Leamington Co. v. NONPROFITS'INS. ASS'N

• Decision Date: 03 August 2000
• Docket Number: No. C9-98-2056.,C9-98-2056.
• Citation: 615 N.W.2d 349
• Parties: LEAMINGTON CO., petitioner, Appellant, v. NONPROFITS' INS. ASSOCIATION, an Interinsurance Exchange, Respondent.
• Court: Minnesota Supreme Court

615 N.W.2d 349

LEAMINGTON CO., petitioner, Appellant, v. NONPROFITS' INS. ASSOCIATION, an Interinsurance Exchange, Respondent.

No. C9-98-2056.

Supreme Court of Minnesota.

August 3, 2000.

Paul C. Peterson, William L. Davidson, David J. Retzlaff, Lind, Jensen & Sullivan, P.A., Minneapolis, for appellant.

Charles J. Noel, Jennifer Kjos Fackler, Charles J. Noel & Associates, P.A., St. Paul, Patricia E. Kuderer, Hoff, Barry & Kuderer, P.A., Eden Praire, for respondent.

Jeffrey J. Lindquist, Pustorino, Tilton & Parrington, P.A., Minneapolis, for amicus curiae Insurance Fed. of Minnesota.

Paul A. Sortland, Sortland Law Office, Minneapolis, for amicus curiae Minnesota Trial Lawyers Association.

Heard, considered, and decided by the court en banc.

OPINION

PAUL H. ANDERSON, Justice.

This matter comes to us on appeal from a district court grant of summary judgment for Nonprofits' Insurance Association (NIA). NIA moved for summary judgment, arguing that Leamington Co.'s breach of contract action was barred because Leamington failed to submit a sworn proof of loss 60 days after one was requested by NIA. NIA also argued that because Leamington was not a named insured on its policy, Leamington had no standing to sue. The Minnesota Court of Appeals affirmed the district court, holding that Leamington's failure to submit the proof of loss within 60 days barred it from any recovery. The court of appeals did not decide whether Leamington had standing to sue under the policy because the issue was rendered moot by the court's holding on the proof of loss issue. We reverse, holding that Leamington's action is not barred by its failure to submit the proof of loss within 60 days of NIA's request. Further, because we conclude that there are material issues of fact regarding Leamington's standing under the policy, we reverse the district court's conclusion on this issue and remand for further proceedings.

Appellant, Leamington Co., a Minnesota corporation, owns the Francis Drake Building (Drake) in Minneapolis. From 1983 until May 1996, Leamington leased the Drake to People Serving People, Inc. (PSP), a Minnesota nonprofit corporation. PSP used the 144-room Drake as a homeless shelter. A 10-year lease agreement, signed in 1990, required PSP to maintain liability and hazard loss insurance equal to the value of the Drake. The lease also required that Leamington be named in the insurance policy as the owner-insured.

From May 1994 until May 1996, insurance on the Drake was provided under annual policies issued by respondent NIA to PSP. During the times relevant to this appeal, PSP purchased these policies through independent agent Acordia of Minnesota and its predecessors.¹ Leamington introduced evidence on summary judgment indicating that Acordia and the predecessor agents were aware of Leamington's lease requirement that it be listed as an owner-insured and the 1994-1995 policy listing Leamington as a loss payee. Leamington also produced evidence that Acordia had been provided with a copy of the lease between PSP and Leamington and that Acordia was aware that the primary reason for PSP's purchase of the insurance policy was to comply with its lease obligations.

When NIA's policy with PSP was renewed in 1995 and again in 1996, Leamington was not named as a loss-payee or as an additional insured on the policy. However, in August 1996, after discovering the damage to the Drake, Acordia became aware of the omission of Leamington on the policies and notified NIA. NIA promptly issued endorsements listing Leamington as an additional insured for 1994, 1995, and 1996. NIA now claims that these changes were made without the knowledge of PSP and at the sole request of Leamington. NIA also states that the endorsements issued were only for the liability coverage and not for the hazard loss coverage. Leamington asserts that its omission from the policy was a mutual mistake and that both PSP and NIA, through its agents, intended that Leamington be listed as an additional insured.

Meanwhile, problems developed in the business relationship between Leamington and PSP and in May 1996, PSP vacated the Drake. When it repossessed and inspected the Drake, Leamington discovered water damage to the ceilings and walls of the rooms and corridors, which probably was caused by thawing of snow or ice during December 1995. Leamington also discovered extensive vandalism and property destruction throughout the building attributed by Leamington to PSP's guests and invitees.² Leamington offered evidence to show that in July 1996, it notified Acordia of its potential claim. Leamington also provided NIA with written notice of its claim on August 30, 1996.

On November 26, 1996, NIA sent a reservation of rights letter to Leamington. In the letter, NIA also requested a sworn proof of loss and included a standard proof of loss form. Leamington completed and signed the sworn proof of loss and mailed it to NIA on February 11, 1997—77 days after NIA's request.

Leamington received no response from NIA after it mailed the proof of loss. In August 1997, Leamington commenced an action in Hennepin County District Court alleging that NIA breached its policy and seeking to reform the policy to include Leamington as an additional insured. Among other allegations and denials in its answer, NIA denied that Leamington was entitled to coverage on the grounds that it was not a named insured on the policy. Additionally, NIA argued that, in any case, because the proof of loss was not provided within 60 days of NIA's request, Leamington was barred from recovery on the policy.

NIA moved for summary judgment claiming (1) that by failing to provide the sworn proof of loss within 60 days of NIA's request, Leamington was barred from recovery, and (2) that Leamington was a stranger to the policy with no standing to assert a reformation claim. The district court agreed with NIA and granted it summary judgment, concluding that Leamington's failure to provide the proof of loss within 60 days after NIA's request barred it from recovery under the policy and under the Minnesota Standard Fire Insurance Policy. See Minn.Stat. § 65A.01, subd. 3 (1998). The court further stated that Leamington could not have obtained reformation of the policy because it was not a party to the original contract and that the contracting parties did not agree to reformation.

Leamington appealed. The court of appeals, in an unpublished decision, affirmed the district court's ruling that Leamington's failure to provide the proof of loss within 60 days barred it from recovery on the policy. See Leamington Co. v. Nonprofits' Ins. Ass'n, C9-98-2056, 1999 WL 561951, at *3 (Minn.App. July 28, 1999). The court of appeals did not decide whether Leamington had standing to reform the policy because the court concluded that this issue was rendered moot. See id. at *4. We accepted review on two issues: first, whether Leamington's failure to timely submit a sworn proof of loss barred it from any recovery on the policy and second, whether the district court erred in finding that Leamington had no standing to bring an action to reform the policy.

I.

Summary judgment is appropriate when a district court determines that "there is no genuine issue as to any material fact and that either party is entitled to a judgment as a matter of law." Minn. R. Civ. P. 56.03. When reviewing a grant of summary judgment, an appellate court must consider (1) whether there are any genuine issues of material fact, and (2) whether the lower court erred in its application of the law. See Offerdahl v. University of Minn. Hosps. & Clinics, 426 N.W.2d 425, 427 (Minn.1988)

. When, as in this case, the material facts are not in dispute, we review de novo the lower court's application of the law. See Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn.1989). Additionally, the interpretation of an insurance policy is a question of law that we review do novo. See Metropolitan Property & Cas. Ins. Co. & Affiliates v. Miller, 589 N.W.2d 297, 299 (Minn. 1999).

The court of appeals, relying on its earlier decision in Nathe Bros., Inc. v. American Nat'l Fire Ins. Co., 597 N.W.2d 587, 590 (Minn.App.1999), concluded that Leamington's failure to timely submit a sworn proof of loss effected a complete bar to any recovery by Leamington on the policy. See Leamington, 1999 WL 561951, at *2-3. In Nathe, the court of appeals held that timely submission of the proof of loss is a condition precedent to any liability on the part of an insurer and therefore the failure to timely submit a proof of loss operates as a bar to recovery on the policy. 597 N.W.2d at 590.

We reversed the court of appeals' holding in Nathe in a decision considered and released contemporaneously with this decision. See generally Nathe Brothers, Inc. v. American Nat'l Fire Ins. Co., 615 N.W.2d 341 (Minn.2000)

. In Nathe, we held that under Minnesota's Standard Fire Insurance Policy (Minn.Stat. § 65A.01 (1998)), the timely submission of a proof of loss is not a condition precedent to recovery on a policy. See id., at 349. Therefore, under the Standard Fire Insurance Policy, the failure to timely submit a proof of loss will not automatically operate as a bar to recovery. See id.

On appeal, NIA asserts, and Leamington agrees, that its policy terms comply with and are essentially the same as those contained in the Standard Fire Insurance Policy.³See generally Minn. Stat. § 65A.01, subd. 3. As we explained in Nathe, under the Standard Fire Insurance Policy, an insured's failure to timely submit a sworn proof of loss statement does not automatically operate as a complete bar to recovery. Nathe, 615 N.W.2d at 349. Neither party argues that Leamington's 17-day delay in submitting the proof of loss caused prejudice to NIA. Accordingly, we hold that Leamington's delay in submitting its proof of loss does not bar its recovery in this case.

II.

Having concluded that Leamington is not barred from...