Koskovich v. Am. Family Mut. Ins. Co.
| Decision Date | 25 June 2012 |
| Docket Number | A11-2206 |
| Parties | Jerome Koskovich, et al., Appellants, v. American Family Mutual Insurance Company, a foreign corporation, Respondent. |
| Court | Minnesota Court of Appeals |
This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2010).
Affirmed
Olmsted County District Court
Mark G. Stephenson, Geraldine M. Sutcliffe, Stephenson & Sutcliffe, P.A., Rochester, Minnesota; and
Peter C. Sandberg, Sandberg Law Firm, Rochester, Minnesota (for appellants)
Steven M. Sitek, Mark R. Bradford, Bassford Remele, Minneapolis, Minnesota (for respondent)
Considered and decided by Stoneburner, Presiding Judge; Hudson, Judge; and Collins, Judge.*
UNPUBLISHED OPINION
Appellants insurance policyholders challenge the district court's summary judgment declaring that their property losses related to mold, rot, and condensation were excluded from coverage under their all-risk policy with respondent insurance company. Because the district court did not err by concluding that appellant's losses were excluded from coverage; that the policy's ensuing-loss clause did not restore coverage; and that no genuine issue of material fact existed as to the application of supplementary coverage for collapse, we affirm.
In 1978, appellants Jerome and Marlyce Koskovich purchased a home in Byron that was built in 1904. Beginning in 1983, appellants insured the home with an all-risk insurance policy issued by respondent American Family Mutual Insurance Company. From 1991-95, appellants undertook substantial remodeling, which included rotating the house 45 degrees, "cut[ing] [the house] in half," removing a wing, and adding a new section. During the project, the exterior of the house was torn down to the studs and then re-sided. Because of new energy-code requirements, polypropylene vapor barriers were installed, with pinholes to assist with ventilation. Appellant Jerome Koskovich, a civil engineer and a former director of building and safety for the City of Rochester, acted as general contractor.
In 2008, Jerome Koskovich noticed water on an interior floor and determined that adhesive holding a rubber membrane to a roof had failed. In the course of investigatingthe damage, he discovered that the sheathing underneath the siding, as well as the home's framing, was wet and rotten, requiring removal and replacement of the siding and studs. Roof boards and rafters were also damaged by high water content and insects. He believed that the water damage had been caused by the condensation of warm inside air, which migrated to the cooler exterior wall surface, where it was trapped by the vapor barrier.
Appellants undertook extensive repairs and submitted a property-damage claim under the policy with respondent. Respondent's structural engineer inspected the property and noted moisture stains and dampness, which indicated to him that water had been held between the vapor barrier and the wood siding, with a severe and widespread level of moisture in the walls. He believed that the moisture was likely caused by condensation of water vapor where the vapor barrier was held tight to the sheathing, and by inward water migration from wet siding during rainy periods by capillary action through the vapor-barrier perforations. He opined that, although the home's framing was deteriorated and structurally compromised, it was not apparent that the structure was in imminent danger of collapse.
Respondent denied coverage for appellants' loss, and appellants filed a complaint in district court seeking a determination that the policy covered the damage to their home. The parties filed cross motions for summary judgment. After a hearing, the district court issued summary judgment in favor of respondent. The district court concluded that the damage from mold, rot, and insect infestation, which was excluded under the policy, was not separate from damage resulting from moisture. The districtcourt also concluded that an ensuing-loss clause did not bring the damage within the policy coverage and that supplemental coverage for collapse did not apply because there was no evidence on which a jury could reasonably find that the home was in danger of imminent collapse. This appeal follows.
When reviewing an appeal from summary judgment, this court determines whether any genuine issues of material fact exist and whether the district court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). Because the facts are undisputed, we must decide only whether either party is entitled to judgment as a matter of law. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).
The interpretation of an insurance policy presents a legal issue, which this court reviews de novo. Auto-Owners Ins. Co. v. Todd, 547 N.W.2d 696, 698 (Minn. 1996). We interpret insurance policies using general principles of contract law and give effect to the parties' intentions as expressed in the contract of insurance. Thommes v. Milwaukee Ins. Co., 641 N.W.2d 877, 879 (Minn. 2002). An insurance policy "must be construed as a whole, and unambiguous language must be given its plain and ordinary meaning." Henning Nelson Constr. Co. v. Fireman's Fund Am. Life Ins. Co., 383 N.W.2d 645, 652 (Minn. 1986). Ambiguities affecting coverage are resolved in favor of the insured, and exclusions are strictly construed against the insurer. Progressive Specialty Ins. Co. v. Widness by Widness, 635 N.W.2d 516, 518 (Minn. 2001); Thommes, 641 N.W.2d at 884.Language in a policy is ambiguous if it is susceptible to two or more reasonable interpretations. Medica, Inc. v. Atl. Mut. Ins. Co., 566 N.W.2d 74, 77 (Minn. 1997).
The insured bears the initial burden of demonstrating a prima facie case of coverage under the policy. SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 311 (Minn. 1995), overruled on other grounds by Bahr v. Boise Cascade Corp., 766 N.W.2d 910 (Minn. 2009). The burden then shifts to the insurer to prove the applicability of an exclusion. Id. at 313. If the insurer shows that an exclusion applies, the burden shifts back to the insured to demonstrate an exception to that exclusion, which then restores coverage. Id. at 314.
Appellants' policy is an all-risk policy, which covers all losses except those expressly excluded. Sentinel Mgmt. Co. v. N.H. Ins. Co., 563 N.W.2d 296, 299 (Minn. App. 1997) (citation omitted). The district court concluded that the plain language of the policy unambiguously excluded coverage for the damage to appellants' home because the policy contained exclusions for property loss resulting directly or indirectly from "condensation, mold, wet or dry rot."
Appellants assert that the district court erred by concluding that an exclusion applied to preclude coverage and claim that the all-risk policy did not unambiguously state that the water damage in their home was excluded from coverage. They point out that a different water-related exclusion in the policy specifically excludes from coverage water damage that is a consequence of surface or flood waters, drain sewer backups, and sub-surface waters. They argue that, because their water-related damage did not result from one of those enumerated water-related events, but rather from the installation of thevapor barriers, no water-related exclusion applies. And they maintain that, because their damages flowed from a covered event, coverage was established under the policy.1
The Minnesota Federal District Court recently granted summary judgment to an insurer based in part on the application of policy language similar to that in appellants' policy. Friedberg v. Chubb & Son, Inc., _ F. Supp. 2d _, 2011 WL 5078777 (D. Minn. Oct. 25, 2011). In Friedberg, the plaintiffs' home was constructed with an exterior insulation and finish system, which allegedly allowed water intrusion causing mold, rot, and damage to framing and insulation. Id. at *1-2. Their insurance policy contained an exclusion for losses "contributed to, made worse by, or in any way result[ing] from" construction defects. Id. at *5. The court concluded that coverage for appellants' losses was barred by the construction-defects exclusion, reasoning that the policy language "unambiguously includes both the faulty construction itself and the results of such faulty construction." Id. at *6.
In this case, the plain language of the policy states:
We do not cover loss to the property . . . resulting directly or indirectly from or caused by one or more of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. [The exclusions include] . . . deterioration . . . condensation, mold, wet or dry rot; . . . insects.
(Emphases added.) We conclude that, as in Friedberg, the policy language in this case unambiguously excludes losses resulting from the named exclusions, regardless of whether other causes contributed concurrently to those losses. In other words, the only reasonable interpretation of appellants' policy is that it excludes damage from mold, rot, insects, and deterioration, even if water damage caused or contributed to those damages. Cf. Medica, Inc., 566 N.W.2d at 77 (). Therefore, the district court did not err by concluding that the named exclusions apply to bar coverage for appellants' losses.
Appellants argue that some of their damages resulting from water intrusion, such as damage to electrical membranes of the house, are not excluded because they do not relate to the exclusions for mold or insects. But the policy also contains exclusions for "deterioration" and "condensation," and we cannot conclude that the district court erred by failing to distinguish appellants' mold-and-rot damage from additional damage, such as damage to the home's electrical membranes, which also was caused by...
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