African Economic Development Solutions v. West Bend Mutual Insurance Company

Background

African Economic Development Solutions (AEDS) purchased a one-story commercial building in St. Paul, Minnesota, in January 2021. The building was vacant and subject to a St. Paul City Council order to rehabilitate or raze it. AEDS and West Bend entered into an insurance contract covering “all direct physical loss” unless the policy excluded or limited the loss. A Minnesota-specific provision also included “all loss or damage caused by fire.”

The policy’s vacancy provision applied when a building had been vacant for more than 60 consecutive days. It excluded certain losses, including vandalism, sprinkler leakage, building glass breakage, water damage, theft, and attempted theft. For other covered causes of loss, it reduced the payment by 15 percent. The policy also listed fire and vandalism separately in provisions concerning additional coverage and specified causes of loss.

On February 20, 2022, an intentionally set fire heavily damaged the property. The parties stipulated that the property was vacant at the time and had been vacant for the preceding 60 days. AEDS submitted a timely insurance claim, but West Bend denied coverage based on the vacancy provision. AEDS then brought this action, including a request for a declaration that the fire damage was covered.

Parties’ Arguments

The parties agreed that the material facts were undisputed and that the only issue for summary judgment was whether the policy covered damage from an intentionally set fire. West Bend argued that an intentionally set fire constitutes vandalism and therefore falls within the vacancy provision’s exclusion. AEDS argued that the policy was ambiguous about whether fire damage caused by a vandal was excluded and that the ambiguity should be resolved in AEDS’s favor.

Court’s Analysis

Applying Minnesota law, the court explained that insurance policies must be read as a whole and according to both their ordinary meaning and what a reasonable insured would understand. The insured has the initial burden of showing coverage, while the insurer has the burden of establishing an exclusion. Exclusions are construed narrowly, and ambiguous policy language—language reasonably open to two or more interpretations—is construed in favor of the insured.

The court acknowledged that the dictionary definitions of “vandalism” and “arson” overlap. But it concluded that the policy’s structure created ambiguity. The policy repeatedly treated fire and vandalism as separate causes of loss. In the vacancy provision, vandalism appeared among the specifically excluded causes, while fire was among the covered causes of loss not specifically listed there. The policy’s property-in-transit provision also separately listed fire and vandalism, as did its definition of specified causes of loss.

The court further reasoned that the other causes listed alongside vandalism in the vacancy provision suggested less catastrophic types of property damage, rather than damage from a fire. It distinguished cases relied on by West Bend because those policies did not distinguish between fire and vandalism.

Ruling

The court held that, at a minimum, the policy was ambiguous about whether damage from an intentionally set fire was fire damage or vandalism damage. Because the ambiguity had to be construed in favor of AEDS and exclusions had to be narrowly interpreted, the court concluded that West Bend was required to cover the damage under the policy.

The court granted AEDS’s motion for partial summary judgment (ECF No. 23) and denied West Bend’s motion for summary judgment (ECF Nos. 30, 35). The court stated that the case moves forward solely on the question of damages.