Opinion ID: 617942
Heading Depth: 2
Heading Rank: 3

Heading: Grant of the Insurers' JMOL Motion

Text: We next consider Penford's alternative argument that the extrinsic evidence on the issue of intent did not point unswervingly to only one reasonable conclusion, Gardner, 82 F.3d at 251, and that the district court therefore erred by granting the insurers' JMOL motion. When contract language is ambiguous, we must engage in a process of interpretation to search for the meanings attached by each party at the time the contract was made. Clinton Phys. Therapy Serv., P.C. v. John Deere Health Care, Inc., 714 N.W.2d 603, 615 (Iowa 2006) (internal quotation marks omitted). [E]xtrinsic evidence is admissible when it sheds light on the situation of the parties, antecedent negotiations, the attendant circumstances, and the objects they were striving to attain. Id. (internal quotation marks omitted). As noted by the district court in its summary judgment ruling, if the extrinsic evidence is undisputed, the court will construe the contract as a matter of law. D. Ct. Order of Jan. 19, 2010, at 15 (citing State Farm Mut. Auto. Ins. Co. v. Townsend, 361 N.W.2d 332, 335 (Iowa 1984)). When the interpretation of a contract depends on the credibility of extrinsic evidence or on a choice among reasonable inferences that can be drawn from the extrinsic evidence, the question of interpretation is determined by the finder of fact. Pillsbury Co. v. Wells Dairy, Inc., 752 N.W.2d 430, 436 (Iowa 2008); see also Restatement (Second) of Contracts § 212(2) (1981). We have held that judgment as a matter of law may be appropriate in a case in which summary judgment was initially denied. See Armco Steel Corp. v. Realty Inv. Co., 273 F.2d 483, 485 (8th Cir.1960) (When, however, both parties have had an opportunity to adduce all relevant, available evidence so that the trial court is no longer uncertain as to the circumstances of the case, then slight doubt as to the facts is insufficient to avert a directed verdict or a judgment notwithstanding the verdict.). The district court did not elaborate on its reasoning in granting the motion. Implicit in its ruling, however, is the conclusion that the extrinsic evidence presented at trial removed any ambiguity regarding the meaning of the sublimits provision. Accordingly, we must determine whether, when viewed in the light most favorable to Penford, a reasonable jury could have concluded that the sublimits did not capture and cap business interruption losses. The insurers contend that the extrinsic evidence showed that the parties to the negotiation shared a mutual understanding that the sublimits applied to all losses, including business interruption losses. They cite testimony from the underwriters, each of whom understood that peril sublimits apply to all forms of coverage. Weltscheff testified that this understanding was basic 101 insurance, a bedrock principle that prevailed across the industry. Tr. 1215:24. The insurers contend that not only did the underwriters share this understanding, but that Rehmer, Penford's agent, did so as well. They assert that Rehmer was aware that the underwriters were prevented from offering more than $5 million for locations categorized as 100-year flood zones, as was Zone A, in the absence of prior approval. They refer to Rehmer's statement that it was her understanding that the two sublimits would apply to both property damage and time element loss, citing the following testimony from her December 2009 deposition: Q: When you wrote this [June 11, 2008, email to a Penford representative], was it your understanding that the two $10 million Cedar Rapids flood sublimits would apply to both property damage and time element loss? A: It was my understanding, yes. J.A. 603. The insurers maintain that, as Penford's agent, Rehmer was aware that each insurer intended to limit its exposure to $10 million, that she understood that the sublimits would apply to business interruption losses, and that her knowledge should be imputed to Penford under agency principles. The insurers contend that because Penford presented no affirmative evidence regarding the policy's underlying intent, the extrinsic evidence the insurers submitted was uncontested and left no question that the parties had attached the same meaning to the contract at the time it was made. In such circumstances, the insurers argue, Penford cannot avoid that meaning and its attendant consequences by offering another construction, even if such were reasonable on its face. [5] Accordingly, they argue that because the interpretation of the contract did not depend on the credibility of extrinsic evidence or on a choice among reasonable inferences that can be drawn from the extrinsic evidence, Pillsbury, 752 N.W.2d at 436, the district court properly granted their JMOL motion. We disagree with the insurers' suggestion that, when faced with their undisputed evidence regarding intent, the district court had no choice but to grant their motion. [W]hile a district court is permitted to enter judgment as a matter of law when it concludes that the evidence is legally insufficient, it is not required to do so. To the contrary, the district courts are, if anything, encouraged to submit the case to the jury, rather than granting such motions. Unitherm Food Sys. v. Swift-Eckrich, Inc., 546 U.S. 394, 405, 126 S.Ct. 980, 163 L.Ed.2d 974 (2006). Penford argues that, by granting the insurers' motion, the district court not only ignored this prudential precept, but also failed to apply Federal Rule of Civil Procedure 50(a)'s exacting standard. Penford argues that even if the insurers' extrinsic evidence was undisputed, it derived primarily from the testimony of interested witnesses and therefore should have been disregarded. In the alternative, Penford contends that it provided sufficient evidence to impeach and contradict the insurers' extrinsic evidence and thus raised issues of fact and credibility that were rightfully within the province of the jury. When ruling on a JMOL motion, a district court must consider `evidence supporting the moving party that is uncontradicted and unimpeached, at least to the extent that that evidence comes from disinterested witnesses.' Wilson v. Brinker Int'l, Inc., 382 F.3d 765, 770 (8th Cir.2004) (quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 151, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000)). Put another way, we must accept all the evidence favoring [the nonmoving party], but only the evidence favoring [the moving party] that is uncontradicted and unimpeached and that comes from disinterested witnesses. Salitros v. Chrysler Corp., 306 F.3d 562, 569 (8th Cir.2002). Penford takes this statement to mean that the testimony of interested parties must be discounted entirely when considering a JMOL motion. It contends that the underwriters were interested parties because they were employees of the insurers and could arguably be blamed if the policy they drafted exposed their employers to more liability than had been anticipated or approved. Thus, according to Penford, the district court should have disregarded their testimony in conducting its Rule 50(a) analysis. We do not believe such an insuperable bar exists. Our sister circuits have recognized that, in employment discrimination cases, a district court may consider testimony from the employer's agents at the summary judgment stage even though the agents are arguably interested parties. Traylor v. Brown, 295 F.3d 783, 791 (7th Cir.2002) (rejecting interpretation that would require a court to ignore the uncontroverted testimony of company employees or to conclude, where a proffered reason [for terminating the plaintiff-employee] is established through such testimony, that it is necessarily pretextual); Sandstad v. CB Richard Ellis, Inc., 309 F.3d 893, 898 (5th Cir.2002) (rejecting same interpretation). Whether it is proper to credit the testimony of an interested witness will depend on the context and circumstances at issue. See 9B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2527 (3d ed. 2008) (Often it will be for the jury to determine the credibility of uncontradicted and unimpeached testimony of an interested witness but in other circumstances even this testimony must be believed.). In this case, the insurers purported to offer more than testimony from interested parties: they assert that the extrinsic evidence shows that all parties involved in the negotiations, including Penford's agent, operated under the same implicit agreement regarding the scope of the sublimits. Penford argues that a reasonable jury would not be required to believe that the parties intended for the flood sub-limits to apply to property damage and business interruption losses. Penford asserts that it adduced evidence in support of the inference that the sublimits, as written, were not intended to cap business interruption losses, pointing to a document from National Union entitled Property Underwriting Practices and Procedures Manual, which reads: 1.3 Sublimits Whenever a sublimit is used and the policy covers Property Damage (PD) and Time Element (TE) it should be made clear that the sublimit is a combined PD/TE sublimit. J.A. 2937. Gunty admitted that the underwriters did not apply this provision in this case. The absence of such a clear statement, Penford argues, was evidence that the parties did not intend for the flood sublimits to cap any coverage other than for property damage. Penford's argument is misplaced. It is not enough to have adduced evidence that its interpretation of the sublimits was reasonable or to imply that had the underwriters really intended for the sublimits to apply to all coverages, they would have made that point explicitly. The underwriters testified that the policy did make that point explicitly, as recounted in Gunty's testimony: Q: Is there any other language that you seized upon in this [sublimits] provision as consistent with your intent in underwriting the account? A: Go down to the next paragraph, I guess, the line that says sublimits stated below. Sublimits stated below apply per occurrence for all locations and coverages involved. That, to me, was really a key part of the heart and soul of what was we were trying to get across, and this wording did a very fine job with that. It says that if you have a sublimit, that sublimit is going to apply on a per occurrence basis and it includes all coverages. That's pretty comprehensive. That was exactly our intent. And those words say that precisely. Tr. 1081:1-15. As set forth above, Rehmer's deposition confirmed that she understood the flood sublimits in the same way. This evidence of mutual intent is the most salient evidence available. See Swainston v. Am. Family Mut. Ins. Co., 774 N.W.2d 478, 481 (Iowa 2009) (In construing insurance contracts, we adhere to the rule that the intent of the parties must control.) (internal quotation marks omitted); Pillsbury, 752 N.W.2d at 436 (The cardinal rule of contract interpretation is to determine what the intent of the parties was at the time they entered into the contract.). Thus, to overcome the insurers' extrinsic evidence, Penford was required to establish that a reasonable jury would have had a sound basis to conclude that no such mutual understanding existed at the time the contract was entered into. Penford contends that not only could a reasonable jury decline to impute Rehmer's statements to Penford, but also could conclude that those statements lack credibility. Penford denies that Rehmer's understanding of the contract terms can be imputed to it with binding effect. It contends that Marsh had offered to provide the service of interpretation of insurance policies, but that that service was not included in its agreement with Marsh. Penford seems to suggest that Rehmer had the authority to negotiate the terms of the policy, but should not have been permitted to recount what she understood those terms to mean. We do not agree. Rehmer served as Penford's broker and chief negotiator, and her deposition testimony should be read in that light. Rehmer was in the best position to offer to Penford a precise account of what would be covered under the policy. Her understanding of what the sublimits meant reflected her interactions with the insurers' representatives and her awareness of the meaning the parties had respectively attached to the sublimits provision. We find unpersuasive Penford's attempt to distance itself from Rehmer's deposition testimony, particularly in light of its request for her opinion and its reliance on that opinion when preparing for the impending flood. Penford argues in the alternative that it should not be bound by Rehmer's testimony because it lacks credibility and cannot be taken at face value. Penford contends that evidence adduced at trial revealed Rehmer's ongoing financial ties to the insurance industry. Appellant's Br. 57. It points to Gunty's cross-examination, in which he explained that brokers from Marsh and other insurance brokerage firms earn a commission from the insurers for each policy they place with insureds. At no point in this line of questioning, however, was Rehmer ever mentioned by name, and thus the nonspecific nature of this testimony is insufficient to sustain an inference that would undermine Rehmer's credibility. Furthermore, Penford called as a witness Richard Michaels, Rehmer's supervisor at Marsh. Among other things, Michaels described Rehmer as a key member of the team and expressed confidence in her ability to deliver quality service. He agreed that she would be the person to whom Penford would direct questions related to coverage and stated that he would expect her to make her best effort to answer its questions, hardly the description of one whose testimony should be deemed lacking in probity. We conclude that there was no factual dispute regarding whether Rehmer shared the same understanding as the underwriters and whether that understanding bound Penford. Consequently, the interpretation of the contract did not depend on the credibility of extrinsic evidence or on a choice among reasonable inferences that can be drawn from the extrinsic evidence, Pillsbury, 752 N.W.2d at 436, and thus the district court did not err when it granted the insurers' JMOL motions on the declaratory judgment and breach of contract claims. The judgment is affirmed.