Submitted: October 17, 2018
Appeals from United States District Court for the District of
North Dakota - Fargo
Before
SMITH, Chief Judge, LOKEN and GRUENDER, Circuit Judges.
GRUENDER, CIRCUIT JUDGE.
Strata
Corporation appeals the district court's[1] order granting
summary judgment to its excess insurer Houston Casualty
Company and denying its cross-motion for summary judgment. We
affirm.
In July
2012, Strata employee Peter Faust fell to his death at a
Montana mine. While Montana's Workers' Compensation
Act generally provides the exclusive remedy for workplace
injuries, Mont. Code Ann. § 39-71-411, Faust's
estate brought suit alleging that Strata's intentional
failure to maintain a safe workplace triggered an exception
and gave it a cause of action against Strata, see
id. § 39-71-413.
Strata
had a Workers Compensation and Employers Liability Insurance
Policy from Liberty Mutual Insurance Company that included a
coverage limit of $500, 000 for each accident. The policy
excluded coverage for certain acts, including "[b]odily
injury intentionally caused or aggravated" by Strata.
The policy also included a Montana Intentional Injury
Exclusion Endorsement excluding coverage for "[b]odily
injury caused by [Strata's] intentional, malicious or
deliberate act, whether or not the act was intended to cause
injury to the employee injured, or whether or not [Strata]
had actual knowledge that an injury was certain to
occur." Strata also had a Commercial Excess Liability
Policy from Houston Casualty Company that provided up to $5
million in excess coverage over and above the underlying
Liberty Mutual policy limits. This excess policy
"followed form" with the underlying Liberty Mutual
policy. In particular, the Houston Casualty excess policy
provided that "[u]nder no circumstances will this
coverage be broader than" the Liberty Mutual policy, and
it stated that it was "subject to the same terms,
conditions, agreements, exclusions and definitions" as
the Liberty Mutual policy.
As the
primary insurer, Liberty Mutual defended Strata against the
Faust estate's lawsuit, subject to a reservation of
rights. Strata eventually settled the lawsuit with
Faust's estate, and Liberty Mutual contributed a portion
of the settlement in exchange for a release from Strata.
Houston Casualty refused to contribute anything toward the
settlement, forcing Strata to pay the remaining balance from
its own funds.
Houston
Casualty brought suit seeking a declaratory judgment that it
had no duty to defend or indemnify Strata and that it did not
breach its duty of good faith. Strata counterclaimed. On
cross-motions for summary judgment, the district court
concluded that North Dakota law applied, granted summary
judgment to Houston Casualty, and denied summary judgment for
Strata. Strata appealed the district court's order, and
Houston Casualty cross-appealed, maintaining that the
district court erred in finding that the settlement exhausted
the underlying policy limits.
We
review a district court's grant of summary judgment
de novo and may affirm on any ground supported by
the record. Moyle v. Anderson, 571 F.3d 814, 817
(8th Cir. 2009). Summary judgment is proper if "the
movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a
matter of law." Fed.R.Civ.P. 56(a). Applying this
standard, we conclude that the district court properly
granted summary judgment to Houston Casualty because the
excess insurance policy did not cover the Faust estate's
claims against Strata in the underlying lawsuit. Thus,
Houston Casualty had no duty to indemnify Strata, and it did
not breach its duty of good faith.
On
appeal, Strata points out that Houston Casualty's excess
policy does not expressly state that it is subject to
endorsements to Liberty Mutual's underlying
policy. Arguing that the policy must be construed strictly
against the insurer, Strata maintains that this omission
means that the Montana Intentional Acts Exclusion Endorsement
cannot limit the scope of coverage. Strata further contends
that this endorsement is ambiguous, even if it does apply,
and thus should not preclude coverage here. These arguments
are unavailing. The excess policy expressly states that it is
subject to exclusions in the underlying coverage. An
exclusion is no less an exclusion because it is incorporated
into the underlying policy through an endorsement. Under the
policy's plain language, in other words, coverage is
subject to the Montana Intentional Acts Exclusion
Endorsement.
Nor is
that provision ambiguous. To evade the exclusivity provision
of Montana's Workers' Compensation Act, Faust's
estate alleged that Strata's deliberate and intentional
acts caused his death. Those allegations necessarily brought
Faust's lawsuit within the Montana Intentional Acts
Exclusion Endorsement, which excludes coverage for
"[b]odily injury caused by [Strata's] intentional,
malicious or deliberate act, whether or not the act was
intended to cause injury to the employee injured, or whether
or not [Strata] had actual knowledge that an injury was
certain to occur." Indeed, this language is more
sweeping than the language in Section 413, which it tracks
and amplifies. See Mont. Code Ann. §
39-71-413(3) ("'[I]ntentional injury' means an
injury caused by an intentional and deliberate act that is
specifically and actually intended to cause injury to the
employee injured and there is actual knowledge that an injury
is certain to occur."). As a result, Houston Casualty
has no duty to indemnify Strata under the excess policy.
Furthermore,
because the excess policy does not provide coverage for
Faust's claims, Houston Casualty did not breach its duty
of good faith. Under North Dakota law, an "insurer has a
duty to act fairly and in good faith in dealing with its
insured, including a duty of fair dealing in paying claims,
providing defenses to claims, negotiating settlements, and
fulfilling all other contractual obligations."
Hartman v. Estate of Miller, 656 N.W.2d 676, 680
(N.D. 2003). An insurer acts in bad faith when it "acts
unreasonably in handling an insured's claim . . . by
failing to compensate an insured for a loss covered by a
policy, unless the insurer has a proper cause for refusing
payment." Id. at 681. For the reasons explained
above, Houston Casualty had a proper cause for refusing
payment because Strata's loss was not covered by its
excess insurance policy. Citing Montana and Ninth Circuit
cases, Strata argues that the reasonableness of Houston
Casualty's actions must be measured at the time its claim
first arose rather than with hindsight. But given the policy
language, it was clear from the time of the Faust
estate's original complaint that the excess policy did
not provide coverage.
Finally,
we may easily dispose of the remaining issues. First, Strata
argues that Houston Casualty breached its duty to defend in
the underlying lawsuit. But the duty to defend is not at
issue in this case because Strata's primary insurer,
Liberty Mutual, defended it during the litigation. Second,
Houston Casualty acknowledged at oral argument that its
cross-appeal would be ...