Landico, Inc. v. American Family Mutual Insurance Co.

559 N.W.2d 438, 1997 Minn. App. LEXIS 211, 1997 WL 76132

Opinions

OPINION

HUSPENI, Judge.

Appellant Landico, Inc. sued respondent American Family Mutual Insurance Company for breach of an insurance contract. On the parties’ cross-motions for summary judgment, the district court denied Landico’s motion for summary judgment and granted summary judgment in favor of American Family on the ground that the parties’ policy unambiguously restricts Landico’s recovery to the $100,000 policy limit. On appeal, Lan-dico seeks review of the district court decision finding the insurance policy unambiguous and limiting Landico’s recovery. We affirm.

FACTS

Qn January 4, 1993, Landico bought an American Family insurance policy covering, among other things, employee dishonesty. The policy provides employee dishonesty coverage of $100,000 per occurrence for an annual premium of $659. Landico paid the first premium of $659 for coverage from January 4,1993, to January 4,1994, and paid a second premium in the same amount for coverage from January 4, 1994, to January 4, 1995. American Family issued Landico only one new policy form, one declaration sheet, and one policy number for the entire period of Landico’s coverage. In addition, the same “Crime General Provisions” and “Employee Dishonesty Coverage Form” remained in force throughout American Family’s coverage of Landico.

Section B.10. of the Crime General Provisions on “Non-Cumulation of Limit of Insurance” provides that:

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.

Section D.3. of the Employee Dishonesty Coverage Form defines “occurrence” as

all loss caused by, or involving, one or more “employees,” whether the result of a single act or a series of acts.

Section B.13.b. provides that American Family “will pay only for loss that [Landico] sustains] through acts committed or events occurring during the Policy Period.” The Declarations sheet sets forth the annual premium due with the notation “POLICY PERIOD FROM 1-04^93 TO 1-03-94.”

A Landico employee repeatedly embezzled from Landico throughout 1993 and 1994. The parties do not dispute that this conduct and Landico’s resulting losses came within Landico’s Employee Dishonesty Coverage. They do dispute, however, the amount of payment due Landico under the policy coverage. Landico filed claims with American Family for embezzlement losses of $47,424.48 in 1993 and $102,697.88 in 1994. American Family paid Landico only $100,000 on its claims.

Landico sued American Family for payment on Landico’s $47,424.48 claim. American Family moved for summary judgment against Landico, arguing that the occurrence and noncumulation provisions of the policy restrict Landieo’s recovery to the policy limit of $100,000. The district court agreed and granted summary judgment to American Family on the ground that the policy unambiguously limits Landico’s recovery to $100,-000.

ISSUES

1. Did the district court err in concluding that the “policy period” and “occurrence” definitions, when read together, do not create ambiguity in the policy?

2. Did the district court err in concluding the noncumulation clause unambiguous?

ANALYSIS

“The interpretation and construction of an insurance contract is a question of law, subject to de novo review.” Haarstad v. Graff, 517 N.W.2d 582, 584 (Minn.1994) (citation omitted). Because the parties dispute only the interpretation of their insurance contract, we review the district court’s decision de novo.

I.

Landico argues that the “occurrence” definition, when read in combination with the policy period definition, creates an ambiguity requiring this court to apply the occurrence definition separately for each year of coverage. Landico asserts that the definition of occurrence is ambiguous in light of the policy language that provides coverage for acts occurring “during the policy period” and defines the policy period as one year.

The language of an insurance policy will be held ambiguous only if it is reasonably subject to more than one interpretation. American Commerce Ins. Brokers, Inc. v. Minnesota Mut. Fire & Cas. Co., 551 N.W.2d 224, 227 (Minn.1996). “However, the court must ‘fastidiously guard against the invitation to “create ambiguities” where none exist.’ ” Id. (quoting Columbia Heights Motors v. Allstate Ins. Co., 275 N.W.2d 32, 86 (Minn.1979)). In order to effectuate the parties’ intent, “[t]he policy must be read as a whole, and unambiguous language must be accorded its plain and ordinary meaning.” SCSC Corp. v. Allied Mut. Ins. Co., 536 N.W.2d 305, 311 (Minn.1995) (citation omitted).

Here, the policy defines “occurrence” as “all loss caused by, or involving, one or more ‘employees,’ whether the result of a single act or a series of acts.” As Landico correctly points out, subsection b of the policy period definition provides that American Family “will pay only for loss that you sustain through acts committed or events occurring during the Policy Period,” and the declarations sheet lists “POLICY PERIOD FROM 1-04-93 TO 1-04-94.” Contrary to Landico’s assertions, however, neither these provisions nor any others in the policy show an intent of the parties to restrict the definition or application of “occurrence.” We decline to read such intent into the policy in the absence of clear language directing us to do so. The policy unambiguously limits recovery on claims arising from one employee’s misconduct ¹ to the stated policy limit.

II.

Landico further argues that the policy’s noncumulation clause in itself creates an ambiguity that this court must resolve in favor of Landico, contending that Prairie Land Coop. v. Millers’ Mut. Ins. Ass’n of Illinois, No. C2-91-1503, 1992 WL 20705 (Minn.App.Feb.11, 1992), compels a finding that the noncumulation provision here is ambiguous in itself. We disagree. We note first that unpublished cases of this court are not precedential and are at best of persuasive value. Dynamic Air, Inc. v. Bloch, 502 N.W.2d 796, 800 (Minn.App.1993). Second, the Prairie Land finding of ambiguity in the noncumulation provision was mere dictum, because the decision in that case turned on whether the noncumulation clause and the declarations sheets together created ambiguity in the policy, and not whether, as here, the noncumulation provision alone was ambiguous. Third, and most important, although the policy here contains a noncumulation clause substantially similar to the noneumulation clause found ambiguous in Prairie Land, the facts of the two cases are distinguishable in one critical respect: here, unlike in Prairie Land, the policy includes an “occurrence” definition.

Where possible, courts should interpret insurance policies so as to give effect to all of their provisions. Steele v. Great West Cas. Co., 640 N.W.2d 886, 888 (Minn.App.1995), review denied (Minn. Feb. 9, 1996). A court should not adopt a construction of a policy that neutralizes one provision if an alternative construction exists that gives effect to all the policy provisions and is consistent with the parties’ general intent. Employers Reinsurance Corp. v. Caswell, 490 N.W.2d 145, 148 (Minn.App.1992), review denied (Minn. Nov. 17, 1992). “[O]nly if more than one meaning applies within that context does ambiguity arise.” Board of Regents v. Royal Ins. Co., 517 N.W.2d 888, 892 (Minn.1994).

Here, the “occurrence” definition, which we have already found unambiguous, limits Landico’s recovery for one employee’s theft over the entire period of coverage to the policy limit of $100,000. As a result, the “occurrence” definition here parallels the first possible interpretation of the noncumu-lation clause in Prairie Land (insurer is liable for only $100,000 for any one employee’s theft over the entire course of coverage). We will not strain to create an ambiguity by totally reading out of the policy the “occurrence” provision. In order to give effect to all of the policy provisions in this case, the only reasonable interpretation of the noneu-mulation clause is that if no claim is filed in a given one-year period, Landico cannot accumulate liability limits and claim $200,000 coverage in the next year.² Thus, there is no ambiguity.

Nor does Columbia Heights Motors compel a finding that the district court erred in finding the noncumulation clause unambiguous. In Columbia Heights Motors, the court found that use of a noneumulation provision in an “aggregate” insurance policy rendered the policy ambiguous. Columbia Heights Motors, 275 N.W.2d at 36. This case is distinguishable from Columbia Heights Motors, however, because here the policy does not include an aggregation provision so as to make the policy ambiguous. The district court noted that there is no reference to a limitation on annual liability to conflict with its noncumulation clause. Accordingly, we find Columbia Heights Motors inapposite.

Finally, to the extent Landico argues that its reasonable expectations regarding the scope of coverage were frustrated, we find the argument to be without merit. There are no “hidden exclusions” in a policy provision purporting to describe covered hazards. Cf. Atwater Creamery Co. v. Western Nat’l Mut. Ins. Co., 366 N.W.2d 271, 278 (Minn.1985) (noting applicability of reasonable expectations doctrine “where major exclusions are hidden in the definitions section” of the policy). On the contrary, “occurrence” is unambiguously defined. It would be an unwarranted extension of the doctrine of reasonable expectations for this court to infer additional language in the “occurrence” clause or to expand the clear definition in such a way as to meet what Landico describes as its “reasonable expectations.”

DECISION

The policy unambiguously limits the insurer’s exposure regarding any one employee’s theft to $100,000 notwithstanding the fact the thefts of that one employee may continue for several years. The district court properly granted summary judgment to respondent thereby limiting respondent’s exposure to $100,000 for one employee’s theft over a two-year period.

Affirmed.

Footnotes

1

. As recognized by American Family at oral argument, $100,000 in coverage would extend to each employee independently engaged in misconduct.

2

. The occurrence definition, in contrast, limits recovery across multiple years of coverage. Thus, the occurrence definition and the noncu-mulation clause work in conjunction with each other to restrict Landico’s recovery. The noncu-mulation clause limits recovery vertically, within each year of coverage, while the occurrence definition limits recovery horizontally, across multiple years of coverage.