Hickman v. SAFECO Insurance Company of America, No. A03-2042 (MN 8/17/2004)
| Decision Date | 17 August 2004 |
| Docket Number | No. A03-2042.,A03-2042. |
| Parties | Dennis Hickman, Appellant, v. SAFECO Insurance Company of America, a foreign corporation, Respondent, Guaranty Residential Lending, Inc., a foreign corporation, Respondent. |
| Court | Minnesota Supreme Court |
Appeal from the District Court, Wright County, File No. CX03945.
Patrick J. Neaton, Neaton, Puklich & Klassen, (for appellant)
Marlene S. Garvis, Jardine, Logan & O'Brien, P.L.L.P., (for respondent SAFECO Insurance Company of America)
Kerry A. Trapp, Leonard, O'Brien, Spencer, Gale & Sayre, LTD., (for respondent Guarantee Residential Lending, Inc.)
Considered and decided by Peterson, Presiding Judge; Anderson, Judge; and Parker, Judge.*
UNPUBLISHED OPINION
Respondent Guaranty Residential Lending, Inc. (GRL), the holder of the mortgage on appellant Dennis Hickman's home, purchased an insurance policy through respondent SAFECO Insurance Company of America and its affiliate General Insurance Company of America (SAFECO/GICA)1 to protect its interest in appellant's home after appellant failed to comply with the mortgage requirement that he maintain insurance on the property. After appellant's home was damaged by a storm, he sought and was denied coverage under the policy issued by SAFECO/GICA. Appellant brought suit against SAFECO/GICA and GRL. The district court granted summary judgment for SAFECO/GICA on the grounds that it had no insurance agreement and/or contractual relationship with appellant and that appellant was not a third-party beneficiary under the policy. The district court also dismissed the complaint. We affirm in part and reverse and remand in part.
Appellant and his wife obtained a $58,100 loan that was secured by a first mortgage to Rothschild Financial Corporation. They also obtained a loan that was secured by a second mortgage to the Minnesota Housing Finance Agency. Rothschild assigned the first mortgage to Temple-Inland Mortgage Corporation, which later became GRL. Both mortgages required appellant to maintain at his expense, through an insurance company of his choice, fire and hazard insurance on the property.
In 1999, appellant failed to obtain the insurance required under the mortgages, and in March 2000, GRL's predecessor sent appellant a letter stating:
Your loan agreement requires that you have acceptable insurance in force.
In order to protect our mutual interest in the property, we have obtained coverage in accordance with the terms of your Loan Agreement/Mortgage . . . . The premium amount for this coverage that we have ordered will be charged to your escrow account. If you currently do not have an escrow account for insurance, one will be established on your behalf. The breakdown and amount of the new payment will be sent to you.
PLEASE NOTE THIS IS NOT A HOMEOWNERS POLICY. IT DOES NOT COVER FLOOD, RISING WATERS, EARTHQUAKE, THEFT OR LIABILITY. IT DOES NOT INCLUDE COVERAGE FOR BUILDING CODE UPGRADES. NO ATTEMPT WAS MADE TO DUPLICATE ANY INSURANCE YOU MAY HAVE HAD IN THE PAST. THE INSURANCE COVERAGE WE HAVE OBTAINED MAY BE MORE EXPENSIVE, MAY NOT BE ENOUGH TO COVER YOUR LOSS AND PROVIDE LESS COVERAGE THAN YOU COULD OBTAIN FROM AN AGENT OR COMPANY OF YOUR CHOICE.
. . . We encourage you to obtain an acceptable replacement policy from an agent or company of your choice.
The coverage section of the policy that GRL's predecessor obtained states:
We will provide insurance to "insured locations" for the Coverages and Perils Insured Against applicable to the "class of property" insured for which a premium is stated.
1. COVERAGE APPLICABLE TO "RESIDENTIAL PROPERTY"
A. COVERAGE 1A — Dwelling
We cover:
(1) the dwelling on the "insured location";
(2) structures attached to the dwelling . . . .
The policy also provided coverage for "other structures on an `insured location' separated from the dwelling by clear space" and "personal property, usual to the occupancy as a dwelling and owned or used by the `borrower' or members of the `borrower's' family residing with the `borrower' while it is on the `insured location.'"
Temple-Inland was the named insured on the policy until June 1, 2001, when GRL became the named insured. GRL and its predecessor renewed the policy annually. The policy provided $85,500 in coverage for the house, $8,550 for other structures, and $8,550 for personal property.
In June 2002, appellant's home and a separate structure were damaged by a storm. GRL filed a claim with SAFECO/GICA, which hired Crawford and Company to investigate the damage. Crawford determined that appellant's home was not a total loss and issued checks to GRL for $42,431.80 for damage to the house and $8,550 for damage to a separate structure. GRL held the insurance proceeds in escrow and did not apply them to satisfy the mortgage on appellant's home.
A federal agency, FEMA, inspected appellant's home and determined that it was a total loss. Appellant hired GDS Design and Build, Inc., to inspect the damage to his home. GDS determined that it would cost $114,048 to repair the home.
Appellant initiated this lawsuit seeking to recover the policy limit for damage to his home and seeking to compel GRL to apply the insurance proceeds to satisfy the mortgage on appellant's home. After the lawsuit began and after receiving authorization from appellant and his wife, GRL applied the insurance proceeds to the mortgage balance and issued appellant a check for $7,339.08, the remaining balance of the insurance proceeds. The district court granted summary judgment for SAFECO/GICA and dismissed the complaint. This appeal followed.
On appeal from a summary judgment, this court must ask two questions: (1) whether there are any genuine issues of material fact in dispute; and (2) whether the district court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). This court views the facts in the light most favorable to the party against whom judgment was granted and accepts as true the facts presented by that party. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).
Appellant argues that his home was insured under the policy, giving him an "insurable interest" under the policy, and that "clearly [a]ppellant was insured." SAFECO/GICA argues that this court should not address whether appellant had an insurable interest in the property because he did not raise that issue before the district court. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (). Because appellant argued in the district court that he was insured under the policy, we will address whether appellant had an insurable interest in the property in the context of whether appellant was insured under the policy.
Caselaw addressing whether a party has an insurable interest in property involves situations in which the property owner secured insurance for the property and later an event occurred that raised an issue as to whether the owner continued to have an insurable interest in the property. See, e.g., Crowell v. Delafield Farmers Mut. Fire Ins. Co., 463 N.W.2d 737, 738 (Minn. 1990) (); Hane v. Hallock Farmers Mut. Ins. Co., 258 N.W.2d 779, 781 (Minn. 1977) (). But this caselaw does not indicate that having an insurable interest in property by itself gives the party with the insurable interest a right to sue to enforce an insurance policy obtained by a third party.
Generally, a stranger to a contract acquires no rights under the contract. N. Nat'l Bank v. N. Minn. Nat'l Bank, 244 Minn. 202, 208, 70 N.W.2d 118, 123 (1955). The record contains no evidence of any contractual relationship between SAFECO/GICA and appellant. GRL obtained the insurance policy and is the named insured, and appellant is not listed as an insured. The insurance policy is a general policy that insures multiple residential and commercial properties for which GRL was the mortgagee and for which GRL requested coverage because it did not have evidence of insurance protecting its interests in the properties. GRL obtained coverage for appellant's property because he failed to comply with the mortgage requirement that he maintain insurance against loss by fire and other hazards. GRL notified appellant that the policy was not a homeowner's policy and that its coverage could differ from any coverage appellant had previously had on the home and might provide less coverage than a policy appellant could obtain through an agent or company of his choice. GRL also encouraged appellant to purchase a replacement policy from an agent or company of his choice.
Appellant argues that the district court incorrectly believed that GRL owned the properties insured under the policy. But although the memorandum accompanying the summary-judgment order incorrectly refers to the properties as being owned by GRL, appellant does not explain how this error affects the outcome of this case. To prevail on appeal, a party must show both error and that error caused prejudice. Midway Ctr. Assocs. v. Midway Ctr., Inc., 306 Minn. 352, 356, 237 N.W.2d 76, 78 (1975).
Appellant also cites the fact that GRL used appellant's escrow account to pay the insurance premium, but he cites no authority that indicates that that fact confers on him the right to sue to enforce the policy. See Twin City Sav. & Loan Ass'n v. Zimmerman, 411 N.W.2d 294, 295-97 (Minn. App. 1987) (...
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