Kenneth Myers, et al., Appellants, vs. State Farm Fire and Casualty Company, Respondent.

Kenneth Myers, et al., Appellants, vs. State Farm Fire and Casualty Company, Respondent. C8-02-62, Court of Appeals Unpublished, July 16, 2002. This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2000).

 

 

STATE OF MINNESOTA IN COURT OF APPEALS C8-02-62

 

Kenneth Myers, et al.,
Appellants,
 
vs.
 
State Farm Fire and Casualty Company,
Respondent.

 

 

Filed July 16, 2002

Affirmed

Peterson, Judge

 

 

Polk County District Court

File No. C801000191

 

 

Michael A. Zimmer, Tina M. Dobbelaere, Tewksbury Kerfeld Zimmer, 219 South Fourth Street, Suite 500, Minneapolis, MN  55401 (for appellants)

 

 

C. Todd Koebele, Michael D. Christensen, Murnane, Conlin, White & Brandt, 444 Cedar Street, Suite 1800, St. Paul, MN 55101 (for respondent)

 

 

            Considered and decided by Schumacher, Presiding Judge, Peterson, Judge, and Poritsky, Judge.*

U N P U B L I S H E D   O P I N I O N

PETERSON, Judge

Appellants Gail and Kenneth Myers filed a claim with respondent State Farm Fire and Casualty Company, their home insurer, after their home was rendered uninhabitable due to mold.  State Farm denied coverage because the policy contained an exclusion for losses resulting from defective construction, continuous seepage or leakage of water, mold, or contamination.  In this appeal from a summary judgment for State Farm, the Myerses contend that (a) fact issues exist as to the cause of contamination; (b) the district court failed to consider language of the policy requiring compensation for "resulting losses;" and (c) the policy is ambiguous, so it must be resolved in favor of the insured.  We affirm.

FACTS

Contamination

            In 1998, the Myerses hired a contractor, Gary DeBoer, to construct a kitchen addition to their home.  The kitchen addition was built over a crawl space constructed of wood and fiberglass insulation.  The floor of the crawl space consisted of four or five inches of gravel over a layer of polyethylene.  The crawl space was accessed through a basement window and was not heated or ventilated.

            In June 1998, Thomas Morlan, a plumber doing business as Riverside Service & Plumbing, installed the plumbing system in the kitchen addition.  A few months later, he installed a dishwasher and a kitchen sink in the addition.  Kenneth Myers testified that shortly after the remodeling project, the Myerses noticed slight odors around the kitchen sink but attributed the odors to the trash container under the sink.  Kenneth Myers also testified that there was sometimes a slight odor when the dishwasher was running.  During 1998 and 1999, the Myerses opened the window accessing the crawl space during extremely cold winter days to help heat the crawl space.

            On about January 26, 2000, when Kenneth Myers opened the window to the crawl space, he noticed a strong odor and saw water dripping from a pipe in the crawl space.  The Myerses discovered that the plumbing work in the kitchen addition had been performed improperly.  The dishwasher drain pipe was connected to the waste system in a manner that allowed sewer gases and bacteria to enter the dishwasher, and the dishwasher drain line was connected to the waste system in a manner that allowed drainage from the sink to drain into the dishwasher.  In addition, pipes were improperly connected, causing water to leak into the crawl space.

            In February 2000, McGregor Pearce tested the Myerses' home for mold contamination and found unacceptable levels of mold in the home.  Pearce concluded that the mold problem was caused by moisture in the crawl space resulting from defective plumbing.  Robert Krell of IAQ Technologies inspected the Myerses' home in June 2000.  Krell observed excessive moisture and active fungal growth in the crawl space.  Krell opined that the moisture in the crawl space did not result solely from the defective plumbing system but also from defective construction of the crawl space.  Charles Lane, an expert for State Farm who inspected the Myerses' home, concluded that the fungal growth in the home was not directly related to the fungal growth in the crawl space, but rather was the type of growth to be expected in a 100-year-old home.

Policy

            The Myerses' insurance policy contains the following coverages:

SECTION I - LOSSES INSURED

 

COVERAGE A - DWELLING

 

            We insure for accidental direct physical loss to the property described in Coverage A [dwelling used principally as a private residence], except as provided in SECTION I - LOSSES NOT INSURED.

 

COVERAGE B - PERSONAL PROPERTY

 

            We insure for accidental direct physical loss to property described in Coverage B [personal property owned or used by an insured] caused by the following perils, except as provided in SECTION I - LOSSES NOT INSURED * * *:

           

            12.  Sudden and accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or from within a household appliance.

 

The other perils insured under coverage B are fire or lightning; windstorm or hail; explosion; riot or civil commotion; aircraft; vehicles; smoke; vandalism or malicious mischief; theft; falling objects; weight of ice, snow or sleet; sudden and accidental tearing asunder, cracking, burning or bulging of a steam or hot water heating system, and air conditioning or automatic fire protective sprinkler system, or a water heating appliance; freezing of a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or of a household appliance; sudden and accidental damage to electrical appliances, devices, fixtures and wiring from an increase or decrease of artificially generated electrical current; and damage to personal property caused by the breaking of glass that is part of a building.

            The Myerses' insurance policy contains the following exclusions:

SECTION I - LOSSES NOT INSURED

 

            1.  We do not insure for any loss to the property described in Coverage A which consists of, or is directly and immediately caused by, one or more of the perils listed in items a. through o. below, regardless of whether the loss occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these:  * * *

            f.  continuous or repeated seepage or leakage of water or steam from a :

(1) heating, air conditioning or automatic fire protective sprinkler system;

            (2) household appliance; or

            (3) plumbing system, including from, within or around any shower stall, shower bath, tub installation, or other plumbing fixture, including their walls, ceilings or floors;

            which occurs over a period of time.  If loss to covered property is caused by water or steam not otherwise excluded, we will cover the cost of tearing out and replacing any part of the building necessary to repair the system or appliance.  We do not cover loss to the system or appliance from which the water or steam escaped; * * *

            i.  mold, fungus or wet or dry rot;

            j.  contamination[.]

 

            * * * *

 

            However, we do insure for any resulting loss from items a. through m. unless the resulting loss is itself a Loss Not Insured by this Section.

 

            * * * *

 

            3.  We do not insure under any coverage for any loss consisting of one or more of the items below.  Further, we do not insure for loss described in paragraphs 1. and 2. immediately above regardless of whether one or more of the following:  (a) directly or indirectly cause, contribute to or aggravate the loss; or (b) occur before, at the same time, or after the loss or any other cause of the loss:  * * *

 

            * * * *

 

b.  defect, weakness, inadequacy, fault or unsoundness in:

            (1) planning, zoning, development, surveying, siting;

            (2) design, specifications, workmanship, construction, grading, compaction;

            (3) materials used in construction or repair; or

            (4) maintenance;

of any property (including land, structures, or improvements of any kind) whether on or off the residence premises[.]

 

            * * * *

 

            However, we do insure for any resulting loss from items a., b. and c. unless the resulting loss is itself a Loss Not Insured by this Section.

 

D E C I S I O N

            When reviewing a grant of summary judgment, an appellate court must determine whether any genuine issues of material fact exist and whether the district court erred in applying the law.  Cummings v. Koehnen, 568 N.W.2d 418, 420 (Minn. 1997).  This court views the evidence in the light most favorable to the nonmoving party.  Id.  To defeat a summary judgment motion, a party cannot rely on denials or general averments, but must offer specific facts to show that there is a genuine issue of material fact for trial.  Minn. R. Civ. P. 56.05; DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn. 1997).  A material fact is one that affects the outcome of the case depending on its resolution.  Zappa v. Fahey, 310 Minn. 555, 556, 245 N.W.2d 258, 259-60 (1976).

            The interpretation of an insurance policy is a question of law subject to de novo review.  Metropolitan Property & Cas. Ins. Co. v. Miller, 589 N.W.2d 297, 299 (Minn. 1999).  Determining whether a policy is ambiguous is also a question of law.  Hammer v. Investors Life Ins. Co., 511 N.W.2d 6, 8 (Minn. 1994).  Unambiguous coverage language in an insurance policy must be given its plain and ordinary meaning.  Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn. 1998).  Ambiguous coverage language will be construed against the insurer, as drafter of the contract.  Progressive Specialty Ins. Co. v. Widness ex rel. Widness, 635 N.W.2d 516, 518 (Minn. 2001).

When relying on an exclusion to deny coverage, the insurer bears the burden of proving the application of the exclusion.  SCSC Corp. v. Allied Mut. Ins. Co.,536 N.W.2d 305, 313-14 (Minn. 1995).  Exclusions are interpreted narrowly against the insurer, while the insured bears the burden of proving coverage and the applicability of an exception to an exclusion.  Id. at 314.

The Myerses argue that a material fact issue exists regarding the source of the contamination in their home.  The Myerses cite the differences in opinion among the experts regarding whether the mold or fungus was dispersed into their home from the crawl space as a result of defective installation of the plumbing system or improper construction of the crawl space or whether the mold or fungus was typical for that of a 100-year-old house and unrelated to the condition of the crawl space and plumbing system.  A factual dispute does exist regarding the source of contamination, but its resolution will not affect the outcome of the case.

Regarding the damage to the home, the Myerses' policy expressly excludes coverage for damages caused by continuous or repeated seepage or leakage of water from a plumbing system or plumbing fixture that occurs over a period of time; mold, fungus or wet or dry rot; and contamination.  The policy also expressly excludes coverage for damages resulting from defective or inadequate design, workmanship, construction, grading, and compaction.  All of the damage that occurred to the Myerses' home resulted from the continuous or repeated seepage or leakage of water from a plumbing system or plumbing fixture, from improper construction and grading, or from mold or fungal contamination.  The policy's plain language excludes coverage for those damages.

            Regarding damage to personal property, personal property is only covered if the damage is caused by a peril listed in coverage B.  Of the perils listed in coverage B, only peril 12, the sudden and accidental discharge or overflow of water from a plumbing system or from within a household appliance, could possibly apply to the Myerses' claim.  Because there is no allegation of a sudden discharge or overflow of water, peril 12 does not apply to the Myerses' claim.

            Alternatively, the Myerses argue that if the damage to their home and personal property is otherwise not covered or excluded, the "resulting loss" clause resurrects coverage.  The Myerses' policy provides:

            1.  We do not insure for any loss to the property described in Coverage A which consists of, or is directly and immediately caused by, one or more of the perils listed in items a. through o. below, regardless of whether the loss occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these:  * * *

            f.  continuous or repeated seepage or leakage of water or steam from a :

(1) heating, air conditioning or automatic fire protective sprinkler system;

            (2) household appliance; or

            (3) plumbing system, including from, within or around any shower stall, shower bath, tub installation, or other plumbing fixture, including their walls, ceilings or floors;

            which occurs over a period of time.  If loss to covered property is caused by water or steam not otherwise excluded, we will cover the cost of tearing out and replacing any part of the building necessary to repair the system or appliance.  We do not cover loss to the system or appliance from which the water or steam escaped; * * *

            i.  mold, fungus or wet or dry rot;

            j.  contamination[.]

 

            * * * *

 

            However, we do insure for any resulting loss from items a. through m. unless the resulting loss is itself a Loss Not Insured by this Section.

 

            * * * *

 

            3.  We do not insure under any coverage for any loss consisting of one or more of the items below.  Further, we do not insure for loss described in paragraphs 1. and 2. immediately above regardless of whether one or more of the following:  (a) directly or indirectly cause, contribute to or aggravate the loss; or (b) occur before, at the same time, or after the loss or any other cause of the loss:  * * *

 

            * * * *

 

b.  defect, weakness, inadequacy, fault or unsoundness in:

            (1) planning, zoning, development, surveying, siting;

            (2) design, specifications, workmanship, construction, grading, compaction;

            (3) materials used in construction or repair; or

            (4) maintenance;

of any property (including land, structures, or improvements of any kind) whether on or off the residence premises[.]

 

            * * * *

 

            However, we do insure for any resulting loss from items a., b. and c. unless the resulting loss is itself a Loss Not Insured by this Section.

 

            In Sentinel Mgt. Co. v. N.H. Ins. Co., 563 N.W.2d 296 (Minn. App. 1997), this court construed an "ensuing loss" provision, similar to the "resulting loss" provision at issue in this case, and concluded that asbestos damage resulting from normal wear and tear, an excluded peril, was covered as an ensuing loss.  The court explained:

[A]n "ensuing loss" clause, like the one following Sentinel's wear-and-tear exclusion, brings within coverage a loss from a covered peril that follows as a consequence of an excluded peril.  See Aetna Ins. Co. v. Getchell Steel Treating Co., 395 F.2d 12, 16 (8th Cir. 1968) (stating "ensuing fire" is one that "follows as a consequence of" electrical disturbance); Webster's New Universal Unabridged Dictionary 606 (Jean L. McKechnie ed., 2d ed. 1983) (defining "ensue" as "to follow as a consequence;  to result").  An ensuing loss is covered even if an excluded peril is a "but for" cause of the loss. See, e.g., Lake Charles Harbor & Terminal Dist. v. Imperial Cas. & Indem. Co., 857 F.2d 286, 288-89 (5th Cir. 1988) (finding coverage existed under ensuing loss clause for damage to shiploader where machinery breakdown, an excluded peril, directly caused heavy object to fall, damaging shiploader); Allstate Ins. Co. v. Smith, 450 S.W.2d 957, 959 (Tex. Civ. App. 1970, no writ) (disallowing recovery for replacement cost of defective pipe under policy exclusion for inherent defect, but permitting recovery for ensuing damage to wall and floor that occurred when defective pipe burst).

 

            Sentinel argues the release of asbestos fibers in its buildings, while ensuing from ordinary wear and tear, also constitutes a distinct peril.  We agree.  Damage to the buildings arising from wear and tear, such as holes in the ceilings and abrasions on walls, is separable from the asbestos contamination.  The two are not different classifications of a single phenomenon.  Cf. Aetna Cas. & Sur. Co. v. Yates, 344 F.2d 939, 941 (5th Cir. 1965) (finding, under policy excluding damage from rot or dampness of atmosphere but covering ensuing loss from water damage, that excluded and covered causes were not separable events, where condensation of moisture under floor boards caused damage).  Furthermore, Sentinel does not attempt to use the ensuing loss provision to nullify the wear-and-tear exclusion.  Cf. Ames Privilege Assocs.  Ltd. Partnership v. Utica Mutual Ins. Co., 742 F. Supp. 704, 707-08 (D. Mass. 1990) (refusing to find coverage under ensuing loss clause in face of policy exclusion clearly applicable to claimed loss, noting given perils cannot simultaneously be excluded and covered).

 

Id. at 301-02 (citation omitted).

            The Myerses argue that the loss of value of their home is a resulting loss, but they cannot explain how the loss of value is separate from "any loss to the property" caused by "continuous or repeated seepage or leakage of water," "mold, fungus," or "contamination" of from "any loss" caused by defective or inadequate design, workmanship, construction, grading, and compaction.  The Myerses' home lost its value because it was contaminated by mold or fungus.  The loss of value was a loss to the property.  There was no separate, covered cause, like a fire or a pipe that burst suddenly, that caused the loss of value to the Myerses' home or the damage to their personal property.  To interpret the resulting-loss clause as urged by the Myerses would negate the policy exclusions.

            The Myerses also claim loss-of-use damages.  Their insurance policy contains the following coverage for loss-of-use damages:

When a Loss Insured causes the residence premises to become uninhabitable, we will cover the necessary increase in cost you incur to maintain your standard of living for up to 24 months.

 

The loss-of-use coverage only applies when a "Loss Insured" causes the loss of use.  The Myerses' home became uninhabitable as a result of a "Loss Not Insured"; therefore, the loss-of-use coverage does not apply.

            The district court properly granted judgment for State Farm.

            Affirmed.

*   Retired judge of the district court, serving as judge of the Minnesota  Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.