Opinion
No. C4-02-2150.
Filed July 22, 2003.
Appeal from the District Court, Washington County, File No. C9014672.
Kevin K. Shoeberg, Kevin K. Shoeberg, P.A., (for appellants)
E. Curtis Roeder, Candy B. Olson, Hanson Lulic Krall, (for respondent)
Considered and decided by Klaphake, Presiding Judge, Willis, Judge, and Hudson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
Respondent insurer refused to pay an insurance claim arising from a fire, claiming that appellant procured the insurance by a misrepresentation in the application, in which he stated that there was no business on the premises and failed to correct the insurer's restatement of that false statement when, in fact, there was an auto body shop in a pole barn in the rear of his property. The district court granted summary judgment for the insurer. Appellant contends that genuine issues of material fact exist because (a) he disclosed the existence and location of his business to respondent's agent and the agent failed to properly fill out the application and (b) the application was not returned to him to review before the coverage went into effect. Because genuine issues of material fact exist concerning whether appellant disclosed to the agent that the business was on the premises, and whether the agent had constructive notice of the business on the property, we reverse the district court's grant of summary judgment and remand for trial.
FACTS
This case arises out of a claim made by appellants David J. Schumann and his wife, Carol J. Schumann, under their homeowners' policy with respondent AMCO Insurance Company, Inc. (AMCO), for property damage incurred as a result of a fire originating in a pole barn on the Schumanns' property in February 2001. David J. Schumann is the self-employed owner and operator of DJ's Auto, a body shop, parts yard, and mechanic repair shop that he has operated on his family's homestead property in Hugo since 1964. The body shop was built in 1988 and housed in a 40- by 63-foot wood-frame pole barn. The main structure was heated with a four-year-old heater and had electrical service. Schumann also rented about 1,200 square feet of space in the north end of this building to another party who had an auto body restoration business. A 30- by 32-foot addition was later added to the pole barn in 1992 to store the personal property of Schumann and his wife. This addition contained no heat or electricity.
Schumann originally applied for homeowners' coverage on his property with AMCO on September 19, 1997. On that date, Schumann met with insurance agent James W. Lee in Lee's office to fill out an application for insurance. The parties agree that Lee asked Schumann the questions on the application, that Lee wrote out the answers on the application, and that Schumann then signed it. They also agree that Schumann told Lee that he was in the auto repair business, but that Lee never asked Schumann whether his business was on the premises. Schumann stated that he did not read the application in great detail because he answered the questions that Lee posed to him as Lee filled out the application. Lee stated that he did not know the auto repair business was on the property. The completed application listed Schumann's occupation as "auto body repairman." The application contained a question, "Business on premises (including day care)?" Lee checked the answer box for that question, "No."
Because Schumann had a potentially hazardous wood burner at his home, Lee visited Schumann's property to take pictures of the stove. The record reflects that a business sign for DJ's Auto Body was hanging under the mailboxes at the property. Lee, however, stated that he did not notice an auto body business or automobiles on the property. Lee acknowledged that Schumann paid the policy premium with a business check made out from DJ's Auto Body, with the same address as that on the insurance application.
Schumann never received a completed copy of the insurance application. He did receive, however, a cover sheet when the policy arrived, with the notation, "Business on property?" and the typed answer, "No." The sheet stated, "Please advise us immediately if this information is incorrect." Schumann never informed AMCO that this information was incorrect.
The company issued a policy with stated coverages of $145,500 for the principal dwelling, $14,550 for "other structures," and $109,125 for personal property. The policy contained a business pursuits exclusion, as well as a provision stating that the entire policy would be void if the insured made false statements relating to the insurance.
On February 10, 1999, fire substantially damaged the north area of the outbuilding, where the auto businesses were located. The fire marshal determined that the possible cause of the fire was welding activity or electrical. The tenant of the building had been using a welder a few hours before the fire was reported. The other side of the attached building, where Schumann's personal property was stored, also sustained fire damage.
After the fire, Schumann and his wife filed a sworn statement of proof of loss on the policy for $24,702 to cover the loss to the part of the outbuilding containing their personal property. The company declined coverage on the ground that the policy was void for material misrepresentation increasing the risk of loss to the insurer under Minn. Stat. § 60A.08, subd. 9 (1996). The alleged misrepresentation consisted of checking "no" in the box on the application asking whether there was a business on the property, and Schumann's signature attesting to the truth of the application.
The current version of this statute, Minn. Stat. § 60A.08, subd. 9 (2002) is identical.
Schumann filed a complaint in district court for breach of contract and sought a declaratory judgment that the losses to the part of the building used to store his personal property were covered under the policy. AMCO moved for summary judgment and dismissal on the ground that the Schumann had misrepresented a material fact in the application. The district court granted the summary judgment motion, and this appeal followed.
DECISION
On appeal from summary judgment, this court determines whether there are any disputed issues of material fact and whether the district court erred in its application of the law. Minn.R.Civ.P. 56.03; State by Cooper v. French, 460 N.W.2d 2,4 (Minn. 1990). This court views the evidence in the light most favorable to the party against whom judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).
Schumann argues that the district court erred in ordering summary judgment for AMCO because a material fact issue exists as to whether he misrepresented that his auto repair business was not located on the property, thus increasing the risk of loss to the insurer. Minn. Stat. § 60A.08, subd. 9 (2002) states:
No oral or written misrepresentation made by the assured, or in the assured's behalf, in the negotiation of insurance, shall be deemed material, or defeat or avoid the policy, or prevent its attaching, unless made with intent to deceive and defraud, or unless the matter misrepresented increases the risk of loss.
A misrepresentation increases the risk of loss if it impairs the insurer's ability to make a reasonable decision to assume the risk of coverage. Howard v. Aid Assn. for Lutherans, 272 N.W.2d 910, 912-13 (Minn. 1978). The burden of proving intent to deceive, or that the misrepresentation increased the risk of loss, rests on the one who asserts it. Craigmile v. Sorenson, 248 Minn. 286, 295, 80 N.W.2d 45, 51 (1956). The resolution of these issues is a question of fact to be determined by the jury, "unless the evidence is conclusive one way or the other," when the district court may determine the issue as a matter of law. Id.
AMCO contends, and the district court concluded, that as a matter of law, the policy was void because Schumann materially misrepresented that no business existed on his property when he signed the application with the "no" box, checked by Lee, indicating that there was no business on the property. We disagree.
AMCO argues forcefully that by signing the application, Schumann confirmed all of its contents — including the representation that there was no business on the property. Generally, a person is bound by the contents of a contract that he or she signs. See Sorensen v. New York Life Ins. Co., 195 Minn. 298, 300, 262 N.W. 868, 869 (1935). But the Minnesota Supreme Court has held that when an insured truthfully gives correct answers, but the insurance application is incorrectly completed by the agent without the fault, knowledge, or collusion by the insured, and the insured signs the application without reading it first, relying on the good faith of the agent, the insurance company cannot avoid the policy. Pomerenke v. Farmers Life Ins. Co., 228 Minn. 256, 260, 36 N.W.2d 703, 706 (1949).
Here, the record shows that genuine issues of material fact exist, precluding a proper grant of summary judgment. Lee asked Schumann his occupation, and Schumann answered truthfully. Significantly, Lee admitted in his deposition that he did not ask whether the auto repair business was located on the property, and that he, Lee, checked the answer box "no" where the application asked if there was a business on the premises. We cannot conclude that Schumann misrepresented whether his business was on the premises when Lee never asked Schumann in the first place.
Schumann also stated that he signed the application without reading it carefully. AMCO asserts that it is entitled to rely on the general presumption that individuals read documents before signing them. Regardless of the merits of AMCO's position, any such presumption was clearly rebutted because Lee knew that Schumann had not read the application, and indeed testified that applicants typically do not read the application because the agents ask the questions and simply have the applicants sign it. Plainly, Schumann was relying on Lee to fill out the application correctly. Finally, we note that the existence of the business sign on the property and the payment of premiums with a business check could be deemed sufficient to put Lee on notice that Schumann had been contemplating business coverage when the policy was purchased. Thus, because material factual issues exist as to whether Schumann made a misrepresentation increasing the risk of loss to the insurer under Minn. Stat. § 60A.08, subd. 9, so as to void the policy, we conclude that the district court erred in granting summary judgment on this issue.
AMCO also argues for the first time on appeal that the business pursuits exclusion of the policy applies to exclude coverage of the attached garage housing the Schumanns' personal property. Because AMCO failed to raise this argument below, and because the court granted summary judgment on the issue of whether the policy was void, this issue has not been previously addressed. This court will generally not consider matters not argued and considered in the district court. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988). We therefore decline to consider this issue.