Opinion
No. 8:02CV577.
June 16, 2004
MEMORANDUM AND ORDER
This matter is before the court on the cross-motions for summary judgment by plaintiff Royal Insurance Co. ("Royal"), Filing No. 73, and defendant Duhamel Broadcasting Enterprises ("Duhamel"), Filing No. 69. Royal seeks a declaration of rights and obligations under a policy of insurance. Specifically, it seeks a declaration that the September 24, 2002, collapse of Duhamel's 1965'-tall broadcasting tower in Hemingford, Nebraska, resulting from a contractor's failure to brace the tower while it was strengthened, is outside the coverage of policy #P2SV0200970000. Duhamel has filed a counterclaim alleging estoppel, negligence, and mistake justifying reformation of the contract. The undisputed evidence shows that the insurance contract at issue contained several exclusionary clauses, but not all the exclusions were set out in the insurance proposal that applied to the tower prior to receipt of the policy on September 17, 2002. See Filing No. 1, 3.
Royal asserts that the insurance contract unambiguously excludes the tower from coverage because the undisputed evidence shows that the tower was either: 1) undergoing repair or alteration; 2) in the course of construction; 3) a loss resulting from faulty, inadequate, or defective workmanship, repair, construction, renovation, or remodeling; or 4) a loss resulting from faulty, inadequate, or defective materials used in repair, construction, renovation, or remodeling. Duhamel asserts that at least some of these exclusionary clauses were not present in the policy or proposal issued to them and that, in any event, the exclusionary clauses are not applicable in light of Royal's knowledge of operations on Duhamel's tower and Royal's acceptance and retention of premium payments despite the avowed noncoverage.
LEGAL STANDARD
Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The court must view the evidence and the inferences which may be reasonably drawn from the evidence in the light most favorable to the nonmoving party. Enterprise Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir. 1996). The court's function is not to weigh the evidence, but merely to determine whether there is sufficient evidence favoring the nonmovant for a finder of fact to return a verdict in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Essentially, the court performs the threshold inquiry of determining whether a trial is necessary. Id. at 250.
The moving party bears the initial burden of showing the absence of a genuine issue of material fact, which can be done by pointing to the lack of evidence to support an essential element of the nonmoving party's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). Once the moving party has met its burden, the nonmoving party must then set forth "specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). See Anderson, 477 U.S. at 256; Krenik v. County of LaSueur, 47 F.3d 953, 957 (8th Cir. 1995). Generally, a genuine issue of material fact exists when there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. Anderson, 477 U.S. at 248.
CHOICE OF LAW
In a diversity case, the forum state's choice of law rules govern. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Nebraska follows the Restatement (Second) of Conflicts of Laws. Inacom Corp. v. Sears, Roebuck Co., 254 F.3d 683, 687 (8th Cir. 2001). The Supreme Court of Nebraska has adopted the Restatement (Second) of Conflict of Laws § 188 with respect to contracts generally. Mertz v. Pharmacists Mut. Ins. Co., 625 N.W.2d 197, 202 (Neb. 2001). The Restatement, provides, in relevant part:
1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.
(2) In the absence of an effective choice of law by the parties . . . the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicile, residence, nationality, place of incorporation and place of business of the parties.
These contacts are to be evaluated according to their relative importance with respect to the particular issue.
(3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189-199 and 203.
Restatement (Second) of Conflict of Laws § 193 (1971). The importance of any of the particular factors listed in subsection (2) "will depend upon the contract issue in dispute." Mertz, 625 N.W.2d at 202. "While § 188 sets out the general contacts to consider in contract cases involving conflict of law disputes, §§ 189 through 197 deal with conflict of laws disputes with regard to specific types of contracts." Id. Restatement § 193 deals with "Contracts of Fire, Surety or Casualty Insurance." That section provides that "[t]he validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied." The court finds the Nebraska courts would be guided by the Restatement § 193 to determine the choice of law with respect to an insurance contract. See Mertz, 625 N.W.2d at 202-03 (referring to sections of the Restatement that deal with conflict of laws disputes involving specific types of contracts as providing "guidance"). Section 193 of the Restatement establishes a presumption with respect to casualty insurance contract issues in favor of the law of the "state which the parties understood was to be the principal location of the insured risk during the term of the policy." General Ceramics Inc. v. Firemen's Fund Ins. Cos., 66 F.3d 647, 653 (3d Cir. 1995).
Applying § 193, the court finds that the parties clearly understood that the principal location of the insured risk during the term of the policy was Nebraska. The tower is an immovable object and its location does not vary. There has been no showing that South Dakota "has a more significant relationship under the principles stated in § 6 to the transaction and the parties" to rebut the presumption that Nebraska law should apply. Accordingly, the court finds Nebraska law should apply to the rights and obligations of the parties under the contract of insurance.
DISCUSSION
The construction and legal effect of a written contract are generally questions of law. United Fire Cas. Co. v. Gravette, 182 F.3d 649, 654 (8th Cir. 1999); see also Day v. Toman, 266 F.3d 831, 835 (8th Cir. 2001) (applying Nebraska law). However, if a contract is fairly susceptible to at least two reasonable interpretations, summary judgment is inappropriate because extrinsic evidence is then admissible to show the intent of the contracting parties. Rosemann v. Roto-Die, Inc., 276 F.3d 393, 399 (8th Cir. 2002); ABC Electric, Inc. v. Nebraska Beef, Ltd., 249 F.3d 762, 765 (8th Cir. 2001) (applying Nebraska law). In opposition to plaintiff's motion, the defendant has submitted evidence including depositions that demonstrate genuine issues of material fact with respect to the scope of their insurance coverage. In opposition to defendant's motion, plaintiff has submitted the terms of the policy itself (Filing No. 1, Ex. A at 30) which when read in the best light to plaintiff, create a dispute of material fact which renders summary judgment inappropriate.IT IS THEREFORE ORDERED:
1. Royal's motion for summary judgment, Filing No. 73, is denied, and
2. Duhamel's motion for partial summary judgment, Filing No. 69, is denied.