United States District Court, D. Minnesota
Michael T. Burke, LIND JENSEN SULLIVAN & PETERSON, PA,
P. Essling, for defendants.
MEMORANDUM OPINION AND ORDER DENYING MOTION FOR
R. TUNHEIM CHIEF JUDGE
question presented in this case sounds something like a bad
riddle: “When is an asbestos case not an asbestos
case?” The punchline sounds even worse: When a portion
of the property damage alleged against a third-party
defendant in the underlying action is not inarguably and
clearly a natural and reasonable consequence of the existence
of, or presence of, asbestos. Because that is the case in
this case, the Court will deny the Motion for Summary
Judgment brought by Plaintiff Midwest Family Mutual Insurance
Company (“Midwest Family”) in this declaratory
judgment action against insured Defendants Justkyle, Inc.
(“Justkyle”), and Nicholas Guettler.
Family brings this declaratory judgment action to determine
whether it is obligated to defend or indemnify its insured,
Justkyle, for claims brought against that company in
Minnesota state court. (Compl. ¶ 1, May 17, 2017, Docket
Family is an Iowa corporation authorized to transact business
in Minnesota. (Id. ¶ 3.) Guettler is the owner
and sole employee of Justkyle, a Minnesota corporation;
Midwest Family insures both parties. (Id.
¶¶ 1, 4-5, 7; Guettler Ans. ¶¶ 3, 6, July
31, 2017, Docket No. 15.) Alleging an amount in controversy
greater than $75, 000, Midwest Family properly states that
the Court has diversity jurisdiction over this case.
(See Compl. ¶¶ 2, 6.)
Eric and Barbara Grutzner brought the underlying state-court
action against contractor M.A. Peterson Designbuild, Inc.,
and Mark Peterson (collectively, “M.A. Peterson”)
in 2016. (Compl. ¶ 8, Ex. C (“Grutzner
Compl.”), May 17, 2017, Docket No. 1-3.) M.A. Peterson
in turn filed third-party claims against Justkyle and another
contractor, UMR Geothermal, Inc., for contribution and
indemnification. (Compl. ¶ 10, Ex. D (“M.A.
Peterson Compl.”), May 17, 2017, Docket No. 1-4.)
THE UNDERLYING ACTION
and Barbara Grutzner purchased their Inver Grove Heights home
in 2005. (Grutzner Compl. ¶ 6.) The house was built in
1956. (Id. ¶ 7.) The Grutzners contacted their
long-time friend, Mark Peterson, to get his professional
opinion as to whether they should remodel the house or tear
it down and rebuild. (Id. ¶¶ 9-10.) In
2006, Peterson recommended that they hire his firm, M.A.
Peterson, to remodel it. (Id. ¶¶ 17, 24.)
The Grutzners did so, entering into two contracts - one
governing demolition and the other construction.
(Id. ¶¶ 25, 28.) Both contracts contained
a provision stating that M.A. Peterson would stop work and
immediately notify the Grutzners if the contractor
encountered any “hazardous substances.”
(Id. ¶¶ 26, 29.)
2006 remodel focused on the main floor, but the Grutzners
allege that it also involved work in the floors, walls, and
basement - areas that contained asbestos. (Compare
Id. ¶¶ 39, 41, 44, with M.A. Peterson
Compl. ¶¶ 8, 27.) According to the Grutzners,
Peterson conceded in the state-court litigation that he
discovered asbestos during the course of the 2006 remodel,
and that he understood then that the asbestos was a
“hazardous substance” under the terms of the
contracts. (Grutzner Compl. ¶¶ 46, 57.) Instead of
telling the Grutzners about the asbestos, however, M.A.
Peterson allegedly concealed its existence and completed the
project. (Id. ¶¶ 50, 52.)
Grutzers say that they were unaware of the existence of
asbestos in their home until 2016, when they hired Justkyle
(which is really just Guettler) to remodel the lower level.
(See Id. ¶ 54.) According to Guettler, he
suspected there was asbestos in the floor titles before he
began demolition. (Aff. of Nicholas Guettler (“Guettler
Aff.”) ¶ 4, Jan. 16, 2018, Docket No. 40.) He had
the tiles removed and abated. (Guettler Aff. ¶ 7, Ex. A
(“Guettler Dep.”) 29:12-24.) At one point in the
project, Guettler pulled down a piece of ceiling tile with
his bare hands, and asbestos insulation fell from around
pipes that he believed had been accessed by M.A. Peterson and
UMR Geothermal, a contractor who had done work in the home in
2015. (Guettler Dep. 35:25-37:25.) Guettler notified the
Grutzners, who notified Peterson. (Grutzner Compl.
¶¶ 55-56.) The Grutzners say Peterson came to the
home, acknowledged the asbestos, apologized, and said that
M.A. Peterson would take responsibility for the matter - a
promise that Peterson promptly reneged. (Id.
¶¶ 57-59.) The Grutzners subsequently filed suit in
state court, bringing five claims: Breach of Contracts,
Negligence, Breach of Warranty, Breach of Fiduciary Duty, and
Fraud by Omission. (Id. ¶¶ 60-84.)
Peterson denies all liability, including denying failing to
notify the Grutzners about the asbestos or disturbing the
asbestos. (M.A. Peterson Compl. ¶ 21.) M.A. Peterson
specifically denies doing its remodeling work in the impacted
area of the home. (Id. ¶ 27.) M.A. Peterson
instead points the finger at Justkyle and UMR Geothermal.
(Id. ¶¶ 10-13, 22.) Specifically, Peterson
24. To the extent Plaintiffs have been damaged as alleged in
the Amended Complaint, such damages were caused by the
negligence, breach of contract, breach of warranty, or other
acts, omissions, or fault of Third-Party Defendants JustKyle,
Inc. or UMR Geothermal, Inc., or both of them.
25. Third-Party Defendants performed construction and
remodeling work in the lower-level areas of the Home - the
exact same areas where the allegedly disturbed asbestos
materials were found - long after M.A. Peterson performed its
remodeling work in other areas of the Home.
26. To the extent any asbestos materials were disturbed in
the Home, Third-party Defendants are responsible for
disturbing those materials.
27. M.A. Peterson did not perform its remodeling work in the
allegedly impacted areas.
28. To the extent Third-Party Plaintiffs are found liable to
the Plaintiffs, Third-Party Plaintiffs are entitled to
contribution and/or indemnification from Third-Party
(Id. ¶¶ 24-28.) M.A. Peterson did not
identify Guettler as the owner or sole employee of Justkyle
and did not name him as a third-party defendant; thus, as
relevant here, it brought claims solely against Justkyle.
(See generally id.)
THE PRESENT ACTION
Family brings this case in federal court pursuant to the
Declaratory Judgment Act. See 28 U.S.C. § 2201.
Family issued an “Artisan Contractor Policy”
(“the policy”) insuring “Nick Guettler DBA:
Justkyle Inc.” from September 28, 2015, through
September 28, 2016, and subsequently renewed through
September 28, 2017. (Compl. ¶ 7, Ex. A (“2015-2016
Policy”) at 1, May 17, 2017, Docket No. 1-1; Compl.
¶ 7, Ex. B (“2016-2017 Policy”) at 1, May
17, 2017, Docket No. 1-2.) Guettler states that the policy
incorrectly identifies his relationship with Justkyle because
he is not doing business as Justkyle, Inc., but rather,
Justkyle is a corporation and Guettler its sole employee.
(Guettler Ans. ¶ 6.) At the hearing on this motion,
Guettler's counsel stated that Guettler understood the
policy as insuring his corporation, a claim that Midwest
Family did not dispute. (Minute Entry, Mar. 13, 2018, Docket
No. 44.) The policy states that, if an insured is
“designated in the Declarations as:” a. An
individual, you and your spouse are insureds, but only with
respect to the conduct of a business of which you are the
sole owner. . . .
d. An organization other than a partnership, joint venture,
or limited liability company, you are an insured. Your
“executive officers” and directors are insureds,
but only with respect to their duties as your officers or
directors. Your stockholders are also ...