FIRE AND TORNADO FUND v. University

• Decision Date: 06 April 2005
• Docket Number: No. 20040228.,20040228.
• Citation: 2005 ND 75,694 N.W.2d 225
• Parties: STATE of North Dakota, by and through the STATE FIRE AND TORNADO FUND OF THE NORTH DAKOTA INSURANCE DEPARTMENT, Plaintiff, Counterclaim Defendant, Crossclaim Defendant, and Appellee, v. NORTH DAKOTA STATE UNIVERSITY, Defendant, Counterclaimant, Third-Party Plaintiff, and Appellant, v. Hartford Steam Boiler Inspection and Insurance Company, Third-Party Defendant, Crossclaimant, and Appellee.
• Court: North Dakota Supreme Court

694 N.W.2d 225

2005 ND 75

STATE of North Dakota, by and through the STATE FIRE AND TORNADO FUND OF THE NORTH DAKOTA INSURANCE DEPARTMENT, Plaintiff, Counterclaim Defendant, Crossclaim Defendant, and Appellee, v. NORTH DAKOTA STATE UNIVERSITY, Defendant, Counterclaimant, Third-Party Plaintiff, and Appellant, v. Hartford Steam Boiler Inspection and Insurance Company, Third-Party Defendant, Crossclaimant, and Appellee.

No. 20040228.

Supreme Court of North Dakota.

April 6, 2005.

Leo F.J. Wilking, Special Assistant Attorney General, Nilles, Hansen & Davies, Ltd., Fargo, N.D., for State Fire and Tornado Fund of the North Dakota Insurance Department.

Sara Gullickson McGrane, Felhaber Larson Fenlon Vogt, Minneapolis, MN, for North Dakota State University.

Terrence R. Joy (argued), Robins, Kaplan, Miller & Ciresi, L.L.P., Michael P. McNamee (appeared), Meagher & Geer, P.L.L.P., Minneapolis, MN; and W. Todd Haggart (appeared), Vogel Law Firm, Fargo, N.D., for Hartford Steam Boiler Inspection and Insurance Company.

SANDSTROM, Justice.

[¶ 1] North Dakota State University ("NDSU") appealed from a judgment dismissing its claims against the State Fire and Tornado Fund of the North Dakota Insurance Department ("Fund") and Hartford Steam Boiler Inspection and Insurance Company ("Hartford") to collect insurance proceeds for water damage to various campus structures following a June 2000 rainstorm. We conclude the district court correctly ruled, as a matter of law, the insurance policies in question did not provide NDSU coverage for the claimed water damage. We affirm.

I

[¶ 2] During the evening and early morning hours of June 19 and 20, 2000, a severe rainstorm struck the Fargo area, dumping approximately seven inches of rain during a seven-hour period. By the time the rainfall stopped at about 2 a.m. on June 20, a large amount of water, waist-deep in some places, had accumulated in and around NDSU's campus. The FargoDome is not owned by NDSU, but the facility is located near the campus and is connected to NDSU's heating plant and Industrial Agriculture and Computer Center ("IACC") by a 4,295 foot-long steam tunnel. Water on the surface of the ground outside of the FargoDome began cascading through its loading dock doors, and by 4 a.m. on June 20, more than eight feet of water covered its floor. At about 11 a.m. on June 20, NDSU employees who were inspecting the steam tunnel heard a surge of water in the tunnel coming from the direction of the FargoDome and exited the tunnel. The heating plant and the IACC received significant amounts of water through the steam tunnel, and consultants concluded the "floodwater in the FargoDome contributed significantly to the flooding in the Heating Plant and the IACC."

[¶ 3] NDSU also suffered water damage to its underground direct buried steam line, which branches off from the main steam line in the steam tunnel and supplies steam to many of NDSU's buildings. The direct buried steam lines are connected every 200 feet by ten-foot by ten-foot concrete vaults. The steam line between each vault is buried three to four feet below the surface of the ground. The vaults are accessed through manhole covers on the concrete ceilings of the vaults, which are two inches above ground level. Moisture entered the insulation of the direct buried steam line system, wearing away the insulation and causing the lines to fail.

[¶ 4] NDSU submitted claims for coverage to their insurers, the Fund and Hartford. The insurers denied coverage, claiming the water damage was excluded by the flood and surface water exclusions included in their respective policies. In February 2002, the Fund filed a declaratory judgment action against NDSU, seeking a declaration that its property insurance policy did not cover NDSU's claim for losses. NDSU filed a counterclaim for coverage against the Fund and filed a third-party claim against Hartford for coverage under its policy. Hartford cross-claimed against the Fund for contribution or indemnity.

[¶ 5] The parties filed cross-motions for summary judgment. The district court granted summary judgment in favor of Hartford regarding NDSU's claim for damages to its steam tunnel, the IACC and the direct buried steam line, and in favor of the Fund regarding the claim for damages to the heating plant and the IACC. The court ruled as a matter of law that the respective insurance policies did not cover the water damage to the steam tunnel, the heating plant, the IACC and the direct buried steam line because of surface water exclusions contained in the policies. After the parties settled NDSU's other claims against the insurers, the court entered a final judgment.

[¶ 6] The district court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. §§ 32-23-01 and 27-05-06. NDSU's appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, §§ 2 and 6, and N.D.C.C. §§ 32-23-07 and 28-27-01.

II

[¶ 7] NDSU argues the district court erred in granting summary judgment in favor of the Fund and Hartford.

[¶ 8] The standard of review for summary judgments is well established. In Zuger v. State, 2004 ND 16, ¶ 7, 673 N.W.2d 615 (citations omitted), we explained:

Summary judgment is a procedural device for promptly disposing of a lawsuit without a trial if there are no genuine issues of material fact or inferences which can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law.

"Whether summary judgment was properly granted is `a question of law which we review de novo on the entire record.'" On appeal, this Court decides if the information available to the trial court precluded the existence of a genuine issue of material fact and entitled the moving party to summary judgment as a matter of law. Summary judgment is appropriate against parties who fail to establish the existence of a factual dispute on an essential element of a claim on which they will bear the burden of proof at trial.

Mere speculation is not enough to defeat a motion for summary judgment, and a scintilla of evidence is not sufficient to support a claim. Id. at ¶ 8.

A

[¶ 9] NDSU contends the court erred in ruling the surface water exclusions in the insurers' policies applied and precluded its claim for water damage to the steam tunnel, the heating plant, and the IACC.

[¶ 10] The Fund's insurance policy provides for a maximum aggregate payout of $10,000 for flood damage per occurrence and provides:

B. EXCLUSIONS

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

....

g. Water

(1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not;

[¶ 11] Hartford's policy similarly provided:

B. EXCLUSIONS

1. We will not pay for loss or damage caused by or resulting from:

....

d. Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not.

[¶ 12] Interpretation of an insurance contract is fully reviewable on appeal and is a question of law for a court to decide, so we independently examine and construe the insurance contract to determine whether the district court erred in its construction. Grinnell Mut. Reinsurance Co. v. Lynne, 2004 ND 166, ¶ 20, 686 N.W.2d 118. In Ziegelmann v. TMG Life Ins. Co., 2000 ND 55, ¶ 6, 607 N.W.2d 898 (citations omitted), we summarized the standards for construing an insurance contract:

Our goal when interpreting insurance policies, as when construing other contracts, is to give effect to the mutual intention of the parties as it existed at the time of contracting. We look first to the language of the insurance contract, and if the policy language is clear on its face, there is no room for construction. "If coverage hinges on an undefined term, we apply the plain, ordinary meaning of the term in interpreting the contract." While we regard insurance policies as adhesion contracts and resolve ambiguities in favor of the insured, we will not rewrite a contract to impose liability on an insurer if the policy unambiguously precludes coverage. We will not strain the definition of an undefined term to provide coverage for the insured. We construe insurance contracts as a whole to give meaning and effect to each clause, if possible. The whole of a contract is to be taken together to give effect to every part, and each clause is to help interpret the others.

[¶ 13] Exclusions from coverage in an insurance contract must be clear and explicit and are strictly construed against the insurer. Nationwide Mut. Ins. Cos. v. Lagodinski, 2004 ND 147, ¶ 9, 683 N.W.2d 903. Although we construe exclusionary provisions strictly, we will not rewrite a contract to impose liability on an insurer if the policy unambiguously precludes coverage. Id.

[¶ 14] Because the term "surface water" is not defined in the policy, we look to its plain and ordinary meaning. In 5 Appleman, Insurance Law and Practice § 3145, at p. 463 (1970) (footnote omitted), "surface water" is described as:

water which is derived from falling rain or melting snow, or which rises to the surface in springs, and is diffused over the surface of the ground, while it remains in such diffused state, and which follows no defined course or channel, which does not gather into or form a natural body of water, and which is lost by evaporation, percolation, or natural drainage.

See also Heller v. Fire Ins. Exch., 800 P.2d 1006, 1008-09 (Colo.1990)

(footnotes omitted) ("Surface water is water from melted snow, falling rain, or rising springs, lying or flowing naturally on the earth's surface, not gathering into or forming any more definite body of water than a mere bog, swamp, slough, or marsh, and lost by percolation, evaporation or natural drainage. Surface water...