Acuity v. Extreme Lawns, LLC

480 F.Supp.3d 908

ACUITY, a Mutual Insurance Company, Plaintiff,

v.EXTREME LAWNS, LLC; Michael Velde; Susan A. Warren ; and Joseph Kloster, as Trustee for the heirs and next of kin of Tiffany Kloster, Deceased, Defendants.

Case No. 19-cv-0025 (WMW/ECW)

United States District Court, D. Minnesota.

Signed August 19, 2020

Stephen M. Warner, Arthur, Chapman, Kettering, Smetak & Pikala P.A., Minneapolis, MN, for Plaintiff.

Patricia Yoedicke, Philip L. Sieff, Scott G. Johnson, Robins Kaplan LLP, Minneapolis, MN, for Defendants.

ORDER

Wilhelmina M. Wright, United States District Judge

This matter involves an insurance-coverage dispute between Plaintiff ACUITY, A Mutual Insurance Company (Acuity), and Defendant Joseph Kloster. Before the Court are the parties’ cross-motions for summary judgment. (Dkts. 18, 22.) For the reasons addressed below, the Court grants Kloster's motion for summary judgment and denies Acuity's motion for summary judgment.

BACKGROUND

The material facts of this case are not in dispute. Defendant Extreme Lawns, LLC, is a limited liability company that is engaged in the business of providing lawn care services. The sole members of Extreme Lawns are Defendant Michael Velde and his wife, Toni Warren. Extreme Lawns has no employees, and Velde performs all of the lawn care work for Extreme Lawns.

In 2012, Velde purchased a 2012 Ford F-150 pickup truck (the pickup truck) and Defendant Susan A. Warren, who is Toni Warren's mother, co-signed for the loan. As listed on the title, Velde and Susan Warren are the only owners of the pickup truck. Toni Warren made payments on the loan with funds from both her personal account and the Extreme Lawns business account. Extreme Lawns included the loan payments as a business expense on its tax returns. Extreme Lawns paid for the fuel for the pickup truck and the pickup truck was the only vehicle used in Extreme Lawns’ business.

On October 17, 2018, Velde was driving the pickup truck to a business meeting with an Extreme Lawns client when he collided with a motorcycle operated by Tiffany Kloster, who died as a result of the collision. The parties stipulate that Extreme Lawns is vicariously liable for the acts of Velde in connection with the collision. When the collision occurred, Extreme Lawns was the named insured of an insurance policy issued by Acuity for the period of May 1, 2018 to May 1, 2019.

The Acuity policy provides coverage generally for business liability and medical expenses, but the policy contains a coverage exclusion for any bodily injury or property damage arising out of the ownership, maintenance, or use of any auto. Extreme Lawns purchased a Hired Auto and Nonowned Auto Liability Endorsement that modifies the policy to restore some coverage for auto liability. Relevant to this dispute, the endorsement provides:

HIRED AUTO AND NONOWNED AUTO LIABILITY

***

1. Insurance is provided as stated below.

a. Hired Auto Liability

The insurance provided under the Liability and Medical Expenses Coverages Section, paragraph 1, Business Liability, applies to bodily injury ... arising out of the maintenance or use of a hired auto by you or your employees in the course of your business.

b. Nonowned Auto Liability

The insurance provided under the Liability and Medical Expenses Coverages Section, paragraph 1, Business Liability, applies to bodily injury arising out of the use of any nonowned auto in your business.

2. For insurance provided by this endorsement only:

a. The exclusions under Paragraph 1, Applicable to Business Liability Coverage, other than exclusions a, b, d, f and i and the Nuclear Energy Liability Exclusion, are deleted ...

b. Who is an Insured is replaced by the following:

Each of the following is an insured under this endorsement to the extent set forth:

(1) You for any covered auto.

(2) Anyone else while using with your permission a covered auto you lease, hire, rent or borrow except:

(a) The owner or anyone else except from whom you lease, hire, rent or borrow a covered auto. This exception does not apply if the covered auto is a trailer connected to a covered auto you own.

(b) Your employee if the covered auto is owned by that employee or a member of his or her household.

***

(e) A ... member (if you are a limited liability company) for a covered auto owned by him or her or a member of his or her household.

3. The following additional definitions apply:

***

c. "Hired Auto " means only those autos you lease, hire, rent or borrow. This does not include any auto you lease, hire, rent or borrow:

(1) From any of your employees , ... members (if you are a limited liability company) or members of their households;

***

d. "Nonowned Auto " means only those autos you do not own, lease, hire, rent or borrow that are used in connection with your business. This includes autos owned by your employees, ... members (if you are a limited liability company) or members of their households but only while used in your business.

Extreme Lawns paid a premium of $168 for the Hired Auto and Nonowned Auto Liability coverage, which represents 18.3 percent of the total premium. Acuity provided Extreme Lawns two Policyholder Identification cards that state:

Policy Number [Redacted]

Policy Period 05-01-18 To 05-01-19

Named Insured EXTREME LAWNS

Your Agency BEARENCE MANAGEMENT GROUP 651.379.7800

Your Car HIRED AND NONOWNED AUTOS

The policyholder identification cards also directed Extreme Lawns to "keep one card in your vehicle at all times."

Extreme Lawns requested from Acuity liability coverage under the policy as to claims arising from the October 17, 2018 motor vehicle collision. Acuity denied coverage on December 26, 2018, asserting that the pickup truck did not meet the definition of "nonowned auto" because Extreme Lawns "borrowed" the pickup truck from its registered owners. Extreme Lawns subsequently assigned its claim under the Acuity policy to Defendant Joseph Kloster, as Trustee for the heirs and next of kin of Tiffany Kloster.

Acuity commenced this declaratory judgment action on January 4, 2019, seeking a declaration that it has no duty to defend or indemnify Extreme Lawns against liability claims arising out of the October 17, 2018 collision and, therefore, that Joseph Kloster is not entitled to recover under the Acuity policy for claims of wrongful death arising out of the collision. Upon stipulation, the Court dismissed Extreme Lawns, Velde, and Susan Warren without prejudice from this action. Kloster filed a counterclaim for declaratory relief, seeking a declaration that the "nonowned auto" liability coverage applies to his claim against Acuity arising out of the collision that resulted in the death of Tiffany Kloster. Acuity and Joseph Kloster now cross-move for summary judgment.

ANALYSIS

Summary judgment is proper when the record before the district court establishes that there is "no genuine dispute as to any material fact" and the moving party is "entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A genuine dispute as to a material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Courts construe the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party. See Young v. United Parcel Serv., Inc. , 575 U.S. 206, 135 S. Ct. 1338, 1347, 191 L.Ed.2d 279 (2015). A nonmoving party asserting that a fact is genuinely disputed must cite "particular parts of materials in the record" that support the assertion. Fed. R. Civ. P. 56(c)(1)(A). The nonmoving party may not "rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial." Krenik v. Cty. of Le Sueur , 47 F.3d 953, 957 (8th Cir. 1995) (internal quotation marks omitted). Insurance coverage disputes ordinarily may be resolved on summary judgment based on the court's interpretation of the disputed insurance policy provisions. See, e.g. , Secura Ins. v. Horizon Plumbing, Inc. , 670 F.3d 857, 860–61 (8th Cir. 2012) ; Kresse v. Home Ins. Co. , 765 F.2d 753, 754–55 (8th Cir. 1985).

The interpretation of an insurance policy is governed by state law. Progressive N. Ins. Co. v. McDonough , 608 F.3d 388, 390 (8th Cir. 2010). Under Minnesota law, "[t]he interpretation of an insurance policy, including the question of whether a legal duty to defend or indemnify arises, is one of law." Midwest Fam. Mut. Ins. Co. v. Wolters , 831 N.W.2d 628, 636 (Minn. 2013). Subject to statutory laws of Minnesota, general principles of contract interpretation apply to insurance policies. Lobeck v. State Farm Mut. Auto. Ins. Co. , 582 N.W.2d 246, 249 (Minn. 1998) ; Progressive Specialty Ins. Co. v. Widness , 613 N.W.2d 781, 783 (Minn. Ct. App. 2000). When a state's highest court, here the Minnesota Supreme Court, has not decided an issue, this Court predicts how the state's highest court would resolve that issue. Minn. Supply Co. v. Raymond Corp. , 472 F.3d 524, 534 (8th Cir. 2006).

The goal of insurance policy interpretation is to give effect to the parties’ intent. Nathe Bros. v. Am. Nat'l Fire Ins. Co. , 615 N.W.2d 341, 344 (Minn. 2000). The Court construes the terms of the policy as a whole "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). Unambiguous language in an insurance policy is given its usual and accepted meaning. McDonough , 608 F.3d at 390–91 (citing Lobeck , 582 N.W.2d at 249 ). The language of an insurance policy is ambiguous only if it is susceptible of more than one reasonable interpretation. Eng'g & Constr. Innovations, Inc. v. L.H. Bolduc. Co. , 825 N.W.2d 695, 705 (Minn. 2013). Extrinsic evidence of intent shall not be used to create ambiguity where no such ambiguity exists on the face of the policy. In re Hennepin...