Clarinet, LLC v. Essex Insurance Company

United States Court of Appeals
For the Eighth Circuit
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No. 12-1416
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Clarinet, LLC
lllllllllllllllllllll Plaintiff - Appellant
v.
Essex Insurance Company
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
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Submitted: November 14, 2012
Filed: April 22, 2013
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Before RILEY, Chief Judge, WOLLMAN and MELLOY, Circuit Judges.
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RILEY, Chief Judge.
In this diversity of citizenship case, Clarinet, LLC (Clarinet) sued Essex
Insurance Company (Essex) in Missouri state court, alleging Essex wrongfully refused
to pay Clarinet under a commercial general liability insurance policy. Essex removed

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the case to federal court. On cross-motions for summary judgment, the district court 1
granted judgment in favor of Essex, denying Clarinet relief. Clarinet appeals. Having
jurisdiction under 28 U.S.C. § 1291, we affirm.
I. BACKGROUND
A. Factual Background
1. Clarinet’s Property and Loss
Clarinet, a Missouri limited liability company whose members were all
Missouri citizens, is a commercial and residential real estate development company
operating in St. Louis, Missouri. Essex is an insurance company incorporated under
the laws of Delaware and headquartered in Virginia.
In 2005, Clarinet purchased the Switzer building, “a turn of the century
masonry structure” Clarinet intended to renovate “into luxury condominiums with
street level retail and commerical space.” The Switzer building was a registered and
protected historical building listed on the National Register of Historic Places.
On July 19, 2006, a windstorm struck the city of St. Louis. The storm seriously
damaged the Switzer building, destroying parts of two exterior walls and part of the
roof. Debris and bricks fell onto an adjacent bridge and electrical substation,
damaging this city property. The parties dispute the extent of the damage, but Essex
admits “[t]he [s]torm left large portions of the east and north walls with no support,”
and “exposed the building’s interior to the weather, resulting in continued
deterioration.”
1The Honorable David D. Noce, United States Magistrate Judge for the Eastern
District of Missouri, sitting by consent of the parties pursuant to 28 U.S.C.
§ 636(c)(1).
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As an emergency stabilization effort, Clarinet installed approximately twenty
aluminum bracing towers and additional braces and netting to prevent more debris
from falling from the building onto adjacent property. Clarinet’s stabilization “efforts
continued for several months.” The parties dispute whether “the building remained
structurally unsound” after Clarinet’s initial efforts, but Clarinet contends the building
“constituted a continuing hazard and immediate threat to the public safety” in April
2007, and had to be demolished.
On or about January 23, 2007, Clarinet entered into a demolition contract with
a third-party demolition company. Because the Switzer building was a designated
historical landmark, Clarinet had to seek approval from various city agencies before
demolishing the building. Clarinet maintains the city initially resisted Clarinet’s
requests to demolish the building, believing it would be preferable to preserve as
much of the existing structure as possible. On June 6, 2007, the city issued a Notice
of Emergency Condemnation that required Clarinet to demolish the building. The
notice indicated the city concluded the property could not “be made reasonably safe
without the demolition and removal of” the damaged Switzer building. Clarinet
demolished the building by approximately June 18, 2007, at costs exceeding
$660,000.
2. Insurance Policy
At all relevant times, Clarinet held a commercial general liability insurance
policy from Essex relating to the Switzer building. Under the policy, Essex insured
Clarinet against liability to third parties resulting from “bodily injury” or “property
damage,” either of which must be caused by a covered “occurrence.” The insurance
policy also contained several conditions and exclusions.
One such exclusion was the owned property exclusion, excluding from
coverage “‘[p]roperty damage’ to . . . [p]roperty [Clarinet] own[ed], rent[ed], or
occup[ied], including any costs or expenses incurred by [Clarinet], or any other
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person, organization or entity, for repair, replacement, enhancement, restoration or
maintenance of such property for any reason, including prevention of injury to a
person or damage to another’s property.”
Clarinet did not inform Essex of the storm damage to the Switzer building or
the damage to city property until May 11, 2007. There is no evidence Essex knew of
Clarinet’s intention to demolish the Switzer building until after the building was
demolished, and Clarinet admits it did not seek Essex’s consent before proceeding
with the demolition. After the demolition, Clarinet asked Essex to pay Clarinet’s
expenses for stabilizing and demolishing the Switzer building, in accordance with
Clarinet’s interpretation of the policy. Essex denied coverage and refused payment.
B. Procedural History
Clarinet sued Essex in Missouri state court, alleging Essex had a duty under the
policy to cover Clarinet’s expenses in stabilizing and ultimately demolishing the
Switzer building. Essex removed the case to federal court on the basis of diversity
jurisdiction. See 28 U.S.C. §§ 1332(a), 1441(a). The parties filed cross-motions for
summary judgment, and the district court granted judgment in favor of Essex.
II. DISCUSSION
A. Standard of Review and Applicable Law
We review de novo the district court’s grant of summary judgment, construing
all facts and making all reasonable inferences in favor of the non-moving party. See
Washington v. Countrywide Home Loans, Inc., 655 F.3d 869, 871-72 (8th Cir. 2011).
We will affirm summary judgment if “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
The parties agree Missouri law applies in this diversity case. See HealthEast
Bethesda Hosp. v. United Commercial Travelers of Am., 596 F.3d 986, 987 (8th Cir.
2010). Under Missouri law, courts generally give the terms of an insurance policy
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their ordinary meaning. See Farmland Indus., Inc. v. Republic Ins. Co., 941 S.W.2d
505, 508 (Mo. 1997) (en banc). We construe ambiguities in policies in favor of the
insured and against the insurance company. See Todd v. Mo. United Sch. Ins.
Council, 223 S.W.3d 156, 160 (Mo. 2007) (en banc.). A court may not create an
ambiguity where none exists, and “must enforce clear and unambiguous” policy
exclusions. See id. at 163. The insured has the burden to prove an event is covered
under the policy, and the insurer has the burden to prove an exclusion applies to an
otherwise covered event. See State Farm Fire & Cas. Co. v. D.T.S., 867 S.W.2d 642,
644 (Mo. Ct. App. 1993).
B. Owned Property Exclusion
The owned property exclusion plainly bars coverage in this case. The exclusion
provides the policy does not cover damage to Clarinet’s property, “including any costs
or expenses incurred . . . for repair, replacement, . . . or maintenance of such property
for any reason, including prevention of injury to a person or damage to another’s
property.” (Emphasis added). Clarinet’s entire argument is based on the premise that
Essex must cover the expenses Clarinet incurred in stabilizing and ultimately
demolishing the Switzer building because these expenses were necessary to prevent
further injury to persons and property. Yet, the policy explicitly excludes such
expenses. Clarinet’s argument therefore fails.
Citing a case interpreting a similar provision under New York law, Clarinet
argues Essex is responsible to cover any of Clarinet’s expenses that were “necessary
to stop ongoing and imminent damage to property belonging to another.” Castle Vill.
Owners Corp. v. Greater N.Y. Mut. Ins. Co., 64 A.D.3d 44, 50 (N.Y. App. Div. 2009).
Clarinet contends Castle Village also describes the law in Missouri, but cites no
Missouri case in support of its argument.2 Under Missouri law, “‘where [an]
2Our decision in Slay Warehousing Co. v. Reliance Ins. Co., 471 F.2d 1364 (8th
Cir. 1973), discussed below, is not to the contrary. The policy in Slay Warehousing
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insurance polic[y is] unambiguous, [it] will be enforced as written.’” Todd, 223
S.W.3d at 160 (quoting Rodriguez v. Gen. Accident Ins. Co. of Am., 808 S.W.2d 379,
382 (Mo. 1991) (en banc)). The Essex policy patently excludes such repairs, even
when undertaken to prevent harm to third parties or property. We will not ignore the
plain language of the policy.
Clarinet also relies upon Slay Warehousing Co. v. Reliance Ins. Co., 471 F.2d
1364 (8th Cir. 1973), an Eighth Circuit case presumably applying Missouri law. See
id. at 1366 n.3. In Slay Warehousing, “[t]he primary issue [was] whether the insurer
[was] liable [under an inland marine policy warehousemen endorsement 3
] for
expenses incurred by [the insured] in taking reasonable means to protect chemicals
stored in [the insured’s] warehouse from damage due to exposure following the
collapse of [a] warehouse wall.” Id. at 1365. The policy at issue expressly required
the insured to “take all reasonable means to protect, safeguard and salvage the
[covered] property.” Id. at 1365. We held that the policy obligated the insurer to pay,
recognizing “the obligation [of the insurer] to pay the expenses of protecting the
exposed [third party] property may arise from either the insurance agreement itself,
or an implied duty under the policy contract based upon general principles of law and
equity.” Id. at 1367-68 (internal citation omitted).
Slay Warehousing provides no help to Clarinet. Clarinet does not identify any
similar express language in the Essex policy, as is in the policy in Slay Warehousing,
requiring Clarinet to mitigate or prevent damages. Even assuming Clarinet had an
implied duty to mitigate or prevent damages, the Essex policy expressly placed the
did not have an owned property exclusion expressly making the insured liable for
repairs to the insured’s own property. See infra. at 6-7 & n.3.
3The agreement in Slay Warehousing required the insurance company to “pay
on behalf of the [in]sured all sums which the [in]sured shall become legally obligated
to pay by reason of liability imposed.” Id. at 1366.
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burden of such costs on Clarinet. Cf. Die-Cutting Diversified, Inc. v. United Nat’l Ins.
Co., 353 F. Supp. 2d 1053, 1058 (E.D. Mo. 2004) (distinguishing Slay Warehousing
because the policy in Slay Warehousing expressly required the insured to mitigate
damages, and finding the insurer was not required to cover the insured’s mitigation
expenses absent an express contractual duty to mitigate).
Because the owned property exclusion bars coverage in this case, the district
court properly granted summary judgment to Essex and denied relief to Clarinet.4
III. CONCLUSION
Anticipating the Supreme Court of Missouri’s interpretation, for the reasons
stated above, we affirm.
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4Because we hold the owned property exclusion applies, we need not consider
the effect of any other policy condition or exclusion, the city’s demolition order, or
whether the storm was an “occurrence” covered under the policy.
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