Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-06-03982/USCOURTS-ca8-06-03982-0/pdf.json

Parties Involved:
Farm Bureau Mutual Insurance Company
Appellee
David Wilcox
Appellant

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 06-3982

___________

Farm Bureau Mutual Insurance *

Company, *

*

Plaintiff - Appellee, * Appeal from the United States

* District Court for the

v. * District of Minnesota.

*

David Wilcox, *

*

Defendant - Appellant. *

___________

Submitted: June 13, 2007

Filed: August 28, 2007

___________

Before LOKEN, Chief Judge, ARNOLD and COLLOTON, Circuit Judges.

___________

LOKEN, Chief Judge.

David Wilcox owned and rented a house and outbuildings in Dodge County,

Minnesota. Farm Bureau Mutual Insurance Company (Farm Bureau) insured the

properties against fire and other perils. The tenants moved out unexpectedly in June

2004. Wilcox removed all their possessions by early August and undertook various

repairs. On November 21, 2004, Wilcox discovered that water running from an open

faucet into a stopped sink in an upstairs bathroom had overflowed and extensively

damaged the house. Wilcox filed a claim for the loss. Farm Bureau commenced this

diversity action, seeking a declaratory judgment of no coverage because the loss was

governed either by a policy provision excluding loss caused by vandalism to a house

Appellate Case: 06-3982 Page: 1 Date Filed: 08/28/2007 Entry ID: 3345764
-2-

vacant more than thirty days, or by the provision in Minnesota's statutory Standard

Fire Policy excluding loss to a house vacant and unoccupied more than sixty days.

The district court granted summary judgment to Farm Bureau. The court

concluded that whether the loss was caused by vandalism is a disputed issue of fact

but granted summary judgment because the property was vacant and unoccupied for

more than sixty days when the loss occurred, and the sixty-day vacancy/unoccupancy

provision in the Standard Fire Policy applies and excludes the loss from coverage.

Reviewing the grant of summary judgment de novo, we conclude that Farm Bureau

failed to bring a governing policy provision to the district court's attention and

therefore remand. 

No fire insurance policy may be issued in Minnesota “unless it shall provide the

specified coverage and conform as to all provisions” with the statutory Standard Fire

Policy. Minn. Stat. § 65A.01, subd. 1. The statute “was enacted to do away with the

evils arising from the insertion in policies of insurance of conditions ingeniously

worded, which . . . gave the insured less protection than he might naturally suppose

he was getting under his contract.” Heim v. Am. Alliance Ins. Co. of N.Y., 180 N.W.

225, 226 (Minn. 1920). The Standard Fire Policy guarantees a minimum level of

coverage. “Insurance companies may, however, incorporate additional or different

terms into their policies that offer more than the statutory minimum.” Watson v.

United Serv. Auto Ass’n, 566 N.W.2d 683, 690 (Minn. 1997) (citations omitted); see

Krueger v. State Farm Fire & Cas. Co., 510 N.W.2d 204, 209 (Minn. App. 1993). 

In its declaratory judgment complaint, Farm Bureau alleged that Wilcox's loss

fell within an exclusion in the statutory Standard Fire Policy provisions:

Unless otherwise provided [in the policy, the insurer] shall not be liable

for loss occurring . . . while the described premises, whether intended for

occupancy by owner or tenant, are vacant or unoccupied beyond a period

of 60 consecutive days.

Appellate Case: 06-3982 Page: 2 Date Filed: 08/28/2007 Entry ID: 3345764
-3-

Minn. Stat. § 65A.01, subd. 3. In arguing Farm Bureau's motion for summary

judgment to the district court, the parties represented that the Farm Bureau policy

contained no general vacancy/unoccupied provision, only a more limited exclusion:

Vandalism and Malicious Mischief

There is no coverage for loss arising out of vandalism or malicious

mischief, or any ensuing loss caused by any intentional and wrongful act

committed in the course of the vandalism or malicious mischief, to a

dwelling or its contents if the dwelling has been “vacant” or

“unoccupied” for more than 30 consecutive days immediately before the

loss. 

Wilcox argued that the Farm Bureau policy provided more coverage than the statutory

minimum because the policy's vacancy exclusion was limited to losses arising out of

vandalism or malicious mischief. The district court rejected this contention. Relying

on an alternative ground in Krueger v. State Farm Fire & Casualty Co., No. C0-94-

557, 1994 WL 440258 (Minn. App. Aug. 16, 1994) (unpublished), the district court

concluded that “under Minnesota law, the Vacancy/Vandalism clause does not afford

greater coverage than the Standard Vacancy/Unoccupancy Clause and the Standard

[Fire] Policy must apply.” 

On appeal, Wilcox again argues that the policy's narrow thirty-day exclusion

for loss due to vandalism or malicious mischief offers more coverage than the sixtyday vacancy exclusion in the Standard Fire Policy. Therefore, the sixty-day exclusion

does not apply and this loss was covered. Farm Bureau responds that the thirty-day

vacancy/vandalism provision is distinct from a general exclusion for loss occurring

while a house is vacant and unoccupied. Therefore, the policy is silent, and the sixtyday Standard Fire Policy provision applies. This is not an easy issue. Krueger was

an unpublished opinion of Minnesota's intermediate appellate court, so it is not

controlling precedent. Moreover, the ruling in Krueger that the Standard Fire Policy

Appellate Case: 06-3982 Page: 3 Date Filed: 08/28/2007 Entry ID: 3345764
-4-

exclusion applies when the policy is silent was an alternative ground -- the fire loss

was due to arson so the policy's express thirty-day vacancy/vandalism exclusion also

applied. Similarly, in Vennemann v. Badger Mut. Ins. Co., 334 F.3d 772, 773 & n.3

(8th Cir. 2003), the fire loss was caused by arson, so we applied the policy's thirty-day

vacancy/vandalism exclusion, enlarging the vacancy period to sixty days consistent

with the Standard Fire Policy's mandatory minimum coverage. 

The district court's application of the sixty-day exclusion results in an insurer

using the Standard Fire Policy as a sword, and an insured losing coverage to a hidden

statutory exclusion. Our review of the relevant Minnesota statutes casts grave doubt

on this result. The above-quoted § 65A.01, subd. 1, further provides that a policy

covering fire and other perils -

may be issued without incorporating the exact language of the Minnesota

standard fire insurance policy, provided: Such policy or contract shall,

with respect to the peril of fire, afford the insured all the rights and

benefits of the Minnesota standard fire insurance policy . . .; such policy

or contract is complete as to its terms of coverage; and the commissioner

is satisfied such policy or contract complies with the provisions hereof.

(Emphasis added.) The subdivision setting forth the mandatory provisions of the

Standard Fire Policy, § 65A.01, subd. 3, provides that “the following provisions and

subject matter shall be stated in the following words and in the following sequence”

(emphasis added). The Minnesota insurance statutes further provide that “[n]o policy

form” may be issued unless it has been filed for approval with the Commissioner of

Insurance. Minn. Stat. § 70A.06, subd. 2. If there is compliance with these statutes

and careful review of filed policy forms by the Commissioner, no policy covering the

peril of fire should be issued in Minnesota unless it either expressly informs the

insured that the sixty-day vacancy exclusion contained in the Standard Fire Policy

applies, or contains the insurer's vacancy provision or some other provision offering

more generous coverage. 

Appellate Case: 06-3982 Page: 4 Date Filed: 08/28/2007 Entry ID: 3345764
-5-

In fact, as Wilcox's attorneys belatedly discovered and raised for the first time

on appeal, the Farm Bureau policy contains such a provision. The Property Section

of Wilcox's Personal Package Policy includes a Payment for Loss subpart that adds

the following provision “with respect to coverage provided by this section”:

Except where specifically limited elsewhere in this policy, coverage on

buildings will not be affected by being “vacant” or “unoccupied” unless

the “vacancy” or “unoccupancy” lasts more than 180 consecutive days.

In the event of loss to buildings “vacant” or “unoccupied” for more than

180 consecutive days we will pay 50% of the amount we would have

paid if the building had not been “vacant” or “unoccupied.”

Obviously, this is more generous coverage of vacant buildings than the sixty-day

exclusion in the Standard Fire Policy. Therefore, Wilcox argues, the 180-day

provision applies. As the water damage discovered in November 2004 occurred less

than 180 days after the tenants vacated the house, it was a covered loss. 

On appeal, Farm Bureau first argues that we should not consider the effect of

the 180-day provision because it was not raised in the district court. That is of course

the general rule. But it is subject to exceptions, for example, “where injustice might

otherwise result, or when the argument involves a purely legal issue in which no

additional evidence or argument would affect the outcome of the case.” Universal

Title Ins. Co. v. United States, 942 F.2d 1311, 1314-15 (8th Cir. 1991) (citations and

quotation omitted). Here, the 180-day provision is in the record on appeal, and its

interpretation is, at least in most instances. an issue of law for the court. See Noran

Neurological Clinic, P.A., v. Travelers Indem. Co., 229 F.3d 707, 709-10 (8th Cir.

2000); Watson, 566 N.W.2d at 688. Farm Bureau beginning with its complaint

alleged to the district court that the only provisions relevant to coverage were the

thirty-day vacancy/vandalism provision in the policy and the sixty-day vacancy

exclusion in the Standard Fire Policy. Although counsel for Wilcox should not have

overlooked the 180-day policy provision in the district court, we think injustice would

Appellate Case: 06-3982 Page: 5 Date Filed: 08/28/2007 Entry ID: 3345764
1

The policy's glossary defined vacancy as, “For a dwelling or other building,

when it is empty, containing nothing of significant value,” and defined unoccupied as,

“For a dwelling, when it is no longer used as a residence. For a building other than

a dwelling, when it is not significantly utilized.” (Emphasis added). 

-6-

result if an insurance company were permitted to prevail in a coverage dispute by

failing to advise the trial court of a relevant provision in its complex policy form.

Thus, we will exercise our discretion to consider the 180-day provision. 

Turning to the merits of that provision, Farm Bureau argues that Wilcox's

policy included a “Dwelling Module” and that, properly construed, the 180-day

provision applies to “buildings” but not to “dwellings.” This contention is without

merit. “[T]he terms of an insurance policy . . . not specifically defined . . . must be

given their plain, ordinary, or popular meaning.” Smith v. St. Paul Fire & Marine Ins.

Co., 353 N.W.2d 130, 132 (Minn. 1984). As a matter of plain meaning, a dwelling

is one type of building.1

 Moreover, the Dwelling Module on which Farm Bureau

relies is part of the Property Section of the policy and its Payment for Loss subpart

expressly provides, “The Payment for Loss provisions in . . . the Property Section

apply.” That cross-reference includes the 180-day provision. Finally, Farm Bureau's

proposed interpretation would leave the Dwelling Module without a general vacancy

exclusion, contrary to the statutory mandates that the policy be “complete as to its

terms of coverage” and include each “subject” addressed in the Standard Fire Policy

provisions. When Farm Bureau filed this policy form for approval, we have no doubt

that the Minnesota official who reviewed it for statutory compliance construed the

180-day vacancy provision as applying to dwellings, as well as to other buildings. 

Because the policy's 180-day vacancy provision applies to the circumstances

of this loss and clearly provides broader coverage, the district court erred in applying

the statutory sixty-day exclusion. See Krueger, 510 N.W.2d at 209. In addition,

because the 180-day provision applies to all perils covered by the policy, it renders

moot another issue Wilcox raises for the first time on appeal -- whether the sixty-day

Appellate Case: 06-3982 Page: 6 Date Filed: 08/28/2007 Entry ID: 3345764
-7-

vacancy exclusion in the Standard Fire Policy applies only to fire losses, and therefore

not to the water damage loss here at issue. Given the wording of Minn. Stat.

§ 65A.01, subd. 1 -- that a multi-peril policy must incorporate the provisions of the

Standard Fire Policy “with respect to the peril of fire” -- this appears to be a serious

unresolved issue of Minnesota law. We need not consider it in this case.

However, even if the policy's 180-day provision applies, it does not fully

resolve the coverage question. If the water damage was caused by vandalism or by

malicious mischief, the resulting loss is excluded by the policy's thirty-day vacancy/

vandalism provision (even with vandalism coverage increased to sixty days in

accordance with Minn. Stat. § 65A.01, subd. 1, as construed in Vennemann, 334 F.3d

at 773 n.3). The summary judgment record included conflicting evidence on this

issue, and the district court declined to decide it. Wilcox initially testified that, in his

opinion, someone intentionally turned on the faucet in an effort to damage the house.

But in opposing summary judgment, he submitted an affidavit by his wife suggesting

an accidental cause of the water damage -- in late October 2004, she turned on the

upstairs faucet and did not turn it off when no water came out; a workman could later

have turned the water back on, not knowing the faucet was open. We must remand

to allow the district court to take up this issue in the first instance. 

The judgment of the district court is reversed and the case is remanded for

further proceedings not inconsistent with this opinion. Farm Bureau's motion to

supplement the record on appeal is granted.

______________________________

Appellate Case: 06-3982 Page: 7 Date Filed: 08/28/2007 Entry ID: 3345764