Appeal from the United States District Court for the Eastern District of Missouri.
The opinion of the court was delivered by: Bye, Circuit Judge
Submitted: March 10, 2010
Before BYE, ARNOLD, and COLLOTON, Circuit Judges.
This appeal involves an insurance coverage dispute over the validity of an insurance policy AMCO Insurance Company issued to Beckon, Inc., insuring the latter's business operations as well as the building it occupied but did not own. The district court concluded the entire policy was void on the grounds Beckon lacked an insurable interest in the building. Beckon appeals the district court's grant of summary judgment in favor of AMCO. We reverse and remand for further proceedings.
Beckon is in the business of repairing industrial machines used in the beverage container industry. The company started in 1985. In its first several years, Beckon operated out of the garage of its owner, John Herbst. In September 1992, Beckon moved into a 22,000 square foot building located at 455 East Clinton Place in Kirkwood, Missouri (hereinafter the building).
The terms under which Beckon occupies the building are somewhat atypical. The building is owned by Rosalinda Rosemann, the widow of the founder of RotoDie Company, Inc. Roto-Die occupied the building pursuant to a twenty-year lease starting in 1977. In the fall of 1990, Roto-Die moved to a new location and vacated the building even though the twenty-year lease remained in effect. The lease required Roto-Die "to use reasonable diligence in the care and protection of said premises" and to keep the building "in good order and repair and free from any nuisance or filth upon or adjacent thereto." The lease allowed Roto-Die to sublet the building.
During the two years the building was vacant, it was vandalized. In a move that benefitted both companies, Roto-Die reached an oral agreement with Herbst to allow Beckon to occupy the building in exchange for acting as its caretaker, i.e., to maintain the building and prevent it from being vandalized. The agreement also required Beckon to pay the utilities for the building, which Beckon did, while Roto-Die continued to pay the real estate taxes and sewer bills. Roto-Die instructed Herbst to "treat the building as your own," or words to that effect. Among other things, Herbst understood this to mean he should insure the building, which he did, unaware that Roto-Die also continued to insure the building.
When Herbst inquired about purchasing the building, Roto-Die told him a sale was a possibility sometime in the future. While Herbst was not told as much, the building was never sold or formally leased to Beckon because Rosemann's interest in the building was limited to a life tenancy, and the remaindermen who would jointly own the building upon her death were embroiled in litigation.
After taking possession, Beckon treated the building as its own, making numerous improvements. Beckon enlarged and replaced the bay doors, remodeled the offices, remodeled the floors and bathrooms, changed the lighting, painted the building, expanded the mezzanine, covered the driveway with asphalt, and installed a large (five ton) hoist. Beckon was not reimbursed for these improvements.
Starting in 1992 and throughout its occupancy of the building, Beckon purchased insurance covering the building, the contents of the building, and its own business operations. In 2004, Beckon switched insurers because Zurich, its insurer at the time, determined Beckon's business operations did not fit within any of Zurich's underwriting programs. Beckon's insurance agent filed an online application with AMCO on Beckon's behalf. The underwriting report AMCO obtained while considering the application listed Beckon as a renter, i.e., "Rents 15,000 sq. ft. in one story brick building."
In October 2004, AMCO approved the application and issued a policy of insurance to Beckon. The policy insured Beckon against damage to the building and its contents, i.e., "business personal property." The policy listed various "Additional Coverages," for loss of business income, extra expenses, equipment breakdown, etc. Separate premiums were charged for the building and the business personal property.
AMCO renewed the policy for one-year terms in October 2005, and again in October 2006. Beckon paid all premiums.
Between1992 and 2006, Beckon had no insurance claims in connection with the building. Then, two events occurred within a span of months. On March 4, 2007, sparks from a welder operated by an independent contractor ignited some insulation inside the building and caused a fire. The fire damaged the work areas of the building, and damaged or destroyed many of the building's contents. For example, Beckon estimated damages of $18,000 alone to the five-ton hoist it had installed in the building. In order to carry on its business, Beckon rented space in another location in Fenton, Missouri, while the building was repaired. The cost of renting the temporary space in Fenton approached $10,000 per month. Beckon's temporary rental expenses continued for nearly two years until it was finally able to move back into the building in early 2009. On August 24, 2007, while Beckon waited for AMCO to respond to its fire claim, part of the building's roof blew off during a wind storm. Rain water damaged an interior office area. Beckon repaired the roof at a cost of approximately $35,000, and again reported the loss to AMCO.
Between the time of the fire and the wind storm, AMCO investigated Beckon's ownership interest in the building. After determining Beckon did not own the building, AMCO did not cancel the policy or claim it was void based on the misrepresentation of a material fact. Rather, on April 23, 2007, AMCO continued to provide insurance to Beckon, and issued a Change of Declarations Endorsement to the policy which added Rosemann and Roto-Die as additional insureds. AMCO charged Beckon an increased premium for adding the additional insureds, which Beckon paid.
AMCO failed to accept or deny Beckon's fire claim by September 14, 2007, the date it was required to do so under the terms of the policy (as extended by agreement of the parties). Finally, on October 1, 2007, AMCO denied Beckon's claim for the fire damage to the building on the grounds Beckon lacked an insurable interest in the building. On October 16, 2007, AMCO denied Beckon's claim for wind damage to the building on the same grounds. Later, on November 27, 2007, AMCO ...