Midwest Reg'l Allergy v. Cincinnati Ins. Co.

• Decision Date: 31 July 2015
• Docket Number: No. 14–3026.,14–3026.
• Citation: 795 F.3d 853
• Parties: MIDWEST REGIONAL ALLERGY, Asthma, Arthritis & Osteoporosis Center, P.C., a Missouri Corporation; Dr. Michael Joseph, Individually, Plaintiffs–Appellees Sooner Three, LLC, Plaintiff v. The CINCINNATI INSURANCE COMPANY, Defendant–Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

795 F.3d 853

MIDWEST REGIONAL ALLERGY, Asthma, Arthritis & Osteoporosis Center, P.C., a Missouri Corporation; Dr. Michael Joseph, Individually, Plaintiffs–Appellees

Sooner Three, LLC, Plaintiff

v.The CINCINNATI INSURANCE COMPANY, Defendant–Appellant.

No. 14–3026.

United States Court of Appeals, Eighth Circuit.

Submitted: April 16, 2015.

Filed: July 31, 2015.

Daniel G. Litchfield, Litchfield Cavo LLP, Chicago, IL, argued (Nicholas D. Butovich, Litchfield Cavo LLP, Chicago, IL, Paul J. Skoulaut, J. Philip Davidson, Hinkle Law Firm LLC, Wichita, KS, on the brief), for appellant.

Brett W. Roubal, Baird Lightner Millsap, P.C., Springfield, MO, argued, for appellees.

Before WOLLMAN and GRUENDER, Circuit Judges, and GRITZNER,¹ District Judge.

Opinion

GRITZNER, District Judge.

The Cincinnati Insurance Company (Cincinnati Insurance) appeals the order of the district court² granting summary judgment in favor of Midwest Regional Allergy, Asthma, Arthritis & Osteoporosis Center, P.C. (Midwest Regional), and Dr. Michael Joseph. Having jurisdiction under 28 U.S.C. § 1291, we affirm.

I.

Dr. Joseph operates Midwest Regional in Joplin, Missouri. Since at least 2009, Midwest Regional used specialized medical equipment as part of its normal business operations, including a magnetic resonance imaging

(MRI) machine, an X-ray machine, a bone density scanner, laboratory analysis equipment, and specialty infusion equipment. On May 22, 2011, a tornado struck Midwest Regional's medical practice located at 1727 W. 26th Street in Joplin (the Premises). The tornado substantially damaged the building and its contents, rendering it inoperable for medical practice. The tornado damaged Midwest Regional's MRI machine and destroyed the other specialized medical equipment.

After the tornado, Dr. Joseph decided to permanently relocate his medical practice to the Gryphon Building in Joplin (the Replacement Location). The Replacement Location required substantial construction before Midwest Regional could begin its operations. Until construction was complete, Midwest Regional operated out of a temporary location in Webb City, Missouri (the Temporary Location). Midwest Regional, however, was unable to operate at its normal business capacity while at the Temporary Location. Midwest Regional did not accept new patients, and it operated at a reduced schedule. In part because of space restrictions, Midwest Regional did not install the MRI machine, X-ray machine, bone density scanner, or infusion equipment at the Temporary Location and did not receive any revenue from such services.

In preparation to move into the Replacement Location, Midwest Regional repaired the MRI machine and replaced the destroyed X-ray machine, bone density scanner, laboratory analysis equipment, and specialty infusion equipment (collectively, other specialty equipment). Moving the repaired MRI machine to the Replacement Location required a crane and the special expertise of the machine's manufacturer. In addition, the Replacement Location required substantial modification in order to house the MRI and X-ray machines. Among other things, it was necessary to reinforce the floors with concrete, remove and replace exterior brick, as well as install pipe, specialized heating and air conditioning equipment, and copper

shielding in the walls, door, and ceiling. The Replacement Location opened on May 1, 2012, slightly less than one year after the tornado.

The Premises was insured by a business owner's policy issued by Cincinnati Insurance (the Policy). Cincinnati Insurance paid Midwest Regional the policy limit of $2,414,161.26 for the building loss, and the policy limit of $388,000 for Midwest Regional's business personal property loss. In addition, Cincinnati Insurance paid $828,081.75 for business income interruption and extra expenses. The parties agree that Cincinnati Insurance paid the full amount of business income loss. Under the “Extra Expense” provision, Cincinnati Insurance reimbursed Midwest Regional for office computer equipment, other medical equipment, office equipment and furniture, and other miscellaneous property.

Midwest Regional subsequently requested reimbursement under the Extra Expense provision for the costs to repair and relocate the MRI machine and to replace the other specialty equipment necessary to resume the normal operations of the medical practice. Cincinnati Insurance denied payment for the additional expenses contending the expenditures did not fall under the Extra Expense provision. Cincinnati Insurance contended the expenses were losses covered under the Building or Business Personal Property provisions, for which Midwest Regional was paid the policy limits.

Midwest Regional filed suit against Cincinnati Insurance alleging it was entitled to reimbursement for the repair and relocation of the MRI machine and the replacement of the other specialty equipment under the Extra Expense provision. On cross motions for partial summary judgment, the district court granted partial summary judgment in favor of Midwest Regional and against Cincinnati Insurance. The district court found the claimed expenses were recoverable under the Extra Expense provision, and alternatively, the Policy was ambiguous and therefore should be read as providing coverage. The parties subsequently entered into a consent judgment as to the loss amount, and Cincinnati Insurance reserved its right to appeal the summary judgment order. This appeal followed.

II.

“We review both the district court's grant of summary judgment and its interpretation of the insurance policy de novo. ” United Fire & Cas. Co. v. Titan Contractors Serv., Inc., 751 F.3d 880, 883 (8th Cir.2014). Summary judgment is required “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).

“Because federal jurisdiction in this case is based on diversity of citizenship, state law controls the interpretation of the Policy.” DeAtley v. Mut. of Omaha Ins. Co., 701 F.3d 836, 838 (8th Cir.2012). There is no dispute that Missouri substantive law controls. Under Missouri law, the interpretation of an insurance policy is a question of law. Schmitz v. Great Am. Assurance Co., 337 S.W.3d 700, 705 (Mo.2011). “[T]he insured bears the burden of proving coverage under an insurance policy,” and the insurer bears the burden of proving the applicability of any exclusion from coverage. Fischer v. First Am. Title Ins. Co., 388 S.W.3d 181, 187 (Mo.Ct.App.2012) (citation omitted). When construing an insurance policy, courts must apply “the meaning which would be attached by an ordinary person of average understanding if purchasing insurance.” Allen v. Cont'l W. Ins. Co., 436 S.W.3d 548, 553–54 (Mo.2014) (internal quotation marks and citation omitted).

The general rules of contract interpretation apply to insurance contracts as well. Todd v. Mo. United Sch. Ins. Council, 223 S.W.3d 156, 160 (Mo.2007). “A contract must be construed as a whole so as to not render any terms meaningless, and a construction that gives a reasonable meaning to each phrase and clause and harmonizes all provisions is preferred over a construction that leaves some of the provisions without function or sense.” State ex rel. Riverside Pipeline Co., L.P. v. Pub. Serv. Comm'n, 215 S.W.3d 76, 84 (Mo.2007). “When a provision of a contract deals with a specific situation, it will prevail over a more general provision if there is ambiguity or inconsistency between them.” Five Star Quality Car–MO, L.L.C. v. Lawson, 283 S.W.3d 811, 815 (Mo.Ct.App.2009).

If an insurance policy is unambiguous, we must enforce the policy as written. Allen, 436 S.W.3d at 553–54. If the policy is ambiguous, however, any ambiguity must be resolved against the insurer-drafter. Id. at 554. “An ambiguity exists when there is duplicity, indistinctness, or uncertainty in the meaning of the language in the policy,” or if the policy “is reasonably open to different constructions.” Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo.2007) (quoting Gulf Ins. Co. v. Noble Broad., 936 S.W.2d 810, 814 (Mo.1997) ).

At issue is the application of section k, the Extra Expense provision, under the Additional Coverages section of the Policy. The Court must begin with analyzing the written language of the Policy. Mansion Hills Condo. Ass'n v. Am. Family Mut. Ins. Co., 62 S.W.3d 633, 637 (Mo.Ct.App.2001). The Extra Expense provision states:

SECTION I—PROPERTY, D. Deductibles does not apply to this Additional Coverage.

(1) We will pay the necessary Extra Expense you incur during the “period of restoration” caused by or resulting from a Covered Cause of Loss that you would not have incurred if there had been no direct physical “loss” to property at the “premises”, including personal property in the open, or in a vehicle within 1,000 feet of the “premises”.

(2) Extra Expense means expense you incur:

(a) To avoid or minimize the “suspension” of business and to continue “operations”:

1) At the “premises”; or2) At a replacement location or a temporary location, including:

a) Relocation expenses; and

b) Costs to equip and operate the replacement or temporary location;

(b) To minimize the “suspension” of business if you cannot continue “operations”;

(c) To:

1) Repair or replace any property; or

2) Research, replace or restore the lost information on damaged “valuable papers and records”;

to the extent it reduces the amount of loss that otherwise would have been payable under this Additional Coverage or SECTION I–PROPERTY, A. Coverages, 5. Additional Coverages, c. Business Income.

If any property obtained for temporary use during the “period of restoration” remains after the resumption of normal “operations”, the salvage value of that property shall be taken into consideration in the adjustment of the loss.

(3) We will only pay for Extra Expense that you sustain during the “period of restoration” and that occurs within 12 consecutive months after the date of

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