Opinion ID: 1263554
Heading Depth: 2
Heading Rank: 1

Heading: Whether Shayna Fayette is an Insured

Text: Westchester's first argument is that, although the district court correctly held that Westchester had no duty to defend the Insureds against any portion of the Fayette lawsuit, it erroneously found that Shayna Fayette was not an Insured under the policy. Westchester maintains that this finding creates the potential for Mark and Shayna Fayette to dismiss their complaint and refile in Shayna Fayette's name alone. Looking to the language of the policy, the district court determined that Shayna Fayette was not an Insured. According to the district court, the D & O coverage section defines the term Insureds to mean the Company and the Directors and Officers. (Boldface in original). But the General Terms and Conditions section states that a spouse is an Insured under the policy. As a result, the district court concluded that an ambiguity existed in the policy because the definition of Insured is subject to two different meanings. The court noted that the General Terms and Conditions section states that Terms that appear in boldface in the General Terms and Conditions but are not defined in this Definitions subsection and are defined in other Coverage Sections of the Policy shall have the meanings ascribed to them in those Coverage Sections. (Boldface in original). The court observed that the term Insureds is not defined in the General Terms and Conditions section; instead, it is only defined in the D & O coverage section to mean the Company and the Directors and Officers. (Boldface in original). This definition does not include spouses. As a result, the district court held that because the term Insureds is defined in the D & O coverage section, meaning that such definition is the only definition applicable to the D & O coverage section and its exclusions, Shayna Fayette is not an Insured under the D & O policy. Under Minnesota law, [t]he insured bears the burden of demonstrating coverage under an insurance policy. SECURA Supreme Ins. Co. v. M.S.M., 755 N.W.2d 320, 323 (Minn.Ct.App.2008). If the insured meets this burden, then the insurer must establish the applicability of exclusions. Id. [A]ll exclusions are construed strictly against the insurer. Id. (internal quotations and citation omitted). General principles of contract interpretation apply to insurance policies. When the language in an insurance policy is unambiguous, the language must be given its plain and ordinary meaning. Id. (internal quotations and citations omitted). But if the court finds that the policy language is ambiguous, such ambiguity must be resolved in the insured's favor. Id. This is done by interpreting the ambiguity in accordance with the reasonable expectations of the insured. Id. In deciding whether an ambiguity truly exists in an insurance policy, the court must read the policy as a whole. Mutual Serv. Cas. Ins. Co. v. Wilson Twp., 603 N.W.2d 151, 153 (Minn.Ct.App.1999). The language must be considered within its context, and with common sense. Id. If the court concludes that a phrase is subject to two interpretations, one reasonable and the other unreasonable in the context of the policy, the reasonable construction will control and no ambiguity exists. Id. Likewise, provisions in an insurance contract must be read and studied independently and in context with all other relevant provisions and the language of the policy as a whole. West Bend Mut. Ins. Co. v. Armstrong, 419 N.W.2d 848, 850 (Minn.Ct.App.1988). Construction of an insurance policy which entirely neutralizes one provision should not be adopted if the contract is susceptible of another construction which gives effect to all of its provisions and is consistent with the general intent. Id. Viewing the relevant policy language in context, giving effect to all of the policy's provisions, and applying a commonsense construction to such language, we hold that no ambiguity exists in the policy language and that Shayna Fayette is an Insured under the policy. The term Insured does appear in boldface type in the General Terms and Conditions section. The term is not defined in the Definitions subsection of the General Terms and Conditions section. Likewise, the Estates, Legal Representatives, and Spouses provision appearing in the General Terms and Conditions section does not define Insured but instead advises that [t]he ... spouses ... of natural persons who are Insureds shall be considered Insureds under this Policy.... (Boldface in original). Thus, this provision does not purport to define the term Insured; instead, it only explains that spouses are considered Insureds under the policy  however that term is defined in the relevant coverage section. Therefore, as directed by the policy, because the term Insured is not defined in the Definitions subsection of the General Terms and Conditions section, the relevant coverage section's definition of Insured governs. The relevant coverage section is the D & O coverage section, which defines an Insured as the Company and the Directors and Officers. (Boldface in original). Applying the D & O coverage section's definition of Insured to the Estates, Legal Representatives, and Spouses provision in the General Terms and Conditions section yields the following result: The ... spouses ... of natural persons who are Insureds [defined as the Company and the Directors and Officers] shall be considered Insureds [defined as the Company and the Directors and Officers] under this Policy .... (Boldface in original). Because Mark Fayette is a director and officer of the Residences, he is an Insured under the D & O policy. In turn, applying the Estates, Legal Representatives, and Spouses provision, because Shayna Fayette is the spouse of Mark Fayette  a director and officer who meets the definition of Insured under the D & O coverage section  she is also considered an Insured. This plain language, commonsense interpretation of the policy gives effect to all sections and provisions in the policy. Because both Mark Fayette and Shayna Fayette are Insureds under the policy, the insured v. insured exclusion applies because the policy excludes coverage for any Claim ... brought or maintained by, on behalf of, in the right of, or at the direction of any Insured in any capacity... whether or not collusive.... (Boldface in original). [2] Therefore, Westchester has no duty to defend the Insureds. As a result, we need not address the question whether the insured v. insured exclusion applies when the lawsuit involves the presence of both an insured plaintiff and a noninsured plaintiff.