949 F.3d 403
8th Cir.2020Background
- Owner terminated Miller Architects and Builders after construction defects surfaced at a luxury apartment project; arbitration followed seeking damages.
- Miller sought defense and indemnity from its commercial general liability insurer, Westfield; Westfield warned it would likely deny coverage and filed a federal declaratory-judgment action seeking to avoid defending or indemnifying Miller.
- The arbitration alleges a defectively installed roof leaked and damaged interior finishes and electrical work.
- District court held Westfield must defend Miller (final judgment on duty to defend) but stayed resolution of the duty to indemnify.
- On appeal, the question is whether Westfield has no duty to defend because exclusions unambiguously bar coverage.
- The roof was installed by a subcontractor, a fact relevant to exclusion (l)’s subcontractor exception.
Issues
| Issue | Plaintiff's Argument (Miller) | Defendant's Argument (Westfield) | Held |
|---|---|---|---|
| Whether insurer has a duty to defend | Arbitration claims (leaky roof damaging interiors) are "arguably within" policy coverage (property damage from an occurrence) | Exclusions remove coverage so no duty to defend | Duty to defend affirmed: claim is arguably within coverage; insurer must show claims clearly outside coverage to avoid defense |
| Whether exclusions (j)(5) & (j)(6) bar coverage because damage arises from contractor operations or requires repair of the same part | Damage to interior finishes/electrical is to a different "particular part" than the exterior roof, so exclusions don't clearly apply | Exclusions should be read broadly to cover the project part upon which Miller performed | Court rejects Westfield’s broad reading; "that particular part" means a segment of the whole, so exclusions not clearly applicable |
| Whether exclusion (l) (damage to Miller’s work) applies | Exclusion (l) does not apply here because the roof work was performed by a subcontractor (exclusion expressly does not apply if caused by a subcontractor) | Exclusion (l) could bar coverage for damage to the contractor's work | Court holds exclusion (l) does not clearly apply because subcontractor performed the roof |
| Standard of review and burdens | Arguable coverage by insured is sufficient at duty-to-defend stage; burden then shifts to insurer to prove exclusions clearly apply | Insurer contends claims fall outside coverage so no duty arises | Court applies Minnesota law: duty-to-defend standard met; review de novo and burden shifts to insurer, which failed to show exclusions clearly excluded coverage |
Key Cases Cited
- Jostens, Inc. v. Mission Ins. Co., 387 N.W.2d 161 (Minn. 1986) (establishes "arguably within" duty-to-defend standard and burden-shift to insurer)
- Remodeling Dimensions, Inc. v. Integrity Mut. Ins. Co., 819 N.W.2d 602 (Minn. 2012) (addresses scope and interpretation of contractor-work/property-part exclusions)
- Murray v. Greenwich Ins. Co., 533 F.3d 644 (8th Cir. 2008) (applies Minnesota duty-to-defend standard)
- RSUI Indem. Co. v. New Horizon Kids Quest, Inc., 933 F.3d 960 (8th Cir. 2019) (duty-to-defend issues reviewed de novo)
- Midwest Family Mut. Ins. Co. v. Wolters, 831 N.W.2d 628 (Minn. 2013) (policy terms given plain and ordinary meaning)
- Ohio Cas. Ins. Co. v. Terrace Enters., Inc., 260 N.W.2d 450 (Minn. 1977) (faulty construction can constitute an "occurrence" triggering coverage)