Court Opinion

ID: 9383849
Source: CourtListenerOpinion
Date Created: 2023-03-31 14:06:45.348335+00
Date Added: 2024-06-11T17:17:48.462576
License: Public Domain

FILED
                                                                      IN THE OFFICE OF THE
                                                                   CLERK OF SUPREME COURT
                                                                          MARCH 31, 2023
                                                                    STATE OF NORTH DAKOTA

                  IN THE SUPREME COURT
                  STATE OF NORTH DAKOTA

                                   2023 ND 63

Secura Supreme Insurance Company
and Secura Insurance, a Mutual
Company,                                             Plaintiffs and Appellants
      v.
Scott Differding, The Cincinnati
Insurance Company, Nationwide
Affinity Insurance Co. and
Nationwide Mutual Insurance Company,                Defendants and Appellees

                                No. 20220213

Appeal from the District Court of Cass County, East Central Judicial District,
the Honorable Reid A. Brady, Judge.

REVERSED.

Opinion of the Court by McEvers, Justice.

William P. Harrie, Fargo, ND, for plaintiffs and appellants.

Louise B. Miller, Minneapolis, MN, for defendants and appellees Scott
Differding, Nationwide Affinity Insurance Co. and Nationwide Mutual
Insurance Company.

Amy M. Oster (argued), Bismarck, ND, John W. Harkins IV (on brief), Billings,
MT, Sabrina C. Haurin (on brief) and James M. Young (on brief), Columbus,
OH, for defendant and appellee The Cincinnati Insurance Company.
           Secura Supreme Ins. Co., et al. v. Differding, et al.
                           No. 20220213

McEvers, Justice.

[¶1] Secura Supreme Insurance Company appeals from a judgment ordering
Secura to indemnify Scott Differding for damages awarded against him in a
tort case. The district court, deciding cross motions for summary judgment,
held Secura’s policy did not insure Differding. The court nonetheless held
Secura must indemnify Differding under theories of waiver and estoppel
because it assumed his defense in the tort case without reserving the right to
deny coverage. We hold Differding cannot invoke waiver and estoppel to create
personal coverage under an insurance policy to which he is not a party and has
no right to enforce. The district court’s judgment is reversed.

                                        I

[¶2] Aaron Greterman sued Oxbow Golf and Country Club, Inc., some of its
board members, both in their official and individual capacities, as well as an
individual named David Campbell. Greterman claimed slander based on an
incident that occurred during a golf tournament at the country club. His initial
complaint did not name Differding, who was an Oxbow board member. Secura
insured Oxbow under a commercial general liability policy (“the CGL policy”).
The CGL policy’s coverage extends to the directors, “but only with respect to
their duties as . . . officers or directors.” Secura issued a letter to the Oxbow
Board of Directors stating it would provide a defense, but Secura specifically
reserved its right to deny coverage based on certain provisions in the CGL
policy. The letter advised the board members that “[i]f you have coverage
available to you under any other insurance policy, it is suggested that you
report this matter to the other company so as not to invalidate the coverage.”

[¶3] Greterman later amended his complaint. The amended complaint listed
Differding both individually and in his official capacity as an Oxbow board
member. Secura retained an attorney to represent Oxbow and the board
members. The representation was not limited to the board members’ official
capacities. The case proceeded to trial. On the eighth day of trial, Secura issued

                                        1
another reservation of rights letter. This letter was addressed to both the
Oxbow Board of Directors as well as the individual board members. It is similar
to the first letter and sets out the same reservations. The jury returned a
special verdict on the tenth day of trial finding Greterman was slandered and
attributing fault to the defendants in various percentages. The district court
entered judgment against Oxbow for $432,257.82 and against Differding
individually for $540,320.18, including post-judgment interest against both.
Secura satisfied the judgment against Oxbow. Nationwide Insurance, which
insured Differding under a homeowner’s policy, satisfied the judgment against
him.

[¶4] Secura brought this action seeking a declaratory judgment that it is not
obligated to indemnify Differding for his individual liability. Secura sought an
alternative declaration that if it was liable, Cincinnati Insurance Company,
which provided Oxbow with an officer’s and director’s insurance policy, is
responsible for any amounts in excess of the $1 million CGL policy limit.
Differding and Nationwide counterclaimed arguing Secura was barred from
denying coverage based on waiver and estoppel. The parties filed cross-motions
for summary judgment. The district court ruled in favor of Differding,
Nationwide, and the Cincinnati Insurance Company. The court held:

      Secura’s policy did not provide coverage for the individual liability
      assessed against Differding in the underlying case, but Secura
      provided Differding’s defense, did not properly reserve its right to
      deny coverage to Differding, has waived its right to deny coverage,
      and is equitably estopped from denying coverage.

The court entered judgment ordering Secura to indemnify Differding for the
judgment against him in the tort action in the amount of $561,333.46 plus
interest. Secura appeals.

                                       II

[¶5] Our standard for reviewing a district court’s summary judgment is well
established:

                                       2
     Summary judgment is a procedural device under N.D.R.Civ.P.
     56(c) for promptly resolving a controversy on the merits without a
     trial if there are no genuine issues of material fact or inferences
     that can reasonably be drawn from undisputed facts, or if the only
     issues to be resolved are questions of law. The party seeking
     summary judgment must demonstrate there are no genuine issues
     of material fact and the case is appropriate for judgment as a
     matter of law. In deciding whether the district court appropriately
     granted summary judgment, we view the evidence in the light
     most favorable to the opposing party, giving that party the benefit
     of all favorable inferences which can reasonably be drawn from the
     record. A party opposing a motion for summary judgment cannot
     simply rely on the pleadings or on unsupported conclusory
     allegations. Rather, a party opposing a summary judgment motion
     must present competent admissible evidence by affidavit or other
     comparable means that raises an issue of material fact and must,
     if appropriate, draw the court's attention to relevant evidence in
     the record raising an issue of material fact. When reasonable
     persons can reach only one conclusion from the evidence, a
     question of fact may become a matter of law for the court to decide.
     A district court's decision on summary judgment is a question of
     law that we review de novo on the record.

Larson Latham Huettl LLP v. Iversen, 2023 ND 16, ¶ 5, 985 N.W.2d 662
(quoting Cuozzo v. State, 2019 ND 95, ¶ 7, 925 N.W.2d 752).

[¶6] Secura argues waiver and estoppel cannot be used to create coverage for
Differding as a matter of law. We agree. Waiver and estoppel are distinct but
related concepts:

     [E]stoppel requires (1) an admission, statement, or act
     inconsistent with the claim afterwards asserted and sued upon, (2)
     action by the other party on the faith of such admission, statement,
     or act, and (3) injury to such other party, resulting from allowing
     the first party to contradict or repudiate the admission, statement,
     or act. Waiver is founded upon the intentional relinquishment of a
     known right. If waiver is implied from conduct, the conduct must
     clearly and unequivocally show a purpose to relinquish the right.

                                      3
D.E.M. v. Allickson, 555 N.W.2d 596, 600 (N.D. 1996) (internal quotations and
citation omitted) (quoting Brown v. State Farm Mut. Auto. Ins. Co., 776 S.W.2d
384, 386-87 (Mo. 1989)). “Waiver involves the act or conduct of one of the
parties to the contract only. An estoppel involves the act or conduct of both
parties to a contract.” D.E.M., at 600 (quoting Brown, at 387).

[¶7] There is a split of authority on the issue of whether waiver and estoppel
can extend coverage to risks that are not included in the terms of an insurance
policy. See Wangler v. Lerol, 2003 ND 164, ¶ 12, 670 N.W.2d 830; see also 46
C.J.S. Insurance § 1155 (March 2023 update). The majority rule is that waiver
and estoppel cannot operate to extend coverage. Wangler, at ¶ 12; see also
Conklin v. N. Am. Life & Cas. Co., 88 N.W.2d 825, 830-31 (N.D. 1958)
(“[W]aiver or estoppel may not be successfully urged as a method of bringing
within the terms of the policy risks expressly excluded therefrom, or as a
means of extending the coverage of the policy.”). The rationale for the rule is
that courts should not rewrite parties’ insurance contracts to force an insurer
to cover a loss for which the insured did not pay. French v. State Farm Fire &
Cas. Co., 950 N.E.2d 303, 310 (Ind. Ct. App. 2011); see also Harr v. Allstate Ins.
Co., 255 A.2d 208, 218 (N.J. 1969). “[I]f courts entertained the prospect that
insureds could gain unpurchased coverage on account of collateral action by
the insurer, unprotected insureds would have obvious incentive to pursue
litigation.” Maxwell v. Hartford Union High Sch. Dist., 814 N.W.2d 484, 492
(Wis. 2012).

[¶8] We applied the majority rule in National Farmers Union Property &
Casualty Co. v. Michaelson, 110 N.W.2d 431 (N.D. 1961). Michaelson applied
for insurance but died in a motor vehicle accident before an insurance company
accepted her application. Id. at 435. The insurance company rejected the
application after learning of the accident. Id. Claimants sued Michaelson’s
estate. Id. The insurance company participated in the defense without
reserving its right to contest coverage. Id. Judgment was entered in favor of
the claimants. Id. The insurance company brought a declaratory judgment
action to determine its liability. Id. The claimants argued waiver and estoppel
barred the insurance company from denying coverage because the company

                                        4
participated in the defense without a reservation of rights. Id. at 438. We held
waiver and estoppel could not operate to create a policy that did not exist:

      We do not believe, in a case where the deceased applicant had no
      insurance coverage at the time of the accident resulting in the
      injuries for which the appellants have brought their actions, as is
      true here, that the company, by undertaking to assist in the
      defense of such uninsured person or her estate, by such action in
      effect created a policy, thus enabling the judgment creditors of the
      applicant’s estate to recover from the insurance company.

Id. As we have acknowledged, some courts have carved exceptions from the
majority rule. See Wangler, 2003 ND 164, ¶ 12; see also Cornhusker Cas. Co. v.
Skaj, 786 F.3d 842, 853-54 (10th Cir. 2015) (insurer may be estopped from
denying coverage by unconditionally assuming the insured’s defense); Mgmt.
Specialists, Inc. v. Northfield Ins. Co., 117 P.3d 32, 37-38 (Colo. App. 2004)
(same); Potesta v. U.S. Fidelity & Guar. Co., 504 S.E.2d 135, 150 (W. Va. 1998)
(discussing exceptions for cases where an insurer misrepresents coverage or
acts in bad faith).

[¶9] Differding invokes one of these exceptions. He asserts Secura defended
him in the underlying tort case without reserving its right to deny him
coverage. Differding thus claims Secura was required to indemnify him under
theories of waiver and estoppel. Differding relies on cases where courts have
held insurers were estopped from denying coverage after providing their
insureds with unconditional defenses or insufficient reservations of rights. See
Westport Ins. Corp. v. McClellan, 493 F. Supp. 3d 315, 324-27 (E.D. Pa. 2020);
Interstate Fire & Cas. Co. v. Apartment Mgmt. Consultants LLC, No. 13-CV-
278, 2015 WL 5165858, at *10-11 (D. Wyo. Sept. 1, 2015); First United Bank of
Bellevue v. First Am. Title Ins. Co., 496 N.W.2d 474, 482 (Neb. 1993); City of
Carter Lake v. Aetna Cas. & Sur. Co., 604 F.2d 1052, 1060-61 (8th Cir. 1979).
Based on these cases, Differding asks us to adopt an exception to the general
rule (that waiver and estoppel cannot extend coverage) for cases where an
insurance company has provided a defense without reserving its right to deny
coverage.

                                       5
[¶10] We need not decide whether to adopt the exception applied in the cases
Differding relies upon. It is not applicable here. Unlike the parties invoking
waiver and estoppel in those cases, Differding is not a party to the insurance
policy or personally insured by it. An insurance policy is a contract. K & L
Homes, Inc. v. Am. Family Mut. Ins. Co., 2013 ND 57, ¶ 8, 829 N.W.2d 724. “An
insurance contract relates to the parties executing it.” Medd v. Fonder, 543
N.W.2d 483, 487 (N.D. 1996). Litigants cannot claim estoppel based on policies
to which they are not a party; nor can they claim waiver of a provision in a
policy they have no right to enforce. Malakowsky v. Johannsen, 374 N.W.2d
816, 818 (Minn. Ct. App. 1985) (holding non-party to insurance contract cannot
invoke estoppel; “[e]stoppel can only affect rights reserved in the policy”); W.
Cas. & Sur. Co. v. Am. Nat’l Fire Ins. Co., 318 N.W.2d 126, 128 (S.D. 1982)
(“Only the parties to the contract of insurance, or their privies, can claim the
benefit of a waiver or an estoppel[.]”); Donovan v. New York Cas. Co., 94 A.2d
570, 571 (Pa. 1953) (“[A] stranger to a contract of insurance is not in a position
to invoke an estoppel or waiver of a condition in the policy.”); 46 C.J.S.
Insurance § 1156 (March 2023 update) (“[O]nly the parties to the contract of
insurance can claim the benefit of waiver or estoppel . . . .”). As we have noted,
estoppel for purposes of insurance “involves the act or conduct of both parties
to a contract.” D.E.M., 555 N.W.2d at 600 (emphasis added) (quoting Brown,
776 S.W.2d at 387).

[¶11] In this case, Differding is not personally a party to the insurance policy
in question. The CGL policy is between Secura and Oxbow Golf and Country
Club. Although coverage under the CGL policy may extend to Oxbow’s directors
in their official capacities, as the district court determined, and the parties do
not dispute, Differding is not individually insured. As a matter of law,
Differding cannot invoke waiver and estoppel to create coverage under an
insurance policy to which he is not a party and has no right to enforce. We thus
conclude the district court erred as a matter of law when it applied the
doctrines of waiver and estoppel to require Secura to indemnify Differding for
his personal liability.

                                        6
                                     III

[¶12] The parties have raised a number of issues we need not decide.
Differding argues Secura’s reservation of rights letters were insufficient.
Resolution of his argument is unnecessary because, regardless of the
sufficiency of the letters, he is not entitled to coverage as a matter of law.
Secura also raises various alternative arguments, in the event Secura is
required to indemnify Differding, concerning priority among the insurers.
Resolution of these arguments is also unnecessary given our holding that
Differding is not entitled to coverage.

                                     IV

[¶13] The judgment is reversed.

[¶14] Jon J. Jensen, C.J.
      Daniel J. Crothers
      Lisa Fair McEvers
      Jerod E. Tufte
      Douglas A. Bahr

                                      7