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Smith v. State Farm Fire and Casualty Co.2/11/2003
Appellant State Farm Fire and Casualty Company challenges the district court's grant of summary judgment to respondent Joan F. Smith, arguing a business-purposes exclusion in Smith's homeowner's insurance policy precludes coverage for damage to a structure on her property. We reverse and remand.
FACTS
In June, 1997, Smith purchased residential property in Carver County, Minnesota, that included a home, two pole barns, and various other outbuildings. Smith purchased a homeowner's policy from State Farm. The policy provided coverage for"the dwelling" (the home) and"structures on the residence premises, separated from the dwelling by clear space," but excluded from coverage any non-dwelling structure"used in whole or in part for business purposes" or"rented or held for rental to a person not a tenant of the dwelling, unless used solely as a private garage." The policy was in effect at all times relevant to this dispute.
When Smith purchased the property, she continued the previous owner's practice of renting one pole barn to a neighbor for car storage. When the neighbor removed the cars in late 1997, a commercial marina rented both barns to store customer boats for the winter. Smith entered into a lease agreement that required the marina to separately insure the boats and its employees and release Smith from liability for any property damage or personal injury associated with the rental.
As part of her 1997 federal tax return, Smith filed a Schedule C-EZ ("Net Profit From Business") listing"property rental" as her"principal business or profession" and reporting $1,550"gross receipts from trade or business" and $250"deductible business expenses."
For the following three years, Smith rented the barns to commercial marinas for approximately $4,000 each winter. None of the marinas ever received keys to the barns, which remained locked throughout the winter. There is no evidence in the record that Smith notified State Farm, or that State Farm was otherwise aware, that she was renting space in the pole barns.
In February 2001, one pole barn collapsed, apparently due to snow and ice accumulation on its roof. Neither party has alleged that the roof collapse was in any way related to the presence of the boats inside the barn. Smith submitted a claim to State Farm for the loss of the barn. State Farm denied the claim on the grounds that the policy's business and rental exclusions precluded coverage because Smith was renting the barn for business purposes.
Smith brought suit seeking a declaratory judgment that State Farm was obligated to provide coverage. State Farm moved for summary judgment, arguing coverage was precluded under the policy because Smith was using the barn for business purposes and because Smith was renting the barn for use other than as a private garage.
The district court determined that Smith's rental conduct was governed by the policy's rental exclusion, rather than its general business exclusion,"regardless of whether or not [Smith's] actions could be construed as a'business.'" Applying the rental exclusion, the court concluded that because the marina was functionally using the barn as a private garage in which to store vehicles, Smith was entitled to coverage under the rental exclusion's private garage exception. The court granted summary judgment against State Farm.
ISSUE
Did the district court err by concluding that the rented pole barn was covered under the private garage exception to the rental exclusion in Smith's homeowner's policy?
ANALYSIS
We review a grant of summary judgment to determine"whether there are any genuine issu
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