Opinion
A21-0240
09-27-2021
St. Matthews Church of God and Christ, Appellant, v. State Farm Fire and Casualty Company, Respondent.
Edward E. Beckmann, Beckmann Law Firm, LLC, Bloomington, Minnesota (for appellant) Scott G. Williams, Alex L. Rubenstein, HKM, P.A., St. Paul, Minnesota (for respondent)
This opinion is nonprecedential except as provided by Minn. R. Civ. App. P. 136.01, subd. 1(c).
Ramsey County District Court File No. 62-CV-19-3752
Edward E. Beckmann, Beckmann Law Firm, LLC, Bloomington, Minnesota (for appellant)
Scott G. Williams, Alex L. Rubenstein, HKM, P.A., St. Paul, Minnesota (for respondent)
Considered and decided by Connolly, Presiding Judge; Reyes, Judge; and Florey, Judge.
CONNOLLY, Judge
Appellant-insured challenges the district court's grant of summary judgment to respondent-insurer on appellant's insurance-coverage claim arising from wind and hail damage. Appellant argues that the district court erred in concluding that it is not entitled to coverage under, either Minn. Stat. § 65A.10 (2020), or the code-compliance provision of respondent's insurance policy. Appellant also contends that it is entitled to preappraisal interest. We affirm.
FACTS
The facts of this case are undisputed. On June 11, 2017, a wind and hail storm damaged the property owned by appellant St. Matthews Church of God and Christ (St. Matthews) located in the City of St. Paul (the city). One year later, St. Matthews reported the storm loss to its insurer, respondent State Farm Property & Casualty Co. (State Farm). Over the next few months, State Farm worked with St. Matthews to process the claim, and in December 2018, State Farm made its last payment to St. Matthews to cover the loss.
In February 2019, St. Matthews's public adjuster, Troy Brown, emailed State Farm requesting payment for the cost to repair a common wall (the wall) between two low-sloped roofs on St. Matthews's property. In accordance with the applicable city building code, the wall needed to be repaired to conform to "current codes" before the city would issue a building permit. Brown informed State Farm that he would follow up with an estimate for "all city mandated related costs."
On March 28, 2019, Brown emailed State Farm a proposal and recommendation from an engineer to repair damage to the wall that was allegedly caused by the storm. The email included an estimate from a contractor to perform the repairs and an email from the city highlighting the pertinent sections of the Minnesota Energy Code. The engineer described the wall's condition as "hazardous," and the total cost of repair was estimated at $109,303.11, which included $72,975.95 in "code upgrades."
In response to the proposal and estimate, State Farm retained Rimkus Consulting Group (Rimkus) to evaluate the damage to the wall. After evaluating the wall, a representative from Rimkus concluded that the cracked and out-of-plumb condition of the wall "was a long-term condition unrelated to the storm event on June 11, 2017." The representative further opined that evidence of previous repairs showed that the cracks in the wall were a "known condition" that existed prior to the storm and that a design issue may have caused the cracking in the wall. Based on the report from Rimkus, State Farm issued a letter to St. Matthews denying coverage for the code upgrades.
Shortly before receiving State Farm's denial letter, St. Matthews commenced this action seeking an appraisal of the storm damage under the applicable policy and coverage for the costs associated with all required code upgrades to the wall. St. Matthews then formally demanded an appraisal, which was opposed by State Farm. The district court subsequently ordered the appraisal and, following a hearing, the appraisal panel determined that additional costs were necessary to address the code upgrades, and that those costs totaled $77,969.39. But the appraisal panel concluded that the "deteriorated conditions and out-of-plumb condition" of the wall was not caused by the June 11, 2017 storm, and that the amount of money necessary to repair the conditions caused to the wall by the storm totaled "$0.00."
Despite the appraisal-panel's decision that the out-of-plumb condition of the wall was not caused by the June 2017 storm, St. Matthews insisted that State Farm "render payment on the appraisal award, as well as $16,320.17 in statutory interest." State Farm declined to render payment because there was no insurance coverage to repair the wall. St. Matthews subsequently moved for summary judgment, claiming that it is entitled to coverage for the cost to repair the wall under the code-compliance provision contained in State Farm's insurance policy. State Farm filed a cross-motion for summary judgment, arguing, that because the damage to the wall was not caused by the June 11, 2017 storm, there is no coverage for the cost to repair the wall.
The district court determined that St. Matthews failed to "prove coverage for the disputed portion of the loss." Specifically, the district court determined that under the clear terms of State Farm's insurance policy, "building code coverage would apply only if the June 11, 2017 storm produced actual damage that caused a building code violation," and that based on the undisputed record, the "condition of the wall generating the building code violations was present before the storm and it was not altered by the storm." Thus, the district court granted State Farm's motion for summary judgment, and denied St. Matthews's motion for the same. This appeal follows.
DECISION
St. Matthews challenges the district court's grant of summary judgment to State Farm. We review a district court's legal conclusions on summary judgment de novo, viewing the evidence in the light most favorable to the party against whom the summary judgment was granted. Commerce Bank v. W. Bend. Mut. Ins. Co., 870 N.W.2d 770, 773 (Minn. 2015). More specifically, interpretation of an insurance policy and whether a policy provides coverage in a particular situation are questions of law that are subject to de novo review. Visser v. State Farm Mut. Auto. Ins. Co., 938 N.W.2d 830, 832 (Minn. 2020).
"Subject to the statutory law of the state, a policy of insurance is within the application of general principles of the law of contracts." Quade v. Secura Ins., 814 N.W.2d 703, 705 (Minn. 2012) (quotation omitted). Insurance policy language is to be given its plain and ordinary meaning. Gen. Mills, Inc. v. Gold Medal Ins. Co., 622 N.W.2d 147, 151 (Minn.App. 2001). "[Appellate courts] review the language of a contract to determine the intent of the parties." Caldas v. Affordable Granite & Stone, Inc., 820 N.W.2d 826, 832 (Minn. 2012). "When the language of a contract is clear and unambiguous, we enforce the agreement of the parties as expressed in the contract. But if the language is ambiguous-that is, susceptible to more than one reasonable interpretation-parol evidence may be considered to determine the intent of the parties." Id. (citation omitted).
"Whether a contract is ambiguous is a question of law that we review de novo." Id. (quotation omitted). "[W]here the language used in an insurance policy, which is chosen by the insurance company, is ambiguous or susceptible of two meanings, it must be given that meaning which is favorable to the insured." Garrick v. Northland Ins. Co., 469 N.W.2d 709, 713 (Minn. 1991) (quotation omitted). But "such interpretation should not go beyond the reasonable expectations of the insured." Id. Exclusions are construed in favor of the insured. Canadian Universal Ins. Co. v. Fire Watch, Inc., 258 N.W.2d 570, 572 (Minn. 1977).
Minnesota law mandates that Minnesota insurance policies including replacement cost insurance must provide coverage for repair costs associated with building-code requirements. See Minn. Stat. § 65A.10. Specifically, the statute provides:
Subject to any applicable policy limits, where an insurer offers replacement cost insurance: (i) the insurance must cover the cost of replacing, rebuilding, or repairing any loss or damaged property in accordance with the minimum code as required by state or local authorities . . . . In the case of a partial loss, unless more extensive coverage is otherwise specified in the policy, this coverage applies only to the damaged portion of the property.Id., subd. 1.
In order to comply with section 65A.10, State Farm's insurance policy contains a code compliance provision. This provision provides:
If this coverage is provided on a replacement costs basis we will pay the increased cost of replacing, rebuilding, repairing or demolishing any building in accordance with the minimum code in force at the time of loss as required by state or local authorities, when the loss or damage is caused by a Covered Cause Of Loss. In case of a partial loss to the covered property, we will pay only for the damaged portion of the property.
St. Matthews argues that State Farm is required to pay for the replacement costs of the wall under section 65A.10. To support its position, St. Matthews points to the following undisputed facts: (1) the storm that damaged St. Matthews's property is a covered loss under State Farm's insurance policy; (2) the drywall portion of the wall was damaged by the storm, but the damage to the masonry portion of the wall consisted of pre-existing, non-storm-related damage; (3) State Farm paid for all dry-wall related repair costs to the wall; (4) the city would not authorize drywall repairs unless the entire wall was brought up to code; and (5) the additional cost for the code upgrades was $77,969.39.
St. Matthews contends that because the wall was partially damaged by the storm, and State Farm paid for repairs to the drywall portion of the wall, the entire wall is covered by the loss. In other words, St. Matthews argues that, but for the storm-caused drywall damage to the wall, the pre-existing condition that failed to comply with the building code would not have been discovered and the code upgrades would not have been ordered. Thus, St. Matthews argues that State Farm must pay for the wall's replacement because the covered event directly caused the code upgrades.
State Farm argues that, under Minn. Stat. § 65A.10, building code coverage only applies to the damaged portion of the property. State Farm contends that because the storm only damaged the drywall covering the wall, and did not damage anything encompassing the code upgrade ordered by the city in the building permit, there is no coverage under the plain language of section 65A.10, subdivision 1.
The only case addressing section 65A.10, is a nonprecedential case from this court that was decided several years ago. See Grill v. North Star Mut. Ins. Co., No. A13-1012 (Minn.App. Jan. 27, 2014), review denied (Minn. Apr. 14, 2014). In that case, the insured submitted a claim for damage to her home resulting from an ice dam. Grill, 2014 WL 274089, at *1. After the claim was adjusted and a check was issued for the damage caused by the ice dam, the insured decided to "include demolition so she could see the full extent of the damage." Id. A city inspector subsequently visited the home and indicated that a long list of repairs would be required "before any permits are issued." Id. These repairs included re-wiring and re-plumbing the entire home and replacing and repairing the foundation. Id. The home was eventually demolished and the insured submitted a total-loss claim, arguing that her insurer was "required to pay the policy limit because section 65A.10, subdivision 1, requires insurance companies to pay any increase in repair costs due to complying with building codes." Id. at *1, 4.
This court rejected the insured's argument, concluding that Minn. Stat. § 65A.10, subd. 1, "is not ambiguous and does not require payment of [the insured's] total-loss claim." Id. at *4. The court explained:
Neither statutes nor caselaw expand [the insurer's] insurance coverage to include [the insured's] total-loss claim. No genuine issue of material fact exists about whether [the insured's] ice-dam damage resulted in a partial loss and a separate "building code enforcement that was not caused by the ice dam." Under the plain language of Minn. Stat. § 65A.10, subd. 1, [the insurer] is required to pay any relevant ordinance costs necessary to repair the portion of the property damaged by the ice-dam loss. Because the ice-dam damage did not cause the building-code violations, the statute does not dictate that [the insurer] was liable for payment to [the insured] of the cost of remedying the building-code violations in her home. We therefore conclude that the district court properly granted summary judgment to [the insurer].Id.
We conclude, as did the district court, that Grill is persuasive. See Dynamic Air, Inc. v. Bloch, 502 N.W.2d 796, 800 (Minn.App. 1993) (stating that unpublished opinions, now designated "nonprecedential" opinions, are not precedential, but they may be persuasive). Section 65A.10, subdivision 1, which was determined to be unambiguous by this court in Grill, requires an insurer to pay the cost of code upgrades, "when the damage is caused by a Covered Cause Of Loss," but that "[i]n the case of a partial loss . . . coverage applies only to the damaged portion of the property." Minn. Stat. § 65A.10, subd. 1. It is undisputed that although the storm damaged the drywall portion of the wall, it did not cause any damage to the wall related to the building code violations. Rather, the condition of the wall generating the building code violations was present before the storm and was not affected by the storm. In this manner, the case is similar to Grill, where the insurer paid for the damage caused by the ice dam, but was not liable for the cost of the code upgrades because "the ice-dam damage did not cause the building-code violations." See Grill, 2014 WL 274089, at *4. Notably, as the district court pointed out, the result may be different if "replacement of the drywall with a code-mandated higher grade and quality of drywall than the drywall damaged in the storm" was required, or if St. Matthews "demonstrated actual storm damage to any portion of the wall generating the city's [c]ode [u]pgrade order." But those are not the facts of this case. Thus, under the plain language of Minn. Stat. § 65A.10, subd. 1, St. Matthews is not entitled to coverage for the code upgrades.
St. Matthews also argues that it is entitled to coverage under the code-compliance provision of State Farm's insurance policy because "what constitutes 'the property' in State Farm's ordinance and law coverage is at least ambiguous and must be resolved in favor of St. Matthews." To support its position, St. Matthews points to the following language of the above-quoted code-compliance provision: "In the case of a partial loss to the covered property, we will pay only for the damaged portion of the property." (Emphasis added.) St. Matthews contends that because "the property" is not a defined term, it "must be interpreted consistent with how property is defined elsewhere in State Farm's policy." St. Matthews then refers to State Farm's policy, which defines "Covered Property" as "property as described under Coverage A-Buildings." The policy describes "Coverage A-Buildings," as follows:
Buildings, meaning the buildings and structures at the described premises, including:
1. Completed additions;
2. Fixtures, including outdoor fixtures;
3. Permanently installed:
a. Machinery; and
b. Equipment;
4. Your personal property in apartments, rooms or common areas furnished by you as landlord;
5. a. Fire extinguishing equipment;
b. Outdoor furniture;
c. Floor coverings; and
d. Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering . . . .
St. Matthews argues that there is no language in State Farm's policy "to suggest [that] a portion of one element of the building is not covered." In other words, St. Matthews's position is that "a wall is a wall, and the drywall was part of the wall. And since part of the wall was covered, all of the wall is covered" under State Farm's policy.
We are not persuaded. The disputed language in the code-compliance provision provides: "In the case of a partial loss to the covered property, we will pay only for the damaged portion of the property." This language essentially mirrors section 65A.10, subdivision 1, which, as discussed above, is unambiguous. And as discussed above, the masonry portion of the wall was not damaged by the storm; rather, only the drywall portion of the wall was damaged by the storm. Although the city would not issue a permit to replace the damaged drywall unless the masonry portion of the wall was brought up to code, the same situation occurred in Grill, where this court determined that the insurer was only "required to pay any relevant ordinance costs necessary to repair the portion of the property damaged by the ice-dam loss." 2014 WL 274089, at *1, 4. Similar to Grill, because the storm did not cause the building-code violations, State Farm's policy does not dictate that State Farm is liable for payment to St. Matthews for the cost of remedying the code violations to the wall.
St. Matthews further argues that "State Farm's policy must be reformed to meet statutory minimum protection." Indeed, the supreme court has recognized that if an insurance policy does not meet a statutory requirement, the policy must be reformed to meet the statutory requirement. Brua v. Minn. Joint Underwriting Ass'n, 788 N.W.2d 294, 306 (Minn. 2010). But St. Matthews's reformation argument is not properly before us because it was not raised below. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (stating that appellate courts generally do not consider issues that were not presented to and considered by the district court). Moreover, as mentioned previously, State Farm's policy essentially mirrors section 65A.10, subdivision 1, and provides the requisite coverage under the statute. The district court, therefore, properly granted summary judgment to State Farm. And because the district court did not err by granting summary judgment in favor of State Farm, we need not address St. Matthews's argument that it is entitled to preappraisal interest.
Affirmed.