Borsheim Builders Supply, Inc. v. Manger Ins., Inc.

• Citation: 917 N.W.2d 504
• Decision Date: 25 September 2018
• Docket Number: No. 20180082,20180082
• Parties: BORSHEIM BUILDERS SUPPLY, INC., d/b/a Borsheim Crane Service, Plaintiff and Appellant v. MANGER INSURANCE, INC., and Mid-Continent Casualty Company, Defendants and Appellees
• Court: United States State Supreme Court of North Dakota

917 N.W.2d 504

BORSHEIM BUILDERS SUPPLY, INC., d/b/a Borsheim Crane Service, Plaintiff and Appellant

v.MANGER INSURANCE, INC., and Mid-Continent Casualty Company, Defendants and Appellees

No. 20180082

Supreme Court of North Dakota.

Filed September 25, 2018

Christian A. Preus, Minneapolis, MN, for plaintiff and appellant.

Tyler J. Siewert, Bismarck, ND, for defendants and appellees.

McEvers, Justice.

[¶ 1] Borsheim Builders Supply, Inc., doing business as Borsheim Crane Service, ("Borsheim") appeals from a declaratory judgment granting summary judgment to Mid-Continent Casualty Company and dismissing Borsheim’s claims for coverage. We conclude the district court erred in concluding Construction Services, Inc. ("CSI"), and Whiting Oil and Gas Corporation ("Whiting") are not insureds entitled to defense and indemnity under the "additional insured" endorsement in the commercial general liability ("CGL") policy Mid-Continent issued to Borsheim. We further conclude the court erred in holding Mid-Continent has no duty to defend or indemnify Borsheim, CSI, and Whiting under the CGL policy for the underlying bodily injury lawsuit. We reverse and remand.

I

[¶ 2] In May 2005, Whiting and Borsheim entered into a master service contract ("MSC"). In the MSC, Borsheim, as the "contractor," agreed to defend, indemnify, and hold harmless the Whiting Group, intending to extend Borsheim’s indemnity obligation to CSI, one of Whiting’s subcontractors, selected and assigned to work with Borsheim. Section 12 of the MSC states, in part:

12. Indemnities .

a. Contractor hereby agrees to release, defend, indemnify and hold the "Whiting Group" harmless from and against any and all loss, cost, damage or expense of every kind and nature ... arising out of bodily injury ... to the Contractor Group, ... WHETHER OR NOT RESULTING IN WHOLE OR IN PART FROM THE SOLE, CONCURRENT, OR COMPARATIVE NEGLIGENCE, OR STRICT LIABILITY OF THE Whiting GROUP.

Section 2(l) of the MSC defines the "Whiting Group" as "Whiting, its Affiliates, co-owners at the Site, joint venturers, partners, contractors and subcontractors and all of their respective directors, officers, employees, representatives and agents."

[¶ 3] Section 13 of the MSC requires Borsheim to "secure and maintain" insurance coverage during the term of the MSC and to "furnish certificates of such insurance satisfactory to Whiting before commencing the Work." The required insurance under this section includes "Comprehensive General Liability Insurance INCLUDING CONTRACTUAL LIABILITY" and "SHALL EXTEND TO AND PROTECT THE Whiting GROUP TO THE FULL EXTENT AND AMOUNT OF SUCH COVERAGE." This section also states, "Contractor’s insurance carrier(s) will provide Whiting, as evidence that the required insurance coverage has been obtained, with a certificate of insurance reflecting the amount of any deductibles."

[¶ 4] In 2000, Mid-Continent issued a CGL insurance policy to Borsheim, which was renewed each year for an annual term for the following ten years. Mid-Continent provided the CGL policy at issue for the policy period April 17, 2011, to April 17, 2012. While the CGL policy contains an exclusion for "contractual liability," the policy also contains an exception to the exclusion for an "insured contract." The term "insured contract" is defined in the CGL coverage form and is amended by the "amendment of insured contract definition" endorsement. The policy also includes an "additional insured—owners, lessees or contractors—scheduled person or organization" endorsement. Certificates of liability insurance were issued separately to Whiting and to CSI.

[¶ 5] In 2011, David Stec, Borsheim’s employee, was injured while working on Whiting’s oil rig site when a backhoe, owned by CSI and operated by its employee, released a beam and crushed his foot. Stec and his wife subsequently commenced a negligence action against CSI. In 2013, an attorney retained to defend CSI and Whiting against Stec’s underlying liability claim tendered a demand for indemnity and defense to Borsheim under the MSC and to Mid-Continent under the CGL policy. Mid-Continent denied coverage. In 2014, Borsheim sued Mid-Continent for breach of contract after Mid-Continent failed to provide a defense or indemnity coverage under its CGL policy for the underlying bodily injury lawsuit. Mid-Continent answered the lawsuit and filed a counterclaim for declaratory judgment. In 2015, Borsheim moved for summary judgment. Mid-Continent opposed the motion and filed its own summary judgment motion.

[¶ 6] In March 2016, the district court entered an order for declaratory judgment concluding Borsheim is statutorily immune from liability under North Dakota’s workers compensation act; the CGL policy’s contractual liability exclusion applies to preclude coverage because of this immunity; CSI and Whiting are not additional insureds under the CGL policy; Mid-Continent did not breach its duty to defend; and summary judgment was inappropriate and therefore denied. In December 2017, the court entered a declaratory judgment dismissing all claims against Mid-Continent with prejudice.

II

[¶ 7] Our standard for reviewing summary judgment is well established:

Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. In determining whether summary judgment was appropriately granted, we must view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the record. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Whether the district court properly granted summary judgment is a question of law which we review de novo on the entire record.

Forsman v. Blues, Brews & Bar-B-Ques, Inc. , 2017 ND 266, ¶ 9, 903 N.W.2d 524 (quoting K & L Homes, Inc. v. Am. Family Mut. Ins. Co. , 2013 ND 57, ¶ 7, 829 N.W.2d 724 ) ).

[¶ 8] "Insurance policy interpretation is a question of law, which is fully reviewable on appeal."

Forsman , 2017 ND 266, ¶ 10, 903 N.W.2d 524. This Court independently examines and construes the insurance contract on appeal to decide whether coverage exists. K & L Homes , 2013 ND 57, ¶ 8, 829 N.W.2d 724. This Court construes policy language to give effect to the parties’ mutual intention at the time of contracting:

We look first to the language of the insurance contract, and if the policy language is clear on its face, there is no room for construction. If coverage hinges on an undefined term, we apply the plain, ordinary meaning of the term in interpreting the contract. While we regard insurance policies as adhesion contracts and resolve ambiguities in favor of the insured, we will not rewrite a contract to impose liability on an insurer if the policy unambiguously precludes coverage. We will not strain the definition of an undefined term to provide coverage for the insured. We construe insurance contracts as a whole to give meaning and effect to each clause, if possible. The whole of a contract is to be taken together to give effect to every part, and each clause is to help interpret the others.

Forsman , at ¶ 10 (quoting K & L Homes , at ¶ 8 ). "Exclusions from coverage ... must be clear and explicit and are strictly construed against the insurer." Schleuter v. N. Plains Ins. Co., Inc. , 2009 ND 171, ¶ 8, 772 N.W.2d 879 (quoting Nationwide Mut. Ins. Cos. v. Lagodinski , 2004 ND 147, ¶ 9, 683 N.W.2d 903 ). "While exclusionary clauses are strictly construed, a contract will not be rewritten to impose liability when the policy unambiguously precludes coverage." Forsman , at ¶ 10 ; see also K & L Homes , at ¶ 8 ; Schleuter , at ¶ 8.

[¶ 9] In interpreting an insurance policy, this Court first examines its coverages before examining its exclusions. Forsman , 2017 ND 266, ¶ 11, 903 N.W.2d 524 ; K & L Homes , 2013 ND 57, ¶ 9, 829 N.W.2d 724. "If and only if a coverage provision applies to the harm at issue will the court then examine the policy’s exclusions and limitations of coverage." Wisness v. Nodak Mut. Ins. Co. , 2011 ND 197, ¶ 16, 806 N.W.2d 146 (quoting 1 Robert D. Goodman, John C. Dockery & Matthew S. Hackell, New Appleman Law of Liab. Ins. § 1.04[1] (2d ed. 2011) (citations omitted) ). "An exclusionary provision, or the absence of one, cannot be read to provide coverage that does not otherwise exist." Id. "Similarly, while an exception to an exclusion results in coverage, ‘an exception to an exclusion is incapable of initially providing coverage; rather, an exception may become applicable if, and only if, there is an initial grant of coverage under the policy and the relevant exclusion containing the exception operates to preclude coverage.’ " Forsman , at ¶ 11 (quoting K & L Homes , at ¶ 9 (citations omitted) ).

[¶ 10] "It is axiomatic that the burden of proof rests upon the party claiming coverage under an insurance policy." Forsman , 2017 ND 266, ¶ 11, 903 N.W.2d 524 (quoting Grzadzielewski v. Walsh Cty. Mut. Ins. Co. , 297 N.W.2d 780, 784 (N.D. 1980) ). "While the insured bears the initial burden of demonstrating coverage, the insurer carries the burden of establishing the applicability of exclusions." Forsman , at ¶ 11 (quoting Travelers Indem. Co. v. Bloomington Steel & Supply Co. , 718 N.W.2d 888, 894 (Minn. 2006) ).

III

[¶ 11] The language of the CGL policy that Mid-Continent issued to Borsheim for the relevant period provides in part:

SECTION I—COVERAGES

COVERAGE A BODILY INJURY AND PROPERTY DAMAGE

...