R & J ENTERPRIZES v. General Cas. Co. of Wisconsin
2010 U.S. App. LEXIS 25616
8th Cir.2010Background
- Country Club Coffee bought a commercial marketplace policy from General Casualty with optional employee dishonesty coverage.
- Employee dishonesty coverage covers losses from dishonest acts by employees with intent to obtain financial benefit other than normal employee benefits.
- From May 2001 to August 2006, a service technician defrauded the company by overstating hours,amounting to over $100,000
- Country Club Coffee filed a claim November 28, 2006; General Casualty denied October 29, 2007 alleging the loss falls outside coverage due to the wage/benefit exclusion.
- The district court granted summary judgment for General Casualty on coverage and related claims; Country Club Coffee appealed.
- The Eighth Circuit affirmed, holding the exclusion unambiguously bars coverage for overpayments categorized as wages or benefits earned in the ordinary course.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the 4(a)(2) exclusion bar coverage for overpaid wages? | Country Club Coffee argues wages were overpaid, not earned benefits, so exclusion does not apply. | General Casualty argues the limiting language excludes any 'salary' or 'employee benefits earned in the normal course of employment' regardless of misappropriation. | Exclusion unambiguously precludes coverage for wages paid due to employee dishonesty. |
| Is there coverage despite a potential ambiguity in the employee dishonesty provision? | Country Club Coffee contends the provision could be interpreted to cover the loss. | General Casualty argues the provision is unambiguous. | Policy language is unambiguous; no ambiguity to construe in insured's favor. |
| Do reasonable expectations, implied warranty, or unconscionability theories create coverage? | Country Club Coffee relies on these theories to obtain coverage for the loss. | General Casualty contends these theories do not apply given the policy language and record. | Country Club Coffee fails to establish submissible cases on all three theories. |
| Does the unconscionability claim survive given the policy's optional nature and notice? | Country Club Coffee claims the limitations clause is unconscionable due to bargaining dynamics. | General Casualty argues the clause is clear, optional, and not unconscionable. | The limitations provision is not unconscionable; contract formation and notice support enforcement. |
Key Cases Cited
- Nationwide Agri-Business Ins. Co. v. Goodwin, 782 N.W.2d 465 (Iowa 2010) (determine policy intent when interpreting insurance contracts)
- Hartig Drug Co. v. Hartig, 602 N.W.2d 794 (Iowa 1999) (interpretation of terms in context to avoid ambiguity)
- Kibbee v. State Farm Fire & Cas. Co., 525 N.W.2d 866 (Iowa 1994) (ambiguity requires favorable interpretation to insured)
- Performance Autoplex II Ltd. v. Mid-Continent Cas. Co., 322 F.3d 847 (5th Cir. 2003) (interpretation of employee dishonesty exclusions given context)
- James B. Lansing Sound, Inc. v. Nat'l Union Fire Ins. Co., 801 F.2d 1560 (9th Cir. 1986) (interpretation of insurer's coverage scope)
- Glaser v. Hartford Cas. Ins. Co., 364 F.Supp.2d 529 (D. Md. 2005) (examples of employee theft covered by dishonesty provisions)
- Universal Underwriters Ins. Co. v. Buddy Jones Ford, Lincoln-Mercury, Inc., 734 So.2d 173 (Miss. 1999) (interpretation of dishonesty coverage and exclusions)
- Cairns v. Grinnell Mut. Reins. Co., 398 N.W.2d 821 (Iowa 1987) (intent to interpret policy language; ambiguity framework)