Wobig v. Safeco Insurance Company of Illinois

Background

Joseph and Carrie Wobig submitted a homeowners-insurance claim to Safeco for damage to heating coils beneath the floor of a pole-barn shop on their residential property. Safeco denied the claim after concluding that the shop was used for Wobig Construction, a business owned by Joseph Wobig. The Wobigs sued, asserting breach of contract, negligence, breach of an implied warranty of fitness for a particular purpose, and bad-faith denial of benefits under Minnesota law.

The parties filed competing motions for summary judgment. Summary judgment is entered when the evidence shows that no genuine dispute over an important fact requires a trial and that one party is entitled to judgment under the law.

Insurance-policy exclusion

The policy covered certain other structures on the residence premises but excluded structures “used in whole or in part for business.” The policy defined “business” to include a trade, profession, occupation, or other compensated activity conducted full-time, part-time, or occasionally, subject to an exception for activities producing no more than $3,000 in compensation during the relevant twelve-month period.

The court held that this language was broad and unambiguous. It did not require business use to be the structure’s main use or to occur frequently. A structure could fall within the exclusion if it was used in any manner for a compensated activity exceeding the policy’s $3,000 threshold. The court also declined to apply Minnesota’s reasonable-expectations doctrine because the exclusion was neither hidden nor unexpected in the homeowners policy.

Application to the shop

The court identified undisputed evidence that Wobig Construction used the shop at least in part for business. The company used the Wobigs’ residential address as its registered business address, its tax records included deductions and depreciation associated with the property and shop, its employees had access to the shop, employees visited approximately weekly, and company employees used Joseph Wobig’s tools kept there. Wobig Construction also stored business-related signs and other items in the shop. Because the business generated approximately $5 million annually, the policy’s $3,000 exception did not apply.

The court concluded that any reasonable jury would find that the shop was used at least partly for business. Safeco therefore properly denied coverage and did not breach the insurance contract.

Other claims

For the bad-faith claim, the court held that Safeco could not have denied the claim in bad faith after establishing that the policy properly excluded coverage.

For negligence, the Wobigs argued that insurance salesperson Jacob Simmons failed to tell them that the shop would not be covered. The court did not resolve whether Simmons was Safeco’s agent or an insurance broker because, either way, the record did not support a finding that he had an affirmative duty to give that advice or that he breached such a duty. The court granted Safeco summary judgment on this claim.

For the implied-warranty claim, the court held that the Wobigs could not establish such a claim because implied warranties of fitness for a particular purpose apply to consumer goods, and the Wobigs offered no support for extending that doctrine to insurance policies. The court granted Safeco summary judgment on this claim as well.

Disposition

The court granted Safeco’s motion for summary judgment, denied the Wobigs’ motion for summary judgment, and dismissed the action. Judge John R. Tunheim ordered that judgment be entered accordingly.