State Farm Fire and Casualty Company v. Joseph Otten, Paul Braun ( 2016 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).
STATE OF MINNESOTA
IN COURT OF APPEALS
A15-1574
State Farm Fire and Casualty Company,
Respondent,
vs.
Joseph Otten, et al.,
Defendants,
Paul Braun,
Appellant.
Filed May 23, 2016
Affirmed
Smith, Tracy, Judge
Sherburne County District Court
File No. 71-CV-14-585
Scott G. Williams, Kyle P. Dareff, HKM, P.A., St. Paul, Minnesota (for respondent)
Michael B. Healy, Michael Healy Law, LLC, St. Paul, Minnesota (for appellant)
Considered and decided by Reyes, Presiding Judge; Ross, Judge; and Smith, Tracy,
Judge.
UNPUBLISHED OPINION
SMITH, TRACY, Judge
Appellant Paul Braun appeals from the district court’s grant of summary judgment
to respondent State Farm Fire and Casualty Company, arguing that the district court erred
as a matter of law by determining that State Farm had no duty to indemnify its insureds
against Braun’s wrongful-eviction claim. Because the insurance policy does not cover the
insureds’ intentional acts resulting in intended harm, and because the undisputed facts
establish that there is no coverage here, we affirm.
FACTS
Joseph and Kristen Otten and T.E.O. Properties, Inc. own a rental home insured
under a Rental Dwelling Policy issued by State Farm. The policy provides business-
liability coverage as follows:
If a claim is made or a suit is brought against any insured for
damages because of bodily injury, personal injury, or property
damage to which this coverage applies, caused by an
occurrence, and which arises from the ownership,
maintenance, or use of the insured premises, we will:
1. pay up to our limit of liability for the damages
for which the insured is legally liable; and
2. provide a defense at our expense by counsel of
our choice. We may make any investigation and settle any
claim or suit that we decide is appropriate. Our obligation to
defend any claim or suit ends when the amount we pay for
damages, to effect settlement or satisfy a judgment resulting
from the occurrence, equals our limit of liability.
(Emphasis added.) The policy defines “occurrence” as “an accident, including exposure
to conditions” that results in (1) bodily injury; (2) property damage; or (3) personal injury.
“Personal injury” under the policy means injury arising out of any of a number of listed
“offenses,” including “wrongful eviction.”
The policy also contains an intentional-acts exclusion, which excludes coverage for:
a. bodily injury, personal injury, or property damage:
(1) which is either expected or intended by an
insured; or
(2) to any person or property which is the result of
willful and malicious acts of an insured;
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b. bodily injury, personal injury, or property damage
arising out of the rendering or failing to render professional
services . . . .
In addition, the policy contains a separate exclusion related to mold.
In May 2011, Braun and his then wife entered a lease agreement to rent the home
from June 1, 2011 to May 31, 2012. Before entering the lease, the Brauns inquired about
the presence of mold in the home because Braun’s stepdaughter had respiratory problems.
The Ottens said they were unaware of any mold.
On May 16, 2012, a toilet malfunctioned in the home, causing water to flood the
bathroom floor. When Joseph Otten visited the home to perform repairs, Braun asked him
to have the home inspected for mold. According to Braun, Joseph Otten then revealed that
the home had mold when he purchased it. Joseph Otten refused to have the home inspected
and asked the Brauns to move out.
On May 18, 2012, the Ottens gave the Brauns a letter titled “Notice to end lease,”
stating: “The rental agreement ends May 31, 2012 12:00 noon. You must be moved out
by that time. An unlawful detainer will be filed if this is not met.” The Brauns vacated the
home on May 31.
Braun sued the Ottens and T.E.O., alleging several claims, including wrongful
eviction. The parties in Braun’s lawsuit entered a Miller-Shugart agreement1 in which the
1
When the insurer does not “wholeheartedly defend the insured,” the insured may enter a
Miller-Shugart agreement with the claimant in which the claimant agrees only to “sue for
the insurance proceeds to enforce the settlement.” Bob Useldinger & Sons, Inc. v.
Hangsleben, 505 N.W.2d 323, 325 & n.2 (Minn. 1993); see Miller v. Shugart, 316 N.W.2d
729, 733-36 (Minn. 1982).
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Ottens and T.E.O. agreed there was a substantial likelihood they would be found liable and
(1) consented to pay $500 on Braun’s fraudulent-inducement claim and all issues related
to mold and (2) consented to a $35,892 judgment on Braun’s breach-of-contract and
wrongful-eviction claims. Braun agreed not to collect the judgment from the Ottens and
T.E.O. but only to “seek to satisfy this judgment from State Farm.” The district court
entered judgment for Braun against the Ottens and T.E.O. in the amount of $35,892.
In discovery, the Ottens admitted that the lease agreement required them to provide
30 days’ notice before evicting the Brauns and that they “were aware of the lease’s notice
provisions but felt the circumstances warranted the May 18th notice.” Kristen Otten
testified in a deposition that she knew of the 30-day notice requirement but decided to give
the Brauns less than 30 days’ notice due to the circumstances. She further testified that the
Ottens knew that the Brauns would incur costs associated with moving and finding a new
place to live.
State Farm sued the Ottens, the Brauns, and T.E.O., seeking a declaratory judgment
that it had no duty to indemnify the Ottens and T.E.O. It also moved for summary
judgment. Following a hearing, the district court granted summary judgment to State Farm
and declared that State Farm had no obligation to indemnify the Ottens and T.E.O. in
Braun’s lawsuit. The district court found that Braun’s “non-mold-related breach of
contract or wrongful eviction” claims were excluded from insurance coverage because the
Ottens acted intentionally and that Braun’s mold-related claims were excluded under the
separate mold exclusion.
Braun appeals.
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DECISION
A district court must grant summary judgment “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that either party is entitled to a
judgment as a matter of law.” Minn. R. Civ. P. 56.03. We review the district court’s grant
of summary judgment de novo to determine if there are any issues of material fact and
whether the district court erred in applying the law. Larson v. Nw. Mut. Life Ins. Co., 855
N.W.2d 293, 299 (Minn. 2014). “In doing so, we view the evidence in the light most
favorable to the nonmoving party.” Remodeling Dimensions, Inc. v. Integrity Mut. Ins.
Co., 819 N.W.2d 602, 610 (Minn. 2012).
“Generally, the extent of an insurer’s liability is determined by its insurance contract
with its insured.” Hanbury v. Am. Family Mut. Ins. Co., 865 N.W.2d 83, 86 (Minn. App.
2015), review denied (Minn. Aug. 25, 2015). We review de novo the interpretation of an
insurance policy and its application to the facts of the case. Remodeling Dimensions, Inc.,
819 N.W.2d at 610. “Insurance policies are contracts and, absent statutory provisions to
the contrary, general principles of contract law apply.” Id. at 611. “When the language of
a contract is clear and unambiguous, we enforce the agreement of the parties as expressed
in the contract.” Caldas v. Affordable Granite & Stone, Inc., 820 N.W.2d 826, 832 (Minn.
2012). The insured has the initial burden of demonstrating coverage. Midwest Family
Mut. Ins. Co. v. Wolters, 831 N.W.2d 628, 636 (Minn. 2013). The insurer bears the burden
to show that a coverage exclusion applies. Bob Useldinger & Sons, Inc., 505 N.W.2d at
327.
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The district court concluded both that coverage was not triggered because there was
no “occurrence” and that, even if coverage had been triggered, the intentional-acts
exclusion applied because the injuries were expected or intended. Braun argues that as a
matter of law the policy must be interpreted to cover the wrongful-eviction claim here. In
the alternative, Braun argues that there is a genuine issue of material fact as to whether the
injuries were “expected or intended” and therefore as to whether the exclusion applies.2
1.
We first address Braun’s argument regarding interpretation of the insurance policy.
Braun argues that the policy is ambiguous because it both provides coverage for the
intentional act of wrongful eviction and excludes coverage for the insured’s intentional
acts, and that the policy therefore should be construed in favor of coverage. We disagree.
Braun is correct that the insurance policy generally contemplates coverage for
wrongful eviction. The policy generally provides coverage for “personal injury,” including
injury arising from a “wrongful eviction.” The policy, however, provides coverage for
personal injury only if the injury is “caused by an occurrence.” An “occurrence” is defined
as an “accident.” While “accident” is not defined by the policy, our supreme court has
defined “accident” as it appears in an insurance policy to mean “an unexpected, unforeseen,
or undesigned happening or consequence.” Am. Family Ins. Co. v. Walser, 628 N.W.2d
605, 608 (Minn. 2001) (quotation omitted). The policy also contains an intentional-acts
2
On appeal, Braun challenges the district court’s interpretation of the insurance policy as
it relates to his wrongful-eviction claim only. He makes no argument regarding his breach-
of-contract claim.
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exclusion, which excludes from coverage claims for “personal injury” when the injury is
“expected or intended” by the insured. The plain and unambiguous language of the
“occurrence” requirement and the intentional-acts exclusion requires a wrongful eviction
to be accidental and the resulting injury to be unintended for coverage to apply.
Contrary to Braun’s argument, this conclusion does not defeat coverage for all
wrongful-eviction claims. The insurance policy does not define “wrongful eviction.”
Black’s Law Dictionary defines a “wrongful-eviction action” as “[a] lawsuit brought by a
former tenant . . . against one who has put the plaintiff out of possession, alleging that the
eviction was illegal.” Black’s Law Dictionary 1752 (9th ed. 2009). In addition, it defines
“wrongful” as “[c]haracterized by unfairness or injustice” or “[c]ontrary to law.” Id. at
1751. Neither of these definitions requires intent. As State Farm argues, it is possible for
a landlord to accidentally dispossess the wrong tenant or to make another mistake that
unintentionally results in a wrongful eviction and, in such a case, coverage would apply.
Because a “wrongful eviction” may or may not be intentional, the insurance policy does
not both cover and exclude the same wrongful-eviction claim.
We conclude that the district court did not err by interpreting the insurance policy
to provide coverage only for accidental wrongful evictions where injury is not expected or
intended.
2.
We turn next to Braun’s argument that, even under this reading of the insurance
policy, summary judgment was erroneous because a genuine issue of material fact remains
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regarding whether the Ottens acted intentionally. The district court concluded that “the
Ottens’ actions were not accidental, but were intended as a matter of law.”
“The questions of whether an injury is the result of an accident and whether
coverage is excluded because the injury is the result of an intentional act are for all practical
purposes, identical issues.” State Farm Fire & Cas. Co. v. Schwich, 749 N.W.2d 108, 112
(Minn. App. 2008) (quotation omitted). As in Schwich, the policy here “excludes coverage
when the insured acts with specific intent to cause injury.” See id. Such an intentional-
acts exclusion applies when the insured acts “with specific intent to cause harm” and
intends not just to act, but “intend[s] the harm itself.” Walser, 628 N.W.2d at 611
(quotations omitted).
Braun argues that the Ottens lacked the required intent because, at the time of the
eviction notice, they believed that they had provided sufficient notice. In making this
argument, Braun cites to portions of Joseph Otten’s deposition testimony that are not in the
record, and we can find no evidence in the record to support Braun’s assertion. To the
contrary, the record includes a portion of Kristen Otten’s deposition in which she stated
that she knew the Ottens were required to provide 30 days’ notice but decided to give the
Brauns less than 30 days’ notice due to the circumstances. The record also contains the
Ottens’ admission that the lease required 30 days’ notice and that they “were aware of the
lease’s notice provisions but felt the circumstances warranted the May 18th notice.” On
May 18, 2012, the Ottens provided notice to the Brauns to vacate the home by May 31, just
13 days later. The record shows no genuine issue of material fact that the Ottens
intentionally provided inadequate notice to the Brauns.
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Braun also argues that the Ottens lacked the required intent to cause harm because
they did not know that the Brauns would suffer financial losses from the wrongful eviction
and did not intend the specific injuries Braun suffered from the eviction. But the Ottens
did not have to intend to cause Braun the specific harm he suffered. See Walser, 628
N.W.2d at 611 (“[T]o find that an insured acted intentionally, a court need only find that
the insured intended some harm, not that the insured intended the specific harm that
resulted.”). In her deposition, Kristen Otten testified that the Ottens knew that the Brauns
would incur costs associated with moving and finding a new place to live. This undisputed
evidence supports the conclusion that the Ottens intended “some harm.” See id.
Because there is no genuine issue of material fact that the Ottens knew that the
notice given was inadequate and that the Brauns would suffer financial losses, the district
court properly concluded that the insurance policy does not cover the Ottens’ intentional
and wrongful eviction of the Brauns as a matter of law. See Schwich, 749 N.W.2d at 112
(defining “accident” as “an unexpected, unforeseen, or undesigned happening or
consequence” and “intentional conduct” as requiring “a specific intent to cause injury”
(quotations omitted)). State Farm therefore was not required to indemnify the Ottens, and
the district court did not err by granting summary judgment to State Farm. We need not
consider State Farm’s alternative argument that the mold exclusion would also bar
coverage for Braun’s claim.
Affirmed.
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