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Zurich American Insurance Co. v. New Mech Companies, Inc.

United States District Court, Eighth Circuit

January 22, 2014

Zurich American Insurance Co., Plaintiff,
New Mech Companies, Inc. and Corval Group, Inc., Defendants.

Michelle D. Hurley, Anamarie Reyes Kolden, Steven Theesfeld, Yost & Baill, LLP, Minneapolis, Minnesota, for Plaintiff.

James M. Jorissen, Ernest F. Peake, Patrick J. Lindmark, Leonard, O'Brien, Spencer, Gale & Sayre, Ltd., Minneapolis, Minnesota, for Defendants.


RICHARD H. KYLE, District Judge.


This insurance-coverage dispute arises out of property damage to The Groveland, a condominium building in Minneapolis. In 2006, certain piping connections in the building separated, causing water damage to nearly thirty units and to common areas. Defendants NewMech Companies, Inc. and Corval Group Inc. (collectively referred to as "NewMech")[1] had designed and installed The Groveland's plumbing and were responsible for the damage. NewMech's insurer at the time, Plaintiff Zurich American Insurance Company ("Zurich"), paid for the building's repairs and then sought reimbursement from NewMech for the applicable deductible amount. Zurich assessed a deductible for each unit damaged plus one for the common areas, but NewMech refused to pay, contending only one deductible applied to all of the building's damage. Four years later, Zurich commenced this declaratory judgment action, seeking a determination as to the number of deductibles and total amount owed to Zurich under the parties' insurance contract. Zurich now moves for partial summary judgment on the number of deductibles owed, but not the amount of each. For the reasons set forth below, the Court will grant Zurich's Motion.


In 2004, NewMech was retained to design and install domestic water lines for The Groveland during its construction. On October 24, 2006, certain piping connections NewMech had installed separated, causing water damage to both common areas and individual condominium units in The Groveland. (Compl. ¶ 7.) NewMech promptly reported this to Zurich, which assigned the event a claim number. (Id. ¶¶ 7-8.) On October 28, a different piping connection separated, causing further damage to common areas and to additional individual units. (Id. ¶ 9.) NewMech again promptly reported the damage to Zurich, which assigned the event a second claim number. (Id. ¶¶ 9-10.) Zurich took over the repairs for the Groveland and hired the building's contractor, Frana Companies, Inc. ("Frana"), to repair the damage. (Id. ¶ 11.) In 2007, after negotiations, Zurich and Frana reached a settlement for the total amount of the repairs and Zurich issued two liability payments, totaling $999, 603. (Id.)[2]

NewMech's insurance policy with Zurich covering the losses at issue-policy number GLO XXXXXXX-XX (the "Policy")-provided for a $25, 000 property-damage deductible "per claim, " as opposed to "per occurrence." (Id. Ex. A at 51.) In June 2007, shortly after NewMech notified Zurich that it was cancelling its policy, Zurich informed NewMech that it would be treating the damage to each individual condominium as a separate "claim" and the damage to common areas as another "claim." Zurich assessed a $25, 000 deductible for each of these "claims"-seeking reimbursement from NewMech for $349, 099 total. (Brunn Aff. ¶¶ 13-14.) Until this point, Zurich had referred to the damage to The Groveland as a single claim, and NewMech had expected to pay one or, at most, two deductibles. (Id. ¶¶ 12, 16.) NewMech refused to pay Zurich's invoice, maintaining it had submitted only one claim to Zurich for damage to The Groveland and therefore only one $25, 000 deductible should apply.

In June of 2012, Zurich commenced this declaratory-judgment action pursuant to 28 U.S.C. §§ 2201 and 2202, seeking resolution of the parties' dispute as to the number of applicable deductibles. Zurich now moves for partial summary judgment, seeking a declaration of the meaning and application of its "per-claim" deductible. The Motion has been fully briefed and is ripe for disposition.


Summary judgment is proper if, drawing all reasonable inferences in favor of the nonmoving party, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Ricci v. DeStefano , 557 U.S. 557, 586 (2009). The moving party bears the burden of showing that the material facts in the case are undisputed. Torgerson v. City of Rochester , 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). The Court must view the evidence, and the inferences that may be reasonably drawn from it, in the light most favorable to the nonmoving party. Beard v. Banks , 548 U.S. 521, 529-30 (2006); Weitz Co. v. Lloyd's of London , 574 F.3d 885, 892 (8th Cir. 2009). The nonmoving party may not rest on mere allegations or denials, but must show through the presentation of admissible evidence that specific facts exist creating a genuine issue of material fact for trial. Fed.R.Civ.P. 56(c)(1)(A); Wood v. SatCom Mktg., LLC , 705 F.3d 823, 828 (8th Cir. 2013).


I. The Voluntary Payment Doctrine

In response to the instant Motion, NewMech asserts Zurich is precluded from recovering any deductible under Minnesota's "voluntary payment doctrine" because it voluntarily paid the full cost of repairs when it was under no legal obligation to do so. "[T]he voluntary payment doctrine is a long-standing doctrine of law" in Minnesota.[3] Hanson v. Tele-Comms., Inc., No. C7-00-534 , 2000 WL 1376533, at *3 (Minn.Ct.App. Sept. 26, 2000). It provides that "[o]ne who has knowledge of the material facts and makes a payment voluntarily cannot later recover it on the ground that he or she was under no legal obligation to make the payment in the first place." Minn. Pipe & Equip. Co. v. Ameron Int'l Corp., Civ. No. 11-2158, 2013 WL 1346152, at *9 (D. Minn. Apr. 3, 2013) (Tunheim, J.). Under the terms of the Policy, Zurich was only legally obligated to pay "damages in excess of any deductible amounts." Thus, ...

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