Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-14-03026/USCOURTS-ca8-14-03026-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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United States Court of Appeals

For the Eighth Circuit

___________________________

No. 14-3026

___________________________

Midwest Regional Allergy, Asthma, Arthritis & Osteoporosis Center, P.C., a

Missouri Corporation; Dr. Michael Joseph, Individually

lllllllllllllllllllll Plaintiffs - Appellees

Sooner Three, LLC

lllllllllllllllllllll Plaintiff

v.

The Cincinnati Insurance Company

lllllllllllllllllllll Defendant - Appellant

____________

Appeal from United States District Court 

for the Western District of Missouri - Joplin

____________

 Submitted: April 16, 2015

 Filed: July 31, 2015 

____________

Before WOLLMAN and GRUENDER, Circuit Judges, and GRITZNER,1

 District

Judge.

____________

1

The Honorable James E. Gritzner, Senior United States District Judge for the

Southern District of Iowa, sitting by designation.

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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

2

The Honorable Greg Kays, Chief United States District Judge for the Western

District of Missouri. 

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Appellate Case: 14-3026 Page: 2 Date Filed: 07/31/2015 Entry ID: 4301327 
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. 

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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

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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:

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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”; or 

2) 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 direct physical “loss”.

This Additional Coverage – Extra Expense, is not subject to the

Limits of Insurance.

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J.A. 112-13.

It is undisputed that the claimed expenses were caused by a covered cause of

loss and that those expenses would not have been incurred absent the damage to the

Premises. The claimed expenses were also incurred during the period of restoration3

and within twelve consecutive months from the date of loss. Therefore, the only issue

in determining whether the expenses are recoverable under the Extra Expense

provision is whether the expenses meet the definition of “Extra Expenses” under

subsection k(2).

The district court found the claimed expenses met the definition of extra

expenses under subsection k(2)(a). We agree this is a reasonable reading of the provisions. Subsection k(2)(a) provides extra expense coverage “to avoid or minimize

the ‘suspension’ of business and to continue ‘operations’ . . . [a]t a replacement

location . . . .” J.A. 112. It is undisputed that prior to the tornado, Midwest

Regional’s normal business operations included providing MRIs, X-rays, bone density

scans, full laboratory analysis, and specialty infusion services. While operating at the

Temporary Location, Midwest Regional was unable to offer such services and

suffered a direct loss of business income as a result. The MRI machine and other

specialty equipment were therefore necessary for Midwest Regional to avoid the

3

“Period of restoration” is defined under the Policy as 

the period of time that:

(1) Begins at the time of direct physical ‘loss’; and 

(2) Ends on the earlier of: 

(a) The date when the property at the ‘premises’ should be

repaired, rebuilt or replaced with reasonable speed and

similar quality; or 

(b) The date when business is resumed at a new permanent

location.

J.A. 139.

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continued cessation or slowdown of the business and to resume normal business

operations at the Replacement Location.

Expenses covered under subsection k(2)(a) include “relocation expenses” and

“costs to equip and operate the replacement or temporary location.” Midwest

Regional sought reimbursement for three specific expenses: repair of the MRI

machine, replacement of the other specialty equipment, and installation of the MRI

machine. Considering the Policy as a whole and reading all provisions in harmony, 

it is a reasonable construction that the repair of the MRI machine and the replacement

of the other specialty equipment were costs to equip and operate the Replacement

Location. It is similarly reasonable to construe the installation expenses associated

with the MRI machine as costs to relocate the business to the Replacement Location. 

Although the nature of Midwest Regional’s business and the extent of the damage

necessitated substantial relocation expenses and significant costs to equip and operate

the Replacement Location, this is not a factor in determining whether coverage exists

under the Extra Expense provision of the Policy.

Cincinnati Insurance argues the claimed expenses are not recoverable under

subsection k(2)(a) because such expenses do not reduce the amount of loss

recoverable under the Policy’s Business Income provision. However, a plain reading

of the Policy reveals that only extra expenses recoverable under section k(2)(c) are

required to lessen or mitigate losses otherwise payable under the Extra Expense

provision or the Business Income provision. Extra expenses under subsections k(2)(a)

and k(2)(b) are not connected to the Business Income provision.

Because the claimed expenses are recoverable under subsection k(2)(a), the

Court finds it is unnecessary to discuss whether the claimed expenses may also fall

under subsections k(2)(b) or k(2)(c). Under the plain language of the Policy, an

ordinary person of average understanding in the insured’s position would interpret the

three definitions of extra expenses in section k(2) as distinct and separate. There is

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no connecting language between subsections k(2)(a), k(2)(b), and k(2)(c), and

therefore they are each construed independently. Furthermore, a plain reading of each

subsection reveals they apply in separate and distinct scenarios. The first two

subsections apply to avoid or minimize the suspension of business operations when

business operations are continued, subsection k(2)(a), or when the business operations

cannot presently continue, subsection k(2)(b). The third definition of extra expenses

in subsection k(2)(c) is not connected to expenses necessary to avoid or minimize the

suspension of the business, but rather provides coverage to specific expenses that

reduce losses otherwise payable under the Extra Expense and Business

Income provisions.

Cincinnati Insurance further argues Midwest Regional is prohibited from

reimbursement for the claimed expenses because the expenses are covered under the

Building and Business Personal Property provisions of the Policy, in which Cincinnati

Insurance paid the policy limits. Cincinnati Insurance argues the Extra Expense

provision is a separate and distinct provision and Midwest Regional cannot use the

Extra Expense provision to circumvent the policy limits of the Building and Business

Personal Property provisions.

The reliance by Cincinnati Insurance on our decision in Polytech, Inc. v.

Affiliated FM Insurance Co., 21 F.3d 271 (8th Cir. 1994), in support of this argument

is misplaced. In Polytech we held a business income interruption policy, not an extra

expense provision, was a separate and distinct type of insurance under Missouri’s

valued policy statute. Id. at 275. We did not address how an extra expense provision

relates to other property coverages under a similar insurance policy. Polytech,

therefore, has no relevant application. The other cases Cincinnati Insurance cites,

most of which are unpublished and from other jurisdictions, similarly do not

illuminate the specific issue in dispute. See Galvan v. Amco Ins. Co., No. CIV S-10-

2257-GEB-CMK, 2011 WL 3882497, at * 5-6 (E.D. Cal. Sept. 2, 2011) (denying

extra expense coverage under the first two definitions of extra expenses because the

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insured terminated, as opposed to suspended, its business operations, and the expenses

did not meet the third definition because the expense did not reduce losses otherwise

payable under the extra expense provision or business income provision); Nassau

Gallery, Inc. v. Nationwide Mut. Fire Ins. Co., No. Civ.A. 00C-05-034, 2003 WL

21223843, at *3 (Del. Super. Ct. April 17, 2003) (denying coverage under the extra

expense provision for reconstruction expenses for a rented building, such as lighting

and other fixtures, because such expenses were exclusively covered by the property

provision); Thompson v. Threshermen’s Mut. Ins. Co., 493 N.W.2d 734, 737 (Wis.

Ct. App. 1992) (holding extra expense coverage for the construction of a new building

when the insured previously rented the building contravened the parties’ intent).

Cincinnati Insurance ignores the fact that the language of the Policy does not

specifically exclude coverage under the Extra Expense provision if the expenses

happen to fall under another coverage in the Policy. Rather, the Policy specifically

states that Extra Expense coverage is not subject to the policy limits. See Mansion

Hills Condo. Ass’n, 62 S.W.3d at 637 (“When the language of an insurance contract

is unambiguous then rules of construction are inapplicable and, absent a public policy

exception to the contrary, the contract must be enforced as written.” (citation

omitted)). Given the lack of a clear indication in the Policy to the contrary, an

ordinary person in the position of the insured would understand the disputed provision

to provide coverage for the expense at issue. The Court therefore finds the Policy, as

written, covers the claimed expenses under the Extra Expense provision.

The judgment of the district court is affirmed.

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