Court Opinion

ID: 9688935
Source: CourtListenerOpinion
Date Created: 2023-08-24 18:13:47.015166+00
Date Added: 2024-06-11T18:18:43.126445
License: Public Domain

GORDON W. SHUMAKER, Judge
(dissenting).
I respectfully dissent and would reverse the summary judgment.
The majority focuses on the effect of the settlement between AMICA Mutual Insurance Company and the Francks and the Pennistons and applies the rationale of Teigen V- Jelco of Wis., Inc., 124 Wis.2d 1, 367 N.W.2d 806 (Wis.1985):
The desirability of Loy-type agreements lies in the encouragement of partial settlements in future cases, thereby fostering effective and expeditious resolution of lawsuits. Partial settlements not only benefit the parties involved, but the justice system as a whole.
Id. at 809-10.
Although this settlement undoubtedly benefited AMICA, the Francks, and the Pennistons, it surely did not benefit the umbrella insurer. Thus, the laudable goal of benefit to settling disputants is turned on its head if some of the parties can contrive to benefit themselves at the expense of a nonsettling party. Additionally, it is unlikely that the justice system is benefited in any respect by a judicial rewriting of the insurance contract to which insureds and umbrella insurer agreed.
Cincinnati agreed, through its insurance policy, to provide “[ejxcess insurance over and above the amounts provided for in basic policies * * It is undisputed that the “basic policy” applicable here is AMICA’s primary liability policy with a $500,000 bodily injury limit.
Cincinnati’s policy requires the insured to maintain basic coverage of $500,000, and provides: “We will pay only the amount which is more than the required basic policy limits and more than any other collectible insurance.” If there is other insurance in addition to the basic policy, Cincinnati provides that “the other insurance will pay first and this policy will be in excess of the other insurance.”
In deciding insurance coverage questions, courts must begin with a review of the insurance policy at issue because insurance policies, like other contracts, “are matters of agreement by the parties and the function of a court is to determine what the agreement was and enforce it.” Fillmore v. Iowa Nat’l Mut. Ins. Co., 344 N.W.2d 875, 877 (Minn.App.1984). As the majority notes, in ascertaining what the agreement was, courts must construe the policy according to the terms the parties have used and must give the policy language its ordinary and usual meaning so *477as to give effect to the parties’ intent as it appears from the contract. Dairyland Ins. Co. v. Implement Dealers Ins. Co., 294 Minn. 236, 244-45, 199 N.W.2d 806, 811 (1972). Where there is no ambiguity in an insurance policy, there is no room for construction. Id. at 244, 199 N.W.2d at 811.
Cincinnati’s umbrella policy provides only excess insurance coverage. As the Minnesota supreme court explained in Jostens, Inc. v. Mission Ins. Co., 387 N.W.2d 161, 165 (Minn.1986), the significant features of umbrella coverage are: 1) the requirement that there be an underlying policy with a different insurer, 2) an express agreement between the insured and the umbrella insurer that the umbrella coverage will be available for claims that exceed the limits of the underlying insurance, and 3) the ability of the umbrella carrier to offer high limits for a modest premium because the underlying .insurer absorbs most claims and the umbrella carrier’s defense costs, which can be substantial, can be kept low.
The majority acknowledges that umbrella insurers are ordinarily liable for losses in excess of the underlying coverage, and that the term “excess” unambiguously means the amount by which one quantity exceeds another. Under the plain language of Cincinnati’s umbrella insurance contract, there is rio coverage available until a claim exceeds the limit of the underlying policy. Only in a fictional sense has the claim here exceeded the limit of the underlying policy.'
The majority makes the same error that the district court made. Instead of beginning with the plain contract language and then enforcing the contract as agreed between the parties, the majority and the district court suggest that the enforcement of the contract will “nullify the intent of the settlement” and will “deprive the Pen-nistons of the protection from person exposure that they bargained for in the agreement.” I first note that the Pennistons did not bargain for the protection that the majority would now give to them. The Pennistons bargained for “excess” coverage, but such coverage has not yet been reached.
The focus of the district court and the majority is on upholding the intent of the settlement. To even reach that issue it is necessary to ignore the intent of the insurance contract.
The real effect of the settlement agreement is the unilateral de facto revision of the excess policy so as to thrust Cincinnati into the role of primary carrier.
The majority relies on Drake v. Ryan, 514 N.W.2d 785 (Minn.1994), and the policy rationale in Schmidt v. Clothier, 338 N.W.2d 256 (Minn.1983), in determining that exhaustion ,of a primary policy is not always necessary to reach excess coverage and in presenting the public policy goal of encouraging settlements. Neither case is sufficiently analogous to offset the rule that the plain language of the excess policy is to be honored and given effect.
Drake involved two insurers who agreed in their respective policies to provide primary coverage, and one of the insurers also agreed to provide excess coverage for a non-owned insured vehicle. Id. at 786. The supreme court expressly declined to rule on the issue squarely presented here:
We leave for another day James Ryan’s argument regarding “umbrella insurers” and the rising cost of excess insurance if primary carriers can so easily shift the cost of defense to excess insurers. State Farm is not an umbrella carrier.
Drake, 514 N.W.2d at 789.
So, Drake, not having an umbrella insurance policy to construe, had no occasion to be concerned about whether umbrella excess insurance could be reached if cover*478age still remained under the primary policy-
In Schmidt, the supreme court held that, for purposes of determining underin-sured motorist coverage, “[e]nforcement of policy exhaustion clauses would produce results contrary” to the no-fault insurance act. Schmidt, 338 N.W.2d at 260. Although some general legal principles are likely applicable to all insurance contracts, the no-fault act incorporates specific public policies that serve as limitations on automobile insurance. Thus, while exhaustion clauses in automobile policies violate the public policies expressed in the no-fault act, there might be no such public policy considerations in other insurance contexts. Thus, Schmidt, having been decided in a no-fault context, is not persuasive authority for any proposition here.
I believe the district court erred in not construing the Cincinnati umbrella policy according to its plain and ordinary language. The effect of that error was to convert an excess insurance policy to a de facto primary policy, in contravention of the contract language, and to shift duties and costs to the excess carrier where that carrier had no obligation to assume the duties or pay the costs. I would reverse.