Opinion
No. A04-1088.
Filed March 8, 2005.
Appeal from the District Court, Roseau County, File No. C1-03-57.
Jerome S. Rice, and Karl A. Oliver, (for appellant)
Thomas Bell Caswell, III, Zelle, Hofmann, Voelbel, Mason Gette, (for respondent)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2004).
UNPUBLISHED OPINION
Appellant insured challenges the summary judgment for respondent insurer, arguing that damage caused by the backup of sewers and drains is covered by an endorsement to its insurance policy that can be read free from exclusionary language in the underlying policy. Because rules of insurance policy construction dictate that we construe the policy and the endorsement together, we affirm.
FACTS
In June 2002, intense rainfall caused the Roseau River to overflow its banks, flooding the city of Roseau. Appellant Post #24 sustained water damage to its premises in downtown Roseau. The parties have stipulated that water entered appellant's basement through the backup of sanitary and storm sewers and drains, that this backup was set in motion by the flooding, and that the flooding was a necessary condition for the backup of those sewers and drains.
Appellant filed this suit seeking coverage for its damages under an all-risk insurance policy issued by respondent TIG Insurance Company. The policy provides broad casualty coverage "except as otherwise excluded or limited." A general statement of covered causes also states an exception for exclusions declared in Section B.
Section B of the policy outlines several exclusions, including the following list of water damages:
1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not;
2) mud slide or mudflow; or
3) water under the ground surface pressing on, or flowing or seeping, through: a) foundations, walls, floors or paved surfaces; b) basements, whether paved or not; or c) doors, windows or other openings.
The exclusion list begins with this general declaration:
We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
The TIG policy was accompanied by a document titled "TUX Property ENHANCEMENT Endorsement" that outlines the following causes of loss:
Because neither party has explained the meaning of the term "TUX" to this court, we do not assign any particular meaning to it.
PROPERTY/BUSINESS INCOME CAUSES OF LOSS
Special Form Included Back up of Sewers Drains Included Surface Water NO Water Below Surface NO Marring Scratching YES Artificially generated electrical current YES
The TUX endorsement is labeled "PROPOSAL/SUMMARY" and contains the following disclaimer: "This is a summary of coverages for your convenience only. Please refer to the policy(ies) for actual coverage description."
In April 2004, the district court granted summary judgment for respondent. The court concluded that the policy covered the backup of sewers and drains, but that coverage was nevertheless subject to the policy's exclusion for damages caused by floodwater. Furthermore, the court held that because the June 2002 flooding was an excluded peril under the policy, the anti-concurrent clause in the policy made the exclusion applicable regardless of other contributing causes of the loss. Finally, the court concluded that the TUX endorsement did "not provide a separate and independent grant of coverage that is not subject to the Policy exclusions."
DECISION
On appeal from a summary judgment when there are no disputed issues of material fact, this court reviews de novo whether the district court erred in its application of the law. Kelly v. State Farm Mut. Auto. Ins. Co., 666 N.W.2d 328, 330 (Minn. 2003). Interpretation of the language in an insurance policy is also subject to de novo review. Auto-Owners Ins. Co. v. Forstrom, 684 N.W.2d 494, 497 (Minn. 2004).
Appellant argues that because it purchased an "endorsement" and that document is labeled as an "enhancement" endorsement, this suggests coverage independent of the exclusions in the underlying policy. See Indep. Sch. Dist. 833 v. Bor-Son Constr., 631 N.W.2d 437, 441 (Minn.App. 2001) (stating that an endorsement is "[a]n amendment to an insurance policy" that "represents the owner's intent to insure something not covered by the existing policy"), review denied (Minn. Oct. 16, 2001). For numerous reasons, we conclude that appellant's argument is without merit.
(a) First, above the "enhancement endorsement" title the document is labeled "PROPOSAL/SUMMARY," and at the bottom of the document it states: "This is a summary of coverages for your convenience only. Please refer to the policy(ies) for actual coverage description." The label of "summary," along with the disclaimer, is a patent reference back to the main policy. We also find no merit in appellant's supportive argument that the underlying policy does not cover the backup of sewers and drains. To the contrary, because the policy is an "all-risk" policy, recovery is allowed for "all fortuitous losses not resulting from misconduct or fraud, unless the policy contains a specific provision expressly excluding the loss from coverage." General Mills, Inc. v. Gold Medal Ins. Co., 622 N.W.2d 147, 152 (Minn.App. 2001) (quotation omitted), review denied (Minn. Apr. 17, 2001). The policy states no exception regarding sewer and drain backup. Thus, the policy provides coverage for these losses subject to the applicable policy conditions and exclusions.
Appellant points out that the quoted language is in small print, implying that it is hidden. But this language is contained in a single line with a distinctive font, and it is, therefore, easily observable.
Respondent does not dispute that sewer and drain backup is a covered "cause of loss" subject to the applicable policy conditions and exclusions.
(b) We must also look at the policy as a whole in construing its terms and conditions. Watson v. United Servs. Auto. Ass'n, 566 N.W.2d 683, 692 (Minn. 1997). Accordingly, the endorsement and the underlying policy must be read together. See Bobich v. Oja, 258 Minn. 287, 294, 104 N.W.2d 19, 24 (1960) (stating that "endorsements and the policy must be construed together"); see also Dairyland Ins. Co. v. Implement Dealers Ins. Co., 294 Minn. 236, 245, 199 N.W.2d 806, 811 (1972) (stating that endorsements "should be construed, if possible, so as to give effect to all provisions" in the underlying policy); Bor-Son Constr., 631 N.W.2d at 441 (stating that Minnesota courts have "construed an endorsement to be part of an existing contract, not a separate and independent document"). These standards confirm that the TUX endorsement is merely a "summary" that requires reference back to the main policy.
(c) The endorsement contains conflicting provisions. Although appellant argues that the provision stating "Back up of Sewers Drains" — "Included" stands out, we also note that the provision stating "Water Below Surface" — "NO" is equally prominent. Because water below surface is a specific cause of sewer and drain backup, and the endorsement does not resolve this conflicting language on its own, the endorsement on its face begs for attention to the main policy.
(d) Finally, the parties acknowledge that appellant did not pay an additional premium for the TUX endorsement, and there is no evidence suggesting there were separate negotiations pertaining to the endorsement. These facts conflict with appellant's assertion that the endorsement provided additional coverage beyond that contemplated by the main policy.
Appellant insists that any merit in the preceding arguments is offset by the fact that a reference back to policy exclusions renders the endorsement illusory. This is not the case. The exclusion destroys coverage for flood-induced backup of sewers and drains, but it does not contain language sufficient to destroy coverage for backups due to other causes.
Lastly, appellant argues that it is entitled to summary judgment based upon the doctrine of reasonable expectations. Essentially, the doctrine "protects the objectively reasonable expectations of insureds even though painstaking study of the policy provisions would have negated those expectations." Jostens, Inc. v. Northfield Ins. Co., 527 N.W.2d 116, 118 (Minn.App. 1995) (quotation omitted), review denied (Minn. Apr. 27, 1995). Factors to be considered when applying the doctrine are "the presence of ambiguity, language which operates as a hidden exclusion, oral communications from the insurer explaining important but obscure conditions or exclusions, and whether the provisions in a contract are known by the public generally." Hubred v. Control Data Corp., 442 N.W.2d 308, 311 (Minn. 1989). Here, because there is no suggestion that the relevant exclusion was hidden or otherwise inconspicuous, we conclude that the doctrine of reasonable expectations does not apply. See Amos ex rel. Amos v. Campbell, 593 N.W.2d 263, 269-70 (Minn.App. 1999) (declining to apply the doctrine of reasonable expectations where the policy exclusions were clearly marked under the heading "EXCLUSIONS").
We conclude that the TUX endorsement does not provide a separate and independent grant of coverage that is not subject to the policy exclusions. Because the June 2002 flooding is an excluded peril under the policy, appellant is barred from recovering for its losses under the policy. The district court's summary judgment to respondent was proper.