Court: Court of Appeals for the Seventh Circuit; August 16, 2016; Federal Appellate Court
In January 2011, Linda K. Phillips, an employee of Hoker Trucking, LLC, was involved in a fatal accident in Indiana, striking Mike Douglas Robbins’s vehicle, which resulted in Robbins's death. At the time, Phillips was driving a semi-truck owned by Hoker, pulling a trailer borrowed from Lakeville Motor Express, Inc. Lakeville had an insurance policy from Great West Casualty Company covering the trailer. This case centers on a declaratory judgment filed by Great West against Hoker, Phillips, and Pamela Robbins, administratrix of Robbins’s estate, seeking clarification that it is not obligated to indemnify them for liability related to the accident.
The liability of Phillips and Hoker was not contested here, as Robbins's estate had already filed a separate action in state court, and they were indemnified by Hoker's policy. After cross-motions for summary judgment were filed, the district court ruled in favor of Great West, leading to an affirmation of this decision by the appellate court.
The background details reveal that Hoker owned the tractor but borrowed the trailer from Lakeville, which was leasing the trailer from Wren Equipment, LLC. Lakeville had multiple leasing agreements with Wren, including a December 2009 contract that required Lakeville to provide insurance coverage for the trailer, with a minimum coverage of $1,000,000. Lakeville purchased this coverage from Great West and added Wren as an additional insured, but Hoker and Phillips were not included in the policy. Hoker was insured by Northland Insurance Company at the time of the accident.
The Great West insurance policy includes an endorsement ensuring conformance with state laws regarding coverage and limits for states where a Motor Carrier Certificate of Bodily Injury or Property Damage Liability Insurance was filed, specifically in Iowa, Illinois, Minnesota, North Dakota, and Wisconsin. Pamela Robbins, as administratrix of Mike Douglas Robbins' estate, filed a negligence complaint in Indiana against Hoker and Phillips, with Lakeville later dismissed from the case. In February 2013, Great West sought a declaratory judgment to affirm it was not liable to defend or indemnify Hoker or Phillips. After obtaining default judgments against other defendants and amending the complaint, the remaining relevant defendants became Robbins and Wren, who supported Great West's position. Robbins moved for summary judgment in June 2014, which Great West opposed while cross-moving for its own summary judgment. The district court ruled in favor of Great West, finding the policy clearly excluded Hoker and Phillips from coverage. On appeal, Robbins presents three arguments: 1) the policy is ambiguous, necessitating coverage for Hoker and Phillips; 2) even if unambiguous, the exclusions do not apply to them; and 3) the exclusions are invalid under Wisconsin law, where the trailer is registered. The appellate review of the summary judgment is de novo, favoring the party against whom the motion was made, and summary judgment is deemed appropriate if no genuine dispute of material fact exists. The court's jurisdiction is based on diversity of citizenship, applying Indiana's substantive law, including its choice-of-law rules. Although Indiana's rules apply, the parties agree that Minnesota law governs the insurance contract interpretation, which the court accepts for this dispute.
Robbins argues that Great West's insurance policy is ambiguous regarding the exclusion of Hoker and Phillips from coverage. Minnesota courts evaluate insurance policies based on general contract law principles, determining ambiguity as a question of law. A policy is deemed ambiguous if it allows for two or more reasonable interpretations. In assessing this, courts consider the contract's overall purpose rather than isolated phrases. If ambiguity exists, it is resolved in favor of coverage; however, unambiguous language is interpreted according to its plain meaning, with courts unable to create ambiguity to extend coverage. Exclusions that eliminate legally required coverage are not enforceable.
The dispute involves a September 2010 endorsement that modified the policy's definition of "WHO IS AN INSURED." Prior to the endorsement, the policy specified various categories of insured individuals, including the insured and those using covered vehicles with permission, while listing specific exclusions. The endorsement added two categories of insureds, potentially increasing the exclusions under section A.1.b. Great West claims this results in eight exceptions to coverage, while Robbins posits a different interpretation that includes the new categories of insureds without altering the overall structure of exclusions.
Robbins argues that the estate's interpretation of the insurance policy is reasonable as it avoids duplicating numbers and renumbering paragraphs. He asserts that Great West's interpretation forces the reader to overlook existing exclusions in subparagraph A.1.b, which are already numbered. Robbins believes that his interpretation expands the definition of who is considered "insured," aligning with Minnesota law that favors the insured in cases of ambiguity. However, it is noted that no ambiguity exists to challenge Great West's interpretation. The district court agrees that Great West's reading is the only reasonable one, emphasizing that the policy and endorsement should be interpreted from a layperson's perspective, not in a hyper-technical manner. The endorsement explicitly adds two enumerated exclusions to subparagraph A.1.b, and there is no indication that Great West intended to alter the initial part of that subparagraph. Robbins's interpretation is deemed unreasonable as it complicates the policy language and creates redundancy, rendering the endorsement superfluous. Minnesota courts typically reject interpretations that distort the clear meaning of contract language. Furthermore, Robbins's assertion that the exclusions independently exclude individuals from coverage is viewed as redundant given that those individuals were already covered under the policy prior to the endorsement.
The policy exclusions are not entirely redundant, as there are scenarios where they apply differently. For instance, an independent contractor transporting goods for Lakeville may not fall under the first policy exclusion unless there is a trailer interchange agreement in place. Even with some overlap, Great West's interpretation of the policy remains valid and aligns with standard practices in insurance to outline exclusions comprehensively.
Robbins argues that neither Hoker nor Phillips are excluded from coverage due to two reasons: the trailer involved in the accident was not covered by a written trailer interchange agreement, and it was in use for Lakeville's business. Upon examination, Robbins is correct regarding the lack of evidence for a written agreement. The evidence presented by Great West includes a 2006 agreement between unspecified parties and Robbins's own admission, which does not clarify whether the agreement was written or oral. Consequently, there remains a genuine issue of material fact regarding the existence of a written trailer interchange agreement, indicating that Great West has not provided sufficient evidence to support its exclusion claim.
The Great West insurance policy endorsement excludes coverage for Hoker and Phillips as they 'rented' or 'borrowed' an 'auto' (specifically a trailer) for use in a business that is not Lakeville's. It is uncontested that the trailer qualifies as an 'auto' under the policy. Robbins’ discovery responses confirm that Hoker and Phillips did 'rent' or 'borrow' the trailer. The terms 'rent' and 'borrow' are defined by common dictionary meanings, with 'rent' indicating an agreement to pay for use, and 'borrow' indicating temporary possession with intent to return. Robbins acknowledged that the trailer was used under a Trailer Interchange Agreement with Lakeville, which permitted Hoker to use the trailer in exchange for payment, establishing that Hoker 'rented' and 'borrowed' the trailer.
The determination then shifts to whether the trailer was used in a business other than Lakeville’s. While it is accepted that the trailer was used in Hoker’s freight-moving business, the estate argues it also served Lakeville’s business simultaneously. Citing a Minnesota case, Scottsdale Insurance Company v. Transport Leasing/Contract, Inc., the estate claims that simultaneous use requires evidence of operational control by the insured entity. However, no evidence was presented showing that Lakeville had day-to-day control over Hoker’s operations or drivers. The language of the trailer interchange agreement, which Robbins uses to argue control, does not substantiate Lakeville's operational influence over Hoker. The conclusion drawn from the evidence is that Hoker used the trailer solely for its own business, not Lakeville’s. Consequently, Hoker and Phillips are excluded from coverage under the Great West policy.
Wisconsin law, specifically Wis. Stat. 632.32, mandates that insurance policies must provide coverage to permissive users of motor vehicles described in the policy. Robbins argues that Hoker and Phillips should be covered under the Great West policy due to this statute, claiming compliance since Great West filed a certificate of insurance with the Wisconsin Department of Transportation. However, this interpretation is countered by Wisconsin case law. In Biasing v. Zurich Am. Ins. Co., the court established that the permissive user requirement is imposed on all automobile insurance contracts issued in Wisconsin. In Danielson v. Gasper, the court ruled that a policy issued to a Minnesota resident did not have to comply with Wisconsin statutes since it was delivered in Minnesota. Similarly, since Great West's policy was issued and delivered to Lakeville, a Minnesota company, it does not fall under Wisconsin's statutory requirements. Robbins's argument that filing a certificate equates to delivering a policy is flawed, as the terms are not interchangeable. The court maintains that 'delivered' refers specifically to the policyholder receiving the actual policy, not merely filing a certificate. Thus, Robbins's claims do not align with established Wisconsin precedent.
Robbins argues that the trailer's registration in Wisconsin is significant in relation to the insurance policy in question, asserting that the policy must comply with Wisconsin laws, specifically the statutory requirement for coverage of permissive users under Wis. Stat. 632.32. Robbins cites *Amery Motor Co. v. Corey* as precedent, where an insurance policy was invalidated for not conforming to Wisconsin statutes despite being issued in another state. However, the court clarifies that the Great West policy lacks a specific endorsement incorporating Wisconsin law, containing only a general provision to comply with motor carrier laws in states where the certificate is filed, which includes multiple states and does not imply unconditional adherence to Wisconsin law.
Furthermore, Robbins references Wis. Stat. 194.41 to imply a permissive user requirement in the Great West policy. Nonetheless, the court determines that this statute does not apply to Lakeville's policy due to an exception for carriers registered under the unified carrier registration system, which Lakeville was at the time of the accident. Lakeville's compliance with registration requirements and the absence of contradictory evidence from Robbins enable the court to conclude that the Great West policy is not subject to Wisconsin’s insurance requirements.
In Sisson v. Hansen Storage Company, the Wisconsin Court of Appeals concluded that Wis. Stat. § 194.41 did not invalidate an exclusion in an insurance policy because the insured had registered under Iowa’s unified carrier registration system. The court reasoned similarly to exempt the Great West policy in the current case from § 194.41. Robbins argued against this exemption by referencing an unpublished Fifth Circuit ruling that invalidated an exclusion in a Great West policy for a Wisconsin company. However, this case differs as the Great West policy in question was issued to a Minnesota-based company, and no evidence suggested that the Wisconsin company registered under another state’s unified carrier registration system. Robbins further cited Mullenberg v. Kilgust Mechanical, Inc. to assert that insurance policies must conform to the laws of any state where they are certified, regardless of where an accident occurs. The court rejected this interpretation, noting that Mullenberg's ruling did not support Robbins’s claim and that it was absurd to allow selection of the most favorable state law without connection to that state. Additionally, Robbins suggested that the focus should be on Wren, a rental company, regarding § 194.41's application. The court clarified that while the statute applies to rental companies, it does not require both the motor carrier and rental company to hold an approved insurance certificate. The facts indicated that Lakeville was responsible for the registration and operation of the trailer prior to the accident, leading to the conclusion that the registration application pertained to Lakeville’s use.
Wren is not considered the owner of the vehicle under Wis. Stat. 194.41, as Lakeville is identified as the primary lessee, which assumes ownership for legal liabilities and control over the vehicle. The lease agreement grants Lakeville full responsibility, including insurance. Consequently, Lakeville and the Great West policy are excluded from the application of 194.41, affirming the district court’s judgment. Northland’s insurance policy has a limit of $1,000,000 per occurrence, while Great West's limit is $5,000,000. Continental Western Insurance Company, which provided coverage for the vehicle driven by Michael Robbins at the time of the accident, has chosen not to appeal. Robbins claims the Great West exclusion is ambiguous regarding simultaneous use by two parties, citing Canal Insurance Company v. Great West Casualty Company. However, the court clarifies that ambiguity does not automatically grant coverage; Robbins must demonstrate that the trailer was being used simultaneously, which she fails to do. Unlike Canal Insurance, where there was evidence of control over the vehicle, there is no indication that Lakeville controlled the trailer while it was with Hoker. The Wisconsin Supreme Court did not address whether Wis. Stat. 194.41 includes the Omnibus Statute, which pertains to insurance policy compliance outside Wisconsin.
