637 F. App'x 864
6th Cir.2016Background
- Decedent Timothy Ryan died in a 2009 car accident; passenger Margaret Ryan (his wife) and grandchildren were injured. Timothy’s auto policy was issued by Depositors Insurance Company.
- Depositors notified Andrew Ryan (personal representative for grandchildren) in 2010 about $5,000 in medical-payments coverage and statute-of-limitations timing; Margaret was copied but not referenced by name.
- Margaret and Andrew sued the Estate of Timothy Ryan in state court; Depositors defended the Estate but later sought a federal declaratory judgment (2014) that a Policy exclusion precludes coverage for Margaret.
- The Policy’s “Liability Coverage Exclusion Endorsement” (PP0326) states liability coverage is not provided for bodily injury to “you” or any “family member.” "You" and "family member" are defined to include named insureds and household relatives; both Timothy and Margaret are named insureds.
- The district court granted Depositors’ Rule 12(c) motion, holding the exclusion unambiguous, applying to Margaret, and rejecting appellants’ affirmative defenses (laches, waiver/estoppel, contract-of-adhesion).
- The Sixth Circuit affirmed: reading the policy as a whole, the exclusion is valid and precludes coverage for Margaret; appellants’ defenses failed on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Policy ambiguity/structure (distance of exclusion from coverage) | The policy structure and a "Quick Reference" that omits the exclusion make the policy ambiguous; reasonable consumer would not expect the exclusion so far back. | The policy, read as a whole, unambiguously labels and references the exclusion; declarations reference endorsement numbers; no precedent that placement creates ambiguity. | No ambiguity; exclusion is clear and enforceable when the policy is read as a whole. |
| Applicability of exclusion to Margaret Ryan | The declarations and insuring agreement grant coverage to named insureds; exclusion shouldn’t defeat reasonable expectations or be read to bar recovery. | Exclusion expressly bars liability coverage for “you” and “family member”; Margaret is both a named insured and family member, so exclusion applies. | Exclusion applies to Margaret; she falls within both definitions, so coverage is precluded. |
| Laches (timeliness/prejudice) | Depositors’ ~3-year delay in asserting the exclusion was unreasonable and prejudicial (expenses, induced litigation). | Laches requires prejudice to the Estate (the party whose rights are affected); Estate suffered no demonstrated prejudice and Depositors’ delay does not bar its defense. | Laches fails: appellants did not show prejudice to the Estate; any asserted prejudice to Margaret is not the relevant inquiry. |
| Waiver / Equitable estoppel / adhesion | Depositors’ 2010 letter (which copied Margaret) and silence until 2013 induced litigation or forfeited the exclusion; policy is a contract of adhesion beyond reasonable expectations. | Waiver (as forfeiture of substantive rights) isn’t applicable under Tennessee law; no misrepresentation or concealment to the Estate; Estate had access to the policy and means to discover the exclusion; family-member exclusions are routinely enforced. | Waiver/estoppel fail for lack of misrepresentation, reliance, and prejudice to the Estate; adhesion argument fails because the exclusion is not oppressive or beyond reasonable expectations. |
Key Cases Cited
- Johnson v. Bredesen, 624 F.3d 742 (6th Cir.) (standard of review for 12(c) motion)
- JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577 (6th Cir.) (Rule 12(c) judgment on the pleadings standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S.) (pleading plausibility principle referenced)
- McKimm v. Bell, 790 S.W.2d 526 (Tenn. 1990) (insurance-contract construction follows ordinary-contract rules)
- Travelers Indem. Co. of Am. v. Moore & Assocs., 216 S.W.3d 302 (Tenn.) (give policy language its usual and ordinary meaning)
- Purkey v. Am. Home Assurance Co., 173 S.W.3d 703 (Tenn. 2005) (upholding household/family exclusion clauses)
- Setters v. Permanent Gen. Assurance Corp., 937 S.W.2d 950 (Tenn. Ct. App.) (family-member exclusion enforceable; exclusions may be listed separately)
- Omaha Prop. & Cas. Ins. Co. v. Johnson, 866 S.W.2d 539 (Tenn. Ct. App.) (coverage set in one part with exclusions grouped separately is not ambiguous)
- Long v. Bd. of Prof’l Responsibility, 435 S.W.3d 174 (Tenn. 2014) (equitable laches principles)