Coverage Analysis
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 (8th Circuit)


  "Where an intentional act results in injuries which are the natural and probable consequences of the act, the injuries as well as the act are intentional."  Hins v. Heer, 259 N.W.2d 38, 40 (N.D. 1977)(assault) and National Farmers Union Property & Cas. Co. v. Kovash, 452 N.W.2d 307 (N.D. 1990)(trespass claims held intentional).  

  Intent may be inferred as a matter of law in cases of sexual assault.  Northwest G.F. Mut. Ins. Co. v. Norgard, 518 N.W.2d 179 (N.D. 1994).

  In Nodak Mutual Ins. Co. v. Heim, 559 N.W.2d 846 (N.D. 1997) the North Dakota Supreme Court rejected an insured's attempt to obtain insurance coverage for his claimed sexual abuse of his minor nephews despite the fact that some of the claims against him were framed in terms of negligence, holding that the claims failed to allege an "occurrence," were subject to the intentional injury exclusion and should not be insurable for reasons of public policy.  Similarly, the court ruled in  Ohio Casualty Co.  v.  Clark,  583 N.W.2d 377 (N.D. 1998) that a homeowners carrier had properly refused to defend a wrongful death claim for which the insured had been convicted of manslaughter.  In such circumstances, the court ruled that the insured was collaterally estopped from contending that he had acted in self-defense so as to potentially avoid a liability insurance policy’s exclusion for “expected or intended” injuries.  The court left open the issue of whether injuries committed in “self defense” would otherwise have been covered.

  Insurers are barred by statute from insuring against "willful acts."  Civil Code §26.1-32-04 ("an insurer is not liable for a loss caused by a willful act of the insured, but the insurer is not exonerated by the negligence of the insured or of the insured's agents or others").


  An insurer may not pro-rate its payment of defense costs to reflect the portion of  the claims that exceed its policy limits.  Prince v.  Universal Underwriters Ins.  Co., 143 N.W. 2d 708 (N.D. 1966).  


  Unfair or deceptive consumer practices are proscribed by
N.D. Cent. Code § 51-15-01 (1989). Unfair claims handling by insurers is regulated under N.D. Cent. Code § 26.1-04-03(9) (1983). 

  A third party claimant cannot sue an insured for bad faith.   Dvorak v.  American Family Mutual Ins.  Co., 508 N.W.2d 329, 332 (N.D. 1993).  


  Held not to encompass claims for mental distress in McCroskey v. Cass County, 303 N.W.2d 330 (N.D. 1981)(false arrest); Rolette County v. Western Cas. & Surety Co., 452 F.Supp. 125 (D.N.D. 1978)(civil rights claims).


  The insurer must prove prejudice.  Finstad v. Steiger Tractor, Inc., 301 N.W.2d 392, 398 (N.D. 1981).


  Insured has initial burden of showing that its claim is within the scope of coverage. Kunze v. State Farm, 197 N.W.2d 685 (N.D. 1972).


  North Dakota adopted the LeFlar "most significant contacts" test for tort claims in Apollo Sprinkler Co. v. Fire Sprinkler Design, 382 N.W.2d 386 (N.D. 1986).  The Supreme Court subsequently applied this same test in Vigen Construction Co. v. Millers National Ins. Co., 436 N.W.2d 254 (1989), while reserving judgment as to whether it would be applied in all future contract cases.  In Vigen, the court found that Minnesota law should be applied since, even though the underlying accident had occurred in North Dakota, the policy had been negotiated and issued in Minnesota between Minnesota corporations.  See also Plante v. Columbia Paints, 494 N.W.2d 140 (N.D. 1992)(liability policy should be interpreted in accordance of state where policy was executed, rather than location of underlying accident giving rise to claim).

  More recent contract cases have largely merged this approach with a more traditional Restatement view.   As set forth in its original opinion in Issendorf v.  Olson, 194 N.W.2d 750, 756 (N.D. 1972), courts are to consider such “choice influencing” factors as predictability of results; maintenance of interstate and international order; simplification of the judicial task; advance of the forum’s governmental interests and application of the better rule of law.   See also Daley v.  American States Preferred Ins.  Co., 1998 WL 887729 (N.D. December 22, 1998)(North Dakota law should apply to a dispute involving UIM coverage for a car accident in Minnesota, as the claims involved North Dakota residents and related to an insurance policy issued in North Dakota).  


  Where a conflict of interest exists, the insurer may either retain independent counsel of its own choosing or should reimburse the insured for independent counsel of the insured's choosing.   Fetch v. Quam, 530 N.W.2d 337, 341 (N.D. 1995). 


  No pollution cases.  The cost of complying with an action seeking only a mandatory injunction was held not to seek "damages" in National Farmers Union Property & Cas. Co. v. Kovash, 452 N.W.2d 307 (N.D. 1990).


  An insurer was held obligated to pay its policyholder's attorneys fees for the cost of litigating a coverage suit commenced by the insurer, based upon the "supplemental payments" provision in a homeowner's policy.  In State Farm Fire & Cas. Co. v. Sigman, 508 N.W.2d 323 (N.D. 1993), the court found ambiguity in the policy's promise to pay "reasonable expenses an insured incurs at our request."  In any event, the court ruled that such relief was justified by the state DJ statute, which authorizes a trial court to grant "supplemental relief" where "necessary or proper."  


   --Claims Manuals

   --Drafting History

   --Other Policyholder Claims

   --Reinsurance Information



  A liability insurer's defense obligation is measured by the claim alleged against the insured.  Kyllo v. Northland Chemical Co., 209 N.W.2d 629, 634 (N.D. 1973).  In  National Farmers Union Property & Cas. Co. v. Kovash, 452 N.W.2d 307 (N.D. 1990)  the North Dakota Supreme Court refused to expand this obligation to also include facts that could be uncovered through a reasonable investigation, holding that an insurer cannot consider extrinsic facts.  See also Pennzoil Co. v. USF&G, 50 F.3d 580 (8th Cir. 1995)(no affirmative duty to investigate but insurer cannot ignore facts actually known to it).  However, in Ohio Casualty Co.  v.  Clark, 583 N.W.2d 377 (N.D. 1998), the court ruled that a homeowner’s carrier was not bound to defend a wrongful death claim, notwithstanding allegations that the insured had acted “carelessly and negligently,” in view of the fact that the insured had been found guilty of manslaughter.  Under such circumstances, the court ruled that it was appropriate to look to the actual facts.


  The North Dakota Supreme Court ruled in D.E.M. v. North Star Ins. Co., 555 N.W.2d 596 (N.D. 1996) that the failure of an insurer to state all of the grounds upon which it was denying coverage estopped it from asserting additional grounds later on.  In Northstar, a liability insurer that denied coverage on the basis of a sexual misconduct exclusion was held to be estopped to also assert the defense of late notice due to the resulting prejudice to the policyholder.  In any event, estoppel requires proof of prejudice.


  No cases.


  No cases.


  North Dakota does not allow coverage for punitive damages based upon intentional conduct of insured. N.D. Century Code Annot. Sec. 26.1-32-04 (1985).  See also Hins v. Heer, 259 N.W.2d 38 (N.D. 1977).  Coverage is, in any event, prohibited to the extent that an award is based upon a "willful act" of the insured.  Civil Code §26.1-32-04.    However, in a case where the policy was found to expressly provide coverage for such awards, the North Dakota Supreme Court ruled that the insurer was contractually required to pay the plaintiff's award but could sue its insured to seek reimbursement for the sums paid.  Continental Cas. Co. v. Kinsey, 499 N.W.2d 574 (N.D. 1993), appeal after remand, 513 N.W.2d 66.

  Under North Dakota law, punitive damage awards are limited to double the amount of compensatory damages.  MDCC 32-03.2-11(4).  However, the North Dakota Supreme Court has ruled that the statute shall only be given prospective effect.  Ingalls v. Paul Revere Life Ins. Group, 1997 WL 124247 (N.D. March 20, 1997).  


  The North Dakota Civil Code specifies that a court should interpret a policy to effect the mutual intention of the parties at the time of contracting.  Civil Code §9-07-03.  National Bank v. International Harvester, 421 N.W.2d 799 (N.D. 1988).  In interpreting a policy, the court should strive to give effect to every term.  Civil Code §9-07-06.  Where possible, intent should be derived from the instrument alone.  Civil Code §9-07-04.  Parole evidence may be relied on, however, in cases where the manifest intent of the parties at the time of contracting is other than what is expressed in their contract.  Aid Ins. Services v. Geiger, 294 N.W.2d 411, 414 (N.D. 1980)(no coverage where insured understood at time of contracting that policy did not apply, even though policy might otherwise be interpreted in favor of coverage).  Only as a rule of last resort should the rule of contra proferentum be invoked.  Civil Code §9-07-19.

  Under North Dakota law, an insurance policy must be construed as a whole.  “If the language is clear on its face, there is no room for construction.”  Decotau v. Nodak Mutual Insurance Company, 603 N.W.2d 906, 913 (N.D. 2000).

  The North Dakota Supreme Court endorsed the "reasonable expectations" doctrine in Mills v. Agrichemical Aviation, Inc., 250 N.W.2d 663 (N.D. 1977).  However, Mills continuing viability was placed in doubt by court's subsequent ruling in Walle Mutual Ins. Co. v. Sweeney, 419 N.W.2d 176 (N.D. 1988).  The court has since ruled in Continental Cas. Co. v. Kinsey, 499 N.W.2d 574 (N.D. 1993) that the doctrine should only be resorted to as an interpretive tool of last resort.  

  Language in an insurance policy stating that coverage was precluded for injury caused by any insured precluded coverage notwithstanding a severability of interest clause stating that the interests of each insured were to be considered separately.  Northwest G.F. Mutual Insurance Company v. Norgard, 518 N.W.2d 179, 183 (N.D. 1994).

  In the event of a conflict between the provisions of an insurance policy and an endorsement to the policy, the endorsement prevails.  Nodak Mutual Insurance Company v. Heim, 559 N.W.2d 846, 850 (N.D. 1997).


  No cases.


  North Dakota follows the general rule that coverage is triggered when the underlying claimant is actually injured.  Friendship Homes, Inc. v. American States Ins. Companies, 450 N.W.2d 778 (N.D. 1990)(fire resulting from negligent installation of fireplace triggered policy in effect at time of fire, not when negligent work was performed).  

  In Kief Farmers Cooperative Elevator Co. v. Farmland Mutual Ins. Co., 534 N.W.2d 28 (N.D. 1995), the North Dakota Supreme Court ruled that first-party coverage for damage to a grain operator's property was not limited to the policy year in which the damage was discovered, but rather triggered coverage under all policies in effect while the damage was continuing.

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