Noran Neurological v. Travelers Indemnity Company

Noran Neurological Clinic, P.A., (Noran) brought suit against its property
insurer, The Travelers Indemnity Company (Travelers), alleging breach of contract; a
deceptive trade practice in violation of Minn. Stat. §§ 325D.09-.16 (1995); and bad faith denial of coverage. Noran now appeals the district court's2 grant of summary
judgment in favor of Travelers, except for the bad faith denial of coverage claim which
is not at issue in this appeal. We affirm.

I.

Noran is a neurological medical clinic with its principal office located in south
Minneapolis. Noran's radiology department is located on the lower level of the building
and has large windows facing an open-to-the-sky, landscaped "atrium." From the
outside, the windows are nearly even with the ground. The base of the atrium is
approximately seven feet below street level. A drain, which is located in the southeast
corner of the atrium, leads to a catch basin and storm drain. On July 1, 1997,
Minneapolis received excessive rainfall occurring during a one-hour period. At some
point during the storm, the atrium filled with water comprised of rain falling on the
atrium and water flowing into the atrium from the nearby flooded street, causing at least
one of the clinic's windows to break and water to rush into the radiology department.
The water destroyed most of the office furniture, imaging equipment, and computers
located in the department. Noran believed that debris collected in the atrium, blocked
the atrium's drain, and culminated in the buildup of water breaking the window.

At the time of this incident, Noran owned a commercial property insurance
policy written by Travelers that provided coverage for physical loss or damage to the
clinic, subject to specified exclusions. Noran submitted a claim exceeding $1.6 million
under its insurance policy with Travelers, which Travelers denied pursuant to the
policy's surface water exclusion. This provision mandated that any loss caused either
directly or indirectly by surface water was excluded from coverage. Noran
subsequently filed suit, and the case was submitted on motions for summary judgment.

Noran argued that Travelers improperly denied coverage and asserted that
Travelers should have provided coverage consistent with the blocked drain exception
found within a subsection of the water exclusion provision of the policy. The district
court disagreed and held as a matter of law that the blocked drain exception was
inapplicable to Noran's loss, which was caused by surface water. The district court
also concluded that because Travelers' denial of coverage was justified by the policy
language, Noran's statutory claim necessarily failed. Noran now appeals.

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Court's opinion.

Affirmed.

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