Minn. Stat. § 65A.08

Reedon of Faribault, Inc. v. Fidelity & Guaranty Insurance Underwriters, Inc. · 1988 4 citations

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Casablanca Concerts, Inc. v. American National General Agencies, Inc. · 1987 2 citations

*444 [T]he valuation is conclusive only in cases of a total loss, and where the loss is partial, the actual damage is the measure of recovery. 6 J. Appleman, Insurance Law and Practice, §§ 3827, 3828, at 245, 254 (1972) (footnotes omitted). The Minnesota valued fire insurance statute also requires a total loss before recovery of the face value of the policy. See Minn. Stat. § 65A.08, subd. 2 (1978). Respondents claim that appellant did not sustain a total loss because the concert was not canceled, postponed, or abandoned. This argument, however, assumes that the risk insured against was the cost of cancellation, postponement, or abandonment of the event. Appellant, on the other hand, argues that the risk insured against was not the risk of losses due to cancellation of the event, but rather, the risk of decreased profit caused by the rainfall without cancellation of the concert. Appellant argues that if it had wanted to insure against cancellation of the event, it would have insured the concert for much more than $150,000, claiming that its estimated expenses for the entire concert were $560,000. Therefore, the loss should not be judged by cancellation of the concert, but rather, by diminution of the profits caused by the rain. Respondents argue that it cannot be assumed that Casablanca suffered a total loss merely because it rained more than one-tenth of one inch, and argue that Casablanca must prove its actual loss. At the hearing, appellant submitted an affidavit from Henry L. Fox, a weather insurer, in which Fox stated that valued rain insurance policies are written to allow payment without cancellation, postponement, or abandonment of the event to avoid any dispute as to the need for cancellation, and that rain creates intangible damages which are difficult, if not impossible, to prove after the fact. Thus, due to the nature of this loss, the parties before the fact agree on the value of loss, both tangible and intangible, which will result if the stated risk occurs. Accordingly, appellant argues that the parties agreed upon the valuation of the increased costs due to rain — $150,000, and therefore, under Minnesota law, they need not prove the actual value of these expenses. In construing the fire insurance statutes, Minnesota courts have long held that the basic principle of the valued policy is that the parties to the 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. Antell, 252 Minn. at 132, 89 N.W.2d at 736; see Brooks Realty Inc. v. Aetna Insurance Co., 276 Minn. 245, 252, 149 N.W.2d 494, 499 (1967); Board of Trustees of First Congregational Church of Austin v. Cream City Mutual Insurance Company of Milwaukee, 255 Minn. 347, 352, 96 N.W.2d 690, 695 (1959). We think that this rule must be applied in the context of rain insurance as well. Appellant must, however, prove that it did in fact sustain the losses against which it insured the concert. Respondents then have the burden of proving that appellant grossly overvalued its interest, thereby rendering the policy a wagering contract. See In re Estate of Peterson, 203 Minn. 491, 493, 281 N.W. 877, 878 (1938). Respondents argue further that allowing appellant to recover without proof of the actual value of its loss would result in a windfall to appellant and defeat the underlying purpose of insurance — indemnification. The very nature of valued policies, however, represents a deviation from the principle of indemnity because the stipulated value may not equal the actual value of the property. See R. Keeton, Basic Text on Insurance Law, § 3.8, at 140 (1971). Valued policy legislation came into effect to halt the process whereby agents sold too much insurance to the insured and then, when loss occurred, relied on a provision in the contract which limited proceeds to the actual loss sustained. By forcing insurance companies to pay the full amount of the policy in the event of a total loss, it was expected that insurers would be more prudent in establishing insurable value, thereby preventing the double evil of overinsurance. Williams, The Valued Policy and *445 Value Determination, 1961 Ins.L.J. 71, 72; see Antell, 252 Minn. at 132-33, 89 N.W.2d at 737 (court assumes, from issuance of valued insurance policy, that insurer has made sufficient inspection of property to value property accurately). Allowing appellant to recover the face value of the policy is also consistent with the doctrine of reasonable expectations recently adopted by the Minnesota Supreme Court, in part, to encourage insurance companies to conspicuously and concisely communicate the parameters of policy coverage. See Atwater Creamery Co. v. Western National Mutual Insurance Co., 366 N.W.2d 271, 278 (Minn.1985); see also Comment, Great Expectations for the Reasonable Expectations Doctrine, 12 Wm. Mitchell L.Rev. 371 (1986).

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White v. New Hampshire Insurance Co. · 1986 2 citations

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Schmidt v. St. Paul Fire & Marine Insurance Co. · 1985 2 citations

ANALYSIS In order to overturn a trial court's findings, a reviewing court "must be left with a definite and firm conviction that a mistake has been made, notwithstanding the evidence to support such findings." Cherne Industrial, Inc. v. Grounds & Associates, Inc., 278 N.W.2d 81, 88 (Minn. 1979). We initially note that appellants failed to move for a new trial as dictated under Minn.R.Civ.P. 59.01 and 59.03. The trial court erred, however, in considering the reasonable expectation of coverage in its findings of fact. Determination of reasonable expectation of coverage presents a question of law and thus we are not foreclosed from considering this issue on appeal. See Rautio v. International Harvester Co., 180 Minn. 400, 231 N.W. 214 (1930). Moreover, an appellate court need not defer to the trial court in reviewing questions of law. Van De Loo v. Van De Loo, 346 N.W.2d 173 (Minn.Ct.App.1984). I. Neither party disputes the court's finding that the November 28 letter was a binder. The court noted that coverage was obtained under the Minnesota FAIR Plan Act, which specifies: Binders * * * shall be deemed to include all the terms of such standard fire insurance policy and all such applicable endorsements *240 as may be designated in such contract of temporary insurance. Minn. Stat. § 65A.03 (1984). Therefore, the court held that reference to the underlying policy must determine the details of coverage. See, Indiana Mutual Casualty Co. v. Pratt, 177 Minn. 36, 224 N.W. 253 (1929). The standard fire policy is set forth in Minn. Stat. § 65A.01 (1984). It contains as part of its standard terms a provision which reads: Unless otherwise provided in writing added hereto this company shall not be liable for loss occurring: * * * * * * (b) while the described premises, whether intended for occupancy by owner or tenant, are vacant or unoccupied beyond a period of 60 consecutive days * * *. Minn. Stat. § 65A.01, subd. 3 (1984) (emphasis supplied). A vacancy endorsement attached to the policy specified that vacancy coverage "shall not exceed 90 days." The court incorporated this 30-day extension of coverage into the policy and found the policy language unambiguous. According to the court, the policy terminated on March 5, 1980. Appellants agree that a binder normally implies reference to the standard policy to determine the details of coverage. Appellants contend, however, that in this case they contracted for coverage beyond that provided in the standard policy. Specifically, they argue that the additional premium charged for a vacancy permit, the binder's reference to one year coverage and the absence of any language limiting or excluding coverage created an ambiguity in the policy. Therefore, they argue that the trial court erred in disregarding the jury's finding of a reasonable expectation of coverage beyond March 5, 1980. Appellants further contend that the court's action is incongruent with the jury's finding that appellants never received a copy of the insurance policy and the endorsement's restrictive language. We agree. The trial court relied on Twin City Hide v. Transamerica Insurance Co., 358 N.W.2d 90 (Minn.Ct.App.1984), in holding that the reasonable expectations doctrine was not applicable. The court read that decision as requiring ambiguity in an insurance policy before the reasonable expectations doctrine applied. This reliance is misplaced. Twin City Hide concerned representations made after a loss had occurred. The appellant in Twin City Hide argued that its reasonable expectations should determine coverage. The court summarily stated that an insurance contract is not subject to interpretation if the contract is unambiguous. Id. at 93. The court, however, did not analyze the reasonable expectations doctrine. The controlling authority for this issue is Atwater Creamery Co. v. Western National Mutual Insurance Co., 366 N.W.2d 271 (Minn.1985). In Atwater, the court reversed the denial of policy coverage due to the reasonable expectations of the purchaser of the policy. Twin City Hide was not referred to in the decision. The insurance policy there contained a provision for loss caused by burglary but required "evidence of forcible entry" before coverage was allowed. Despite the plaintiff's admission that he had not read the policy in its entirety, the court held that where the technical definition of burglary is, in effect, an exclusion of coverage it would not be interpreted to defeat the reasonable expectations of coverage. Id. at 278-79. The Atwater court discussed at some length the reasonable expectations doctrine noting that it gives the court a standard by which to construe insurance contracts without having to rely on arbitrary rules which do not reflect real-life situations and without having to bend and stretch those rules to do justice in individual cases. Id. at 278. The Atwater court cited Canadian Universal Insurance Co. v. Fire Watch, Inc., 258 N.W.2d 570 (Minn.1977) as another instance where the reasonable expectations doctrine was used to provide coverage when the actual language of the policy *241 would have proscribed coverage. Canadian Universal involved a special endorsement issued after the policy which reduced coverage without notice to the insured. Because the language of the policy and endorsement were unambiguous, the trial court there excluded coverage. The supreme court reversed, applying the reasonable expectations doctrine. The court in Atwater correctly observed that the issue in Canadian Universal was somewhat different from the issue in Atwater, but concluded it was not so different that the general principle was inapplicable. The Atwater court concluded: [T]he reasonable expectations doctrine does not automatically mandate either pro-insurer or pro-insured results. It does place a burden on insurance companies to communicate coverage and exclusions of policies accurately and clearly. It does require that expectations of coverage by the insured be reasonable under the circumstances. Atwater at 278. In the present case, Schmidt and Auel told McNamee that they wanted coverage for a vacant building. McNamee testified that he told Auel the general vacancy coverage was for 60 days, but was assured that the building would be vacant for only 30 days. Appellants' assurances are not relevant to a decision in this case since they were made prior to issuance of the binder agreement. The relevant portion of the binder provides as follows: Perils X Fire X Extended Coverage X VMM Term-One year Vacancy Permit 21.00 4.00 125.00 .42 Total Annual Premium $411.68 We think the binder's plain language creates an ambiguity in the policy. The binder references to annual coverage twice: "VMM — One year" and "Total Annual Premium." A more restrictive reading of "VMM Term — One year" lends support to one year coverage for vandalism and malicious mischief only, but this is not dispositive. The binder provides for "Extended Coverage" and includes "Fire" within the perils of coverage. Moreover, the binder includes an additional $150.42 premium for a vacancy permit within the total annual premium of $411.68. Respondent admits that payment in this amount was received on December 3, 1979. The vacancy endorsement attached to appellants' standard policy specifies that vacancy coverage extended for 90 days and terminated on March 5, 1980. The trial court relied on this date in finding the policy unambiguous. This ignores a material fact in the jury's special verdict. The jury found that neither the policy nor the vacancy endorsement was delivered to appellants. Therefore, appellants' sole source of information pertaining to coverage was the binder agreement which did not provide for a definite coverage period. As such, appellants could reasonably rely on a full year's coverage and compensation for their loss on October 24, 1980. The ambiguity of the binder and the nondelivery of the policy and vacancy endorsement convince us that appellants had a reasonable expectation of coverage. The jury's finding in this regard will not be disturbed. On this issue, we reverse. II. Appellants argue that the issue of damages should not have been submitted to the jury since their loss was total and accordingly, respondent must tender the face amount of the policy — $25,000. The jury assessed damages of $16,000. Appellants also seek prejudgment interest on the full amount of damages. Although appellants failed to object to jury instructions on damages at trial, the issue was *242 raised in its motion for JNOV. The trial court did not address appellants' motion since it determined no coverage existed. The basic principle of a "valued" policy statute is that the parties to a fire insurance contract agree in advance to the value of the property to be insured. Nathan v. St. Paul Mutual Insurance Co., 243 Minn. 430, 68 N.W.2d 385 (1955). "[T]he 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 (1984). See Ehlert v. Graue, 292 Minn. 393, 195 N.W.2d 823 (1972). We are unable to glean any definite proof of loss from the record. The only evidence of loss introduced by appellants consisted of Auel's testimony that the building had "burned down" and the proof of loss filed with respondent indicating that the loss was "total." Moreover, there is insufficient evidence in the record to indicate how the jury arrived at its assessment of $16,000 in damages. The trial court did not rule on appellants' request for prejudgment interest due to its finding that the loss was not covered. Section 65A.01 is applicable to this issue and provides that in a standard fire insurance policy: [T]he company will not in any case be liable for more than the sum insured, with interest thereon from the time when the loss shall become payable, as above provided. Minn. Stat. § 65A.01, subd. 3 (emphasis added). We note that the trial court refused to allow Patrick Johnson to substitute for appellants' counsel during oral argument on plaintiffs' motion to amend judgment. This action was based on the absence of such authority in the record. While we do not encourage lack of proper documentation in substituting attorneys, we think that attorney Johnson's presence throughout portions of the trial and his association with the attorney of record supported his authority to argue the motion. Johnson made the request to argue the case as an officer of the court and here the request should have been honored.

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