Pavlicek v. American Steel Systems, Inc., 970 N.W.2d 171

Background

In 2013 Pavlicek contracted construction of a steel building; JRC Construction installed the concrete floor and a floor drain; a different subcontractor installed in‑floor heating. Grinnell insured JRC under a commercial general liability (CGL) policy covering 7/30/2012–7/30/2013.
JRC’s concrete floor was defective; its repair attempts damaged the already‑installed floor drain and required replacement of work.
Pavlicek sued JRC; after a 2017 jury trial he recovered $217,244.55 for replacement of the concrete floor, drain, and in‑floor heating.
Pavlicek then sued Grinnell (supplemental complaint) seeking indemnity under JRC’s CGL policy. Parties waived a new trial and the district court relied on the 2017 trial record and policy interpretation.
The district court held the CGL policy covered the damaged floor drain and, because replacing the drain would necessitate removing the floor and would destroy the heating tubes, also covered replacement of the concrete floor and in‑floor heating; it ordered Grinnell to pay $214,045.55.
Grinnell appealed, arguing the policy excludes (1) damage to the insured’s own work and (2) the future/economic losses for replacing JRC’s defective floor and heating system.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether CGL covers repair/replacement of the floor drain	Pavlicek: Grinnell must indemnify because the drain damage was property damage from an occurrence and not excluded	Grinnell: Drain is JRC’s work and excluded by the Damage‑to‑Your‑Work exclusion	Court: Affirmed coverage for the drain — policy ambiguous as to completed work vs. your work; ambiguities construed for insured
Whether CGL covers replacement of the defective concrete floor	Pavlicek: Entire replacement is necessary to make him whole and thus covered	Grinnell: Floor damage is JRC’s faulty workmanship (insured’s own work) and not an occurrence — excluded	Court: Reversed coverage for the floor — floor damage was defective work, not a covered occurrence
Whether CGL covers replacement of in‑floor heating that will be destroyed when floor is replaced	Pavlicek: Heating will be destroyed by necessary drain repair and thus coverage attaches as property damage/occurrence	Grinnell: Heating was undamaged during policy period; future loss not an occurrence	Court: Reversed coverage for the heating system — no property damage occurred during the policy period, so no occurrence
Whether the district court’s judgment needed allocation of amounts for drain repair	Pavlicek: Judgment awards total replacement costs; Grinnell must pay under coverage rulings	Grinnell: Only drain costs are covered; district court must separate amounts	Court: Remanded for district court to determine the specific damages attributable to repair/replacement of the drain (insufficient itemized evidence in record)

Key Cases Cited

ACUITY v. Burd & Smith Constr., Inc., 721 N.W.2d 33 (N.D. 2006) (faulty workmanship that causes damage to property other than the insured’s work can be a covered occurrence under a CGL policy)
Fisher v. Am. Fam. Mut. Ins. Co., 579 N.W.2d 599 (N.D. 1998) (Damage‑to‑Your‑Work exclusion bars coverage for repairing insured’s defective work but not for damage the defective work causes to other property)
K & L Homes, Inc. v. Am. Fam. Mut. Ins. Co., 829 N.W.2d 724 (N.D. 2013) (interpret coverage provisions before exclusions; exclusions strictly construed)
Hart Constr. Co. v. Am. Fam. Mut. Ins. Co., 514 N.W.2d 384 (N.D. 1994) (endorsement provisions prevail over conflicting policy language)
Heitkamp v. Milbank Mut. Ins. Co., 383 N.W.2d 834 (N.D. 1986) (if one reasonable interpretation imposes liability and another does not, adopt interpretation favoring insured)
Grinnell Mut. Reinsurance Co. v. Thies, 755 N.W.2d 852 (N.D. 2008) (time of occurrence is when the claimant is actually damaged, not when the wrongful act occurred)
Friendship Homes, Inc. v. American States Ins. Cos., 450 N.W.2d 778 (N.D. 1990) (discusses timing of occurrence under liability policies)