Auto-Owners Ins. Co. v. Kammerer

• Decision Date: 26 April 2019
• Docket Number: File No. 18-cv-02143 (ECT/SER)
• Citation: 386 F.Supp.3d 1030
• Parties: AUTO-OWNERS INSURANCE COMPANY, Plaintiff, v. Laura KAMMERER and Frank Kammerer, Defendants, and J.M., a minor, through her mother and natural guardian, Jacqueline Macha, Intervenor Defendant.
• Court: U.S. District Court — District of Minnesota

386 F.Supp.3d 1030

AUTO-OWNERS INSURANCE COMPANY, Plaintiff,

v. Laura KAMMERER and Frank Kammerer, Defendants,andJ.M., a minor, through her mother and natural guardian, Jacqueline Macha, Intervenor Defendant.

File No. 18-cv-02143 (ECT/SER)

United States District Court, D. Minnesota.

Signed April 26, 2019

Gerald H. Bren and Olivia A. Moe, Fisher Bren & Sheridan, LLP, Minneapolis, MN, for plaintiff Auto-Owners Insurance Company.

Matthew J. Barber, Alicia N. Sieben, James S. Ballentine, Schwebel Goetz & Sieben, P.A., Minneapolis, MN, for intervenor defendant J.M.

OPINION AND ORDER

Eric C. Tostrud, United States District Court Judge

This case is about insurance coverage for injuries from a dog bite. The answer to the coverage question depends on whether a term appearing in the relevant policy in bold text—"insured "—means the same thing or something different when it appears in the policy in plain text—"insured." Plaintiff Auto-Owners Insurance Company says the word unambiguously has the same meaning regardless of whether it appears in bold or plain text and that, as a result, there is no coverage for dog-bite injuries sustained by intervenor defendant J.M. J.M. says the opposite, and she has intervened and moved to dismiss Auto-Owners' complaint under Federal Rule of Civil Procedure 12(b)(6). J.M.'s motion will be granted because the Auto-Owners policy is at least ambiguous about whether it uses the word "insured" to mean different things depending on whether it appears in bold or regular text, and Minnesota law requires that ambiguity to be construed against Auto-Owners. Auto-Owners' complaint for declaratory relief based on its interpretation of the policy is therefore implausible.

I

The facts of this case are few and straightforward. Defendants Laura and Frank Kammerer asked J.M. to care for their two dogs while the Kammerers were away. Compl. ¶¶ 8–11 [ECF No. 1]. J.M. was caring for the dogs in the Kammerers' home on December 31, 2016, when one of them bit her multiple times, causing injuries. Id. ¶¶ 12–13. At that time, the Kammerers were covered under the Auto-Owners homeowners policy, and the policy provided personal-liability protection. Id. Ex. B ("Policy") at 9, 25–30 [ECF No. 1-2].

The Kammerers notified Auto-Owners of the incident on January 3, 2017. Compl. ¶ 13; id. Ex. A [ECF No. 1-1]. On April 26, 2018, J.M.'s attorney sent a demand letter to Auto-Owners. Id. ¶ 14. Auto-Owners sent the Kammerers a "reservation-of-rights" letter on June 28, 2018. Id. Ex. C [ECF No. 1-3]. In the letter, Auto-Owners wrote that it would defend the Kammerers against J.M.'s claims subject to a reservation of rights but added: "Please be advised that the Auto-Owners Policy does not apply to ‘bodily injury or personal injury to any insured.’ If Claimant is an insured under the Policy, then no coverage exists under the Policy." Id. at 1, 6 (bold text in original). (The letter's reference to "insured" in plain text in the first quoted sentence followed by its reference to "insured " in bold text in the second presaged the central issue in this case.) Auto-Owners filed this case in July 2018 against the Kammerers seeking a declaration under the federal Declaratory Judgments Act, 28 U.S.C. § 2201, that the policy does not cover J.M.'s claim.¹ See Compl. ¶¶ 18–22; id. at 6. J.M. intervened by stipulation and then moved to dismiss for failure to state a claim.

II

A

Several settled legal rules govern consideration of J.M.'s Rule 12(b)(6) motion and interpretation of the policy. The complaint's factual allegations and reasonable inferences from those allegations must be accepted as true. Gorog v. Best Buy Co. , 760 F.3d 787, 792 (8th Cir. 2014) (citation omitted). The complaint must "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Parties agree that Minnesota law controls interpretation of the policy, and this makes sense. The case is in federal court on the basis of diversity. Erie R. Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The policy was issued in Minnesota, and no relevant fact is alleged to have occurred outside Minnesota. Under Minnesota law, "[g]eneral principles of contract interpretation apply to insurance policies." Carlson v. Allstate Ins. Co. , 749 N.W.2d 41, 45 (Minn. 2008) (citation omitted). "Interpretation of an insurance policy is a question of law. Unambiguous language is given its plain and ordinary meaning. Ambiguous language is construed against the insurer. While the insured bears the initial burden of demonstrating coverage, the insurer carries the burden of establishing the applicability of exclusions." C.S. McCrossan Inc. v. Fed. Ins. Co. , No. 16-cv-3379, 2018 WL 2180256, at *7 (D. Minn. Mar. 29, 2018) (cleaned up) (quoting and citing Travelers Indem. Co. v. Bloomington Steel & Supply Co. , 718 N.W.2d 888, 894 (Minn. 2006) ); see also 3M Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh , 858 F.3d 561, 566 (8th Cir. 2017).

B

There is no dispute about which parts of the policy matter. The Parties identify the same four provisions in their briefs:

• First , the policy has a "DEFINITIONS " section that begins with this two-sentence explanation: "To understand this policy, you must understand the meaning of the following words. These words appear in bold face type whenever used in this policy and endorsements attached to this policy." Policy at 14.

• Second , relative to "Coverage E – Personal Liability ," the policy says: "We will pay all sums any insured becomes legally obligated to pay as damages because of or arising out of bodily injury ... caused by an occurrence to which this coverage applies." Id. at 25.

• Third , for purposes of "Personal Liability " coverage, the policy defines "insured " to mean, not just the Kammerers, but also "any person ... legally responsible for animals ... owned by [the Kammerers]. However, we will cover that person ... only with respect to those animals." Id. at 14–15.

• Fourth , the policy contains an exclusion—known commonly as an "intra-insured" exclusion—that reads: "Coverage E – Personal Liability does not apply ... to bodily injury ... to any insured." Id. at 27–28. (Note that "insured" appears in this exclusion in plain text, and that creates the issue.)

See Mem. in Supp. at 2–3 [ECF No. 15]; Mem. in Opp'n at 4–5 [ECF No. 18].

The coverage issue in this case—and the scope of the Parties' dispute—is narrow. All agree J.M. sustained a "bodily injury " caused by an "occurrence " within the policy's coverage. Everyone also agrees that J.M. was "legally responsible" for the Kammerers' two dogs when she cared for them, making her an "insured " under the policy's "Personal Liability " coverage, but "only with respect to those animals."² The Parties disagree—and the dispositive issue in this case is—whether J.M. is an "insured" for purposes of the "Personal Liability " intra-insured exclusion. Auto-Owners argues that J.M. "is an insured as used in [the] exclusion because the Policy unambiguously defines insured to include any person legally responsible for the Kammerers' covered animals." Mem. in Opp'n at 2. Auto-Owners describes the word's appearance in the exclusion in plain text as "what appears to be [a] typographical error" and argues "that typographical detail does not change the meaning of the defined term under the Policy." Id. J.M. argues that the policy unambiguously intended the word "insured" to have different meanings depending on whether it appeared in bold or plain text. Mem. in Supp. at 1–3.

C

The policy reasonably may be construed to cover J.M.'s claim. The "DEFINITIONS " section says explicitly that words in "bold face type " have the policy-specific meanings given them in that section. Policy at 14. The necessary corollary is that words in the policy that are not in "bold face type "—even words defined by the DEFINITIONS section—do not have a policy-specific meaning. Authorities on this precise point seem scarce, but some conclude persuasively that words appearing in plain text unambiguously do not share a policy-specific or specialized meaning assigned to words in bold text. See, e.g. , Certain Underwriters at Lloyd's v. LM Ericsson Telefon, AB , 272 S.W.3d 691, 696–97 (Tex. Ct. App. 2008) ("But we do not think any reasonable reader would construe ‘you ’ to have the meaning assigned to ‘you.’ They are the same words, but they are, in effect, different terms." (citations omitted)); State Farm Mut. Auto. Ins. Co. v. Stein , 940 P.2d 384, 388 (Colo. 1997) (en banc) ("In contrast, ‘pedestrian’ as used in the anti-stacking provision within the UM coverage section is not in bold italic typeface. Such contrast indicates that the parties only intended the technical definition of ‘pedestrian’ to apply in the No-Fault section where it does appear in bold italics, and its ordinary meaning to apply in the UM section."); Silverman v. Econ. Fire & Cas. Co. , 272 Ill.App.3d 490, 208 Ill.Dec. 909, 650 N.E.2d 603, 605 (1995) ("We reject Economy's argument that ‘loss’ has the same meaning everywhere it appears in the policy, boldface type or not. The policy carefully and sensibly limits the applicability of the defined ‘loss .’ "); see also Antonin Scalia and Brian A. Garner, Reading Law: The Interpretation of Legal Texts 225–27 (2012) (advising that "[d]efinition sections and interpretation clauses are to be carefully followed," and observing that "text-specific definitions" ordinarily are applied "with rigor"). But at least one court has concluded that this distinction in meaning is not so obvious:

[W]here a term that is defined by the policy when appearing in bold face type appears in another face type ... the term is ambiguous because it might be read to be defined as it would be if in bold face type, or it might be read to be defined in the way it is in common usage.

City of Boise v. Planet Ins. Co. , 126 Idaho 51, 878 P.2d 750, 754 (1994).

Auto-Owners...