Cincinnati Ins. Co. v. Rymer Cos.

Cincinnati Insurance Company, Plaintiff and Counter-Defendant, v. Rymer Companies, LLC, a/k/a Rymer Companies, Inc.,and Cannon Falls Mall, Inc., Defendants and Counter-Claimants.

File No. 19-cv-1025 (ECT/TNL)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

May 13, 2021

OPINION AND ORDER

Anthony J. Kane and Jessica K. Allen, Pfefferle Kane LLP, Minneapolis, MN, for Plaintiff and Counter-Defendant Cincinnati Insurance Company.

Bradley K. Hammond and Alexander M. Jadin, Smith Jadin Johnson, PLLC, Bloomington, MN, for Defendants and Counter-Claimants Rymer Companies, LLC and Cannon Falls Mall, Inc.

The roof on the Cannon Falls Mall was in rough shape. It often leaked. Roofing materials had been infiltrated by water, leaving them saturated (or "wet," in industry parlance). The roof displayed numerous other signs suggesting it needed extensive repairs. In 2014, in fact, a consultant recommended replacing the entire roof "as soon as possible." But that did not happen. Then came a storm.

The storm occurred on September 4, 2018. The Mall's owners—two business organizations that will be referred to together as "Rymer"—believed the storm caused extensive damage to the roof, and they submitted a claim to the Mall's insurer, Cincinnati Insurance Company. Rymer's roof-damage claim eventually would total more than $1.7 million. A panel appointed to appraise the roof damage essentially rejected Rymer's claim. It determined that the storm's wind caused just $23,225 worth of damage to the Mall's roof.

The remaining dispute in this case stems from what happened next: Rymer applied for a building permit necessary to repair the wind damage identified by the appraisal panel, but Goodhue County denied the application. According to Rymer, the County determined that the roof's generalized "wet" condition meant the localized repairs authorized by the appraisal panel could not be performed without replacing the Mall's entire roof. Rymer says that the County's denial of its building permit triggered a provision in the Cincinnati policy providing coverage when, as Rymer describes the provision, an insured incurs added costs for complying with an ordinance or law.

The Parties have filed cross-motions for summary judgment that, boiled down, require deciding whether the ordinance-or-law coverage provision relied on by Rymer requires Cincinnati to cover the cost to replace the Mall's entire roof in view of Goodhue County's rejection of Rymer's building permit. Cincinnati's motion will be granted, and Rymer's motion will be denied, because the ordinance-or-law coverage provision unambiguously requires a but-for causal connection between the storm and the enforcement of an ordinance or law, and that connection is missing here as a matter of law.

I

The Parties. Two business organizations—Rymer Companies, LLC (which is also known as Rymer Companies, Inc.) and Cannon Falls Mall, Inc. (together "Rymer")—own the Mall. Answer and Countercl. at 3 ¶ 2 [ECF No. 6]; Reply to Countercl. ¶ 3 [ECF No. 14]. Rymer Companies, LLC has just two individual members—Edward Rymer andPaulette Rymer—and they are Florida citizens. See Statement of Citizenship [ECF No. 63]. Cannon Falls Mall, Inc. is incorporated under Minnesota law and maintains its principal place of business in Florida. Compl. ¶ 3 [ECF No. 2]; Answer and Countercl. at 1 ¶ 2.¹ Rymer contracted with Cincinnati to provide insurance coverage for the Mall under a policy effective from July 15, 2016 to July 15, 2019. See Hammond Aff., Ex. A [ECF No. 33-1 at 1-152] ("Policy").² Cincinnati is incorporated under Ohio law and maintains its principal place of business there. Compl. ¶ 1.

The basic terms of the Policy. The Policy covers "direct physical 'loss' to Covered Property at the 'premises' caused by or resulting from any Covered Cause of Loss." Policy at 28. The Policy defines "loss" to "mean[] accidental loss or damage." Id. at 59. The Mall (i.e., the "building or structure" that is the Mall) is "Covered Property." Id. at 4, 28. And a "Covered Cause of Loss" is one that is not excluded or limited by the Policy. Id. at 30. The Policy neither excludes nor limits coverage generally for loss caused by windstorms. See id. at 30-36.

The storm. On September 20, 2018, a thunderstorm moved through the Cannon Falls area. The National Weather Service reported that around 7:00 p.m. that evening "an EF-1 tornado touched down south-southwest of Cannon Falls . . . and traveled north-northeast for approximately 1.7 miles." Kane Aff., Ex. A-9 at 61 [ECF No. 51-1]. The tornado's "maximum width was estimated to be approximately 100 yards[,]" and it produced maximum wind speeds between 85 and 95 miles per hour. Id. Based on maps showing the tornado's track, "tornado-strength winds were no closer than one-quarter to one-third of a mile from the [Mall]." Id. at 61-62. (These facts regarding the storm and tornado appear in a report prepared at Cincinnati's request by Pie Consulting & Engineering, id. at 60-97, and neither Cincinnati nor Rymer disputes their accuracy.)

Rymer's claim under the Policy and Cincinnati's decision. On September 24, 2018, Rymer filed a claim with Cincinnati for damage to the Mall caused by wind from the September 20 tornado. Kane Aff., Ex. A-8 at 56-58. Rymer did not at that time identify a probable amount of the loss. See id. at 56. In a subsequent proof-of-loss submission to Cincinnati, Rymer identified the amount of its claimed loss to be $1,541,699.84. Kane Aff., Ex. A-15 at 159. Cincinnati alleges it "determined that the total damage to the Mall as a result of the September 20, 2018 storm was $10,702.40, exclusive of depreciation and the applicable deductible[,]" and tendered payment in this amount to Rymer in October 2018. Compl. ¶¶ 11-12.

The Parties' claims in this lawsuit. Cincinnati commenced this lawsuit with the filing of its Complaint in April 2019. ECF No. 2. Invoking diversity jurisdiction under 28 U.S.C. § 1332(a)(1), Compl. ¶ 4,³ Cincinnati asserted a single cause of action under Minnesota statutes authorizing the issuance of declaratory judgments, id. ¶¶ 19-21 (citingMinn. Stat. §§ 555.01, 555.02, and 555.11).⁴ Cincinnati sought various forms of declaratory relief, including the adjudication of, and a declaration regarding, the Parties' "contractual obligations under the terms of the Policy[.]" Compl. at 7, ¶ 1. Rymer answered and counterclaimed, alleging that Cincinnati had "breached the Policy by failing to fully and fairly adjust and pay the [l]oss." Answer and Countercl. at 5 ¶ 14. Rymer sought damages for Cincinnati's breach, id. at 5 ¶ 15, a declaration that Rymer was covered under the Policy in the amount of its claimed loss, id. at 5 ¶ 19, and an order compelling an appraisal under the Policy, id. at 6 ¶ 22.

The appraisal. In September 2019, the Parties stipulated to stay proceedings in this case pending completion of an appraisal pursuant to an appraisal-authorizing Policy term. Stip. ¶ 5 [ECF No. 17].⁵ In their stipulation, the Parties wrote that they "agree[d] that aninsurance appraisal . . . is expected to resolve all remaining matters to be resolved, without further litigation." Id. ¶ 2. Following a series of delays, the appraisal occurred November 9, 2020. See ECF Nos. 19-28. Rymer sought a total appraisal award of $2,114,200. Kane Aff., Ex. C-1 at 18 [ECF No. 51-3]. Relevant here, this amount included an award of $1,726,921.90 for the Mall's roof. Id. at 9. Rymer's position regarding the basic issues before the appraisal panel was clear. In a letter accompanying its submission to the panel, Rymer wrote:

There are two issues for consideration at this appraisal. First, the panel should determine the scope of damage that exists at the Property from the September 20, 2018, storm. Second, the panel should determine the amount of loss, which includes the cost and scope of repair to repair the damage at the Property.

Kane Aff., Ex. C at 3. In other words, Rymer understood that the appraisal panel had to determine first what property damage was caused by the storm and, if any, then second the amount of loss. The Parties' appraisal submissions were extensive. See Kane Aff., Ex. A at 2-10 (Cincinnati's appraisal brief), and Ex. C at 2-4 (Rymer's). To summarize,Cincinnati identified evidence it argued showed that the Mall's roof needed replacement and "had exceeded its useful life" for several years prior to the September 2018 storm. Kane Aff., Ex. A at 3-5. Cincinnati's exhibits included evidence of extensive previous leaks, see, e.g., id., Exs. A-6 at 48, A-9 at 80, and the report of a roofing contractor from October 2014 identifying numerous problems with the Mall's roof, id., Ex. A-4. The contractor who prepared this report "recommend[ed] reroofing as soon as possible." Id. at 34. For its part, Rymer sought "replacement of all roofing and other building components[.]" Id., Ex. C at 3. Rymer submitted the report of a contractor, Phil Simon, who identified roof damage caused by the storm. Id., Ex. C-2. Simon acknowledged that portions of the roof were saturated, id. at 50, 55, and explained that the "Minnesota Building code requires all damaged and saturated roofing materials [to] be removed before repairing[,]" id. at 54.⁶ To buttress Simon's description of the Minnesota Building Code, Rymer submitted correspondence from Goodhue County and a roofing manufacturer representing that the Code and manufacturer's specifications prohibited re-roofing over wet, water-damaged, or deteriorated materials. Id., Exs. C at 2-3, C-3, and C-4.

The appraisal award. The panel issued its award the day of the appraisal. Essentially rejecting Rymer's claim, the panel awarded $23,226 for "Mall roof repair" and noted that this amount did not account for any deductible or prior payments Cincinnati mayhave made. ECF No. 28-1. The next day, Rymer's counsel, Alexander Jadin, sought clarification of the panel's roof-repair award. Hammond Aff., Ex. B at 153. Jadin wrote:

In order to counsel Rymer

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