Volk v. ACE American Insurance Company

Filing 42

ORDER denying 14 plaintiff's Motion for Summary Judgment; granting 27 defendant's Motion for Summary Judgment (Written Opinion). Signed by Senior Judge David S. Doty on 2/5/2013. (PJM)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 12-1065(DSD/JSM)
Linda Volk, as guardian of
Andrew John Johnson,
Plaintiff,
ORDER

v.
ACE American Insurance Company,
Defendant.

Richard W. Curott, Esq. and Curott & Associates, LLC,
P.O. Box 206, Milaca, MN 56353, counsel for plaintiff.
Steven J. Sheridan, Esq. and Fisher, Bren & Sheridan,
LLP, 920 Second Avenue South, Suite 975, Minneapolis, MN
55415, counsel for defendant.

This matter is before the court upon cross-motions for summary
judgment.

Based on a review of the file, record and proceedings

herein, and for the following reasons, the court grants the motion
for summary judgment by defendant ACE American Insurance Company
(ACE).

BACKGROUND
This insurance-coverage dispute arises out of a 2005 injury to
Andrew John Johnson, son of plaintiff Linda Volk.

Johnson is

mentally-handicapped and requires the services of a personal care

attendant (PCA).

Volk Aff. ¶ 2.1

At the time of his injury,

nonparty North Country Home Care, Inc. (North Country) provided PCA
services for Johnson.

Id.

On November 20, 2005, under the

supervision of his North Country PCA, Johnson was permanently
blinded in a BB gun accident.

Id. ¶¶ 5, 7.

At the time of the injury, ACE provided North Country with
coverage for both general liability and professional liability.
Answer ¶ 3.

The insurance policy (Policy) was in effect from July

6, 2005, until June 26, 2006, when North Country sold its assets
and ceased business operations.

Gill Aff. Ex. 1, at 0059.

In

January 2009, the Minnesota Secretary of State officially dissolved
North Country.

Kirk Aff. Ex. 2, at 4, ECF No. 32.

In June 2009, Volk notified Donita Wark, former president of
North Country, that Volk intended to file a claim for Johnson’s
injury.

See McGuire Aff. Ex. 1, at 0208.

Wark reported the claim

to ACE, seeking coverage under the Policy.

Id.

ACE denied

coverage in August 2009, determining that the incident fell under
the Policy’s professional liability coverage, which only covered
claims made prior to the Policy’s termination. Id. Ex. 3, at 0238.
ACE informed Wark that general liability coverage did not apply
because

the

incident

fell

within

that

portion’s

exclusions,

including an exclusion (Patient Exclusion) for “[a]ny loss, cost or

1

Linda Volk’s affidavit is attached as Exhibit A to the
affidavit of Richard W. Curott. See Curott Aff. Ex. A., ECF No.
17.
2

expense arising out of ‘bodily injury’ to your patients.”

Gill

Aff. Ex. 1, at 0021; see McGuire Aff. Ex. 3, at 0237.
Following ACE’s denial of coverage, Volk sued North Country in
Minnesota court.
to ACE.
2011,

North Country forwarded a copy of the complaint

McGuire Aff. Ex. 5, at 0252.
Volk

settlement.2

and

North

Country

Thereafter, on November 22,

agreed

Kirk Aff. Ex. 4, ECF No. 32.

to

a

Miller-Shugart

On February 21, 2012,

Volk obtained a judgment against North Country for $2,675,758.27.
Id. Ex. 3.

On April 11, 2012, Volk filed this suit in Minnesota

court, seeking a declaration that ACE owed coverage under the
Policy.

ACE timely removed, and both parties move for summary

judgment.

DISCUSSION
I.

Standard of Review
“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); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

2

“In a Miller-Shugart settlement, an insured ... who has been
denied coverage for a claim agrees with the claimant ... on a
judgment for an amount collectible from the insurance policy. The
claimant releases the insured from personal liability and the
claimant’s recovery is limited to the amount obtained from the
insurers.” Corn Plus Coop. v. Cont’l Cas. Co., 516 F.3d 674, 677
n.2 (8th Cir. 2008) (citing Miller v. Shugart, 316 N.W.2d 729
(Minn. 1982)).
3

A fact is material only when its resolution affects the outcome of
the case.
(1986).

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

A dispute is genuine if the evidence is such that it could

cause a reasonable jury to return a verdict for either party.

See

id. at 252.
On a motion for summary judgment, the court views all evidence
and inferences in a light most favorable to the nonmoving party.
See id. at 255.

The nonmoving party, however, may not rest upon

mere denials or allegations in the pleadings but must set forth
specific facts sufficient to raise a genuine issue for trial.
Celotex, 477 U.S. at 324.

See

A party asserting that a genuine dispute

exists - or cannot exist - about a material fact must cite
“particular parts of materials in the record.”
56(c)(1)(A).

Fed. R. Civ. P.

If a party cannot support each essential element of

a claim, the court must grant summary judgment because a complete
failure of proof regarding an essential element necessarily renders
all other facts immaterial.
II.

Celotex, 477 U.S. at 322-23.

Insurance Coverage
In Minnesota the interpretation of an insurance policy is a

question of law.
609 (Minn. 2001).

Am. Family Ins. Co. v. Walser, 628 N.W.2d 605,
The court interprets an insurance policy in

accordance with general principles of contract construction, giving
effect to the intent of the parties.

Thommes v. Milwaukee Ins.

Co., 641 N.W.2d 877, 879 (Minn. 2002). The court gives unambiguous

4

language its plain and ordinary meaning, and construes ambiguous
language against the drafter and in favor of the insured.

Id. at

880; Nathe Bros., Inc. v. Am. Nat’l Fire Ins. Co., 615 N.W.2d 341,
344 (Minn. 2000).

Language is ambiguous if “reasonably subject to

more than one interpretation.”

Columbia Heights Motors, Inc. v.

Allstate Ins. Co., 275 N.W.2d 32, 34 (Minn. 1979).

However, the

court “guard[s] against invitations to find ambiguity where none
exists.”

Metro. Prop. & Cas. Ins. Co. v. Jablonske, 722 N.W.2d

319, 324 (Minn. Ct. App. 2006) (citation and internal quotation
marks omitted).
A plaintiff seeking to enforce a Miller-Shugart settlement has
the burden of proving the judgment is covered by the Policy.
Koehnen v. Herald Fire Ins. Co., 89 F.3d 525, 529 (8th Cir. 1996)
(applying Minnesota law).

To do so, the insured must first

establish a prima facie case of coverage.

SCSC Corp. v. Allied

Mut. Ins. Co., 536 N.W.2d 305, 311 (Minn. 1995), overruled on other
grounds by Bahr v. Boise Cascade Corp., 766 N.W.2d 910, 919 (Minn.
2009).

If coverage is established, the burden shifts to the

insurer to prove that a policy exclusion applies.

Id. at 313. The

court strictly construes exclusions against the insurer, in light
of the insureds’ expectations. Thommes, 641 N.W.2d at 880.

If the

insurer demonstrates that an exclusion applies, the insured bears
the burden of proving an exception to the exclusion.
536 N.W.2d at 314.

5

SCSC Corp.,

A.

Patient Exclusion

Volk argues that the injury is covered by the Policy’s general
liability

section.3

ACE

responds

Exclusion precludes coverage.

that

the

section’s

Patient

Volk claims that Johnson was not a

“patient,” but instead was a “recipient” or “consumer” of PCA care,
and that, as a result, the Patient Exclusion is inapplicable.
Specifically, Volk argues that “patient” connotes a professional
relationship and PCAs are not licensed professionals.
“Patient” is not defined within the Policy, and Volk argues
that the term is ambiguous.

“Patient” is not ambiguous, however,

unless it is read in isolation from the rest of the Policy.

See

Gammon v. Auto-Owners Ins. Co., 454 N.W.2d 434, 436 (Minn. Ct. App.
1990) (“Courts must determine the intent of contracting parties not
by a process of dissection in which words are isolated from their
context, but rather from a process of synthesis in which the words
and phrases are given a meaning in accordance with the obvious
purpose of the ... contract as a whole.” (citations and internal
quotation marks omitted) (alteration in original)).

3

The Policy

No recovery for professional liability is possible because
no claim was timely reported. The professional liability section
only covers claims reported “during the Policy Period or during any
Extended Reporting Period.”
Gill Aff. Ex. 1, at 0025.
Under
Minnesota law, such claims-made policies require that the insurer
be given notice of the claim during the coverage period. Winthrop
& Weinstine, P.A. v. Travelers Cas. & Sur. Co., 187 F.3d 871, 874
(8th Cir. 1999). Volk and Johnson did not raise their claim until
after the effective date of the Policy lapsed.
Therefore, the
professional liability section provides no coverage.
6

refers only to “patients,” and never mentions “customers” or
“recipients.”
Moreover, the term “patient” is used elsewhere in the Policy.
The professional liability portion covers injuries caused by “any
act or omission in the rendering or failure to render ‘healthcare
professional services,’” which are defined as “services performed
by an insured to care for or assist your patients.”
1, at 0005, 0008 (emphasis added).

Gill Aff. Ex.

If, as Volk argues, those

receiving PCA services are not patients, the professional liability
section could
illusory.
(Minn.

never

be

triggered,

and

its

coverage

would be

See Taulelle v. Allstate Ins. Co., 207 N.W.2d 736, 739

1973)

(“[I]nsurance

contracts

should,

if

possible,

be

construed so as not to be a delusion to those who have bought
them.”

(citation

and

internal

quotation

marks

omitted)).

Therefore, the recipients of PCA services must be patients, and the
Patient

Exclusion

precludes

general

liability

coverage

for

Johnson’s accident.
Even if the term “patients” is ambiguous, however, extrinsic
evidence conclusively resolves the question of whether the incident
fell within general liability coverage.

See Wessman v. Mass. Mut.

Life Ins. Co., 929 F.2d 402, 407 (8th Cir. 1991) (“[I]f the
language is ambiguous, resort may be had to extrinsic evidence, and
construction then becomes a question of fact, unless such evidence
is conclusive.” (citations omitted)) (applying Minnesota law).

7

Approximately seventy-four percent of North Country’s premium paid
for

professional

liability

coverage,

with

eight

percent

Gill Aff. ¶ 7.

Ninety-

allocated to general liability coverage.

only

four percent of the professional liability portion covered PCA
services.

Id. ¶ 8.

If, as Volk argues, individuals receiving PCA

services were not “patients” under the Policy, these large premiums
would be for wholly illusory coverage. See Taulelle, 207 N.W.2d at
739. As a result, the extrinsic evidence conclusively resolves any
purported

ambiguity.

Therefore,

for

this

additional

reason,

summary judgment for ACE is warranted.4
B.

Statutory Insurance Requirements

Volk next argues that, interpretation of the Policy terms
notwithstanding, the Policy must provide coverage.

Specifically,

Volk argues that, under Minnesota law, North Country was required
to “maintain a surety bond and liability insurance throughout the
duration of enrollment and provide[] proof thereof.”
§ 256B.0655 subdiv. 1g(2).

Minn. Stat.

In other words, North Country and ACE

were not allowed to opt out of statutorily-required coverage.

See

Am. Family Mut. Ins. Co. v. Ryan, 330 N.W.2d 113, 115 (Minn. 1983)
(“[P]arties [to an insurance contract] are free to contract as they
desire, and so long as coverage required by law is not omitted and
policy provisions do not contravene applicable statutes, the extent

4

Because the Patient Exclusion applies, the court need not
address the “Other Coverage Parts” exclusion.
8

of the insurer’s liability is governed by the contract entered
into.” (citation omitted)).

North Country, however, maintained

coverage under the Policy until it ceased business operations, and
was not required to maintain coverage indefinitely.
Ex. 1, at 0059.

See Gill Aff.

Therefore, North Country met its statutory

coverage obligations, and Volk’s argument is unavailing.
C.

Doctrine of Reasonable Expectations

Finally, Volk argues that the Policy should provide coverage
under the doctrine of reasonable expectations, as North Country
intended to procure comprehensive coverage.5

See Atwater Creamery

Co. v. W. Nat. Mut. Ins. Co., 366 N.W.2d 271, 277 (Minn. 1985)
(“[T]he objectively

reasonable

expectations of

applicants

and

intended beneficiaries regarding the terms of insurance contracts
will be

honored

even

though

The doctrine of reasonable expectations, however, is
a

tool

for

expectations.”

policy

omitted)).

“as

those

the

would

applicable

negated

of

provisions

only

have

painstaking study

resolving

ambiguity

(citation

and

for

correcting extreme situations ... where a party’s coverage is
significantly different from what the party reasonably believes it
has paid for and where the only notice the party has of that

5

Volk relies, in part, on a deposition of Donita Wark taken
prior to the commencement of this action. ACE objects to this as
inadmissible hearsay, arguing that it did not have a chance to
cross-examine Wark. See Fed. R. Civ. P. 32(a)(1). Because the
term “patient” is not ambiguous, and because the court declines to
invoke the doctrine of reasonable expectations, the court need not
address this argument.
9

difference is in an obscure and unexpected provision.”

Carlson v.

Allstate Ins. Co., 749 N.W.2d 41, 49 (Minn. 2008).
As already explained, the policy language was unambiguous.
Moreover, even if there was ambiguity, this is not an extreme
situation where North Country was misled into purchasing illusory
coverage.

Indeed, North Country had comprehensive coverage during

its existence, and Johnson’s injury, had it been timely reported,
would have fallen squarely within North Country’s professional
liability coverage.

Thus, Volk may not invoke the doctrine of

reasonable expectations to establish coverage for Johnson’s injury.
Therefore, summary judgment for ACE is warranted.6

CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.

Plaintiff’s motion for summary judgment [ECF No. 14] is

denied;
2.

Defendant’s motion for summary judgment [ECF No. 27] is

granted.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated:

February 5, 2013
s/David S. Doty
David S. Doty, Judge
United States District Court

6

Because the injury was not covered by the Policy, the court
does not address ACE’s argument that Wark’s assignment of the claim
to Volk was invalid.
10