Depositors Ins. Co. v. Ryan

• Decision Date: 06 January 2016
• Docket Number: Case No. 15-5516,Case No. 15-5507
• Parties: DEPOSITORS INSURANCE COMPANY, Plaintiff-Appellee, v. ESTATE OF TIMOTHY A. RYAN III & MARGARET JEAN RYAN, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

DEPOSITORS INSURANCE COMPANY, Plaintiff-Appellee, v. ESTATE OF TIMOTHY A. RYAN III & MARGARET JEAN RYAN, Defendants-Appellants.

Case No. 15-5507

Case No. 15-5516

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

January 6, 2016

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 16a0003n.06

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TENNESSEE

OPINION

BEFORE: SILER, MOORE, and GIBBONS, Circuit Judges.

JULIA SMITH GIBBONS, Circuit Judge. After Margaret Ryan was injured in a vehicle accident involving a car that her husband, Timothy Ryan, was driving, she sued the Estate of Timothy Ryan for damages. Depositors Insurance Company, through which Timothy Ryan had an automobile insurance policy, brought an action for a declaratory judgment, seeking to declare that a policy exclusion precluded coverage for Margaret Ryan. Margaret Ryan and the Estate (collectively, the appellants) appeal the district court's grant of Depositors' motion for judgment on the pleadings. Because the unambiguous language of the Policy precludes coverage for Margaret Ryan, and the three affirmative defenses she raises fail on the merits, we affirm the district court's judgment.

I.

On December 13, 2009, Timothy Ryan died in a car accident involving the vehicle he was driving. His passengers, his wife Margaret Ryan and their grandchildren, were injured in the accident. At the time of the accident, Timothy Ryan's insurance policy (the Policy) through Depositors Insurance Company (Depositors) was in effect. In a letter to Andrew Ryan—personal representative for his two children injured in the accident—dated October 21, 2010, Depositors advised him that there was "$5000 in available medical payments coverage under this policy that is available regardless of fault," and that the statute of limitations for his bodily injury claims would expire December 13, 2010. Letter to Andrew Ryan 1, ECF No. 38-2. Margaret Ryan was copied on this letter, but the letter references only her grandchildren's claims, not her own.

On December 1, 2010, Margaret Ryan and Andrew Ryan,¹ individually and as father and personal representative of the grandchildren, filed an action against the Estate of Timothy Ryan (the Estate) in state court, seeking damages for physical and emotional pain and suffering. Depositors provided legal representation to the Estate in the state court action but alleged that one of the Policy's exclusions (the Exclusion) precludes coverage for Margaret Ryan's injuries.

The Policy has a "Quick Reference" page that does not reference the Exclusion. Twice, however, in all capital letters, this page states "READ YOUR POLICY CAREFULLY." Insurance Policy 19, ECF No. 38-1.

The Policy provides, in relevant part:

PART A - LIABILITY COVERAGE

INSURING AGREEMENT

A. We will pay damages for "bodily injury" or "property damage" for which any "insured" becomes legally responsible because of an auto accident. Damages include pre-judgment interest awarded against the "insured." We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted. We have noduty to defend any suit or settle any claim for "bodily injury" or "property damage" not covered under this policy.

Insurance Policy 21. On the same page that provides this coverage, and on the subsequent page, exclusions are listed, but not the exclusion relevant to this appeal.

The policy later states, on a page entitled "CHANGES PROVISION," that "this policy contains all of the coverage agreements between you and us. Its terms may not be changed or waived except by an endorsement issued by us." Id. at 37.

At the end of the Policy is the Exclusion. On a page entitled "LIABILITY COVERAGE EXCLUSION ENDORSEMENT," it states:

LIABILITY COVERAGE

The following exclusion is added to Part A, Section A:

We do not provide Liability Coverage for any person for "bodily injury" to you or any "family member."

This endorsement must be attached to the Change Endorsement when issued after the policy is written.

Id. at 57. The Exclusion is located at the top of the page, in the same size font as the rest of the Policy. Also, the Exclusion is the only provision on the page. The endorsement number for the Exclusion, PP0326, is referenced on the "DECLARATIONS" page.

The "DEFINITIONS" section of the Policy contains the following relevant definitions:

A. Throughout this policy, "you" and "your" refer to:

1. The "named insured" shown in the Declarations; and

2. The spouse if a resident of the same household. . . .

F. "Family member" means a person related to you by blood, marriage or adoption who is a resident of your household. This includes a ward or foster child.

Id. at 20. Timothy Ryan and Margaret Ryan are both listed on the "DECLARATIONS" page as "named insured." Id. at 17.

In a letter to Margaret Ryan dated March 28, 2013, Depositors informed her that "even if you are successful in your claims against [the Estate], this insurance policy will provide no coverage or pay any judgment you might obtain against the estate." Letter to Margaret Ryan 2, ECF No. 38-3. On May 22, 2014, Depositors amended its claim under 28 U.S.C. § 2201 and Rules 15(a)(1)(B) and 57 of the Federal Rules of Civil Procedure, seeking a declaration that the Policy does not provide coverage for Margaret Ryan's injuries. Margaret Ryan and the Estate filed answers, raising the affirmative defenses of laches and waiver and estoppel, and asserting that the relevant exclusion is contrary to public policy² and that the Policy is a contract of adhesion. Depositors then moved for judgment on the pleadings. Margaret Ryan opposed the motion and the Estate adopted her brief in opposition.

The district court granted Depositors' motion. It concluded that the Exclusion is not ambiguous and that it is standard for insurance companies to provide coverage in one section and narrow it through an exclusion, as Depositors did here. Regarding the affirmative defenses, the court noted that the Ryans did not cite authority for their argument that Depositors' three-year delay was unreasonable. In addition, the court indicated that the Ryans alleged prejudice only to Margaret Ryan, not the Estate, so the laches defense did not apply. Regarding the waiver/estoppel defense, the court concluded that to succeed, Depositors would have had to make a misrepresentation to the Estate, not to Margaret Ryan, but also that the express terms of the Policy precluded application of the doctrine. Finally, the court concluded that the Policy's terms were not "oppressive or unconscionable," nor "beyond the reasonable expectations of an ordinary person," so the contract of adhesion defense also failed. Order 13-14, ECF No. 45.

The appellants filed timely notices of appeal.³

II.

We review a district court's grant of a motion for judgment on the pleadings under Rule 12(c) using the same de novo standard as a motion to dismiss under Rule 12(b)(6). Johnson v. Bredesen, 624 F.3d 742, 746 (6th Cir. 2010). A party's Rule 12(c) motion is properly granted "when no material issue of fact exists and the party making the motion is entitled to judgment as a matter of law." JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 582 (6th Cir. 2007) (quoting Paskvan v. City of Cleveland Civil Serv. Comm'n, 946 F.2d 1233, 1235 (6th Cir. 1991)).⁴ We will accept as true "all well-pleaded material allegations" of the opposing party. Johnson, 624 F.3d at 746 (quoting Tucker v. Middleburg-Legacy Place, LLC, 539 F.3d 545, 549 (6th Cir. 2008)). However, we "need not accept as true legal conclusions or unwarranted factual inferences." Winget, 510 F.3d at 581-82 (quoting Mixon v. Ohio, 193 F.3d 389, 400 (6th Cir. 1999)). Jurisdiction in this case is based on diversity of citizenship, so we apply Tennessee substantive law. See id. at 582 (citation omitted). We follow the decisions of the Tennessee Supreme Court, but unless that court would decide the issue differently, state appellate court decisions are persuasive. See Savedoff v. Access Grp., Inc., 524 F.3d 754, 762 (6th Cir. 2008); In re Dow Corning Corp., 419 F.3d 543, 549 (6th Cir. 2005).

III.

Appellants argue that the district court erred because it analyzed the affirmative defenses under a heightened pleading standard. The district court asserted that "a defendant's pleadingsmust contain sufficient facts to state a [defense] that is plausible on its face." Order 5 (alteration in original) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)) (internal quotation marks omitted). Nonetheless, the court did not limit its analysis to the statements contained in appellants' answers but rather analyzed the merits of the arguments presented in the briefs and concluded they lacked merit. It seems this circuit has not addressed the precise issue of whether the Twombly/Iqbal heightened pleading standard applies to affirmative defenses. But because the district court did not actually apply that standard to appellants' affirmative defenses, it is unnecessary for us to resolve this issue.

IV.

Next, appellants contend the Policy is ambiguous because of its structure. They point to several provisions that could be read to provide coverage, highlight the fact that the "Quick Reference" page at the beginning of the Policy does not include the Exclusion, and conclude "[f]iguratively, throughout this policy, it giveth, giveth, giveth . . . and then at the last page . . . taketh away." R. at 24, Appellant Br. 21.

Under Tennessee law, insurance contracts are governed by the same rules of construction as ordinary contracts. McKimm v. Bell, 790 S.W.2d 526, 527 (Tenn. 1990). They "must be interpreted fairly and reasonably, giving the language its usual and ordinary meaning." Travelers Indem. Co. of Am. v. Moore & Assocs., 216 S.W.3d 302, 306 (Tenn. 2007) (citation omitted). Provisions...