Law School Case Brief
Atwater Creamery Co. v. W. Nat’l Mut. Ins. Co. - 366 N. W.2d 271 (Minn. 1985)
Where the technical definition of burglary in a burglary insurance policy is, in effect, an exclusion from coverage, it will not be interpreted so as to defeat the reasonable expectations of the purchaser of the policy.
Defendant Western National Mutual Insurance Company (Western Insurer) issued a burglary insurance policy to Plaintiff Atwater Creamery Company (Atwater Insured). When Atwater Insured filed a claim after a loss from a burglary, Western Insurer denied coverage on the ground that there were no visible marks of physical damage to the exterior at the point of entrance or to the interior at the point of exit, as required by the definition of burglary in the policy. Atwater Insured brought a declaratory judgment action against defendants, Western Insurer, as well as Charles H. Strehlow (Agent), the owner of the Strehlow Insurance Agency (Agency), Western Insurer's agent. The trial court directed a verdict for defendant agent because Atwater Insured failed to establish an insurance agent's standard of care by expert testimony. It then ordered judgment for Western Insurer, concluding that the burglary insurance policy in effect defined burglary so as to exclude coverage of the burglary involved here. On appeal, Atwater Insured argued that the conformity clause in the burglary insurance policy operated to substitute the statutory definition of burglary for the policy definition.
- Did the conformity clause in the policy operate to substitute the statutory definition of the crime of burglary for the definition of burglary in the policy?
- Was expert testimony necessary to establish an insurance agent’s standard of care in advising customers of gaps in policy coverage?
The Supreme Court of M held that an insurance policy provision must be in direct conflict with a statute before a conformity clause operates to substitute the statutory provisions for the policy provision. In the present case, the policy definition of burglary was different and more limited than the criminal statute definition, but there was no conflict between the two given their disparate functions. The difference between the two, however, has a bearing on an insured’s reasonable expectations in purchasing burglary insurance. According to the Court, the technical definition of burglary in the insurance policy was, in effect, an exclusion, and could not be interpreted to Atwater Insured's reasonable expectations of coverage. Anent the second issue, the Court held that expert testimony was necessary in order to establish an insurance agent’s standard of care in advising customers of gaps in policy coverage. The Court noted that insurance agents were professionals in a field that few lay persons knew well. Thus, the rule applied that if it would be speculative for the fact-finder to decide the issue of negligence without having the benefit of expert testimony on the standard of care, the expert testimony was necessary.
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