                  United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 14-3522
                         ___________________________

                           Great West Casualty Company

                         lllllllllllllllllllll Plaintiff - Appellee

                                            v.

                            National Casualty Company

                       lllllllllllllllllllll Defendant - Appellant

                                    ____________

                     Appeal from United States District Court
                    for the District of North Dakota - Bismarck
                                   ____________

                           Submitted: September 10, 2015
                              Filed: December 7, 2015
                                   ____________

Before LOKEN, MELLOY, and GRUENDER, Circuit Judges.
                           ____________

LOKEN, Circuit Judge.

        This is a liability insurance coverage dispute. In April 2011, independent
owner-operator Steven Heinis leased his Volvo semi-tractor and Trailmobile tanker-
trailer to Avery Enterprises (“Avery”), a trucking firm providing services to the oil
and gas industry in the Bakken oilfields in North Dakota. On June 18, Heinis drove
the tractor-trailer rig to Avery’s shop in Powers Lake, North Dakota, to repair a crack
in the loading valve or pipe on Heinis’s trailer. When Jesse Miller, a shop employee,
contacted the pipe with his welding torch, an explosion occurred, injuring Miller, who
received workers’ compensation benefits from the North Dakota Workforce Safety &
Insurance Organization and filed a state court negligence action against Heinis. See
N.D. Cent. Code Ch. 65-02, § 65-01-09.

       At the time in question, Great West Casualty Company (“Great West”) was
Heinis’s commercial lines liability insurer, and National Casualty Company
(“National”) was Avery’s commercial motor carrier liability insurer. Great West filed
this declaratory judgment action seeking a declaration that National is contractually
obligated to defend and indemnify Heinis in Miller’s pending state court lawsuit and
Great West is not. National’s Amended Answer asserted contrary positions. The
district court1 granted summary judgment in favor of Great West, concluding that
Miller’s negligence claim against Heinis was covered under National’s policy and
excluded under Great West’s policy. Great W. Cas. Co. v. Nat’l Cas. Co., 53 F. Supp.
3d 1154, 1190 (D.N.D. 2014). National appeals. Though the parties have argued
other issues, to resolve the appeal we need only determine (i) that Heinis was an
“insured” under the National policy, (ii) that neither of two exclusions in the National
policy applied, and (iii) that the exclusion in Great West’s policy applied. Reviewing
these issues de novo, we affirm.

                                   I. Background

        The April 2011 Lease Agreement provided that Avery would dispatch Heinis
to haul fresh water to drilling sites and contaminated “flowback” water from drilling
sites to disposal facilities. Avery dispatched and paid Heinis on a per-job basis. The
lease required Heinis to remain in “constant contact” with Avery and to respond to


      1
        The Honorable Charles S. Miller, Jr., United States Magistrate Judge for the
District of North Dakota.

                                          -2-
dispatches within a reasonable amount of time. Heinis hauled only for Avery from
the commencement of the lease until the June 2011 accident. Heinis agreed to
maintain the tractor and trailer in good and safe operational condition, to comply with
federal motor carrier safety regulations, and to be responsible for the cost of repairs,
maintenance, and fuel. The lease required Avery to maintain “fleet cargo and liability
insurance” for the equipment, and required Heinis to maintain “property and casualty
insurance (bobtail) for the leased equipment.”2 At the time of the accident, Avery’s
name and DOT motor carrier numbers were affixed to the tractor.

        Some days prior to the accident, Heinis noticed a leak from the trailer’s valve
or pipe during loading and unloading. After using a bucket to prevent spills while
loading and unloading at least one load of contaminated water, Heinis called Kevin
Avery the day before the accident and arranged to have the leak repaired at Avery’s
repair shop. It is undisputed that the repair was Heinis’s responsibility under the
Lease Agreement and that Heinis was not required to have the repair done at Avery’s
shop. The next day, Heinis testified, he backed the trailer into the shop, unhooked the
trailer before Miller undertook the repair, and rehooked the trailer after the explosion
to pull it away from the scene. Kevin Avery testified that the tractor and trailer were
hooked together when he ran out of his office after hearing the explosion.

       Miller sued Heinis to recover damages for the serious injuries Miller sustained
while undertaking, at Avery’s shop, repairs that were Heinis’s responsibility under the
lease. Whether Miller’s claims are covered under Avery’s policy with National and/or
under Heinis’s policy with Great West requires us to review de novo the district


      2
        A motor vehicle policy that excludes coverage when the vehicle is operating
“in the business of” a lessee is commonly known as “bobtail” insurance. Federal law
requires interstate motor carriers, but not equipment lessors, to maintain minimum
levels of liability insurance. Thus, this term of the lease agreement and the terms of
Great West’s bobtail policy are issues of state law. See Hartford Ins. Co. v.
Occidental Fire & Cas. Co., 908 F.2d 235, 237 & n.3 (7th Cir. 1990).

                                          -3-
court’s interpretation of these insurance contracts, as well as its decision to grant
summary judgment. See Land O’ Lakes, Inc. v. Empl’rs Ins. Co. of Wausau, 728 F.3d
822, 827 (8th Cir. 2013).

         II. Whether National’s Policy Provided Coverage to Heinis

       National’s policy provided coverage to an insured for “‘bodily injury’ or
‘property damage’ to which this insurance applies, caused by an ‘accident’ and
resulting from the ownership, maintenance or use of a covered ‘auto.’” National
argues there was no coverage because the “Who Is An Insured” provision did not
include Heinis, and because two exclusions applied. The parties do not challenge the
district court’s determination that North Dakota law governs these issues. Great W.,
53 F. Supp. 3d at 1159. Under North Dakota law:

      The interpretation of an insurance policy is a question of law, fully
      reviewable on appeal. 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. NDCC § 9-07-03.
      Generally, we attempt to ascertain the intent of the parties through the
      language of the contract itself. NDCC § 9-07-04.

Nw. G.F. Mut. Ins. Co. v. Norgard, 518 N.W.2d 179, 181 (N.D. 1994) (other citations
omitted).

      A. Was Heinis a Covered Insured? Section II.A.1.c. of National’s Motor
Carrier Coverage Form provided that Who Is An Insured included:

            c. The owner or anyone else from whom you [Avery] hire or
      borrow a covered “auto” that is a “trailer” while the “trailer” is
      connected to another covered “auto” that is a power unit, or, if not
      connected, is being used exclusively in your business.



                                         -4-
It is undisputed that Heinis’s leased tractor was a covered auto “power unit” and that
Miller’s injuries resulted from an accident during “maintenance or use” of the leased
trailer. Great West argued that Heinis was an insured because the trailer was a
covered auto under § II.A.1.c. National argued that § II.A.1.c. did not apply because
the accident occurred when the tractor and trailer were not “connected” and the trailer
was not being used exclusively in Avery’s business. The district court concluded that
§ II.A.1.c. applied because the trailer was being used exclusively in Avery’s business
at the time of the accident. Great W., 53 F. Supp. 3d at 1162-71. We need not reach
that question because we conclude that, even if the trailer was not being used
exclusively in Avery’s business at the time of the accident,3 it was “connected to
another covered ‘auto’ that is a power unit.”

        National argues that § II.A.1.c. did not provide coverage because “connected”
required that the trailer be physically attached to a covered power unit when the
accident occurred, and Heinis testified that he unhooked the tractor and trailer before
Miller began the repairs. We agree with the district court that whether the tractor and
trailer were physically attached when the explosion occurred was at least a disputed
issue of fact. At the summary judgment stage, we must view the facts in favor of the
non-moving party, and therefore we assume the trailer was physically unhooked at the


       3
        The district court relied on the decision in Freed v. Travelers, 300 F.2d 395,
398 (7th Cir. 1962) (explaining that “the procurement of repairs incident to lessor’s
duty to hold the tractor ready at all times for the services of the lessee is to be regarded
as an activity exclusively in the business of the lessee”) (quotation omitted). But
Freed was premised on an Interstate Commerce Commission order mandating that
leases provide for the exclusive possession, use, and control of leased equipment by
the lessee. Id. Motor carrier transportation has been significantly deregulated, and the
regulation requiring this provision is now subject to exemptions. See 49 C.F.R.
§ 376.12(c)(1). The Lease Agreement did not contain a provision giving lessee Avery
exclusive possession, use, and control of leased equipment. Neither the parties nor the
district court addressed the significance of this omission in applying the policy term
“exclusively” to the facts of this case.

                                            -5-
moment the explosion occurred. See, e.g., Watkins Inc. v. Chilkoot Distrib., Inc., 655
F.3d 802, 803 (8th Cir. 2011). But we conclude this is not a material fact dispute that
precludes the grant of summary judgment. See Fed. R. Civ. P. 56(a).

       We are unaware of any case, from North Dakota or any jurisdiction, that has
interpreted the word “connected” in this context. Thus, we must determine how the
Supreme Court of North Dakota would resolve the issue. See, e.g., Hudson Specialty
Ins. Co. v. Brash Tygr, LLC, 769 F.3d 586, 591 (8th Cir. 2014). That Court would
“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.”
Farmers Union Mut. Ins. Co. v. Decker, 704 N.W.2d 857, 860 (N.D. 2005). In
conducting this analysis, “a contract may be explained by reference to the
circumstances under which it was made and the matter to which it relates.” Norgard,
518 N.W.2d at 183, citing N.D. Cent. Code § 9-07-12.

       Because National’s policy does not define the term “connected,” we must give
the term its plain, ordinary meaning. Webster’s Third New International Dictionary
defines “connected” as including objects “joined or linked together,” or “having the
parts or elements logically related,” at 480 (1986). This definition includes objects
that are physically attached, but the words “linked” and “logically related” do not
require physical attachment. So the term as used in § II.A.1.c. needs to be defined by
reference to “the matter to which it relates.”

       A commercial tractor and trailer need not operate as a single unit. The trailer
can be unhitched and hauled by other tractors operating for different owners or lessees
under different contracts. When the tractor is a “covered auto,” this provision was
obviously intended to exclude coverage for accidents arising from use of a companion
trailer when the trailer is operated separately from the tractor and the insured’s
business. But when a scheduled trailer is “connected,” that is, functioning as a unit

                                           -6-
with a scheduled tractor, both are covered autos. There clearly are times when a
trailer is briefly unhooked from a tractor for a reason that is consistent with the
trailer’s status as a covered auto. For example, the driver performing a haul for the
insured may briefly detach the trailer to save fuel while he drives to a nearby filling
station to refuel the tractor. The trailer is physically unhooked, but the tractor and
trailer are still an operating unit, and the trailer should be considered “connected” to
the tractor for purposes of § II.A.1.c. This interpretation is consistent with the parties’
intent to provide coverage to the lessor of a covered auto being used in the lessee’s
business. Therefore, whether Heinis was covered by reason of § II.A.1.c. does not
turn only on whether he unhooked the tractor and trailer to facilitate the trailer’s
repair. Rather, the Supreme Court of North Dakota would consider the relevant
question to be whether the tractor and the trailer were functioning as a paired unit
when the accident occurred.

       The Lease Agreement obligated Heinis to remain in “constant contact” with
Avery’s dispatcher and to respond to dispatches within a reasonable time. The record
reflects that, every time Heinis transported a load as Avery’s lessor, he drove the same
tractor pulling the same trailer. After entering into the lease, Heinis did not use the
tractor-trailer rig for any purpose other than hauling loads for Avery. In these
circumstances, the tractor and trailer were a functional unit consisting of two types of
covered autos being used in Avery’s business.

       The lease required Heinis to maintain the trailer in safe operating condition and
to perform all repairs and maintenance in a timely manner. After discovering the leak,
Heinis used a bucket to prevent spills while loading and unloading contaminated
drilling water for Avery. He then called Kevin Avery and arranged to have the leak
fixed at Avery’s shop before the tractor and trailer would be dispatched on another
job. Thus, in repairing the tractor, Heinis was executing his contractual duties and,
as the explosion tragically confirmed, eliminating an unsafe condition before
continuing to transport loads under the Lease Agreement. The tractor and trailer

                                           -7-
arrived at Avery’s repair shop as a unit and were unhooked only to facilitate repair the
lease required. Momentarily unhooking the trailer to make a necessary repair did not
render the trailer “not connected” to the tractor. On these undisputed facts, we
conclude that Heinis’s tractor was “connected” to a covered auto power unit for the
purposes of § II.A.1.c. of National’s policy. Therefore, Heinis was an “insured” to
whom the liability coverage provided by National’s policy applied to Miller’s claim
that Heinis’s negligence caused the explosion.

        B. Did a Policy Exclusion Apply? National argues that, even if its policy
provided Heinis coverage for the accident that injured Miller, the “employer’s
liability” and “fellow employee” exclusions precluded coverage. Section II.B.5. of
National’s policy, the “Fellow Employee” exclusion, excluded coverage for “[b]odily
injury to . . . [a]ny fellow employee of the insured arising out of and in the course of
the fellow employee’s employment or while performing duties related to the conduct
of your business.” National argued that Heinis was an employee of Avery, and
therefore a fellow employee of Miller, because the definition of employee in the
Federal Motor Carrier Safety Regulations (“FMCSRs”) should replace any contrary
definitions in its policy or in state law.4 The district court, noting that the Supreme
Court of North Dakota has not considered this question, and that other jurisdictions
have reached conflicting conclusions, held that the FMCSRs did not apply, and even
if they did, Heinis was not an employee under the FMCSRs. Great W., 53 F. Supp.
3d at 1178-88. Applying North Dakota’s rule requiring courts to construe ambiguous
exclusions strictly against the insurer, the district court found no reason to depart from


      4
        The FMCSRs define “employee” as “any individual, other than an employer,
who is employed by an employer and who in the course of his or her employment
directly affects commercial motor vehicle safety. Such term includes a driver of a
commercial motor vehicle (including an independent contractor while in the course
of operating a commercial motor vehicle), a mechanic, and a freight handler.” 49
C.F.R. § 390.5.


                                           -8-
the plain meaning of the definition in National’s policy or to assume that the FMCSRs
were implicitly incorporated. Great W., 53 F. Supp. 3d at 1187.

       Section II.B.4.a. of National’s policy, the “Employer’s Liability” exclusion,
excluded coverage for “[b]odily injury to . . . [a]n employee of the insured arising out
of and in the course of (1) Employment by the insured; or (2) Performing the duties
related to the conduct of the insured’s business.” National argued that, if Heinis was
an additional “insured,” this provision excluded coverage because the bodily injury
caused by the covered accident was suffered by Miller, an employee of the named
insured. National cited our decision in Farmers Elevator Mutual Insurance Co. v. Carl
J. Austad & Sons, Inc., 366 F.2d 555 (8th Cir. 1966), as controlling on this issue of
North Dakota law. The district court disagreed because the policy in Farmers lacked
a “severability clause,”5 and the presence of this clause created an ambiguity that must
be resolved against National in construing this exclusion.6 In its only decision
considering this issue, the Supreme Court of North Dakota “observed that the
jurisdictions that have attempted to reconcile severability clauses and exclusionary
clauses have not done so uniformly,” and concluded that “the ambiguity here is
resolved by applying the rules for interpreting contracts, contained in NDCC Chapter
9-07.” Norgard, 518 N.W.2d at 182-83.

       We agree with the district court that neither exclusion applied. But unlike the
district court, we conclude the Supreme Court of North Dakota would apply the


      5
       National’s policy provided that, “Except with respect to the Limit of Insurance,
the coverage afforded applies separately to each insured who is seeking coverage or
against whom a claim or suit is brought.”
      6
       In so ruling, the court disregarded our decision in Universal Underwriters
Insurance Co. v. McMahon Chevrolet-Oldsmobile, Inc., 866 F.2d 1060, 1064 (8th Cir.
1989), where we concluded that, despite the policy’s severability clause, the Supreme
Court of South Dakota would not “extend[] an insurer’s liability to additional insureds
above and beyond that afforded to the named insured.”

                                          -9-
analysis mandated by Norgard equally to both exclusions. National does not (and
could not) challenge the district court’s conclusion that the interpretation of the
exclusions is governed by state law. Applying North Dakota common law to the
Lease Agreement, it appears that Heinis was acting as Avery’s independent contractor,
not its employee, at the time of the accident. See generally Doan ex rel. Doan v. City
of Bismarck, 632 N.W.2d 815, 821 (N.D. 2001); Iverson v. Bronco Drilling Co., Inc.,
667 F. Supp 2d 1089, 1094 (D.N.D. 2009); see also 49 C.F.R. § 376.12(c)(4)
(“[n]othing in the provisions required by paragraph (c)(1) of this section is intended
to affect whether the lessor or driver provided by the lessor is an independent
contractor or an employee of the authorized carrier lessee”).

      The fellow employee and employer’s liability exclusions limit the policy
coverage to liabilities that are not excluded by the remedy of workers’ compensation
benefits. Workers’ compensation benefits are an injured employee’s exclusive
remedy against his employer and fellow employees for an injury arising out of and in
the course of employment. See, e.g., N.D. Cent. Code §§ 65-01-01, 65-01-08.1;
Mitchell v. Sanborn, 536 N.W.2d 678, 683 (N.D. 1995). By statute, an “employee”
may recover workers’ compensation benefits from an “employer,” but not from “an
independent contractor under the common-law test,” § 65-01-02.17. An injured
employee may “proceed at law to recover damages” that a third person is liable to pay,
including an independent contractor of the employer. If the employee has received
workers’ compensation benefits, the North Dakota Workforce Safety & Insurance
Organization “is subrogated to the rights of the injured employee” and has a lien that
“attaches to all . . . insurance payable by reason of a legal liability of a third person.”
§ 65-01-09.

       Miller’s lawsuit is premised on these statutory principles -- he received
workers’ compensation benefits as Avery’s employee and sued Heinis for negligence.
If Heinis was acting as a common law independent contractor, North Dakota law will
apparently permit Miller to recover in the negligence action. If Heinis is denied

                                           -10-
coverage under National’s policy by reason of either exclusion -- because the FMCSR
definition of employee applies, or because an insurer’s liability to additional insureds
may not exceed that afforded the named insured -- and if coverage is also excluded
under Great West’s “bobtail” insurance, then Miller and the Workforce Safety &
Insurance Organization will likely find any damages recovered in the negligence
action uncollectible. Of course, no North Dakota statute or judicial precedent
precludes this result. But we conclude the Supreme Court of North Dakota would find
it inconsistent with the policies underlying the workers’ compensation statutes and
therefore with the parties’ intent reflected in the insurance contract. See Blaskowski
v. N.D. Workmen’s Comp. Bureau, 380 N.W.2d 333, 335 (N.D. 1986) (“The purpose
of the Bureau’s subrogation rights is to reimburse the fund . . . at the expense of the
persons at fault.”). In these circumstances, applying Norgard, the Court would rule
that these exclusions, read together with the severability clause, do not apply to relieve
National of the duty to defend additional-insured Heinis from a negligence action by
the named insured’s employee.7 National’s duty to indemnify Heinis, if any, must of
course await the outcome of Miller’s lawsuit.

          III. Whether Great West’s Policy Provided Coverage to Heinis

       The district court held that Great West’s policy excluded coverage for Heinis
in Miller’s underlying state court lawsuit because the trailer was a covered auto being
used “in the business of” Avery, a person “to whom the ‘auto’ is rented, leased or
loaned.” Great W., 53 F. Supp. 3d at 1189-90. We agree.




      7
       In other words, consistent with North Dakota workers’ compensation
principles, the Court would read the severability clause in National’s policy as
excluding coverage only when an injured employee brings a negligence claim against
his own employer or fellow employee. Here, under North Dakota common law,
Heinis was not Miller’s fellow employee at Avery, nor was he Miller’s employer.

                                          -11-
        We have found no North Dakota Supreme Court decision interpreting “in the
business of” in this context. In National Continental Insurance Co. v. Empire Fire &
Marine Insurance Co., 157 F.3d 610 (8th Cir. 1998), the owner-operator of a tractor
under permanent lease to a trucking company was sued by persons injured in an
accident that occurred while he was driving the tractor in for scheduled maintenance.
The trucking company’s insurer sued the operator’s “nontrucking” liability insurer to
recover settlement damages and litigation costs. Applying Oregon law, we concluded
that, in construing the defendant insurer’s exclusion for damages while a covered auto
is “used in the business of” the lessee, the question was whether the independent
contractor “was acting within the scope of the service contract with [the lessee] -- in
other words, whether he was fulfilling his bargained-for contractual duties at the time
of the accident. To the extent that he was executing his contractual duties, he was
clearly acting ‘in the business of’ [the lessee].” Nat’l Cont’l, 157 F.3d at 612, citing
Hartford, 908 F.2d at 239.

       While not controlling authorities, we agree with the district court that the
Supreme Court of North Dakota would adopt the reasoning of National Continental
and Hartford and look to the terms of the Lease Agreement between Heinis and Avery
to determine whether, at the time of the accident, Heinis was performing his
contractual duties and therefore the trailer was being used in Avery’s business.8 The
Lease Agreement required Heinis to maintain the trailer in safe operating condition,
to perform all repairs and maintenance in a timely manner, and to comply with all
federal motor carrier safety regulations. After Heinis finished a haul for Avery in
which he used a bucket to prevent spills of contaminated water, Heinis contacted


      8
       National argues that South Dakota law governs this issue because Heinis is a
South Dakota resident and Great West issued its policy there. This is a dubious
choice-of-law contention given the dispute’s ties to North Dakota, but in any event we
conclude the Supreme Court of South Dakota would apply the same analysis.
National has not argued that South Dakota law differs from North Dakota law in any
relevant respect.

                                         -12-
Kevin Avery and arranged to have the leak repaired before Heinis was again
dispatched. In having the tractor repaired, Heinis executed his contractual duties and
therefore was acting in Avery’s business at the time of the accident.

        National argues the district court erred in granting summary judgment on this
issue because the phrase “in the business of” is an ambiguity that must be construed
against the insurer, Great West. National notes that various courts have interpreted
the phrase to apply when the driver is “under dispatch,” is acting at the specific
direction of the carrier, or is engaged in an “operational routine.” However, that a
contract term is subject to conflicting interpretations does not make it ambiguous as
a matter of law. Moreover, the Supreme Court of South Dakota “would be reluctant
to apply the general rule construing ambiguities liberally in favor of the insured and
strictly against an insurer in a dispute between insurance companies.” St. Paul Fire
& Marine Ins. Co. v. Schilling, 520 N.W.2d 884, 889 (S.D. 1994).

        Under North Dakota and South Dakota law, the meaning of an insurance policy
is determined based on contractual intent and the objectives of the parties as expressed
in the contract. Trucking and bobtail insurance policies are intended to ensure there
is liability coverage when leased equipment is used for both trucking and non-trucking
activities. The focus in National Continental and Hartford on the lessor’s bargained-
for contractual duties at the time of the accident is consistent with that purpose. We
conclude that the Supreme Courts of North Dakota and South Dakota would interpret
the Great West bobtail policy to exclude coverage for an accident that occurred while
the equipment was being used “in the business of” the trucking company lessee and
was covered by the lessee’s liability insurer. That is the situation presented in this
case, We therefore affirm the district court’s ruling that Miller’s claim against Heinis
was not covered by the Great West policy.

      The judgment of the district court is affirmed.
                     ______________________________

                                         -13-
