Galaxy Wireless, LLC v. Western National Mutual Insurance Company
Minnesota Court of Appeals
Galaxy Wireless, LLC v. Western National Mutual Insurance Company, 8 N.W.3d 698 (Minn. Ct. App. 2024)
Galaxy Wireless, LLC v. Western National Mutual Insurance Company
Opinion
STATE OF MINNESOTA
IN COURT OF APPEALS
A23-1460
Galaxy Wireless, LLC,
Respondent,
vs.
Western National Mutual Insurance Company,
Appellant.
Filed June 24, 2024
Affirmed
Segal, Chief Judge
Hennepin County District Court
File No. 27-CV-20-14245
Edward E. Beckmann, Beckmann Law Firm, Bloomington, Minnesota (for
respondent/cross-appellant Galaxy Wireless, LLC)
Charles E. Spevacek, Julia J. Nierengarten, Meagher & Geer, P.L.L.P., Minneapolis,
Minnesota; and
Anthony J. Kane, Hilary R. Hannon, Pfefferle Kane, LLP, Minneapolis, Minnesota (for
appellant/cross-respondent Western National Mutual Insurance Company)
Considered and decided by Bratvold, Presiding Judge; Segal, Chief Judge; and
Frisch, Judge.
SYLLABUS
Unless otherwise provided for in a fire-insurance policy, total-loss coverage under
Minnesota Statutes section 65A.08 (2022) applies only to total loss of a building, not loss
of an insured-lessee’s tenant improvements to leased premises in a building.
OPINION
SEGAL, Chief Judge
In this fire-insurance coverage dispute, appellant-insurer argues that the district
court erred in denying insurer’s posttrial motions for judgment as a matter of law (JMOL)
or a new trial. By notice of related appeal, respondent-insured challenges the district
court’s determinations that (1) total-loss coverage under Minn. Stat. § 65A.08, does not
apply to its claim for tenant-improvement damages, and (2) prejudgment interest did not
begin to accrue until respondent’s submission of its written proof of loss. We affirm.
FACTS
In May 2018, a fire of unknown origin broke out in a commercial building in
Minneapolis. The building had housed a shoe store until 2014, when the shoe store’s
president, who was also one of the building’s owners (hereafter, the building owner)
decided to close the store and subdivide the building for tenants. In January 2015,
respondent Galaxy Wireless, LLC leased street-level retail space and basement storage
space in the building. At the time of the fire, Galaxy was operating a store that sold and
repaired cellphones for individual customers and provided wholesale services for other
small cellphone stores in the area. Ali Mansour owned the business and managed it along
with his brother, Khalaf (David) Mansour. Galaxy was insured under a policy issued by
appellant Western National Mutual Insurance Company.
The fire rendered the building unsafe and no one was permitted to go inside. The
building was demolished shortly after the fire due to public-safety concerns. Following
the demolition, the site was excavated. Nancy Jacobson, Western’s director of special
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investigations, and Peter Dahl, a certified fire inspector retained by Western, attended the
excavation on behalf of Western. Dahl was allowed into the area being excavated, while
Jacobson observed from the sidelines. The excavation uncovered, among other things, one
filing cabinet with approximately 115 cellphones stored inside. The filing cabinet and
cellphones belonged to Galaxy and were located in what was its basement storage area.
In January 2019, Galaxy submitted a sworn proof of loss averring that it suffered in
excess of two million dollars in covered losses under the policy, including $445,000 for
tenant improvements. Galaxy subsequently prepared a list of the claimed improvements,
which included electrical work and removing, repairing, or installing floor tiles, the ceiling,
a partition wall, windows, doors, slatwall panels, bathroom fixtures, and an HVAC system.
Galaxy also prepared an inventory of its lost business personal property. In the inventory,
Galaxy claimed lost business personal property, including more than 4,000 cellphones,
nearly 900 of which were purportedly stored in the basement.
The policy obligated Western to “pay for direct physical loss of or damage to
Covered Property at the premises . . . caused by or resulting from any Covered Cause of
Loss.” There is no dispute that the fire is a “Covered Cause of Loss.” As relevant here,
the “Covered Property” set out in the policy included “Buildings” and “Business Personal
Property.” And the policy explicitly listed tenant improvements as a form of “Business
Personal Property.” But the policy contained an exclusion that states Western “will not
pay for any loss or damage if any insured has . . . [a]fter a loss, willfully and with intent to
defraud . . . concealed or misrepresented any material fact or circumstances concerning . . .
[t]he Covered Property . . . [or a] claim under this policy.”
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Western denied Galaxy’s claim in its entirety. Western advised that the denial was
“based on material misrepresentations contained in Galaxy’s Tenant Improvements claim,
material misrepresentations contained in Galaxy’s Business Personal Property claim, and
material misrepresentations made by Ali Mansour and David Mansour during their
respective [examinations under oath].” Galaxy then initiated this lawsuit against Western
in November 2020, alleging claims of breach of the insurance contract and seeking
recovery of its losses from the fire, among other claims. Western filed an answer and
counterclaim, seeking a declaration that it was not obligated to pay for any damage
resulting from the fire due to material misrepresentations made by Galaxy relating to the
insurance claim.
After the close of discovery, Western moved for summary judgment, and Galaxy
moved for partial summary judgment, claiming it was entitled to total-loss coverage under
section 65A.08 of the Minnesota Statutes and the policy. The district court denied both
motions.
The case proceeded to a jury trial in January 2023 on Galaxy’s breach-of-contract
claim and Western’s intent-to-deceive defense. 1 Prior to trial, Galaxy brought a motion
in limine to preclude Western from calling Dahl as a witness because Western did not
disclose Dahl as an expert and had objected to the disclosure of his opinions, claiming they
were privileged as attorney work product. The district court granted the motion and
ordered that “Western National may not present undisclosed expert testimony at trial, nor
1
All other claims were resolved before trial.
4
may Western withhold evidence during discovery based upon a claim of attorney work
product, and then present such evidence at trial.”
Western nevertheless sought to call Dahl as a witness at trial. Western argued that
Dahl should be permitted to testify as a fact witness and that his testimony would be limited
to “his observations of the excavation of the basement.” The district court decided to “take
it question by question” and permitted Dahl to testify but cautioned Western not to elicit
testimony from Dahl precluded by the pretrial ruling. After Dahl testified at trial, Galaxy
moved to strike his testimony on the grounds that it inevitably involved Dahl’s expertise
as a fire inspector and thus violated the court’s prior ruling. After hearing the parties’
arguments, the district court granted Galaxy’s motion to strike and instructed the jury to
disregard the entirety of Dahl’s testimony.
The jury returned a verdict in favor of Galaxy. In its answers on the special-verdict
form, the jury found that Western breached its contract of insurance with Galaxy and
awarded the following damages: tenant improvements, $100,000; business personal
property, $1.1 million; business income and extra expenses, $1.2 million; money and
security inside premises, $10,000; personal property of others, $49,000; and outdoor signs,
$20,000, for a total of $2,479,000. The individual sums awarded by the jury were equal to
the amount sought by Galaxy for each category of loss except tenant improvements. For
that category, Galaxy claimed it had damages of $445,000, but the jury awarded only
$100,000.
On the issue of Western’s intent-to-deceive defense, the jury answered “Yes” to the
question on the special-verdict form whether Galaxy made any misrepresentations in its
5
insurance claim to Western. But the jury answered “No” to the question whether Galaxy
“ma[d]e any misrepresentation willfully or intentionally, intending to deceive Western
National.”
The district court subsequently entered judgment in favor of Galaxy in the amount
of $2,479,000 and ordered that “[p]rejudgment interest shall be calculated upon
determination of the appropriate date of Galaxy’s first written notice of loss.” Western
filed posttrial motions for JMOL or a new trial. Western asserted it was entitled to JMOL
because there was insufficient evidence of damages and the jury’s answers on the special-
verdict form were inconsistent and irreconcilable. Western argued, in the alternative, that
it was entitled to a new trial because the district court made erroneous evidentiary rulings
and gave improper jury instructions, and because the jury’s verdict was irreconcilable.
Galaxy opposed the motions and asserted that prejudgment interest should be calculated as
of May 30, 2018—the date the Mansours met with Western’s independent adjuster and
discussed the claims process—or, in the alternative, January 10, 2019—the date Galaxy
submitted its sworn proof of loss. Western opposed any award of prejudgment interest but
argued that, if prejudgment interest was to be awarded, it should be calculated as of the
date Galaxy commenced suit.
The district court, in a thorough, carefully analyzed order, denied Western’s
posttrial motions and set the accrual date for prejudgment interest as January 10, 2019,
reasoning that this was the first date that Galaxy had communicated a specific amount of
monetary loss to Western.
6
Western appeals the district court’s denial of its posttrial motions seeking reversal
of the judgment or a new trial. By notice of related appeal, Galaxy challenges the district
court’s denial of its claim seeking the policy limit for tenant-improvement losses and the
district court’s determination that prejudgment interest did not begin to accrue until the
date that it submitted its proof of loss to Western.
ISSUES
I. Did the district court err in denying Western’s motion for judgment as a matter of
law?
II. Did the district court abuse its discretion in denying Western’s motion for a new
trial?
III. Did the district court err in determining that Galaxy is not entitled to recover the
policy limit on its claim for tenant-improvement losses without being required to
prove damages?
IV. Did the district court err in determining the accrual date for prejudgment interest?
ANALYSIS
I. The district court did not err in denying Western’s motion for judgment as a
matter of law.
If a party moves for JMOL after a jury returns a verdict, the district court may
“(1) allow the judgment to stand, (2) order a new trial, or (3) direct entry of judgment as a
matter of law.” Minn. R. Civ. P. 50.02. We review de novo the denial of a JMOL motion.
Vermillion State Bank v. Tennis Sanitation, LLC, 969 N.W.2d 610, 618 (Minn. 2022). In assessing a district court’s ruling on a JMOL motion, we view the evidence in the light most favorable to the nonmoving party.Id.
“We affirm the denial of a [JMOL motion] unless no reasonable theory supports the verdict.”Id. at 618-19
. “This means that to
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reverse, the evidence must be so overwhelming on one side that reasonable minds cannot
differ as to the proper outcome.” Id. at 619 (quotations omitted).
Western’s appeal of the district court’s denial of its JMOL motion focuses on
Galaxy’s claim for tenant-improvement damages. Western argues that the district court
erred by failing to grant JMOL to Western because the jury’s award of damages for tenant
improvements lacked evidentiary support and was based on nothing more than speculation.
Western also argues that the district court erred because the jury’s finding of
misrepresentation by Galaxy, and its substantially reduced award for tenant-improvement
damages to less than one-fourth of the amount sought by Galaxy, cannot be reconciled with
the jury’s determination that Galaxy lacked the intent to deceive. Western maintains that,
based on the evidence and the jury’s finding that Galaxy made misrepresentations, it is
entitled as a matter of law to a determination that Galaxy acted with an intent to deceive,
which voids the policy. We address each argument in turn.
A. Basis for Jury’s Award of Tenant-Improvement Damages
Western argues that, because Galaxy provided just a lump sum total of $445,000 for
its claimed tenant-improvement damages with no breakdown of those damages, the jury
had no “reliable basis to conclude that [Galaxy] was entitled to some damages but not the
full amount requested.” Western maintains that the jury’s reduced award of $100,000 was
thus based on nothing but speculation and must be reversed.
The burden is on the plaintiff to “establish a reasonable basis for approximating a
loss.” DeRosier v. Util. Sys. of Am., Inc., 780 N.W.2d 1, 5 (Minn. App. 2010). “[A]n
owner’s testimony as to the value of his property is competent evidence” for the jury to
8
consider in assessing a claim for damages. Johnson v. Garages, Etc., Inc., 367 N.W.2d 85,
87(Minn. App. 1985) (citing Lavalle v. Aqualand Pool Co.,257 N.W.2d 324, 328
(Minn. 1977)). “Damages cannot be speculative, remote, or conjectural.” DeRosier,780 N.W.2d at 5
(quotations omitted). But appellate courts “will not disturb a damage award unless the failure to do so would be shocking or would result in plain injustice.” Dunn v. Nat’l Beverage Corp.,745 N.W.2d 549, 555
(Minn. 2008) (quotation omitted).
At trial, the jury heard conflicting testimony from the building owner and the
Mansours about who paid for various improvements in Galaxy’s leased premises. Galaxy
claimed that it made substantial improvements to its leased premises, estimating the cost
at $445,000. It submitted into evidence at trial a number of photographs allegedly
depicting the improvements, and David Mansour testified as to his estimate of the costs of
the improvements. But as Western points out, Mansour’s testimony was not supported by
any receipts, invoices, or other written evidence of the cost of the improvements. Mansour
testified that “all the invoices, all the paper [about the improvements] was in the store and
destroyed in the fire.” He explained that he arrived at the $445,000 figure after thinking
“about how much money was spent there.” He did not provide a breakdown of the
$445,000 figure or additional details about the costs of specific improvements.
Western called the building owner as a witness at trial to counter Mansour’s
estimate. The building owner testified that he, not Galaxy, was responsible for many of
the improvements claimed by Galaxy, including installing a partition wall, new flooring,
and a ceiling, renovating the bathrooms, installing the HVAC system, and performing the
electrical work. He further testified that he hired the contractor, paid for the improvements,
9
and did not bill Galaxy for the cost. But when the building owner was cross-examined, he
acknowledged that Galaxy did install some tiling and solid wood and made some
improvements above the door and to the walls with sheetrock and drywall. He also
admitted he was unsure about some of the other claimed improvements.
The district court concluded that “Galaxy’s damages evidence was not so
speculative as to preclude recovery.” We agree. As outlined above, the jury heard
conflicting evidence on the claimed tenant improvements, but the building owner
ultimately acknowledged that Galaxy did perform several of the claimed improvements.
And as noted by the district court, David Mansour explained that the fire destroyed
Galaxy’s documentation of its expenditures for the improvements and Galaxy “offered
many photographs to illustrate [David Mansour’s] testimony.”
Given the largely undisputed evidence that at least some tenant improvements were
made by Galaxy, it was not outside the jury’s authority to award damages that the jury
determined were proportionate based on the evidence presented. Thus, viewing the
evidence in the light most favorable to Galaxy, we discern no “plain injustice” in the jury’s
award. Id. (quotation omitted).
B. Intent to Deceive
Western next argues that the district court erred in denying its JMOL motion
because the evidence presented supports only one reasonable conclusion—that Galaxy
“intentionally mispresented its tenant improvement losses” and that this constitutes an
intent to deceive as a matter of law. Western maintains that its evidence was overwhelming
on the issue of misrepresentation and that the jury’s answers on the special-verdict form
10
are irreconcilable such that the jury’s finding that there was no intent to deceive must be
set aside. But “[i]f answers on a special verdict form ‘can be reconciled on any theory’
consistent with the evidence and the fair inferences drawn from the evidence, ‘the verdict
will not be disturbed.’” 650 N. Main Ass’n v. Frauenshuh, Inc., 885 N.W.2d 478, 486(Minn. App. 2016) (quoting Dunn,745 N.W.2d at 555
) (other quotation omitted), rev. denied (Minn. Nov. 23, 2016). “The burden of proving that a misrepresentation was made with intent to deceive or defraud the insurer rests on the one who asserts it.” Craigmile v. Sorenson,80 N.W.2d 45, 51
(Minn. 1956).
Western maintains that, because “the jury awarded [only] a small fraction of the
value Galaxy claimed,”—$100,000 instead of $445,000—“the only conclusion can be that
Galaxy intentionally misrepresented its claim,” and thereby had an intent to deceive. But
a misrepresentation can be made negligently and not with an intent to deceive. See, e.g.,
Florenzano v. Olson, 387 N.W.2d 168, 174-75(Minn. 1986) (distinguishing between “intentional and negligent misrepresentation[s]” and determining the case involved a “negligent, not fraudulent misrepresentation”); see also Henning Nelson Constr. Co. v. Fireman’s Fund Am. Life Ins. Co.,383 N.W.2d 645, 654
(Minn. 1986) (stating “only
willful or intentional misstatements calculated to deceive the insurer operate to void the
policy”). In apparent recognition of this fact, the special-verdict form, which was agreed
to by Western, divided the issue of misrepresentation and intent to deceive into two
separate questions: one question asked whether Galaxy made any misrepresentations and
11
a second question asked whether any such misrepresentations were made with an intent to
deceive. 2
Western cites Hodge v. Franklin Insurance Co. of Philadelphia to support its
argument that a large discrepancy between the amount of damages claimed and the amount
awarded is dispositive evidence of intentional deception. 126 N.W. 1098(Minn. 1910). Hodge held that a large discrepancy may serve as evidence of fraud, but that the question of whether a misrepresentation was made with an intent to deceive is a fact issue for the jury.Id. at 1099
. The supreme court explained:
A discrepancy, even if a very considerable proportion, between
the amount stated by the insured in the proofs of loss and the
value found by the jury, does not conclusively establish fraud
or false swearing; but it remains a question of fact whether the
valuation was intentionally fraudulent or merely an error of
judgment. A very large discrepancy, however, is some
evidence of fraud.
Id. (quotation omitted). The supreme court reached this conclusion even though some of
the claims made by the insured in that case “were considerably overvalued.” Hodge thus
squarely supports that the determination of whether a misrepresentation is made with intent
to defraud is a fact question for the jury.
Western also cites to a prior opinion of this court, Collins v. USAA Property and
Casualty Insurance Co., 580 N.W.2d 55 (Minn. App. 1998). But in contrast to this case,
the jury in Collins expressly found that the insureds misrepresented their personal-property
2
There was also a third question on the special-verdict form asking whether any
misrepresentations were material. The jury did not answer this question because they were
instructed to skip that question on the form if they found no intent to deceive.
12
losses “with the intent and purpose of deceiving [the insurer] of material facts and
circumstances.” 580 N.W.2d at 56. We held that the jury’s finding of a material misrepresentation with intent to deceive voided the whole policy.Id. at 58
. Collins thus
also fails to support Western’s argument.
As the district court noted, the evidence here is such that the jury could have
reasonably found that Galaxy had an intent to deceive Western. But there was also
evidence presented by Galaxy that allowed the jury to find to the contrary. We are thus
left with the inevitable conclusion that Western simply failed to persuade the jury that
Galaxy’s misrepresentations were made with an intent to deceive. We therefore conclude
that the jury’s answers are not irreconcilable. And, like the district court, we discern no
basis to overturn the jury verdict on this ground.
II. The district court did not abuse its discretion in denying Western’s motion for
a new trial.
Western next challenges the district court’s denial of its posttrial motion for a new
trial. “We review a district court’s decision to grant or deny a new trial for an abuse of
discretion.” Christie v. Est. of Christie, 911 N.W.2d 833, 838 (Minn. 2018). Western
argues that it should have been granted a new trial because the district court made
evidentiary errors in striking the testimony of Peter Dahl, Western’s fire inspector, and
allowing Galaxy to question the building owner about the building’s fire-insurance
coverage. Western also argues that it was entitled to a new trial because the district court
abused its discretion in providing a jury instruction related to honest mistake and, as argued
13
in its JMOL motion, because the jury’s verdict is irreconcilable. We begin our analysis
with Western’s challenge to the district court’s evidentiary rulings.
A. Evidentiary Rulings
Appellate courts “review evidentiary rulings of the district court, including the
admission of expert testimony, for an abuse of discretion.” City of Moorhead v. Red River
Valley Coop. Power Ass’n, 830 N.W.2d 32, 39(Minn. 2013). Even if a party demonstrates “[a]n improper evidentiary ruling resulting in the erroneous admission of evidence,” such an error “will only compel a new trial if it results in prejudicial error to the complaining party.” George v. Est. of Baker,724 N.W.2d 1, 9
(Minn. 2006). “An evidentiary error is prejudicial if it might reasonably have influenced the jury and changed the result of the trial.” Kedrowski v. Lycoming Engines,933 N.W.2d 45
, 62 (Minn. 2019) (quotation
omitted).
Decision to Strike Testimony of Peter Dahl
Western argues that the district court committed prejudicial error by striking Dahl’s
testimony as undisclosed expert testimony. Western asserts that it “never hid that it would
call Dahl as a fact witness at trial” and that the district court’s decision to strike the
testimony caused “significant unfair prejudice . . . primarily tak[ing] the form of depriving
[Western] of valid, admissible witness testimony presenting credible information about the
lack of evidence supporting Galaxy’s claims.” We are not persuaded.
Dahl was hired by Western as an expert fire inspector, but Western never disclosed
Dahl’s opinions to Galaxy. In fact, during the deposition by Galaxy of one of Western’s
employees, Western’s counsel directed the witness not to answer a question about Dahl’s
14
conclusions on the ground of attorney work product. Because Western never disclosed
Dahl’s opinions to Galaxy, the district court granted Galaxy’s motion in limine to exclude
any expert testimony by Dahl, a ruling not contested by Western on appeal.
In response to Western’s assertion that Dahl would be asked to testify only as a fact
witness concerning his observations of the excavation site, the district court stated that it
would allow Dahl to testify in that limited capacity, but warned Western that it would
scrutinize the propriety of Dahl’s testimony on a “question by question” basis. When Dahl
testified not just about the photographs he took during the excavation, but what he observed
about fire damage and other matters, the district court determined that his testimony bled
over into expert testimony and ordered that Dahl’s testimony be stricken from the record.
The district court explained in its order denying Western’s motion for a new trial that
Dahl’s observations “were not the observations of a lay passerby who happened to see the
excavation process. He undoubtedly was looking for and saw things that an ordinary fact
witness would not have noticed or understood.”
We discern no abuse of discretion in the district court’s ruling. Dahl was an expert
fire inspector working on behalf of Western. Western did not disclose Dahl’s opinions to
Galaxy during discovery and did not even identify him as a witness it intended to call at
trial except by a general reference to persons Western identified as having relevant
knowledge in its initial disclosures. Western also advised Galaxy during discovery that, if
it desired to take Dahl’s deposition, it would have to pay Dahl’s hourly rate and expenses.
Based on these facts and a review of Dahl’s stricken testimony, we conclude that the district
court acted within its discretion in determining that Dahl’s observations during the
15
excavation were intertwined with his expertise and went beyond the testimony of a mere
fact witness.
In addition, we are not persuaded that the decision to strike Dahl’s testimony
prejudiced Western in any significant way. Dahl testified about a filing cabinet that
contained 115 cell phones, whether he observed any snowblowers or business signs in the
rubble that Galaxy claimed were lost in the fire—he did not—and his observations about a
slat wall. But Nancy Jacobson—Western’s director of special investigations—was also
present during the excavation and testified at trial. Her testimony included information
about the number of cellphones recovered from the filing cabinet and observations about
the slat wall and whether she observed snowblowers or signs. Moreover, 21 photographs
taken by Dahl of the site were admitted into evidence and were available to the jury.
Jacobson also referred to and testified about at least a couple of Dahl’s photographs. It
thus appears that Jacobson’s testimony covered the same factual observations as were
presented in Dahl’s testimony.
Western contends that Dahl’s testimony was not duplicative of Jacobson’s
testimony within the meaning of Minn. R. Evid. 403, which allows the exclusion of
cumulative evidence. But whether Dahl’s testimony was excludable as being needlessly
cumulative under Minn. R. Evid. 403, is a separate issue from whether the exclusion of the
testimony caused prejudice. And the fact that Jacobson’s testimony referenced the same
items that were in Dahl’s testimony is relevant to whether the exclusion of Dahl’s
testimony “might reasonably have influenced the jury and changed the result of the trial.”
Kedrowski, 933 N.W.2d at 62 (quotation omitted).
16
Having carefully reviewed the testimony of both Dahl and Jacobson, we discern no
prejudicial error in the district court’s decision to strike Dahl’s testimony.
Cross-Examination of Building Owner about the Owner’s Fire-Insurance Coverage
Western next argues that the district court erred in permitting Galaxy to cross-
examine the building owner about his insurance on the building. At trial, Galaxy, over
Western’s objection, cross-examined the building owner about his obligations as landlord
under the lease with Galaxy. The lease provides: “Landlord shall, at Tenant’s expense . . .
procure and maintain at all times during the Lease Term . . . fire and extended coverage
insurance on the Premises.” During cross-examination, the building owner confirmed that
he had insurance on the building, a portion of Galaxy’s rent went toward the cost of that
insurance, his insurance company paid for the losses resulting from the fire, and he did not
direct any of those funds to Galaxy. Galaxy then moved on to questioning the building
owner about other lease provisions.
Western later renewed its objection to the testimony about insurance, and the district
court explained that the testimony was relevant “given the way that [Western] is trying to
portray [the building owner] . . . as a witness who not only has no stake in this, but actually
liked [Galaxy and the Mansours].” The district court reasoned it was “fair game for
[Galaxy] to come at it from another direction to suggest maybe [the building owner] wasn’t
as disinterested or as kindly toward his tenants as [Western] seem[s] to suggest.” In the
order denying Western’s posttrial motion for a new trial, the district court affirmed its prior
ruling that the testimony was relevant to credibility and bias.
17
Under the rules of evidence, the credibility of a witness can be attacked by evidence
of bias or prejudice. 3 Minn. R. Evid. 616.; see also Riewe v. Arnesen, 381 N.W.2d 448,
454 (Minn. App. 1986) (concluding cross-examination disclosing insurance, and
relationship with insurer, was relevant to proving bias or prejudice of the witness under
rule 411), rev. denied (Minn. Mar. 27, 1986). Here, the building owner was a key witness
for Western, providing testimony that suggested he was the one who arranged and paid for
many of the improvements claimed by Galaxy. His testimony directly contradicted many
of Galaxy’s claims and was central to Western’s intent-to-deceive defense. Evidence of
the building owner’s insurance was relevant to his potential bias as one of Western’s key
witnesses.
Western contends that “neither the court nor Galaxy identified what ‘facts’ the
questions about his insurance coverage elicited that ‘might tend to show [the building
owner] was not as favorably inclined toward the Mansours as he claimed to be.’” But the
jury could fairly draw an inference that the building owner had a motive to claim that he
had made and paid for tenant improvements to maximize his insurance recovery, a recovery
that was not shared with Galaxy.
Moreover, we are not persuaded that Western has demonstrated prejudicial error.
Western argues that the testimony was designed to be inflammatory and draw a contrast
between Western—which denied the insured’s claim—and the building owner’s insurance
company—which paid the claim. But the questions suggest the intent was focused on
3
We also note that the rules of evidence expressly allow the admission of evidence of
liability insurance coverage to show “bias or prejudice of a witness.” Minn. R. Evid. 411.
18
trying to undermine the building owner’s credibility, not to draw a contrast with Western.
The questions were also part of a broader series of questions about the terms of the lease
and the testimony consisted of only five questions; the information was not otherwise
highlighted. On this record, the district court did not abuse its discretion in denying
Western’s motion for a new trial based on the building owner’s testimony about his
insurance coverage.
B. Jury Instruction on Honest Mistake
Western next argues that it is entitled to a new trial because the district court
provided an improper jury instruction. The district court has broad discretion in fashioning
jury instructions, but “a court errs if it gives a jury instruction that materially misstates the
law.” George, 724 N.W.2d at 10. An erroneous jury instruction “does not necessitate a new trial unless the error was prejudicial.”Id.
“A jury instruction is prejudicial if a more accurate instruction would have changed the outcome in the case.”Id.
When instructing the jury on Western’s intent-to-deceive defense, the district court
instructed: “Under insurance provisions voiding the policy for misrepresentation or fraud,
only willful or intentional misstatements calculated to deceive the insurer operate to void
the policy. Honest mistakes do not void the policy.” (Emphasis added.) Western contends
that the district court erred by instructing the jury that “[h]onest mistakes do not void the
policy” because there was no evidence to support the theory that Galaxy made an honest
mistake in its representations to Western. See Henning Nelson Constr. Co., 383 N.W.2d
at 654.
19
We disagree for several reasons, most significantly because the instruction did not
“materially misstate[] the law.” George, 724 N.W.2d at 10. The district court’s instruction was not only an accurate statement of law, but a direct quote from the supreme court’s opinion in Henning Nelson Construction Co.383 N.W.2d at 654
(“Honest mistakes do not
void the policy.”). And the Mansours did admit to some errors and inaccuracies in the
documentation supporting the claim. The admissions are all to minor inaccuracies, such
as the location of certain property claimed to have been destroyed by the fire, but they are
nonetheless admissions that the initial representations were not wholly accurate. David
Mansour also testified that the claimed damages were an estimate based on his recollection
because their records were destroyed in the fire. Given the Mansours’ testimony and the
passage of several years between the renovations and fire, it would not be unreasonable for
the jury to conclude that any misrepresentations concerning the damages claimed may have
been due, at least in part, to an honest mistake rather than intentional deceit. Accordingly,
the district court did not err in providing the honest-mistake instruction.
C. Irreconcilable Verdict
Finally, Western argues that it is entitled to a new trial because the jury verdict is
irreconcilable. As previously noted, the jury could have fairly concluded that Western
failed to meet its burden of proving its intent-to-deceive defense, and “[i]f answers on a
special verdict ‘can be reconciled on any theory’ consistent with the evidence and the fair
inferences drawn from the evidence, ‘the verdict will not be disturbed.’” 650 N. Main
Ass’n, 885 N.W.2d at 486(quoting Dunn,745 N.W.2d at 555
). We thus reject this
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argument as a basis for a new trial for the same reasons stated in our discussion of the
verdict with regard to Western's JMOL motion.
III. The district court correctly determined that Galaxy is not entitled to claim
total-loss coverage and recover the applicable policy limit on its claim for
tenant-improvement losses.
By notice of related appeal, Galaxy argues that the district court erred in determining
that it is not entitled to total-loss coverage on its claim for tenant-improvement losses. This
issue was initially addressed by the district court in its order denying the parties’ cross-
motions for summary judgment. Galaxy bases its claim for total-loss coverage on both
section 65A.08, subdivision 2(a), and the policy language.
A. Minn. Stat. § 65A.08, subd. 2(a)
All fire-insurance policies in Minnesota must conform to the specified coverages
and provisions of the “Minnesota standard fire insurance policy.” Minn. Stat. § 65A.01,
subd. 1 (2022). The legislature has further established:
In the absence of any change increasing the risk, without
the consent of the insurer, of which the burden of proof shall
be upon it, and in the absence of intentional fraud on the part
of the insured, the insurer shall pay the whole amount
mentioned in the policy or renewal upon which it receives a
premium, in case of total loss, and in case of partial loss, the
full amount thereof.
Minn. Stat. § 65A.08, subd. 2(a).
Galaxy argues that section 65A.08 applies because the fire resulted in a total loss of
the building, and it is therefore entitled to $500,000—the policy limit—for tenant
improvements, without having to prove actual damages in that amount. This presents a
21
question of statutory interpretation, which we review de novo. Stand Up Multipositional
Advantage MRI, P.A. v. Am. Fam. Ins. Co., 889 N.W.2d 543, 547 (Minn. 2017).
When interpreting a statute, we first determine whether the statute’s language, on
its face, is clear or ambiguous. Am. Fam. Ins. Grp. v. Schroedl, 616 N.W.2d 273, 277(Minn. 2000). Language is ambiguous only when it is subject to more than one reasonable interpretation.Id.
We construe statutes in their entirety and interpret each section in light of its surrounding sections to avoid conflicting interpretations.Id.
In denying Galaxy’s motion for summary judgment, the district court determined:
“Chapter 65A establishes that, absent specific individual policy terms providing for a set
recovery for a total loss of other property, the chapter’s total loss provisions apply only to
losses of buildings.” We agree with the district court’s interpretation. When section
65A.08 is read in the context of chapter 65A as a whole, it is clear that total-loss coverage
unambiguously applies to the amount due for a total loss of a building. Cf. Save Lake
Calhoun v. Strommen, 943 N.W.2d 171, 181 (Minn. 2020) (interpreting chapter 83A as a
whole).
Chapter 65A governs fire and related insurance. The very first section of that
chapter details the provisions that are required in standard fire-insurance policies. Minn.
Stat. § 65A.01, subd. 3 (2022). As Western notes, the term “total loss” is immediately
followed by the phrase “on buildings” in every instance it is used in the mandatory
provisions set out in that section.
Section 65A.01 provides: “The amount of said loss or damage, except in case of
total loss on buildings, [is] to be estimated according to the actual value of the insured
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property at the time when such loss or damage happens.” Minn. Stat. § 65A.01, subd. 3
(emphasis added). The statute further provides:
In case of any loss under this policy the insured shall
give immediate written notice to this company of any loss,
protect the property from further damage, and a statement in
writing, signed and sworn to by the insured, shall within 60
days be rendered to the company, setting forth the value of the
property insured, except in case of total loss on buildings the
value of said buildings need not be stated, the interest of the
insured therein, all other insurance thereon, in detail, the
purposes for which and the persons by whom the building
insured, or containing the property insured, was used, and the
time at which and manner in which the fire originated, so far
as known to the insured.
Id. (emphasis added). These provisions make clear that total-loss coverage is an exception
to the general rule that the amount of loss is measured by the actual value of insured
property, and that the exception applies only when determining the amount of loss for a
building deemed a total loss.
Galaxy argues that “Minn. Stat. § 65A.01, subd. 3 says that, in the event of a total
loss ‘the insured need not state the value of the property in a notice of loss.’” But the
statute does not say this. Rather, the statute provides that “in case of total loss on buildings
the value of said buildings need not be stated.” Id. The quote Galaxy attributes to the
statute appears to be taken from this court’s decision in Auto-Owners Insurance Co. v.
Second Chance Investments, LLC. 812 N.W.2d 194, 197(Minn. App. 2012), aff’d,827 N.W.2d 766
(Minn. 2013). Galaxy, however, quotes just a partial sentence from that opinion. The full sentence states: “First, in instances of ‘total loss on buildings,’ the insured need not state the value of the property in a notice of loss.”Id.
(quoting Minn. Stat.
23
§ 65A.01, subd. 3). When the word “property” in Auto-Owners is viewed in context of the
full sentence, it is clear that “property” references the loss of a building, not the loss of an
insured-lessee’s tenant improvements inside leased premises. And although the fire here
resulted in the total loss of the building, Galaxy does not seek to recover the loss of the
building, it seeks to recover the policy limit for its tenant improvements.
This interpretation is consistent with the purpose of the statute’s agreed-value
exception for total loss of a building. “The basic principle of a ‘valued policy’ statute is
that the parties to a fire insurance contract agree in advance on a valuation of the property
to be insured, and, in the absence of fraud, this valuation is binding and not subject to
judicial inquiry.” Nathan v. St. Paul Mut. Ins. Co., 68 N.W.2d 385, 388(Minn. 1955). “Thus, the purpose of valued policy statutes is twofold: (1) To prevent overinsurance by requiring prior valuation; and (2) to avoid litigation by prescribing definite standards of recovery in case of total loss.”Id.
This principle is easily applicable when considering an
insurance contract that provides coverage for the total loss of a building, because at the
time the parties enter into the contract, there is some understanding of the value of the
building being insured. By contrast, business personal property, such as tenant
improvements, is more likely to change during the policy period.
Our interpretation is also supported by our decision in White v. New Hampshire
Insurance Co., which acknowledged that section 65A.08, the section at issue in this case,
substantively parallels the “total loss on buildings” language in section 65A.01. 390
N.W.2d 313 (Minn. App. 1986), rev. denied (Minn. Aug. 27, 1986). There, this court
explained:
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Section 65A.01 also provides that insurers are
prohibited from attaching provisions limiting the amount to be
paid in the case of total loss on buildings by fire to less than
the stated amount of insurance. Id. § 65A.01, subd. 5. This
“valued policy law” is repeated in section 65A.08, which
provides that “the insurer shall pay the whole amount
mentioned in the policy or renewal upon which it receives a
premium, in case of total loss, and in case of partial loss, the
full amount thereof.” Id. § 65A.08, subd. 2.
Id. at 315 (emphasis added).
The cases cited by Galaxy are distinguishable. In both cases, the insureds proved
the scope of their damages; there was no claim that the insureds were entitled to policy
limits without such proof. In Brecher Furniture Co. v. Firemen’s Insurance Co., the
insured established that the actual losses incurred were in excess of the policy limits and
that is why the policy limits were awarded in that case. 191 N.W. 912, 912(Minn. 1923). Similarly, in Marshall Produce Co. v. St. Paul Fire & Marine Insurance Co., because the insured proved their total stock was rendered valueless, they were entitled to the full value of the lost product under the policy.98 N.W.2d 280, 296
(Minn. 1959). Here, Galaxy
failed to persuade the jury that it incurred tenant-improvement losses in excess of the
$100,000 the jury awarded.
We thus conclude that, unless otherwise provided for in a fire-insurance policy,
total-loss coverage under section 65A.08 applies only to total loss of a building, not loss of
an insured-lessee’s tenant improvements to leased premises in a building.
B. Policy Language
Galaxy argues that, even if not required by statute, it is entitled to recover the policy
limits for tenant improvements under the provisions of its insurance contract. We review
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the interpretation of insurance policies de novo. Depositors Ins. Co. v. Dollansky, 919
N.W.2d 684, 687 (Minn. 2018).
Consistent with the mandatory fire-insurance provisions set out in section 65A.01,
all of the references to “total loss” in the insurance policy are in the context of the total loss
of an entire building. As to losses for tenant improvements, the policy explicitly provides
that such losses are to be valued at “[r]eplacement cost” or “[a] proportion of your original
cost.” In its reply brief, Galaxy acknowledges this fact but asserts that the quoted provision
“is amended by the Minnesota Changes form to state that in the event of a total loss, the
Limit of Insurance sets the value.” Galaxy thus argues that because the fire resulted in a
total loss of the building, under the Minnesota Changes endorsement, the policy limit sets
the value for its tenant-improvement losses. We disagree.
The provision referenced by Galaxy states: “We agree that, in the event of a total
loss, the Limit of Insurance (or the limit shown in the total loss schedule of values) for a
building which is Covered Property represents its value.” (Emphasis added.) This
provision clearly refers only to coverage for a building, not a lessee-insured’s tenant
improvements. Accordingly, neither this provision nor the general reference to “broadened
coverage” entitle Galaxy to total-loss coverage for tenant improvements. Rather, the plain
language of the insurance policy, which conforms with the Minnesota standard fire-
insurance policy, provides that losses for tenant improvements are to be calculated using
replacement cost or a proportion of the cost of those improvements borne by the insured.
We thus affirm the district court’s denial of Galaxy’s motion for a new trial on the issue of
total-loss coverage based on the terms of the policy.
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IV. The district court did not err in determining the accrual date for prejudgment
interest.
Finally, Galaxy argues that the district court erred in determining the accrual date
for prejudgment interest. Pursuant to Minn. Stat. § 60A.0811, subd. 2(a) (2022):
An insured who prevails in any claim against an insurer
based on the insurer’s breach or repudiation of, or failure to
fulfill, a duty to provide services or make payments is entitled
to recover ten percent per annum interest on monetary amounts
due under the insurance policy, calculated from the date the
request for payment of those benefits was made to the insurer.
(Emphasis added.) The district court determined that prejudgment interest should be
calculated from January 10, 2019—the date Galaxy submitted its sworn proof of loss—
because that is the first date that Galaxy requested payment of a specific monetary amount.
Galaxy argues that the proper date should be May 30, 2018—the date an independent
adjuster hired by Western met with representatives from Galaxy.
In support of its argument, Galaxy relies on the fact that the prejudgment-interest
statute at issue here, section 60A.0811, subdivision 2(a), does not expressly provide that
prejudgment interest is triggered upon a written notice of claim as is required by the general
prejudgment-interest statute. Cf. Minn. Stat. § 549.09, subd. 1(b) (2022) (stating
“preverdict, preaward, or prereport interest on pecuniary damages shall be computed
[from] . . . the time of a written notice of claim”). Instead, the statute provides that
prejudgment interest is “calculated from the date the request for payment of those benefits
was made to the insurer.” Minn. Stat. § 60A.0811, subd. 2(a). Galaxy thus maintains that
the district court erred in concluding that prejudgment interest only began to accrue after
27
Galaxy made a demand for a specific monetary amount, when it submitted its proof of loss
to Western.
But we need not resolve this question because we conclude that Galaxy failed to
establish that it made any “request for payment” to Western during the May 30, 2018
meeting. The independent adjuster testified at trial that, during the meeting, the Mansours
did not ask him for any information or documents; they asked if he could assist them in
retrieving the cash register and a computer from the building. The independent adjuster
was unable to help because no one was allowed in the building at that point. David
Mansour similarly testified that he asked the independent adjuster for assistance in
retrieving items from the building, but he did not testify to making any other requests of
the independent adjuster during the meeting. On this limited record, Galaxy has failed to
establish that it made a “request for payment” at the May 30, 2018 meeting. The undisputed
evidence thus supports the district court’s finding that the first request for payment
occurred on January 10, 2019. We therefore discern no error in the district court’s
determination of the accrual date for prejudgment interest.
DECISION
In sum, we affirm the district court’s denial of Western’s motions for judgment as a
matter of law or a new trial. We also affirm the district court’s determinations that Galaxy
is not entitled to total-loss coverage under Minnesota Statutes section 65A.08, subdivision
2(a), or the policy provisions, and that, under the record in this case, the district court did
not err in determining that prejudgment interest began to accrue on January 10, 2019.
Affirmed.
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Reference
- Status
- Published
- Syllabus
- Unless otherwise provided for in a fire-insurance policy, total-loss coverage under Minnesota Statutes section 65A.08 (2022) applies only to total loss of a building, not loss of an insured-lessee's tenant improvements to leased premises in a building. Affirmed.