Borsheim Builders Supply, Inc. v. Manger Insurance, Inc.
2018 ND 218
| N.D. | 2018Background
- Borsheim Crane Service (Borsheim) contracted with Whiting under a Master Service Contract (MSC) requiring Borsheim to defend/indemnify the “Whiting Group” (defined to include Whiting, CSI, subcontractors) and to obtain CGL insurance extending protection to the Whiting Group.
- Mid-Continent issued a CGL policy to Borsheim (policy period Apr 17, 2011–Apr 17, 2012) with a contractual-liability exclusion but an exception for an "insured contract" and an additional-insured endorsement for written insured contracts.
- In 2011, Borsheim employee David Stec was injured when a CSI-owned backhoe allegedly crushed his foot; Stec sued CSI (alleging Stec was Borsheim’s employee), and CSI’s answer blamed Borsheim in part.
- CSI and Whiting tendered defense/indemnity to Borsheim and Mid-Continent under the MSC and CGL policy; Mid-Continent denied coverage and defense.
- District court granted declaratory relief for Mid-Continent, concluding the contractual-liability exclusion applied, CSI and Whiting were not additional insureds, and Mid-Continent had no duty to defend or indemnify; Borsheim appealed.
- Supreme Court of North Dakota reversed: held the MSC qualified as an "insured contract" under the policy’s amended definition, CSI and Whiting were additional insureds, and Mid-Continent had a duty to defend and potentially indemnify.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MSC is an "insured contract" under policy §9(f) | MSC pertains to Borsheim’s business; Borsheim assumed tort liability for Whiting Group, and Borsheim in part caused injury | Workers’ comp immunity means Borsheim could not be liable, so MSC cannot trigger insured-contract exception | Held: MSC satisfies §9(f): pertains to business, assumes tort liability, and injury was caused in part by Borsheim => insured contract |
| Whether CSI and Whiting are additional insureds under endorsement | Additional-insured endorsement names any org the insured agreed by written "insured contract" to designate; MSC qualifies so CSI/Whiting are additional insureds | Insurer argued parties are not covered because contractual-liability exclusion applies and because insured not named in underlying suit | Held: CSI and Whiting are additional insureds under endorsement |
| Whether contractual-liability exclusion bars coverage for claims here | Exception for damages assumed in an insured contract applies; subparagraph (f) focuses on causing injury, not legal liability | Insurer argued exclusion applies due to contractual assumption and workers’ comp immunity eliminating liability | Held: Exclusion does not bar coverage as exception applies to insured contract; causing injury suffices under §9(f) |
| Whether Mid-Continent had a duty to defend in underlying Stec suit | Duty to defend exists because underlying complaint alleges facts that create possibility of coverage as to CSI/Borsheim/Whiting | Mid-Continent argued no duty because complaint names only CSI and statutory immunity/pleading prevents coverage | Held: Duty to defend existed—possibility of coverage based on pleadings and CSI’s answer blaming Borsheim; insurer’s denial was erroneous |
Key Cases Cited
- Forsman v. Blues, Brews & Bar-B-Ques, Inc., 903 N.W.2d 524 (N.D. 2017) (standards for summary judgment and insurance policy construction)
- K & L Homes, Inc. v. Am. Family Mut. Ins. Co., 829 N.W.2d 724 (N.D. 2013) (policy interpretation and insured-contract principles)
- Wisness v. Nodak Mut. Ins. Co., 806 N.W.2d 146 (N.D. 2011) (coverage before exclusions; exceptions cannot create initial coverage)
- Ramara, Inc. v. Westfield Ins. Co., 814 F.3d 660 (3d Cir. 2016) (insurer must interpret underlying complaint in light of workers’ compensation regime for duty-to-defend analysis)
- Capital City Real Estate, LLC v. Certain Underwriters at Lloyd’s London, 788 F.3d 375 (4th Cir. 2015) (distinguishing causation vs. legal liability under insured-contract language)
- Gilbane Bldg. Co. v. Admiral Ins. Co., 664 F.3d 589 (5th Cir. 2011) (discussion on insured-contract interpretation and causation vs. liability)