Hart Construction Co. v. American Family Mutual Insurance Co.

LEVINE, Justice,

dissenting.

In May 1981, Hart bought a comprehensive general liability policy. It provided coverage of $300,000 for bodily injury and $100,-000 for property damage. It provided no builders risk coverage or coverage for negligent construction. In September 1981, Hart contracted with Menards to construct farm buildings. Under that contract, Hart promised to maintain liability limits of one million dollars for bodily injury and one million dollars for property damage. Hart was not required to provide builders risk insurance. So Hart asked his insurance agent to provide the coverage required by the Hart-Menards contract. That is the genesis of the change endorsement we examine in this case.

On appeal, Hart argues that “[njowhere in that new policy ... is there any indication that endorsement ‘CL-425’ [excluding coverage for “faulty workmanship”] is applicable,” and that without that endorsement, the policy provided not only increased liability limits but also coverage for negligent construction. That is the extent of Hart’s argument; he cites no supporting authority and provides no analysis. Instead, he urges that “there is a fact question” about whether the CL-425 endorsement was intended to apply.

Insurance policies are to be interpreted as a whole to give effect to all of the provisions of the policy if possible. NDCC § 9-07-06; e.g., Haugen v. Auto-Owners Ins. Co., 191 N.W.2d 274, 280 (N.D.1971). Endorsements attached to an insurance contract are part of the contract and the endorsements and the policy must be construed together. National Indent. Co. v. Ness, 457 N.W.2d 755, 759 (Minn.Ct.App.1990); George J. Couch et al., 1 Cyclopedia of Insurance Law § 4:86, at 399 (2d ed. 1984). If there is a conflict between a provision in the insurance policy and the endorsement, the endorsement prevails. Haugen v. Auto-Owners, supra.

When we construe a policy in favor of the insured, that means we should construe the policy to cover, if possible, the risk obviously sought to be insured. See, e.g., Couch, supra, § 42:444-445. Here, Hart was to carry compensation and liability insurance and others were to carry builders risk insurance for loss resulting from collapse, including windstorm damage. Builders risk coverage generally extends to damage to the building being constructed by an external force rather than an inherent defect in the construction. Couch, supra, § 42:444-445.

There is no dispute here that the insurance policy excluded coverage for Hart’s negligence through the CL-425 endorsement. The question is whether the change endorsement, which increased the limits of liability, also superseded the CL-425 endorsement in the original policy because the change endorsement did not mention the CL-425 endorsement specifically. The majority says that the failure of that express mention creates a “conflict” between the change endorsement and the policy which makes the change endorsement prevail and thus provides coverage for faulty workmanship.

I disagree with that conclusion primarily because I see no conflict between the original policy and the change endorsement. The only way to create a conflict is by failing to give any meaning to the provision in the change endorsement that says, “All other terms, agreements, conditions and provisions remain unchanged.” That means that the change endorsement does not affect, alter, or have any impact on the CL-425 endorsement in the original policy. Clearly, the CL-425 endorsement is a “term, agreement, condition or provision.” That being the case, the change endorsement directs that the CL — 425 endorsement remained unchanged. The change endorsement did not abrogate the insurance policy. It only changed the provisions of the policy relating to the amount of *393the limits. That is what was requested and that is what was undertaken. If one reads the policy and the change endorsement together, keeping in mind the purpose of each, i.e., the intent, one sees that the effect of the change endorsement was to raise the liability limits of the policy to comport with the Hart-Menards contract. There is still no builders risk insurance, which is also in accord with Hart’s responsibilities under the Hart-Me-nards contract, and there is still no coverage for negligent construction.

The change endorsement does not change any part of the policy except the provisions which it specifically addresses. Couch, supra § 4:36. In finding a conflict between the terms attached to the change endorsement with the terms of the original policy, specifically the CL-425 endorsement, I believe the majority ignores the rule that directs us to give effect to all the provisions and to read the original policy and the endorsement together as a whole.

The majority seems to rely on the adage that the expression of one thing is the exclusion of the other. So because certain endorsements were specifically referred to in or attached to the change endorsement, only they apply. But that means that every change endorsement, no matter what its purpose, will have to recite every endorsement contained within a policy, if it recites any, notwithstanding an express direction that no other terms of the policy are affected by the change endorsement. It also overlooks the fact that the change endorsement included those forms referred to or attached because they were modified by the change endorsement or had been updated since the original policy was issued. The four forms referred to in or attached to the change endorsement are:

L6113A (7/81), which contains no substantive change in terms, but is an updated version of a form included in the policy;
L6120 (3/81), which modifies the language of the snowmobile exclusion contained in the policy;
L9300 (4/73), which adds an operation to the description of hazards in the policy;
L6432F (1/76), which lists descriptions of the operations included in the description of hazards.

The change endorsement did not include the CL-425, apparently because the CL-425 had not been updated since the original policy and was not modified by the change endorsement. The change endorsement did not include other forms contained in the policy because, as I believe is clear, they are plainly irrelevant to the purpose of the change endorsement. These forms are:

CL-413, which adds a definition of “loading or unloading” and immediately precedes the CL-425, and is similar in wording and format to the CL^425;
UCL-314, which gives notice to the insured to obtain certificates of insurance from subcontractors;
L9294 (1/73), which is the older version of the L6113A (7/81) form.

The CL^425 endorsement was not referred to in or attached to the change endorsement because it, too, was irrelevant and unaffected.

Under the majority’s view it matters not why the endorsements that were actually referred to in or attached to the change endorsement, were referred to or attached. Nor does it matter why others were omitted; apparently all that matters is that some were included and some were excluded. Ergo, conflict; ergo, coverage! It makes no sense to me.

I would affirm the summary judgment because without coverage, there is no duty to defend. Therefore, I dissent.