We have formulated the duty to defend to require a liability insurer to defend an underlying action against its insured if the allegations in the complaint give rise to potential liability or a possibility of coverage under the insurance policy.Schultze v. Continental Ins. Co., 2000 ND 209, ¶ 8, 619 N.W.2d 510 (citations omitted); see also Decker, at ¶ 14;Fetch v. Quam, 2001 ND 48, ¶ 14, 623 N.W.2d 357;Hart Constr. Co. v. American Family Mut. Ins. Co., 514 N.W.2d 384, 389 (N.D.1994); Kyllo v. Northland Chem. Co., 209 N.W.2d 629, 634 (N.D.1973). When several claims are made against the insured in the underlying action, the insurer has a duty to defend the entire lawsuit if there is potential liability or a possibility of coverage for any one of the claims.
Under North Dakota law, we also construe USF G's insurance policy de novo. See Hart Constr. Co. v. American Family Mut. Ins. Co., 514 N.W.2d 384, 388 (N.D. 1994). II.
[¶ 29] We have also held an insurer has a duty to act fairly and in good faith in its contractual relationship with its policyholders. Hart Const. Co. v. American Family Mut. Ins. Co., 514 N.W.2d 384, 391 (N.D. 1994); Bender v. Time Ins. Co., 286 N.W.2d 489 (N.D. 1979); Corwin Chrysler-Plymouth v. Westchester Fire Ins. Co., 279 N.W.2d 638, 643 (N.D. 1979). The test for bad faith is whether the insurer acts unreasonably in handling an insured's claim by failing to compensate the insured, without proper cause, for a loss covered by the policy.
"The mere fact that an insurer's position is held invalid by the courts does not necessarily mean it acted in bad faith." Hart Const. Co. v. Am. Fam. Mut. Ins. Co. , 514 N.W.2d 384, 391 (N.D. 1994). "The test for an insurer's bad faith is whether the ‘insurer has acted unreasonably in handling an insured's claim by failing to compensate the insured, without proper cause, for a loss covered by the policy.’ "
Each of those claims requires that there be a breach of contract. See Hart Constr. Co. v. Am. Fam. Mut. Ins. Co., 514 N.W.2d 384, 391-92 (N.D. 1994); Martin v. Ill. Farmers Ins., 742 N.E.2d 848, 857-58 (Ill. Ct. App. 2000).
The gravamen of the test for bad faith is whether the insurer acts unreasonably in handling an insured's claim. Fetch v. Quam, 2001 ND 48, ¶ 12, 623 N.W.2d 357, 361. Whether an insurer has acted in bad faith is ordinarily a question of fact to be determined by the trier of fact. Hartman, 2003 ND 24, ¶ 12, 656 N.W.2d at 681;Fetch, 2001 ND 48, ¶ 12, 623 N.W.2d at 361; see also Hart Constr. Co. v. Am. Family Mut. Ins. Co., 514 N.W.2d 384, 391 (N.D. 1994) ("Whether an insurer has acted in bad faith in refusing to pay amounts claimed under an insurance policy is a question of fact."). An insurer acts unreasonably by failing to compensate the insured for a loss covered by the policy, unless the insurer has a proper cause for refusing payment.
Nonetheless, release of an employee does not release an employer from claims of direct liability for its "own wrongful conduct independent of any theory of vicarious liability." Hart Constr. Co. v. American Family Mut. Ins. Co., 514 N.W.2d 384, 391 (N.D. 1994) (quoting Zimprich v. North Dakota Harvestore Systems, Inc., 419 N.W.2d 912, 913 (N.D. 1988)). Thus, the amended complaint must be examined for direct claims against the Keimkonzept defendants.
, when 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.
(alteration in original) (citation omitted) ). But see Hart Constr. Co. v. Am. Family Mut. Ins. Co. , 514 N.W.2d 384, 391 (N.D. 1994) (applying reasonableness standard to whether an insurer breached its duties to an insured in seeking a declaratory judgment in connection with a third-party lawsuit). Courts also advance different approaches to the duty to defend.
(alteration in original) (citation omitted)). But see Hart Constr. Co. v. Am. Family Mut. Ins. Co., 514 N.W.2d 384, 391 (N.D. 1994) (applying reasonableness standard to whether an insurer breached its duties to an insured in seeking a declaratory judgment in connection with a third-party lawsuit). Courts also advance different approaches to the duty to defend.