St. Marys Foundry v. Employers Ins. of Wausau, 01-4183.

• Decision Date: 16 June 2003
• Docket Number: No. 01-4183.,01-4183.
• Citation: 332 F.3d 989
• Parties: ST. MARYS FOUNDRY, INC., Plaintiff-Appellant, v. EMPLOYERS INSURANCE OF WAUSAU, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

332 F.3d 989

ST. MARYS FOUNDRY, INC., Plaintiff-Appellant, v. EMPLOYERS INSURANCE OF WAUSAU, Defendant-Appellee.

No. 01-4183.

United States Court of Appeals, Sixth Circuit.

Argued March 14, 2003.

Decided and Filed June 16, 2003.

Gary M. Glass (argued and briefed), Kimberly E. Ramundo (briefed), Thompson Hine LLP, Cincinnati, OH, for Appellant.

Robert J. Gilbertson (argued), Mel I. Dickstein (briefed), Michael P. McNamee (briefed), Robins, Kaplan, Miller & Ciresi, Minneapolis, MN, for Appellee.

Before CLAY and ROGERS, Circuit Judges; COFFMAN, District Judge.^*

OPINION

CLAY, Circuit Judge.

Plaintiff St. Marys Foundry appeals from an order awarding summary judgment to Defendant Employers Insurance of Wausau, after Plaintiff filed a complaint in federal diversity jurisdiction under 28 U.S.C. § 1332 for declaratory judgment pursuant to 28 U.S.C. §§ 2201-2202, seeking a declaration that it was entitled to insurance coverage for lost income following a warehouse fire. For the reasons set forth below, we AFFIRM the district court's order.

FACTS

Plaintiff is located in St. Marys, Ohio, and manufactures metal castings for customers in a wide variety of industries. The castings range in size from 500 to 60,000 pounds, and Plaintiff makes them by pouring molten iron into sand molds. The sand molds are formed from wood "patterns." Each pattern is custom made to produce a particular casting. Plaintiff cannot manufacture castings without patterns. The patterns Plaintiff uses to make castings are owned by Plaintiff's customers. Consistent with industry practice, Plaintiff stores the patterns when not using them. Plaintiff stored approximately 4000 patterns in a warehouse known as the Pattern Storage Warehouse.

On February 10, 2000, Defendant issued Business Property Policy No. 226100053729 ("the Policy") to Plaintiff providing insurance coverage for various interests including the Pattern Storage Warehouse. The Policy provided coverage for Plaintiff's property interests during the period from February 1, 2000 to February 1, 2001. As drafted and issued by Defendant, the Policy provided separate units of insurance for separate property interests, including coverage for real property, personal property, loss of income, additional expense, and equipment breakdown. The unit has terms set forth in separate coverage forms.

The Policy begins with a Declarations section which sets forth the total annual premium along with the Policy limits and deductibles. Immediately following the Declarations are the separate coverage forms. The Loss of Income Form provides, in pertinent part:

1. COVERAGE

We will pay for:

A. Loss of income; or,

B. Necessary expenses which you incur to resume, or to maintain your ability to resume, normal operations, not exceeding the amount by which your loss of income is reduced;

that you sustain during a period of recovery, resulting from a covered loss, up to the limit of liability shown on the DECLARATIONS.

(J.A. at 56) (emphasis in original.) Under the Policy, "covered loss" means a "loss to covered property at a covered location resulting from a peril insured against." The Policy also includes a "Property Not Covered Endorsement" ("PNC Endorsement"), which expressly excludes coverage for patterns, dyes, and molds not owned by Plaintiff. The PNC Endorsement, however, modifies only the Personal Property Form.

On April 20, 2000, a fire destroyed the Pattern Storage Warehouse. As a result, Plaintiff suffered a loss of income in excess of $900,000. Plaintiff concedes that the Policy does not cover the value of its customers' patterns, but claims entitlement to coverage for its business losses that resulted from the loss of the patterns.

When Defendant disagreed with Plaintiff's theory of coverage, Plaintiff filed a complaint for declaratory judgment in Ohio's Auglaize County Court of Common Pleas seeking a declaration that it was entitled to coverage for lost income. Pursuant to 28 U.S.C. §§ 1441 and 1446, Defendant removed the action to the United States District Court for the Northern District of Ohio.

Both parties filed cross motions for summary judgment on the issue of Plaintiff's coverage for loss of income under the Policy. On September 28, 2001, the district court denied Plaintiff's motion and granted Defendant's.

On October 25, 2001, Plaintiff filed a timely notice of appeal.

DISCUSSION

We review summary judgment de novo. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 466 n. 10, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992); Johnson v. Econ. Dev. Corp., 241 F.3d 501, 509 (6th Cir.2001); Buckeye Cmty. Hope Found. v. City of Cuyhaoga Falls, 263 F.3d 627, 633 (6th Cir.2001). Summary judgment is appropriate when there is no genuine issue of material fact such that the moving party is entitled to a judgment as a matter of law. Kocsis v. Multi-Care Mgmt., Inc., 97 F.3d 876, 882 (6th Cir.1996). The Supreme Court restated the framework governing motions for summary judgment in a 1986 series of cases: Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); and Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In Anderson v. Liberty Lobby, Inc., the Supreme Court explained that

[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff. The judge's inquiry, therefore, unavoidably asks whether reasonable jurors could find by a preponderance of evidence that the plaintiff is entitled to a verdict.

477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The "mere possibility" of a factual dispute cannot create a triable case. Gregg v. Allen-Bradley Co., 801 F.2d 859, 863 (6th Cir.1986). To avoid summary judgment, the plaintiff "must come forward with more persuasive evidence to support [his or her] claim than would otherwise be necessary." Matsushita, 475 U.S. at 586, 106 S.Ct. 1348. If the defendant successfully demonstrates, after a reasonable period of discovery, that the plaintiff cannot produce sufficient evidence beyond the bare allegations of the complaint to support an essential element of his or her case, summary judgment is warranted. Celotex, 477 U.S. at 325, 106 S.Ct. 2548. When determining whether to reach this conclusion, we draw all reasonable inferences in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Williams v. Int'l Paper Co., 227 F.3d 706, 710 (6th Cir.2000); Smith v. Thornburg, 136 F.3d 1070, 1074 (6th Cir.1998).

I.

In Ohio, normal rules of contract construction apply to the interpretation of insurance policies. Weiss v. St. Paul Fire & Marine Ins. Co., 283 F.3d 790, 796 (6th Cir.2002). Ohio courts first determine whether contract terms are ambiguous. United Nat'l Ins. Co. v. SST Fitness Corp., 182 F.3d 447, 449 (6th Cir.1999). A term is ambiguous if it is reasonably susceptible of more than one meaning. Weiss, 283 F.3d at 796 (citing King v. Nationwide Ins. Co., 35 Ohio St.3d 208, 519 N.E.2d 1380, 1383 (1988)). If the terms of the contract are unambiguous the court determines the meaning of the contract. Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm, 73 Ohio St.3d 107, 652 N.E.2d 684, 686 (1995). Ohio courts give the terms of the contract their plain and natural meaning. Burdett Oxygen Co. v. Employers Surplus Lines Ins. Co., 419 F.2d 247, 248 (6th Cir.1969); Essex House v. St. Paul Fire & Marine Ins. Co., 404 F.Supp. 978, 986 (S.D.Ohio 1975). Following Ohio law, we must give meaning to every paragraph, clause, phrase, and word. Affiliated FM Ins. Co. v. Owens-Corning Fiberglas Corp., 16 F.3d 684, 686 (6th Cir.1994). Finally, we cannot look to evidence outside of the policy where the contract is clear and unambiguous. Kelly v. Med. Life Ins. Co., 31 Ohio St.3d 130, 509 N.E.2d 411, 413 (1987).

When an insurance policy includes ambiguous exclusions, "`a general presumption arises to the effect that that which is not clearly excluded from the operation of such contract is included in the operation thereof.'" Moorman v. Prudential Ins. Co. of Am., 4 Ohio St.3d 20, 445 N.E.2d 1122, 1124 (1983) (quoting Home Indem. Co. v. Plymouth, 146 Ohio St. 96, 64 N.E.2d 248, 250 (1945)). The exclusion "must be stated clearly in explicit wording setting forth with specificity exactly what is to be excluded." River Servs. Co. v. Hartford Accident & Indem. Co., 449 F.Supp. 622, 626 (N.D.Ohio 1977) (citing Am. Fin. Corp. v. Fireman's Fund Ins. Co., 15 Ohio St.2d 171, 239 N.E.2d 33, 35 (1968)). "The insurer, being the one who selects the language in the contract, must be specific in its use; an exclusion from liability must be clear and exact in order to be given effect." Lane v. Grange Mut. Cos., 45 Ohio St.3d 63, 543 N.E.2d 488, 489 (1989). As we explained in Burdett:

The basis of this rule is that the insurer — who formulates the insurance contract and proffers it to the insured for the ostensible benefit of the insured in the event of a loss — is responsible for the language employed. Furthermore, the purpose of the contract being to provide insurance coverage, an interpretation of doubtful terms which construes the language to provide such coverage tends to effectuate the presumed good faith intent of the contracting parties.

Burdett, 419 F.2d at 248-49. For these reasons, the insurer, not the insured, bears the burden of proving the applicability of an exclusion in its policy. Cont'l Ins. Co. v. Louis Marx Co., 64 Ohio St.2d 399, 415 N.E.2d 315, 317 (1980). Courts should not, however, construe an insurance contract against the insurer in the absence of ambiguity in its language. Karabin v. State Auto. Mut. Ins. Co., 10 Ohio St.3d 163, 462 N.E.2d 403, 406 (1984); see also King, 519...