Court Opinion

ID: 9665340
Source: CourtListenerOpinion
Date Created: 2023-08-24 00:45:23.734255+00
Date Added: 2024-06-11T18:15:14.835335
License: Public Domain

OPINION
ROBERT H. SCHUMACHER, Judge.
Relator Minnesota Property Insurance Placement, an insurance provider, challenges an order of the Commissioner of Commerce that it honor a damages claim filed by respondent HomeComings Financial Network, Inc. for losses sustained in a fire involving property insured by Minnesota Property and mortgaged to HomeComings. Minnesota Property argues that because the fire insurance policy naming HomeComings as mortgagee was fraudulently obtained without the named insured’s knowledge, it was void as to all named parties, including HomeComings. We affirm.
FACTS
In January 1999, Howard Gangestad purchased a residential property in Minneapolis for $25,000. Seven months later, respondent Craig Mattice purchased the property from Gangestad with a $54,000 mortgage from HomeComings and $6,000 cash.
Immediately after closing, Mattice signed a quitclaim deed transferring the property back to Gangestad. In exchange, Gangestad paid Mattice $6,000 cash and assumed the mortgage payments, which he guaranteed by making Mattice a beneficiary of his life insurance policy. Although Gangestad became the property’s titleholder after the quitclaim transaction, he intentionally failed to record the deed in order to circumvent a mortgage provision authorizing HomeComings to call the entire mortgage due in case of a sale. Mattice’s name remained on the title and on the mortgage, but he had no further financial involvement with the property. The transaction enabled Gangestad to use Mattice’s credit to get a loan, in the form of a mortgage, from HomeComings.
In September 2000, Gangestad instructed his insurance agent to submit to Minnesota Property an application for insurance coverage for the property. Minnesota Property is an organization of insurers charged by statute with implementing the Minnesota Fair Plan Act, pursuant to which all Minnesota insurers share responsibility for insuring high-risk property. See Minn.Stat. § 65A.31-.42 (2002). Minnesota Property is administered by a board of directors authorized to take appeals from Minnesota Property’s coverage decisions. The board’s determinations can in turn be appealed to the Commissioner of Commerce. Minn.Stat. § 65A.39.
The insurance agent completed the application in Mattice’s name and named Mattice as the owner of the property and HomeComings as mortgagee. The agent forged Mattice’s signature to falsely certify Mattice’s insurable interest in the property and the truth of the information contained in the application. There is no evidence in *339the record that Mattice had any knowledge of the application.
In September 2000, Minnesota Property issued a one-year $60,000 policy on the property naming Mattice as the insured and HomeComings as the mortgagee. The policy contained a standard mortgage clause providing that denial of a claim to the policy’s insured “will not apply to a valid claim of the [policy’s named] mortgagee.”
In October 2000, the property was destroyed by arson. Mattice filed a property-damage claim with Minnesota Property and submitted a sworn statement in proof of loss indicating that he was the “fee owner” of the property. Minnesota Property denied Mattice’s claim after its investigation revealed that the insurance application and policy were fraudulently obtained. Minnesota Property rescinded the policy and refunded the premiums. HomeComings filed a claim under the policy’s standard mortgage clause. Minnesota Property denied HomeComings’s claim, again reasoning that because the policy had been fraudulently obtained, it was null and void as to all covered parties, including mortgagee HomeComings.
Both Mattice and HomeComings appealed Minnesota Property’s denial of their claims to its board of directors, which upheld the denials. The parties then appealed to the Commissioner, who consolidated the appeals and issued findings of fact, conclusions of law, and an order in April, 2002.
The Commissioner reversed Minnesota Property’s decision to rescind the policy as to both Mattice and HomeComings. The Commissioner found that there was a fraudulent misrepresentation in the policy application: the statement that Mattice had an insurable interest in the property. The Commissioner nonetheless concluded that Minnesota Property could not rescind the policy as to either Mattice or HomeComings because the policy’s fraud provision and Minn.Stat. § 60A.08, subd. 9 (2002) authorize recission only if the misrepresentation is committed by or on behalf of the insured, and here, Mattice had no knowledge of the application.
The Commissioner affirmed the denial of Mattice’s claim on the grounds that Mattice had intentionally defrauded Minnesota Property by claiming on the sworn statement in proof of loss filed after the fire to be the property’s “fee owner.” The Commissioner reversed Minnesota Property’s denial of HomeComings’ claim, reasoning that (1) the policy was not void under its own fraud provision or Minn. Stat. § 60A.08, subd. 9, because Mattice himself committed no fraud in the application, and (2) the Minnesota Standard Fire Insurance Policy, Minn.Stat. § 65A.01, subd. 8(c) (2002), precludes rescinding or voiding a policy as to a mortgagee because of a third party’s fraud committed “before or during the term of [the] policy.” The Commissioner remanded the case to Minnesota Property to determine and pay HomeComings’s claim.
ISSUES
1. Was the fraudulently obtained insurance policy void as to HomeComings?
2. Was HomeComings’s recovery barred by its acquiescence in the policy’s fraudulent procurement?
ANALYSIS
We may reverse a decision by the Commissioner of Commerce if the decision violates the constitution, exceeds the agency’s statutory authority or jurisdiction, is based on an erroneous theory of law, is not supported by substantial evidence, or is arbitrary and capricious. *340Minn.Stat. § 14.69(a), (b), (e), (f) (2002); Markwardt v. State, Water Resources Bd., 254 N.W.2d 371, 374 (Minn.1977). Although we defer to the Commissioner’s findings of fact if they are reasonably supported by the evidence in the record, Ress v. Abbott N.W. Hosp., Inc., 448 N.W.2d 519, 523 (Minn.1989), the interpretation of statutes and their application to undisputed facts present questions of law that we review de novo. Brookfield Trade Ctr., Inc., v. County of Ramsey, 584 N.W.2d 390, 393 (Minn.1998). We note that “judicial deference * * * is extended to an agency decision-maker in the interpretation of statutes that the agency is charged with administering and enforcing.” In re Excess Surplus Status of Blue Cross and Blue Shield of Minnesota, 624 N.W.2d 264, 278 (Minn.2001) (citations and quotations omitted).
The party seeking review on appeal has the burden of proving that the agency decision meets one or more of the above-listed statutory criteria. Markwardt, 254 N.W.2d at 374. Minnesota Property contends the Commissioner’s decision was based upon an erroneous-theory of law and not supported by substantial evidence.
1. Minnesota Property argues the insurance contract between itself and respondent HomeComings was void ab initio because it was fraudulently obtained by Howard Gangestad’s insurance agent. HomeComings argues -the policy’s standard mortgage clause gives it a separate and enforceable insurance contract with Minnesota Property that is unaffected by the agent’s fraud.
A standard mortgage clause specifies that the insurance with respect to the mortgagee shall not be invalidated by the insured mortgagor’s intentional acts or neglect. American Nat. Bank and Trust Co. v. Young, 329 N.W.2d 805, 810 n. 1 (Minn.1983). It is undisputed that the policy here contains a standard mortgage clause providing that “[i]f a mortgagee is named in this policy,” denial of a claim made by the named insured “will not apply to a valid claim of the mortgagee * * *.” The effect of a standard mortgage clause
is to make a new and separate contract between the mortgagee and the insurance company, and to effect a separate insurance of the interest of the mortgagee, dependent for its validity solely upon the course of action of the insurance company and the mortgagee, and unaffected by any act or neglect of the mortgagor, of which the mortgagee is ignorant, whether such act or neglect was done or permitted prior or subsequent to the issue of the mortgage clause.
Id. at 810 (quoting Allen v. St. Paul Fire and Marine Ins. Co., 167 Minn. 146, 150, 208 N.W. 816, 818 (1926) (citation omitted) (emphasis omitted)). The contract between the mortgagee and the insurer “begins and proceeds” when the contract between the insured and the insurer “fails, or if it never attaches.” Allen, 167 Minn, at 150, 208 N.W. at 818 (quotation omitted) (emphasis added). See H.F. Shepherdson Co. v. Cent. Fire Ins. Co., 220 Minn. 401, 19 N.W.2d 772 (1945) (holding that arson by mortgagor cannot invalidate mortgagee’s coverage under standard mortgage clause).
In Minnesota, both the inclusion and the terms of a standard mortgage clause in a fire insurance policy are mandated by statute. See Minn.Stat. § 65A.01, subd. 1 (2002) (the Minnesota Standard Fire Insurance Policy). When, as is the case here, an insurance policy’s standard mortgage is inconsistent with the statutory policy provision, the statutory provision is substituted for the policy provision. Watson v. United Servs. Auto. Ass’n, 566 N.W.2d 683, 689 (Minn.1997).
*341The statute requires that fire insurance policies provide:
Notwithstanding any other provisions of this policy, if this policy shall be made payable to a mortgagee * * * of the covered real estate, no act or default of any person other than such mortgagee * * *, whether the same occurs before or during the term of this policy, shall render this policy void as to such mortgagee * * *.
Minn.Stat. § 65A.01, subd. 3 (2002). We note that the statute provides the innocent mortgagee coverage regardless of the wrongdoer’s identity, and not, as was previously the case, only in case of an act or default of the mortgagor. See American National, 329 N.W.2d at 810 (holding that contract between “the insurance company and the mortgagee [is] unaffected by any act or neglect of the mortgagor” (emphasis added) (quotation omitted)).
Minnesota Property contends that the standard mortgage clause has no effect here because the fraudulent application precluded the policy from ever becoming a valid contract, and the policy was therefore void as to all named parties. The question of whether Minn.Stat. § 65A.01, subd. 3, provides a mortgagee coverage when the insurance contract was obtained through the fraud of a third party, and without the mortgagor’s knowledge, is an issue of first impression in Minnesota.
The object of statutory interpretation is to ascertain and effectuate legislative intent. See Minn.Stat. § 645.16 (2002). Generally, if statutory language is plain and unambiguous, we look to its plain meaning to determine the legislation’s purpose. Wegener v. Comm’r of Revenue, 505 N.W.2d 612, 617 (Minn.1993). The Minnesota Standard Fire Insurance Policy plainly provides that
no act or default of any person other than such mortgagee ⅝ * *, whether the same occurs before or during the term of this policy, shall render this policy void as to such mortgagee * ⅜ ⅜.
Minn.Stat. § 65A.01, subd. 3. The statute makes no exceptions for fraudulent applications or third party acts or defaults. Here, the policy was obtained through the fraud of a person other than HomeComings before the term of the policy, and is therefore not void as to HomeComings. Had the legislature intended to bar mortgagee recovery under the facts before us, J it presumably would have drafted the statute accordingly. But as the statute is written, HomeComings is entitled to recover.
Minnesota Property urges us to look beyond the plain meaning of the statute to general principles of contract law, which, Minnesota Property argues, compel the conclusion that the policy was void as to all named parties because there was no meeting of the minds between Mattice and Minnesota Property on the essential terms of the agreement. We note that the validity or existence of the contract between Mattice and Minnesota Property has no bearing on the validity of the separate contract between HomeComings and Minnesota Property, which “begins and proceeds” when the contract between the insured and the insurer “fails, or if it never attaches.” Allen, 167 Minn, at 150, 208 N.W. at 818. We also note that our role is simply to interpret the statutory language, not to look beyond the statute’s plain meaning in order to
in effect rewrite a statute so as to accomplish a result which might be desirable and at the same time conflict with the expressed will of the legislature.
McNeice v. City of Minneapolis, 250 Minn. 142, 147, 84 N.W.2d 232, 237 (1957); see also State ex rel. Coduti v. Hauser, 219 Minn. 297, 301-03, 17 N.W.2d 504, 507-08 *342(1945) (stating both that legislature may ignore logic and perpetrate injustice as long as it does not violate constitution and that, absent ambiguity, any remedy for suspect statute must be by amendment and not construction).
Minnesota Property also argues that the fraudulent application violated the policy’s Concealment and Fraud provision as well as Minn.Stat. § 60A.08, subd. 9 (2002), both of which authorize voiding or .rescinding an insurance policy when the insured party makes a material misrepresentation related to the insurance. Because we have concluded that Minn.Stat. § 65A.01, subd. 3, authorizes HomeComings to recover despite the fraudulent application, we need not address this argument. We note, however, that the record contains no evidence that Mattice, the insured party, participated in submitting the fraudulent application to Minnesota Property or had any knowledge of the policy’s various misrepresentations. Therefore, neither the Concealment and Fraud provision of the policy nor Minn.Stat. § 60A.08, subd. 9, would bar coverage or authorize voiding or rescinding the policy for fraud.
2. Minnesota Property argues that HomeComings cannot recover under the insurance policy because it knew and acquiesced in the fraudulent quitclaim transaction between Gangestad and Mattice, thereby breaching its duty to inform Minnesota Property about the fraud. We disagree.
There is no evidence in the record that the quitclaim transaction between Gangestad and Mattice was fraudulent or otherwise illegal; Mattice, the titleholder, quitclaimed the property to Gangestad, as was his right. Nor is there evidence that HomeComings was aware of the quitclaim transaction, which Gangestad intentionally failed to record precisely to prevent HomeComings from learning about the transfer. The record contains no evidence that HomeComings had any knowledge of the Gangestad-Mattice quitclaim transaction.
DECISION
We affirm the Commissioner’s order concluding that Minn.Stat. § 65A.01 (2002) permits HomeComings to recover under the policy issued by Minnesota Property to Mattice.
Affirmed.