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Gen. Mills, Inc. v. Gold Medal Ins. Co.

Court of Appeals of Minnesota

February 6, 2001, Filed





Appellant challenges summary judgment entered against it, finding insurance coverage for losses suffered by respondent and denying appellant a setoff against other insurance. Because we conclude as a matter of law that there was direct physical loss to insured property as required by terms of the policy, and because the exclusions from coverage relied on by appellant are ambiguous, we affirm the decision of the district court. Because the district court did not err in its application of the law regarding setoffs, we affirm as to that issue as well.


Respondent General Mills, Inc. (General Mills), is a Delaware corporation with executive offices in Minnesota. Appellant  [*150]  Gold Medal Insurance Co. (Gold Medal), a Minnesota corporation and wholly-owned subsidiary of General Mills, was established by General Mills as a captive insurer for the purpose of accessing insurance markets in a cost-effective manner. Because Gold Medal has no actual employees, American Risk Management (ARM), an independent company that specializes in such work, handles its essential services. ARM drafted the wording of the Gold [**3]  Medal insurance contracts that were issued to General Mills, although General Mills had considerable bargaining power with respect to the terms of the various policies.

This matter involves two insurance policies. The first policy, a Named Peril/Grain Stocks policy (named-peril policy), provided coverage for General Mills' grain storage facilities at Duluth and Superior, as well as other storage facilities. The second, the All Risk Property Policy (all-risk policy) covered all real and personal property of General Mills at named locations, but did not include the Duluth and Superior storage facilities. The limit of coverage for the named-peril policy was $ 65,576,000, and for the all-risk policy was $ 3,276,890,000.

In 1993-94, General Mills hired George Roggy, an independent contractor, to treat its grain stocks in Duluth and Superior with an FDA-approved pesticide, Reldan. Unbeknownst to General Mills, Roggy substituted the cheaper, but unapproved, pesticide Dursban. Although Reldan and Dursban are chemically almost identical, and although Dursban was approved for treatment of other foods, Dursban was not approved for use on oats. The FDA treats the presence of an unapproved chemical [**4]  as an illegal adulteration of food products, even if not dangerous for human consumption; the fact that Dursban was not approved for application on oats was sufficient to violate FDA regulations on adulteration of food products.

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622 N.W.2d 147 *; 2001 Minn. App. LEXIS 139 **

General Mills, Inc., a Delaware corporation, Respondent, vs. Gold Medal Insurance Company, Appellant.

Subsequent History:  [**1]  Petition for Further Review Denied April 17, 2001, Reported at: 2001 Minn. LEXIS 240.

Prior History: Hennepin County District Court. File No. 9611980.

Disposition: Affirmed.


coverage, district court, peril, oat, contamination, setoff, physical loss, ambiguous, adulterated, malicious, all-risk, products, insurer, stocks, regulations, actual malice, faulty, insurance contract, insured property, summary judgment, food product, consumption, tampering, policies, losses, malice

Civil Procedure, Appeals, Summary Judgment Review, General Overview, Summary Judgment, Entitlement as Matter of Law, Genuine Disputes, Materiality of Facts, Standards of Review, De Novo Review, Insurance Law, Claim, Contract & Practice Issues, Policy Interpretation, Judicial Review, Judgments, Question of Law, Entire Contract, Ordinary & Usual Meanings, Plain Language, Contracts Law, Defenses, Ambiguities & Mistakes, Ambiguous Terms, Construction Against Insurers, Contract Interpretation, Ambiguities & Contra Proferentem, Coverage Favored, Property Insurance, Coverage, All Risks, Fortuity Doctrine, Types of Insurance, Real Property Law, Environmental Regulations, Indoor Air & Water Quality, Obligations, Covered Losses