Minges Creek, L.L.C. v. Royal Ins. Co.

• Citation: 442 F.3d 953
• Decision Date: 06 April 2006
• Docket Number: No. 05-1313.,05-1313.
• Parties: MINGES CREEK, L.L.C., Plaintiff-Appellee, v. ROYAL INSURANCE COMPANY OF AMERICA, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

442 F.3d 953

MINGES CREEK, L.L.C., Plaintiff-Appellee, v. ROYAL INSURANCE COMPANY OF AMERICA, Defendant-Appellant.

No. 05-1313.

United States Court of Appeals, Sixth Circuit.

Argued: March 16, 2006.

Decided and Filed: April 6, 2006.

ARGUED: James N. McNally, Sommers Schwartz, Southfield, Michigan, for Appellant. Rick J. Patterson, Potter, DeAgostino, O'Dea & Patterson, Auburn Hills, Michigan, for Appellee. ON BRIEF: James N. McNally, Leonard B. Schwartz, Sommers Schwartz, Southfield, Michigan, for Appellant. Rick J. Patterson, Steven M. Potter, Potter, DeAgostino, O'Dea & Patterson, Auburn Hills, Michigan, for Appellee.

Before: DAUGHTREY and GILMAN, Circuit Judges; RUSSELL, District Judge.^*

OPINION

RONALD LEE GILMAN, Circuit Judge.

A customer slipped and fell on an icy sidewalk upon exiting a card store in the Minges Brook Mall, a shopping center owned by Minges Creek, L.L.C. Chubb Insurance Company, the insurer of the mall's common areas, paid the settlement cost and the associated litigation expenses resulting from the customer's lawsuit. Minges Creek then sued Royal Insurance Company of America, the insurer of the card store, for indemnification on the basis that Minges Creek was named as an additional insured under the card store's liability policy with Royal. Summary judgment was granted in favor of Minges Creek. For the reasons set forth below, we REVERSE the judgment of the district court and REMAND the case with instructions for the district court to dismiss the complaint with prejudice.

I. BACKGROUND

Minges Creek is the owner of the Minges Brook Mall located in Battle Creek, Michigan. In December of 1989, Minges Creek leased a portion of its property to the "1/2 Off Card Shop" (Card Shop). The "leased premises" were defined in the lease as the 6,796 square feet shown on the site plan, which clearly indicated that the leased premises were limited to the interior of the store and did not include the exterior walls, the roof, or the surrounding land. (Lease § 1.01) Common areas, including the parking lots, roadways, and pedestrian sidewalks, were provided by Minges Creek "for the convenience and use of the tenants of the Shopping Center, and their respective subtenants, agents, employees, customers, invitees, and any other licensees of Landlord." (Lease § 7.03)

The lease also set forth the Card Shop's insurance obligations as a tenant:

Tenant shall, during the entire term hereof, keep in full force and effect a policy of public liability and property damage insurance with respect to the leased premises, and the business operated by Tenant and any subtenants of Tenant in the leased premises .... The policy shall name Landlord, any other parties in interest designated by Landlord, and Tenant as insured ....

(Lease § 10.01) (Emphasis added.)

Pursuant to the Card Shop's lease obligation, Royal issued a general liability policy to the Card Shop to cover its Minges Brook Mall store and several other Card Shop locations. An addendum to Royal's policy with the Card Shop defined additional insureds as follows:

The following is added to SECTION II-WHO IS AN INSURED:

5. a. Any person or organization you are required by a written contract, agreement or permit to name as an insured is an insured but only with respect to liability arising out of:

...

2. Premises owned or used by you.

(Royal Ins. Policy "Enhancement Endorsement" § 12).

The Card Shop, along with all of the other tenants of the Minges Brook Mall, was also required by the lease to pay a proportionate share of Minges Creek's cost of maintaining and insuring the common areas of the mall. Minges Creek's insurance policy covering the common areas was issued by Chubb.

The underlying accident that gave rise to the insurance dispute in this case occurred in March of 1999 when Peggy Lampert, a customer of the Card Shop, slipped and fell on ice while walking to her car from the store. Lampert sued Minges Creek, the Card Shop, and a snow removal contractor in Michigan state court. Her complaint alleged as follows:

The accident occurred when Plaintiff Peggy Lampert, as a customer of the ½ Off Card Shop, Inc., began walking toward her car which was located in Defendant Minges Creek LLC's parking lot, and while in the process of leaving the store, slipped and fell on ice, causing her to sustain very serious personal injuries and damages.

The state trial court dismissed the Card Shop from Lampert's suit because the Card Shop did not "legally possess[] the sidewalk area where the fall occurred." Minges Creek was found to have "exclusive dominion and control over maintaining the entire parking area including the sidewalks in front of the ½ Off Card Shop." Following the Card Shop's dismissal, Minges Creek settled the lawsuit with Lampert for $210,000. Chubb, as Minges Creek's insurer, covered this cost as well as the expense of defending against Lampert's claim.

Minges Creek then filed suit against Royal, the Card Shop's insurer. The suit was removed to federal court based on diversity of citizenship. Alleging that it was an additional insured under the Card Shop's policy, Minges Creek sought reimbursement for the $210,000 settlement cost and approximately $26,700 in expenses that were incurred in defending against Lampert's claims. Royal's insurance contract promised to pay all insureds "those sums that the insured becomes legally obligated to pay ... [and] defend the insured against any `suit' seeking [bodily injury or property] damages."

After both parties moved for summary judgment, the district court granted judgment in favor of Minges Creek. It held that Minges Creek was an additional insured under the Card Shop's insurance policy issued by Royal and that the accident occurred on premises used by the Card Shop. Thus, even though the Card Shop did not control the common area where the accident occurred, and even though it was dismissed from Lampert's lawsuit, the Card Shop's insurance policy was deemed to cover the claim. According to the district court, this obligated Royal to defend and indemnify Minges Creek. The district court therefore ordered Royal to reimburse Minges Creek for the settlement cost and the litigation expenses for the underlying litigation with Lampert. Royal now appeals.

II. ANALYSIS

A. Standard of review

The district court's grant of summary judgment is reviewed de novo. Int'l Union v. Cummins, Inc., 434 F.3d 478, 483 (6th Cir.2006). Summary judgment is proper where there exists no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In considering a motion for summary judgment, the district court must construe the evidence and draw all reasonable inferences in favor of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The central issue is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

B. Applicable law

Both parties agree that because Michigan is the forum state and the place where Royal's insurance policy was written, Michigan law governs the interpretation of the insurance policy. See Himmel v. Ford Motor Co., 342 F.3d 593, 598 (6th Cir.2003) (applying the law of the forum state in diversity cases). The interpretation of an insurance policy is a question of law that is reviewed de novo. Schmalfeldt v. N. Pointe Ins. Co., 469 Mich. 422, 670 N.W.2d 651, 653 (2003).

An insurance policy is interpreted in accordance with its terms. Twichel v. MIC Gen. Ins. Corp., 469 Mich. 524, 676 N.W.2d 616, 622 (2004) (holding that, based on the clear language of the policy at issue, a driver was not covered by his grandfather's insurance). Moreover, a party's "reasonable expectations cannot super[c]ede the clear language of a contract." Wilkie v. Auto-Owners Ins. Co., 469 Mich. 41, 664 N.W.2d 776, 786 (2003) (quotation marks omitted).

Insurance policies must be read as a whole, giving meaning to all of their terms. Auto-Owners Ins. Co. v. Harrington, 455 Mich. 377, 565 N.W.2d 839, 841 (1997). If a term is not defined in an insurance policy, the term is "accorded its commonly understood meaning." Twichel, 676 N.W.2d at 622. The Michigan Supreme Court employs dictionary definitions to interpret nontechnical terms, but uses specialized dictionaries and caselaw to interpret legal terms of art. See id. (referencing dictionary definitions to interpret the term "owner"); Henderson v. State Farm Fire & Cas. Co., 460 Mich. 348, 596 N.W.2d 190, 194 (1999) (distinguishing between legal terms of art, like "equitable remedy," which should be interpreted in accordance with their common law understandings, and colloquialisms, which should be given their ordinary meaning). If language in an insurance policy can reasonably be interpreted in more than one way, the policy will be interpreted against the insurer. Wilkie, 664 N.W.2d at 786-87. Courts, however, should not "create ambiguity in an insurance policy where the terms of the contract are clear and precise." Henderson, 596 N.W.2d at 193. Unambiguous terms "must be enforced as written," and insurers are not liable for risks that they do not assume. Id.

In the present case, the district court held Royal liable for both the expense of litigating Lampert's suit and the ultimate settlement cost. It thus held that Royal had both a duty to defend and a duty to indemnify Minges Creek, a named insured under Royal's policy with the Card Shop. According to the Michigan Supreme Court, "the duty to defend is broader than the duty to indemnify and is properly invoked when claims are even arguably within coverage." Polkow v. Citizens Ins. Co., 438 Mich. 174, 476 N.W.2d 382, 384 (1991) (quotation marks omitted). Although all doubts regarding whether the...