Harleysville Insurance Company v. Physical Distribution Services, 716 F.3d 451

This diversity jurisdiction case analyzes Minnesota-law interpretation of two contract provisions: an indemnification clause in a 1989 PDSI–Miller agreement and an insurance contract provision extending coverage to PDSI’s indemnification of third parties for tort liability.
Hughes, a PDSI employee leased to Miller, was injured at a Miller facility in West Virginia on September 6, 2007, while performing resin-cleaning work.
PDSI directed Hughes’s daily activities in part, with Chapman (PDSI lead man) instructing Hughes to perform the task that led to the injury, though Miller supervision also overlapped on site.
Hughes sued Miller for negligence; Miller tendered defense/indemnity to Harleysville; Harleysville initially denied coverage under its Harleysville general liability policy to cover Miller’s settlement-related costs.
Miller reached a $300,000 settlement with Hughes, and Miller sought indemnification from PDSI, with Harleysville asked to reimburse Miller’s settlement plus legal fees ($404,337 total).
The district court entered judgment requiring PDSI to indemnify Miller for the settlement and Harleysville to cover the $300,000 settlement plus $104,337 in fees; Harleysville appealed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Indemnification enforceability for Miller’s negligence	PDSI argues the clause is clear and unequivocal.	Harleysville contends Yang requires reversal of enforceability.	Indemnity is enforceable under Minnesota law.
Insurance causation interpretation for coverage of Miller’s settlement	Policy covers if Hughes’s injuries were caused, in part, by PDSI or those acting for PDSI.	Causation requires a more restrictive direct/proximate causation standard under Bolduc.	Harleysville must cover Miller’s settlement under the insured-contract provision.

Farmington Plumbing & Heating Co. v. Fischer Sand and Aggregate, Inc., 281 N.W.2d 838 (Minn. 1979) (strictly construes indemnification for indemnitee’s own negligence)
National Hydro Systems v. M.A. Mortenson Co., 529 N.W.2d 690 (Minn. 1995) (indemnification must be clear and unequivocal)
Yang v. Voyagaire Houseboats, Inc., 701 N.W.2d 783 (Minn. 2005) (indemnity language must be clear and unequivocal; public policy considerations)
Eng’g & Constr. Innovations, Inc. v. L.H. Bolduc Co., 825 N.W.2d 695 (Minn. 2013) (Bolduc framework; interpretation of insured contracts and exclusions)
Bolduc v. Bolduc Constr. Co., 825 N.W.2d 701 (Minn. 2013) (addressed coverage limitations for indemnified liability; vicarious vs. direct liability distinctions)
Westchester Fire Ins. Co. v. Wallerich, 563 F.3d 707 (8th Cir. 2009) (read policy as a whole; context and common sense guide interpretation)
United Fire & Cas. Ins. Co. v. Garvey, 328 F.3d 411 (8th Cir. 2003) (predict Minnesota Supreme Court’s law when unsettled by state courts)
Cement, Sand & Gravel Co. v. Agric. Ins. Co. of Watertown, N.Y., 30 N.W.2d 345 (Minn. 1947) (policy as a whole supports interpretation)