Case Information
*1 Before WOLLMAN, BEAM, and LOKEN, Circuit Judges.
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WOLLMAN, Circuit Judge.
Grinnell Mutual Reinsurance Company (Grinnell) appeals the district court’s order granting summary judgment to Roger Schwieger and Amy Streit, d/b/a Schwieger Livestock (Schwieger), and Bernell Voss, on Grinnell’s declaratory judgment claim concerning coverage under a liability insurance policy. We reverse and remand.
I.
This declaratory judgment action concerns a controversy over the coverage limits of an insurance policy issued by Grinnell to Voss. Voss owns and operates a cattle feed lot in Jackson County, Minnesota, in which he feeds to market weight cattle owned by others. Voss entered into an oral contract with Schwieger, under the terms of which Voss agreed to feed and care for cattle owned by Schwieger until they reached a market weight of 1400 to 1500 pounds, in return for a yardage fee of 28 cents per day per head of cattle. In July 2008, Schwieger’s cattle in Voss’s care began to die in unusually high numbers. According to Voss, a typical death loss for cattle over the course of a year would be roughly three percent, which would have amounted to approximately forty cattle annually out of Schwieger’s herd of 1400 head. During the summer of 2008, 125 to 130 of Schwieger’s cattle died from Rumensin poisoning. Many of the surviving cattle sustained a growth deficiency resulting from the Rumensin poisoning.
Schwieger brought suit in Minnesota state court, asserting claims against Voss for strict liability, breach of express and implied warranty, and negligence. Schwieger alleged that Voss failed to properly mix a commercially produced nutritional supplement when feeding it to the cattle, with the result that the cattle were exposed to Rumensin levels much greater than they could tolerate. Schwieger sought damages for his cattle’s excess mortality rates and delayed growth in reaching market weight.
Voss submitted the complaint in the underlying action to Grinnell, his insurer. Voss’s insurance policy with Grinnell included two parts: (1) the FARMATE policy, which provides first party property coverage, and (2) the FARM-GUARD policy, *3 which provides liability coverage. The FARM-GUARD policy provides $1 million in coverage as follows:
LIABILITY TO PUBLIC — COVERAGE A
We will pay subject to the liability limits shown for LIABILITY TO PUBLIC COVERAGE and the terms of the policy all sums arising out of any one loss which any insured person becomes legally obligated to pay as damages because of bodily injury or property damage covered by this policy.
If a claim is made or suit is brought against any insured person for liability covered by this policy, we will defend the insured person. We will use our lawyers and bear the expense.
HOWEVER, WE WILL NOT DEFEND ANY SUIT AFTER OUR LIMIT OF LIABILITY FOR THIS COVERAGE HAS BEEN PAID. WE WILL DEFEND OR SETTLE ONLY IF COVERAGE EXISTS UNDER THE TERMS OF THIS POLICY.
FARM-GUARD Policy, at 3 (internal quotation marks omitted).
The policy contains the following relevant exclusions: UNDER ANY OF THE COVERAGES
***
6. We do not cover bodily injury or property damage arising out of: a. custom farming operations of any insured person if the total gross receipts from all custom farming exceed $2,000 in the twelve months of the prior calendar year.[ ]
***
UNDER LIABILITY TO PUBLIC — COVERAGE A
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2. We do not cover performance guarantees of crops or livestock.
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5. We do not cover property damage to property rented to, leased to, occupied by, used by, or in the care, custody or control of any insured person or any persons living in the household of an insured person.
Id. at 5, 7 (internal quotation marks omitted).
Voss had purchased a Custom Feeding Endorsement, which modifies the FARM-GUARD policy as follows:
UNDER ANY OF THE COVERAGES
In consideration of the premium charged, exclusion 6.a. under this section of the policy does not apply if:
1) the bodily injury or property damage arises from the activities of care or raising of livestock or poultry by any insured person for any other person or organization in accordance with a written or oral agreement; . . .
All other terms and provisions of the policy apply.
Custom Feeding Endorsement (internal quotation marks omitted).
Grinnell denied coverage for the loss of Schwieger’s cattle and refused to defend or indemnify Voss in the case brought by Schwieger. Grinnell based the denial of coverage on Exclusion 5, the exclusion for damage to property in the “care, custody or control” of the insured.
Id. at 1 (internal quotation marks omitted).
*5 Schwieger and Voss subsequently stipulated to a “Miller-Shugart Agreement,” which was approved by the Minnesota district court. As part of the agreement, Voss withdrew his answer to Schwieger’s complaint and agreed that the Minnesota district court could enter default judgment against him in the underlying action. In exchange, Schwieger agreed not to execute the judgment against Voss personally, but rather reserved the right to execute the judgment against Grinnell. The Minnesota district court entered judgment against Voss in the amount of $1 million.
Grinnell then commenced this action against Schwieger and Voss in federal district court in Minnesota, seeking a declaratory judgment that the claims alleged in the underlying action are not covered under Voss’s FARM-GUARD policy with Grinnell and that Grinnell therefore has no obligation to defend or indemnify Voss under the policy. The parties brought cross-motions for summary judgment asking the district court to determine as a matter of law whether Schwieger’s claims alleged in the underlying action are covered under the policy. Schwieger argued that Voss had coverage for custom feeding operations under the Custom Feeding Endorsement because the endorsement superseded Exclusion 5 of the policy—the “care, custody or control” exclusion. Grinnell argued that the “care, custody or control” exclusion still applied because the Custom Feeding Endorsement provided that only Exclusion 6.a. did not apply, the endorsement did not refer to Exclusion 5, and the endorsement stated that all other policy provisions remained unchanged. The district court concluded that the claims were covered by the policy and granted Schwieger and Voss’s motion for summary judgment.
II.
We “review de novo both the district court’s grant of summary judgment and
its interpretation of state insurance law,” Pioneer Indus. v. Hartford Fire Ins. Co., 639
F.3d 461, 465 (8th Cir. 2011), “applying the same standards as the district court and
viewing the evidence in the light most favorable to the nonmoving party.” Zike v.
Advance Am., Cash Advance Ctrs. of Mo., Inc.,
III.
There being no dispute about the facts, the only question to be answered is whether, as a matter of law, Schwieger’s claims against Voss are covered under Grinnell’s policy.
A. Applicable Minnesota Law
Under Minnesota law, interpretation of an insurance policy, including whether
a contract is ambiguous and whether an exclusion is valid and enforceable, is a
question of law to be decided by the court. See Gen. Cas. Co. of Wis. v. Outdoor
Concepts,
When the text of an insurance policy is unambiguous, “the language used must
be given its usual and accepted meaning.” Bobich,
“Exclusions in a policy or endorsements 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.” Bobich,
B. The “Care, Custody or Control” Exclusion
Grinnell argues that the district court erred in concluding that Exclusion 5, the exclusion for property in the “care, custody or control” of the insured, did not prevent coverage to Schwieger for damage to custom fed livestock. The parties agree that Schwieger’s cattle were under Voss’s care, custody, and control. Schwieger argues, however, that the district court correctly concluded that Exclusion 5 is superseded by the Custom Feeding Endorsement. Schwieger contends that the two provisions are in irreconcilable conflict and thus the policy is ambiguous and should be interpreted against the insurer according to the reasonable expectations of the insured.
Recently, in Gaza Beef, Inc. v. Grinnell Mutual Reinsurance Co., No. A11-444,
The plain language of the custom-feeding endorsement states that it applies only to exclusion 6.a. and that it does not change the other portions of the policy, which include the section-5 [“care, custody or control”] exclusion. Exclusion 6.a. refers to “‘bodily injury’ or ‘property damage’ arising out of: ‘custom farming’ operations of any ‘insured person’ . . . .” But the custom-farming endorsement expressly states that, “all other terms and provisions of the policy apply.” Among *9 those provisions is exclusion 5 for “‘property damage’[”] to “property rented to, leased to, occupied by, used by, or in the care, custody, or control of any ‘insured person’ or any persons living in the household of an ‘insured person.’[”] Because the custom-farming endorsement expressly limits its application to exclusion 6.a., it is not inconsistent with the “care, custody, or control” exclusion.
Id.
The court further noted that Grinnell’s construction of the custom feeding
endorsement did not conflict with the remainder of the policy, because the custom
feeding endorsement was consistent with the overarching purpose that “Grinnell’s
policy provides liability insurance, which is a type of insurance that indemnifies one
from liability to third persons as contrasted with insurance coverage for losses
sustained by the insured.” Id. (citation and internal quotation and alteration omitted).
In other words, the court determined that Grinnell’s liability policy, which contained
a similar custom feeding endorsement, provided liability coverage for situations in
which third-parties sustained injuries resulting from the custom feeding operation,
e.g.
, “if a person is injured operating farm machinery on the custom-feeding premises,
or contracts a food-borne illness traceable to the custom-feeding operation,” or
custom-fed cattle become loose and damage a neighbor’s field, as opposed to
property coverage for damages sustained to the cattle in the insured’s “care, custody
or control.” Id. at *5. Thus, the Gaza Beef court found the doctrine of reasonable
expectations inapplicable because the policy did not contain ambiguous language or
constitute the “extreme situation” of a policy containing a “hidden exclusion.”
Id. (quoting Carlson v. Allstate Ins. Co.,
IV.
The judgment is reversed and the case is remanded for entry of summary judgment in favor of Grinnell.
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insured’”) (quoting Jostens, Inc. v. Northfield Ins. Co.,
precludes all of Schwieger’s claims, we need not consider the parties’ additional arguments relating to the “performance guarantees” exclusion.
Notes
[1] Rumensin is a commercially produced nutritional supplement for livestock.
[2] “Custom farming” is defined in the policy to include any activity arising out of or connected with the “care or raising of livestock or poultry by any insured person for any other person or organization in accordance with a written or oral agreement.”
[3] A Miller-Shugart Agreement allows an insured who has been denied coverage
to enter into a settlement agreement whereby the insured agrees that judgment in a
certain sum may be entered against him, in return for the claimant’s releasing the
insured from any personal liability and agreeing to seek coverage from the insurer.
See Miller v. Shugart,
[4] The parties have not disputed that Minnesota substantive law governs this matter, in which we exercise federal diversity jurisdiction under 28 U.S.C. § 1332.
[5] “Although federal courts are not bound to follow the decisions of intermediate
state courts when interpreting state law, state appellate court decisions are highly
persuasive and should be followed when they are the best evidence of state law.”
Baxter Int’l, Inc. v. Morris,
[6] Because the Custom Feeding Endorsement does provide liability coverage for losses that otherwise would have been excluded by Exclusion 6.a., Schwieger’s argument under the illusory coverage doctrine fails. See In re SRC Holding Corp., 545 F.3d at 671 (noting that, under the illusory coverage doctrine, “‘liability insurance contracts should, if possible, be construed so as not to be a delusion to the