Palmer v. Illinois Farmers Ins. Co.

Decision Date02 February 2012
Docket Number11–2065,11–2067.,11–2064,Nos. 11–2061,s. 11–2061
PartiesSharon K. PALMER, on behalf of herself and all others similarly situated, Appellant, v. ILLINOIS FARMERS INSURANCE COMPANY, Appellee.Sandra Kluessendorf, on behalf of herself and all others similarly situated, Appellant, v. Progressive Preferred Insurance Company, Appellee.Michael Hara, on behalf of himself and all others similarly situated, Appellant, v. USAA Casualty Insurance Company, Appellee.David Johnson, on behalf of himself and all others similarly situated, Appellant, v. American Family Mutual Insurance Company, Appellee.
CourtU.S. Court of Appeals — Eighth Circuit

OPINION TEXT STARTS HERE

Ira Neil Richards, argued, Kenneth I. Trujillo, Jennifer Agnew, Gary M. Goldstein, Trujillo & Rodriguez, Philadelphia, PA, Garrett D. Blanchfield, Jr., Brant D. Penney, Reinhardt & Wendorf, St. Paul, MN, Christopher P. Caputo, Joseph E. Mariotti, Caputo & Mariotti, P.C., Moosic, PA, John Jacobs, Bryan Kolton, Chicago, IL, for appellants.

Robert N. Feltoon, argued, Deborah J. Krabbendam, Francesco P. Trapani, Conrad O'Brien PC, Philadelphia, PA, Lewis A. Remele, Jr., Christopher R. Morris, Bassford & Remele, PA, Minneapolis, MN, Charles N. Nauen, Eric C. Tostrud, Matthew R. Salzwedel, David W. Asp, Lockridge Grindal Nauen P.L.L.P., Minneapolis, MN, Mark A. Solheim, David C. Linder, Larson King LLP, St. Paul, MN, Thomas Fraser, Joseph J. Cassioppi, Fredrikson & Byron, P.A., Philadelphia, PA, for appellees.

Before LOKEN, MURPHY, and SHEPHERD, Circuit Judges.

MURPHY, Circuit Judge.

Minnesota residents Sharon Palmer, Sandra Kluessendorf, Michael Hara, and David Johnson (insureds) filed class action complaints against their automobile insurers, Illinois Farmers Insurance Company, Progressive Preferred Insurance Company, USAA Casualty Insurance Company, and American Family Mutual Insurance Company respectively. They alleged 1) violations of a Minnesota statute requiring insurers to provide a discount for cars which have antitheft devices and 2) breach of contract claims based on the failure to apply the statutory discount. Minn.Stat. § 65B.285. The district court 1 granted motions to dismiss the complaints, and the insureds appeal. We affirm in all four consolidated appeals.

I.

Palmer, Kluessendorf, Hara, and Johnson are Minnesota residents who each purchased automobile insurance from one of the defendant insurer companies. They filed nearly identical class action complaints alleging that their insurers had failed to comply with the statutory requirement that [a]n insurer ... provide an appropriate premium reduction of at least five percent on the comprehensive coverage on a policy of private passenger vehicle insurance ... to an insured whose vehicle is equipped with an authorized antitheft protection device.” Minn.Stat. § 65B.285, subdiv. 2. The statute defines an authorized antitheft protection device as equipment activated if a locked car is entered without a key which causes an alarm to sound, the horn to honk, the lights to flash, or the car to be inoperable. Minn.Stat. § 65B.285, subdiv. 1. The insureds asserted claims directly under Minn.Stat. § 65B.285 and for breach of contract. They did not allege that they had informed their insurers they had such devices on their cars, but they did allege that the insurers had in their possession information about the standard equipment on their cars through sources routinely used by insurance companies to assess risk, comply with reporting requirements, and determine premiums.

The insurers moved to dismiss, arguing that § 65B.285 does not create a private right of action and that the insureds cannot circumvent this bar by “relabel[ing] their claim as breach of contract. The district court agreed that § 65B.285 does not create a private right of action and dismissed the statutory claims. The district court then concluded that while there is contractual language supporting independent claims for breach of contract based on the insurers' alleged failure to apply the discounts, the insureds had failed to state a claim for breach of contract because the statute does not require insurers to conduct their own investigation into the standard antitheft equipment on insureds' cars.

On appeal the insureds assert that in dismissing their breach of contract claims the district court erred procedurally, interpreted the statute incorrectly, and failed to view the factual allegations in their complaint in the light most favorable to them. The insurers also challenge the district court's decision and argue that it erred in concluding that the insureds could bring breach of contract claims based on a violation of § 65B.285 because the statute does not include a private right of action provision.

We review the district court's grant of motions to dismiss de novo, taking all allegations in the complaint as true and drawing all reasonable inferences in favor of the non moving party. O'Neal v. State Farm Fire & Cas. Co., 630 F.3d 1075, 1077 (8th Cir.2011). We also review de novo the district court's interpretation of an insurance policy, Spirtas Co. v. Fed. Ins. Co., 521 F.3d 833, 835 (8th Cir.2008), and its interpretation of the Minnesota statutes. Alpine Glass, Inc. v. Ill. Farmers Ins. Co., 643 F.3d 659, 664 (8th Cir.2011).

II.

The insureds do not directly challenge the district court's conclusion that § 65B.285 does not create a private right of action. See Becker v. Mayo Found., 737 N.W.2d 200, 207–09 (Minn.2007); Morris v. Am. Family Mut. Ins. Co., 386 N.W.2d 233, 237–38 (Minn.1986). The insureds nevertheless seek to bring breach of contract claims premised on violations of that statute.

A.

Insurance companies operating within Minnesota are subject to a detailed regulatory scheme created by the legislature. The Commissioner of Commerce is charged with enforcing the state's insurance laws and may undertake periodic examinations of insurers. Minn.Stat. §§ 60A.03, 60A.031. Commerce officials can examine insurers “at any time and for any reason related to the enforcement of insurance laws.” Minn.Stat. § 60A.031, subdiv. 1(1). Insurers are required to file proposed rates and policy documents with the Department of Commerce before the rates and policies take effect. Minn.Stat. § 70A.06, subdivs. 1, 2.

The Department of Commerce can require supporting documentation including statistical and actuarial information and can withhold approval of excessive or discriminatory rates. Minn.Stat. §§ 70A.04, subdiv. 1, 70A.06, subdivs. 1, 2. It can also initiate enforcement proceedings if an insurer has charged illegal or improper rates and seek administrative remedies including fines for violations of the state's insurance laws of $50 for each violation or $500 if the violation was willful. Minn.Stat. § 70A.21. The department can also suspend an insurer's license until it complies with any order issued by the Commissioner. Id. Insurance officers and agents are also subject to criminal liability for willful violation of Minnesota's insurance law. Minn.Stat. § 72A.02.

Insurers are required upon written request to provide insureds all pertinent information about their rates. Minn.Stat. § 70A.19. The insurance company must also provide an official avenue of review “whereby any person aggrieved by the application of its rating system may be heard” within 30 days of the request. Id. The insured can then appeal the denial of her request to the Commissioner of Commerce who must hold a hearing and affirm or reverse the insurer's action. Id. An insurer which is found to use an excessive or discriminatory rate must refund the insured the excess premium plus interest. Minn.Stat. § 70A.11. The insureds in this case do not challenge the adequacy of the remedies or enforcement measures provided in the insurance regulations.

B.

The insureds cite Olson v. Moorhead Country Club, 568 N.W.2d 871, 873–74 (Minn.Ct.App.1997), in support of their claims. Olson considered a common law claim for conversion based on a violation of the Minnesota Fair Labor Standards Act for which there was no private right of action. The court stated there that such a claim might nonetheless be possible if an employment contract created a right to gratuities “independent of” the statute. Id. The insureds argue that two provisions in each of their insurance policies give rise to their claims for breach of contract. Although the language in each policy varies somewhat, one is a type of provision referred to as a “conformity clause” which generally states that if a policy term conflicts with Minnesota law it will be deemed amended to conform to that law.2 The second type of provision states that the insurer will calculate a premium based on “information [the insurer] ha[s] received from [the insured] or other sources,” or from “information in [the insurer's] possession.” 3

The Minnesota Supreme Court has not decided whether such contract language would support a breach of contract action based on the failure to provide a discount when § 65B.285 does not provide a private right of action. Because our task in this diversity action is to follow Minnesota law even on an undecided point, we look to related decisions by the state's highest court and by the intermediate court of appeals. See United Fire & Cas. Ins. Co. v. Garvey, 328 F.3d 411, 413 (8th Cir.2003).

The decisions by Minnesota courts indicate that they generally defer to the Commissioner of Commerce to enforce the state's comprehensive scheme for insurance regulation. These cases do not favor private rights of action or parallel common law claims. While considering enforcement of the state's insurance regulatory scheme, the Minnesota Supreme Court concluded in Morris that the Unfair Claims Practices Act governing insurers did not create a private right of action. The court explained that “when a statute creates a right which did not exist at common law and provides administrative remedies, those remedies are...

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