Bjorneby v. Nodak Mutual Insurance Company, 2016 ND 142

Background

The Bjornebys, farmers, insured their potato operation with Nodak Mutual; Bryan Hurst was their insurance agent. A fire started in the potato washing facility on October 7, 2011, and smoke damaged potatoes stored in a separate building connected by flumes.
Prior to the fire the Bjornebys updated Hurst periodically with harvested potato counts; bin-capacity insurance (which would cover full storage capacity) was available but not used.
On the day of the fire Chris Bjorneby called Hurst to report additional potatoes; the parties disputed whether Hurst told him those additional potatoes were covered.
Nodak Mutual paid for certain losses but denied coverage for the potatoes reported on the day of the fire, arguing the known-loss doctrine barred coverage. The Bjornebys sued for breach of contract and alleged Hurst was negligent.
A jury returned a general verdict for the Bjornebys for $356,000. Nodak and Hurst moved for judgment as a matter of law or a new trial; the district court denied both motions. The defendants appealed and the Supreme Court of North Dakota affirmed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether potatoes reported after knowledge of the fire were uninsurable under the known-loss doctrine	Bjornebys argued coverage existed because damage was not substantially certain when they reported the potatoes	Nodak argued the known-loss doctrine bars coverage because Chris knew a fire was occurring when he reported additional potatoes	The court held factual dispute existed about whether loss was substantially certain, so judgment as a matter of law was improper
Whether the jury instruction on known-loss was erroneous	Bjornebys relied on given instruction that an insured with actual knowledge that a loss occurred or is substantially certain to occur cannot obtain coverage	Nodak argued the instruction misstated law and should have tracked N.D.C.C. § 26.1-29-11	Court found Nodak did not preserve the objection to the instruction; the instruction became law of the case
Whether Hurst was negligent as a matter of law	Bjornebys argued Hurst failed to follow instructions to insure all potatoes in storage	Hurst argued he acted in good faith and followed plaintiffs’ instructions; no breach as a matter of law	Court held evidence could support jury finding Hurst was negligent (e.g., failure to obtain bin-capacity coverage), so JMOL was improper
Whether the general verdict required a new trial for lack of allocation between defendants	Bjornebys did not demand special verdict form	Nodak argued inability to discern basis of liability warranted a new trial	Court applied limited review, upheld general verdict because either theory could support the verdict and parties failed to request special verdict

Key Cases Cited

Okken v. Okken, 325 N.W.2d 264 (N.D. 1982) (standard for judgment as a matter of law)
Minto Grain, LLC v. Tibert, 776 N.W.2d 549 (N.D. 2009) (appellate standard reviewing JMOL under N.D.R.Civ.P. 50)
Amyotte v. Rolette Cnty. Hous. Auth., 658 N.W.2d 324 (N.D. 2003) (jury-instruction preservation principles)
Rawlings v. Fruhwirth, 455 N.W.2d 574 (N.D. 1990) (agent’s duty of care and good-faith instruction)
Public Util. Dist. No. 1 v. International Ins. Co., 881 P.2d 1020 (Wash. 1994) (known-loss doctrine as question of fact)
Crawfordsville Square, LLC v. Monroe Guar. Ins. Co., 906 N.E.2d 934 (Ind. 2009) (definition of known-loss doctrine)
Sollin v. Wangler, 627 N.W.2d 159 (N.D. 2001) (requirement to object to jury instructions to preserve error)
Leingang v. George, 589 N.W.2d 585 (N.D. 1999) (preservation of jury-instruction objections)
Bakke v. D & A Landscaping Co., 820 N.W.2d 357 (N.D. 2012) (unchallenged instruction becomes law of the case)
Vanover v. Kansas City Life Ins. Co., 553 N.W.2d 192 (N.D. 1996) (limited review of jury findings)
Olander Contracting Co. v. Gail Wachter Invs., 643 N.W.2d 29 (N.D. 2002) (preference to uphold jury verdicts)
Wilson v. Gen. Motors Corp., 311 N.W.2d 10 (N.D. 1981) (standard of review for new-trial denials)