915 F.3d 549
8th Cir.2019Background
- In July 2012, Strata employee Peter Faust died in a workplace fall; Faust’s estate sued Strata alleging intentional failure to maintain a safe workplace under Mont. Code Ann. § 39-71-413 (an intentional-injury exception to workers’ compensation exclusivity).
- Strata had primary Workers’ Compensation and Employers Liability coverage from Liberty Mutual ($500,000 per accident) that included a Montana Intentional Injury Exclusion Endorsement and an exclusion for bodily injury intentionally caused or aggravated by the employer.
- Strata also had a $5 million Commercial Excess Liability policy from Houston Casualty that “followed form” to the Liberty Mutual policy and stated it would not be broader than the underlying policy and was subject to the same terms, conditions, exclusions, and definitions.
- Liberty Mutual defended Strata under a reservation of rights and contributed to a settlement; Houston Casualty refused to contribute, so Strata paid the remainder and sought recovery.
- Houston Casualty sued for declaratory relief denying any duty to defend or indemnify; the district court granted summary judgment to Houston Casualty applying North Dakota law. Strata appealed; the Eighth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the excess policy is subject to the underlying Montana Intentional Injury Exclusion | Strata: excess policy does not expressly incorporate underlying endorsements; ambiguous language should be construed against insurer, so exclusion shouldn’t apply | Houston: excess policy expressly “followed form” and is subject to same terms/exclusions as Liberty Mutual, so the Montana exclusion applies | Held: Exclusion incorporated by plain language; excess coverage is subject to the Montana Intentional Injury Exclusion |
| Whether the Montana Intentional Injury Exclusion is ambiguous | Strata: endorsement is ambiguous and should not bar coverage | Houston: endorsement language is clear and broader than statutory definition of intentional injury | Held: Not ambiguous; endorsement clearly excludes coverage for alleged intentional acts and thus bars coverage |
| Whether Houston Casualty had a duty of good faith in refusing payment | Strata: insurer acted unreasonably; reasonableness measured at time claim arose | Houston: no bad faith because policy provided no coverage from the outset | Held: No bad faith—refusal was reasonable because excess policy did not cover the claims |
| Duty to defend or exhaustion of underlying limits | Strata: argues breach of duty to defend and that settlement exhausted underlying limits | Houston: Liberty Mutual defended; duty to defend not at issue; excess policy not triggered | Held: Duty to defend not implicated (primary insurer defended); exhaustion issue rendered moot by affirmance; cross-appeal dismissed as moot |
Key Cases Cited
- Moyle v. Anderson, 571 F.3d 814 (8th Cir. 2009) (standard of review for summary judgment)
- Hartman v. Estate of Miller, 656 N.W.2d 676 (N.D. 2003) (North Dakota law on insurer’s duty of good faith)