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Westfield Insurance Co. v. Miller Architects & Builders, Inc.

United States District Court, D. Minnesota

January 19, 2018

Westfield Insurance Company, Plaintiff,
v.
Miller Architects & Builders, Inc., Defendant.

          MEMORANDUM AND ORDER

          Paul A. Magnuson United States District Court Judge

         This matter is before the Court on the parties' cross-Motions for Summary Judgment or Partial Summary Judgment. For the following reasons, Plaintiff's Motion for Summary Judgment is denied and Defendant's Motion for Partial Summary Judgment is granted.

         BACKGROUND

         Defendant Miller Architects and Builders, Inc. (“Miller”), is a Minnesota-based design/build company. In 2013, a real-estate trust called IRET-Cardinal Point LLC (“IRET”) hired Miller to design and build a two-building luxury apartment complex in Grand Forks, North Dakota. IRET ultimately terminated Miller's role in the project, ostensibly because of faulty construction and poor design. IRET then commenced arbitration against Miller under the terms of the parties' contract. That arbitration is ongoing, and is still in its preliminary stages.

         In March 2015, Miller tendered IRET's allegations to its insurer, Plaintiff Westfield Insurance Company. Westfield determined that it had no duty to defend or indemnify Miller in the arbitration, and Westfield filed this lawsuit seeking a declaration to that effect. Westfield now seeks summary judgment on its duty to defend. Miller has cross-moved for partial summary judgment, contending that Westfield's breach of its duty to defend means that Miller is entitled to recover the attorney's fees it has thus far expended in the arbitration as well as the fees it has incurred in defending this coverage action.

         The parties focus their discussions on five broader categories of claimed damage, rather than each of the more than 65 separate damages claims IRET has preliminarily raised in the underlying arbitration. (Medeiros Aff. (Docket No. 31) Ex. 2.) Miller contends that all of these five categories fall within its insurance policies' coverage, and thus that the Court need look no further than the five categories to determine that Westfield has the duty to defend Miller in the arbitration. Westfield argues that none of these categories is covered and that Miller's failure to discuss the remaining items of damages constitutes a waiver of its claims regarding those remaining items. The waiver argument is specious and the Court will not address it further. The Court agrees with Miller that it can resolve the parties' dispute by examining these five categories of damages:

1. Water intrusion damage caused by Miller's subcontractor defectively installing the roof of one building, which caused electrical problems and damaged some of the finishes in the building.
2. Damage to concrete support beams caused by Miller's subcontractor drilling holes in those beams.
3. Damage to the parking ramp because the ramps themselves were constructed at an improperly steep angle with no transition strip.
4. Foundation problems allegedly caused by an unstable foundation.
5. Loss of use because of the delay necessary to correct the defective work.

         DISCUSSION

         An insurer's duty to defend is determined by comparing “the allegations in the complaint in the underlying action with the relevant language in the insurance policy.” Meadowbrook, Inc. v. Tower Ins. Co., 559 N.W.2d 411, 415 (Minn. 1997) (emphasis omitted). An insurer has a duty to defend all claims even if only one of the claims is “arguably” covered by its policy. Jostens, Inc. v. Mission Ins. Co., 387 N.W.2d 161, 165 (Minn. 1986) (quotation omitted). It is the insurer's burden to demonstrate that “each claim asserted in the lawsuit clearly falls outside the policy.” Murray v. Greenwich Ins. Co., 533 F.3d 644, 648 (8th Cir. 2008) (quoting Jostens, 387 N.W.2d at 165-66). And all “[d]oubts as to coverage must be resolved against the insurer issuing the policy in favor of coverage.” Id. (citation omitted).

         This case requires construction of perhaps the most oft-litigated provisions in standard Commercial General Liability (“CGL”) insurance policy[1] forms, the products-completed-operations-hazard provision and its interaction with the “your work” exclusion. These provisions appear to be drafted to intentionally obscure coverage decisions, and after more than 30 years of use, it is past time ...


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