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Meridian Security Insurance Co. v. Schmitt-Selken

United States District Court, N.D. Iowa, Cedar Rapids Division

June 21, 2019

MERIDIAN SECURITY INSURANCE COMPANY, Plaintiff,
v.
LOIS SCHMITT-SELKEN, Defendant.

          MEMORANDUM OPINION AND ORDER

          Kelly K.E. Mahoney Chief United States Magistrate Judge.

         This insurance-coverage dispute arises out of a tragic car accident that left Defendant Lois Schmitt-Selken widowed and seriously injured. As I find that her insurance policy unambiguously excludes underinsured motorist coverage under the facts here, I will enter declaratory judgment in favor of Plaintiff Meridian Security Insurance Company (Meridian).

         I. BACKGROUND[1]

         Lois married Donald Selken on June 3, 2017, and the two began living together.[2]A little more than a month later, on July 15, 2017, a drunk driver crashed head-on into a vehicle driven by Donald in which Lois was a passenger. Donald died, and Lois suffered serious injury.

         At the time of the accident, Lois and Donald owned separate vehicles and had separate insurance policies for those vehicles; the vehicle involved in the crash belonged to Donald, and Lois had no ownership interest in it. Donald's vehicle was insured through Farm Bureau, and Lois will receive the maximum payment of underinsured motorist benefits available under that policy ($300, 000). Lois has also received payment from the drunk driver's State Farm insurance policy ($1, 200, 000).

         At the time of the accident, Lois insured her vehicle through Meridian in a policy that provided a single occurrence limit of $500, 000 in underinsured motorist coverage. Meridian initiated this declaratory-judgment action in April 2018, seeking an order holding that Lois is not entitled to underinsured motorist coverage under the “owned but not insured” exclusion in the Meridian policy. Doc. 1; see 28 U.S.C. § 2201.

         The parties consented to the exercise of jurisdiction by a United States magistrate judge, and the case was assigned to me for final disposition. Doc. 11. Diversity jurisdiction exists under 28 U.S.C. § 1332. See Docs. 1, 40, 42. The parties submitted a joint stipulation of facts (Docs. 18, 24)[3] and briefing (Docs. 20, 25, 26, 37, 38), and the case is ready for decision (Doc. 27).

         II. DISCUSSION

         “Interpretation of an insurance policy is a matter of state law.” Progressive N. Ins. Co. v. McDonough, 608 F.3d 388, 390 (8th Cir. 2010) (quoting Stan Koch & Sons Trucking, Inc. v. Great W. Cas. Co., 517 F.3d 1032, 1039 (8th Cir. 2008)). The parties agree that Iowa law applies here. Federal courts are “bound by decisions of the highest state court when interpreting state law.” Id. “If the highest state court has not decided an issue[, the court] must attempt to predict how the highest court would resolve the issue, with decisions of intermediate state courts being persuasive authority.” Id.

         “The cardinal principle in construing insurance policies is ‘that the intent of the parties must control; and except in cases of ambiguity this is determined by what the policy itself says.'” Johnson v. Farm Bureau Mut. Ins. Co., 533 N.W.2d 203, 206 (Iowa 1995) (quoting Essex Ins. Co. v. Fieldhouse, Inc., 506 N.W.2d 772, 775 (Iowa 1993)). “An ambiguity exists if, after the application of pertinent rules of interpretation to the policy, a genuine uncertainty results as to which one of two or more meanings is the proper one.” LeMars Mut. Ins. Co. v. Joffer, 574 N.W.2d 303, 307 (Iowa 1998) (quoting A.Y. McDonald Indus., Inc. v. Ins. Co. of N. Am., 475 N.W.2d 607, 618 (Iowa 1991)). “Insurance policies are construed in the light most favorable to the insured, and exclusions are construed strictly against the insurer.” Johnson, 533 N.W.2d at 206.

         The Meridian “Personal Auto Policy” at issue here begins with a section of definitions followed by six parts, one of which contains the underinsured motorist coverage, and concludes with a number of endorsements that modify the policy language. See Doc. 1-2. One of these endorsements contains the following owned-but-not-insured exclusion:

We do not provide Underinsured Motorists Coverage for “bodily injury” sustained by any “insured” . . . [w]hile “occupying” . . . any motor vehicle owned by you which is not insured for this coverage under this policy. . . .

See Doc. 18; Doc. 1-2 at 47.

         Meridian argues that this exclusion applies because the policy defines “you” to include Donald, and it is undisputed that when the accident occurred, Lois occupied a vehicle owned by Donald that was not insured under the Meridian policy. Meridian ...


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