Court Opinion

ID: 9725701
Source: CourtListenerOpinion
Date Created: 2023-08-26 12:02:33.938897+00
Date Added: 2024-06-11T18:25:18.495590
License: Public Domain

DAVIES, Judge
(dissenting).
I respectfully dissent.
The issue in this case is: Is insurance coverage normally a series of one-year policies, each subject to its own annual limit, or does coverage come, instead, as a long-term policy with a single, perpetual limit? And how does the answer to the foregoing question affect the recovery for a multi-year embezzlement? The answer we give is significant, for the phrasing and, I think, marketing of the policy in this case appears to be typical of most policies available to insurance purchasers.
The majority relies primarily on the fact that the definition of “occurrence” does not include the phrase “during the policy period.” But the policy itself is pervasively constructs ed on the idea of policy periods. (The phrase “policy period” itself appears at least five times.)
Most to the point, I read the “occurrence” definition as incorporating “policy period” from the description of coverage in clause B.13., which reads: “[W]e will pay only for loss that you sustain through acts committed or events occurring during the Policy Period.” In light of this coverage clause, it would be redundant to repeat the phrase “during the policy period” in the definition of “occurrence.”
The limit of employee dishonesty coverage on the declarations page is $100,000, and the term of that coverage is a policy period from “01-04-93 to 01-04r-94.” Therefore, to calculate the applicable coverage with a multi-year occurrence, the loss must be divided into the separate losses occurring within each policy period. In this case, $100,000 of a loss in one policy period totalling $102,000 should be covered, as should all of the $47,000 loss occurring in the previous 365-day policy period.
The fact that the insurer prepared a single declarations page for the policy — a fact noted by the majority — is nothing but a clerical procedure. The declarations page issued with the first year’s policy was simply incorporated, for all terms except duration, into subsequent policies — the policy for the second (and third) year’s coverage. The declarations page cannot be a perpetual declarations page as to the duration of coverage because it explicitly states a policy period of 365 days in 1993-9⅛. Taken literally, this would leave the insured without any coverage for the following 365 days (in 1994-95) or for any subsequent 365-day period. The insurer, for clerical efficiency, simply carries forward the substance of the declarations page and by reference adopts it as appropriate to each new 365-day policy period.
* * * * * *
To avoid an adverse impact on the insurance marketplace, the policy must be read as I propose. To read this standard policy as the majority suggests makes it advisable for insureds to change insurers annually. That would be absurd.
In addition, the majority’s reading denies to insureds the coverage they intended to purchase. Insureds pay premiums with the expectation that losses in the applicable policy period will be covered up to $100,000. If that coverage is denied them on a technical reading of the policy, the insured does not get what has been paid for.
In contrast with the court’s decision, the result I suggest is consistent with an insureds’ reasonable expectations under relevant ease law. In Okada v. MGIC Indem. Corp., 608 F.Supp. 383 (D.Haw.1985), rev’d in, part on other grounds, 823 F.2d 276 (9th Cir.1986), the plaintiffs, directors, and officers (directors) of a savings and loan association sought an order declaring their rights under a directors’ and officers’ policy. 608 F.Supp. at 385. The policy limited the insurer’s liability to $1,000,000 per qualifying “loss” incurred by the directors. Id. at 387. The court addressed the issue of whether the directors’ allegedly negligent acts caused one “loss” or a series of losses for the purposes of determining the insurer’s liability. Id. at 388. The court held that the savings and loan suffered more than one “loss” due to the directors’ negligence and that the insurer *443was accordingly liable beyond $1,000,000. Id. at 389.
Minnesota courts have reached similar results in suits on policies covering pollution costs. In Northern States Power Co. v. Fidelity & Cas. Co., 523 N.W.2d 657 (Minn.1994), NSP sued to recover on a series of comprehensive general liability policies. 523 N.W.2d at 658-59. Although the damage at issue occurred continuously over a period of years, the NSP court permitted yearly recoveries under the multiple policies that were in effect during the course of pollution. Id. at 664. The court held that there had been
one occurrence during the policy period of each applicable [insurance] policy and NSP must assume the retained limit with respect to each of these policies. [The insurance company] is liable for the excess portion of the damages allocated to each policy up to the policy limit for one occurrence.
Id. (emphasis added). The court, thus, permitted recovery under each of the consecutive insurance policies up to the policy limit on each policy.
Further, this court has “rejectfed] the argument that there can be only one occurrence in a case where [loss] results from continuous or repeated conditions of exposure.” Industrial Steel Container Co. v. Fireman’s Fund Ins. Co., 399 N.W.2d 156, 159 (Minn.App.1987), review denied (Minn. Mar. 18, 1987).
Here, Landico incurred losses due to repeated theft by one of its employees. That Landico’s losses resulted from a series of thefts does not, under NSP, preclude a finding of more than one occurrence for- the purposes of determining American Family’s liability.
⅜ ⅜ ⅜ ¾: ⅜ ⅝
It might be suggested that the insured has an obligation to discover an embezzlement that continues beyond a single year. The obligation to discover is, however, explicitly stated in the policy. Clause B.3. provides:
Discovery Period for Loss: We will pay only for covered loss discovered no later than one year from the end of the policy period.
And clause B.5.d. provides:
If this insurance or any of its coverages is cancelled or terminated as to any Insured, loss sustained by that Insured is covered only if discovered no later than one year from the date of that cancellation or termination.
In no circumstance does the employer have an obligation to discover embezzlements more promptly than within 12 months in order to be eligible for coverage. Here, the loss was discovered well within the time specified. I see no reason why this loss should be an exception to these explicit timeliness rules.
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Finally, I find the non-cumulation clause of the policy irrelevant to the problem before us.3 That provision prohibits “banking” of unused insurance; that is, insurance unused during one policy period may not be carried forward to a subsequent policy period to increase the limit of coverage so as to reimburse a loss that exceeds the policy’s policy-period limit.4
We have here exactly the opposite problem; $100,000 of coverage has been fully utilized in one policy period and, thus, the question is not whether unused coverage carries over to the next period. The question is whether using it up in one period uses it up for the next policy period as well. It does not.
I would reverse.

. Clause B. 10. of the policy states:
Non-Cumulation of Limit of Insurance: Regardless of the number of years this insurance remains in force or the number of premiums paid, no Limit of Insurance cumulates from year to year or period to period.

. My position is consistent with the reading given the clause in this court’s unpublished decision Prairie Land Coop. v. Millers’ Mut. Ins. Ass’n of Illinois, C2-91-1503, 1992 WL 20705 (Minn.App. Feb. 11, 1992).