Great Northwest Insurance Company v. Hector A. Campbell, Betty L. Campbell, ...

STATE OF MINNESOTA
IN COURT OF APPEALS
A23-0519

Great Northwest Insurance Company,
Appellant,

vs.

Hector A. Campbell,
Respondent,

Betty L. Campbell,
Defendant.

Filed February 5, 2024
Affirmed
Gaïtas, Judge

Ramsey County District Court
File No. 62-CV-22-6321

Christopher A. Wills, Rajkowski Hansmeier LTD, St. Cloud, Minnesota (for
appellant/cross-respondent)

Edward E. Beckmann, Beckmann Law Firm, LLC, Bloomington, Minnesota; and

Thomas J. Okoneski, Okoneski Law Firm, LLC, North St. Paul, Minnesota (for
respondent/cross-appellant)

Considered and decided by Gaïtas, Presiding Judge; Segal, Chief Judge; and Cleary,

Judge. ∗

SYLLABUS

Minnesota Statutes section 65A.10, subdivision 1 (2022), requires replacement cost

insurance to cover the cost of repairing any loss or damaged property in accordance with

∗
Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
the minimum state or local codes, which, “[i]n the case of a partial loss,” includes only “the

damaged portion of the property.” When an insurance policy covers the cost of replacing

damaged roof shingles, but the shingles cannot be replaced according to code unless repairs

are made to roof decking that was not damaged by the insured event, section 65A.10,

subdivision 1, requires the insurer to also cover the cost of repairing the roof decking.

OPINION

GAÏTAS, Judge

This appeal arises from a dispute regarding insurance coverage for roof repairs

following a hailstorm. Respondent and cross-appellant Hector A. Campbell owned a home

in St. Paul. Appellant and cross-respondent Great Northwest Insurance Company insured

Campbell’s home. The insurance policy covered direct physical loss or damage to “the

outer most layer of roof material.” During a May 2022 storm, hail damaged the shingles

on Campbell’s roof. Campbell reported the damage to Great Northwest. An adjuster

confirmed the damage, and Great Northwest approved removal and replacement of the

shingles.

When Campbell’s contractor removed the damaged shingles, the contractor

discovered that the roof decking—the wooden boards to which shingles are affixed—had

gaps exceeding one-fourth of an inch in some places. To comply with the shingle

manufacturer’s instructions and the state building code, the contractor was required to

repair the gaps before installing the shingles. The contractor placed oriented-strand-board

sheathing over the existing roof decking and installed the shingles on top of the sheathing.

2
Then, the contractor invoiced Great Northwest for the roof repairs, including charges for

the sheathing and the contractor’s overhead and profit.

Citing to the insurance policy, Great Northwest disclaimed coverage for the

sheathing and the contractor’s overhead and profit, and it ultimately brought a declaratory-

judgment action concerning its coverage obligations. The district court determined that

Minnesota Statutes section 65A.10, subdivision 1, required Great Northwest to cover the

cost of the sheathing but not the contractor’s overhead or profit.

We conclude that, under section 65A.10, subdivision 1, when a replacement-cost

policy covers damage to shingles, and the shingles can only be replaced according to code

if repairs are made to roof decking that was not damaged by the insured event, the insurer

must also cover repairs to the roof decking. However, Campbell has not shown that the

insurance policy violates the statute by excluding coverage for overhead and profit. We

therefore affirm.

FACTS

The facts here are undisputed. Great Northwest issued a homeowners’ insurance

policy to Campbell, which was in effect at the time of the hailstorm. 1 The policy included

a “Roof Damage Limitation Endorsement,” which states:

With respect to the roof of [the home] “we” will only
pay for direct physical loss or damage to the outer most layer
of roof material . . . .

There is no coverage for and “we” will not pay for tear
off, repair, removal, or replacement of any layer of roofing

1
Campbell’s wife, Betty L. Campbell, was also named as a defendant in the district court,
but she recently passed away and is not a party to this appeal.

3
 material, including “decking,” beneath the outermost layer.
This limitation applies even if the tear off, repair, removal, or
replacement of any layer of roofing material beneath the
outermost layer or “decking” is necessary to repair, remove, or
replace the outermost layer of roofing material. This limitation
also applies even if the tear off, repair, removal, or replacement
of any layer of roof material, including “decking,” other than
the outermost layer, is required by any law or ordinance,
including any building code.

“We” do pay for direct physical loss to “decking” below
all layers of roof material . . . .

....

Any part of the policy in conflict with this endorsement
has no effect, and shall not apply to any loss or damage to a
roof of [the home].

“Decking” is defined in the endorsement as “the wood, plywood, wood fiber, or other

material applied to the structure of a building or other structure and to which a roof

assembly is attached” and “does not include shingles of any type or other roof surfacing

material.”

Following the May 2022 hailstorm, an independent insurance adjuster retained by

Great Northwest inspected Campbell’s home and concluded that hail had damaged the

shingles on the roof. The roof decking of Campbell’s home was not damaged during the

hailstorm.

Great Northwest paid Campbell $9,599.22—the actual cash value of the loss minus

Campbell’s $1,000 deductible. The policy required Great Northwest to pay Campbell an

additional amount for the replacement cost value of the loss once the repairs were complete.

Great Northwest warned Campbell that, if his contractor’s estimate for repairing the

4
damage was higher than Great Northwest’s estimate, Campbell would be required to

resolve the difference with the claims adjuster before beginning any repairs.

There is no dispute that Campbell’s contractor could not install new shingles

without first repairing the decking. The state building code 2 requires contractors to follow

the instructions of the shingle manufacturer when installing new shingles. See Int’l Res.

Code § R905.1 (“Roof coverings shall be applied in accordance with the applicable

provisions of this section and the manufacturer’s installation instructions.”). 3 And the

shingle manufacturer instructed that the shingles could not be installed on decking with

2
For its building code, Minnesota has incorporated by reference the 2018 International
Building and Residential Codes. Minn. R. 1305.0011, subp. 1 (adopting the building code),
1309.0010, subp. 1 (adopting the residential code) (2021). The term “state building code”
therefore refers to the International Building Code and the International Residential Code,
subject to the exceptions, amendments, and qualifications to those codes as set forth in the
administrative rules. See generally Minn. R. chs. 1305, 1309 (2021) (amending certain
provisions of the International Building and Residential Codes). Chapter 9 of the
International Residential Code addresses “roof assemblies.” Int’l Res. Code §§ R901 to
R908 (Int’l Code Council 2018); see also Minn. R. 1309.0903, .0905 (amending sections
R903 and R905 of the Int’l Res. Code) (2021).
3
We note that Minn. R. 1309.0905 amends R905.1 of the International Residential Code,
but the amendment is not relevant to our analysis here.

5
gaps exceeding one-eighth of an inch. 4 As noted, there were gaps measuring one-fourth of

an inch in Campbell’s existing decking. 5

By placing sheathing over the existing decking, the contractor was able to install the

shingles according to the manufacturer’s instructions and in compliance with the state

building code. Campbell did not seek Great Northwest’s preapproval for the installation

of the sheathing.

After the contractor submitted its invoice to Great Northwest, which included

charges for installing the sheathing and for overhead and profit, Great Northwest emailed

the contractor, disclaiming coverage for these items. Great Northwest pointed out that the

Roof Damage Limitation Endorsement excluded coverage for “repair . . . or replacement

of any layer of roofing material, including ‘decking,’” that was not directly damaged. And

Great Northwest referenced another policy provision—an exclusion for overhead-and-

profit coverage—as the basis for disclaiming coverage for the contractor’s overhead and

profit charges. That exclusion provides: “Overhead and profit on the materials and labor

4
The manufacturer’s instructions state:

ROOF DECKS: Use minimum 3/8” (10mm) plywood or OSB
decking as recommended by APA-The Engineered Wood
Assn. Wood decks must be well-seasoned and supported
having a maximum 1/8” (3mm) spacing, using minimum
nominal 1” (25mm) thick lumber, a maximum 6” (152mm)
width, having adequate nail-holding capacity and a smooth
surface.
5
Great Northwest has not asserted that the contractor should have installed different
shingles.

6
associated with roofing or the roofing system will not be covered under this policy unless

the damage to the roof or roof system is a result of fire or lightning.”

After Great Northwest disclaimed coverage, Campbell sent Great Northwest a letter

asserting that the roof-damage endorsement and the overhead-and-profit exclusion violate

Minnesota Statutes section 65A.10, subdivision 1. Great Northwest brought a declaratory-

judgment action against Campbell to determine its coverage obligations, and then moved

for summary judgment. The district court denied the motion in part, determining that the

roof endorsement violated the statute. And the district court granted the motion in part,

determining that the overhead-and-profit exclusion did not implicate the statute.

Great Northwest appeals, challenging the district court’s partial denial of its motion

for summary judgment. Campbell filed a notice of related appeal challenging the partial

grant of summary judgment to Great Northwest.

ISSUES

I. Does Minnesota Statutes section 65A.10, subdivision 1, mandate coverage

for repairs to roof decking that are required by the state building code before damaged

shingles can be replaced?

II. Does the overhead-and-profit exclusion in Campbell’s homeowners’

insurance policy violate Minnesota Statutes section 65A.10, subdivision 1?

ANALYSIS

Appellate courts “review the grant of summary judgment de novo to determine

whether there are genuine issues of material fact and whether the district court erred in its

application of the law.” Montemayor v. Sebright Prods., Inc., 898 N.W.2d 623, 628 (Minn.

7
2017) (quotation omitted). Reviewing courts “view the evidence in the light most

favorable to the party against whom summary judgment was granted.” STAR Ctrs., Inc. v.

Faegre & Benson, L.L.P., 644 N.W.2d 72, 76-77 (Minn. 2002).

I. Under Minnesota Statutes section 65A.10, subdivision 1, Great Northwest must
cover the cost of bringing the roof decking into compliance with the state
building code.

Great Northwest argues that the Roof Damage Limitation Endorsement in

Campbell’s homeowners’ insurance policy clearly excludes coverage for repairing the

decking by installing sheathing. It further contends that the district court erred in

interpreting Minnesota Statutes section 65A.10, subdivision 1, to require coverage of the

sheathing notwithstanding the roof-damage endorsement.

A. The Roof Damage Limitation Endorsement in Campbell’s insurance
policy plainly excludes coverage for the sheathing.

We first consider whether the policy itself excludes coverage for the sheathing. An

appellate court reviews de novo the “interpretation of an insurance policy and the

application of the policy to the undisputed facts of a case.” Com. Bank v. W. Bend Mut.

Ins. Co., 870 N.W.2d 770, 773 (Minn. 2015).

The roof-damage endorsement excludes coverage for “tear off, repair, removal, or

replacement” of decking unless there is “direct physical loss” to the decking “below all

layers of roof material.” Furthermore, the roof-damage endorsement states that this

limitation applies “even if the tear off, repair, removal, or replacement” of decking “is

required by any law or ordinance, including any building code.”

8
 Campbell agrees that there was no direct damage to the decking of his home. But

he argues that the roof-damage endorsement does not exclude coverage of the sheathing

that the contractor installed over the decking. According to Campbell, the decking was not

“removed” or “replaced,” and the installation of the sheathing was not a “repair.”

The policy does not define the terms “remove,” “replace” or “repair.” “An

insurance policy must be construed as a whole, and unambiguous language must be given

its plain and ordinary meaning.” Midwest Fam. Mut. Ins. Co. v. Wolters, 831 N.W.2d 628,

636 (Minn. 2013) (quotation omitted). When a term is not defined in an insurance policy,

courts may rely on dictionary definitions to determine the plain and ordinary meaning of

the term. Russell v. Sentinel Ins. Co., 906 N.W.2d 543, 546 (Minn. App. 2018). One

dictionary’s definition of “repair” is “[t]o set right; remedy.” The American Heritage

Dictionary of the English Language 1488 (5th ed. 2018).

Using this definition, we conclude that the contractor’s installation of sheathing

constituted a repair to the decking. The contractor used sheathing to remedy the one-

fourth-of-an-inch gaps in order to install new shingles in compliance with the

manufacturer’s instructions and the state building code. Because the installation of

sheathing is a repair of the decking, and there was no “direct physical loss” to the decking

“below all layers of roof material,” coverage is excluded under the plain language of the

roof-damage endorsement.

9
 B. Notwithstanding the policy language, Minnesota law requires Great
Northwest to cover the cost of the sheathing.

Next, we address whether the district court erred in interpreting section 65A.10,

subdivision 1, to require coverage for the sheathing despite the roof-damage endorsement.

Section 65A.10, subdivision 1, states:

Subject to any applicable policy limits, where an insurer offers
replacement cost insurance . . . the insurance must cover the
cost of replacing, rebuilding, or repairing any loss or damaged
property in accordance with the minimum code as required by
state or local authorities . . . . In the case of a partial loss,
unless more extensive coverage is otherwise specified in the
policy, this coverage applies only to the damaged portion of
the property.

The parties agree, and the record demonstrates, that the policy provides

replacement-cost coverage and the state building code did not allow the replacement

shingles to be installed on Campbell’s existing roof decking. And there is no dispute that

the hailstorm caused a partial loss. But Great Northwest argues that it is not required by

section 65A.10, subdivision 1, to cover the cost of installing the sheathing because the

decking is not “the damaged portion of the property.”

The Minnesota Supreme Court recently interpreted the phrase “the damaged portion

of the property” as used in section 65A.10, subdivision 1. It determined in St. Matthews

Church of God & Christ v. State Farm Fire & Casualty Co. that this phrase is susceptible

of only one reasonable interpretation. 981 N.W.2d 760, 764 (Minn. 2022). According to

St. Matthews, the unambiguous statutory language means that an insurer’s “obligation to

bring the damaged portion of the property up to minimum code is limited to repairs

10
necessary to bring up to code that part of the property that was damaged in the insured

event.” Id. at 765.

Both Great Northwest and Campbell argue that this interpretation of section 65A.10,

subdivision 1, supports their respective positions. According to Great Northwest, the

decking was not part of the property that was damaged in the hailstorm—rather, only the

shingles were damaged. But Campbell contends that the roof was damaged, and the

decking is part of the roof.

We agree with Great Northwest that the damaged part of the property was the

shingles. However, we conclude that section 65A.10, subdivision 1, as interpreted by the

supreme court in St. Matthews, requires coverage of the sheathing. That is because, to

replace the damaged shingles in accordance with the state building code, the decking had

to be repaired. Thus, the sheathing was a repair to the decking that was part of the cost of

replacing the damaged shingles.

In St. Matthews, the supreme court acknowledged that considering whether section

65A.10, subdivision 1, requires coverage is “a fact-intensive inquiry.” Id. at 767-68. Our

decision in this case is guided by contrasting the factual circumstances in St. Matthews with

those here.

Not surprisingly for Minnesota, St. Matthews also involved storm damage to a

building. See id. at 761. A wind and hailstorm damaged drywall in St. Matthews’s church

in St. Paul, causing a partial loss. Id. at 763. St. Matthews’s insurance policy provided

replacement cost coverage for storm damage. Id. at 762. The insurer approved coverage

of the cost of repairing and replacing the drywall. Id. at 763. Once the drywall was

11
removed, it was discovered that the masonry behind the drywall was cracked. Id. Although

the storm did not damage the masonry, the city would not issue St. Matthews a permit to

replace the drywall unless repairs were also made to the masonry in order to “protect the

public health, safety and welfare in all structures and on all premises” under city ordinance.

Id. at 763, 764 n.3, 767 (quotation omitted). St. Matthews sought coverage for the masonry

repair, but its insurer denied coverage. Id. at 763.

Before the supreme court, St. Matthews argued that the denial of coverage violated

section 65A.10, subdivision 1. Id. at 766. St. Matthews contended that the damaged

portion of the property was the wall, which included both the masonry and the drywall. Id.

And because the city would not issue a permit authorizing repair of the drywall unless

St. Matthews also repaired the masonry, denial of coverage for that repair was contrary to

the statute. Id.

The supreme court disagreed. Id. at 766-67. For three reasons, it determined that

the insurer was not required to cover the repair of the masonry. First, the supreme court

observed that the insurer “fully covered the cost of replacing the drywall consistent with

any municipal codes related to the drywall.” Id. at 766. Second, it noted that “absent the

City’s requirement mandating that the masonry be brought up to code before repairing the

drywall,” the insurer had no “independent responsibility to pay for repairs to the masonry.”

Id. at 767. And third, the supreme court reasoned that the condition of the masonry did not

prevent the installation of the drywall. Id. It explained that, because “the drywall itself

could be completely replaced in compliance with the municipal code without making any

additional changes to other parts of the property,” the damaged portion of the property was

12
the drywall and not the masonry. Id. at 767 n.6. However, as to this third reason, the

supreme court observed that different factual circumstances could lead to different results.

For example, it postulated,

one could imagine a situation where a storm caused damage
to a section of aluminum wiring in a house. The insurer would
be required to replace that section of aluminum wiring and,
under section 65A.10, subdivision 1, if the building code
required the use of copper wiring, the insurer would have to
install copper wiring for the damaged section of the wiring. A
different question would arise under the rule we announce
today if the building code also prohibited the installation of
new wiring that resulted in a mixture of copper and aluminum
wiring; that prohibition might raise a different question of
whether section 65A.10, subdivision 1 would require
replacement of nondamaged aluminum wiring to comply with
the wiring provisions of the code.

Id.

Great Northwest argues that the supreme court’s rationale in St. Matthews directly

applies to the circumstances here. It analogizes the drywall and masonry in St. Matthews

to Campbell’s shingles and decking. And it contends that St. Matthews requires this court

to determine that section 65A.10, subdivision 1, does not require coverage of the sheathing

because the decking was not part of the damaged portion of Campbell’s property, which

was just shingles.

We reject Great Northwest’s comparison. Indeed, the circumstances here more

closely resemble those in the supreme court’s hypothetical concerning replacement of

nondamaged aluminum wiring to comply with code requirements. Although the shingles

were the damaged portion of Campbell’s property, it was not possible for a roofer to install

new shingles in accordance with the state building code unless the decking was first

13
repaired. The state building code requires shingles to be installed pursuant to the

manufacturer’s instructions. And the parties agree that those instructions necessitated the

repair of the decking. Thus, replacing the damaged shingles in accordance with the state

building code required both repair of the decking and new shingles.

Under section 65A.10, subdivision 1, which requires replacement cost insurance to

cover the cost of repairing any loss or damaged property in accordance with the minimum

state or local codes, the cost of repairing the damaged shingles in accordance with the state

building code included the cost of repairs to the decking required by the state building code.

Accordingly, Great Northwest was required to cover the cost of the sheathing, and the

district court did not err in denying Great Northwest’s motion for summary judgment in

part.

II. Campbell does not satisfy his burden of showing that the district court erred
by enforcing the overhead-and-profit exclusion in his homeowners’ insurance
policy.

Campbell argues that the district court erred in granting partial summary judgment

to Great Northwest. He contends that the policy’s exclusion of coverage for overhead and

profit violates Minnesota Statutes section 65A.10, subdivision 1.

As noted, that exclusion in Campbell’s policy precludes coverage for overhead and

profit on materials and labor for roofing unless the damage was caused by fire or lightning.

Of course, Campbell’s roof, which was damaged by a hailstorm, was not damaged by fire

or lightning. Thus, the district court concluded, the exclusion applies.

Campbell argues that the exclusion violates section 65A.10, subdivision 1.

According to Campbell, the statute “requires an insurance company to cover all costs

14
mandated by the building codes, not some costs.” He contends that “all” costs necessarily

include overhead and profit.

While a grant of summary judgment is reviewed de novo, Montemayor, 898 N.W.2d

at 628, Campbell has the burden to show that the district court erred by determining that

the exclusion does not violate section 65A.10; this court will not presume error, see

Midway Ctr. Assocs. v. Midway Ctr., Inc., 237 N.W.2d 76, 78 (Minn. 1975) (“[T]he burden

of showing error rests upon the one who relies upon it.” (quotation omitted)). For several

reasons, we conclude that he does not satisfy this burden. First, the plain language of

section 65A.10, subdivision 1, does not contain the language “all costs.” Second, Campbell

does not explain how the statutory language supports his argument. And finally, Campbell

provides no authority to support his argument. Because Campbell fails to show any error,

we conclude that the district court did not err in enforcing the overhead-and-profit

exclusion in the policy and affirm the partial grant of summary judgment to Great

Northwest.

DECISION

Although Campbell’s roof decking was not damaged by the hailstorm, Minnesota

Statutes section 65A.10, subdivision 1, requires Great Northwest to cover the cost of the

decking repair because the damaged shingles could not be replaced according to code

unless the decking was repaired. Stated otherwise, the repair to the decking was part of the

cost of replacing the damaged shingles. Thus, the district court did not err in denying Great

Northwest’s motion for summary judgment as to its claim regarding coverage of the

sheathing—which repaired the decking. Additionally, Campbell fails to show any error in

15
the district court’s determination regarding the enforceability of the policy’s overhead-and-

profit exclusion. We therefore conclude that the district court did not err in granting

summary judgment to Great Northwest as to that claim.

Affirmed.

16