Donald BABINSKI, in his personal capacity and as personal representative of the Estate of John Babinski, Appellee, v. AMERICAN FAMILY INSURANCE GROUP, Appellant.
No. 08-1986
United States Court of Appeals, Eighth Circuit
Submitted: Dec. 12, 2008. Filed: June 18, 2009.
569 F.3d 349
Court J. Anderson, argued, Alan C. Eidsness, on the brief, Minneapolis, MN, for appellee.
Before COLLOTON and SHEPHERD, Circuit Judges, and GOLDBERG,1 Judge.
SHEPHERD, Circuit Judge.
Donald Babinski (“Babinski“) filed this diversity aсtion seeking a declaratory judgment that the automobile insurance
I.
American Family issued the Policy, which became effective November 16, 2006, in Sioux Falls, South Dakota. The Policy‘s declarations page names Babinski as the policyholder, identifies a 2004 Dodge Ram pickup as the insured vehicle, and caps coverage for liability resulting from bodily injury at $1,000,000. Babinski purchased the Policy and paid its premiums for the benefit of John, who lived in Crow Wing County, Minnesota, and was the primary driver of the insured vehicle. The Dodge Ram pickup was registered to Babinski‘s real estate business, Janice‘s Estates, a Minnesota general partnership that owns and operates real estate in Crow Wing County. The Policy requires American Family to “pay compensatory damages an insured person is legally liable for because of bodily injury” and defines “[i]n-sured person” as including “[a]ny person using your insured car.” (J.A. 35 (emphases omitted).) The Policy lists 13 exclusions from liability coverage, including this housеhold drop-down exclusion:
This coverage does not apply to ...
10. Bodily injury to:
a. Any person injured while operating your insured car;
b. You or any person related to you and residing in your household; or
c. Any person related to the operator and residing in the household of the operator.
This exclusion applies only to the extent the limits of liability of this policy exceed the limits of liability required by law. (Id. at 36.)
On December 10, 2006, John and his wife, Kathi Babinski (“Kathi“), were killed in an automobile accident in Crow Wing County. John was driving the Dodge Ram pickup; Kathi was sitting in the passenger seat. At the time of the accident,
Babinski and American Family filed motions for summary judgment in the present case. American Family argued that, pursuant to the household drop-down exclusion, the extent of liability coverage available under the Policy is equal to the amount of coverage required by law, which in Minnеsota is $30,000. See
II.
We review de novo the district court‘s interpretation of stаte law and its grant of summary judgment. Wolfley v. Solectron USA, Inc., 541 F.3d 819, 823 (8th Cir.2008). Summary judgment is appropriate when “there is no genuine issue as to any material fact and [] the movant is entitled to judgment as a matter of law.”
A. Ambiguity
The Policy‘s household drop-down exclusion is not ambiguous. “Whether a contract is ambiguous is a question of law....” Carlson v. Allstate Ins. Co., 749 N.W.2d 41, 45 (Minn.2008). Policy language “is ambiguous if it is susceptible to two or more reasonable interpretations.” Id. “[A]ny ambiguity in the insurance contract must be construed in favor of the insured.” State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 64 (Minn.1992). However, “the court has no right to read an ambiguity into the plain language” of the policy. Id. When it “is clear and unambiguous, the language used must be given its usual and accepted meaning.” Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn.1998) (quotation omitted). “[E]xclusions in a policy [] are as much a part of the contract as other parts thereof and must be given the same consideration in determining what is the coverage.” Id. (quotation omitted).
Babinski argues, and the district court agreed, that the drop-down exclusion does not limit coverage to the statutory minimum; instead, the Policy provides full coverage up to $1,000,000. However, neither Babinski nor the district court identifies any language in the exclusion that is reasonably susceptible to such an interpretation. See Carlson, 749 N.W.2d at 45. In finding that the exclusion is ambiguous, the district court focused solely on its inability to locate the specific dollar amount of coverage by searching within the Policy‘s four corners. (See J.A. 112–13.) When it could not find an exact amount, the court refused to enforce the drop-down exclusion and declared that because the Policy “has a face value of $1 million [and] never refers to any other sum ... [t]his is a $1 million policy, and so it shall remain.” (Id. at 113–14.) Minnesota law does not confine our ambiguity analysis to the Policy‘s four corners. In fact, the Minnesota Court of Appeals has found no ambiguity in a policy that limited liability coverage to “the MINIMUM dollar amount required” by a state‘s “motor vehicle financial responsibility laws” and did not provide a specific dollar amount. Agency Rent-A-Car, Inc. v. Am. Family Mut. Auto. Ins. Co., 519 N.W.2d 483, 485, 487 (Minn.Ct.App.1994). Therefore, the mere fact that we must look beyond the Policy‘s four corners to state law in order to determine the exact dollar amount of coverage does not render the drop-down exclusion ambiguous under Minnesota law.
The drop-down provision‘s language plainly excludes liability coverage for “[b]odily [i]njury to ... [a]ny person related to the operator and residing in the housеhold of the operator” but then limits the scope of the exclusion “to the extent the limits of liability of this policy exceed the limits of liability required by law.” (J.A. 36.) In other words, the Policy does not provide liability coverage for bodily injury suffered by Kathi to the extent the Policy‘s $1,000,000 coverage limit exceeds the $30,000 limit required under Minnesota
B. Doctrine of Reasonable Expectations
Minnesota‘s reasonаble expectations doctrine does not apply in this case. According to this doctrine, the “objectively reasonable expectations of [insureds] regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations.” Carlson, 749 N.W.2d at 48 (quotation omitted). However, as this court has previously observed, Minnesota‘s doctrine of reasonable expectations is extremely narrow and “applies only on the few ‘egregious’ occasions when an exclusion is disguised in a policy‘s definitions section.” Allstate Ins. Co. v. Steele, 74 F.3d 878, 881 (8th Cir.1996) (citing Bd. of Regents of Univ. of Minn. v. Royal Ins. Co. of Am., 517 N.W.2d 888, 891 (Minn.1994)). In the present case, American Family did not conceal the household drop-down exclusion in the Policy‘s definitions section. The language excluding coverage above “the limits of liability required by law” appears exactly where an insured would expect—in the Policy‘s exclusions section. (J.A. 36.) Moreovеr, we are not persuaded by Babinski‘s assertion that the household drop-down exclusion is actually a “limitation” or “reduction” and, thus, a reasonable insured would not expect to find it in the Policy‘s “exclusions” section. (Appellee‘s Br. 17.) Because the Policy is not ambiguous and does not contain a hidden exclusion, the doсtrine of reasonable expectations does not apply. E.g., Levin v. Aetna Cas. & Sur. Co., 465 N.W.2d 99, 102 (Minn.Ct.App.1991).
III.
Having determined that the Policy‘s household drop-down exclusion is not ambiguous and that the doctrine of reasonable expectations does not apply, we now turn to the broader question of whether the exclusion is per se unenforceable under Minnesota law. Both parties have moved to certify this question to the Minnesota Supreme Court.4 “Whether a federal court should certify a question to a state court is a matter of discretion.” Johnson v. John Deere Co., 935 F.2d 151, 153 (8th Cir.1991). Because we believe that Minnesota law is clear on this issue, we decline to exercise our discretion to certify.
The Minnesota No-Fault Automobile Insurance Act mandates that insurers provide liability coverage “of not less than $30,000 because of bodily injury to one person in any one accident....”
The Minnesota Court of Appeals has consistently held that drop-down exclusions are enforceable so long as they satisfy the minimum cоverage limits in Minnesota‘s no-fault act. See Frey v. United Servs. Auto. Ass‘n, 743 N.W.2d 337, 341 (Minn.Ct.App.2008) (“an automobile insurance policy that provides for reduced-liability (drop-down) limits on bodily-injury coverage for resident family members is valid and enforceable” so long as it “do[es] not omit coverage required by law“); see also Bundul, 753 N.W.2d 761, 766-67 (household exclusiоn in umbrella policy was enforceable because it required the policyholder to maintain primary liability coverage in amounts that satisfied the no-fault act); State Farm Mut. Auto. Ins. Co. v. Universal Underwriters Ins. Co., 625 N.W.2d 160, 163-65 (Minn.Ct.App.2001) (establishing one policy limit for certain classes of insureds and another limit for other classes of insureds doеs not violate Minnesota law). In light of these intermediate appellate court decisions and the Minnesota Supreme Court‘s observations concerning the purpose of the no-fault act, we are satisfied that household drop-down exclusions are valid and enforceable under Minnesota law so long аs they meet the minimum statutory coverage limits. Because the drop-down provision in this case excludes coverage “only to the extent the limits of liability of this policy exceed the limits of liability required by law” (J.A. 36), it is enforceable in Minnesota.
IV.
In conclusion, the Policy‘s household drop-down exclusion is enforceable undеr Minnesota law. The district court erred by granting Babinski‘s motion for summary judgment and by denying American Family‘s motion for summary judgment. Accordingly, we reverse the district court‘s judgment and remand with instructions to enter summary judgment for American Family. As Babinski is no longer the prevailing party in this case, we also vacate
GOLDBERG, Judge, dissenting.
In my view, the step-down provision at issue in this cаse is sufficiently ambiguous to render it unenforceable. The provision states, “This exclusion applies only to the extent the limits of liability of this policy exceed the limits of liability required by law.” Ambiguity in a contract is determined from the viewpoint of a layperson, not a lawyer. Mut. Serv. Cas. Ins. Co. v. Wilson Twp., 603 N.W.2d 151, 153 (Minn.Ct.App.1999). I believe that it is no acсident that the insurance company crafted this murkily worded provision so that a reasonable person would be unable to readily interpret the language.
The provision notably makes no reference to which state‘s law should apply or even what method will be used to choose the applicable lаw, e.g., a reference to the law of the state where the accident occurred.5 In Agency Rent-A-Car, 519 N.W.2d at 485, cited by the court, the Minnesota Court of Appeals found a provision referring to “the applicable motor vehicle financial responsibility laws of the state in which this agreement of rental was executed” to be unambiguous. However, this provision, at a minimum, provides the reader of the contract the ability to determine which state‘s law will be applied, i.e., that state where the rental agreement was executed. In this case, even if we look beyond the Policy‘s four corners to state law, we cannot determine with precision what law should apply in the provision. Thus, regardless if the rest of the provision‘s meaning is discernable, if its application is unascertainable, the provision is ambiguous. As the court pointed out, “any ambiguity in the insurance contract must be construed in favor of the insured.” State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 64 (Minn.1992). I thus respectfully dissent from the court‘s opinion and I would affirm the district court‘s decision.