Grinnell Mut. Reinsurance Co. v. Schwieger

• Citation: 685 F.3d 697
• Decision Date: 16 August 2012
• Docket Number: No. 11–3084.,11–3084.
• Parties: GRINNELL MUTUAL REINSURANCE COMPANY, Appellant, v. Roger SCHWIEGER; Amy Streit, doing business as Schwieger Livestock; Bernell Voss, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

685 F.3d 697

GRINNELL MUTUAL REINSURANCE COMPANY, Appellant,

v.Roger SCHWIEGER; Amy Streit, doing business as Schwieger Livestock; Bernell Voss, Appellee.

No. 11–3084.

United States Court of Appeals,

Eighth Circuit.

Submitted: May 16, 2012.

Filed: July 16, 2012.

Rehearing Denied Aug. 16, 2012.

Curtis David Ruwe, argued, Elizabeth A. Jenson Prouty, on the brief, Minneapolis, MN, for appellant.

Matthew Thompson Nielsen, argued, Fairmont, MN, for appellee.

Before WOLLMAN, BEAM, and LOKEN, Circuit Judges.

WOLLMAN, Circuit Judge.

Grinnell Mutual Reinsurance Company (Grinnell) appeals the district court's order granting summary judgment to Roger Schwieger and Amy Streit, d/b/a Schwieger Livestock (Schwieger), and Bernell Voss, on Grinnell's declaratory judgment claim concerning coverage under a liability insurance policy. We reverse and remand.

I.

This declaratory judgment action concerns a controversy over the coverage limits of an insurance policy issued by Grinnell to Voss. Voss owns and operates a cattle feed lot in Jackson County, Minnesota, in which he feeds to market weight cattle owned by others. Voss entered into an oral contract with Schwieger, under the terms of which Voss agreed to feed and care for cattle owned by Schwieger until they reached a market weight of 1400 to 1500 pounds, in return for a yardage fee of 28 cents per day per head of cattle. In July 2008, Schwieger's cattle in Voss's care began to die in unusually high numbers. According to Voss, a typical death loss for cattle over the course of a year would be roughly three percent, which would have amounted to approximately forty cattle annually out of Schwieger's herd of 1400 head. During the summer of 2008, 125 to 130 of Schwieger's cattle died from Rumensin poisoning.¹ Many of the surviving cattle sustained a growth deficiency resulting from the Rumensin poisoning.

Schwieger brought suit in Minnesota state court, asserting claims against Voss for strict liability, breach of express and implied warranty, and negligence. Schwieger alleged that Voss failed to properly mix a commercially produced nutritional supplement when feeding it to the cattle, with the result that the cattle were exposed to Rumensin levels much greater than they could tolerate. Schwieger sought damages for his cattle's excess mortality rates and delayed growth in reaching market weight.

Voss submitted the complaint in the underlying action to Grinnell, his insurer. Voss's insurance policy with Grinnell included two parts: (1) the FARMATE policy, which provides first party property coverage, and (2) the FARM–GUARD policy, which provides liability coverage. The FARM–GUARD policy provides $1 million in coverage as follows:

LIABILITY TO PUBLIC—COVERAGE A

We will pay subject to the liability limits shown for LIABILITY TO PUBLIC COVERAGE and the terms of the policy all sums arising out of any one loss which any insured person becomes legally obligated to pay as damages because of bodily injury or property damage covered by this policy.

If a claim is made or suit is brought against any insured person for liability covered by this policy, we will defend the insured person. We will use our lawyers and bear the expense.

HOWEVER, WE WILL NOT DEFEND ANY SUIT AFTER OUR LIMIT OF LIABILITY FOR THIS COVERAGE HAS BEEN PAID. WE WILL DEFEND OR SETTLE ONLY IF COVERAGE EXISTS UNDER THE TERMS OF THIS POLICY.

FARM–GUARD Policy, at 3 (internal quotation marks omitted).

The policy contains the following relevant exclusions:

UNDER ANY OF THE COVERAGES

* * *

6. We do not cover bodily injury or property damage arising out of:

a. custom farming operations of any insured person if the total gross receipts from all custom farming exceed $2,000 in the twelve months of the prior calendar year.²

UNDER LIABILITY TO PUBLIC—COVERAGE A

* * *

2. We do not cover performance guarantees of crops or livestock.

* * *

5. We do not cover property damage to property rented to, leased to, occupied by, used by, or in the care, custody or control of any insured person or any persons living in the household of an insured person.

Id. at 5, 7 (internal quotation marks omitted).

Voss had purchased a Custom Feeding Endorsement, which modifies the FARM–GUARD policy as follows:

UNDER ANY OF THE COVERAGES

In consideration of the premium charged, exclusion 6.a. under this section of the policy does not apply if:

1) the bodily injury or property damage arises from the activities of care or raising of livestock or poultry by any insured person for any other person or organization in accordance with a written or oral agreement;

...

All other terms and provisions of the policy apply.

Custom Feeding Endorsement (internal quotation marks omitted).

Grinnell denied coverage for the loss of Schwieger's cattle and refused to defend or indemnify Voss in the case brought by Schwieger. Grinnell based the denial of coverage on Exclusion 5, the exclusion for damage to property in the “care, custody or control” of the insured.

Schwieger and Voss subsequently stipulated to a “Miller–Shugart Agreement,” which was approved by the Minnesota district court.³ As part of the agreement, Voss withdrew his answer to Schwieger's complaint and agreed that the Minnesota district court could enter default judgment against him in the underlying action. In exchange, Schwieger agreed not to execute the judgment against Voss personally, but rather reserved the right to execute the judgment against Grinnell. The Minnesota district court entered judgment against Voss in the amount of $1 million.

Grinnell then commenced this action against Schwieger and Voss in federal district court in Minnesota, seeking a declaratory judgment that the claims alleged in the underlying action are not covered under Voss's FARM–GUARD policy with Grinnell and that Grinnell therefore has no obligation to defend or indemnify Voss under the policy. The parties brought cross-motions for summary judgment asking the district court to determine as a matter of law whether Schwieger's claims alleged in the underlying action are covered under the policy. Schwieger argued that Voss had coverage for custom feeding operations under the Custom Feeding Endorsement because the endorsement superseded Exclusion 5 of the policy—the “care, custody or control” exclusion. Grinnell argued that the “care, custody or control” exclusion still applied because the Custom Feeding Endorsement provided that only Exclusion 6.a. did not apply, the endorsement did not refer to Exclusion 5, and the endorsement stated that all other policy provisions remained unchanged. The district court concluded that the claims were covered by the policy and granted Schwieger and Voss's motion for summary judgment.

II.

We “review de novo both the district court's grant of summary judgment and its interpretation of state insurance law,” Pioneer Indus. v. Hartford Fire Ins. Co., 639 F.3d 461, 465 (8th Cir.2011), “applying the same standards as the district court and viewing the evidence in the light most favorable to the nonmoving party.” Zike v. Advance Am., Cash Advance Ctrs. of Mo., Inc., 646 F.3d 504, 509 (8th Cir.2011) (quoting Travelers Prop. Cas. Co. of Am. v. Gen. Cas. Ins. Co., 465 F.3d 900, 903 (8th Cir.2006)). “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).

III.

There being no dispute about the facts, the only question to be answered is whether, as a matter of law, Schwieger's claims against Voss are covered under Grinnell's policy.

A. Applicable Minnesota Law

Under Minnesota law, interpretation of an insurance policy, including whether a contract is ambiguous and whether an exclusion is valid and enforceable, is a question of law to be decided by the court.⁴See Gen. Cas. Co. of Wis. v. Outdoor Concepts, 667 N.W.2d 441, 443 (Minn.Ct.App.2003) (noting that “[c]onstruction of an insurance policy involves a question of law”) (citation omitted); Warren v. Am. Family Mut. Ins. Co., 418 N.W.2d 526, 528 (Minn.Ct.App.1988) (noting that “[w]hether an insurance policy is ambiguous is a question of law”) (citation omitted); Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn.1998) (noting that “whether the exclusion is valid and enforceable” is “a question of law”) (citation omitted). When interpreting insurance policies, general principles of contract interpretation apply. See St. Paul Sch. Dist. v. Columbia Transit Corp., 321 N.W.2d 41, 45 (Minn.1982) (noting that “[s]ubject to the statutory law of the state, a policy of insurance is within the application of general principles of the law of contracts”) (citing Bobich v. Oja, 258 Minn. 287, 104 N.W.2d 19) (1960).

When the text of an insurance policy is unambiguous, “the language used must be given its usual and accepted meaning.” Bobich, 104 N.W.2d at 24 (citing Phil G. Ruvelson, Inc. v. St. Paul Fire & Marine Ins. Co., 235 Minn. 243, 50 N.W.2d 629 (1951)). When policy language is ambiguous, it “will be construed against the insurer according to the ‘reasonable expectations' of the insured.” Gen. Cas. Co. of Wis. v. Wozniak Travel, Inc., 762 N.W.2d 572, 575 (Minn.2009) (quoting Minn. Mining & Mfg. Co. v. Travelers Indem. Co., 457 N.W.2d 175, 179 (Minn.1990)). Insurance policy language is ambiguous if reasonably subject to more than one interpretation or if provisions irreconcilably conflict. Medica, Inc. v. Atl. Mut. Ins. Co., 566 N.W.2d 74, 77 (Minn.1997) (“Language in a policy is ambiguous if it is reasonably subject to more than one interpretation”) (citing Hammer v. Investors Life Ins. Co. of N. Am., 511 N.W.2d 6, 8 (Minn.1994)); Rusthoven v. Commercial Standard Ins. Co., 387 N.W.2d 642, 644–45 (Minn.1986) (concluding that “irreconcilably inconsistent” terms render insurance policy ambiguous).

“Exclusions in a policy or endorsements are as much a part of the contract as other parts thereof and must be...