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VND12/19/2003
iability insurance at its own expense.
[ ] In interpreting another contract provision dealing with all-risk insurance, the Sixth Circuit Court held the term "any loss" could not mean the defendants were required to insure against every conceivable happening. The court held that the term should be read in the context of the whole paragraph. The court determined the term "any loss" meant all losses discussed in the contract provision or otherwise covered under the "all risk" policy the defendants obtained. The provision stated:
10.5.1 The Owner shall obtain and maintain property insurance in a form acceptable to the Contractor upon the entire Project for the full cost of replacement at the time of any loss. The insurance shall include as additional insureds the Contractor, Subcontractors and Subsubcontractors. This insurance shall insure against loss from the perils of fire and extended coverage, and shall include "all risk" insurance for physical loss or damage including without duplication of coverage, at least: theft, vandalism, malicious mischief, transit, collapse, false work, temporary buildings, debris removal, flood, earthquake, testing, and damage resulting from defective design, workmanship or material. The Owner shall increase limits of coverage, if necessary, to reflect estimated replacement cost.
Chelm Mgmt. Co. v. Wieland-Davco Corp., No. 00-3768, 23 Fed. Appx. 430, 432 (6th Cir. 2001).
[ ] In the Chelm Mgmt. case the defendant was required to purchase rather than reimburse for insurance; however, the court was interpreting the type of loss for which the defendant was liable to purchase insurance. Similarly, the lease agreement between Leevers and VND should be read as requiring Leevers to reimburse for all-risk insurance to protect against "any loss" to the building or other insurable portions of the premises. The provision should not be construed as requiring reimbursement for any loss whatsoever.
[ ] In Garofalo v. Saint Joseph's Hosp., we stated:
The language of a contract is to govern its interpretation if the language is clear and explicit and does not involve an absurdity. N.D.C.C. § 9-07-02. A contract is interpreted to give effect to the mutual intention of the parties as it existed at the time of contracting. N.D.C.C. § 9-07-03. "The whole of a contract is to be taken together so as to give effect to every part if reasonably practicable. Each clause is to help interpret the others." N.D.C.C. § 9-07-06. A contract may be explained by reference to the circumstances under which it was made and the matter to which it relates. N.D.C.C. § 9-07-12.
2000 ND 149, * 8, 615 N.W.2d 160.
[ ] Given the aforementioned cases and the rules of contract construction, we conclude the language of the contract should govern. The language of the contract is clear and explicit and does not involve an absurdity. The lease provision in question specifically includes the purpose of the insurance ("such insurance shall protect against any loss, damage and/or destruction to the building or any other insurable portion of the demised premises"). Interpreting the contract to include liability for things not specifically indicated in the paragraph would lead to an absurdity.
[ ] VND argues Leevers is nonetheless required to pay a pro-rata share of VND's liability insurance on the basis of custom and usage, waiver, and laches.
ustom and usage may be given effect as part of a written contract where the agreement is silent or ambiguous on a point, and where there is a well-established custom concerning a subject so that the parties may be presumed to have acted with reference to the custom. Tong
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