Dilworth-Glyndon-Felton Independent School District 2164 v. Construction

Background

Dilworth-Glyndon-Felton Independent School District 2164 (DGF) contracted with Comstock Construction, Inc. to provide construction-management services for renovations and an addition at Dilworth School. DGF alleged that on October 12, 2021, rainwater accumulated between the existing gymnasium and the new construction, entered through exterior doors, and damaged the gymnasium floor.

Comstock obtained a Commercial Inland Marine Builders Risk insurance policy from The Travelers Indemnity Company covering October 1, 2021, through October 1, 2022. The policy declarations named Comstock as the sole named insured. DGF sued Comstock and Travelers, claiming that DGF was an additional insured or an intended third-party beneficiary under the policy. Travelers moved to dismiss DGF’s amended complaint under Rule 12(b)(6), which tests whether a complaint states a legally sufficient claim.

Contractual relationship and additional-insured status

The court applied Minnesota law, under which a plaintiff must have a contractual relationship with an insurer to enforce the insurer’s policy. Because DGF was not a named insured and Travelers disputed DGF’s claimed additional-insured or third-party-beneficiary status, the court ruled that DGF lacked the required contractual relationship and therefore lacked standing under Minnesota law to enforce the policy or seek a declaration about coverage.

The policy required a written agreement, made before the loss, between Comstock and an entity seeking additional-insured coverage. DGF admitted that no such written agreement existed. The court also ruled that the policy clearly excluded buildings or structures that existed before the policy began. Because the gymnasium was pre-existing, the court concluded that DGF did not qualify as an additional insured for the claimed gymnasium-floor damage.

Intended third-party beneficiary

The court rejected DGF’s alternative argument that it was an intended third-party beneficiary. Under Minnesota law, a third party has enforceable contract rights only when the contract shows an intent to grant that specific party the right to performance. The court concluded that the policy’s specific requirements for additional-insured status showed an intent to benefit only entities that met those requirements. Because DGF did not plead facts showing that it met them, the court ruled that DGF could not enforce the policy as an intended third-party beneficiary.

Coverage for the gymnasium and rainwater damage

The court separately ruled that the policy did not cover the gymnasium floor damage. The policy’s definition of covered property excluded pre-existing buildings. The court held that this specific exclusion controlled over any broader language describing general coverage for construction or renovation projects. The gymnasium therefore remained excluded even though renovations were occurring there.

The court also held that the policy’s rain exclusion applied. DGF alleged that accumulated rainwater entered the gymnasium and caused the interior damage. The court ruled that the water remained rain under the policy even after it collected outside and entered the building. The court further noted that DGF did not allege that the building first suffered exterior damage caused by a covered event, which the policy required for the asserted exception to the rain exclusion.

DGF argued that a flood endorsement applied because the water became surface water after accumulating on the ground. The court concluded that DGF had not plausibly alleged facts showing that the endorsement created an exception to the rain exclusion. Because DGF had not first shown that the endorsement applied, the court found no policy ambiguity requiring an interpretation in DGF’s favor.

Disposition

The court stated that Travelers’ first motion to dismiss was moot because Travelers had filed a second motion directed at DGF’s amended complaint. The court considered only the second motion, docket entry 24, and granted The Travelers Indemnity Company’s motion to dismiss. The court ordered judgment to be entered accordingly.