Auto-Owners Insurance Company v. Kammerer

Background

Laura and Frank Kammerer asked J.M. to care for their two dogs while they were away. On December 31, 2016, one of the dogs bit J.M. multiple times while she was caring for the dogs in the Kammerers’ home. The Kammerers had an Auto-Owners homeowners policy that included personal-liability protection.

Auto-Owners filed a federal declaratory-judgment action seeking a ruling that the policy did not cover J.M.’s claim. J.M. intervened and moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim.

The policy dispute

The policy’s definitions section stated that defined words appeared in bold type whenever used in the policy. In the personal-liability coverage provision, the policy used the bold, defined term “insured.” That definition included a person legally responsible for animals owned by the Kammerers, but only with respect to those animals. The parties agreed that J.M. was legally responsible for the dogs while caring for them and therefore was an “insured” under that coverage provision.

The policy also excluded coverage for bodily injury to “any insured.” In that exclusion, however, the word appeared in plain text rather than bold text. Auto-Owners argued that this was a typographical error and that “insured” had the same meaning everywhere in the policy. J.M. argued that the bold and plain-text terms could have different meanings, so the exclusion did not necessarily apply to her.

Court’s analysis

The court applied Minnesota law, under which insurance-policy language is interpreted as a question of law. Unambiguous language receives its ordinary meaning, while ambiguous language is construed against the insurer.

The court held that the policy reasonably could be read to give “insured” different meanings depending on whether it appeared in bold or plain text. The definitions section specifically stated that words in bold type had special policy meanings. A reasonable policyholder could therefore understand that a plain-text use of the word did not necessarily carry the specialized definition.

The court also found that “insured” in plain text could reasonably mean the named insured or policyholder. The policy declarations named the Kammerers, not J.M., as the insureds. This interpretation gave separate meaning to the bold and plain-text terms and avoided treating the formatting distinction as meaningless.

The court rejected Auto-Owners’ reliance on Minnesota’s dog-liability statute and two cases involving dog-sitters. The statute addressed liability for injuries caused by dogs, not the meaning of the insurance policy. The cited cases involved policies that used bold text in both the coverage provision and the exclusion, unlike the Kammerers’ policy.

Disposition

The court concluded that Auto-Owners’ interpretation—that “insured” had the same meaning regardless of formatting—was incorrect. Because the complaint’s request for declaratory relief depended on that interpretation, the complaint was implausible under Rule 12(b)(6).

The court granted J.M.’s motion to dismiss and dismissed the complaint with prejudice. It directed that judgment be entered accordingly.