Opinion ID: 6501101
Heading Depth: 2
Heading Rank: 1

Heading: Policy Interpretation and Coverage

Text: The Wobigs assert the policy provides coverage for their claimed loss because: (1) a common sense understanding of the business use exclusion requires actual business activity to take place on the property and there was no actual business being conducted on the property; (2) the policy provides limited coverage for business property located on the premises and the definition of premises includes “other structures;” and (3) enforcement of the exclusion violates their reasonable expectations. Whether an insurance policy is ambiguous is a question of law that follows ordinary contract construction principles. Carlson v. Allstate Ins. Co., 749 N.W.2d 41, 45 (Minn. 2008). Policy language is ambiguous if reasonably susceptible to more than one interpretation. King’s Cove Marina, LLC v. Lambert Com. Constr. LLC, 958 N.W.2d 310, 316 (Minn. 2021) (quoting Midwest Family Mut. Ins. Co. v. Wolters, 831 N.W.2d 628, 640 (Minn. 2013)). In determining whether an insurance policy provides coverage, we first look at the policy language. Depositors Ins. Co. v. Dollansky, 919 N.W.2d 684, 691 (Minn. 2018). If the language is unambiguous and clear, courts effectuate the parties’ intent by construing the language in its plain and ordinary sense. Eng’g & Constr. Innovations, Inc. v. L.H. Bolduc Co., 825 N.W.2d 695, 704 (Minn. 2013). Under Minnesota law, only in “extremely narrow” circumstances will a court resort to the reasonable expectations doctrine, which “applies only to resolving ambiguity in policy terms and for correcting extreme situations, such as where a party’s coverage is significantly different from what the party reasonably believes it has paid for and where the only notice the party has of that difference is an obscure and unexpected provision.” Bethel v. Darwin Select Ins. Co., 735 F.3d 1035, 1041 (8th Cir. 2013) (cleaned up). -5- Here, the homeowner’s insurance policy unambiguously excludes coverage for loss occurring to an “other structure” used in whole or in part for a business that generates more than $3,000 in annual compensation during the prior year, regardless of whether the business is engaged in on a full-time, part-time, or occasional basis. Joseph Wobig’s construction business is substantial, generating approximately $5 million in annual revenue. Wobig admitted that his employees used the tools from inside the shop for business purposes and that the shop stored Wobig Construction signs. Wobig Construction took both business loan expenses and depreciation tax deductions for the shop. A jury confronted with this information would necessarily have to find that, at the time of the loss, the shop was being used, at least in part, for a business. The Wobigs’ arguments seeking to engraft an additional requirement on the business use exclusion—that the structure be used for “actual business activity”— or that the limited coverage for business property located on the premises somehow changes or modifies the plain language of the business use exclusion are unavailing. Because the policy language is unambiguous and the exclusion is neither obscure nor unexpected, the reasonable expectations doctrine is inapplicable. See Bethel, 735 at 1041. Safeco did not breach the contract when it denied coverage.