Plaintiff Johnson’s barn and arena were severely damaged by fire. She collected the full insurance policy amount because the structure had been seriously undervalued in the policy. She continued the same insurance coverage into further periods. Later, the entire structure collapsed because of ice and snow accumulations on the roof. The insurance company denied coverage. The trial court decided in favor of Ms. Johnson. In this opinion, the Court of Appeals affirms that decision. The collapse from ice and snow was a separate event for which she had purchased insurance. The full amount of the policy must be paid.
In successive summary judgment orders the district court interpreted a multi-peril insurance policy to require payment of the coverage limit for the collapse of a fire-damaged barn and arena. The insurers appeal. Because the district court did not err in determining that the insurers' exposure was the coverage amount stated on the policy declaration sheet, in rejecting arguments that policy provisions reduced the coverage amount, or in concluding that the insurers failed to establish a triable issue on the negligent-care-of-property exclusion, we affirm.
Madelia Lake Crystal Mutual Insurance Company, a township mutual fire insurer, and Reinsurance Association of Minnesota, a statewide mutual insurer, jointly issued a multi-peril farm policy to Suzette Johnson. The policy extended from December 21, 1998, to December 21, 2001, and covered Johnson's residence, farm buildings, equipment, and personal property. The covered property included a farm outbuilding described as a horse barn and arena measuring 200 by 100 feet with an attached, 50-by-100-foot building. The structure with the attachment was insured for $335,000.
Fire destroyed the smaller, attached building in April 2000. To control the fire, firefighters cut about 50 feet from the west end of the larger building, leaving the remaining structure open to the elements. Johnson submitted a proof of loss for the fire damage that exceeded $500,000, and the insurers paid the $335,000 limit of coverage listed on the declaration sheet.
Johnson continued to use the structure after the fire, erecting portable stalls in the arena area and reconnecting the electricity and water. She made reconstruction plans but encountered legal challenges on the conditional-use permit and variance necessary for reconstruction. Johnson ultimately prevailed on those challenges. See Buss v. Johnson, 624 N.W.2d 781 (Minn.App.2001); Buss v. Blue Earth County Bd. of Adjustment, C3-01-2016 (Minn.App. June 18, 2002).
In affidavit and deposition testimony, Johnson stated that when the litigation prevented her from proceeding with reconstruction, she became concerned about whether the existing structure was adequately insured. To review her general insurance coverage and to make sure the existing structure was covered, she arranged a meeting in October 2000 with Dale Williams, the agent who had negotiated the joint policy. Williams is a board member of Reinsurance and the secretary-manager of Madelia Lake. Johnson told Williams she intended to rebuild the structure as it had existed before the fire, that she could not proceed until the litigation was resolved, and that she wanted to make sure that the existing structure was insured. According to Johnson, Williams told her that the $335,000 policy amount would be adequate to cover the remaining structure and coverage should be left in that amount. Johnson and Williams both testified that the structure was significantly undervalued in the original policy.
Williams's deposition testimony is more equivocal on the status of coverage for the structure. He acknowledges that the purpose of the October meeting was to review coverage limits including the coverage on the fire-damaged structure, that he knew Johnson could not rebuild until she obtained building and special-use permits, that he was aware that the end of the existing building was standing open, and that he told Johnson "[t]hat the coverage at that limit ($335,000) was still on the policy." But Williams also stated that retaining the coverage limit on the fire-damaged structure was tied to his understanding that the structure would be replaced or repaired. He concedes, however, that he did not tell Johnson that any coverage was conditioned on repair or replacement.
On December 14, 2000, the insurers issued a policy declaration of coverage for a policy period from December 21, 2000, to December 21, 2001, replacing "previously issued declarations," providing coverage for the horse barn and arena and the additional building in the amount of $348,400. The insurers indicate that the increase from $335,000 to $348,400 was an adjustment to reflect inflation of property values. The declaration sheet included an endorsement for replacement-cost coverage and an endorsement for "COLLAPSE--DUE TO WEIGHT OF ICE, SNOW OR SLEET." The premium was $3,465.86, essentially equivalent to the $3,346.06 premium for the previous year's coverage. It is undisputed that Johnson paid the premium.
A week and one-half into the new policy period, a portion of the remaining structure collapsed from the weight of ice and snow that had accumulated on its roof. A month later, the rest of the structure collapsed from the same cause.
The insurers denied coverage for both the December 30, 2000 and the January 30, 2001 collapse. The insurers based the denial on a policy exclusion for loss resulting from the insured's neglecting to use all reasonable means to preserve the property or from increasing the hazard by means within the insured's control or knowledge.
Johnson sued to recover the full coverage limit, asserting that the collapse resulted in a total loss and moved for summary judgment to declare the full limit available. In a cross-motion for summary judgment, the insurers disputed that the structure was a total loss and asserted policy limitations on coverage. The district court first granted summary judgment, declaring that the building was a total loss and the insurers' exposure was the declaration sheet's policy limit of $348,400 and, following a second hearing, granted summary judgment against the insurers' claim that Johnson's negligent care of the property excluded coverage. The insurers appeal, arguing that the district court erred (1) by declaring that the amount stated on the declaration sheet was the insurers' exposure for damages caused by the collapse of the structure, (2) by rejecting the insurers' arguments that the loss was partial rather than total and that coverage was limited by policy provisions, and (3) by granting summary judgment against the insurers' claim that Johnson's negligent care of the property excluded coverage.
The construction of an insurance policy presents a question of law, which the district court may properly decide on summary judgment and which we review de novo. Home Ins. Co. v. Nat'l Union Fire Ins. of Pittsburgh, 658 N.W.2d 522, 527 (Minn.2003). Provisions in an insurance policy, including the contents of the declaration page, are to be interpreted according to their plain, ordinary sense and consistent with what a reasonable person in the insured's position would have understood the words to mean. Farmers Home Mut. Ins. v. Lill, 332 N.W.2d 635, 637 (Minn.1983). If the provisions are subject to more than one reasonable reading, they are ambiguous and "the insurer's reading must give way to the insured's." Id.
The district court declared that the insurers' exposure for the loss caused by the collapse was $348,400, the amount stated on the declaration sheet issued December 14, 2000, and effective for the December 21, 2000 to December 21, 2001 policy period. The insurers contend that this stated amount did not represent available coverage but was included on the declaration sheet either for the purpose of closing out the claim for the fire damage sustained in the previous policy year or to be effective only if Johnson replaced or repaired the structure. For three reasons we reject this argument.
First, the new declaration page issued on December 14, 2000, plainly lists, as part of the farm outbuilding schedule, the horse barn and arena with the additional building. The declaration sheet states that the coverage for this structure is $348,400. On its face, the declaration sheet is not ambiguous, and the specific endorsement for "COLLAPSE--DUE TO WEIGHT OF ICE, SNOW OR SLEET" provides Johnson coverage up to $348,400 for the collapse. See Medica, Inc. v. Atl. Mut. Ins. Co., 566 N.W.2d 74, 77 (Minn.1997) (stating that when the language of an insurance contract is unambiguous, it must be given its plain and ordinary meaning).
Second, even if the fire loss in the previous policy year injected an ambiguity in the stated amount, the resolution of the ambiguity would still result in coverage. The insurers and Johnson in cross-motions for summary judgment agreed that all material facts had been submitted and, according to the district court's order, were essentially undisputed. Johnson's affidavit and deposition testimony are unequivocal in stating her understanding, based primarily on the October meeting with Williams, that the coverage amount stated in the 2000-01 declaration sheet was for the barn and arena as it existed in its fire-damaged condition. Although Williams's deposition testimony on his understanding of the coverage varies from Johnson's, he does not dispute Johnson's testimony. The significant difference is that Williams apparently thought the coverage amount was tied to rebuilding the structure. He admits, however, that he did not tell Johnson that the coverage was conditional nor did the new declaration sheet indicate any conditions on the coverage. In fact, Williams acknowledged that he believed the stated coverage on the horse barn and arena would help Johnson obtain the necessary permits and variance to rebuild.
On these facts, Johnson's understanding of the declaration sheet reflects what a reasonable person in her position would understand the coverage to be. See Nathe Bros., Inc. v. Am. Nat'l Fire Ins. Co., 615 N.W.2d 341, 344 (Minn.2000) ("ambiguities in a policy are generally resolved in favor of the insured"); Lill, 332 N.W .2d 637-38 (reaffirming principle that provisions on declaration sheet are to be interpreted in their ordinary sense and according to "what a reasonable person in the position of the insured would have understood the words to mean" (quotation omitted)).
Third, the premium amount for the 2000‑01 coverage was essentially the same as it had been for the 1999-2000 coverage. If the scheduled coverage had been reduced or discontinued, a commensurate reduction would have occurred in the premium. It is a settled tenet of insurance law that "the insurer is not to have a windfall in premiums paid for coverage not honored." Hilden v. Iowa Nat'l Mut. Ins. Co., 365 N.W.2d 765, 769 (Minn.1985). The insurers have provided no alternative explanation for how the premium was computed; thus the premium must be read to provide coverage for the existing fire-damaged barn and arena up to $348,400.
The insurers advance two arguments that would reduce the damage amount that Johnson could claim for the December and January collapses of the fire-damaged building.
First, in the initial summary judgment motion, the insurers argued that the collapse losses must be treated as events in a series of partial losses that include the fire damage and, therefore, the replacement-cost-coverage endorsement applies to limit the coverage to the amount Johnson actually spent to replace the damaged structure, minus the amount she received after the fire loss.
It is essentially undisputed that at the time of the fire the barn and arena and attached building were underinsured. In its order clarifying the initial summary judgment, the district court stated the actual value prior to the fire was $850,000. The estimate to repair the fire damage to the building exceeded $500,000. Because coverage was denied on the collapse, Johnson was financially unable to rebuild a comparable structure, and the court described the new facility constructed on the premises as "substantially smaller and ... overall [having] less value than the original structure." The court determined that the residual value of the fire-damaged structure was approximately $350,000 and that the December 2000 declaration sheet insured the fire-damaged structure in the amount of $348,400. The court also concluded that the damage from the collapse amounted to approximately $348,400 and that the collapse of the structure resulted in a total loss.
The record supports the district court's determination that the method used to determine the insurance amount, the issuance of the new declaration sheet, and the severity of the collapse resulted in a complete loss under the policy. The policy provides that the insurers "agree that in the event of a total loss, the limit of insurance for a building which is covered by this policy represents that building's value." This provision is consistent with the Minnesota valued-policy statute, Minn.Stat. § 65A.08, subd. 2 (2002) (providing that in the event of total loss, insurer shall pay full policy amount).
The purpose of the valued-policy statute is to prevent overinsurance by requiring prior valuation and avoiding litigation by prescribing definite standards of recovery in case of total loss. Nathan v. St. Paul Mut. Ins. Co., 243 Minn. 430, 433, 68 N.W.2d 385, 388 (1955). The insurers dispute the application of the valued-policy statute to this claim. It is true that township mutual fire insurers are exempt from the valued-policy statute. Ehlert v. Graue, 292 Minn. 393, 397, 195 N.W.2d 823, 826 (Minn.1972). But the coverage for collapse was provided not by the township mutual, but by the statewide reinsurance association. Furthermore, "[a]ll portions of [a] combination policy providing homeowner's insurance, including those issued by a township mutual insurance company, shall be subject to the provisions of chapter 65A ." Minn.Stat. § 67A.191, subd. 2 (2002). Thus the new policy declaration issued in December 2000 insuring against collapse from snow and ice was subject to the valued-policy statute. The court's application of the full policy amount to the collapse is supported by the record and consistent with Minnesota law.
The insurers' second argument on limiting coverage challenges the causation of the collapse. The insurers claim for the first time on appeal that the fire, rather than the snow and ice accumulation, was the proximate cause of the total loss of the barn, and that coverage should be limited to what could be obtained as a result of the fire. We note, first, that this issue was not raised in the trial court and cannot be raised for the first time on appeal. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn.1988) (only issues presented to and considered by the district court may be reviewed on appeal). But, second, even if the issue had been properly preserved, it has no merit. The insurers' expert stated that accumulated snow and ice together with the damaged condition of the building caused the collapse. Damages from concurrent causes are covered under an insurance policy so long as the covered cause constitutes a direct cause of the damage. SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 314 (Minn.1995). All evidence indicates that the snow and ice buildup constituted a direct cause of the loss of the building. See, e.g., Henning Nelson Constr. Co. v. Fireman's Fund Am. Life Ins. Co., 383 N.W.2d 645, 653 (Minn.1986) (establishing that one covered cause for collapse of foundation wall results in coverage even though testimony established eight other possible causes).
Finally, the insurers maintain that there is a genuine issue of material fact on whether Johnson fulfilled her contractual obligation to take reasonable care of the property after the fire. Thus the insurers argue that, even if the collapse loss is a separate and independent loss, the question of whether Johnson fulfilled her contractual obligations precludes summary judgment.
A moving party is entitled to summary judgment when the facts in the record do not raise a genuine triable issue on the existence of an essential element of the nonmoving party's claim. DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn.1997). The district court, in the second summary judgment, concluded that the insurers had provided "no evidence whatsoever that [Johnson] did anything to 'increase the hazard' " and that the record provides "no evidence" that Johnson "should have taken any additional action in the absence of any directives from the carrier." We agree that the evidence provided by the insurers is insufficient to create a triable issue on whether Johnson was negligent in failing to take reasonable care of the property after the fire.
We start from the fundamental fact that Johnson's policy had an endorsement that covered scheduled items for "COLLAPSE--DUE TO WEIGHT OF ICE, SNOW OR SLEET." The insurers do not dispute that the horse barn and arena were scheduled items, and the evidence consistently states that the weight of ice and snow was a direct cause of both the December and January collapses. To deny coverage under an exclusion, the insurer bears the ultimate burden of proving that a policy exclusion applies. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn.1989).
The district court accepted the insurers' evidence submitted by affidavit that the condition of the fire‑damaged wall was a cause of the collapse. The court reasoned that the insurers knew that the wall was open and unrepaired when it issued the declaration sheet for 2000-01 in mid-December of 2000, that the insurers did not suggest to Johnson that she shore up the wall, that under the policy the insurers retained the right of prior approval for any actions on the fire-damaged property, and that because of the ongoing litigation Johnson did not have the permits to repair the fire-damaged barn and arena.
These reasons are sufficient to warrant summary judgment against the insurers on the negligent-care-of-property exclusion. Furthermore, the record does not indicate the duration of the accumulation or that a reasonable person would have undertaken remedial action. It is undisputed that the insurers knew of the condition of the building and issued no directives for shoring up the wall. And finally, the insurers have failed to counter Johnson's evidence that she did not have licensing capability to restore the barn and arena to the condition that would have avoided the collapse. On this record, the district court did not err in granting summary judgment against the insurers' claim that coverage was excluded by Johnson's failure to act.
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