Auto-owners Ins. Co. v. Munroe - ., 09-3427.

• Decision Date: 22 July 2010
• Docket Number: No. 09-3427.,09-3427.
• Citation: 614 F.3d 322
• Parties: AUTO-OWNERS INSURANCE COMPANY, Plaintiff-Appellee, v. Joshua M. MUNROE, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

614 F.3d 322

AUTO-OWNERS INSURANCE COMPANY, Plaintiff-Appellee,

v.Joshua M. MUNROE, et al., Defendants-Appellants.

No. 09-3427.

United States Court of Appeals,Seventh Circuit.

Argued Feb. 17, 2010.

Decided July 22, 2010.

Daniel R. Price, Attorney (argued), Wham & Wham, Centralia, IL, for Plaintiff-Appellee.

Joseph R. Dulle, Attorney (argued), Stone, Leyton & Gershman, St. Louis, MO, for Defendants-Appellants.

Before RIPPLE, MANION, and SYKES, Circuit Judges.

MANION, Circuit Judge.

After Joshua Munroe and his wife entered a settlement agreement that released those who allegedly caused a severe tractor-trailer accident from any individual liability above their liability insurance coverage, Auto-Owners Insurance Company brought a declaratory judgment action to establish that the insurance policy limited coverage to $1,000,000. The district court agreed with Auto-Owners and granted its motion for summary judgment. The Munroes appeal, arguing that the coverage limit was higher either under the terms of the policy or under minimum limits required by the Motor Carriers Act. Because the policy unambiguously limits coverage to $1,000,000 and the federal minimum limits are inapplicable here, we affirm.

I.

On November 6, 2006, Joshua Munroe sustained significant injuries when the tractor-trailer he was driving in the northbound lane of Illinois Route 1 in Edgar County, Illinois, struck the rear of a southbound tractor-trailer driven by Monty Murphy, and then careened into a fiery head-on collision with Roger Snyder's tractor-trailer, which was following close behind. Murphy had been attempting to pass yet another tractor-trailer, this one operated by Gerald Sturgeon. When he saw Munroe approaching, Murphy attempted to pull back into his own lane but could not completely clear Munroe's lane. Munroe was air-lifted from the scene. He suffered severe burns and broken bones throughout his body and incurred medical expenses in excess of $474,000.

All three southbound trucks were owned and operated by Wayne Wilkens Trucking and had been traveling in convoy. All were covered under a single insurance policy issued by Auto-Owners. The policy declarations listed each of the tractor-trailers (and many others), and each declaration specified a limit of $1,000,000 for each occurrence. The policy also contained a Combined Limit of Liability provision, which stated that the maximum total coverage was the $1,000,000 limit stated in the declarations, regardless of how many automobiles were listed in the declarations or involved in the accident.

Munroe and his wife sued Wilkens and the drivers of the tractor-trailers. They alleged that all three drivers acted negligently: Sturgeon by failing to yield and letting the second pass at a safe time and place, Murphy by passing when unsafe, and Snyder for following too closely and failing to avoid the head-on collision. All three tractor-trailers were allegedly exceeding the posted speed limit. Wilkens was allegedly negligent in hiring and training the drivers.

The Munroes entered a partial settlement agreement in which they agreed to release Wilkens and the drivers from any individual liability above their liability insurance coverage in exchange for $903,449.48, the remainder of the $1,000,000 coverage limit after property damage was paid to the owner of Munroe's tractor-trailer. The agreement acknowledged that Auto-Owners would seek a declaratory judgment that the limit of the liability insurance coverage under the policy was in fact $1,000,000. The Munroes reserved the right to proceed with their case if the court determined the coverage limit was greater than $1,000,000.

As anticipated, Auto-Owners brought the present suit for declaratory judgment against the Munroes. Both sides moved for summary judgment. The district court granted summary judgment to Auto-Owners, holding that the insurance policy unambiguously limited coverage to $1,000,000 for each occurrence and dismissing the Munroes' additional argument that federal law mandated at least $2.25 million insurance. The Munroes appeal.

II.

The Munroes advance two arguments. First, they argue that the Auto-Owners policy provided at least $3 million of coverage, either because each vehicle was subject to a separate $1,000,000 limit or because the accident constituted three separate occurrences, with a $1,000,000 limit each, due to the separate negligent acts of each of the drivers. Second, they argue that even if the policy is construed against them, federal law mandates at least $750,000 worth of insurance coverage for each vehicle and that we should read the policy as providing a minimum of $2.25 million coverage for this accident. We consider each argument in turn.

A.

We review the district court's grant of summary judgment, and its construction of the insurance policy, de novo. Ace Am. Ins. Co. v. RC2 Corp., 600 F.3d 763, 766 (7th Cir.2010). The parties agree that Illinois law governs the interpretation of the insurance policy in dispute. Like any contract, an insurance policy is construed according to the plain and ordinary meaning of its unambiguous terms. Nicor, Inc. v. Associated Elec. & Gas, 223 Ill.2d 407, 307 Ill.Dec. 626, 860 N.E.2d 280, 286 (2006). Ambiguity exists only where a term is susceptible to more than one reasonable interpretation. Id.

The insurance policy at issue in this case is not ambiguous. It provides up to $1,000,000 of coverage per occurrence for each insured vehicle. The policy contains a severability clause, which provides that the coverage applies separately to each person against whom a claim is made “except as to our limit of liability.” The “Combined Limit of Liability” provision, which replaces the limit of liability provision referenced in the severability clause, provides that the per-occurrence limit-$1,000,000-is the most that Auto-Owners will pay, “regardless of the number of automobiles shown in the Declarations ... or automobiles involved in the occurrence.” While the Munroes attempt to find ambiguity, including in the terms “automobiles” and “combined,” these contortions merit little discussion here: applied to the facts of this case, the unambiguous terms of the policy limit the coverage to $1,000,000 for each occurrence, notwithstanding the involvement of three Wilkens tractor-trailers.

Thus, the only question of any real substance is whether there was more than one “occurrence” here. The policy defines an occurrence using the same language that the Illinois courts have interpreted many times in the past: “an accident that results in bodily injury or property damage and includes, as one occurrence, all continuous or repeated exposure to substantially the same generally harmful conditions.”

The parties agree that Illinois has adopted the “cause theory” to determine the number of occurrences under an insurance policy for purposes of coverage limitations of deductibles. Under the cause theory, the number of occurrences is determined according to the number of “separate and intervening human acts” giving rise to the claims under the policy. Nicor, 307 Ill.Dec. 626, 860 N.E.2d at 294.

But the cause theory (like the opposing effect theory) answers a question that presupposes there are several discrete events. All of the Illinois cases applying the cause theory involve multiple discrete events rather than an uninterrupted continuum: the only question is whether all of the discrete events should be attributed to a common cause. Most recently, for instance, the Illinois Supreme Court concluded that the deaths of two boys due to negligently maintained property constituted two occurrences despite a common cause under an exception to the cause theory. Addison Ins. Co. v. Fay, 232 Ill.2d 446, 328 Ill.Dec. 858, 905 N.E.2d 747, 756 (2009). Previously, in Nicor, the court found that there were multiple occurrences when separate negligent acts of various employees caused nearly two hundred discrete exposures to mercury contamination. 307 Ill.Dec. 626, 860 N.E.2d at 286. Before Nicor, the Illinois Appellate Court's relevant decisions all involved multiple claims or injuries. For example, the negligent manufacture and sale of asbestos building materials gave rise to a single occurrence despite many claims of exposure. U.S. Gypsum Co. v. Admiral Ins. Co., 268 Ill.App.3d 598, 205 Ill.Dec. 619, 643 N.E.2d 1226, 1259 (1994). And a single trucker caused two “occurrences” when his separate act of negligence following an initial collision with his tractor-trailer caused a second collision five minutes later. Illinois Nat'l. Ins. Co. v. Szczepkowicz, 185 Ill.App.3d 1091, 134 Ill.Dec. 90, 542 N.E.2d 90, 91 (1989).

Whether there is a single continuous event or several discrete events will not always be obvious, but in this case we have a helpful guidance from Illinois Appellate Court precedent. In Szczepkowicz, a truck driver stopped his tractor-trailer in the middle of a state highway, blocking both northbound lanes. 134 Ill.Dec. 90, 542 N.E.2d at 91. An automobile struck the rear wheels of the tractor-trailer, and the driver then moved his vehicle forward enough to free up most of one lane, but failed to completely remove the vehicle from the travel lanes. Id. Five minutes later, a second vehicle traveling northbound smashed into the side of the tractor-trailer. Id. Lawsuits arose from both collisions and the truck's insurer sued for a declaratory judgment to establish its maximum liability. Id. The...