Altru Health System v. American Protection Insurance Company, Civil No. A2-98-53 (D. N.D. 9/23/1999)
| Decision Date | 23 September 1999 |
| Docket Number | Civil No. A2-98-53. |
| Parties | Altru Health System and Altru Specialty Services, Inc., Plaintiffs, v. American Protection Insurance Company, Defendant. |
| Court | U.S. District Court — District of North Dakota |
Before the court are cross motions for summary judgment (doc. # s 30, 34) as well as plaintiff's motion to amend1 (doc. #26). The parties have basically stipulated to the following facts for purposes of the summary judgment motions.
Briefly stated, this somewhat novel insurance coverage dispute arose out of the tragic flooding which devastated the greater Grand Forks, North Dakota area during the spring of 1997. Prior to the flood, plaintiff Altru Health System and Altru Specialty Services purchased a "Highly Protected Risk" (HPR) insurance policy, a form of all-risk policy, from defendant. See Ex. A accompanying Pl.'s Br. in Supp. of Mot. for Summ. J. The policy was in full force and effect during all times pertinent, and contained the following provisions:
E. SPECIAL PROVISIONS APPLYING TO TIME ELEMENT COVERAGE
6. Interruption by Civil Authority - This Policy is extended to include the actual loss sustained by the Insured, resulting directly from an interruption of business as covered hereunder, during the length of time, not exceeding two consecutive weeks, when as a direct result of damage to or destruction of property within 1,000 feet of the premises herein described by the peril(s) insured against, access to such described premises is specifically prohibited by order of civil authority.
. . . .
All claims for loss, damage or expense arising out of any one Flood occurrence shall be adjusted as one claim, and from the amount of such adjusted claim there shall be deducted the following:
$25,000. For loss, damage or expense to other than real or personal property.
A $1,500,000 sublimit of liability applies to any one flood disaster and a $1,500,000 [sublimit] of liability applies in any single one year period commencing August 1 at this location.
Flood waters never entered Altru hospital. However, much of the hospital parking lot was destroyed to make way for a ring dike. Flood waters did cause damage within 1,000 feet of Altru Hospital and on April 19, 1997, the North Dakota State Health Officer ordered the evacuation of all patients residing therein. The hospital was closed from April 20, 1997 until May 9, 1997. Full services were restored on May 12, 1997.
Plaintiff subsequently presented defendant with the following claims for loss:
Business interruption by order of civil authority: $3,424,070
Extra expense: $280,672
Parking lot damage (less a $500,000 deductible): $1,066,275
Repair and cleanup of parking lot: $ 191,247
__________
Total: $4,962,264
The claim for business interruption by order of civil authority represented Altru's calculation of actual loss sustained during two consecutive weeks of the evacuation.
Defendant conceded coverage under the aforementioned civil authority (CA) provision. However defendant limited total indemnities for all of the foregoing loss to $1,500,000, the coverage limit provided in the flood endorsement.
Plaintiff responded with this action, maintaining that the CA provision clearly and unambiguously affords coverage for business loss for a period of two consecutive weeks when its provisions are triggered by the occurrence of a peril covered by the policy. Defendant counterclaimed for declaratory judgment, maintaining that a reading of the policy as a whole clearly and unambiguously reveals that the coverage afforded by the CA provision operates subject to the triggering peril and is therefore limited by the sublimits applicable to that peril, in this case, the $1,500,000 sublimit contained in the flood endorsement. The instant motions ensued, came on for hearing on August 16, 1999, and were thereafter taken under advisement.
Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). A fact is "material" if it might affect the outcome of a case, and a factual dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Churchill Bus. Credit, Inc. v. Pacific Mut. Door Co., 49 F.3d 1334, 1336 (8th Cir. 1995).
The "basic inquiry" for purposes of summary judgment is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one sided that one party must prevail as a matter of law." Quick v. Donaldson Co., Inc., 90 F.3d 1372, 1376 (8th Cir. 1996) (citing Anderson, 477 U.S. at 251-52). Along these lines, courts in North Dakota view the interpretation of an insurance policy as a question of law. Dundee Mut. Ins. Co. v. Marifjeren, 587 N.W.2d 191, 193 (N.D. 1998). Consequently, such cases are particularly amenable to summary judgment. See John Deere Ins. Co. v. Shamrock Indus., Inc., 929 F.2d 413, 415 (8th Cir. 1991).
When construing an insurance policy, North Dakota courts seek to give effect to the mutual intent of the parties as it existed at the time the contract was formed. See Landis v. CNA Ins., 589 N.W.2d 590, 591-92 (N.D. 1999). To accomplish this aim, North Dakota courts look first to the policy language itself. Id. at 592; Marifjeren, 587 N.W.2d at 193. Where a policy term is self explanatory and subject to only one meaning, the inquiry ends. Landis, 589 N.W.2d at 592; Marifjeren, 587 N.W.2d at 193. If coverage hinges on an undefined term, the plain, ordinary meaning of the term is applied in interpreting the contract. Landis, 589 N.W.2d at 592.
An ambiguity exists in an insurance policy under North Dakota law when good arguments can be made for two contrary positions regarding the meaning of a term. Marifjeren, 587 N.W.2d at 194. In these cases, North Dakota courts construe the term in favor of the insured. Id. However, North Dakota courts will not strain the definition of a term to create an ambiguity. See Close v. Ebertz, 583 N.W.2d 794, 796 (N.D. 1998).
As previously mentioned, plaintiff contends that the applicable measure of its coverage under the CA provision is its actual loss sustained within a period of two consecutive weeks during the evacuation, "as set forth in the [provision] itself." See Pl.'s Br. in Supp. of Mot. for Summ. J. Plaintiff argues:
It is illogical and contrary to the language contained in the [CA] provision of the policy for [defendant] to argue that flood limits found in an endorsement to the policy apply when there is clear and explicit language . . . within the [CA provision] that specifically state[s] that coverage is for the actual loss sustained within a period not to exceed two weeks. There is nothing . . . to remotely suggest that the [flood sublimit] . . . somehow [is] imported into the [CA] section without ever being mentioned. In this regard, [defendant] could have very easily put language in the [CA] section of the policy [limiting CA] coverage . . . to the limits of coverage for the [triggering] peril . . . .
See id.
Defendant, on the other hand, maintains that a plain reading of the whole policy results in the conclusion that the coverage provided by the CA provision operates subject to the $1,500,000 flood sublimit, and, that limit having been exhausted, there is no other coverage available. See Mem. In Supp. of Def.'s Mot. for Summ. J. Defendant establishes the connection between the CA provision and the flood endorsement as follows: First, defendant notes that the provision itself only affords coverage for loss due to an order caused "by the peril(s) insured against." Since the coverage is dependent upon and cannot be triggered without the occurrence of a covered peril, defendants contend that the CA provision operates subject to that peril and any of its accompanying limitations. Next, defendant points to the "Application to Coverage" paragraphs of subparts D ("General Conditions") and E ("Special Provisions Applying to Time Element Coverage") of the policy's Coverage Form, each of which provide
When Time Element Coverage2 is provided, for the purpose of such coverage any reference herein to direct loss or damage to the described property shall be construed to mean Time Element loss, as conditioned and limited in such coverage, [resulting directly from] [caused by] such direct loss or damage.
Defendant next turns to the policy preamble's "Limits of Liability" paragraph, which states:
All liability for loss or expense under this Policy for any one occurrence shall not exceed the smallest of the latest Policy amount entered on the Insurance Summary Page or any applicable sublimits of liability entered elsewhere in the Policy including but not limited to its Location Pages, Policy Coverage Sections and Endorsements. Sublimits are part of and not in addition to the Policy amount or other sublimits provided in the Policy.
Next, defendant argues that the policy's Location Pages direct the reader to the aforementioned flood endorsement for all damages arising out of a flood occurrence. Once there, defendant maintains that the flood endorsement ...
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