AMANN v. OLD REPUBLIC INSURANCE COMPANY (2021)

ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

Now pending is Plaintiff Gregory Amann's motion for partial summary judgment, which concerns a single affirmative defense raised by Defendant Old Republic Insurance Company. (Doc. 35.) For the following reasons, the motion is GRANTED.

I. BACKGROUND

Most of the facts in this case are uncontroverted; the Court will not cite to the record unless the parties dispute a particular fact, and, where facts are in dispute, will state them in the light most favorable to Defendant.

Plaintiff was driving a motor vehicle when another vehicle rear-ended him. As a result of the accident, Plaintiff suffered serious bodily harm. The motorist who rear-ended Plaintiff was underinsured, and Plaintiff settled his case with that person's employer for $400,000. (Doc. 39-4 (settlement with underinsured motorist).) Plaintiff has also received approximately $190,000 in Workers Compensation benefits due to the accident. Thus, all told, Plaintiff has received about $590,000 to compensate him for the injuries he sustained in the accident.

At the time of the accident, Plaintiff had an insurance policy with Defendant (the “Policy”). The Policy included an “Underinsured Motorists Coverage” Endorsement (the “Endorsement”). The Endorsement provided that Defendant would “pay all sums the insured is legally entitled to recover as compensatory damages from the owner or driver of an underinsured motor vehicle ․ [that] result from bodily injury sustained by the insured caused by an accident.” (Doc. 35-1, p. 1.)¹ The limit of insurance (the “Limit”) for the Endorsement is $1,000,000 per accident. (Id.) On a separate page, the Endorsement notes that “the most [Defendant] will pay for all damages resulting from any one accident is the limit of Underinsured Motorists Coverage shown in the Schedule or Declarations”—i.e., the Limit. (Id. at p. 2.) But the Endorsement also provides that the Limit may be reduced in two circumstances: first, the “Limit of Insurance shall be reduced by all sums paid for bodily injury by or for anyone who is legally responsible” for the accident; and second, Defendant “will not pay for any element of loss if a person is entitled to receive duplicate payment under ․ [w]orkers’ compensation law․” (together, the “set-off provisions”). (Id.)

Plaintiff later requested coverage from Defendant under the Endorsement, and Defendant did not pay. Plaintiff then filed this action in state court, alleging that Defendant breached the Endorsement and that its refusal to pay was vexatious; Defendant removed the case to federal court on May 29, 2020. (Doc. 1.) On June 3, Defendant filed its Answer, denying liability and asserting a variety of affirmative defenses. (Doc. 4.) One of those affirmative defenses was that the Limit in the Endorsement should be reduced by approximately $590,000 in light of Plaintiff's recovery under his settlement with the underinsured motorist and through the Workers’ Compensation system—meaning that even if Defendant is liable, Plaintiff could only recover approximately $410,000 under the Endorsement. (Doc. 4, pp. 6–7, ¶ 4.)

Plaintiff's motion for summary judgment, (Doc. 35), pertains only to that affirmative defense. Plaintiff contends that the Endorsement is ambiguous because it simultaneously provides that Defendant may “pay all sums the insured is legally entitled to recover as compensatory damages” up to “the limit of Underinsured Motorists Coverage shown in the Schedule or Declarations,” but later purports to reduce the total amount Defendant may be required to pay in the set-off provisions. (Doc. 36, p. 5; see Doc. 35-1, pp. 1–2.) To be clear, Plaintiff's position is not that Defendant is liable for the damages for which he has already received compensation in the form of the settlement and his Workers’ Compensation benefits. (See Doc. 36, p. 5.) Instead, Plaintiff's focus is on any damages he can prove he sustained over and above the $590,000 in compensation he has already received. Plaintiff believes that he is entitled to up to $1,000,000 from Defendant if he can prove that he suffered $1,590,000 or more in damages, (id.); Defendant disagrees and believes that Plaintiff can recover at most $410,000 under the Endorsement because the Limit has been reduced by the set-off provisions. (Doc. 39, pp. 11–12.) The Court resolves these issues below.

II. DISCUSSION

“Summary judgment should be granted when—viewing the facts most favorably to the nonmoving party and giving that party the benefit of all reasonable inferences—the record shows that there is no genuine issue of material fact.” Schilf v. Eli Lilly & Co., 687 F.3d 947, 948 (8th Cir. 2012) (citing Fed. R. Civ. P. 56(c)). “A fact is material if it might affect the outcome of the suit,” and a genuine dispute exists when “the evidence is such that a reasonable jury could return a verdict for the non-moving party.” Dick v. Dickinson State Univ., 826 F.3d 1054, 1061 (8th Cir. 2016) (cleaned up; citations omitted). “The party opposing summary judgment cannot rest solely on ․ [m]ere allegations, unsupported by specific facts or evidence beyond the nonmoving party's own conclusions,” Morgan v. A.G. Edwards & Sons, Inc., 486 F.3d 1034, 1039 (8th Cir. 2007), but must instead point to evidence in the record demonstrating the existence of a factual dispute. Fed. R. Civ. P. 56(c)(1); Conseco Life Ins. Co. v. Williams, 620 F.3d 902, 909–10 (8th Cir. 2010).

Before addressing the substance of Plaintiff's arguments, Defendant suggests that his motion is procedurally deficient because the “limits of insurance” affirmative defense is only relevant if Plaintiff proves that he is entitled to over $1,000,000 in compensatory damages under the Endorsement, or over $410,000 above and beyond what he has already received. (Doc. 39, pp. 14–17.) The Court disagrees. An affirmative defense, by its very nature, is relevant only if the plaintiff establishes that the defendant is otherwise liable—but that does not preclude the Court from assessing summary judgment motions directed at affirmative defenses. Courts routinely address summary judgment motions relating to an insurance policy's limits without demanding proof that the insured's damages exceed the lowest limit the parties propose. See, e.g., Joshua v. Hartford Acci. & Indem. Co., 666 F.2d 1148, 1149 (8th Cir. 1981) (per curiam); Consumers Ins. USA, Inc. v. Davis, 2010 WL 1438823, at *11 (W.D. Mo. April 12, 2010); Frazier v. Bickford, 2015 WL 6082734, at *17 (D. Minn. Oct. 15, 2015). Therefore, the Court finds that Plaintiff's motion is procedurally appropriate.²

Turning to the substance of the arguments, Plaintiff's theory is that there is an apparent contradiction in the terms of the Endorsement: the body of the endorsement indicates that Defendant must “pay all sums [Plaintiff] is legally entitled to recover as compensatory damages ․ result[ing] from bodily injury sustained by [Plaintiff] caused by an accident” up to the limit of insurance, but the set-off provisions reduce the amount Defendant must pay. (Doc. 36, p. 6.)

Because the Court exercises diversity jurisdiction over this case, and following the example of the parties, the Court will apply Missouri law in interpreting the Policy. See Source Food Tech., Inc. v. United States Fid. & Guar. Co., 465 F.3d 834, 836 (8th Cir. 2006). Missouri courts interpret insurance policies according to the general principles of contract law. Todd v. Missouri United Sch. Ins. Council, 223 S.W.3d 156, 160 (Mo. 2007) (en banc). If an insurance policy is unambiguous, it “must be enforced according to its terms․ If, however, ‘policy language is ambiguous, it must be construed against the insurer.’ ” Seeck v. Geico General Ins. Co., 212 S.W.3d 129, 132 (Mo. 2007) (en banc) (quoting Gulf Ins. Co. v. Noble Broadcast, 936 S.W.2d 810, 814 (Mo. 1997) (en banc)). When “a contract promises something at one point and takes it away at another, there is an ambiguity.” Seeck, 212 S.W.3d at 133.

Plaintiff claims that the apparent tension between the body of the Endorsement and the set-off provisions render the policy ambiguous. He cites three cases from the Missouri Supreme Court to support this conclusion. The circumstances of those cases are substantially similar to this one. In each case, an insured had a policy under which (1) the insurer promised to pay up to a Limit of Insurance and (2) the Limit of Insurance was potentially reduced by a set-off provision. Manner v. Schiermeier, 393 S.W.3d 58, 66 (Mo. 2013) (en banc) (“[t]he policy promises to pay the listed limits of liability”); Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132, 136–37 (Mo. 2009) (en banc); (the policy stated both that (1) “[t]he limit of liability shown in the Declarations ․ is our maximum limit of liability for all damages ․ sustained by any one person in any one accident” and (2) that the “limit of liability shall be reduced by all sums ․ [p]aid because of bodily injury ․ on behalf of persons [ ] who may be legally responsible”); Jones v. Mid-Century Ins. Co., 287 S.W.3d 687, 690–91 (Mo. 2009) (en banc) (the policy stated both that (1) “the most [the insurer] will pay will be ․ [t]he limits of liability of this coverage,” and (2) that “[t]he amount of ․ Coverage we will pay shall be reduced by any amount paid ․ by ․ any person or organization who is or may be held legally liable for the bodily injury to an insured person”). And in each case, the Missouri Supreme Court held that the promise to pay up to the Limit of Insurance was inconsistent with the set-off provisions, creating an ambiguity that required ignoring the set-off provisions to interpret the contracts in favor of the insureds.

The general rule announced by those cases, as the Missouri Supreme Court later explained, is that “an ambiguity exists when [a] policy contains both (1) express language indicating the insurer will indeed pay up to the declarations’ listed limit amount; and (2) set-off provisions ensuring the insurer will never be obligated to pay such amount.” Owners Ins. Co. v. Craig, 514 S.W.3d 614, 617 (Mo. 2017) (en banc). The reason for this rule is that an underinsured motorist coverage policy—as opposed to an uninsured motorist coverage policy—is relevant only when the tortfeasor has some insurance, so “the insured always would have recovered at least the statutorily required amount of coverage. Therefore, the insurer never would pay out the full amount of its stated limits of liability, making its statements that it would do so misleading.” Ritchie, 307 S.W.3d at 140. To avoid this interpretation, the Missouri Supreme Court has repeatedly interpreted set-off provisions to mean “simply [ ] that in determining the total damage to which the underinsured motorist coverage will be applied, the amount of money already received from the tortfeasor must be deducted. In this way, it avoids a double recovery.” Jones, 287 S.W.3d at 693.

As Plaintiff points out, this case is indistinguishable from Manner, Ritchie, and Jones. (Doc. 36, pp. 8–9.) As in those cases, the Endorsement here contains both an indication that “the most [the insurer] will pay for all damages resulting from any one accident is the [L]imit ․ shown in the Schedule,” and set-off provisions purporting to reduce that limit. (Doc. 35-1, p. 2.) In fact, the language in the Endorsement is virtually identical to the language in the policies at issue in Manner, Ritchie, and Jones.

Defendant makes two unavailing arguments against this line of cases. First, it contends that the cases “rest on faulty logic,” because—contrary to the Ritchie court's reasoning—there may be some situations in which an insurer would pay the full amount of its stated limits of liability on an underinsured motorist coverage policy. (Doc. 39, pp. 18–19.) Defendant offers a lengthy hypothetical to disprove the “myth, which formed the basis for the purported ambiguity referenced in Jones, Ritchie, and Manner.” (Id. at p. 19.) Whatever the merits of Defendant's hypothetical, the Court must apply Missouri law as set out by the Missouri Supreme Court; thus, even if the Court were convinced that Jones, Ritchie, and Manner “rest on faulty logic,” those cases would still govern Plaintiff's summary judgment motion.³

Second, Defendant offers two other Missouri Supreme Court cases which, it contends, overrule or limit the cases Plaintiff cites. The first of these cases is Owners Ins. Co. v. Craig, 514 S.W.3d 614 (Mo. 2017) (en banc). Like the Endorsement in this case, the policy at issue in Owners featured both (1) a stated Limit of Insurance and (2) set-off provisions reducing that limit. Id. at 615. But unlike the Endorsement, the policy in Owners explicitly stated that the “Limit of [Insurance] stated in the Declarations for Underinsured Motorist Coverage are for reference purposes only. Under no circumstances do[es] [the insurer] have a duty to pay ․ the entire Limits ․ stated in the Declarations for this coverage.” Id. (emphasis added). The court held that this unequivocal disclaimer that the Limit of Insurance was simply a starting point and the blunt disavowal of any obligation to pay up to the Limit rendered the case distinguishable from Manner, Ritchie, and Jones. Id. at 617. Owners is clearly inapposite because the court's reasoning rested solely on the explicit disclaimer, which, as Plaintiff points out, is absent here. (Doc. 40, p. 17.)

The second case Defendant cites is Rodriguez v. General Acci. Ins. Co., 808 S.W.2d 379 (Mo. 1991) (en banc). That case involved a $50,000 underinsured motorist coverage policy; the plaintiff suffered an accident with a tortfeasor whose liability insurance was only $50,000. Id. at 382. Unlike this case, Rodriguez turned on the meaning of “underinsured motor vehicle,” and specifically, the policy's definition of such a vehicle as one “whose limits for bodily injury liability are ‘less than the limit of liability for this [policy's] coverage.’ ” Id. The court held that the policy's definition of “underinsured motor vehicle” was unambiguous, and that, because the tortfeasor's liability insurance equaled the limit of liability under the plaintiff's policy, the tortfeasor was not an “underinsured motorist” under the policy. Id. The court also referenced a set-off provision in the policy to support this reasoning, but that provision was not directly at issue. Id. Thus, Rodriguez did not squarely address the issue in this case, and to the extent it did, it is inconsistent with Manner, Ritchie, and Jones, and therefore overruled by those cases.

III. CONCLUSION

For the foregoing reasons, Plaintiff's motion for partial summary judgment, (Doc. 35), is GRANTED, and the Court finds that the Limit of Insurance in this case is $1,000,000.

IT IS SO ORDERED.

FOOTNOTES

1.   The Court has omitted internal quotation marks in quoting language from the Endorsement, since the parties do not dispute—at least for purposes of Plaintiff's motion for summary judgment—the meaning of any of the Endorsement's terms except the Limit of Insurance.

2.   Defendant also argues that Plaintiff has waived his argument that he can recover any more than $600,000 from Defendant because in Plaintiff's demand letter, he asked “for the policy limits of $600,000.” (Doc. 39, p. 25.) Plaintiff responds that Defendant did not raise waiver as an affirmative defense (and, hence, waived it), and that Plaintiff subsequently advised Defendant during negotiations that Plaintiff's position was that he could recover up to $1,000,000 from Defendant. (Doc. 40, p. 22.) Under Missouri law, for an act “to be construed as an implied waiver,” the actor's behavior “must be so manifestly consistent with and indicative of an intention to renounce a particular right or benefit that no other reasonable explanation of [his] conduct is possible.” Steinberg v. Fleischer, 706 S.W.2d 901, 905 (Mo. Ct. App. 1986). The Court does not believe that the $600,000 figure in Plaintiff's demand letter is so “manifestly consistent” with an intent to renounce his right to pursue the possibility of recovering the listed Limit that “no other reasonable explanation of his conduct is possible.”

3.   Similarly, Defendant contends that the language in the Endorsement is not actually ambiguous, because it is not inconsistent to set out a Limit of Insurance in one part of a policy, and provide scenarios in which that Limit can be reduced in another part. (Doc. 39, pp. 23–25.) But the Court is bound to apply Missouri law, and the Missouri Supreme Court has set out a clear and applicable rule that a promise to pay up to the limit of insurance and set-off provisions purporting to reduce the limit of insurance create an ambiguity that must be resolved in favor of the insured. And if Defendant wished to challenge the Jones line of cases, it could have continued to litigate this matter in state court rather than removing to this Court.

BETH PHILLIPS, CHIEF JUDGE