Zou et al v. American Modern Home Insurance Company

Filing 36

ORDER denying 15 Motion for Summary Judgment; granting 19 Motion for Summary Judgment; denying 33 Motion to Strike Pleading (Written Opinion). Signed by Senior Judge David S. Doty on 2/17/2015. (PJM)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 14-1238(DSD/SER)
Jin Zun Zou and Hua Ting Gao,
Plaintiffs,
ORDER

v.
American Modern Home Insurance
Company, an Ohio corporation,
Defendant.

Timothy D. Johnson, Esq. and Roeder Smith Jadin, PLLC,
7900 Xerxes Ave., Suite 2020, Bloomington, MN 55437,
counsel for plaintiffs.
Christina E. VonderHaar, Esq. and Arthur, Chapman,
Kettering, Smetak & Pikala, P.A., 500 Young Quinlan
Building, 81 South Ninth Street, Minneapolis, MN 55402,
counsel for defendant.

This matter is before the court upon the cross-motions for
summary judgment by plaintiffs Jin Zun Zou and Hua Ying Gao and
defendant American Modern Home Insurance Company (AMI).

Based on

a review of the file, record, and proceedings herein, and for the
following reasons, the court grants plaintiffs’ motion and denies
AMI’s motion.

BACKGROUND
This insurance-coverage dispute arises out of AMI’s denial of
plaintiffs’ claim for losses to their home and personal property as
a result of a fire.

Plaintiffs are insured by AMI under Commercial

General Liability Policy Number CP21884000 (Policy). See Lund Aff.

Ex. 4.

The Policy carries a $100,000 limit on the building and

$2,000 limit on personal property.

Id. at AMIG 000042, 58.

The

Policy includes a “Protective Safeguards” endorsement as follows:
“As a condition of this insurance, you are required to maintain the
protective devices or services listed in the Schedule above.”
at AMIG 000149.

Id.

The schedule identifies the protective system as

“smoke detectors.”1

Id.

The endorsement contains the following

bar to coverage:
We will not pay for loss or damage caused by or resulting
from fire if, prior to the fire, you:
1. Knew of any suspension or impairment in any protective
safeguard listed in the Schedule above and failed to
notify us of that fact; or
2. Failed to maintain any protective safeguard listed in
the Schedule above, and over which you had control, in
complete working order.
Id. at AMIG 000150.
On the morning of November 24, 2013, an accidental fire
started in the basement bedroom of plaintiffs’ one-story St. Paul
home.

Lund Aff. Ex. 1, at AMIG 000019, 21-22.

The heat and fire

damage was largely contained in the basement bedroom, but the rest
of the basement and upper floor of the home sustained smoke damage,

1

The endorsement provided by plaintiffs appears to be from
an earlier policy. See Roeder Aff. Ex. C. The two endorsements
are, for purposes of the instant motions, functionally equivalent.
The court will construe the policy in place at the time of the
fire, as provided by AMI. See Lund Aff. Ex. 4.
2

as did some of plaintiffs’ personal property.2
000020-22; Id. Ex. 2, at AMIG 000015.

See id. at AMIG

Plaintiffs estimate that it

will cost $120,297.14 to fix the damage to the home.

See Roeder

Aff. Ex. E.
The fire investigator, James Novak, arrived at the house as
firefighters were extinguishing the fire. Lund Aff. Ex. 1, at AMIG
000020.

Novak inspected the house and noted the following in his

initial report:
In the hallway [of the main floor], I observed that the
smoke detector had been disconnected prior to the fire
and was nowhere to be found.
Light smoke damage was
observed throughout the hallway. The rear master bedroom
suffered light smoke damage. The smoke detector in this
room was also missing.... Th[e] third bedroom had
suffered light to moderate smoke damage throughout.
There was no smoke detector in this room.
Upon
examination of the hallway closet, I found three smoke
detectors on the shelf.
Id.

The report notes that the upstairs occupants awoke to sounds

of the smoke detector in the basement, but does not note the exact
location of the smoke detector or whether there were additional
working smoke detectors in the home.
report

following

a

second

See id.

inspection

of

the

In a supplemental
property,

Novak

confirmed that there were two smoke detectors installed on the main
floor and a third smoke detector in the basement bedroom.

Roeder

Aff. Ex. G. The basement smoke detector “was plugged in and showed

2

Tragically, plaintiffs’ house guest, who was staying in the
basement bedroom, died in the fire.
The fire investigator
determined that the fire was likely caused by the guest’s
cigarette, which ignited the mattress. Id. at AMIG 000024.
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signs of acoustic soot agglomeration, indicating that it was
working and operating at the time of the fire.”

Id.

Novak

concluded that there were “at least three working smoke detectors
in the house.”

Id.

AMI does

not dispute this finding.

On January 15, 2014, AMI denied plaintiffs’ claim under the
Policy’s protective safeguards exclusion.

Lund Aff. Ex. 6.

On

March 24, 2014, plaintiffs filed suit in state court, alleging that
AMI wrongfully denied coverage, and AMI timely removed.

Both

parties now move for summary judgment.

DISCUSSION
I.

Standard of Review
“The court shall grant summary judgment if the movant shows

that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”

Fed. R. Civ.

P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A fact is material only when its resolution affects the outcome of
the case.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986). A dispute is genuine if the evidence is such that it could
cause a reasonable jury to return a verdict for either party.

See

id. at 252.
On a motion for summary judgment, the court views all evidence
and inferences in a light most favorable to the nonmoving party.
Id. at 255.

The nonmoving party, however, may not rest upon mere

4

denials or allegations in the pleadings but must set forth specific
facts sufficient to raise a genuine issue for trial.
U.S. at 324.

Celotex, 477

A party asserting that a genuine dispute exists - or

cannot exist - about a material fact must cite “particular parts of
materials in the record.”

Fed. R. Civ. P. 56(c)(1)(A).

If a

plaintiff cannot support each essential element of a claim, the
court must grant summary judgment because a complete failure of
proof regarding an essential element necessarily renders all other
facts immaterial.
II.

Celotex, 477 U.S. at 322-23.

Insurance Coverage
In Minnesota the interpretation of an insurance policy is a

question of law.
609 (Minn. 2001).

Am. Family Ins. Co. v. Walser, 628 N.W.2d 605,
The court interprets an insurance policy in

accordance with general principles of contract construction, giving
effect to the intent of the parties.

Thommes v. Milwaukee Ins.

Co., 641 N.W.2d 877, 879 (Minn. 2002). The court gives unambiguous
language its plain and ordinary meaning, and construes ambiguous
language against the drafter and in favor of the insured.

Id. at

880; Nathe Bros., Inc. v. Am. Nat’l Fire Ins. Co., 615 N.W.2d 341,
344 (Minn. 2000).

Language is ambiguous if it is “reasonably

subject to more than one interpretation.” Columbia Heights Motors,
Inc.

v.

Allstate

Ins.

Co.,

275

N.W.2d

32,

34

(Minn.

1979).

However, the court “guard[s] against invitations to find ambiguity
where none exists.” Metro. Prop. & Cas. Ins. Co. v. Jablonske, 722

5

N.W.2d 319, 324 (Minn. Ct. App. 2006) (citation and internal
quotation marks omitted).
The
coverage.

insured

must

first establish

a prima

facie

case

of

SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 311

(Minn. 1995), overruled on other grounds by Bahr v. Boise Cascade
Corp.,

766

N.W.2d

910,

919

(Minn.

2009).

If

coverage

is

established, the burden shifts to the insurer to prove that a
policy

exclusion

applies.

Id.

at

313.

The

court

strictly

construes exclusions against the insurer, in light of the insured’s
expectations.

Thommes,

641

N.W.2d

at

880.

If

the

insurer

demonstrates that an exclusion applies, the insured bears the
burden of proving an exception to the exclusion.

SCSC Corp., 536

N.W.2d at 314.
There is no dispute that the damage sustained by plaintiffs is
covered under the Policy.

AMI argues, however, that coverage is

precluded under the protective safeguards exclusion because there
were three non-working smoke alarms in a main floor closet and
because plaintiffs failed to notify AMI of that fact.

Plaintiffs

respond that the exclusion does not apply because they had working
smoke detectors in the home, one of which alerted them to the fire.
The protective safeguards exclusion excludes coverage where
the

insured

“[k]new

of

any

suspension

or

impairment

in

any

protective safeguard listed in the Schedule... and failed to notify
[AMI] of that fact” or the insured “[f]ailed to maintain any

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protective safeguard listed in the Schedule ... in complete working
order.”

Lund Aff. Ex. 4, at AMIG 000150.

state, however,
installed

how

many

and maintained

fire
in

The Policy does not

detectors

working

were

order

or

detector was required in each room of the home.

required
whether

to
a

be

fire

This omission

renders the Policy ambiguous because it creates an uncertainty with
respect to plaintiffs’ responsibilities.

Oak River Ins. Co. v.

Truitt, 390 F.3d 554, 558 (8th Cir. 2004) (“An ambiguity arises if
there is duplicity, indistinctness, or uncertainty in the meaning
of the contractual terms.”).

AMI argues that use of the word “any”

erases any possible ambiguity by plainly requiring each and every
smoke detector present in the home to be in installed and in
working order.

Even if AMI’s interpretation is correct, it is

unreasonable and would lead to an absurd result.

See Emp’rs Mut.

Liab. Ins. Co. of Wis. v. Eagles Lodge of Hallock, Minn., 165
N.W.2d 554, 556 (Minn. 1969) (“[T]he terms of a contract must be
read in the context of the entire contract, and the terms will not
be

so

strictly

construed

as

to

lead

to

a

harsh

and

absurd

result.”). Under AMI’s interpretation, coverage would be precluded
even if there were functional smoke detectors throughout the house,
but one uninstalled smoke alarm in a closet.3

The result is even

more absurd under the facts of this case because the smoke detector
in the basement was in working order, among others in the home, and

3

This would include replaced or spare smoke detectors.
7

served its purpose by alerting the home’s occupants to the fire.
Under these circumstances, the court will not construe the Policy
to preclude coverage.4

See Taulelle v. Allstate Ins. Co., 207

N.W.2d 736, 739 (Minn. 1973) (“[I]nsurance contracts should, if
possible, be construed so as not to be a delusion to those who have
bought them.” (citation and internal quotation marks omitted)).
III.

Enforceability of Endorsement
Plaintiffs also argue that the protective safeguard exclusion

is

unenforceable

as

contrary

to

the

Minnesota

standard

fire

insurance policy, which is contained in Minn. Stat. § 65A.01. “The
statute was enacted to ‘do away with the evils arising from the
insertion

in

policies

of

conditions

ingeniously

worded

which

restricted the liability of the insurer and gave the insured less
protection than he might naturally suppose he was getting under his
contract.’”

Watson v. United Servs. Auto. Ass’n, 566 N.W.2d 683,

690 (Minn. 1997) (quoting Heim v. Am. Alliance Ins. Co. of N.Y.,
180 N.W. 225, 226 (Minn. 1920)).

“Because the statute has a

remedial purpose, it must be broadly construed.”

Id. “Use of the

statutory form is mandatory, and its provisions may not be omitted,
changed, or waived.”

Id.; see also Minn. Stat. § 65A.01, subd. 1.

Courts remedy a “conflict between an insurance policy and the
statutory standard fire insurance policy by reforming the insurance

4

Plaintiffs’ failure to notify AMI of the uninstalled fire
detectors likewise does not trigger the exclusion under the
circumstances presented.
8

policy to provide at least the level of coverage provided for in
the statute.”

Watson, 566 N.W.2d at 689.

Plaintiffs argue that the exclusion is unenforceable because
it provides a basis for coverage exclusion not authorized by
§ 65A.01.

AMI responds that subdivision 4(6) of the statute

authorizes the exclusion.

Subdivision 4(6) states:

A company may print or use on its policy, printed forms
covering the maintenance or supervision of security
guard’s service, automatic sprinkler service or the
maintenance of a clear space in lumber yards, when
approved by the commissioner of commerce, but no such
clause shall contain any provision calling for the lapse
or the suspension of the insurance coverage.
Minn.

Stat.§

65A.01,

subd.

4(6).

Although

the

subdivision

references certain safeguards, e.g., a sprinkler service, it does
not mention smoke detectors.

Absent such language, the court

cannot conclude that the subdivision authorizes exclusions based on
a lack of smoke detectors.

Thus, even if the court were to

construe the exclusion as urged by AMI, it would be unenforceable
under the Minnesota standard fire insurance policy.

As a result,

summary judgment in favor of plaintiffs is also warranted on this
basis.

CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.

The motion for summary judgment by defendant [ECF No. 15]

is denied;
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2.

The motion for summary judgment by plaintiffs [ECF No.

19] is granted; and
3.

The motion to strike [ECF No. 33] is denied.

LET JUDGMENT BE ENTERED ACCORDINGLY
Dated:

February 17, 2015
s/David S. Doty
David S. Doty, Judge
United States District Court

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