3M Co. v. National Union Fire Insurance Co. of Pittsburgh
858 F.3d 561
8th Cir.2017Background
- 3M invested employee-benefit-plan assets as a limited partner in WG Trading; WG Trading’s general partners (Walsh and Greenwood) committed massive fraud and diverted funds. 3M recovered its capital contribution via receivership but not alleged lost earnings on legitimate investments.
- 3M sought coverage under its Blanket Crime Policy’s Employee Dishonesty provision (as amended by Endorsement 10) for "direct losses of Money, Securities or other property caused by Theft."
- Endorsement 8 defines "insured property" by an ownership/interest test (owned by the insured, held by the insured, or property as respects which the insured is legally liable); 3M argued the Employee Dishonesty clause’s term "other property" is broader and need not meet Endorsement 8’s ownership requirement.
- The district court granted summary judgment to the insurers, holding the ownership requirement applies and 3M did not own the partnership earnings before distribution because partnership assets belong to the partnership.
- The Eighth Circuit affirmed, concluding (1) "other property" must be read in context and reasonably limited to "insured property" per Endorsement 8, and (2) partnership earnings prior to distribution were WG Trading property, not 3M’s.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Employee Dishonesty provision covers "other property" that is not "insured property" as defined by Endorsement 8 | 3M: "other property" is broader than "insured property" and thus covers 3M’s share of partnership earnings | Insurers: Policy must be read in context; Endorsement 8 limits covered property to insured property | Held: "Other property" is reasonably read as limited to insured property under Endorsement 8; coverage requires the ownership interest set by Endorsement 8 |
| Whether 3M’s limited-partnership interest made the stolen earnings property "owned by [3M]" under Endorsement 8 | 3M: its LP interest entitled it to a share of profits and distributions, constituting ownership | Insurers: Partnership earnings are partnership property until distributed; partners do not own partnership assets prior to winding up | Held: Earnings belonged to WG Trading until distribution; 3M did not own the stolen earnings |
| Whether ERISA fiduciary status or regulatory definitions convert the earnings into property "as respects which [3M] is legally liable" | 3M: ERISA fiduciary duties and regulatory treatment of partnership interests make the earnings property for which 3M is legally liable | Insurers: ERISA definitions govern fiduciary duties, not substantive commercial property rights | Held: ERISA regulation does not alter ordinary ownership of partnership assets; it does not make WG Trading’s earnings 3M’s property |
| Whether policy language is ambiguous and must be construed for 3M’s benefit | 3M: ambiguity exists because "other property" is undefined | Insurers: Policy read as a whole is unambiguous and reasonable construction limits coverage to insured property | Held: No ambiguity in context; plain meaning and policy structure limit coverage to insured property defined by Endorsement 8 |
Key Cases Cited
- Modern Equip. Co. v. Cont’l W. Ins. Co., 355 F.3d 1125 (8th Cir.) (construction of insurance contracts is a question of law)
- Ritrama, Inc. v. HDI–Gerling Am. Ins. Co., 796 F.3d 962 (8th Cir.) (policy terms unambiguous are given plain meaning; read policy as a whole)
- Grinnell Mut. Reinsurance Co. v. Villanueva, 798 F.3d 1146 (8th Cir.) (insured bears initial burden to establish coverage; insurer then bears burden to show exclusions)
- Brindle v. Hiatt, 42 F.2d 212 (8th Cir.) (partnership property is not individually owned by partners until winding up)
- In re Bernard L. Madoff Inv. Secs. LLC, 708 F.3d 422 (2d Cir.) (limited partnership interests do not necessarily confer ownership of fund assets invested by the partnership)