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The Phoenix Insurance Company v. Ed Boland Construction, Inc.

United States District Court, D. Montana, Great Falls Division

January 18, 2017

THE PHOENIX INSURANCE COMPANY, a Connecticut Corporation, Plaintiff,
v.
ED BOLAND CONSTRUCTION, INC., Defendant.

          ORDER

          BRIAN MORRIS, UNITED STATES DISTRICT COURT JUDGE

         INTRODUCTION

         Plaintiff The Phoenix Insurance Company (Phoenix) brought this declaratory judgment action for a determination of its rights and obligations under a Commercial General Liability (CGL) policy issued to Defendant Ed Boland Construction, Inc. (EBC). Phoenix seeks a ruling that it has no duty to defend EBC in the federal lawsuit entitled Northbank Civil & Marine, LLC v. Ed Boland Construction, Inc., CV 15-38-GF-BMM. Presently before the Court are the parties's cross-motions for summary judgment on whether Phoenix possesses a duty to defend EBC.

         United States Magistrate Judge John Johnston entered Findings and Recommendations in this matter on September 15, 2016. (Doc. 43). Judge Johnston concluded that Phoenix had no duty to defend or indemnify EBC with respect to the claims asserted by Northbank in Cause CV-15-38-GF-BMM. Judge Johnston recommended that Phoenix's Motion for Summary Judgment be granted, and that EBC's Motion for Summary Judgment be denied. (Doc. 43 at 22-23). EBC filed objections to Judge Johnston's Findings and Recommendations on September 29, 2016. (Doc. 44). Phoenix filed a response to EBC's objections on October 11, 2016. (Doc. 45).

         STANDARD OF REVIEW

         The Court reviews de novo findings and recommendations to which objections are made. 28 U.S.C. § 636(b)(1). No review is required of proposed findings and recommendations to which no objection is made. Thomas v. Arn, 474 U.S. 140, 149-152 (1986).

         BACKGROUND

         Northbank was the general contractor on a construction project with the Federal Highway Administration (FHA) in 2014. Northbank had contracted with the FHA to repair and reconstruct the Swiftcurrent Creek Spillway Bridge in Glacier National Park. EBC was a subcontractor on the project. EBC had contracted with Northbank to perform drilling and pile installation services. The subcontract imposed a requirement on EBC to perform its work under the general direction of Northbank and in accordance with the primary contract between Northbank and the FHA.

         EBC began its work on or about September 30, 2014. Difficulties with the drilling and pile installation arose shortly after work began. EBC informed Northbank on October 2, 2014, that it had encountered unforeseen conditions at the work site that hindered its performance. The unforeseen site conditions included oversized rip-rap, concrete, and timbers. The FHA informed Northbank on the same date that it had concerns over EBC's ability to complete the pile installation according to contract specifications. The FHA alleged that EBC had brought equipment for use on the project that differed from the equipment that it had represented that it would be using in its installation submittal to the FHA.

         Northbank issued EBC a three day notice to cure on October 7, 2014. The notice informed EBC that it had three days to gather the equipment that the FHA had requested be brought to the site or be declared in default under the terms of the subcontract.

         Northbank determined on about October 14, 2014, that EBC was unable to complete its subcontract according to project specifications. Northbank terminated EBC from the project. Northbank sought replacement contractors to complete EBC's drilling and pile installation work. The project was delayed while Northbank was hiring the replacement contractors. Some construction equipment incurred downtime during the construction delay period.

         Northbank filed the underlying action, Northbank Civil & Marine, LLC v. Ed Boland Construction, Inc., CV 15-38-GF-BMM, on May 6, 2015. Northbank asserted claims against EBC for breach of contract, negligence, and negligent misrepresentation. Northbank sought to recover from EBC: (1) the additional sums that it had paid the replacement contractors over and above the original amount it expected to pay EBC for the drilling and pile installation work (Doc. 23-3 at 5); and (2) certain expenses that Northbank had incurred during the construction delay period that were allegedly caused by EBC's failed performance. (Doc. 23-3 at 6-7); Doc. 12-7 at 2-3).

         The additional sums Northbank paid to replacement contractors included $8, 000 paid to subcontractor Bay Materials LLC (Bay Materials) to reimburse Bay Materials for an insurance deductible Bay Materials paid for the repair of a damaged excavator. (Doc. 12-7 at 4). The expenses Northbank incurred during the construction delay period included: rental of a hydraulic crane that sat idle during the construction delay period ($6, 500); rental of “earthwork/roadway” equipment that sat idle during the construction delay period ($10, 200); the use of two work trucks that sat idle during the construction delay period ($3, 780); and the rental of ground thawing equipment ($7, 788). (Doc. 12-7 at 2-3).

         EBC was insured unde Commercial General Liability Policy Number DT-CO-3595N220-PHX-14, issued by Phoenix, with a policy period of April 1, 2014 to April 1, 2015. EBC tendered Northbank's Complaint to Phoenix. Phoenix agreed to defend EBC under a reservation of rights. Phoenix filed the present declaratory judgment action on August 27, 2015. The underlying lawsuit (Cause CV 15-38-GF-BMM) has been resolved. The Court dismissed Cause CV 15-38-GF-BMM with prejudice on December 20, 2016, pursuant to a stipulation of the parties.

         MONTANA INSURANCE LAW

         1. Policy Interpretation

         The interpretation of insurance contracts generally presents a question of law for the Court. Modroo v. Nationwide Mut. Fire Ins. Co., 191 P.3d 389, ¶ 23 (Mont. 2008). The Court must examine the insurance contract as a whole. Id. Insurance contracts should be interpreted according to their usual, common sense meaning as viewed from the perspective of a reasonable consumer of insurance products. Park Place Apartments, L.L.C. v. Farmers Union Mut. Ins. Co., 247 P.3d 236, 239 (Mont. 2010). The Court must enforce clear and explicit terms as they are written. Allstate Ins. Co. v. Wagner-Ellsworth, 188 P.3d 1042, ¶ 16 (Mont. 2008). The burden rests on the insured to establish coverage under the general coverage provision. Travelers Cas. & Sur. Co. v. Ribi Immunochem Research, Inc., 108 P.3d 469, ¶ 29 (Mont. 2005). The burden rests on the insurer to establish the applicability of a coverage exclusion. Id. The insured has the burden to prove an exception to an exclusion. Id. at ¶ 30.

         2. Duty to Defend

         An insurer's duty to defend its insured arises when a complaint against the insured alleges facts which, if proven, would result in coverage under the policy at issue. Tidyman's Mgmt. Servs. v. Davis, 330 P.3d 1139 ¶ 22 (Mont. 2014). There is no duty to defend “if there is no coverage under the terms of the policy based on the facts contained in the complaint.” Steadele v. Colony Ins. Co., 260 P.3d 145, ¶ 25 (Mont. 2011). The insurer has no obligation to search for information outside of the complaint to determine whether coverage exists. Newman v. Scottsdale Ins. Co., 301 P.3d 348, ¶ 56 (Mont. 2013). An insurer may not ignore, however, information that it actually obtains. Id. When ...


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