American Family Mutual Insurance Company v. Donaldson et al
Filing
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ORDER granting 59 Motion for Summary Judgment; denying 67 Motion for Summary Judgment (Written Opinion). Signed by Judge Paul A. Magnuson on December 27, 2013. (ALT)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
American Family Mutual
Insurance Company,
Civil No. 12-2855 (PAM/FLN)
Plaintiff,
v.
MEMORANDUM AND ORDER
John Martin Donaldson,
Todd Richard Patton, and
Jacob Todd Patton,
Defendants.
This matter is before the Court on the parties’ cross-Motions for Summary Judgment.
For the reasons that follow, Plaintiff’s Motion is granted and Defendants’ Motion is denied.
BACKGROUND
This case arises out of a single-car accident, the relevant facts of which are
undisputed. On April 10, 2011, Defendant Jacob Patton was driving his father’s vehicle with
Defendant John Donaldson in the passenger seat. Patton and Donaldson were 18 years old
at the time, and both had been drinking heavily. Patton was speeding through his residential
neighborhood in Lakeville and a neighbor, fearing for his safety, called 9-1-1 to report
Patton’s reckless driving. When police tried to pull him over, Patton led them on a highspeed chase for 80 seconds, at one point reaching 96 miles per hour. (Young Aff. Ex. B
(Docket No. 72-2).) Patton ultimately crashed the car into a tree and Donaldson was severely
injured. At the time of the accident, Patton had both an auto insurance policy and an
umbrella policy with Plaintiff American Family Mutual Insurance Company through his
father, Defendant Todd Richard Patton. Patton was ultimately charged with two counts of
criminal vehicular operation. He has pled not guilty and is awaiting trial.
On March 8, 2012, Donaldson sued the Pattons in Dakota County District Court
alleging negligence. American Family hired counsel to defend the case. American Family
also notified the Pattons on November 11, 2011, and July 27, 2012, that it reserved all rights
to contest coverage. (Duggan Vraa Aff. Ex. 12 (Docket No. 65-2).) On November 1, 2012,
the eve of trial, American Family requested a continuance on the grounds that a trial would
be unnecessary because Patton was planning to plead guilty and because American Family
was poised to file a declaratory judgment action that would resolve the dispute. On
November 14, 2012, American Family filed the instant action, seeking a declaration that
there is no coverage under the umbrella policy.
American Family subsequently entered into a Drake-Ryan release with Donaldson in
exchange for the auto policy limit of $100,000. Under the agreement, the Pattons were
released from all personal liability and the parties agreed that any judgment would only be
collectible under the Patton’s umbrella policy.
Donaldson and the Pattons
later executed a Miller-Shugart agreement under which Donaldson agreed to refrain from
collecting any judgment from the Pattons. (Duggan Vraa Aff. Ex. 17 (Docket No. 65-2) at
6, ¶ 12.) The agreement further provides that Donaldson “will only seek to satisfy this
judgment from American Family as provided under the personal liability umbrella policy[.]”
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(Id. at 6, ¶ 11.)
Next, Donaldson and the Pattons engaged in arbitration to determine the amount of
damages due to Donaldson under the Miller-Shugart agreement. American Family objected
to the Miller-Shugart agreement and refused to participate in the arbitration. On January 2,
2013, the arbitrator issued a $1.25 million award for Donaldson, which is $250,000 in excess
of the Pattons’ $1 million umbrella policy limit. The parties agree that under the MillerShugart agreement, the Pattons cannot be held responsible for the excess judgment.
This Court previously denied Defendants’ Motion to Dismiss, after which Defendants
filed their Answers and Counterclaims. Donaldson filed a counterclaim for “Third Party
Insurance Bad Faith” claiming that American Family acted in bad faith by refusing to settle
for the umbrella policy limit of $1 million, which the Court dismissed. The parties’ crossMotions for Summary Judgment are now before the Court.
DISCUSSION
Summary judgment is proper if there are no disputed issues of material fact and the
moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The Court
must view the evidence and the inferences that may be reasonably drawn from the evidence
in the light most favorable to the nonmoving party. Enter. Bank v. Magna Bank, 92 F.3d
743, 747 (8th Cir. 1996). However, “summary judgment procedure is properly regarded not
as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a
whole, which are designed to secure the just, speedy, and inexpensive determination of every
action.” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986).
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The moving party bears the burden of showing that there is no genuine issue of
material fact and that it is entitled to judgment as a matter of law. Id. at 323; Enter. Bank,
92 F.3d at 747. A party opposing a properly supported motion for summary judgment may
not rest on mere allegations or denials, but must set forth specific facts in the record showing
that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256
(1986).
The interpretation of the language of an insurance contract is usually a legal question
for the Court to decide. Murray v. Greenwich Ins. Co., 533 F.3d 644, 648 (8th Cir. 2008);
Jenoff, Inc. v. N.H. Ins. Co., 558 N.W.2d 260, 262 (Minn. 1997). In diversity cases such as
this, the interpretation of Minnesota-issued insurance policies is a matter of Minnesota law.
Murray, 533 F.3d at 648. Under Minnesota law, “[w]hen insurance policy language is clear
and unambiguous, ‘the language used must be given its usual and accepted meaning.’”
Wanzek Constr., Inc. v. Employers Ins. of Wausau, 679 N.W.2d 322, 324 (Minn. 2004)
(quoting Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn. 1998)).
At issue here is the interpretation of the umbrella policy’s language, which differs
from that of the underlying auto policy language. Although Defendants attempt to conflate
the two, arguing essentially that because there was coverage under the latter policy there
should be coverage under the former, “the underlying policy and the umbrella policy are two
separate contracts; there is nothing unlawful or improper in defining the scope of coverage
differently in each policy.” Engelke v. State Farm Fire & Cas. Co., A10-759, 2011 WL 9170
(Minn. Ct. App. Jan. 4, 2011). The Court therefore will focus solely on the relevant umbrella
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policy language.
A.
Occurrence/Intentional-Act Exclusion
The parties all seek summary judgment on the issue of whether the facts constitute an
occurrence within the meaning of the umbrella policy. The policy defines “occurrence” as
an “accident.” (Vraa Aff. Ex. 16 (Docket No. 65-2) at 2, ¶ 13a.) The policy also expressly
excludes intentional acts defined as “injury caused by or at the direction of any insured even
if the actual injury is different than that which was expected or intended from the standpoint
of any insured” and injury caused by “fraudulent, criminal, or malicious” conduct. (Id. at 4,
¶ 11.) The occurrence requirement and the intentional-act exclusion are “opposite sides of
the same coin.” Am. Family Ins. Co. v. Walser, 628 N.W.2d 605, 611 (Minn. 2001). In
other words, if the injury was caused by an occurrence (or accident), then it could not have
been intentional. The term “accident” is defined as “an unexpected, unforeseen, or
undesigned happening or consequence.” Id. at 609. The difference between an accident and
an intentional act is, not surprisingly, intent.
An insurer may demonstrate intent by showing a specific intent to injure or an
inference of intent to injure, the latter of which may be established when the “insured’s
actions were such that the insured knew or should have known that a harm was substantially
certain to result from the insured’s conduct.” Id. at 613. The question here is whether Jacob
Patton’s decision to drink heavily, drive at high speeds on residential streets, and flee from
the police is sufficient to establish the requisite intent, even assuming that Patton did not
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intend to crash the vehicle.
In determining whether to infer intent, “the facts of particular importance are those
tending to show the likelihood of the harm—the greater the likelihood of the harm occurring,
the more reasonable it is to infer intent.” R.W. v. T.F., 528 N.W.2d 869, 873 (Minn. 1995).
In a strikingly similar case, the Minnesota Court of Appeals held that the intent to injure
could be inferred as a matter of law where there insured was intoxicated, drove at high speeds
through residential neighborhoods, and fled the police. The court reasoned as follows: “The
facts and potential for injury . . . may not occur every time someone engages in this type of
behavior, but the serious threat of injury combined with the wanton disregard for safety
require that the intent to injure be inferred as a matter of law.” Brown v. Am. Nat. Prop. &
Cas. Co., A08-1208, 2009 WL 1119166 (Minn. Ct. App. Apr. 28, 2009).
Defendants contend that Patton’s conduct should be deemed mere teenage horseplay
and that it is clear Patton did not intend to hurt himself or his friend. Defendants point to
expert testimony opining that Patton was too intoxicated to form the requisite intent. (Hardin
Aff. (Docket No. 69-1) ¶¶ 8-10.) As noted above, intent can be inferred under these
circumstances as a matter of law given Patton’s wanton disregard for his, Donaldson’s, his
neighbors, and the police officers’ safety. Patton’s voluntary intoxication is a key aspect of
that determination, not a mitigating factor.1 Indeed, in the context of insurance coverage
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Defendants also argue that Patton’s conduct was not reckless enough to infer intent because
statistics show that only a small percentage of serious auto accidents involve alcohol. (Defs.’
Reply Mem. at 3-5.) According to Defendants, this means that Patton’s decision to drink
heavily, drive erratically at high speeds in a residential neighborhood, and flee the police was
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following the insured’s intoxicated assault, the Minnesota Supreme Court recognized that
voluntary intoxication strongly supports application of the intentional-act exclusion:
[W]e are not inclined to create a situation where the more drunk an insured can
prove himself to be, the more likely he will have insurance coverage. . . . We
hold, therefore, that voluntary intoxication may not be used to deny an intent
to injure one’s victim where the circumstances of the assault otherwise compel
an inference of intent to injure.
Am. Family Mut. Ins. Co. v. Peterson, 405 N.W.2d 418, 422 (Minn. 1987). Like in Brown,
the Court concludes that Patton’s voluntary intoxication and his reckless conduct that
followed are sufficient to infer the intent to injure as a matter of law.
Because the Court concludes that there is no coverage under the umbrella policy based
on the occurrence/intentional act provisions, it need not address American Family’s
remaining arguments.
B.
Estoppel
Defendants argue that American Family should be estopped from relying on the
intentional-act exclusion because American Family’s July 27, 2012, reservation of rights
letter did not disclose the intentional act exclusion as a basis for denying coverage.
Defendants are correct that the July 27 letter is silent on the intentional-act exclusion.
(Duggan Vraa Aff. Ex. 12 (Docket No. 65-2).)
However, American Family’s first
reservation-of-rights letter, dated November 10, 2011, clearly references the intentional-act
not “substantially likely” to lead to an accident and thus does not qualify as an intentional
act. This argument is unpersuasive and irresponsible.
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exclusion. (Id.) And the Amended Complaint plainly alleges that coverage may be denied
under the intentional-act exclusion. (Am. Compl. (Docket No. 17) ¶¶ XXIV, XXIX.) Under
these circumstances, there is no basis on which to conclude that American Family waived,
and should be estopped from relying on, the intentional-act exclusion.
CONCLUSION
There are no genuine issues of material fact precluding summary judgment in favor
of American Family. Accordingly, IT IS HEREBY ORDERED that:
1.
Plaintiff’s Motion for Summary Judgment (Docket No. 59) is GRANTED;
and
2.
Defendants’ Joint Motion for Summary Judgment (Docket No. 67) is
DENIED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: December 27, 2013
s/Paul A. Magnuson
Paul A. Magnuson
United States District Court Judge
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