United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 02-2303

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David L. Edgley,

Plaintiff/Appellee, 

v.

Harold Joseph Lappe,

Defendant,

Dakota, Minnesota & Eastern

Railroad Corporation,

Defendant/Third

Party Plaintiff, 

v.

Krause & Rollins, 

Objector,

v.

National Liability & Fire

Insurance Company, a

Connecticut Corporation,

Garnishee/Appellant.

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Appeal from the United States

District Court for the

District of Minnesota. 
1

 The Honorable Linda R. Reade, United States District Judge for the Northern

District of Iowa, sitting by designation.

2

 The Honorable Michael J. Davis, United States District Judge for the District

of Minnesota.

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___________

Submitted: May 16, 2003

Filed: September 15, 2003

___________

Before SMITH and HANSEN, Circuit Judges, and READE,1

 District Judge.

___________

SMITH, Circuit Judge.

National Liability & Fire Insurance Company ("National") appeals a judgment

entered against it in a garnishment action. David Edgley filed an underlying action

to recover damages for personal injuries he received in an accident involving an

employee of National's insureds, Benita and Harold Lappe, who owned and operated

a taxicab company. National did not defend the Lappes in that lawsuit and denied

coverage based upon explicit exclusions contained in the insurance policy. Edgley

settled his lawsuit against the Lappes and then filed this garnishment action against

National, which was not a party to the settlement negotiations and agreement between

Edgley and the Lappes. After the district court2

 rejected National's defenses, the

court–following a bench trial–awarded Edgley $600,000. National now appeals the

reasonableness of that decision and the court's denials of its pre- and post-trial

motions. Because we agree that National's policy did not afford coverage to the

Lappes, we reverse the district court's decision and dismiss the action.
3 Drake v. Ryan, 514 N.W.2d 785, 788 (Minn. 1994) (holding that a plaintiff

can “dissect” a defendant’s liability by releasing some claims and preserving others).

4 Miller v. Shugart, 316 N.W.2d 729 (Minn. 1982) (allowing an insured, whose

insurer disputed coverage, to settle with the plaintiff and stipulate to a judgment

incorporating the settlement terms, thus allowing the plaintiff to seek collection on

that judgment in a garnishment proceeding against the insurer if the insurer received

notice of the settlement).

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I.

Facts

Edgley, a passenger in a taxicab, sustained injuries when a truck rear-ended the

taxi in November 1991. Edgley filed suit against the Lappes, taxi driver Raymond

Weise, the owners and driver of the truck, and Edgley's employer Dakota, Minnesota

& Eastern Railroad Company. Edgley settled his claims against these defendants in

March 1995. The settlement purportedly included a full and final release of all of his

claims against all parties and participants; however, the release also indicated that

Edgley wished to preserve his claims against Lappe and Weise and their insurers,

including National. Edgley notified National about the settlement negotiations prior

to trial, but National declined coverage and refused to participate.

Several months after reaching the settlement, Edgley filed a document in

district court entitled "Agreement Pursuant to Drake v. Ryan3

 and Stipulation for

Entry of Judgment Pursuant to Miller-Shugart.4

" According to the filing, four matters

had been resolved. In the first two, Edgley settled claims against his employer and the

owners and driver of the commercial truck. In the third, Lappe and Weise agreed to

the entry of judgment against them in the amount of $600,000 collectable only from

National. Lastly, Edgley released the Lappes and Weise from personal liability.

With judgment in hand, Edgley commenced this garnishment action against

National in district court contending that the settlement bound National even though
5

 The district court determined that despite the settlement language, Edgley

intended to retain garnishment rights against National to collect damages pursuant to

the settlement agreement with Lappe and Weise. 

6

 Lappe had not licensed or insured the Buick as a commercial vehicle with

American Family and, in fact, American Family denied coverage for that reason for

Edgley's personal-injury claim.

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it did not participate.5

 National defended the garnishment action based upon the plain

language of its policy, which excluded coverage for substitute vehicles owned

personally by the Lappes. The car in which Edgley was injured, a 1971 Buick

LeSabre ("Buick"), belonged to the Lappes as a personal vehicle insured through

American Family Insurance Company ("American Family").6

 The Lappes, who

operated Lappes Express Cab as a sole proprietorship, owned and operated two

licensed cabs insured with National. One of the cabs, however, was out of service on

the day of the wreck, so the Lappes substituted the Buick for that vehicle.

The National policy covered temporary substitute automobiles, subject to two

conditions: 1) one of the two covered vehicles had to be out of service, and 2) the

Lappes could not own the substitute vehicle. The National policy, issued to "Harold

and Benita Lappe dba Lappes Express Cab," defined "substitute vehicle" as:

Any "auto" you do not own while used with the permission of its owner

as temporary substitute for a covered "auto" you own that is out of

service because of its:

a. Breakdown;

b. Repair;

c. Servicing;
7

 National included this argument in a motion for summary judgment filed prior

to trial and in motions for judgment as a matter of law or for new trial filed after the

court entered its judgment and order.

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d. "Loss"; or

e. Destruction.

(Emphasis added.)

Based on this definition, National denied coverage after determining that the

Buick was not qualified to be a "substitute vehicle" because the Lappes owned it.7

The district court disagreed and found that National's policy was "inherently

ambiguous" because the purpose of the clause was not "undisputedly effectuated by

the plain language of the contract." Based upon the ambiguity it found, the district

court read the policy in the Lappes' favor and determined that coverage existed for the

Buick under the temporary substitute automobile clause. The district court denied

National's summary judgment motion and motion for judgment as a matter of law and

refused to grant it a new trial. On appeal, National challenges the district court's

interpretation of the contract. 

II.

Standard of Review

We review the district court's denial of a motion for judgment as a matter of

law de novo using the same standards as the district court. Amerinet, Inc. v. Xerox

Corp., 972 F.2d 1483, 1505 (8th Cir. 1992). A motion for judgment as a matter of law

presents a legal question to the district court and this court on review "whether there

is sufficient evidence to support a jury verdict." White v. Pence, 961 F.2d 776, 779

(8th Cir. 1992). We view the "evidence in the light most favorable to the prevailing

party and must not engage in a weighing or evaluation of the evidence or consider

questions of credibility." Id. Judgment as a matter of law is appropriate only when all
8

 National raises three points on appeal including whether coverage existed

under its commercial policy, whether the Miller-Shugart agreement was collusive,

and whether the Miller-Shugart agreement was reasonable. We need only address the

first point because its resolution renders the subsequent points moot.

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of the evidence points one way and is "susceptible of no reasonable inference

sustaining the position of the nonmoving party." Id.

We review a district court's interpretation of the contractual provisions of an

insurance policy de novo as a question of law. Noran Neurological Clinic, P.A. v.

Travelers Indem. Co., 229 F.3d 707, 709 (8th Cir. 2000). The parties agree that

Minnesota law governs this diversity action.

III.

Analysis

National challenges the district court's determination that the insurance policy

was ambiguous. The district court based its decision on the purpose and public policy

of such provisions.8

 National asserts that the district court created an ambiguity where

one did not exist. Without ambiguity, the court need only enforce the contract as

written. If enforced as written, the subject contract provides no coverage for the

Lappes. 

We reach a different conclusion than that of the district court in our de novo

review of the insurance contract. We find the contract to be without ambiguity. When

reviewing the construction of insurance policies, general contract principles govern.

Lobeck v. State Farm Mutual Automobile Ins. Co., 582 N.W.2d 246, 249 (Minn.

1998). "In interpreting a policy exclusion, any ambiguity in the language of the policy

must be construed in favor of the insured." Henning Nelson Constr. Co. v. Fireman's

Fund American Life Ins. Co., 383 N.W.2d 645, 652 (Minn. 1986). If, however, the
9

 The court does not consider extrinsic evidence when determining if a contract

is ambiguous. See In re Hennepin County 1986 Recycling Bond Litig., 540 N.W.2d

494, 498 (Minn. 1995). "[A]n insurance policy is still a contract, and where its

provisions are unambiguous the courts have no right to thrust upon the insurer a risk

that it did not accept and for which it was not paid a premium." Simon v. Milwaukee

Automobile Mut. Ins. Co., 115 N.W.2d 40, 49 (Minn. 1962); see also Berken v.

Beneficial Standard Life Ins. Co., 221 N.W.2d 122, 124 (Minn. 1974) ("It is clear that

the clause before us meets this standard in that it is unambiguous and unequivocally

states the circumstances under which coverage will be denied. It is therefore

unnecessary to resort to a determination of the subjective intent of the parties.").

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contract is clear and unambiguous, then the language is given its plain and ordinary

meaning. Lobeck, 582 N.W.2d at 249; American Commerce Ins. Brokers, Inc. v.

Minnesota Mutual Fire & Casualty Co., 551 N.W.2d 224, 227–28 (Minn. 1996).

Moreover, when a provision within an insurance policy is subject to both a reasonable

and unreasonable interpretation, the reasonable construction controls, thereby

eliminating any ambiguity. Mutual Service Casualty Ins. Co. v. Wilson Township, 603

N.W.2d 151, 153 (Minn. Ct. App. 1999). There is a duty to "fastidiously guard

against the invitation to create ambiguities where none exist." Columbia Heights

Motors, Inc. v. Allstate Ins. Co., 275 N.W.2d 32, 36 (Minn. 1979). There is no need,

in this case, to look beyond the plain language of the contract.9

Under the policy, the Lappes could not own the Buick for it to qualify as a

substitute vehicle. The Lappes operated their taxi company as a sole proprietorship.

The "dba" designation in the Lappes' business name–"Harold and Benita Lappa dba

Lappes Express Cab"–does not create a separate business entity from the Lappes as

individuals. Minnesota law–and the law of a majority of the jurisdictions that have

addressed this issue–hold that a "dba" designation does not create a separate entity
10 See, e.g., O'Hanlon v. Hartford Acc. & Indem. Co., 639 F.2d 1019 (3d Cir.

1981); Duval v. Midwest Auto City, Inc., 425 F. Supp. 1381 (D. Neb. 1977), affirmed

578 F.2d 721 (8th Cir.1978); Pinkerton's v. Superior Court, 57 Cal. Rptr. 2d 356

(Cal. Ct. App. 1996); Providence Wash. Ins. v. Valley Forge, 50 Cal. Rptr. 2d 192

(Cal. Ct. App. 1996); Allstate Ins. Co. v. Willison, 885 P.2d 342 (Colo. App. 1994);

Chmielewski v. Aetna Cas. and Sur. Co., 591 A.2d 101, 113 (Conn. 1991); Purcell

v. Allstate Ins. Co., 310 S.E.2d 530 (Ga. 1983); Samples v. Ga. Mutual Ins. Co., 138

S.E.2d 463 (Ga. App. 1964); Georgantas v. Country Mut. Ins. Co., 570 N.E.2d 870

(Ill. 1991); Trombley v. Allstate Ins. Co., 640 So.2d 815 (La. App. 1994); Bushey v.

Northern Assurance, 766 A.2d 598 (Md. 2001); Gabrelcik v. National Indemnity

Company, 131 N.W.2d 534 (Minn. 1964); Hall v. Auto-Owners Ins. Co., 658 N.W.2d

711 (Neb. 2003); Toulousaine de Distrib. v. Tri-State Seed & Grain, 520 N.W.2d 210

(Neb. 1994); Carlson v. Doekson Gross, Inc., 372 N.W.2d 902, 906 (N.D. 1985);

Recalde v. ITT Hartford, 492 S.E.2d 435 (Va. 1997). 

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in these circumstances.10 The Lappes, as individuals, owned the Buick and the

taxicabs, regardless of the existence of their sole proprietorship.

The district court took a different approach. The court looked beyond the plain

language of the contract and found ambiguity in its provisions by looking to public

policy considerations. For authority, the district court cited the dissenting opinion in

Gabrelcik v. National Indemnity Company, 131 N.W.2d 534 (Minn. 1964). The

Gabrelcik dissent described the purpose of the temporary substitute automobile

provision as “to prevent the same policy from being used to provide coverage for

vehicles other than those for which a premium has been paid." Id. at 535. The

provision prevents an insured from purchasing one policy for one automobile, but

securing coverage for every car he owns without paying the proper premiums. The

district court reasoned that because the Lappes paid a premium on the Buick to

American Family, they were not attempting to defraud the insurers by seeking more

coverage than that for which they paid. The district court then concluded that a no-
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coverage finding would circumvent the other purpose of the provision, that is to

benefit the insured. In the district court's view, the Lappes could have reasonably

believed that “Harold and Benita Lappe dba Lappes Express Cab” identified a

separate business entity distinct from themselves individually, thus allowing it to be

covered under the National policy. 

Here, the plain language of the exclusion does not permit the insured, Harold

and Benita Lappe dba Lappe's Express Cab, to use another vehicle owned by them to

replace a covered vehicle. This language is very specific. And Minnesota law

indicates that an individual and a sole proprietorship are the same "entity" for

purposes of personal property ownership. As such, any automobile the Lappes own,

either individually or through their sole proprietorship, is excluded from coverage

under the plain language of National's temporary substitute automobile provision. The

district court erred in looking beyond the language of the provision to determine

intent or policy considerations. The judgment of the district court is reversed and the

garnishment action dismissed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.