Opinion ID: 815102
Heading Depth: 2
Heading Rank: 5

Heading: Space Under Lease to China House and Dog Gone

Text: Oakdale next proposes the district court erred in excluding space once occupied by China House and Dog Gone from the mall’s occupancy calculations because China House had a valid lease and Dog Gone was a tenant at will, both with rights to use their respective spaces. Oakdale acknowledges China House stopped doing business at the mall and was not using the space to conduct its customary operations, but argues China House still had a valid lease and had not notified Oakdale it had stopped using or otherwise surrendered the premises at the time of the theft. According to Oakdale, because China House still had a lease and the right to occupy the property, “Oakdale was very clearly using the China House space as part of [Oakdale’s] customary business operations”—leasing mall space to tenants. With respect to Dog Gone, Oakdale maintains it was “irrelevant whether Dog Gone was using the premises as part of its customary business operations because Oakdale was.” Oakdale asserts the lack of a definition of “customary operations” in the policy means the phrase is ambiguous and can be interpreted “any number of ways” when applied to a mall, including an interpretation that would encompass Oakdale simply leasing the property. We again reject Oakdale’s strained interpretation of the policy. Not only is Oakdale’s interpretation contrary to the purpose of the vacancy provision, it also creates a conflict between the first and second clauses of that provision. The first clause has two parts: (1) the space be rented to a lessee or sub-lessee, and (2) the -9- space be “used by them to conduct their customary operations.” The second clause includes the space used in Oakdale’s customary operations as occupied. Oakdale’s interpretation of the second clause—a valid lease satisfies the vacancy provision because leasing space is Oakdale’s customary operation—would render the requirements in the first clause—the space be both rented and used by the tenant to be occupied—without effect. Oakdale’s interpretation of the vacancy provision is unreasonable, and the district court did not err in rejecting it. See Mut. Serv. Cas. Ins. Co. v. Wilson Twp., 603 N.W.2d 151, 153 (Minn. Ct. App. 1999) (“If a phrase is subject to two interpretations, one reasonable and the other unreasonable in the context of the policy, the reasonable construction will control and no ambiguity exists.”); see also Noran Neurological Clinic, P.A. v. Travelers Indem. Co., 229 F.3d 707, 709 (8th Cir. 2000) (explaining, under Minnesota law, the reasonable construction of a policy controls over an unreasonable interpretation).