Opinion
Civil No. 00-1889 (JRT/FLN).
July 26, 2001.
Michael J. Thompson, MEEKER COUNTY ATTORNEY, Litchfield, MN, for plaintiff.
Christian A. Preus, MEAGHER GEER, P.L.L.P., Minneapolis, MN, for defendant.
MEMORANDUM OPINION AND ORDER ON SUMMARY JUDGMENT MOTIONS
This dispute involves the interpretation of an insurance policy. Plaintiff Meeker County purchased two certificates of deposit from the First National Bank of Keystone in the total amount of $190,762.00. The bank failed and Meeker County was reimbursed for only $100,000 through the Federal Deposit Insurance Company ("FDIC"). Meeker County now seeks to recover $90,000 from its insurance provider, defendant North River Insurance Company ("North River"), based on a "Faithful Performance" endorsement in its insurance policy. Meeker County argues that it sustained a loss as a result of the failure of its treasurer to faithfully perform her duties, triggering coverage under the policy. This matter is now before the Court on the parties' cross-motions for summary judgment. The Court concludes that summary judgment is appropriate in favor of North River as the insurance policy effectively excludes coverage for a bank failure, as occurred here.
BACKGROUND
The parties have stipulated to the facts in this case, making it particularly suited for summary judgment. Sharon Euerle was the Meeker County Treasurer for the relevant time period. Meeker County purchased a Commercial Crime Policy from North River. The policy was purchased by Meeker County in its efforts to satisfy the requirements of Minn. Stat. § 385.01(2). The policy included coverage for "Public Employee Dishonesty." It also included an endorsement, labeled "Faithful Performance of Duty," that specifically amended the "Public Employee Dishonesty" coverage. The relevant portions of the endorsement provided that:
Minn. Stat. § 385.02(2) provides that:
Before entering upon the duties of office the county treasurer . . . shall give bond, to be approved by the county board, and in such sum as the county board directs. . . . Such bond shall be payable to the state, conditioned that the treasurer shall faithfully execute the duties of the office, and for the safekeeping and paying over according to law all moneys which come into the treasurer's hands for state, county, town, school, road, bridge, poor, and all other purposes.
In lieu of the individual bonds required . . . a schedule or position bond or undertaking may be given in the respective amounts so required conditioned as above and upon a form to be prescribed by the commissioner of administration.
The county board shall pay the premiums upon such bonds or undertakings of the treasury of the county in cases where the surety is a corporation duly authorized by law to be surety.
1. The following is added as a Covered Cause of Loss:
Failure of any "employee" to faithfully perform his or her duties as prescribed by law, when such failure has as its direct and immediate result a loss of your Covered Property, including inability to faithfully perform those duties because of a criminal act committed by a person other than an "employee."
2. The following exclusion is added:
Depository Failure: loss resulting from the failure of any entity acting as a depository for your property or property for which you are responsible.
The policy had a coverage limit of $50,000, as well as an additional endorsement, which added $40,000 of coverage for the position of County Treasurer, bringing the total coverage for that position to $90,000.
Accordingly, Meeker County is attempting to recover the policy limit of $90,000 even though its total loss is alleged to be $90,762.
On September 18, 1998, Euerle purchased a Certificate of Deposit ("CD") on behalf of Meeker County in the sum of $96,000 from First National Bank of Keystone through Prudential Securities. The C.D. was callable on September 23, 1999. On September 21, 1998, Euerle purchased another C.D. on behalf of Meeker County in the sum of $94,762 from the First National Bank of Keystone through Norwest Investment Services, Inc. This second C.D. was also callable on September 23, 1999. On September 1, 1999, the First National Bank of Keystone was closed by the Comptroller of the Currency and the FDIC was named its receiver.
Minn. Stat. § 118A.04 requires that all county funds invested in CDs be fully insured by the FDIC.
In October 1999, Meeker County received payment from the FDIC for the entire principal amount of the Norwest Investment C.D. as well as $5,000 towards the principal amount of the Prudential CD. That payment left a balance due on the Prudential C.D. of $90,762.50. After realizing that Meeker County would not recover the remaining amount from the FDIC, Meeker County submitted a Proof of Loss to North River requesting payment under the policy for $90,000. North River denied the claim on February 16, 2000, and Meeker County then commenced this action.
The FDIC only covers up to a maximum of $100,000 per depositor for losses due to bank failure.
DISCUSSION
I. Standard of Review
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "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. Only disputes over facts that might affect the outcome of the suit under the governing substantive law will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary judgment is not appropriate if the dispute about a material fact is genuine, that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id. Summary judgment is to be granted only where the evidence is such that no reasonable jury could return a verdict for the nonmoving party. Id.
The moving party bears the burden of bringing forward sufficient evidence to establish that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The nonmoving party is entitled to the benefit of all reasonable inferences to be drawn from the underlying facts in the record. Vette Co. v. Aetna Casualty Surety Co., 612 F.2d 1076 (8th Cir. 1980). However, the nonmoving party may not merely rest upon allegations or denials in its pleadings, but it must set forth specific facts by affidavits or otherwise showing that there is a genuine issue for trial. Burst v. Adolph Coors Co., 650 F.2d 930, 932 (8th Cir. 1981).
II. Policy Interpretation
The only issue before the Court is whether Meeker County's loss is covered by the North River Commercial Crime Policy. Meeker County argues that its loss was the result of Euerle's "failure . . . to faithfully perform . . . her duties as prescribed by law . . . ." and is thus covered by the "Faithful Performance" policy endorsement. It argues that Euerle failed to perform her duties as prescribed by law by failing to follow the requirements of Minn. Stat. § 118A.04, which requires that all county funds that are invested must be fully insured through the FDIC. Meeker County contends that the North River policy is ambiguous and should therefore be construed against North River and in favor of Meeker County. The Court finds that the depository failure exclusion included in the "Faithful Performance" endorsement precludes Meeker County from recovering for the loss in this case.
Insurance coverage issues and interpretation of insurance contract language are questions of law for the Court. Jenoff, Inc. v. New Hampshire Ins. Co., 558 N.W.2d 260, 262 (Minn. 1997). When interpreting an insurance policy, the Court must give effect to the intentions of the parties as reflected in the terms of the contract. Id. Terms that are contained in an insurance contract but that are not specifically defined must be given their plain, ordinary or popular meaning. Id. Ambiguous terms in an insurance policy are to be resolved strictly against the insurer and in accordance with the reasonable expectations of the insured. Id. An ambiguity exists when the language of the policy is reasonably subject to more than one interpretation. Id. The Court may not, however, read an ambiguity into the plain language of a policy in order to provide coverage. Id.
In this case, there is no ambiguity in the insurance policy. While Euerle's conduct in this case certainly falls within the purview of the "Faithful Performance" endorsement, the policy contains a specific exclusion for "[l]oss resulting from the failure of any entity acting as a depository for your property or property for which you are responsible." This exclusion is clear and unambiguous and must be given effect. Here, the First National Bank of Keystone was acting as a depository for Meeker County. It was holding county funds, which constitute "property," for which Meeker County was responsible. The exclusion therefore applies as its language is simply not susceptible to more that one interpretation. The Court is constrained to find that the exclusion applies in this case and absolves North River of any obligation to cover Meeker County's loss.
The Court notes that if the additional "Depository Failure" exclusion were not included in the policy, the result of this case would undoubtedly be different.
Despite this language, Meeker County argues that City of Marshall v. Gregoire, 259 N.W. 377 (Minn. 1935), is controlling in this case. In Gregoire, the City of Marshall brought suit against the city treasurer and his surety upon three fidelity bonds after the Marshall State Bank failed. Id. at 377-78. The court in Gregoire found that the surety could not escape liability based on the exclusionary language in the bonds. Id. at 378-80. While Gregoire does offer the Court some guidance, the case is distinguishable from the situation here.
Significantly, the language of the fidelity bonds in Gregoire, while containing a "faithful performance" standard, was not the same as the language in the North River insurance policy. In Gregoire, the fidelity bond "was conditioned that Gregoire `as such treasurer shall well and faithfully perform all the duties of his said office.'" Id. at 377. The bonds also contained an exclusionary provision stating that "[t]he surety shall in no way be held liable for any loss . . . caused by the failure of any bank, institution or depository of any kind to pay deliver over or properly account for any money, monies, papers, securities or property of any kind placed on deposit therein or in its custody by . . . Gregoire as such treasurer." Id. at 377-78. In Gregoire, the court relied heavily on the fact that the Marshall State Bank had not been properly designated as a depository of city funds as required by Minnesota law. Id. at 379. The court explained that based on the literal language of the bonds, the surety would likely be exempted from liability. Id. However, the court found that there was another, equally reasonable interpretation of the bond language; that the surety was exempted from liability only if the city funds were deposited in a properly designated depository. Id.
Here, there is no equally reasonable alternative interpretation of the North River "Depository Failure" exclusion. Moreover, the language of the fidelity bonds focused on the failure of the bank or depository to pay, while the language of the insurance policy in this case more narrowly focuses on the actual failure of the depository. The Court therefore believes that Gregoire is limited to its unique factual circumstances; circumstances that are not present in this case. As a result, the Court must rely on the plain language of the North River insurance policy. And as noted above, the plain and unambiguous language of the insurance policy does not require North River to cover Meeker County's loss in this case. North River's motion for summary judgment is therefore granted.
ORDER
Based upon the foregoing, the submissions of the parties, the arguments of counsel and the entire file and proceedings herein, IT IS HEREBY ORDERED that:
1. Plaintiff Meeker County's motion for summary judgment [Docket No. 7] is DENIED.
2. Defendant North River Insurance Company's motion for summary judgment [Docket No. 10] is GRANTED.
3. The Clerk of Court is DIRECTED to enter judgment in favor of defendant.LET JUDGMENT BE ENTERED ACCORDINGLY.