                                     No. 95-3733



Transamerica Insurance                   *
Company,                                 *
                                         *
          Plaintiff-Appellee,            *
                                         *
         v.                              *
                                         *
International Broadcasting               *
Corporation; Island Fun                  *     Appeal from the United States
Corporation, doing business              *     District Court for the
as Fantasy Island,                       *     District of Minnesota.
                                         *
                    Defendants,          *
                                         *
Michael Murach,                          *
                                         *
         Defendant-Appellant,            *
                                         *
John Murach,                             *
                                         *
                        Defendant.       *



                           Submitted:     June 13, 1996

                            Filed:    September 9, 1996


Before BOWMAN     and     HEANEY,    Circuit     Judges,   and   BOGUE,1   District
     Judge.



HEANEY, Circuit Judge.

     Transamerica Insurance Company (Transamerica) brought a declaratory
judgment action seeking a determination that Michael Murach's accident
during a comedic diving performance was not covered by the insurance policy
of Transamerica's policy holder,




     1
      The Honorable Andrew W. Bogue, United States District Judge
for the District of South Dakota, sitting by designation.
the amusement park in which the accident occurred.   Holding that the policy
excluded coverage and that Murach was precluded from invoking principles
of waiver and estoppel, the United States District Court for Minnesota
granted summary judgment in favor of Transamerica.   We reverse and remand.


                                 BACKGROUND


     Michael Murach was employed by Maxwell Associates, Inc. (Maxwell) to
perform in a comedic diving show at amusement parks owned and operated by
Fantasy Island, an affiliate of International Broadcasting Corporation
(IBC).   This suit arises out of an accident described by Murach as follows:

     One June 23, 1990, Murach was performing in one of IBC's
     shows at Fantasy Island amusement park in Grand Island,
     New York. Murach was dressed in ordinary street clothes
     and was seated in the audience, another performer
     explained part of the performance to the audience.
     During this explanation, Murach began to heckle the
     performer and was called onto stage. He came out of the
     audience, still dressed in street clothes, and was
     invited to join the other performer on a 20 foot
     platform. As part of the comedic performance, he was to
     fall from the platform into a tank of water while still
     wearing his street clothes. As he was standing on the
     platform with the other performer, he fell from the
     platform, sustaining severe injuries which have rendered
     him a quadriplegic. He is now unable to move any part of
     his body below his neck.

(Murach's Mem. in Opp'n to Pl.'s Motion at 3.)


     In October 1990, Murach initiated suit against the Island of Bob-Lo
Company d/b/a Fantasy Island Amusement Parks.   IBC, as the parent company,
was later added as a defendant (hereinafter the defendants will be referred
to collectively as IBC).   Murach's suit alleged that his injury was caused
by IBC's failure to maintain the platform.    It also alleged a violation of
New York's Arts and Cultural Affairs Law which requires the sponsor of an
artistic or




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cultural event to provide performers with adequate safety equipment.


     IBC tendered its defense to its insurance carrier, Transamerica.    On
November 13, 1990, Transamerica's agent wrote Fantasy Island:

     Pursuant to this law suit and the terms of the policy
     with Transamerica Insurance Company, please be advised
     that Tom Liptak of Saperston & Day has been retained to
     represent Fantasy Island. Therefore, please see to it
     that Mr. Liptak receives the full cooperation of Fantasy
     Island in the defense of this law suit. Also, you will
     note that the plaintiff seeks $20,000,000 in damages in
     the complaint. Since the total liability limits of your
     policies with Transamerica Insurance Company, are
     $11,000,000, $1,000,000-Basic and $10,000,000-Excess,
     please be advised that any judgment in excess of
     $11,000,000 will be the responsibility of Fantasy Island.

(Appellant App. 12.)   Transamerica issued two insurance policies to IBC and
its affiliates, one primary and one excess.    The primary policy provided
that Transamerica would pay sums up to one million dollars that the insured
became legally obligated to pay because of bodily injury caused by an
"occurrence."   The policy also contained the following endorsement:

     With respect to any operations shown in the Schedule,
     this insurance does not apply to "bodily injury" to any
     person while practicing for or participating in any
     sports or athletic contest or exhibition that you
     sponsor.

(Appellee App. 29.)      The excess policy provided ten million dollars
coverage and a slightly different "sports participant" exclusion that
provided:

     The insurance does not apply to bodily injury, property
     damage, personal injury to any of your employees, or any
     person while practicing for or participating in any
     contest or exhibition of any athletic or sports nature
     sponsored, conducted, directed or participated in by you.




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(Id. at 75.)


     On August 30, 1991, IBC and its affiliates filed for bankruptcy
protection in the United States Bankruptcy Court for the District of
Minnesota.     Murach asserted his claims against the IBC estate.         IBC
objected to the claims:

     To the extent Debtor is ultimately determined       to be
     liable on the [Murach] personal injury claim . .    . such
     claim is covered by Debtor's insurance policy in    effect
     at the time of the alleged injury, except to the    extent
     of the applicable deductible amount.

(Appellant App. 42.)      In response to Murach's inquiries regarding the
extent of IBC's insurance coverage, the defense attorneys retained by
Transamerica on behalf of IBC wrote that "insurance coverage applicable to
the above-referenced incident exists in the amount of $1 million aggregate
with excess coverage in the amount of $10 million."    (Id. at 73.)   Murach
alleges that based on his belief that insurance coverage was available to
satisfy any judgment against IBC, he signed a stipulation on September 15,
1993, whereby he limited his claim against IBC's bankruptcy estate to the
amount of IBC's deductible on its insurance policy, $10,000.   (Id. at 92.)


     Pursuant to the contract between IBC and Maxwell, which provided that
Maxwell would defend and indemnify IBC for all claims arising out of the
Maxwell performances, the defense of the Murach suit was then tendered to
Maxwell's insurer, Utah Home Insurance (Utah).    Utah disclaimed coverage
and defense both because of late notice and because of a sports participant
endorsement.   After receiving Utah's response, Transamerica advised IBC on
October 15, 1993 that it would disclaim coverage for the Murach suit.


     On June 6, 1994, Transamerica commenced this action for      declaratory
judgment that the endorsements in questions excluded




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coverage of the accident.       The United States District Court for the



                                   ANALYSIS


        Summary judgment is appropriate only
of material fact and one party is entitled to judgment as a matter of law.
      Fed. R. Civ. P. 56(c).    We review the grant of summary judgment d
novo,                                                                       .
See Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 58
(1986).


A.


        Murach argues that the endorsements in question are ambiguous an
must be construed in his favor so as not to exclude coverage.          For th
reasons discussed in the district court's
that Murach's comedic diving routine falls within the common understanding
     the term "athletic exhibition" and thus, is excluded from coverage unde
the Transamerica policy.


B.


        In the alternative, Murach argues that Transamerica either waived its
                                                  ped from doing so.    Citing
the                  Shannon v. Great American Insurance Co.
(Minn. 1979), and its progeny, the




        2
      Continental                      , 400 N.W.2d 199 (Minn. Ct.
             Pedersen v. United Servs. Auto. Ass'n, 383 N.W.2d 427
        Ct. App. 1986); Malakowsky v. Johannsen                  6
(Minn. Ct. App. 1985);
Nat'l Mut. Ins. Co., 372 N.W.2d 763 (Minn. Ct. App.),      or rev.
denied                         Twin City Hide v. Transamerica Ins.
Co. 358 N.W.2d 90 (Minn. Ct. App. 1984);                         &
Casualty                  , 347 N.W.2d 848 (Minn. Ct. App.), pet
for rev. denied, (Minn. Dec. 20, 1984).

                                       5
district court held that the principle of estoppel cannot be used to expand
the scope of coverage available under an insurance policy.    Although this
represents the general rule under Minnesota law, the rule does not preclude
claims of estoppel against insurance companies in all instances.       See,
e.g., Anderson v. Minnesota Ins. Guar. Ass'n, 520 N.W.2d 155, 160-61 (Minn.
Ct. App. 1994) (holding that insurer may be estopped from asserting
coverage restriction clause).   In Northwest Airlines, Inc. v. Federal Ins.
Co., 32 F.3d 349 (8th Cir. 1994), another case cited by the district court,
this court examined the role of waiver within the context of insurance
coverage under Minnesota law.   While recognizing that "[i]n general, waiver
cannot be used to bring within the coverage of an insurance policy risks
not covered by its terms," we took note that an insurer might be estopped
where a party is prejudiced by its actions.3   See id. at 356 (citing Faber
v. Roelofs, 250 N.W.2d 817 (1977)); see generally Couch on Insurance 2d
(Rev. ed.) § 71:40 (1983) (hereinafter Couch) ("Equitable estoppel is
available, under appropriate circumstances, to bring within insurance
coverage risks or perils which are not provided for in the policy or which
are expressly excluded.").   Accordingly, the basis for our rejection of the
appellant's claim of waiver in Northwest was that the appellant did "not
argue that it was prejudiced or that the [appellee] controlled the []
litigation."   Id.   Each of the cases cited by the district court presented
occasions in which there was no prejudice to the party asserting estoppel.
See   Shannon, 276 N.W.2d at 78 (in face of unambiguous policy limit, oral
statements not reasonably relied on); Bergquist, 400 N.W.2d at 201-02
(policy date adequately pled); Pedersen, 383 N.W.2d at 430-31 (accidental
overpayment of




       3
       It is only when the general rule is considered within the
context of no prejudice to the claimant that this principal of law
can be reconciled with another principle of law considered by the
district court: an insurer who assumes the defense of the insured
without reservation is estopped from denying coverage, see
discussion infra.

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benefits); Malakowsky, 374 N.W.2d at 818 (no showing of prejudice wher
party against whom estoppel was asserted failed to raise exclusions early
   litigation);                                , 372 N.W.2d at 767-68 (no
               reliance where party seeking estoppel knew relevant facts)
Twin City Hide, 358 N.W.2d at 93 (alleged repres
after                                                       Rudzinski, 34
N.W.2d at                                                                 e
cases, Murach alleges two bases of prejudice: 1)
IBC's                                                                     a
representations                                                           y
stipulation.


                                                                     verage
because                                 IBC's defense without reserving its
rights,                                                       Mutual Serv.
                             , 474 N.W.2d 365 (Minn. Ct. App. 1991) (citing
                     , 232 N.W.2d 790 (Minn. 1930);
v. Liberty Mut. Ins. Co.         N.W.2d 564 (Minn. Ct. App. 1990), pet. for
             , (Minn. Mar. 15, 1991); Gamble-Skogm
Indem. Co., 64 N.W.2d
established                                                               d
parties, see        , 390 N.W.2d at 472, Murach argues that, as a result of
    bankruptcy action, he stands in the position of IBC and may assert
        interest in precluding Transamerica from denying coverage.   Citing
  nnesota law requiring a showing of prejudice by the insured,4           e
            court found that although the denial of coverage was tardy, IBC
                       establish the requisite prejudice because the action
had not proceeded to final judgment or settlement.    Accepting




        4
            t v. Millers Mut. Ins. Ass'n, 362 F.2d 619, 622 (8t
Cir.         St. Paul Sch. Dist. v. Columbia Trasit Corp., 32
N.W.2d 41, 47 (Minn. 1982).

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                                                      C's interest to Murach, we
affirm                                          respect to the prejudice to IBC
and therefore, focus on Murach's personal claims of prejudice.


            response to Murach's claim of prejudice arising out of th
representations made prior to his signing the bankruptcy stipulation, the
                                                      w precluding a stranger to
an         rance contract from asserting estoppel against an insurer.5      Thi
principl      is inapplicable to the present case.           Cf.               0
(discussing case law
not in                                                                         .
Alt          typically an injured third party will not be able to rely on
                        n insurer from denying coverage, this observation is
merely the result of
third party claims that he or
some             See Couch § 71:20.    The cases cited by the district court ar
distinguishable from the present case on this basis: each involved insurer
           that prejudiced              .   See Royal Ins. Co., 444 N.W.2d at 84
(allegation that insurer failed to provide
of termination to insured);           , 390 N.W.2d at 472 (insurer's defense of
insured as basis for estoppel only open to insured); Malakowsky                d
at 816 (insurer altered the basis upon which it denied coverage of
              Thus, third parties are not precluded from relying on principle
of                                                                             e
prejudiced in some way because of the insurer's acts.




       5
     The district court cited the following state court decisions:
Royal Ins. Co. v. Western Casualty Ins. Co., 444 N.W.2d 846, 848
(Minn. Ct. App. 1989); Quam v. Wulfekuhle, 390 N.W.2d 472, 474
(Minn. Ct. App.), pet. for rev. denied, (Minn. Sept. 24, 1986)
(citing Malakowsky v. Johannsen

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      Equitable estoppel may be asserted where (1) there has been a
misrepresentation of material fact, (2) the party to be estopped knew of
or should have known that the representation was false, (3) the party to
be estopped intended the representation to be acted upon, (4) the party
asserting equitable estoppel lacked the knowledge of the true facts, and
(5)   the   party     asserting     the   estoppel   did,    in   fact,   rely   upon   the
misrepresentation to his or her detriment.            See Transamerica Ins. Group v.
Paul, 267 N.W.2d 180, 183 (Minn. 1978).               The district court's order of
summary judgment rejected Murach's claim of equitable estoppel as a matter
of law; our decision today merely holds that Murach is not precluded from
asserting estoppel against Transamerica.             We do not decide whether he has
demonstrated the five elements of estoppel, an issue for a trier of fact.
Specifically, we do not pass judgment upon the relationship between
Transamerica and the attorneys it hired to defend IBC, whether Murach
reasonably     relied    on   the    answers    by   those   attorneys    regarding     the
applicability of the coverage, or whether Murach suffered any detriment by
signing the bankruptcy stipulation.            Therefore, we remand this case to the
district court for proceedings consistent with this opinion.


      A true copy.


            Attest:


                 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.




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