Babinski Properties et al v. Union Insurance Company
Filing
56
ORDER denying 33 Motion for Summary Judgment; granting 45 Motion for Partial Summary Judgment. Signed by Chief Judge Karen E. Schreier on 6/13/2011. (KC)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION
BABINSKI PROPERTIES, and
DONALD BABINSKI, Personally
and as Executor of the Estate of
John Babinski,
Plaintiffs,
vs.
UNION INSURANCE COMPANY,
Defendant.
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CIV. 09-4192-KES
ORDER GRANTING
DEFENDANT’S MOTION
FOR SUMMARY JUDGMENT
AND DENYING PLAINTIFFS’
MOTION FOR PARTIAL
SUMMARY JUDGMENT
Plaintiffs, Babinski Properties and Donald Babinski, brought suit
against defendant, Union Insurance Company, seeking indemnification
under Union’s umbrella policy held by Babinski Properties for money Donald
paid to settle a wrongful death suit brought against his son’s estate. Union
moves for summary judgment. Plaintiffs resist and move for partial summary
judgment, which Union resists. Union’s motion is granted and plaintiffs’
motion is denied.
BACKGROUND
The facts pertinent to this order are as follows: Union issued a
commercial insurance umbrella policy to Babinski Properties on
November 16, 2006. Donald, a South Dakota resident, owns Babinski
Properties, which is located in Sioux Falls, South Dakota.
On December 10, 2006, Donald’s son, John Babinski, and John’s wife,
Kathi Babinski, were involved in a single-car accident in Minnesota.1 At the
time of the accident, John and Kathi, Minnesota residents, resided together
in the same household. On the night of the accident, John drove a 2004
Minnesota-registered truck insured by American Family Insurance Group
and owned by Janice Estates, a company owned by Donald. Kathi was in the
passenger seat. Kathi and John died in the accident.
John’s estate notified American Family that Kathi’s heirs intended to
bring a wrongful death suit against the estate. In June of 2007, Donald, as
the administrator of John’s estate, filed a declaratory judgment action in the
District of Minnesota against American Family to determine the amount of
available coverage to defend Kathi’s heirs’ lawsuit. Babinski v. Am. Family
Ins. Group, 569 F.3d 349 (8th Cir. 2009) (Babinski I). American Family had
issued a personal automobile insurance policy to Donald, which provided
primary liability coverage for the vehicle driven by John at the time of the
accident. Donald argued that the policy provided $1,000,000 in liability
coverage and American Family responded that the household drop-down
exclusion (household exclusion) limited coverage to $30,000, Minnesota’s
minimum liability coverage.
1
Due to the similarity of names, Babinski Properties and Donald Babinski
will collectively be called plaintiffs in this action whenever possible. When
discussing the wrongful death suit, the court will refer to John Babinski and
Kathi Babinski by their first names.
2
After Donald filed the declaratory judgment action, Kathi’s heirs filed a
wrongful death suit in state court in Hennepin County, Minnesota, against
Donald as the administrator of John’s estate. Kathi’s heirs alleged that
John’s negligence caused the accident and Kathi’s death. The heirs sought
damages for their own pecuniary loss stemming from Kathi’s death.
In Babinski I, the issue was whether American Family’s household
exclusion applied. The district court found that the household exclusion was
ambiguous and vague and, thus, invalid. The Eighth Circuit reversed and
found that the household exclusion was neither ambiguous nor vague and
that the household exclusion was enforceable under Minnesota law. See
Babinski I, 569 F.3d at 353. The household exclusion was only enforceable to
the extent that it did not limit coverage below $30,000, the minimum
amount required by Minnesota law. Id.
Before the Eighth Circuit returned its opinion in Babinski I, the state
court wrongful death action settled on December 16, 2008, for $650,000 in
favor of Kathi’s heirs. At all relevant times, Babinski Proprieties was covered
under the Union umbrella policy. When Union refused to indemnify plaintiffs
for the losses and expenses involved in settling the wrongful death action,
plaintiffs filed this lawsuit for indemnification in South Dakota state court.
Union removed the action to this court on diversity grounds.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(a) provides that “[t]he court shall
grant summary judgment if the movant shows that there is no genuine
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dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Only disputes over facts that might affect the outcome of the
case will preclude summary judgment. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). Summary judgment is inappropriate if a dispute about
a material fact is genuine, that is, if the evidence is such that a reasonable
jury could return a verdict for the nonmoving party. Id.
The moving party bears the burden of bringing forward sufficient
evidence to establish that there are no genuine issues of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The court views the facts
“in the light most favorable to the party opposing the motion.” Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (internal
citation omitted). The nonmoving party also receives “the benefit of all
reasonable inferences to be drawn from the underlying facts” in the record.
Vette Co. v. Aetna Cas. & Sur. Co., 612 F.2d 1076, 1077 (8th Cir. 1980)
(citing Adickes v. S. H. Kress & Co., 398 U.S. 144, 158-59 (1970)).
DISCUSSION
I.
Union’s Motion
Union argues that the American Family policy is not listed as
underlying insurance in Union’s umbrella policy, and, thus, Union need not
indemnify plaintiffs. Plaintiffs respond that the American Family policy
qualifies as underlying insurance.
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A.
The Declarations Page Is Unambiguous
This case involves an interpretation of contract language. It is
uncontested that South Dakota law applies to the Union policy. Interpreting
contract language is a matter of law. Canal Ins. Co. v. Abraham, 598 N.W.2d
512, 515 (S.D. 1999). In interpreting a contract, the court must “examine the
contract as a whole and give words their ‘plain and ordinary meaning.’ ” Gloe
v. Union Ins. Co., 694 N.W.2d 252, 260 (S.D. 2005) (quoting Elrod v. Gen.
Cas. Co. of Wis., 566 N.W.2d 482, 486 (S.D. 1997)).
The underlying insurance provision in the Union policy states:
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ
IT CAREFULLY.
AUTOMOBILE LIABILITY - FOLLOWING FORM
Except insofar as coverage is available to the insured in the
underlying insurance, this policy does not apply to bodily injury
or property damage arising out of the ownership, maintenance,
operations, use, loading or unloading or entrustment to others of
any auto.
Docket 36-2 at 2. The policy defines “underlying insurance” as:
T. Underlying insurance means the insurance policies listed as
Underlying Insurance, in the Declarations which provide the
coverage and limits stated. It includes any policies issued to
renew or replace those policies during the term of this insurance
that provide:
1.
At least the same limits of insurance; and
2.
At least the same coverage.
The coverage and limits stated in the Declarations for
Underlying Insurance, and any renewals or replacements
thereof, apply whether or not such is collectible.
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Docket 36-1 at 35.
The meaning of this language is clear. For the American Family policy
to qualify as underlying insurance for Union’s umbrella policy, the American
Family policy must either be listed as underlying insurance or have replaced
a policy listed on the underlying insurance. The South Dakota Supreme
Court, when presented with similar policy language, found a similar
“following form” provision to be unambiguous. See North Star Mut. Ins. Co. v.
Rasmussen, 734 N.W.2d 352, 359 (S.D. 2007) (reasoning that “it would be an
absurd interpretation to hold ‘Declarations’ to mean the declaration page on
any underlying insurance policy the insured may own. . . . The umbrella
policy clearly required that the underlying policies covered by the umbrella
policy be listed in the ‘Declarations’ within the umbrella policy itself.”). See
also Evins v. La. Farm Bureau Mut. Ins. Co., 907 So. 2d 733, 736 (La. Ct. App.
2005) (“[S]ince the umbrella policy only provides coverage for damages
sustained in excess of the policies listed on the schedule of underlying
insurance, and the [contested] policy is not listed on the schedule of
underlying insurance, there is no coverage under the umbrella policy . . . .”);
Am. Res. Ins. Co. v. H & H Stephens Constr., Inc., 939 So. 2d 868, 874 (Ala.
2006) (“Because the [contested] policy is not a policy ‘designated in Item 7 of
the Declarations’ section of the umbrella policy, the umbrella policy does not
apply . . . .”). Thus, the court will examine whether the American Family
policy is either listed as underlying insurance on the Union policy or replaces
an underlying policy listed on the Union policy.
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B.
The American Family Policy
On the “Schedule of Underlying Insurance,” the Union policy lists
“Owners Insurance Company” as a business and hired auto policy with
policy number “42 53891501,” an effective date from November 16, 2006, to
November 16, 2007, and a combined single limit of $1,000,000. Docket 36-1
at 13. But according to an ACORD Cancellation Request/Policy Release
dated November 14, 2006, Babinski Properties canceled two Auto Owners
Insurance policies, including policy number 42 53891501, effective as of
November 16, 2006. Docket 37-12 at 1. Plaintiffs do not dispute that the
Cancellation Request canceled the Owners policy that was listed on the
Declarations page as underlying insurance.
Instead, plaintiffs contend that “[i]t is undisputed that the American
Family Policy replaced the Auto Owners Policy which was listed on the Union
Policy’s declarations sheet.” Docket 53 at 9. Union, however, disputes that
the American Family policy replaced the Owners policy.
Union’s policy includes a “Maintenance of Underlying Insurance”
provision that requires plaintiffs to maintain underlying insurance and give
“prompt written notice” if the underlying insurance is canceled or replaced.
Docket 36-1 at 30-31. If the underlying insurance is replaced, plaintiffs must
give notice of “[a]ny change in the limits or in the coverage of any underlying
insurance . . . .” Docket 36-1 at 31; see also Docket 36-1 at 35 (stating that a
replacement policy to an underlying insurance policy must “provide: (1) At
least the same limits of insurance; and (2) At least the same coverage.”).
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There is no evidence that plaintiffs or the broker at Wingert Insurance
Inc. notified Union in writing that the Owners policy was canceled or that the
American Family policy was meant to replace the Owners policy as was
required by the “Maintenance of Underlying Insurance” provision.
Additionally, the American Family policy is a “South Dakota family car
policy.” Docket 37-2 at 5-7. The Owners policy is a “Business Auto” policy.
Docket 36-1. Business and personal automobile insurance policies may have
different coverages and exclusions. Because plaintiffs failed to give prompt
written notice to Union of the cancellation and replacement of the Owners
policy, the American Family policy does not qualify under the Union policy as
a replacement policy for the Owners policy.
Plaintiffs contend that the Wingert broker knew that the American
Family policy was meant to replace the Owners policy because the same
Wingert broker obtained both the Union policy for Babinski Properties and
the American Family policy for Donald. Plaintiffs argue that because the
Wingert broker was Union’s agent, Union had actual or apparent knowledge
that the American Family policy replaced the Owners policy. Plaintiffs further
argue that “Union Policy’s declaration page was not updated to reflect the
correct underlying insurance . . . because of Union’s agent’s oversight, and
through no fault of the Plaintiffs.” Docket 53 at 9-10. Union denies that the
Wingert broker was its agent.
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Agency is a creature of state law and, in South Dakota, is governed by
both statutory and common law. Rasmussen, 734 N.W.2d at 360. Agency is
determined on a case-by-case basis. Id. at 363 (“ ‘[W]hether an insurance
broker is the agent of the insurer or of the insured depends on the facts of
the particular case.’ ” (quoting Electro Battery Mfg., Co. v. Commercial Union
Ins. Co., 762 F. Supp. 844, 848 (E.D. Mo. 1991))). “Thus, the determination
of whether a person is an agent would typically be a question for a fact
finder.” Id. (citing Rumpza v. Larsen, 551 N.W.2d 810, 815 (S.D. 1996)). But
if the relevant facts are not in dispute, then an agency relationship can be
determined as a matter of law. Id. (citing Damon’s Mo., Inc. v. Davis, 590
N.E.2d 254, 260 (Ohio 1992); Dodds v. Hanover Ins. Co., 880 S.W.2d 311,
313 (Ark. 1994)).
South Dakota defines an agency relationship as “the representation of
one called the principal by another called the agent in dealing with third
persons.” SDCL 59-1-1. “An agency relationship is either actual or
ostensible.” Kasselder v. Kapperman, 316 N.W.2d 628, 630 (S.D. 1982); see
also Dahl v. Sittner, 429 N.W.2d 458, 462 (S.D. 1988) (reasoning that “[a]n
agent’s authority, like the agency relationship itself, can be either actual or
ostensible.”). The burden of proof is on the party claiming that an agency
relationship exists. Kasselder, 316 N.W.2d at 630 (citations omitted). In
determining whether an agency relationship exists, the court examines “the
relations of the parties as they exist under their agreement or acts.” Id.
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“Actual agency exists if the relationship is expressly created by an
agreement whereby the principal appoints his agent who agrees to serve in
that capacity.” Dahl, 429 N.W.2d at 462 (citing SDCL 59-1-4). Actual agency
requires proof of certain factual elements: “ ‘The manifestation by the
principal that the agent shall act for him, the agent’s acceptance of the
undertaking, and the understanding of the parties that the principal is to be
in control of the undertaking.’ ” Kasselder, 316 N.W.2d at 630 (quoting
Watkins Co. v. Dutt, 173 N.W.2d 41, 43 (1969)).
Ostensible agency occurs “when by conduct or want of ordinary care
the principal causes a third person to believe another, who is not actually
appointed, to be his agent.” SDCL 59-1-5. To establish ostensible agency, the
evidence should indicate that the principal, by its representations or actions,
caused a third party to believe that a person was its agent. See Kasselder,
316 N.W.2d at 630 (reasoning that “[o]stensible agency for which a principal
may be held liable must be traceable to the principal and cannot be
established solely by the acts, declarations or conduct of an agent.” (citations
omitted)).
The only evidence before the court on whether an agency relationship
existed between the Wingert broker and Union is an affidavit from Jane
Novotny, a Regional Sales Manager for Continental Western Group, of which
Union is an affiliate, stating that the Wingert broker was not Union’s agent:
“Between 1997 to current, Union Insurance Company never entered into an
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agency agreement with Wingert Insurance.” Docket 34 at ¶ 8. In its
statement of undisputed material facts, Union cited the Novotny affidavit for
the statement that “[f]rom 1997 to current, Union never had an agency
agreement with Wingert Insurance. (Novotny Aff.).” Docket 38 at ¶ 57.
Plaintiffs responded to this statement without citation to any evidence:
“Objection to the extent the statement implies that no agent-principal
relationship existed, without regard to any other agreement or filing, or lack
thereof.” Docket 54 at ¶ 57. Plaintiffs have offered no facts to counter the
Novotny affidavit.
Moreover, there are no filings with the South Dakota Insurance
Commission stating that the Wingert Insurance broker was Union’s agent.
SDCL 58-30-175 states that an individual is an insurance company’s agent if
the company appointed the person as its agent, and SDCL 58-30-176
requires an individual to file a notice of appointment with the state in order
to be an insurance company’s agent. Beyond plaintiffs’ bare assertion of the
basic agency rule and a statement that the court should view the facts in the
light most favorable to them, plaintiffs neither dispute the facts on agency as
offered by Union nor offer any contrary facts. The court has read the entire
record and has found no facts indicating that the Wingert broker was
Union’s agent.
In response to a summary judgment motion, the nonmoving party may
not merely rest upon allegations or denials in its pleadings, but must set
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forth specific facts by affidavits or otherwise showing that a genuine issue of
material fact exists. Forrest v. Kraft Foods, Inc., 285 F.3d 688, 691 (8th Cir.
2002) (citing Rose-Maston v. NME Hosps., Inc., 133 F.3d 1104, 1107 (8th Cir.
1998)); see also Rasmussen, 734 N.W.2d at 356 (“[W]e determine whether the
moving party has demonstrated the absence of any genuine issues of
material fact and showed entitlement to judgment on the merits as a matter
of law.”).
Plaintiffs allege that the Wingert broker is Union’s agent, but the only
facts concerning the existence of an agency relationship are that the Wingert
broker solicited policies on behalf of Union. In North Star Mutual Insurance
Co. v. Rasmussen, 734 N.W.2d 352 (S.D. 2007), the South Dakota Supreme
Court held that a broker who solicited policies on behalf of multiple
insurance companies was an agent of the insured, not the insurer. Id. at
363. The court reasoned that “ ‘whether an insurance broker is the agent of
the insurer or the insured depends on the facts of the particular case.’ ” Id.
(quoting Electro Battery, 762 F. Supp. at 848). While this determination is
usually for the fact-finder, if the relevant facts are not disputed, then the
court can determine, as a matter of law, whether the broker is the insurance
company’s agent. Id. (citations omitted).
In North Star Mutual, there was no dispute that the insurance broker
solicited insurance policies for several insurance companies. Id. When the
insured called the broker to inquire about an umbrella insurance policy for a
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recent purchase, he asked the broker “to examine all possible sources of
coverage and to procure insurance.” Id. The broker was free to negotiate with
multiple insurance companies and was not restricted to choose a specific
insurance policy. Id. Additionally, the broker never had actual authority to
bind the insurance company to an umbrella policy. Id. Based on these facts,
the South Dakota Supreme Court determined that the broker was not the
insurance company’s agent. Id.
The facts here are similar. The Wingert broker appears to have had the
ability to solicit policies from multiple insurance companies on behalf of
plaintiffs. Plaintiffs had multiple insurance policies from varying companies.
See Docket 36-1 at 13-14 (stating that the umbrella policy covered policies
from Union Insurance Company, Owners Insurance Company, American
Family Insurance Company, Westport Insurance Corporation, and State
Farm Insurance Company). There is no evidence that the Wingert broker was
limited in offering only the Union umbrella policy to plaintiffs.
Additionally, plaintiffs have offered neither an agreement between
Union and the Wingert broker that would establish an actual agency
relationship nor evidence of Union’s words or actions that would
demonstrate that an actual agency relationship existed. Plaintiffs also have
offered no evidence that Union through either its conduct or want of ordinary
care caused plaintiffs to believe that the Wingert broker was Union’s agent.
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Thus, plaintiffs have not proven the existence of either an ostensible or
actual agency relationship between the Wingert broker and Union.
The uncontested facts show that plaintiffs canceled the Owners policy,
and never gave Union written notice that the American Family policy was a
replacement policy for the Owners policy. Further, plaintiffs failed to prove
that an agency relationship existed between the Wingert broker and Union,
so even if plaintiffs or the Wingert broker replaced the American Family
policy for the Owners policy, Union had no knowledge of the replacement.
Without an agency relationship, a replacement cannot be imputed to Union.
Because no genuine issues of material fact exist on whether the American
Family insurance policy was listed on the underlying insurance Declarations
page of the Union policy, summary judgment is granted to Union.
II.
Plaintiffs’ Motion
Plaintiffs move for partial summary judgment on Union’s counterclaim
for declaratory judgment. In the counterclaim, Union contends that due to
the umbrella policy’s “cross suits” provision, Union is entitled to a
declaration that it has no obligation to defend or indemnify plaintiffs against
Kathi’s heirs’ wrongful death action. The court need not address plaintiffs’
partial summary judgment motion because Union’s umbrella policy did not
extend to the American Family policy, and, thus, the applicability of the
“cross suits” provision is irrelevant.
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CONCLUSION
Union moves for summary judgment on all of plaintiffs’ claims.
Summary judgment is appropriate because, as a matter of law, the American
Family policy does not constitute underlying insurance for the Union policy.
Plaintiffs move for partial summary judgment on Union’s counterclaim.
Because Union’s umbrella policy does not extend to the American Family
policy, plaintiffs’ motion is denied. Accordingly, it is
ORDERED that plaintiffs’ motion for partial summary judgment
(Docket 45) is denied, and defendant’s motion for summary judgment
(Docket 33) is granted. Judgment will be entered in favor of defendant.
Dated June 13, 2011.
BY THE COURT:
/s/
Karen E. Schreier
KAREN E. SCHREIER
CHIEF JUDGE
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