Opinion
No. C00-2051 MJM
August 8, 2001
OPINION and ORDER
On May 3, 2000, Plaintiff, Van G. Miller Associates, Inc. d/b/a HomeLink ("VGM") filed the present declaratory judgment action against Defendant Gulf Insurance Company ("Gulf"), in Iowa District Court for Black Hawk County. Pursuant to 28 U.S.C. § 1441 and 1446, Gulf removed VGM's action to this Court and now seeks summary judgment pursuant to Fed.R.Civ.P. 56. For the reasons that follow, Gulf's motion is granted.
Fed.R.Civ.P. 56(b) provides:
A party against whom a claim, counterclaim, or cross-claim is asserted or a declaratory judgment is sought may, at any time, move with or without supporting affidavits for a summary judgment in the party's favor as to all or any part thereof.
STANDARD FOR SUMMARY JUDGMENT
The standard for summary judgment is well recognized:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Fed.R.Civ.P. 56(c). "Summary judgment is [therefore only] appropriate when there is no dispute between the parties as to any genuine issues of material fact and when the moving party is entitled to a judgment as a matter of law." Get Away Club, Inc. v. Coleman, 969 F.2d 664, 666 (8th Cir. 1992). "A dispute about a material fact is genuine if the evidence is such that a reasonable trier of fact could return a decision in favor of the party opposing summary judgment." Commercial Union v. Schmidt, 967 F.2d 270, 272 (8th Cir. 1992). "Any inferences to be drawn from the facts must be viewed in the light most favorable to the nonmoving party." Krenik v. Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
Ultimately, courts must "recognize that summary judgment is a drastic remedy and must be exercised with extreme care to prevent taking genuine issues of fact away from juries." Wabun-Inini v. Sessions, 900 F.2d 1234, 1238 (8th Cir. 1990). Concomitantly, however, courts should adhere to the principle that the "[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed 'to secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting, Fed.R.Civ.P. 1).
STATEMENT OF FACTS
Plaintiff, VGM, is an Iowa corporation with its principal place of business in Iowa. Defendant, Gulf, is a member of the Travelers Property Casualty Group and an insurance company authorized to do business in the state of Iowa.
VGM purchased two Employment Related Practices Liability Insurance policies for consecutive policy periods from Gulf through the Brummel Madsen Insurance Agency ("Brummel Madsen"). The first of these "claims-made" policies — Policy, No. GA0425224 ("Policy No. 1") — provided coverage for all claims arising out of a Wrongful Employment Act that took place on or after October 8, 1998 and prior to October 8, 1999 (hereinafter referred to as "Policy Period One.").
VGM then purchased and was issued a renewal of Policy No. 1 for the period from October 9, 1999 to October 8, 2000 (hereinafter referred to as "Policy Period Two"). This policy had a retroactive coverage clause that stated in part "this insurance applies to 'claims' arising out of a 'wrongful employment act' that takes place on or after the retroactive date shown here: 10/08/98." As a renewal of Policy No. 1, it contained identical terms and coverage. The renewal is Policy No. GA0469372 ("Policy No. 2").
On August 19th and 20th of 1999, Carol Davison ("Davison") and Kimberly Tolley ("Tolley") were terminated, respectively, from their employment with VGM. On September 3, 1999, VGM received a letter from Attorney Wolfgang Florin advising VGM that he was representing Davison and Tolley in connection with their claims for discrimination and retaliation while employed by VGM/HomeLink. Specifically the letter stated:
As you may be aware, our clients claim that they were discriminated against and retaliated against during the term of their employment with your company. If substantiated, the adverse employment action taken against my clients would violate both Federal and Florida Law. As result, our clients have requested that we speak with the appropriate representative of your organization to discuss this matter in greater detail.
One month later on September 20th and 26th of 1999, Tolley and Davison filed discrimination charges, respectively, with the Equal Employment Opportunity Commission ("EEOC") and Florida Commission on Human Relations.
On September 16, 1999, VGM's attorney Wesley Chaplin notified Joe Brummel ("Brummel") of Brummel Madsen, of the claims made by Tolley and Davison. The letter stated in relevant part:
This letter will serve as notice that Van G. Miller Associates has been contacted by an attorney in Florida regarding possible discrimination claims against Van G. Miller Associates and its HomeLink division. Specifically, correspondence was forwarded from Wolfgang Florin in Palm Harbor, Florida regarding discrimination claims being pursued on behalf of Kimberly Tolley and Carol Davison. Ms. Tolley and Ms. Davison were former employees of HomeLink.
This notice is intended to alert Gulf Insurance Group, a member of Travelers Group, of possible coverage for these claims under Policy No. GA0425524. ("Policy No. 1")
Brummel Madsen then subsequently notified Gulf on November 19, 1999 of the discrimination claims pending against VGM and forwarded the documents relating to those claims. In a letter dated March 31, 2000, Gulf acknowledged the correspondence from Brummel Madsen concerning VGM's claims. However, Gulf denied coverage for those claims stating:
[N]otice to your office [Brummel Madsen] does not constitute notice to the Insurer under the Policy. Moreover, as you know, your office did not provide notice to the Insurer until after the expiration of the Policy Period in which these Claims were made.
Based on the foregoing, VGM filed an action for declaratory judgment for the purpose of construing its rights under its insurance agreement with Gulf.
DISCUSSION
At issue in this case are VGM's claims pursuant to its "claims made" insurance policy with Gulf. Because it is a "claims made policy", as opposed to an "occurrence policy," Gulf is responsible for any loss resulting from claims made during the term of the policy. FDIC v. St. Paul First Marine, Ins. Co., 993 F.2d 155, 158 (8th Cir. 1993) (citing with approval Burns v. Int.'l Ins. Co., 929 F.2d 1422, 1424 (9th Cir. 1991)). Under such a policy, coverage usually extends only to "claims that were made and reported." Id. (quoting United States v. A.C. Strip, 868 F.2d 181, 187 (6th Cir. 1989)). Hence, "claims made" policies place special reliance on notice, such that the notice provision "is just as important to coverage as the requirement that the claim be asserted during the policy period." Id. "If the insured does not give notice within the contractually required time period, there is simply no coverage under the policy." Id. (citing City of Harrisburg v. Int.'l Surplus Lines Ins. Co., 596 F. Supp. 954, 960 (M.D.Pa. 1984), aff'd, 770 F.2d 1067 (3d Cir. 1985) (table)).
Thus, the outcome of the instant suit turns on notice — that is, whether Gulf received timely notice of VGM's claims during the contractually required time period. VGM proffers three arguments in support of coverage of its claims. First, VGM maintains the letter from Attorney Florin and the subsequent EEOC filings of Tolley and Davison do not constitute "claims" as defined by the policy. As a second line of argument, VGM argues that Gulf received notice within the contractually required time period when VGM notified Brummel Madsen of its claims. Finally, VGM maintains that the retroactive coverage clause of the policy allows for coverage of those claims reported to Gulf in Policy Period Two, although they occurred and were reported to VGM in Policy Period One. The Court will address each argument in turn.
VGM's first argument warrants little discussion. VGM maintains that the letter from Attorney Florin and subsequent administrative filings with the EEOC of Tolley and Davison do not constitute "claims" as that term is defined by the policy, thereby requiring VGM to report those claims to Gulf during Policy Period One. Contrary to VGM's assertions, a letter from an attorney representing a claimant has been held by the Eighth Circuit to constitute "claim" within the meaning of an insurance policy. See Berry v. St. Paul Fire Marine Ins. Co., 70 F.3d 981, 982-83 (8th Cir. 1995) (finding letter from an attorney representing claimant met the policy definition of a claim). Moreover, filings with administrative civil rights agencies are specifically identified in Gulf's policy's definition of "claim," which includes "a civil or administrative proceeding; or . . . a civil administrative proceeding." As such, this Court finds the letter from Attorney Florin and Tolley's and Davison's EEOC filings constitute "claims" which VGM was required to report during the Policy Period One.
Next, VGM avers that its notice to Brummel Madsen regarding Tolley and Davison's discrimination claims constitutes notice to Gulf as required by the policy. Gulf responds that notice to Brummel Madsen does not constitute notice to Gulf because Brummel Madsen is not an agent of Gulf, but rather an agent of VGM. Moreover, Gulf argues, even assuming Brummel Madsen is an agent of Gulf, the plain language of the policy requires direct notice to Gulf and not its agents. Because the Court concurs with Gulf's first line of argument, it need not address its second.
It is well-settled law that an insurance broker, such as Brummel Madsen, is presumptively the agent of the insured, VGM, and not of the insurer, in this instance Gulf. See Bell v. O'Leary, 744 F.2d 1370, 1372 (8th Cir. 1984); Dupeck v. Union Ins. Co., 329 F.2d 548, 557 (8th Cir. 1964); Fireman's Fund Ins. Co. v. ACC Chemical Co., 538 N.W.2d 259, 264 (Iowa 1995). Indeed, the Eighth Circuit squarely addressed this issue in Travelers Indemnity Co. v. National Indemnity Co., holding that:
Unless there are special conditions or circumstances in the case, [a broker] is not the agent of the insurer, and he may not be converted into an agent for the insurance company without some action on the part of the company or the existence of some facts from which his authority to represent it as an agent may be fairly inferred.292 F.2d 214, 220 (8th Cir. 1961). VGM has not alleged, nor has this Court ascertained special circumstances in this case which warrant a finding that Brummel Madsen is in fact an agent of Gulf. Thus, in the absence of such circumstances, VGM's notice to Brummel Madsen cannot constitute notice to Gulf as is contemplated by Gulf's policy and the case law.
Finally, VGM maintains that, regardless of how or by whom Gulf was notified, Gulf did receive notice prior to the expiration date of Policy No. 2 and Policy No. 2's retroactive coverage clause allows for coverage of the claims which occurred during Policy Period One.
In making this argument, VGM ignores the plain language of the policies and thus misconstrues the "retroactive" nature of the renewal policy. Both policies clearly state that claims brought during one policy period must be reported to Gulf during that same policy period in order for coverage to be triggered. Specifically, the policies state:
The "Wrongful Employment Act" must take place on or after the "Retroactive Date" but before the end of the "Policy Period." A "Claim" for a "Wrongful Employment Act" must be first made against you and reported to us during the "Policy Period" or any extended reporting period we provide under this Policy.
In other words, there are two separate prerequisites for coverage. First, the Wrongful Employment Act from which the claim arises must take place on or after the retroactive date, but before the end of the Policy Period. Second, the claim must be reported to the Gulf during the same policy period in which it is reported to the VGM. Thus, the retroactive clause of the policy provides VGM with coverage for those claims that arose during the Policy Period One, but were not reported to VGM until Policy Period Two. In the instant case, the claims occurred and were reported to VGM during Policy Period One, but VGM did not notify Gulf of the claims until Policy Period Two. Under this scenario, the retroactive clause does not affect VGM's claims which are otherwise untimely.
This conclusion is consistent with the holdings of the Iowa Supreme Court and the Eighth Circuit which have narrowly construed the "claims made" and "reported" provisions of insurance policies such as Gulf's. See e.g. St. Paul First Marine, Ins. Co., 993 F.2d at 158 (finding information provided by insured was not effective notice of claim or potential claim because it was not specific enough and did not alert insurer that any claim could have been asserted); Esmailzadeh v. Johnson Speakman, 869 F.2d 422, 425 (8th Cir. 1989); Hasbrouck v. St. Paul First Marine Ins. Co., 511 N.W.2d 364, 366-68 (Iowa 1993).
Because VGM did not give Gulf notice within the contractually required time period, Gulf is not contractually obligated to cover its claims. Gulf's motion for summary judgment is therefore granted.
VGM also maintains the Automatic Reporting Period provision of Gulf's policy is void against public policy. The Court has thoroughly reviewed the parties' arguments on this issue and finds VGM's public policy challenge lacks merit.
ORDER
Accordingly, it is ORDERED:Gulf's motion for summary judgment is GRANTED. (Doc. no. 29).
Done and so ordered.