North Star Mut. Ins. Co. v. Miller
977 N.W.2d 195
Neb.2022Background
- Old Mill Bulk Foods operated a deli/grocery in a rented building that was destroyed by fire on July 2, 2018; it elected not to rebuild and sought a replacement premises.
- Miller Land Enterprises (owned by the Millers) purchased a defunct theater and leased it to Old Mill; substantial renovations (flooring, walls, electrical, plumbing, sinks, etc.) were required to convert it into a grocery.
- Old Mill’s North Star policy covered Business Personal Property and Business Income; North Star paid those claims but denied $159,878.53 Old Mill claimed under the policy’s “Extra Expense” coverage for conversion costs to the replacement premises.
- District court found the Extra Expense clause ambiguous, construed “to equip” narrowly (covering movable equipment but not structural/renovation work), awarded Old Mill $4,600 for a walk-in cooler, and granted only $5,000 of requested attorney fees.
- On appeal, the Nebraska Supreme Court held the Extra Expense language ambiguous but construed it in favor of the insured to include costs to make the replacement premises ready (electrical, plumbing, structural, materials); it reversed the district court on those items, affirmed as to the cooler, and vacated the attorney-fee award for reconsideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether “Extra Expense” phrase “costs to equip” covers conversion/renovation of replacement premises | “To equip” means “to make ready” or furnish for service; includes structural, electrical, plumbing, and materials needed to resume operations | Covers only relocation/operation costs and movable equipment; not building improvements or conversion work | Ambiguous; construed for insured — covers electrical, plumbing, structural work and materials for replacement premises (district court reversed on these items) |
| Whether the walk-in cooler is covered under Extra Expense | Cooler is a cost to equip and operate the replacement premises | (North Star) argued it should not be covered (cross-appeal) | No plain error in district court’s award for the walk-in cooler; affirmed |
| Whether the policy is ambiguous | Old Mill: ambiguous and should be read for insured | North Star: language is not ambiguous; limits coverage | Court found the provision ambiguous and resolved ambiguity in favor of Old Mill |
| Attorney fees under Neb. Rev. Stat. § 44-359 after insured prevails | Old Mill sought $33,797.99 in fees | North Star opposed full fee award | Trial court’s $5,000 award vacated; remanded for reconsideration in light of coverage ruling (trial court to reassess reasonable fees) |
Key Cases Cited
- Midwest Regional Allergy v. Cincinnati Ins. Co., 795 F.3d 853 (8th Cir. 2015) (Eighth Circuit construed an identical extra-expense clause to permit coverage of substantial installation/modification costs to house specialized equipment)
- Thompson v. Threshermen’s Mut. Ins. Co., 172 Wis. 2d 275 (Wis. Ct. App. 1992) (court found extra-expense clause ambiguous but limited coverage, declining to treat insurer as funding a new building)
- American Family Mut. Ins. Co. v. Hadley, 264 Neb. 435 (Neb. 2002) (principles on insurance-policy interpretation as a question of law)
- Young v. Midwest Family Mut. Ins. Co., 276 Neb. 206 (Neb. 2008) (application of Neb. Rev. Stat. § 44-359 and awarding attorney fees when insured prevails)
- State Farm Mut. Auto. Ins. Co. v. Selders, 189 Neb. 334 (Neb. 1972) (insurer’s declaratory action and insured’s entitlement to fees when prevailing)