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Auto-Owners Insurance Co. v. Kammerer

United States District Court, D. Minnesota

April 26, 2019

Auto-Owners Insurance Company, Plaintiff,
Laura Kammerer and Frank Kammerer, Defendants, and J.M., a minor, through her mother and natural guardian, Jacqueline Macha, Intervenor Defendant.

          Gerald H. Bren and Olivia A. Moe, Fisher Bren & Sheridan, LLP, Minneapolis, MN, for plaintiff Auto-Owners Insurance Company.

          Matthew J. Barber, Alicia N. Sieben, James S. Ballentine, Schwebel Goetz & Sieben, P.A., Minneapolis, MN, for intervenor defendant J.M.


          Eric C. Tostrud United States District Court

         This case is about insurance coverage for injuries from a dog bite. The answer to the coverage question depends on whether a term appearing in the relevant policy in bold text-“insured”-means the same thing or something different when it appears in the policy in plain text-“insured.” Plaintiff Auto-Owners Insurance Company says the word unambiguously has the same meaning regardless of whether it appears in bold or plain text and that, as a result, there is no coverage for dog-bite injuries sustained by intervenor defendant J.M. J.M. says the opposite, and she has intervened and moved to dismiss Auto-Owners' complaint under Federal Rule of Civil Procedure 12(b)(6). J.M.'s motion will be granted because the Auto-Owners policy is at least ambiguous about whether it uses the word “insured” to mean different things depending on whether it appears in bold or regular text, and Minnesota law requires that ambiguity to be construed against Auto-Owners. Auto-Owners' complaint for declaratory relief based on its interpretation of the policy is therefore implausible.


         The facts of this case are few and straightforward. Defendants Laura and Frank Kammerer asked J.M. to care for their two dogs while the Kammerers were away. Compl. ¶¶ 8-11 [ECF No. 1]. J.M. was caring for the dogs in the Kammerers' home on December 31, 2016, when one of them bit her multiple times, causing injuries. Id. ¶¶ 12-13. At that time, the Kammerers were covered under the Auto-Owners homeowners policy, and the policy provided personal-liability protection. Id. Ex. B (“Policy”) at 9, 25-30 [ECF No. 1-2].

         The Kammerers notified Auto-Owners of the incident on January 3, 2017. Compl. ¶ 13; Id. Ex. A [ECF No. 1-1]. On April 26, 2018, J.M.'s attorney sent a demand letter to Auto-Owners. Id. ¶ 14. Auto-Owners sent the Kammerers a “reservation-of-rights” letter on June 28, 2018. Id. Ex. C [ECF No. 1-3]. In the letter, Auto-Owners wrote that it would defend the Kammerers against J.M.'s claims subject to a reservation of rights but added: “Please be advised that the Auto-Owners Policy does not apply to ‘bodily injury or personal injury to any insured.' If Claimant is an insured under the Policy, then no coverage exists under the Policy.” Id. at 1, 6 (bold text in original). (The letter's reference to “insured” in plain text in the first quoted sentence followed by its reference to “insured” in bold text in the second presaged the central issue in this case.) Auto-Owners filed this case in July 2018 against the Kammerers seeking a declaration under the federal Declaratory Judgments Act, 28 U.S.C. § 2201, that the policy does not cover J.M.'s claim.[1]See Compl. ¶¶ 18-22; Id. at 6. J.M. intervened by stipulation and then moved to dismiss for failure to state a claim.



         Several settled legal rules govern consideration of J.M.'s Rule 12(b)(6) motion and interpretation of the policy. The complaint's factual allegations and reasonable inferences from those allegations must be accepted as true. Gorog v. Best Buy Co., 760 F.3d 787, 792 (8th Cir. 2014) (citation omitted). The complaint must “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Parties agree that Minnesota law controls interpretation of the policy, and this makes sense. The case is in federal court on the basis of diversity. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). The policy was issued in Minnesota, and no relevant fact is alleged to have occurred outside Minnesota. Under Minnesota law, “[g]eneral principles of contract interpretation apply to insurance policies.” Carlson v. Allstate Ins. Co., 749 N.W.2d 41, 45 (Minn. 2008) (citation omitted). “Interpretation of an insurance policy is a question of law. Unambiguous language is given its plain and ordinary meaning. Ambiguous language is construed against the insurer. While the insured bears the initial burden of demonstrating coverage, the insurer carries the burden of establishing the applicability of exclusions.” C.S. McCrossan Inc. v. Fed. Ins. Co., No. 16-cv-3379, 2018 WL 2180256, at *7 (D. Minn. Mar. 29, 2018) (cleaned up) (quoting and citing Travelers Indem. Co. v. Bloomington Steel & Supply Co., 718 N.W.2d 888, 894 (Minn. 2006)); see also 3M Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 858 F.3d 561, 566 (8th Cir. 2017).


         There is no dispute about which parts of the policy matter. The Parties identify the same four provisions in their briefs:

• First, the policy has a “DEFINITIONS” section that begins with this two-sentence explanation: “To understand this policy, you must understand the meaning of the following words. These words appear in bold face type whenever used in this policy and endorsements attached to this policy.” Policy at 14.
• Second, relative to “Coverage E - Personal Liability, ” the policy says: “We will pay all sums any insured becomes legally obligated to pay as damages because of or arising out of bodily injury . . . caused by an ...

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