This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).




Robert A. Arnold, et al.,



State Farm Insurance Companies,


Filed December 8, 1998


Randall, Judge

Ramsey County District Court

File No. C6-97-6468

Thomas F. Ascher, Caldecott Wheeler Searles Daniels Forro Koepke & Ascher, P.L.C., 900 Lumber Exchange Building, 10 South Fifth Street, Minneapolis, MN 55402 (for appellants)

Peter B. Tiede, Murnane Conlin White & Brandt, 1800 Piper Jaffray Plaza, 444 Cedar Street, Saint Paul, MN 55101 (for respondent)

Considered and decided by Schumacher, Presiding Judge, Randall, Judge, and Short, Judge.



Appellants were insured by respondent State Farm Insurance Companies under a homeowners' policy and an umbrella policy. Appellants sold their home and the purchasers sued, claiming fraudulent, intentional and/or negligent concealment and/or failure to disclose material facts concerning the extent of damage by appellants' cats. State Farm refused to defend appellants, and appellants sued. The district court granted summary judgment in favor of State Farm, dismissing appellants' complaint on the basis that State Farm had no duty to defend. On appeal from the summary judgment, appellants argue that the umbrella policy required State Farm to defend and indemnify them against the purchasers' lawsuit. We affirm.


State Farm insured Robert and Dianne Arnold under two policies; a homeowners' policy and a personal liability umbrella policy. The Arnolds sold their home to the Sachses, who sued approximately one month later, claiming that the Arnolds had fraudulently, intentionally and/or negligently concealed and/or failed to disclose material facts concerning the existence of feline urine and resultant odors in the home.

The Arnolds tendered defense of the Sachses' lawsuit to State Farm, who denied coverage and refused to defend. The Arnolds hired an attorney and eventually settled the Sachses' lawsuit.

The Arnolds then sued State Farm, alleging that State Farm had breached its duties of defense and indemnification under the homeowners' and umbrella policies. Both parties moved for summary judgment, and the district court granted State Farm's motion, concluding that there was no coverage under the umbrella policy because the Sachses' claims of negligent misrepresentation did not allege an "accident" and because the alleged negligent misrepresentation did not cause property damage. The Arnolds have appealed from the district court's decisions regarding the umbrella policy; their entire appeal rests on that policy and they have waived any claims under the homeowners' policy.


On appeal from a summary judgment, we determine whether there are any genuine issues of material fact and whether the district court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990). We independently review questions of law. Hammer v. Investors Life Ins. Co., 511 N.W.2d 6, 8 (Minn. 1994). "Interpretation of an insurance policy, and its application to the facts of the case, are questions of law." Franklin v. Western Nat'l Mut. Ins. Co., 574 N.W.2d 405, 406 (Minn. 1998). "The existence of a legal duty to defend or indemnify is also a legal question, which this court reviews de novo." Id.

The duty to defend is broader than the duty to indemnify; an insurer must defend "when any part of the claim against the insured is arguably within the scope of protection afforded by the policy." Id. at 406-07. Even so, we agree with the district court that the facts as alleged in the Sachses' complaint do not come under any colorable indicia of coverage under the umbrella policy.

The umbrella policy provided that State Farm would defend and indemnify the Arnolds for a "loss" for which they were determined to be liable. The policy defined "loss" as an accident resulting in property damage. The Arnolds argue that the Sachses' complaint alleged a loss because the complaint alleged negligence -- i.e., an "accident" -- and because the Sachses alleged property damage.

The Sachses' complaint alleged that the Arnolds had "negligently omitted material facts concerning the condition of the subject property relating to a feline urine problem and feline urine odor" and had "negligently failed to disclose that information in order to induce the [Sachses] to purchase the subject property." The Sachses' claimed damages were for the Arnolds' alleged misrepresentations.

A claim for negligent misrepresentation requires that a pecuniary loss be caused by justifiable reliance on a statement. * * * Negligent misrepresentations cannot be "accidents" because the insured intends to induce reliance on the statement.

Tschimperle v. Aetna Cas. & Sur. Co., 529 N.W.2d 421, 424 (Minn. App. 1995), review denied (Minn. May 31, 1995). Whether intentional or negligent, a misrepresentation is not the type of loss contemplated by the term "accident" as used in the umbrella policy.

Further, even if we concluded that the Sachses based their claim for property damage on the existence of feline urine, rather than on negligent misrepresentation, the umbrella policy excluded coverage for property damage to the Arnolds' own property. An "owned property exclusion" bars coverage under a policy when an insured is seeking coverage for damage to property the insured owns at the time the policy is in effect. See Domtar, Inc. v. Niagara Fire Ins. Co., 563 N.W.2d 724, 734 (Minn. 1997) (stating that owned property exclusion did not apply where insured did not own the property at the time the defendant's insurance policies were in effect). The umbrella policy was in effect at the time the property was damaged by the Arnolds' cats. Thus, any property damage loss that occurred was to the Arnolds' own property. The Arnolds cannot claim coverage that they never had merely because they have now sold the house. We conclude that on each of the theories advanced by appellants, there was both no coverage under their homeowners' policy and no colorable claim obligating respondent to defend.