Employers Mutual Casualty Company v. Brant Lake Sanitary District et al
Filing
66
OPINION AND ORDER on 42 and 46 Motions for Summary Judgment. Signed by Chief Judge Roberto A. Lange on 3/17/2020. (CLR)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
EMPLOYERS MUTUAL CASUALTY
4:18-CV-04029-RAL
COMPANY,
Plaintiff,
OPINION AND ORDER ON MOTIONS
FOR SUMMARY JUDGMENT
vs.
BRANT LAKE SANITARY DISTRICT, A
POLITICAL SUBDIVISION OF THE STATE
OF SOUTH DAKOTA; and EXCEL
UNDERGROUND,INC.,
Defendants.
Defendant Excel Underground, Inc.(Excel) obtained a $1,569,691.81 jury verdict against
Defendant Brant Lake Sanitary District (Brant Lake) in state court. After the jury verdict. Brant
Lake's insurer. Plaintiff Employers Mutual Casualty Company(EMCC), filed this case seeking a
declaratory judgment that it has no duty to pay for Brant Lake's appeal of the verdict or to
indemnify Brant Lake for any damages Brant Lake owed Excel. Doc. 1. Excel and Brant Lake
both eounterclaimed against EMCC. Docs. 9, 35. EMCC moved for judgment on the pleadings.
Doc. 15, which this Court granted in part and denied in part. Doc. 39. EMCC and Brant Lake
now have filed cross-motions for summary judgment to submit for decision the lone remaining
issue of coverage for the portion of the jmy verdict awarding $800,000 for Excel's lost profits.
Docs. 42,46.
I.
Facts Not Subject to Genuine Dispute
This case concerns coverage under a Linebacker Public Officials and Employment
Practices Liability Policy(the Policy)issued by EMCC to its insured Brant Lake. Brant Lake and
Excel contend that the Policy covers at least a portion of a jury award that Excel received against
Brant Lake.
On May 30,2012, Brant Lake contracted with Excel to build a wastewater system for Brant
Lake and its residents.
The wastewater system project aimed to replace septic tanks of
approximately 220 homes around Brant Lake by connecting each home by pipelines and grinder
stations to a sewage treatment lagoon. Doc. 44 at ^ 6; Doc. 55 at 6. The contract between Brant
Lake and Excel incorporated a performance bond issued by Granite Re, Inc.(Granite Re), which
the contract required Excel to obtain. Doc. 44 at ^ 4; Doc. 48 at^ 2; Doc. 55 at ]f 4; Doc. 59 at ^ 2;
Doc.62 at ^ 2.
A series ofdisputes developed between Brant Lake and Excel over work on the wastewater
system project. Doc. 44 at
7-18. Brant Lake retained monies from Excel and in January of
2014 terminated the contract while a portion ofthe wastewater project remained incomplete. Doc.
48 at 13;Doc. 59 at ]f 3; Doc. 62 at 13. Brant Lake's attorney at the direction of Brant Lake sent
the January 20, 2014 termination letter not only to Excel, but also to Granite Re. Doc. 44 at 21;
Doc. 55 at 21. Brant Lake also made a claim on the performance bond issued by Granite Re.
Doc. 48 at ]|4; Doc. 59 at ^ 4; Doc. 62 at 4.
Brant Lake then sued Excel and Granite Re. Doc.44 at^ 1; Doc. 55 at 1. Excel separately
sued Brant Lake alleging two claims, one seeking a declaratory judgment and the other claiming
breach of contract against Brant Lake. Doc. 1-1 at 7-8; Doc. 44 at ^ 2; Doc. 48 at ^ 5; Doc. 55 at
2; Doc. 59 at Tf 5; Doc. 62 at t 5. The cases were consolidated for trial in state court in Lake
County, South Dakota. EMCC provided defense counsel for Brant Lake to defend against Exeel's
claims, and Brant Lake's own counsel pressed Brant Lake's breach ofcontract claim against Excel.
The jury found in favor of Excel and against Brant Lake, awarding Excel a total of
$1,569,691.81 in damages in three categories: $285,921.81 for "retainage;" $483,770 for "other
payments under the contract;" and $800,000 for "lost profits." Doc.44 at^ 3; Doc.55 at^ 3. This
Court in its Opinion and Order Granting in Part Motion for Judgment on the Pleadings, Doc. 39,
ruled that the $285,921.81 awarded for amounts Brant Lake had retained from paying Excel and
the $483,770 award for additional monies owed to Excel under the contract were excluded from
coverage under Section I.5.d.(l) of the Policy excluding "[ajmounts actually or allegedly due
under the terms of a contract." Doc. 1-5 at 2—3; see Doc. 39 at 12—13. This Court chose not to
grant EMCC's motion for judgment on the pleadings regarding the $800,000 lost profits award
because the "pleadings and the exhibits attached thereto do not provide enough mformation ... to
defmitively rule that subsection (2) of the Contractual Liability Exclusion excludes coverage for
the lost profits jury award." Doc. 39 at 14. The parties now have filed material from the state
court case and trial thereofregarding Exeel's claim and jury award for $800,000 oflost profits.
Brant Lake and Excel tried the case before a jury over nine days in January 2018. Doc. 1
at 113; Doc. 9 at ^ 1; Doc. 35 at ^ 6; Doc. 1-4 at 4. Excel sought lost profits from the date Brant
Lake terminated the wastewater system contract through the date of trial. Doe. 44 at ^ 19; Doc.
55 at
19. Excel presented testimony at trial that Brant Lake's claim on the Granite Re
performance bond impaired Exeel's ability to secure bonds for other projects, which in turn caused
Excel to bid only small projects, to lose out on larger and more profitable projects, and thereby to
suffer lost profits. Doc. 26-1 at 4, 7—8, 12—16, 21—25; Doc. 26-2 at 6; Doc. 26-3 at 8; Doc. 26-4
at 2-3. Exeel's bonding agent testified that Brant Lake's termination ofExeel's contract and claim
on the Granite Re performance bond prompted a "push hold" by bonding companies on Excel
business pending resolution ofthe claim. Doc.44 at 123; Doc. 55 at^ 23. Excel then had to resort
to "quick bonds" without underwriting that carried smaller limits, and Excel had to use more than
one bonding company at a time to increase its bonding limits. Doe. 44 at ^ 23; Doc. 55 at ^ 23.
Excel's president testified that Excel consequently could not bid the same number and type of
public construction projects in the aftermath of Brant Lake's tenmnation ofthe contract and claim
on the Granite Re bond. Doc. 44 at f 24; Doc. 55 at T| 24. Based on testimony from Excel's
president about work Excel lost because of the limits on Excel's bonding ability in the aftermath
ofBrant Lake's bond claim, a certified public accountant hired as Excel's damages expert testified
that Excel's lost profits from 2014 to 2018 totaled $800,000. Doe. 44 at
26—27.
The trial judge instructed thejury on breach ofcontract but not on any other theories. Doc.
1-2. As relevant here. Instructions 16 and 17 explained the implied covenant of good faith and
fair dealing contained in all contracts under South Dakota law. Doc. 1-2 at 17—18. Instruction 19
set forth the parties' positions, stating that "Excel claims that Brant Lake breached the contract
and that Excel sustained damages as a result." Doc. 1-2 at 20. Next,Instruction 20 explained that
ifthe jury found for Excel, it would need to calculate damages for "Excel's retainage;" for "other
payments for work Excel did under the contract, and for work which Excel was prevented from
doing as a result ofBrant Lake Sanitary District's breach(es);" and for "Excel's lost profits." Doe.
1-2 at 21. Instruction 25 then addressed Excel's request for lost profits:
Loss of profits may be recovered if the evidence shows with
reasonable certainty both their occurrence and the extent thereof.
The burden is on Excel to prove it is reasonably certain that the
profits it claims would have been realized except for Brant Lake's
conduct, and that the profits can be ascertained and measured, from
evidence introduced, with reasonable certainty.
Doc. 1-2 at 26.
The trial court entered judgment based on the $1,569,691.81 jury verdict in Excel's favor
on February 20, 2018. Doe. 1-3. Brant Lake filed an appeal, which is currently pending before
the Supreme Court of South Dakota.^ Doc. 35 at ^ 8.
Several sections of the Policy are relevant to the remaining coverage issue regarding the
$800,000 lost profits award. The Policy in short covers a "Public Official's wrongful act" but
excludes coverage for "Contractual Liability." Section I.l. of the Policy describes the coverage
provided:
a. Public Officials Liability
We will pay for "defense expense(s)" and/or those sums that the
insured becomes legally obligated to pay as "damages" because of
a "public official's wrongful act" rendered in discharging duties on
behalf of the insured named in the Declarations.
Doc. 1-5 at 1. The Policy defines "damages" in relevant part as "those amounts that the insured
becomes legally obligated to pay for claims arising out of a 'wrongful act' to which this insurance
applies." Doc. 1-5 at 7. The Policy's definition of a "Public official's wrongful act" reads:
b. "Public official's wrongful act" shall mean any of the following:
(1) Actual or alleged errors;
(2) Misstatement or misleading statement;
(3) Act, omission, neglect, or breach of duty by an insured
in the discharge of "organizational" duties. "Public Officials
Wrongful Aet(s)" does not include an "employment wrongfiil act."
Doe. 1-5 at 8. Thus, there could be coverage for a jury award for Brant Lake's wrongful acts if
there is no applicable exclusion.
Section 1.5. of the Policy contains the exclusion for "Contractual Liability" (Contractual
Liability Exclusion):
/
5. Exclusions - Coverage A and Coverage B
'Nothing in this Opinion and Order is intended to make any factual fmdings affecting the appeal
to the Supreme Court of South Dakota or to address any ofthe issues on appeal in state court.
Each of the following exclusions is an absolute exclusion with no
duty to defend or pay"damages" unless otherwise indicated. Ifboth
an absolute exclusion and an exclusion with a duty to defend apply,
coverage for "defense expenses" is excluded and we have no duty
to defend.
This insurance does not apply to:
d. Contractual Liability
(1) Amounts actually or allegedly due under the terms of a contract;
(2) Failure, refusal, or inability of the insured to enter into, renew or
perform any contract or agreement. Exclusion 5.d. (2) applies to
Coverage
only; or
(3) The proeurement of goods and/or services,including,but not limited
to construction, architect, or engineering, contracts or agreements.
We will defend a claim under Exclusion S.d., but will have no
obligation to pay "damages".
Doe. 1-5 at 2-3.
This Court's Opinion and Order Granting in Part Motion for Judgment on the Pleadings,
Doc. 39, together with agreements between EMCC and Brant Lake concerning the handling ofthe
state court appeal, resolved many of the issues framed by EMCC's complaint and the
counterelaims of Brant Lake and Excel. EMCC and Brant Lake have filed eross-motions for
summary judgment on the lone remaining issue of coverage for the lost profits award, and all
parties agree that there remains no genuine issue of material fact on that issue.
II.
Discussion
A. Summary Judgment Standard
Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is proper
when "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). On summary judgment, the
evidence is "viewed in the light most favorable to the nonmoving party." True v. Nebraska. 612
^In the Policy, Coverage A extends to public officials liability and coverage, while Coverage B
covers employment practices liability. Brant Lake asserts a claim under Coverage A.
F.3d 676, 679 (8th Cir. 2010)(quoting Cordrv v. Vanderbilt Motg. & Fin., Inc., 445 F.3d 1106,
1109(8th Cir. 2006)). There is a genuine issue of material faet if a "reasonable jury[could] retum
a verdict for either party" on a particular issue. Mayer v. Countrywide Home Loans. 647 F.3d
789, 791 (8th Cir. 2011). A party opposing a properly made and supported motion for summary
judgment must cite to particular materials in the record supporting the assertion that a fact is
genuinely disputed. Fed. R. Civ. P. 56(c)(1); Gacek y. Owens & Minor Distrib.. Inc.. 666 F.3d
1142, 1145 (8th Cir. 2012). "Mere allegations, unsupported by specific facts or evidence beyond
the nonmoving party's own conclusions, are insufficient to withstand a motion for summary
judgment." Thomas v. Corwin,483 F.3d 516, 527(8th Cir. 2007). When there are cross motions
for summary judgment, each party's motion must be evaluated independently in accordance with
the standard weight of evidence accorded to the nonmoving party to determine if there is any
genuine issue of material faet. See Wermager v. Cormorant Two. Bd.. 716 F.2d 1211, 1214(8th
Cir. 1983); see also St. Luke's Methodist Hosp. v. Thompson, 182 F. Supp. 2d 765, 769 (N.D.
Iowa 2001).
B. South Dakota Law on Insurance Coverage Issues
The parties agree that South Dakota law governs in this action under diversity ofcitizenship
jurisdiction, 28 U.S.C. § 1332. Secura Ins, v. Horizon Plumbing, Inc.,670 F.3d 857,861 (8th Cir.
2012). Interpretation of an insurance pohey presents a question oflaw for the court. Swenson v.
State Farm Fire & Cas. Co.. 891 F. Supp. 2d 1101, 1107 (D.S.D. 2012). When determining
whether a policy provides coverage, courts in South Dakota read the contract as a whole and give
unambiguous language its plain and ordinary meaning. Culhane v. W. Nat'l Mut. Ins. Co., 704
N.W.2d 287,293(S.D. 2005); Pete Lien & Sons. Inc. v. First Am.Title Ins. Co.,478 N.W.2d 824,
827(S.D. 1991). Ifthe policy's language is "fairly susceptible to two constructions," an ambiguity
exists, and it will be construed against the insurer. Am.Family Mut. Ins. Co. v. Elliot, 523 N.W.2d
100, 102(S.D. 1994)(cleaned up). Nevertheless, courts will not create coverage by reading an
ambiguity into the plain language of a policy. CuUiane. 704 N.W.2d at 293. Instead, courts
"consider the policy according to the natural and obvious import ofthe language, without resorting
to subtle and forced construction for the purpose of either limiting or extendmg its operation." Id.
(cleaned up). South Dakota law provides that exclusions in an insurance policy are strictly
construed, and the insurer bears the burden ofshowing that the exclusion applies. Owners Ins. Co.
V. Tibke Constr.. Inc.. 901 N.W.2d 80, 83 (S.D. 2017); Novak v. State Farm Mut. Auto. Ins. Co.,
293 N.W.2d 452, 455 (S.D. 1980). EMCC can meet that burden by showing that Brant Lake's
claim for indemnity ''clearly falls outside of policy coverage." Owners Ins. Co., 901 N.W.2d at
83 (cleaned up).
C. Contractual Liability Exclusion
EMCC, bearing the burden imder South Dakota law to show an exclusion to coverage
applies,invokes Section I.5.d.(2) ofthe Policy to disclaim coverage for the lost profits award. That
policy provision states in relevant part:
This insurance does not apply to:
d. Contractual Liability
(2) Failure, refusal, or inability of the insured to enter into, renew or perform any
contract or agreement.
Doc. 1-5 at 2-3. EMCC's argument for application ofthis exclusion is straightforward. After all,
the Granite Re performance bond was part ofthe contract between Excel and Brant Lake, Excel's
claims were for breach of contract, and only breach of contract claims were submitted to the jury.
Brant Lake's termination ofits contract with Excel and claim on the performance bond (according
8
to what the jury found) was a breach of contract, the Policy excludes from coverage Brant Lake's
"[fjailure[or] refusal... to ... perform [thejcontract or agreement," so thejury award of$800,000
for Exeel's lost profits are part of excluded breach of contract damages. Doc. 47.
The arguments of Brant Lake and Excel against application of the exclusion in Section
I.5.d.(2) are more complex. Docs. 43,61,63. Brant Lake starts by noting that the language "does
not apply to" leading into the exclusionary clause requires a causal connection between the
damages and the breach of contract. Doc. 43, 61, 63. To support this commonsense proposition.
Brant Lake cites to St. Paul Fire & Marine Insurance Co. v. Thomas. 273 So. 2d 117,119-20(Fla.
Dist. Ct. App. 1973), and one of the rare eases involving such "does not apply to" language in a
policy, Papadell v. Harlevsville Mut. Cas. Co., 191 A.2d 274, 275 (Pa. 1963). Brant Lake then
notes the distinction between what it calls "performance" (or direct) damages from breach of
contract and "consequential" damages that do not directly and immediately flow from injurious
acts under South Dakota law. Brant Lake appropriately characterizes the jury's lost profits award
to Excel as consequential damages. See Stem Oil Co.. Inc. v. Brown.908 N.W.2d 144,152(S.D.
2018); Dakota Style Foods. Inc. v. SunOpta Grains & Foods. Inc., 329 F. Supp. 3d 794, 812
(D.S.D. 2018). Brant Lake compares such a lost profits recovery to a recovery in tort and notes
that those lost profits damages occurred after the contract's termination and thus were
unforeseeable. Brant Lake believes those characteristics ofthe lost profits award place it outside
the exclusion of Section I.5.d.(2). Docs. 43,61, 63. Brant Lake relies heavily on Mt. Hawlev Ins.
Co. V. Slav FrKTinperrnp. 335 F. Supp. 3d 874(W.D. Tex. 2018), which found a duty to defend
triggered in a construction case involving property damage even though a contract Uability
exclusion existed in the policy.^ Brant Lake ofeourse is appealing issues including the lost profits
damage award to the Supreme Court of South Dakota and makes no eoneession about the
proprietary ofthe award.
Brant Lake's argument aecurately states the differenee between direct and consequential
eontract damages under South Dakota law. The direct contract damages awarded to Excel were
for retainage and unpaid amounts, while the consequential damages award was the $800,000 of
lost profits. Brant Lake eharaeterizes the lost profit award as being akin to an award in tort, hut in
reality the trial court only submitted to the jury breach of contract claims and instructions on what
could be awarded as breaeh-of-contraet damages. Indeed, under South Dakota law, there is no
eause ofaction in tort for breaching a contract. Fisher Sand & Gravel Co. v. S.D. Dep't. ofTransp.,
558 N.W.2d 864,868(S.D. 1997). Based on the instruetions the jury received, Exeel's lost profits
must have been eonsequential damages flowing from (and eausally conneeted to) Brant Lake's
breaching of the eontract to be properly awarded by the jury. The lost profits award remains
damages from the breach of contract, including Brant Lake choosing to terminate the eontract and
make a claim on Exeel's performanee bond whieh was incorporated into the contraet. Seetion
I.5.d.(2) of the Policy is sufficiently broad when given its plain and ordinary meaning to exclude
"failure [or] refusal... of[Brant Lake] to . . . perform [the] contract or agreement." Under the
lead-m clause to the exclusion, EMCC would have "an absolute exclusion with no duty to ... pay
damages." Doc. 1-5 at 2-3. The Poliey in turn defines "damages" broadly as "those amounts that
the insured beeomes legally obligated to pay . . . ." Doc. 1-5 at 7. Nothing in the Policy's
Contractual Liability exclusionary language makes coverage turn on whether the damages are
^ The district court in Mt. Hawlev eventually reconsidered its decision and held that the contract
liability exclusion applied to the elaims in the imderlying suit and that the insurer therefore had no
duty to defend. Mt. Hawlev Ins. Co. v. Slav Eng'g. 390 F. Supp. 3d 794, 802(W.D. Tex. 2019).
10
consequential, incurred after the date of termination, or difficult to foresee at the time of
termination.
Excel's arguments for not applying the exclusionary provision of Section I.5.d.(2) are
somewhat different than those of Brant Lake. Exeel makes an argument that Section I.5.d.(2) is at
a minimum ambiguous such that the exelusion should be eonstrued against EMCC and in favor of
coverage. Doc. 58. Excel posits that the jury award for lost profits was (or at least could have
been) based on a finding of a breach of the duty of good faith and fair dealing inherent in any
contraet under South Dakota law. Indeed,the trial eourt instructed the jury on the law that a breach
of contract may be based on "evasion of the spirit of the eontract, abuse of power to determine
compliance, or interferenee with or failure to cooperate with the other parties' performance," hut
that a party remains entitled to enforce the terms that actually appear in the eontract. Doc. 1-2 at
18. Excel then cites to Weitzel v. Sioux Vallev Heart Partners, 714 N.W.2d 884(S.D. 2006)for
the principle that a "breaeh of contract is defined as 'a violation of a eontractual obligation, either
by failing to perform one's own promise or by interfering with another party's performance.'" Id.
at 894 (cleaned up)(quoting Black's Law Dictionary 182 (7th ed. 1999)). Excel argues that the
Policy exclusion is ambiguous because it does not explieitly exclude coverage for breach of an
implied covenant of good faith and fair dealing or for breach by interfering with another party's
performance.
Excel's argument, however, negleets that the exclusionary provision at issue extends to
"[fjailure [or] refusal of[Brant Lake] to . . . perform any contract or agreement." Doe. 1-5 at 3.
The implied covenant of good faith and fair dealing in South Dakota is part of any eontract,
including here the eontraet between Excel and Brant Lake and the Granite Re performance bond
made a part of the eontract. Schipnoreit v. Khan. 775 N.W.2d 503, 505 (S.D. 2009). Moreover,
11
Brant Lake's termination of that contract and claim on Excel's performance bond resulting in the
lost profits is as much "failing to perform one's own promise" as it is interfering with Excel's
performance, both of which constitute a breach of contract anyway. Si^ Weitzel. 714 N.W.2d at
894. Under a plain and ordinary interpretation, the exclusionary provision at issue is not
ambiguous simply because it fails to specifically mention an exclusion for interference with
another's performance or a claim under the implied covenant of good faith and fair dealing.
Excel has a slightly different argument than Brant Lake on coverage for lost profits as
consequential damages.
Excel properly reads Section I.5.d.(l)—excluding coverage for
"[ajmounts actually or allegedly due under the terms of a contract"—as excluding "direct" or
"performance" damages. Excel then argues that the failure of Section I.5.d.(2) to exclude
consequential damages creates an ambiguity. Although creative, this argument does not render
the exclusionary language ambiguous. Section L5.d.(2), in excluding from coverage "[f]ailure,
refusal or inability ofthe insured to enter into,renew or perform any contract or agreement," cannot
fairly be read to exclude only performance or direct damages. The exclusionary language of
Section I.5.d.(2) indeed does not hinge coverage on the type of damages a jury awards, but rather
on the nature ofthe claim.
Finally, Excel in briefing argued citing Citv of Fort Pierre v. United Fire & Casualty Co..
463 N.W.2d 845 (S.D. 1990), that "the context of the risks insured" militates for coverage. Doc.
58. In Citv of Fort Pierre, the Supreme Court of South Dakota held that an insurer had no duty to
defend under an errors and omissions policy when the insured city decided to intentionally ignore
federal permitting requirements in constructing a roadway in a wetland. Id at 848. Nothing in
Citv of Fort Pierre suggests that Brant Lake's decision to terminate Excel's contract and make a
12
claim on Excel's performance bond,and the resulting damages thejury found in breach ofcontract,
are covered under the EMCC poliey.
The only reported case that counsel for the parties or this Court located analyzing policy
language of this type was this Court's prior Opinion and Order in this case. Doc. 39. As far as
cases elose to the language ofthe exclusion, one federal district court equated '"failure to perform'
a eontract" in an insurance policy with breach of contract. Perdue Farms. Inc. v. Nat'l Union Fire
Tns. Co. of Pittsburgh, 197 F. Supp. 2d 370, 379 (D. Md. 2002). ("A breach of contract is by
definition the failure to perform the contraet. No case law supports a contrary conclusion."). The
exclusionary language at issue here—"[fjailure ... of the insured to . . . perform any contract or
agreement"—excludes coverage for breaeh ofcontract. All ofthe damages awarded to Excel were
for breach of contract, so the eoverage exclusion in Section I.5.d.(2) applies.
This conclusion squares with the very reeent decision ofthe United States Court ofAppeals
for the Eighth Circuit in Russell v. Libertv Insurance Underwriters. Inc.. No. 18-2984, 2020 WL
812910 (8th Cir. Feb. 19, 2020). In Russell the Eighth Circuit was applying Kansas law to
directors and officers coverage that exeluded from eoverage liability or defense eosts "based upon,
arising out of, or attributable to any aetual or alleged liability imder or breaeh of any contract or
agreement." Id at *4(cleaned up). The underlying suit stated claims of conversion and breach of
fiduciary duty arising out of a "broken promise to pay... life-insurance proceeds" to the plaintiff
in the underlying action. Id. at *4-5. The Eighth Circuit noted a Kansas Supreme Court case
stating,"where the insured's liability [is] premised upon a legal theory separate and distinct from
the liability excluded by the policy, the policy provide[s] coverage for that claim." Id at *5
(alterations in original) (quoting Marquis v. State Farm Fire & Cas. Co.. 961 P.2d 1213, 1222
13
(Kan. 1998)). The Eighth Circuit described the reasoning ofMarouis as "disfavor[ed]" and found
the exclusion of breach of contract coverage to apply because:
If Marquis applied to contract-breach exclusions, someone could intentionally
obtain die benefit of a breached contract and—depending on the plaintiffs legal
theory—force his insurer to carry the burden.
Id. at *5. Brant Lake clearly did not breach the Excel contract as a means ofobtaining the benefits
thereof while trying to force EMCC to carry the burden. However, the Russell case foreshadows
the Eighth Circuit's likely application ofEMCC's Contractual Liability Exclusion to the breach of
contract damage award to Excel and against Brdnt Lake.
III.
Conclusion and Order
In summary, Section I.5.d.(2) of the Policy contains a contractual liability exclusion that,
given a plain and ordinary meaning, excludes coverage for the breach of contract damages,
including the award of lost profits, that a jury awarded to Excel flowing fi-om Brant Lake's
termination ofits contract with Excel and demand on Excel's performance bond. The performance
bond was part of the contract, affer all, and the instructions to the jury submitted only contract
claims and damages for breach ofcontract. Therefore, it is hereby
ORDERED that Brant Lake's motion for summary judgment. Doc. 42, is denied. It is
further
ORDERED that EMCC's motion for summary judgment. Doc. 46,is granted.
DATED this IT**" day of March,2020.
BY THE COURT:
ROBERTO A. LANGE
CHIEF JUDGE
14
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?