd. 1(c), provides an exception for claims arising out of the "actions for damages resulting from negligence in the maintenance, operation or inspection of the real property improvement against the owners or other persons in possession."

The district court granted Aquila and Northern Pipeline's motions for summary judgment and dismissed respondents' claims against Aquila and Northern Pipeline. In concluding that Minn. Stat. § 541.051 applied to bar respondents' claims, the court held that the natural gas pipeline system constituted an improvement to real property and respondents' injuries arose out of the defective and unsafe condition of the pipeline. Further, the court concluded that respondents failed to present evidence that Aquila was negligent in the maintenance, operation, or inspection of the pipelines, and therefore, the Minn. Stat. § 541.051, subd. 1(c), exception did not apply. As to Northern Pipeline, the court ruled that ...


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