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Auto Club Insurance Association v. Sentry Insurance

July 2, 2012


Appeal from the United States District Court for the District of Minnesota.

The opinion of the court was delivered by: Riley, Chief Judge.

Submitted: May 16, 2012

Before RILEY, Chief Judge, MELLOY and SMITH, Circuit Judges.

Jason McCann was involved in an automobile accident with Jeffrey Kreml. McCann's insurer, Auto Club Insurance Association, defended McCann against Kreml's personal injury claim. After Kreml and McCann settled, Auto Club sought contribution from Sentry Insurance, the insurer for McCann's employer, claiming Sentry was obligated to provide co-primary coverage for McCann. Auto Club sued in federal district court,*fn1 invoking the court's diversity jurisdiction under 28 U.S.C. § 1332. Auto Club appeals the district court's grant of summary judgment to Sentry. We affirm.


McCann was driving his personal vehicle when he rear-ended a vehicle driven by Kreml. Kreml sued McCann and McCann's employer, Life Time Fitness (Life Time), for his injuries, claiming Life Time was vicariously liable because McCann was acting within the scope of his employment when the collision occurred.*fn2 Auto Club paid $100,000, the policy limit, to settle Kreml's claims. Auto Club agreed to loan McCann the costs of defending Kreml's lawsuit and seek reimbursement from Life Time's insurer, Sentry. Auto Club promised to forgive the "loan" if it could not recover from Sentry.

Auto Club sued Sentry, claiming Sentry provided co-primary insurance coverage and seeking contribution for McCann's defense and indemnity costs. The district court granted Sentry's motion for summary judgment and denied Auto Club's motion, finding the Sentry policy only obligated Sentry to provide excess liability coverage, and McCann had no excess exposure because he settled within the limits of the Auto Club policy.


"We review a district court's grant of summary judgment de novo, viewing the facts in the light most favorable to [Auto Club] and giving [Auto Club] the benefit of all reasonable inferences." Marlowe v. Fabian, 676 F.3d 743, 746 (8th Cir. 2012). Sentry is entitled to summary judgment if "there is no genuine dispute as to any material fact and [Sentry] is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a).

Minnesota contract law governs our interpretation of the Sentry policy. See Nat'l Union Fire Ins. Co. of Pittsburgh v. Terra Indus., Inc., 346 F.3d 1160, 1164 (8th Cir. 2003) ("State law governs the interpretation of insurance policies."); Lobeck v. State Farm Mut. Auto. Ins. Co., 582 N.W.2d 246, 249 (Minn. 1998) ("General principles of contract interpretation apply to insurance policies."). We construe the policy's terms "according to what a reasonable person in the position of the insured would have understood the words to mean." Canadian Univ. Ins. Co. v. Fire Watch, Inc., 258 N.W.2d 570, 572 (Minn. 1977). Unambiguous language "must be given its usual and accepted meaning," and ambiguous language is interpreted against the insurer. Bobich v. Oja, 104 N.W.2d 19, 24 (Minn. 1960). Language is ambiguous if it "is reasonably subject to more than one interpretation," Columbia Heights Motors, Inc. v. Allstate Ins. Co., 275 N.W.2d 32, 34 (Minn. 1979), when considered in the context of the entire policy, see Bd. of Regents of the Univ. of Minn. v. Royal Ins. Co. of Am., 517 N.W.2d 888, 892 (Minn. 1994). "A policy and endorsements should be construed, if possible, so as to give effect to all provisions," Bobich, 258 N.W.2d at 24, and "avoid an interpretation . . . that would render a provision meaningless," see Chergosky v. Crosstown Bell, Inc., 463 N.W.2d 522, 526 (Minn. 1990). Specific provisions in a contract govern over more general provisions. See Burgi v. Eckes, 354 N.W.2d 514, 519 (Minn. App. 1984).

Auto Club's policy provides that if the covered vehicle "is also covered by other liability insurance, [Auto Club] will pay the ratio of [its] Limit of Liability to the total applicable Liability Limit." Auto Club claims Sentry must indemnify Auto Club because Sentry also provided primary coverage to McCann at the time of the accident. Auto Club's liability limit is $100,000, which Auto Club claims should be combined with Sentry's $1,000,000 liability limit, for a total liability limit of $1,100,000. Auto Club concludes it is responsible for only 9% of McCann's indemnity and defense costs, and Sentry must pay the remaining 91%.

Sentry's policy provides primary coverage to Life Time for "any covered 'auto' you own,"*fn3 but only excess coverage "[f]or any covered 'auto' you don't own." The Sentry policy explains "you" and "your" refer to the named insured. As the district court determined, "the Sentry policy provides primary coverage only for vehicles that are owned by a 'named insured'--and, at most, excess coverage for vehicles that are not owned by a 'named insured.'" The dispositive question is whether McCann qualifies as a "named insured."

The following "persons or organizations" are named insureds under the Sentry policy's "controlled-entities endorsement":

Life Time Fitness, Inc and its subsidiaries [list of subsidiary business entities omitted] and any other divisions, subsidiaries and persons and organizations under the control of the named insured, and any business entity incorporated or organized under the laws of the United States of America [in which] the ...

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