Bergen v. Grinnell Mut. Reinsurance Co.

• Decision Date: 06 May 2013
• Docket Number: Civ. No. 12–2973 (RHK/JJG).
• Citation: 946 F.Supp.2d 867
• Court: U.S. District Court — District of Minnesota
• Parties: Robin BERGEN d/b/a R & D Enterprises, Plaintiff, v. GRINNELL MUTUAL REINSURANCE COMPANY, Defendant.

946 F.Supp.2d 867

Robin BERGEN d/b/a R & D Enterprises, Plaintiff,

v.GRINNELL MUTUAL REINSURANCE COMPANY, Defendant.

Civ. No. 12–2973 (RHK/JJG).

United States District Court,

D. Minnesota.

May 6, 2013.

Mark D. Covin, Jessica L. Klander, Bassford Remele, PA, Minneapolis, MN, for Plaintiff.

Beth A. Jenson Prouty, Stephen M. Warner, Arthur, Chapman, Kettering, Smetak & Pikala, P.A., Minneapolis, MN, for Defendant.

MEMORANDUM OPINION AND ORDER

RICHARD H. KYLE, District Judge.

INTRODUCTION

In this insurance action, Plaintiff Robin Bergen d/b/a R & D Enterprises (“Bergen”) alleges that his former insurer, Defendant Grinnell Mutual Reinsurance Company (“Grinnell”), must defend and indemnify him against claims brought by a third-party in Minnesota state court. Bergen now moves for partial summary judgmenton the duty to defend, and Grinnell cross-moves for summary judgment on the duties to defend and indemnify. For the reasons that follow, Bergen's Motion will be granted and Grinnell's Motion denied.

BACKGROUND

The key facts are undisputed. In 2002, Terry Karger hired Bergen, a contractor, to build a home in Frazee, Minnesota. Bergen served as the general contractor on the project and subcontracted work on the home's foundation to Carlson Custom Builders (“Carlson”). The home was completed in mid–2002.

At the time of construction, Bergen was insured by Grinnell under a commercial general liability (CGL) insurance policy. The policy provided that Grinnell would “pay those sums that [Bergen] becomes legally obligated to pay as damages because of ... ‘property damage’ to which this insurance applies.” It defined “property damage” as “physical injury to tangible property, including all resulting loss of use of that property,” but applied only to property damage (1) “caused by an ‘occurrence,’ ” meaning “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” and (2) that “occur[red] during the policy period.” The policy was in force from the time of construction until September 2006, when Bergen switched his insurance to Midwest Family Mutual Insurance Company (“Midwest”).

In October 2008, Jay Arvig purchased the home from Karger. Approximately two years later, he discovered a basement wall was bulging. Subsequent home inspections revealed that the home was improperly constructed, causing some of its walls to sway and bow due to improper “backfilling” of the foundation.

On August 4, 2011, Arvig sued Bergen and Carlson in the Becker County, Minnesota District Court, asserting two claims: (1) breach of warranty under Minnesota Statutes § 327A.01 et seq. (against Bergen) ¹ and (2) negligence (against Bergen and Carlson). Bergen tendered the claim to Grinnell, which disclaimed any duty to indemnify or defend. In its denial letter, Grinnell provided several reasons for its decision, but only one is relevant here, as it is the only basis upon which Grinnell now relies:

The Complaint alleges that the home was substantially completed in June or July of 2002. [Arvig] purchased the home on October 29, 2008. However, your Commercial General Liability policy with Grinnell terminated on September 2, 2006. As a result, in the event that any property damage resulted to [Arvig], that property damage would have occurred after your policy period.

(Covin Decl. Ex. C.) Bergen later asked Grinnell to revisit its decision, but the insurer declined.

On November 27, 2012, Bergen commenced the instant action, asserting that Grinnell had wrongly denied coverage and, hence, breached the insurance policy. He also seeks a declaration that Grinnell is obligated to defend and indemnify him in the underlying state-court action.² Grinnell now moves for summary judgment, arguing that it owes no duty to defend or indemnify, and Bergen cross-moves for summary judgment on Grinnell's duty to defend.³ The Motions have been fully briefed and are ripe for disposition.

STANDARD OF REVIEW

Summary judgment is proper if, drawing all reasonable inferences in favor of the nonmoving party, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the burden of showing that the material facts in the case are undisputed. Id. at 322, 106 S.Ct. 2548;Whisenhunt v. Sw. Bell Tel., 573 F.3d 565, 568 (8th Cir.2009). The Court must view the evidence, and the inferences that may be reasonably drawn from it, in the light most favorable to the nonmoving party. Weitz Co., LLC v. Lloyd's of London, 574 F.3d 885, 892 (8th Cir.2009); Carraher v. Target Corp., 503 F.3d 714, 716 (8th Cir.2007). The nonmoving party may not rest on mere allegations or denials, but must show through the presentation of admissible evidence that specific facts exist creating a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Wingate v. Gage Cnty. Sch. Dist., No. 34, 528 F.3d 1074, 1078–79 (8th Cir.2008).

Where, as here, the Court confronts cross-motions for summary judgment, this approach is only slightly modified. When considering Bergen's Motion, the Court views the record in the light most favorable to Grinnell, and when considering Grinnell's Motion, the Court views the record in the light most favorable to Bergen. “Either way, summary judgment is proper if the record demonstrates that there is no genuine issue as to any material fact.” Seaworth v. Messerli, Civ. No. 09–3437, 2010 WL 3613821, at *3 (D.Minn. Sept. 7, 2010) (Kyle, J.), aff'd,414 Fed.Appx. 882 (8th Cir.2011) ( per curiam ).

ANALYSIS

I. General principles

An insurer owes its insured two duties under Minnesota law: ⁴ the duty to defend and the duty to indemnify. E.g., St. Paul Fire & Marine Ins. Co. v. Nat'l Chiropractic Mut. Ins. Co., 496 N.W.2d 411, 415 (Minn.Ct.App.1993). “In determining the existence of [a duty to defend], a court will compare the allegations in the complaint in the underlying action with the relevant language in the insurance policy.” Meadowbrook, Inc. v. Tower Ins. Co., 559 N.W.2d 411, 415 (Minn.1997) (emphases in original). A duty to defend exists “if any part of the claims asserted ... in the underlying case arguably falls within the scope of coverage.” Ross v. Briggs and Morgan, 540 N.W.2d 843, 847 (Minn.1995) (internal quotation marks omitted). The existence of a duty to defend is a question of law for the Court. E.g., Franklin v. W. Nat'l Mut. Ins. Co., 574 N.W.2d 405, 406 (Minn.1998).

The policy at issue here covers “property damage” caused by an “occurrence,” if that property damage occurred during the policy period. Grinnell argues that these provisions conclusively establish it owes no duty to defend (or indemnify) Bergen in the underlying action, because in Minnesota coverage is triggered only once the underlying plaintiff has suffered damage; it does not matter when the wrongful act causing that damage was committed. In other words, while Bergen's (purportedly) defective construction—which took place during the policy period—may have led to the property damage asserted in the underlying action, Arvig cannot have suffered any damage until he purchased the home, more than two years after the policy expired. Accordingly, Grinnell contends that the underlying claims do not give rise to coverage and, hence, it is not obligated to defend or indemnify Bergen. ( See Def. Mem. at 8 (“Arvig was actually injured on or after the date when he purchased the subject home. While damage to the property may have occurred before that date, ... [t]here was no actual injury to Arvig before he purchased the home.”).)

II. The “owner-claimant rule”

The principle Grinnell invokes has been referred to by insurance commentators as the “owner-claimant rule.” Scott C. Turner, Insurance Coverage of Construction Disputes § 6:41 (2012); see also 3 Allan D. Windt, Insurance Claims & Disputes § 11:4 (6th ed. 2013). Grinnell suggests that the Minnesota Supreme Court has endorsed this rule, citing Singsaas v. Diederich, 307 Minn. 153, 238 N.W.2d 878 (1976), and Jenoff, Inc. v. New Hampshire Insurance Co., 558 N.W.2d 260 (Minn.1997). (Def. Mem. at 6.) Singsaas noted that coverage under an occurrence-based insurance policy is triggered not when the wrongful act is committed, but rather when “ the complaining party was damaged.” 238 N.W.2d at 880 (emphasis added). Jenoff quoted Singsaas for the same proposition. 558 N.W.2d at 261;see also In re Silicone Implant Ins. Coverage Litig., 667 N.W.2d 405, 415 (Minn.2003) (citing Singsaas: “[T]he time of the occurrence is not the time the wrongful act was committed but the time the complaining party was actually damaged.”). The key term in these cases is “complaining party.” Grinnell argues that by using this term, the Minnesota Supreme Court requires the underlying plaintiff to have suffered injury during the policy period in order for coverage to exist. Since Arvig (the “complaining party” and underlying plaintiff) could not have been damaged until he owned the home at issue, Grinnell contends there can be no coverage for Arvig's claims.

While there is some superficial appeal to this argument, it does not withstand close scrutiny. True, Singsaas and Jenoff utilized the phrase “complaining party,” but neither of those cases turned on who was asserting the claim for damages. In Singsaas, a construction company was insured under an occurrence-based policy from November 1971 to July 1972. The company negligently installed an elevator while the policy was in force, but the plaintiff was not injured until the elevator failed in August 1972, after the policy had expired. Singsaas found coverage lacking not because of who had suffered damages, but rather because the damages were for injuries that clearly occurred after the policy period had expired.238 N.W.2d at 880–81 (no coverage because policy...