Employers Mutual Casualty Company v. Richards

Filing 40

MEMORANDUM OPINION AND ORDER denying 20 Motion for Summary Judgment; granting 26 Motion for Summary Judgment. Let judgment be entered accordingly. (Written Opinion) Signed by Chief Judge John R. Tunheim on 7/3/2018. (JMK)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
EMPLOYERS MUTUAL CASUALTY
COMPANY,

Civil No. 17-3603 (JRT/LIB)

Plaintiff,

MEMORANDUM OPINION AND
ORDER ON CROSS-MOTIONS FOR
SUMMARY JUDGMENT

v.
CHARLES RICHARDS,
Defendant.

Beth A. Jenson Prouty, ARTHUR, CHAPMAN, KETTERING,
SMETAK & PIKALA, P.A., 500 Young Quinlan Building, 81 South
Ninth Street, Minneapolis, MN 55402, for plaintiff.
Matthew James Barber, SCHWEBEL, GOETZ & SIEBEN, 80 South
Eighth Street, Suite 5120, Minneapolis, MN 55402, for defendant.

Defendant Charles Richards was injured in a motorcycle accident. Richards seeks
compensation under his auto-insurance policy with Plaintiff Employers Mutual Casualty
Company (“EMC”), specifically under the Uninsured/Underinsured Motorist (“UIM”)
Endorsement to his policy. EMC brought this action, seeking a declaration that it is not
liable under its policy with Richards because an owned-vehicle exclusion in the UIM
Endorsement precludes Richards from receiving the UIM benefits he seeks. The parties
have filed cross-motions for summary judgment. Because the Court will conclude that
Richards is not eligible for these benefits under the UIM Endorsement, the Court will

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deny Richards’s motion for summary judgment, grant EMC’s motion for summary
judgment, and enter judgment for EMC.

BACKGROUND
Charles Richards owned three motor vehicles that he insured through EMC.
(Compl. ¶ 13, Aug. 7, 2017, Docket No. 1; Answer ¶ 9, Oct. 3, 2017, Docket No. 8; see
Compl. ¶ 12, Ex. B (“Auto Policy”) at 1-2.) The policy specifically lists: a 1994 Honda,
a 2002 Chevrolet, and a 2014 Honda. (Compl. ¶ 13; Answer ¶ 9.) Richards also owned a
motorcycle, which he insured through a Progressive policy providing liability coverage
but not UIM coverage. (Compl. ¶¶ 2, 9, 14; Answer ¶¶ 3, 5, 10; see also Compl. ¶ 9, Ex.
A.)
On September 11, 2016, Richards was injured in a motor-vehicle accident while
operating his motorcycle. (Compl. ¶¶ 2, 10; Answer ¶¶ 3, 6.) Richards recovered
$50,000 from the at-fault driver – the liability limit under the at-fault driver’s insurance
policy – but this amount failed to cover all the costs of Richards’s injuries. (Compl. ¶ 11;
Answer ¶¶ 7, 35, 36.) Because Richards’s Progressive motorcycle insurance did not
include UIM coverage, he filed a claim with EMC, seeking compensation under the UIM
Endorsement to his auto policy. (See Compl. ¶¶ 2, 16; Answer ¶¶ 3, 12.)
Richards’s UIM coverage is designed to cover Richards if he is injured by an
uninsured motorist or if the cost of his injuries exceeds the limits of another, at-fault
motorist’s coverage.

(See Compl. ¶ 12; Answer ¶ 8; Auto Policy at 29-32 (“UIM

Endorsement”).) Richards’s UIM coverage contains an owned-vehicle exclusion, which
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excludes coverage “for ‘bodily injury’ sustained by any ‘insured’: (1) While ‘occupying’
any motor vehicle owned by that ‘insured’ which is not insured for this coverage.”
(Auto Policy at 30.) This case involves the application of this exclusion to the UIM
coverage.
Richards claims that, as a result of the injuries he sustained during the September
2016 motorcycle crash, he is entitled to UIM benefits under his policy with EMC. EMC
contends that the UIM Endorsement excludes coverage because Richards was occupying
a motor vehicle that he owned but did not insure under his policy with EMC. EMC
brought this declaratory-judgment action, seeking a declaration that it is not required to
pay Richards’s claim under the UIM Endorsement.

DISCUSSION

I.

STANDARD OF REVIEW
Summary judgment is appropriate where there are no genuine issues of material

fact and the moving party can demonstrate that it is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the
lawsuit, and a dispute is genuine if the evidence could lead a reasonable jury to return a
verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A
court considering a motion for summary judgment must view the facts in the light most
favorable to the non-moving party and give that party the benefit of all reasonable
inferences that can be drawn from those facts. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986). “The interpretation of an insurance policy . . . is
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one of law” that is properly decided in a motion for summary judgment. Midwest Family
Mut. Ins. Co. v. Wolters, 831 N.W.2d 628, 636 (Minn. 2013) (quoting Auto-Owners Ins.
Co. v. Todd, 547 N.W.2d 696, 698 (Minn. 1996)).

II.

PRINCIPLES OF INSURANCE POLICY INTERPRETATION
When interpreting an insurance policy under Minnesota law, “general principles of

contract interpretation apply.” Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d
246, 249 (Minn. 1998). The Court must construe the terms of a policy “according to
what a reasonable person in the position of the insured would have understood the words
to mean.” Canadian Universal Ins. Co. v. Fire Watch, Inc., 258 N.W.2d 570, 572 (Minn.
1977). Accordingly, where words and phrases in a policy are unambiguous, the Court
will interpret these terms using their plain and ordinary meaning. Quade v. Secura Ins.,
814 N.W.2d 703, 705 (Minn. 2012).
“Language in a policy is ambiguous if it is susceptible to two or more reasonable
interpretations.” Wolters, 831 N.W.2d at 636. If language in a policy is ambiguous, the
ambiguity must be resolved in favor of the insured. Columbia Heights Motors, Inc. v.
Allstate Ins. Co., 275 N.W.2d 32, 36 (Minn. 1979). “The reviewing court may not,
however, read an ambiguity into the plain language of an insurance contract.” Hubred v.
Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989).

III.

CROSS-MOTIONS FOR SUMMARY JUDGMENT
This case concerns the interpretation of the owned-vehicle exclusion in the UIM

Endorsement to Richards’s auto policy with EMC. That exclusion reads:
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We do not provide Uninsured Motorists Coverage or
Underinsured Motorists Coverage for “bodily injury”
sustained by any “insured” . . . [w]hile “occupying” any
motor vehicle owned by that “insured” which is not insured
for this coverage.
(Auto Policy at 30.) The parties do not dispute that Richards is an “insured” (see Auto
Policy at 3, 9); that Richards was “occupying” his motorcycle when he was injured (id. at
9); that Richards owned his motorcycle when he was injured (Compl. ¶ 2; Answer ¶ 3);
and that Richards’s motorcycle was not insured under his EMC policy (Compl. ¶¶ 2, 9,
14; Answer ¶¶ 3, 5, 10; see also Compl. ¶ 9, Ex. A.). The term “motor vehicle” is
undefined in both the main policy form and the UIM Endorsement, and undefined terms
in an insurance contract are normally given their plain and ordinary meaning. Smith v. St.
Paul Fire & Marine Ins. Co., 353 N.W.2d 130, 132 (Minn. 1984). The parties agree that
the plain and ordinary meaning of “motor vehicle” includes motorcycles. (Compl. ¶ 24;
Answer ¶ 20.) Thus, interpreting the owned-vehicle exclusion according to its plain
language supports a finding that Richards’s UIM coverage does not apply to the injuries
he sustained during the September 2016 motorcycle crash.
Richards notes, however, that in a separate endorsement – the Personal Injury
Protection (“PIP”) Endorsement – motorcycles are expressly excluded from the definition
of “motor vehicle.” The PIP Endorsement, “in accordance with the Minnesota No-Fault
Automobile Insurance Act,” requires EMC to pay for bodily injuries caused by “[a]n
accident arising out of the maintenance or use of a ‘motor vehicle’” or “[b]eing struck by
a motorcycle.” (Auto Policy at 34.) Richards argues that the definition of “motor
vehicle” in the PIP Endorsement should also apply to the main policy form and UIM
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Endorsement, thereby requiring EMC to compensate him for the injuries he sustained
during the motorcycle accident.
For five reasons, the Court concludes that the term “motor vehicle” in the UIM
Endorsement includes motorcycles – consistent with its plain and ordinary meaning – and
therefore that UIM coverage does not extend to Richards’s September 2016 motorcycle
accident.
First, the PIP Endorsement, consistent with its purpose of complying with the
Minnesota no-fault statute, contains an identical definition of “motor vehicle” as used in
the statute. (Compare Auto Policy at 34 (“The following definition is added: . . . ‘motor
vehicle’ does not include: . . . [a] motorcycle; or . . . [a]ny vehicle with fewer than four
wheels.”), with Minn. Stat. § 65B.43 subd. 2 (“‘Motor vehicle’ means every vehicle,
other than a motorcycle or other vehicle with fewer than four wheels . . .”).) Other terms
defined in the PIP Endorsement also track comparable statutory definitions. (Compare
Auto Policy at 34 (defining “occupying,” “family member,” and “insured”), with Minn.
Stat. § 65B.43 subds. 3, 5 (defining “maintenance or use of a motor vehicle” and
“insured”).) This strongly suggests that the definition of “motor vehicle” in the PIP
Endorsement was meant to apply only to the PIP Endorsement.
Second, the PIP Endorsement does not expressly modify the main policy form or
the UIM Endorsement. “[P]rovisions in the body of the policy are not to be abrogated,
waived, limited, or modified by the provisions of an endorsement or rider unless
expressly stated therein that such provisions are substituted for those in the body of the
policy.” EMCASCO Ins. Co. v. Diedrich, 394 F.3d 1091, 1096 (8th Cir. 2005) (quoting
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Pete Lien & Sons, Inc. v. First Am. Title Ins. Co., 478 N.W.2d 824, 827 (S.D. 1991)).
Applying this rule here, if the PIP Endorsement definitions were meant to alter the main
policy form, the Endorsement should say so expressly.
Frauendorfer v. Meridian Security Insurance Co., No. A16-0818, 2017 WL
1316110 (Minn. App. Apr. 10, 2017), provides a helpful contrast. There, the court held
that “motor vehicle” did not include motorcycles because the PIP endorsement in that
case expressly amended the definitions section of the main policy form, stating, “The
Definitions Section is amended as follows.” Id. at *1. In Richards’s policy, however, the
PIP Endorsement does not expressly modify the main policy form or the UIM
Endorsement. Unlike the PIP Endorsement in Frauendorfer, the PIP Endorsement here
includes a Definitions section prefaced merely by the word “Definitions.” (Auto Policy
at 34.) Without express language that the Definitions section in the PIP Endorsement is
meant to modify the rest of the policy, one is left with the conclusion that the Definitions
section in the PIP Endorsement applies only to the PIP Endorsement.
Third, a different endorsement in Richards’s policy further supports this
interpretation.

In an earlier-appearing endorsement in Richards’s policy – the

“Amendment of Policy Provisions - Minnesota” (“Amendments”) – the definitions
section is introduced by the same phrase used in Frauendorfer: “The Definitions section
is amended as follows.” (Id. at 22.) Conversely, the PIP Endorsement merely says
“Definitions.” (Id. at 34.) The purpose of the introductory phrase “The Definitions
section is amended as follows” is to give the insured notice that the Amendments change
the Definitions of the entire main policy form. See Frauendorfer, 2017 WL 1316110, at
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*1. Had EMC and Richards intended the PIP Endorsement to amend the main policy
form definitions, presumably they could have done so by using the same language used in
the Amendments. Because this language is not used in the PIP Endorsement, the logical
inference is that the definitions in the Amendments apply throughout the main policy
form and that the definitions in the PIP Endorsement do not. To interpret the policy
otherwise would create ambiguity and confusion where none exist.

See Columbia

Heights Motors, Inc., 275 N.W.2d at 36.
Fourth, nothing in the PIP Endorsement gives the impression that a reasonable
person in the insured’s position would understand the main policy form to incorporate the
PIP Endorsement’s definition of “motor vehicle.” Rather, a reasonable person would
understand that it is the PIP Endorsement that incorporates the main policy form – not the
other way around as Richards suggests. The PIP Endorsement begins by stating, “With
respect to coverage provided by this endorsement, the provisions of the [Main] Policy
apply unless modified by the endorsement.” (Auto Policy at 33.) To hold that the main
policy form incorporates a definition in the PIP Endorsement would conflict with the
structure of the relationship between the main policy form and the PIP Endorsement that
a reasonable person in the insured’s position would understand. See 2-5 Appleman on
Insurance Law & Practice Archive § 5.1 (2d 2011) (“Where the endorsement expressly
provides that it is subject to all terms, limitations, and conditions of the policy, it does not
abrogate or nullify any provision of the policy unless it is so stated in the endorsement.”).
Finally, if the Court were to find that the definitions section in the PIP
Endorsement defined “motor vehicle” throughout the entire policy, ambiguity would be
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created with respect to the term “family member,” which both the Amendments and the
PIP Endorsement purport to redefine. (Compare Auto Policy at 34, with id. at 9.) The
more reasonable and ambiguity-free interpretation is that the definitions in the PIP
Endorsement apply for purposes of PIP coverage and do not apply to the main policy
form.
The Court is mindful that an insurer must prove that an exclusion applies and that
ambiguities are resolved in favor of coverage. But here, the owned-vehicle exclusion in
the UIM Endorsement to Richards’s auto policy with EMC is clear and unambiguous:
the term “motor vehicle” includes motorcycles, consistent with its plain and ordinary
meaning. EMC has carried its burden to show that the owned-vehicle exclusion applies.
Richards is therefore not entitled to UIM coverage for injuries sustained in his September
2016 motorcycle accident.

ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that Richards’s Motion for Summary Judgment [Docket No. 20]
is DENIED and Employers Mutual Casualty Company’s Motion for Summary Judgment
[Docket No. 26] is GRANTED.
LET JUDGMENT BE ENTERED ACCORDINGLY.

DATED: July 3, 2018
at Minneapolis, Minnesota.

________s/John R. Tunheim _______
JOHN R. TUNHEIM
Chief Judge
United States District Court
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