Peterson v. The Travelers Indemnity Company et al

Filing 31

Memorandum Opinion and ORDER granting 14 Motion to Dismiss; denying 19 Motion for Partial Summary Judgment. Signed by U.S. District Judge Lawrence L. Piersol on 10/6/2015. (JLS)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA

SOUTHERN DIVISION

FILED

OCT 06 2015

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CIV 14-4145
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PlaintifI;
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vs.
MEMORANDUM OPINION
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AND ORDER
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THE TRAVELERS INDEMNITY CO.,
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GRANTING DEFENDANTS'

d/b/a Travelers; THE PHOENIX
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MOTION TO DISMISS

INSURANCE COMPANY, d/b/a Travelers; *
AND DENYING

THE CHARTER OAK FIRE INSURANCE *
PLAINTIFF'S MOTION FOR

COMPANY, d/b/a Travelers; TRAVELERS * PARTIAL SUMMARY JUDGMENT

PROPERTY CASUALTY COMPANY
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LORI PETERSON,

OF AMERICA, d/b/a Travelers:
THE TRAVELERS INDEMNITY
COMPANY OF CONNECTICUT,
d/b/a Travelers; THE TRAVELERS
INDEMNITY COMPANY OF
AMERICA, d/b/a Travelers; TRAVELERS
CASUALTY INSURANCE COMPANY
OF AMERICA, d/b/a Travelers;
Defendants.

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Before the Court are cross-motions submitted by Plaintiff Lori Peterson and Defendants
(collectively, ''Travelers''). Travelers has moved, pursuant to Federal Ru1es ofCivil Procedure 12{b){6),
to dismiss the Complaint for failure to state a claim. Primarily, Travelers argues that a Commercial Policy
(the Policy) issued by Defendant Charter Oak Fire Insurance Company ("Charter Oak") to Billion Empire
Motors ("Billion") does not offer coverage to Peterson. Alternatively, it argues that even ifthe Policy does
insure Peterson, she failed to notify Travelers per the Policy's requirement. In moving for summary
judgment, Peterson requests the Court hold that she was an insured under the Policy and that she was not
contractually obligated to notify Travelers ofher claim. For the following reasons, Travelers' Motion to
Dismiss is granted. Additionally, Peterson's Motion for Partial Summary Judgment is denied.

BACKGROUND

Peterson was injured in an automobile accident in September 2008 in Minnehaha County, South
Dakota. Prior to the accident, Peterson was on a trip from Custer, South Dakota and was the driver of
a"loaner" vehicle, a "2006 Chrysler PT Cruiser," registered to Billion d/b/a Billion Chrysler-Jeep-Mazda
Thepassengerin the vehicle, Laura Dziadek, has alleged in a separate action that the accident was caused,
at least in part, by Peterson's negligence. All parties have denied liability for the accident. Submissions
contained in the record include an accident report that was prepared bypolice officers responding to the
accident. It is undisputed, however, that Peterson herselfdid not fonnallynotif)rTravelersoftheaccident.

At thetime ofthe accident, Peterson had primary coverage under Progressive Northern Insurance
Companyintheamountof$100,000. The vehicle Petersonwas operating as insured under the Policywith
Charter Oak. The Policyalso named various other affiliates d/b/a "Travelers". Under the Policy, Travelers
agreed to provide insurance through Charter Oak as the named insurer. Based on the Policy, Peterson
alleges that she is owed $5,000 inmedicalpayments as aresuh ofthe accident involving the loaned vehicle
per the "Common Policy Declarations" (the Declarations).

Charter Oak conducted an investigationafierreceiving notice ofpotential loss from Billion's broker
in January 2009. Thereafter, Charter Oak contacted Peterson that same month. Charter Oak also
contacted Progressive Insurance and was infonned ofPeterson' s $100,000 policy. After Charter Oak
commenced its investigation, Peterson, in February2009, contacted a "TechnicalSpecialist," Faith Styles
(Styles), inNaperville, Illinois, to inquire about coverage under the Policy. In response, Styles infonned
Peterson that she was not covered under the Policyand, therefore, was not eligible for medical payments
resulting from the accident. As a result, Peterson did not continue herpursuit ofmedicalpayments under
the Policy until this action was filed on September 12, 2014.

Summary Judgment

The Federal Rules ofCivil Procedure provides that sunnnaryjudgment shall be entered if"there
is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter 0 flaw."
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Fed.R. Civ.P. 56( a). In ruling on a motion for summaryjudgment, the Court is required to view the facts
in the light most favorable to the non-moving party and must give that party the benefit ofall reasonable
inferences to be drawn from the underlying facts. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th
Cir.1987). Themovingpartybearstheburdenofshowingboththeabsenceofagenuineissueofmaterial
fact and its entitlement to judgment as a matter oflaw. Fed.R.Civ.P. 56(c);Anderson v. LibertyLobby,
Inc., 477U.S. 242, 247-48 (1986);MatsushitaElec. Indus. Co. v. Zenith Radio COl]]., 475U.S. 574,

586-87 (1986).

Once the moving party has met its burden, the non-moving party may not rest on the allegations
ofits pleadings but must set forth specific facts, byaffidavit or other evidence, showing that a genuine issue
of material fact exists. Fed.R.Civ.P. 56(e); Anderson, 477 U.S. at 257; City ofMt. Pleasant v.
Associated Elec. Co-op., Inc., 838 F.2d 268,273-74 (8th Cir. 1988). Rule 56(c) "mandates the entry

ofsummaryjudgment, after adequate time for discoveryand uponmotion, against apartywho fuilstomake
a showing sufficient to establish the existenceofanelement essential to that party's case, and onwhichthat
party will bear the burden ofproof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

Failure to State a Claim

In considering a motion under Federal Rule 0 fCivil Procedure 12(b)(6), the factual allegations of
a complaint are assumed true and construed in favor 0 fthe plaintiff: "even ifit strikes a savvy judge that
actual proofofthose facts is improbable." BellAtlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007),
cited in Data Mfg., Inc. v. United Parcel Serv., Inc., 557 F.3d 849, 851 (8th Cir. 2009). "While a
complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a
plaintiff's obligation to provide the'grounds' 0 fhis 'entitlement to relief requires more than labels and
conclusions, and a formulaic recitation ofthe elements ofa cause ofaction will not do." Twombly, 550
U.S. at 555 (internalcitations omitted). The complaint must allege facts, which, when taken as true, raise
more than a speculative right to relief Id. (internalcitations omitted); Benton v. Merrill Lynch & Co., Inc.,
524 F.3d 866, 870 (8th Cir. 2008). Although a plaintiffin defending a motion under Rule 12(b)(6) need
not provide specific facts in support ofits allegations, see Erickson v. Pardus, 551 U.S. 89,93 (2007)
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(percuriam), it must includesufficient factual infonnation to provide the grounds on which her claim rests,
and to raisearighttoreliefaboveaspeculativelevel. Twombly, 550U.S. at 555-556&n. 3. Although
FederalRule ofCivil Procedure 8 maynot require "detailed factual allegations," it "demands more than an
unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroftv. Iqbal, 556 U.S. 662, 678
(2009). What is demanded to survive a motion to dismiss is facial plausibility. Id. Determining whether
a claim has facial plausibility is "a context -specific task that requires the reviewing court to draw on its
judicial experience and common sense." Id. at 679.

DISCUSSION
I. IS PETERSON A COVERED INSURED UNDER THE INSURANCE POLICY?

The parties agree, as they must, that since this is a federal diversity action, South Dakota
substantivelawapplies. See Bell v. A llstate Life Ins. Co., 160F.3d452,455 (8thCir. 1998)("Statelaw
controls the construction ofinsurance policies when a federal court is exercising diversity jurisdiction. ")

In additionto the pleadings, a court determining the scope ofthe claims against an insured may also
consider where appropriate, other evidence ofrecord. AlliedMut. Ins. Co. v. Dakota Rose, Inc., 43
F.Supp.2d 1081, 1084 (D.S.D. 1999) (intemalquotes omitted). A court may consider "materials that are
necessarily embraced by the pleadings" without converting a motion to dismiss to summary judgment.
Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (internal quotations omitted).
In Hawkeye-Security Ins. Co. v. Clifford, 366 N.W.2d 489 (S.D. 1985), the South Dakota Supreme
Court explained that whenever it arguably appears from the pleadings that a claim against the insured is
covered by the insurance policy, "[t]he review ends, even though the pleadings are ambiguous." 366
N. W.2d at 491. The Hawkeye decision went on to state, however, that a court should reach a decision
on the scope 0 fthe claims against an insured after considering, ''when appropriate, other record evidence,"
and cited cases which approved theuse ofevidence outside the pleadings fur that verypurpose.ld. at 492.
The South Dakota Supreme Court has continued to cite this passage ofHawkeye and has indicated its
willingness to consider appropriate evidence outside the pleadings. See North Star Mut. Ins. Co. v.
Kneen, 484 N.W.2d 908, 912 (S.D. 1992). Moreover, this Court has considered the absence of
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evidenceoutsidethepleadingsindeterminingthescopeofcIaimsagainstaninsured.SeeCrnm&Forster
Ins. Co. v. Pacific Employers Ins. Co., 907 F. Supp. 312, 314 (D.S.D. 1995). Accordingly, the Court

will consider the exlnbits submitted by the parties in connection to the Rule 12(b)(6) motion to dismiss.

Interpretation 0 fan insurance contract is a question oflaw. Ass Kickin Ranch, LLC, v. North Star
Mut. Ins. Co., 822 N.W.2d 724, 726 (S.D. 2012) (quoting De Smet Ins. Co. o/S.D. v. Gibson, 552

N.W.2d 98, 99 (S.D. 1996». In South Dakota, "'the scope of coverage of an insurance policy is
determined from the contractual intent and the objectives 0 fthe parties as expressed in the contract. '" Id.
at 727 (quoting St. Paul Fire & Marine Ins. Co. v. Schilling, 520 N.W.2d 884, 887 (S.D. 1994»
(alteration omitted). When an insurer seeks to invoke an insurance policy's exclusion in order to bar a
claimant from coverage, the insurer bears the burden ofproving that the exclusion applies. Id. (quoting
Opperman v. Heritage Mut. Ins. Co., 566 N.W.2d 487, 489 (S.D. 1997»; Employers Mut. Cas. Co.,
Inc. v. State Auto Ins., 623 N.W.2d 462,464 (S.D. 2001) ("The burden ofshowing no duty is on the

insurer. "). "'An insurance contract's language must be construed according to its plain and ordinary
meaning and a court cannot make a forced construction or anew contract for the parties. '" North Star,
822 N.W.2d at 726 (quoting Stene v. State Farm Mut. Auto. Ins. Co., 583 N.W.2d 399, 402 (S.D.
1998».

Thus, when a contract's terms are plain and unambiguous, the tenus' ordinary meanings are to be
applied without judicial construction. See id. (quotingAm. Family Mut. Ins. v. Elliot, 523 N.W.2d 100,
102 (S.D. 1994». See also Munroe v. Continental Western Ins. Co., 735 F.3d 783, 786 (8th Cir.
2013) ("If the policy is unambiguous, it will be enforced as written, absent statutory or policy
considerations."). On the other hand, when contract provisions are ambiguous, the interpretation favoring
coverage for the claimant is to be adopted. North Star, 822 N.W.2d at 726 (quoting Nat'I Sun Indus.,
Inc. v. S.D. Farm Bureau Ins. Co., 596 N.W.2d 45, 48 (S.D. 1999». In order to be found ambiguous,

the contract languagemust be fairly susceptibleto different interpretations and '"[t]he fact that the parties
differ as to the contract's interpretation does not create an ambiguity.'" Id. (quoting Zochert v. Nat'l
Farmer Union Prop. & Cas. Co., 576 N.W.2d 531,532 (S.D. 1998». Finally, contract provisions

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should not be interpreted independent 0 f one another. Instead, a contract should be read as a whole and
courts should endeavor to give effect to all the contract's tenus, "avoiding an interpretation that renders
some provisions useless or redundant." Munroe, 735 F. 3d at 787. See Reisig v. Allstate Ins. Co., 645
N.W.2d 544,550 (Neb. 2002)(citingJohnsonLakesDev. v. Central Neb. Pub. Power, 576 N.W.2d
806 (Neb. 1998» (''The contract must be construoo as a whole, and ifpossible, effect must be given to
every part thereof.").

Both Peterson and Travelers maintain that the plain languageoftheinsurance policy favors their
respective positions. Peterson argues that the plain language calls for coverage and Travelers argues the
converse. The Declarationsofthe Policylists ''BillionEmpire Motor's Inc." asthe ''Named Insured." Doc.
20-t at 2. An Endorsement page lists further other Billion ''Named Insureds." Id. at 6. Next, the
"Coverage Part Declarations" page lists various coverage areas that may or may not be covered by the
Policy. Whether or not a coverage area is covered by the Policy is designated by a "Covered Auto
Symbo~"whichissimplyanumberthatcorrespondswithatypeofvehicleor"auto."

Specifically, ''Item

Two" ofthe Coverage Part Declarations states in part, "Insurance only applies to a coverage for which a
Covered Auto Symbolis shown Coverage applies onlyto those 'autos' shown as covered 'autos'byentry
ofone or more ofthe symbols from Section I -COVERED AUTO oftheGarage Coverage Form." Id.
at 9 (emphasis in original). Listed among four coverage areas is the category ''Medical Payments." Unlike
the three other coverage areas, there is no "Covered Auto Symbof' shownnext to "Medical Payments,"
whichindicates that the Policydoes not includethat coverage area for any"autos."Furtherdownfromthe
Coverage Part Declarations is the "Garage Coverage Form", see id. at 24, which contains the definitions
ofmany ofthe words and phrases contained in the Policy, as well as delineates many ofthe Policy's
conditions and exclusions.

Part A.t.a. ofthe Coverage Part Declarations states, ''We will pay all sums an 'insured' legally
must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies
causedby an' accident' and resUlting from 'garage operations' other than the ownership, maintenance or
use ofcovered 'autos"'.Id. at 26. PartA.3.a. ofthe Coverage Part Declarations lists the persons insured
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underthePolicy. Among those insured includes ''You fur any covered 'auto.'" Id at 27. The parties agree
that ''You'' refers to Billion, the named insured. Doc. 20-1 at 25. See Progressive N. Ins. Co. v.
Argonaut Ins. Co., 20 A.3d 977, 982 (N.H. 2011 )(finding that ''You'' refers to the "Named Insured"

contained in the Declarations ofan insurance policy). The Garage Coverage Form also lists as insured,
"Anyone elsewhile using with your pennission a covered 'auto'youown,hireorborrow[.] Doc. 20-1 at
27. Among those excluded from this "anyone else" category is ''Your customers." An exception to the
exclusion exists, however, for customers who have "no other available insurance" or whose insurance fulls
short of''the compulsory or financial responsibility law limits [.]"Id. at 27-28. No exception similar to the
uninsured and underinsured customer provisionis made fur medical payments fur customers. Thus, inorder
for Peterson to be covered by the Policy, an Endorsement must exist that provides her coverage. The
Policy contains two Endorsements that Peterson arguably fulls under. The first is the "Garage Locations
and Operations Medical Payments Coverage" Endorsement. See id. at 54. The second is the "Auto
Medical Payments Coverage" Endorsement. See id. at 55. Each will be discussed in turn.

First to be discussed is the "Garage Locations and Operations Medical Payments Coverage"
Endorsement ("Garage Endorsement"). The top line of the Garage Endorsement states, ''THIS
ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY." Id. at 54 (emphasis
in original). Below the opening line, it is explained, ''This endorsement modifies insurance provided under
the following[.]" Id. The only coverage form listed as modified by the Garage Endorsement isthe Garage
Coverage Form. Id. The Garage Endorsement continues, "With respect to coverage provided by this
endorsement, theprovisionsofthe Coverage Form apply unless modified by the endorsement." Id. Thus,
the conditions and exclusions detailed within the Garage Coverage Form control unless specificallychanged
by the Garage Endorsement. Travelers argues that because there is no covered auto symbol in the
Declarations for medical payments, the Policy does not offer coverage. In opposition, Peterson argues that
including the Garage Endorsement in the Policy obviates the necessity that the Declarations include a
covered auto symbo 1in order for medical payments to apply. The Garage Endorsement states that the
Garage Coverage Form applies unless modified by the Garage Locations and Operations Medical Payment
Coverage Endorsement. The Garage Locations Endorsement does not provide any coverage for Peterson
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because B. Exclusions states ''This insurance does not apply to: 1. 'Bodily injury' resulting from the
maintenance or use ofany' auto' ." Part C., Limit 0 fInsurance shows that "bodily injury" is the medical
payments coverage. As a result, the Garage Locations Endorsement does not provide coverage for
Peterson.

Next is the "Auto Medical Payments Coverage" Endorsement. Analogous to the Garage
Endorsement, the top line ofthe Auto Medical Payments Coverage states, ''THIS ENDORSEMENT
CHANGES THE POLICY. PLEASE READ IT CAREFULLY." Doc. 20-1 at 55 (emphasis inoriginal).
Several coverage forms are listed as modified by the Auto Medical Payments Coverage, including the
Garage Coverage Form. Id. As with the Garage Endorsement, the Auto Medical Payments Coverage
states, ''With respect to coverage provided by this endorsement, the provisions ofthe Coverage Form
apply unless modified by the endorsement." Id. Thus, the conditions and exclusions detailed within the
GarageCoverageFormcontrolunlessspeciticallychangedbytheAutoMedica1PaymentsCoverage. Part
A. ofthe Auto Medical Payments Coverage states that coverage under the Auto Medical Payments
Coverage includes ''reasonable expenses incurred for necessary medical and funeral services to or for an
"insured" who sustains "bodily injury" caused by an "accident." Id. Part B. then states "Who Is An
Insured" under the Auto Medical Payments Coverage. Included in Part B. is:
1. You while "occupying" or, while a pedestrian, when struck by any "auto".
2. Ifyou are an individual, any "farnilymember" while "occupying" or, while a pedestrian,
when struck by any "auto".
3. Anyone else "occupying" a covered "auto" or a temporary substitute for a covered
"auto". The covered "auto" must be out ofservice because ofits breakdown, repair,
servicing, loss or destruction.

The Auto Medical Payments Coverage Endorsement must be examined for coverage. None of
the Exclusions under part C apply. B.l. provides no coverage as this was a one car accident, not being
struck by another auto. The possibility of coverage arises under part B.3. of''Who Is An Insured".
Peterson is with the first sentenceofB.3. in that she was "occupying" a "covered auto". However, the
covered auto was not "out ofservice because ofits breakdown, repair, servicing or destruction." The
damages to the loaned vehicle and the injurynecessitating medical care for Peterson did not happen until
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the one vehicle accident. Prior to the accident the covered auto was not out of service because ofits
breakdown, repair, servicing, loss or destruction. It is a condition precedent to being an insured that the
covered auto be out of service. The covered auto did not go out ofservice until the accident. Whatever
bodily injury Peterson would have received would have been contemporaneous with whateverunalleged
damage the covered auto presumably received. l Therefore, there is no medical payment coverage
provided for Peterson and Defendants' Motion to Dismiss is granted. Plaintiff's Motion for Partial
Summary Judgment is denied. The case is dismissed with prejudice. Accordingly,
IT IS ORDERED:

1.

That Plaintiff's Motion for Partial Summary Judgment, Doc. 19, is denied.

2.

That Defendants' Motion to Dismiss, Doc. 14, is granted.

3.

That Plaintiff's Complaint is dismissed with prejudice.

,Jl

Dated this _W_ day of October, 2015.
BY THE COURT:

ATTEST:
JOSEPH HAAS, CLERK

BY:

~p£~

United States District Judge

Hiii

~DUTY~

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IIf, for example, the covered auto had broken down and was sitting along the road because ofthe
breakdown, and got hit with its occupant being injured, there would be medical payment coverage.

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