United States District Court, D. Minnesota
OCCIDENTAL FIRE & CASUALTY COMPANY OF NORTH CAROLINA, Plaintiff,
INTERSTATE RISK PLACEMENT, INC., Defendant and Third-Party Plaintiff,
OLSON INSURANCE AGENCY, INC.; and MARY OERTLI, Third-Party Defendants.
Patrick J. Larkin, LIND, JENSEN, SULLIVAN & PETERSON,
P.A., for plaintiff Occidental Fire & Casualty Company of
E. Sonnesyn and Beth L. LaCanne, TOMSCHE, SONNESYN &
TOMSCHE, P.A., for defendant and third-party plaintiff
Interstate Risk Placement, Inc.
Schueler and Jennifer M. Peterson, DUNLAP & SEEGER, P.A.,
for third-party defendants Olson Insurance Agency, Inc., and
Patrick J. Schiltz United States District Judge
Occidental Fire & Casualty Company of North Carolina
(“Occidental”) is an insurance company. Defendant
Interstate Risk Placement, Inc. (“Interstate”)
served as Occidental's general agent, with authority to
issue policies on Occidental's behalf. In August 2008,
Interstate issued a liability policy to a trucker named
Thomas Hipp, who purchased the policy through his agents,
third-party defendants Olson Insurance Agency, Inc. and Mary
Oertli (collectively “Olson”). Consistent with
his longstanding practice, Hipp asked for $500, 000 in
coverage, and everyone involved in the transaction-Hipp,
Olson, Interstate, and Occidental-intended that the coverage
limits of Hipp's policy be $500, 000.
later, Hipp was involved in a collision in which the other
driver was killed. In the wake of the accident, Hipp's
insurance policy was closely examined, and a typographical
error was discovered: Hipp's coverage limits were
incorrectly identified as $1 million in one of the
endorsements. Hipp's coverage limits were correctly
identified as $500, 000 in the declarations page, in the
certificate of insurance issued to Hipp, and in every other
document related to the policy.
typographical error proved costly to Occidental. In later
coverage litigation, Hipp's policy was found to be
ambiguous because of the typographical error, that ambiguity
was resolved against Occidental, and Occidental was ordered
to pay $1 million to the estate of Hipp's victim.
Occidental then filed this lawsuit against Interstate.
Occidental argues that Interstate is responsible for the
typographical error; that, but for the error, Occidental
would have owed the estate of Hipp's victim only $500,
000; and that Interstate must now indemnify Occidental for
the extra $500, 000 under the terms of the agency agreement
between the parties.
admits that it is responsible for the typographical error;
that the error was a but-for cause of $500, 000 in damages to
Occidental; and that, as a general matter, Interstate is
contractually obligated to indemnify Occidental for damages
caused by Interstate's errors. Interstate argues,
however, that Occidental cannot recover the extra $500, 000
from Interstate because Occidental failed to reasonably
mitigate its damages. Specifically, Interstate contends that
the lawyer who represented Occidental in the coverage
litigation failed to competently argue that coverage was
limited to $500, 000 under the reasonable-expectations
doctrine-that is, Minnesota case law holding that an
ambiguous insurance policy cannot be construed to provide
coverage that is “beyond the reasonable expectations of
the insured.” Rusthoven v. Commercial Standard Ins.
Co., 387 N.W.2d 642, 645 (Minn. 1986). Had the lawyer
done so, Interstate contends, Occidental would not have been
ordered to pay the extra $500, 000 to the estate of
matter is before the Court on the parties'
summary-judgment motions. For the reasons that follow, the
Court agrees with Interstate that Occidental failed to act
reasonably in mitigating its damages, and the Court therefore
finds that Interstate is not required to indemnify Occidental
for the extra $500, 000. Instead, the Court finds that
Interstate is required to indemnify Occidental only for the
amount of attorney's fees that Occidental incurred in
litigating the question of whether the coverage limits of
Hipp's policy were $500, 000 or $1 million.
Court takes no pleasure in its holding. Occidental was poorly
served by Interstate, which necessitated Occidental's
involvement in coverage litigation in the first place.
Occidental was then poorly served by the attorney who
represented it in that coverage litigation, which resulted in
Occidental having to pay $1 million to the estate of
Hipp's victim when it should have had to pay only $500,
000. Ultimately, however, Occidental is responsible for the
mistakes of its agents.
is an insurance company owned by IAT Insurance Group.
Lindemann Dep. 15. Occidental offers a variety of insurance
products, including liability insurance for commercial
truckers. Cf. Lindemann Dep. 181.
is an insurance agency. It issues insurance policies on
behalf of Occidental and other insurance companies. Sutton
Dep. 29-30, 41. For many years, Interstate operated as a
managing general agent for Occidental. Sutton Dep. 17-18;
Lindemann Dep. 16. Occidental authorized Interstate to
“receive and accept proposals for insurance; to effect,
issue, countersign and deliver” insurance policies for
Occidental; to “collect” and
“receive” premiums for those policies; and
“to cancel or non-renew” those policies at its
discretion. Larkin Aff. Ex. 1 at 1. Interstate was paid a
commission for its services, and Interstate agreed to
indemnify Occidental “for any damages resulting
directly or indirectly from any . . . breach of
[Interstate's] obligations, acts or omissions under this
Agreement, whether intentional or not.” Id. at
is an insurance broker and retail agent owned by Oertli.
Oertli Dep. 22; Fuller Dep. 17, 19, 22; Lindemann Dep. 16.
Olson worked with general agents such as Interstate to place
insurance coverage for commercial truckers. Oertli Dep.
24-25; Sutton Dep. 41. When a new policy was issued to a
trucker by Interstate on behalf of Occidental, Olson would
receive a courtesy copy of that policy, and Olson would send
a copy of the insurance certificate to the trucker. Olson
would also collect premiums from the trucker and remit those
premiums to Interstate. Oertli Dep. 117, 135-40, 148-49.
a trucker who hauled cargo for Airline Transportation
Specialists, Inc. (“ATS”). ATS purchased
insurance from Great West Casualty Company (“Great
West”), and that insurance covered Hipp when he was
acting on behalf of ATS. Occidental Fire & Cas. Co.
of N.C. v. Soczynski, No. 11-CV-2412 (JRT/JSM), 2013 WL
101877, at *1-3 (D. Minn. Jan. 8, 2013) (Occidental
I), aff'd, 765 F.3d 931 (8th Cir. 2014).
ATS also required Hipp to purchase “bobtail”
insurance coverage-that is, insurance that covered Hipp when
he was driving his truck for personal reasons. Id.;
Lindemann Dep. 25-26.
Hipp purchased bobtail insurance
from Occidental in 2003 and every year thereafter, always
seeking and always receiving $500, 000 in coverage. Hipp Dep.
13-21; Oertli Dep. 45-61. In August 2008, Hipp renewed his
insurance for the period August 1, 2008, to August 1, 2009.
Oertli Dep. 61-63. As usual, Hipp asked for $500, 000 of
coverage. Hipp Dep. 22-24. As usual, Hipp paid for $500, 000
of coverage. Lindemann Dep. 26, 54, 86, 93, 100. And as
usual, Hipp thought that he had received $500, 000 of
coverage. Hipp Dep. 24. Indeed, everyone involved in
the transaction-Hipp, Olson, Interstate, and
Occidental-believed that Hipp had received $500, 000 in
coverage. Hipp Dep. 24 (Hipp); Oertli Dep. 77-78, 80-82,
130-32 (Olson); Sutton Dep. 88-89, 103, 106-07, 127
(Interstate); Fuller Dep. 45-48, 73-74 (Interstate);
Lindemann Dep. 205-06 (Occidental).
declarations page of Hipp's policy correctly identified
the coverage limits as $500, 000, as did the certificate of
insurance issued to Hipp and various other documents issued
in connection with the policy. Hipp Dep. 21; Oertli Dep.
56-68; Sutton Dep. 103; Lindemann Dep. 80-81. But one of the
endorsements to the policy incorrectly identified the
coverage limits as $1 million. Oertli Dep. 77-78. That was a
mistake. It is undisputed that “everybody thought this
was a $500, 000 policy, ” and “it should have
been a $500, 000 policy but for the mistake that
happened.” Sutton Dep. 89.
March 2009, Hipp was driving his truck when he crossed the
center line of a two-lane road and crashed into an SUV driven
by Amy Soczynski. Occidental I, 2013 WL 101877, at
*4. Soczynski was killed. Her estate sued ATS (insured by
Great West) and Hipp (insured by Great West and Occidental)
in state court. Great West tendered its policy limits of $1
million to the estate, but Occidental denied coverage,
arguing that, at the time of the accident, Hipp was driving
on behalf of ATS and therefore was not covered under the
brought a declaratory-judgment action against Soczynski's
estate and Hipp, seeking a declaration that its bobtail
policy did not provide any coverage to Hipp in connection
with the accident that killed Soczynski. The estate moved for
summary judgment that Hipp was covered by Occidental's
bobtail policy at the time of the accident. The estate also
sought summary judgment that the policy limits were $1
million. The estate argued that the typographical error
created an ambiguity regarding the amount of coverage and
that the ambiguity had to be resolved against Occidental.
responding to the estate's summary-judgment motion,
Occidental devoted almost its entire brief to arguing that
Hipp was not covered at all by the bobtail policy
because he was working for ATS at the time of the accident.
Occidental devoted just two paragraphs-comprising less than
one page of its brief-to arguing that if Hipp was
covered, the coverage limits were $500, 000. Case No.
11-CV-2412, ECF No. 21 at 6. In those two paragraphs,
Occidental argued simply that because the policy limits were
identified as $1 million only once in an endorsement, and
because the policy limits were identified as $500, 000 on the
declarations page, on the certificate of insurance issued to
Hipp, and in other documents related to the policy,
“[t]he only reasonable reading of the Occidental Policy
is that the limit of coverage is $500, 000.”
Occidental did not argue-even in the alternative-that under
Minnesota law, the result of any construction of an ambiguous
policy “must not be beyond the reasonable expectations
of the insured.” Rusthoven, 387 N.W.2d at 645.
And Occidental did not submit any admissible evidence
regarding Hipp's expectations. Indeed, even though Hipp
was deposed twice, Occidental failed to ask him a single
question about his expectations.
John R. Tunheim granted the estate's summary-judgment
motion. Almost all of Judge Tunheim's lengthy order was
devoted to explaining why he found that Hipp was covered
under the Occidental policy at the time of the accident.
Occidental I, 2013 WL 101877, at *1-15. But in two
brief paragraphs at the end of his order, Judge Tunheim found
that the coverage limits of the Occidental policy were $1
million, not $500, 000. Judge Tunheim's analysis was
perfunctory, reflecting the perfunctory manner in which
Occidental had briefed the issue:
The inconsistencies in the policy create an irreconcilable
conflict and render the policy ambiguous. See
Rusthoven, 387 N.W.2d at 644-45. The Court construes
this ambiguity in favor of Hipp and concludes that the
Occidental policy limit is $1, 000, 000. See Id. at
645. The Court further concludes that construing the
Occidental policy to provide liability coverage of $1, 000,
000 does not exceed the reasonable expectations of Hipp.
See Id. (concluding that resolving a conflict
between liability limits of $25, 000 and $1, 675, 000 in
favor of the larger limit did not exceed the reasonable
expectations of the insured).
Id. at *15.
in support of his conclusion “that construing the
Occidental policy to provide liability coverage of $1, 000,
000 does not exceed the reasonable expectations of Hipp,
” Judge Tunheim did not cite a single piece of evidence
about Hipp's expectations, no doubt because the record
did not contain a single piece of evidence about Hipp's
expectations. Instead, Judge Tunheim cited
Rusthoven, a case in which the Minnesota Supreme
Court found a policy to be ambiguous because it identified
two different coverage limits, resolved the ambiguity in
favor of the higher limits, and in a single sentence declared
that the higher limits did not ...