IN THE SUPREME COURT

STATE OF NORTH DAKOTA

2022 ND 35

Larry Pavlicek, Plaintiff and Appellee

v.

American Steel Systems, Inc., Gabriel 

Construction Services, LLC, Door Pro, Inc., 

Dickinson Ready-Mix, Co., and 

JRC Construction, LLC, Defendants 

and

Grinnell Mutual Reinsurance Company, Garnishee and Appellant

No. 20210116

Appeal from the District Court of Stark County, Southwest Judicial District, 

the Honorable William A. Herauf, Judge.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Opinion of the Court by Crothers, Justice.

Craig E. Johnson, Fargo, ND, for plaintiff and appellee.

Chris A. Edison (argued) and Matthew S. Menge (on brief), Bismarck, ND, for

garnishee and appellant.

FILED 

IN THE OFFICE OF THE 

CLERK OF SUPREME COURT 

FEBRUARY 18, 2022 

STATE OF NORTH DAKOTA
1

Pavlicek v. American Steel Systems, Inc., et al.

No. 20210116

Crothers, Justice.

[¶1] Grinnell Mutual Reinsurance Company appeals from a district court 

judgment ordering it to pay Larry Pavlicek $214,045.55 under a commercial 

general liability insurance (CGL) policy Grinnell had with JRC 

Construction. Grinnell argues the district court misinterpreted the insurance 

policy. Grinnell claims it is not required to indemnify JRC Construction

because its work product was defective. We affirm in part, reverse in part and 

remand.

I

[¶2] In 2013, Pavlicek hired a contractor to construct a steel building on his 

property. JRC Construction installed the concrete floor and floor drain for the 

project. Another subcontractor installed the in-floor heating system for the 

concrete floor. Throughout the project, Grinnell insured JRC under a CGL

policy, effective from July 30, 2012 through July 30, 2013. 

[¶3] After JRC completed the floor drain, it failed to properly install the 

concrete floor, and its attempts to repair the concrete damaged the drain. 

Pavlicek sued JRC for breach of contract relating to the defective work. After 

a December 2017 trial, the jury awarded Pavlicek $217,244.55 in damages 

against JRC for replacement of the concrete floor, drain and in-floor heating 

system.

[¶4] In February 2020, Pavlicek filed a supplemental complaint against 

Grinnell, alleging it was required to satisfy the judgment as JRC’s insurer. 

Grinnell claimed it had no obligation to indemnify JRC under the CGL policy.

Grinnell asserted Pavlicek’s damages were not covered under the CGL policy.

[¶5] Pavlicek and Grinnell waived trial, relying on evidence from the 2017 

trial and interpretation of the insurance policy. The district court concluded

JRC’s defective work on the concrete floor was not covered under the CGL

policy. The court concluded the damage to the floor drain was covered under 
2

the policy. The court found the floor drain could only be repaired by removing 

and replacing the concrete floor. The court also found replacement of the floor 

would destroy the in-floor heating system. Because removal and replacement 

of the floor and in-floor heat were necessary to repair the drain the court 

concluded the CGL policy covered all of those costs. The court concluded the 

CGL policy covered $214,045.55 of the $217,244.55 judgment awarded to 

Pavlicek. 

II

[¶6] The district court made findings of fact and conclusions of law on the 

basis of the evidence presented at the 2017 trial.

“In an appeal from a bench trial, the district court’s findings 

of fact are reviewed under the clearly erroneous standard of 

review, and its conclusions of law are fully reviewable. A finding of 

fact is clearly erroneous if it is induced by an erroneous view of the 

law, if there is no evidence to support it, or if, after reviewing all of 

the evidence, this Court is convinced a mistake has been made. In 

a bench trial, the district court is the determiner of credibility 

issues and we will not second-guess the district court on its 

credibility determinations. Findings of the trial court are 

presumptively correct.” 

Gimbel v. Magrum, 2020 ND 181, ¶ 5, 947 N.W.2d 891 (cleaned up).

III

[¶7] Grinnell argues the district court erred in its interpretation of the CGL

policy. Grinnell claims the policy does not cover the cost of replacing the 

concrete floor, in-floor heating system and floor drain. Grinnell also contends 

the policy excludes coverage for damage to JRC’s work.

[¶8] Grinnell’s arguments involve the interpretation of its CGL policy with 

JRC, which is a question of law fully reviewable on appeal. ACUITY v. Burd & 

Smith Constr., Inc., 2006 ND 187, ¶ 7, 721 N.W.2d 33. We have summarized 

our standards for construing an insurance contract:
3

“Our goal when interpreting insurance policies, as when 

construing other contracts, is to give effect to the mutual intention 

of the parties as it existed at the time of contracting. We look first 

to the language of the insurance contract, and if the policy 

language is clear on its face, there is no room for construction. If 

coverage hinges on an undefined term, we apply the plain, 

ordinary meaning of the term in interpreting the contract. While 

we regard insurance policies as adhesion contracts and resolve 

ambiguities in favor of the insured, we will not rewrite a contract 

to impose liability on an insurer if the policy unambiguously 

precludes coverage. We will not strain the definition of an 

undefined term to provide coverage for the insured. We construe 

insurance contracts as a whole to give meaning and effect to each 

clause, if possible. The whole of a contract is to be taken together 

to give effect to every part, and each clause is to help interpret the 

others.”

Id. See also N.D.C.C. §§ 9-07-02, 9-07-03, 9-07-06.

[¶9] When interpreting an insurance policy, we will first examine the 

coverages provided by the policy before examining a policy’s exclusions from 

coverage. K & L Homes, Inc. v. Am. Fam. Mut. Ins. Co., 2013 ND 57, ¶ 9, 829 

N.W.2d 724. If a coverage provision applies to the harm at issue, then we will 

review the policy’s exclusions and limitations of coverage. Id. “Exclusions from 

coverage in an insurance contract must be clear and explicit and are strictly 

construed against the insurer.” Id. at ¶ 8 (quoting Tibert v. Nodak Mut. Ins.

Co., 2012 ND 81, ¶ 9, 816 N.W.2d 31). Although a policy’s exclusionary 

provisions are strictly construed, this Court will not rewrite a policy to impose 

liability on the insurer when the policy unambiguously excludes coverage. K & 

L Homes, at ¶ 8.

[¶10] Here, the CGL policy provides coverage for property damage caused by 

the insured if the property damage results from an occurrence during the policy 

period. The CGL policy defines “property damage” as: “(a) [p]hysical injury to 

tangible property, including all resulting loss of use of that property; or (b) 

[l]oss of use of tangible property that is not physically injured.” “‘Occurrence’ 

means an accident, including continuous or repeated exposure to substantially 

the same general harmful conditions.” Accident has been defined as 
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“happening by chance, unexpectedly taking place, not according to the usual 

course of things.” ACUITY, 2006 ND 187, ¶ 14 (quoting Wall v. Penn. Life Ins. 

Co., 274 N.W.2d 208, 216 (N.D. 1979)). “[P]roperty damage caused by faulty 

workmanship is a covered occurrence to the extent the faulty workmanship 

causes bodily injury or property damage to property other than the insured’s 

work product.” ACUITY, at ¶ 16.

[¶11] The CGL policy contains several exclusions to coverage, including a 

“Damage To Your Work” exclusion. The damage to your work exclusion states 

the insurance does not apply to: “‘Property Damage’ to ‘your work’ arising out 

of it or any part of it and included in the ‘products-completed operations 

hazard.’” 

[¶12] The CGL policy defines “[y]our work” as “[w]ork or operations performed 

by you or on your behalf.” “Products-completed operations hazard” is defined 

as:

“a. Includes all ‘bodily injury’ and ‘property damage’ occurring 

away from premises you own or rent and arising out of ‘your 

product’ or ‘your work’ except:

(1) Products that are still in your physical possession; or

(2) Work that has not yet been completed or abandoned. However, 

‘your work’ will be deemed completed at the earliest of the 

following times:

(a) When all of the work called for in your contract has been 

completed.

(b) When all of the work to be done at the job site has been 

completed if your contract calls for work at more than one 

job site.

(c) When that part of the work done at the job site has been 

put to its intended use by any other person or organization 

other than another contractor or subcontractor working on 

the same project.
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Work that may need service, maintenance, correction, repair or 

replacement, but which is otherwise complete, will be treated as 

completed.” 

[¶13] In Fisher v. Am. Fam. Mut. Ins. Co., 1998 ND 109, ¶ 15, 579 N.W.2d 599, 

this Court construed a similar damage to your work exclusion:

“The injury to products or work exclusion is intended to exclude 

insurance for damage to the insured’s product or work, but not for 

damage caused by the insured’s product or work. Thus, the 

exclusion does not apply where the product or work causes 

damages to other persons or property. In such a situation, while 

there would not be coverage for damage to the work or product 

itself, damages caused by the product to other work or products 

would be covered.

“The injury to work or products exclusion is consistent with 

the goal of the CGL, which is to protect the insured from the claims 

of injury or damage to others, but not to insure against economic 

loss sustained by the insured due to repairing or replacing its own 

defective work or products.”

(quoting 3 Rowland H. Long, The Law of Liability Insurance § 11.09[2] (1998)).

A

[¶14] Grinnell argues the district court erred in concluding the CGL policy 

covered the damage to the floor drain. Grinnell claims the damage to your work 

exclusion of the CGL policy excludes the damage to the drain because the drain

was JRC’s work as defined in the policy.

[¶15] The declarations page of the CGL policy provides coverage for “ProductsCompleted Operations” in the aggregate limit of $2,000,000. The policy 

includes an endorsement stating: “The most we will pay for . . . [a]ll ‘bodily 

injury’ or ‘property damage’ that is included in the ‘products-completed 

operations hazard’ arising from all ‘occurrences’ during the policy period is the 

amount of the Products-Completed Operations Aggregate limit stated in the 

Declaration.” Although the CGL policy excludes from coverage “productscompleted operations hazard” within the damage to your work exclusion, when 
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a conflict exists between the provisions of an insurance policy and an attached 

endorsement, the provisions of the endorsement prevail. Hart Constr. Co. v. 

Am. Fam. Mut. Ins. Co., 514 N.W.2d 384, 391 (N.D. 1994). Therefore, the CGL 

policy provides $2,000,000 of aggregate coverage for damage resulting from an 

accident or occurrence, including during products-completed operations.

[¶16] The district court found JRC installed the floor drain and the drain was 

functioning properly before and after JRC poured the concrete floor. The court 

found JRC damaged the drain when it attempted to repair its faulty 

workmanship on the floor. The court found JRC damaged the drain housing 

and plugged the drain with the concrete materials JRC attempted to flush 

through the system. The court found JRC’s work on the drain was complete 

and was “not associated with [JRC’s] faulty workmanship on the floor.” The 

court found the damage to the drain was “damage to property other than the 

insured’s work product” and was not excluded under the CGL policy. 

[¶17] The district court erred in finding the drain was “property other than the 

insured’s work product.” Under the CGL policy’s definition of “[y]our work,” the 

drain was “[w]ork or operations performed by [JRC].” However, the court did 

not err in finding the drain was a completed product as defined in the policy. 

The drain had been completed and put to its intended use before being 

damaged by JRC’s attempt to repair the damaged concrete floor.

[¶18] The CGL policy excludes coverage for property damage to “[y]our work,” 

but provides coverage for “Products-Completed Operations.” As to the damage 

to the floor drain, the policy can be construed to provide coverage because the 

drain was a completed product and excluded from coverage because the drain 

was JRC’s work. Exclusions from coverage in an insurance policy must be clear 

and explicit and are strictly construed against the insurer. K & L Homes, 2013 

ND 57, ¶ 8; see also Heitkamp v. Milbank Mut. Ins. Co., 383 N.W.2d 834, 837 

(N.D. 1986) (stating if one interpretation of the policy imposes liability on the 

insurer and the other will not, the interpretation favorable to the insured will 

be adopted). Here, the CGL policy can be read to include and exclude coverage 

for the damage to the floor drain. Therefore, under our cases the policy must 

be construed to provide coverage for the cost to repair and replace the floor 
7

drain. We affirm that part of the judgment holding the CGL policy covers the 

cost of repairing and replacing the floor drain.

B

[¶19] Grinnell argues the district court erred in concluding the CGL policy 

covered the replacement of the concrete floor.

[¶20] In its discussion on the damage to the concrete floor, the district court 

found the damage to the floor was caused by JRC’s faulty workmanship and

did not constitute “property damage” or an “occurrence” under the CGL policy. 

The court concluded Grinnell was not liable for JRC’s faulty work on the 

concrete floor.

[¶21] After discussing damage to the in-floor heating system and the floor 

drain, the district court concluded:

“While Grinnell has no obligation to fix JRC’s defective floor 

when focused only on fixing the floor, the analysis does change as 

it relates to other parts of this project. The only possible way that 

the floor drain can be repaired is to rip out the entire floor. Ripping 

the floor out to repair the drain will also destroy the heating tubes. 

This is what the jury awarded overall to give Pavlicek complete 

relief. Thus, this Court finds that removal of the floor is necessary 

and is a damage properly covered under the insurance policy 

because this is the only way to fix the drain. Thus removal and 

replacement of the floor, replacement of the heating tubes, and 

fixing the drain are all properly covered under JRC’s policy with 

Grinnell.” 

[¶22] The district court initially found JRC’s faulty workmanship caused the 

damage to the concrete floor and the CGL policy did not cover the damage. The 

court later found removal and replacement of the floor was the only way to fix 

the drain and was therefore covered under the CGL policy. In making this

latter finding, the court noted the jury awarded Pavlicek the total cost of 

replacing the floor, heating system and drain “to give Pavlicek complete relief.”

[¶23] We have stated:
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“[A] CGL policy is not a performance bond and is not intended to 

protect a contractor’s business risk to replace or repair defective 

work that does not conform to the agreed contractual 

requirements; rather, the policy is intended to protect the insured 

from liability because the insured’s goods, products, or work cause 

bodily injury or damage to property other than the insured’s work 

product.”

ACUITY, 2006 ND 187, ¶ 23 (citing Ernst v. Acuity, 2005 ND 179, ¶ 14, 704 

N.W.2d 869; Grinnell Mut. Reinsurance Co. v. Lynne, 2004 ND 166, ¶ 18, 686 

N.W.2d 118). A CGL policy does not cover an insured’s economic loss due to 

repairing or replacing its own defective work. Fisher, 1998 ND 109, ¶ 15 (citing 

3 Long, The Law of Liability Insurance § 11.09[2]); see also ACUITY, 2006 ND 

187, ¶ 16 (stating faulty workmanship causing damage to property other than 

the insured’s defective work product is a covered occurrence under a CGL

policy).

[¶24] When addressing the damage to the concrete floor, the district court 

found the damage was caused by JRC’s faulty workmanship and the CGL 

policy did not cover the damage because there was no “occurrence” under the 

policy. That finding has not been appealed. Although the CGL policy provides 

coverage to repair the floor drain, it does not cover the cost of replacing the 

concrete floor because that damage was the result of JRC’s defective work. The 

court erred in finding the CGL policy covered the entire concrete floor 

replacement because replacement of the floor was the only way to repair the 

floor drain. We reverse that part of the judgment holding the CGL policy covers 

the cost of replacing the concrete floor.

C

[¶25] Grinnell contends the district court erred in concluding the cost of 

replacing the in-floor heating system was a covered occurrence under the CGL 

policy. Grinnell argues the heating tubes did not suffer property damage during 

the policy period.

[¶26] The district court discussed the in-floor heating system:
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“Grinnell also has raised the fact that there is no damage to 

the in-floor heating and that in fact such actually works as 

planned. The problem is that once the concrete sets, there is no 

practical way to remove the concrete absent destroying the heat 

tubes. In order to fully compensate and give to Pavlicek what he is 

entitled to have under his contract with JRC, the entire concrete 

floor must be ripped out and replaced. In having to remove the 

concrete floor due to the poor workmanship of JRC, there will be 

damage to the in-floor heat tubes and the work product of 

Plumbers, Inc. will basically be destroyed.

“What is certain is that in order to give Pavlicek what he had

bargained for, there will be a complete loss of the heating system 

that had been installed by Plumbers, Inc. The reason that the 

heating tubes will be lost is due to the poor workmanship in 

pouring and finishing the concrete floor as was done by JRC. While 

the heating system at the time of trial currently functioned, it is 

clear that it will be destroyed upon replacing the concrete floor that 

was poured by JRC. The future damage is certain and qualifies as 

property damage and occurrence under the terms of the policy. 

Further, since the damage is certain, it also qualifies for an 

occurrence during the policy period.”

[¶27] The CGL policy provides coverage if property damage is caused by an 

occurrence during the policy period. Property damage is physical injury to 

property or the loss of use of property under the CGL policy. “[T]he well-settled 

rule that the time of the occurrence of an accident, within the meaning of a 

liability indemnity policy, is not the time when the wrongful act was 

committed, but the time when the complaining party was actually damaged.” 

Grinnell Mut. Reinsurance Co. v. Thies, 2008 ND 164, ¶ 11, 755 N.W.2d 852

(quoting Friendship Homes, Inc. v. American States Ins. Cos., 450 N.W.2d 778, 

780 (N.D. 1990)).

[¶28] Pavlicek testified at trial the in-floor heating system functioned, the 

entire floor was heated and there had been no problems with the floor heat 

after JRC poured the concrete floor. The district court also noted the in-floor 

heat functioned at the time of trial. However, to give Pavlicek what he 

bargained for, the court found the heating system will be damaged and will 

require replacement when the concrete floor is replaced.
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[¶29] The district court did not find the heating system was damaged during 

the policy period, but it concluded the CGL policy covered the future damage 

“to fully compensate and give to Pavlicek what he is entitled to have under his 

contract with JRC.” A CGL policy is not a performance bond. ACUITY, 2006 

ND 187, ¶ 23. Because the in-floor heating system was not damaged during 

the policy period, there was no “occurrence” under the CGL policy. The court 

erred in concluding the CGL policy provided coverage for replacement or repair 

of the in-floor heating system beyond that which may be necessary to repair 

the drain. We reverse that part of the judgment holding the CGL policy covers 

the cost of replacing the in-floor heating system.

D

[¶30] The judgment ordered Grinnell to pay Pavlicek $214,045.55. The CGL 

covers the cost of replacing the floor drain, but does not cover the cost to replace 

the concrete floor or the in-floor heating system. The judgment does not break 

down the separate costs to replace the concrete floor, in-floor heating system 

and floor drain. A JRC invoice shows Pavlicek paid $7,600 for the floor drain

installation; however, the parties have not provided evidence relating to the 

cost of repairing or replacing the floor drain. We remand to the district court 

to determine those damages.

IV

[¶31] The parties’ remaining arguments are either not necessary to our 

decision or are without merit. The judgment is affirmed in part, reversed in 

part, and remanded.

[¶32] Jon J. Jensen, C.J. 

Gerald W. VandeWalle 

Daniel J. Crothers 

Lisa Fair McEvers 

Jerod E. Tufte