Wilson v. Am. Family Mut. Ins. Co.
| Decision Date | 19 May 2015 |
| Docket Number | WD77396 |
| Citation | 472 S.W.3d 579 |
| Parties | Derek Wilson and Jennifer Wilson, Appellants, v. American Family Mutual Insurance Company, Respondent. |
| Court | Missouri Court of Appeals |
Joseph W. Elliott, St. Joseph, MO, for appellants.
Charles H. Stitt, Kansas City, MO, for respondent.
Before Division Three: Victor C. Howard, Presiding Judge, James E. Welsh, Judge and Gary D. Witt, Judge
Derek and Jennifer Wilson ("the Wilsons") purchased a "Gold Star" 100% replacement cost insurance policy (the "Policy") from American Family Mutual Insurance Company ("American Family") to insure their home, a historic farmhouse located in Buchanan County. After a fire completely destroyed the home, American Family informed the Wilsons that it would pay the face amount of the policy of $419,000 for the coverage on the dwelling, an amount that was substantially less than all bids to rebuild the home following the fire.
The Wilsons filed suit in the Circuit Court of Buchanan County against American Family and its agent, Matt Thrasher ("Thrasher"),1 alleging negligent misrepresentation and breach of contract. The jury found for the Wilsons on their breach of contract claim, but found in favor of American Family on the negligent misrepresentation claim. On the breach of contract claim, the jury assessed damages in the amount of $7,500. The Wilsons filed a motion for a new trial or, in the alternative, for additur. The trial court denied both motions. On appeal, the Wilsons argued, inter alia, that the trial court erred in denying their motion for a new trial because evidence established that the Policy was ambiguous as a matter of law.
Because the trial court's finding that the Policy was not ambiguous is erroneous, we reverse and remand for a new trial.
In 2003, the Wilsons purchased a historic farmhouse located in Buchanan County. The farmhouse was believed to have been built in the 1880's. It was unique in many ways. It had three fireplaces, full dimensional log walls, three levels, eight-inch wooden baseboards, seventy-three windows and doors with transoms, eight-to-twelve-inch crown molding, numerous built-in bookshelves, a foundation made of three layers of brick and wooden plank floors, among other unique features.
After purchasing the home, Derek Wilson ("Derek")3 met with Thrasher, his long-time friend and American Family insurance agent regarding obtaining homeowners insurance on the home. Thrasher directed Derek to a "Gold Star" 100% Replacement Cost4 insurance policy offered by American Family. American Family requires its agents to use a computer program provided by the company called Xactware to estimate the total replacement costs of homes when selling a Gold Star 100% Replacement Cost insurance policy. Derek answered questions regarding the home as Thrasher entered information into the Xactware software. Based on the information put into the program, American Family estimated that the total cost to replace the Wilsons' home with "like materials and built with like quality" was $419,000.5 At trial, John Bosman ("Bosnian"), American Family's Director of Sales, testified that American Family expects clients to rely on its Xactware software estimate and does not encourage customers to obtain an appraisal or a second opinion on replacement costs when purchasing a policy. Thus, it was for this amount that Thrasher sold a "total cost replacement" policy to the Wilsons. No one suggested to the Wilsons that they may need to purchase a policy with higher limits nor did the Wilsons request such a policy.6
When the Xactware program calculated the replacement cost of the Wilsons' home to be $419,000, Derek did not question the number. He later testified, "I knew I had purchased the best policy they had to offer and was certain that I had 100 percent replacement cost on my structure." The Wilsons timely paid all of their premiums over the next eight years.
On July 6, 2011, a fire completely destroyed the Wilsons' home. The house and all of its contents, as well as the detached garage, were destroyed. Tim Hutchinson ("Hutchinson") was the American Family adjuster assigned to the case. Prior to receiving any bids, Hutchinson sent three checks to the Wilsons: one in the amount of $421,000 for the house,7 one for $42,000 for the garage8 and a third check for $315,900 for loss of personal property.9 The Wilsons did not cash the checks because they were unsure what the amounts of the bids would be to actually replace the structures and contents. As of July 30, 2011, Hutchinson attempted to obtain estimates of the cost to rebuild the Wilsons' home. During this process he also contacted Thrasher and requested that he obtain an estimate from a local contractor because the contractors Hutchinson normally used were unavailable. Thrasher contacted local builder Mark Powell ("Powell") who met with the Wilsons in early August regarding the rebuilding of their home.
On August 22, 2011, Powell sent an email to Thrasher stating that the cost to replace the Wilsons' home was over $650,000, excluding any demolition work. Shortly thereafter, he provided Thrasher and the Wilsons his actual estimate to totally replace the home which was $665,000. Upon receiving the forwarded email, Derek testified that he so he continued working on getting the rebuilding process started.
The Wilsons then returned two of the checks to Thrasher: the house check for $421,000 and the garage check for $42,000 because together they totaled over $200,000 less than the contractor's estimate to rebuild their home and garage. On September 28, 2011, Hutchinson put a note in his file that he wanted to get a second bid to rebuild the Wilsons' home. At that same time, Hutchinson spoke with Derek and told him that he was looking into whether "anything could be done about changing the limits" of the Policy.
On October 11, 2011, Hutchinson noted receipt of the voided checks but directed they be re-issued to the Wilsons with an "unable-to-reform-policy letter." Between October and December, however, Hutchinson continued to negotiate with the Wilsons and it was not until December 15, 2011 that Hutchinson actually re-issued the same payment, this time sending one check totaling $463,210. The letter enclosing the payment stated that the check represented the policy limits, but also stated that their rights would be unaffected by cashing the check. The Wilsons cashed the check, paid off the mortgage that they had on the home, but continued to negotiate with American Family over obtaining additional funds to rebuild their home under the Policy. As a result of these negotiations, for example, in May 2012, American Family issued the Wilsons an additional check in the amount of $15,165.72 for trees and landscaping.
After 365 days had elapsed from the date of the fire and the Wilsons' home had not yet been rebuilt, American Family notified the Wilsons that they had not complied with the Policy condition precedent of rebuilding within one year of the occurrence date. American Family then informed the Wilsons that, as a result, they were no longer eligible for monthly living expenses nor were they eligible for the additional coverage of 20% that was to be paid in the event the replacement cost was higher than their policy "limit."
The Wilsons filed suit against American Family in which they brought one count for negligent misrepresentation and one count for breach of contract. In December 2013, a jury trial took place in the Circuit Court of Buchanan County. The Wilsons presented evidence that they had purchased a "100% replacement cost" premiere policy yet American Family refused to pay the replacement cost. They presented evidence of various replacement cost estimates, all of which were significantly higher than the replacement cost that American Family's software determined and upon which it based the Policy. In addition to not getting the replacement cost, the Wilsons presented evidence that, alternatively, the Policy was to pay at least 120% of the Policy "limit" in the event that the "limit" of the Policy was not enough to cover replacement costs. They contended that if the "limit" was found to be $419,000, then 120% of that limit, or, $502,800, was due them under the Policy. They argued that the company purposely drew out the negotiation process in order to nullify the supplementary coverage based on a one-year rebuilding deadline and that the 120% provision of the Policy was illusory.
American Family presented evidence that the Policy limit as stated on the declaration page was $419,000, regardless of the true cost of replacement. It argued that the Policy was only to pay "100% of the policy limit " despite being called a "100% replacement cost policy."
At the close of plaintiffs' evidence, both sides moved for a directed verdict, which the court denied. At the close of all evidence, both sides renewed their motions for directed verdict and again the court denied each of them. The jury found for American Family on the negligent misrepresentation claim but found for the Wilsons on the breach of contract claim. On the breach of contract claim, the jury awarded damages of $7,500.10 This appeal follows.
Further facts are set forth below as necessary.
The effective dates of the policy are 09–22–2010 to 07–21–2011, which includes the date of the loss. The relevant portions of the policy are as follows:
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