ACUITY v. Extreme Lawns, LLC

Background

This insurance-coverage dispute concerns a 2012 Ford F-150 pickup truck owned by Michael Velde and Susan A. Warren. Extreme Lawns, LLC, provided lawn-care services. Velde was one of Extreme Lawns’ two members, and he performed all of the company’s lawn-care work. The company paid for the truck’s fuel, used the truck as its only business vehicle, and treated loan payments as a business expense.

On October 17, 2018, Velde was driving the truck to a business meeting with an Extreme Lawns client when he collided with a motorcycle operated by Tiffany Kloster, who died from the collision. The parties stipulated that Extreme Lawns was legally responsible for Velde’s acts connected to the collision. At that time, Extreme Lawns was the named insured under an insurance policy issued by ACUITY.

The policy generally covered business liability but excluded bodily injury or property damage arising from the ownership, maintenance, or use of an automobile. Extreme Lawns purchased a Hired Auto and Nonowned Auto Liability Endorsement that restored some automobile-liability coverage. The endorsement covered bodily injury arising from the use of a nonowned automobile in the company’s business. It defined a nonowned automobile as one the insured did not own, lease, hire, rent, or borrow, and added that the category included automobiles owned by the company’s members when used in the company’s business.

Extreme Lawns requested coverage for claims arising from the collision. ACUITY denied coverage, asserting that the truck was not a nonowned automobile because Extreme Lawns had borrowed it from its registered owners. Extreme Lawns later assigned its claim under the policy to Joseph Kloster, as trustee for the heirs and next of kin of Tiffany Kloster. The court dismissed Extreme Lawns, Velde, and Susan Warren from the action without prejudice, meaning the dismissal did not bar refiling. ACUITY then sought a declaration that it had no duty to defend or indemnify Extreme Lawns and that Kloster could not recover under the policy. Kloster filed a counterclaim seeking a declaration that the nonowned-automobile coverage applied.

Legal Standard

The parties filed cross-motions for summary judgment. Summary judgment is appropriate when there is no genuine dispute about any material fact and the moving party is entitled to judgment as a matter of law. The court explained that insurance-coverage disputes ordinarily can be resolved at this stage when the dispute depends on interpreting the insurance policy.

The court applied Minnesota law. Under that law, interpreting an insurance policy, including deciding whether an insurer owes a duty to defend or indemnify, is a legal question for the court. The court interprets the policy as a whole and gives unambiguous terms their ordinary meaning. A policy is ambiguous only when it reasonably supports more than one interpretation, and ambiguity ordinarily is construed against the insurer.

Analysis

The central issue was whether Velde’s pickup truck was a “nonowned auto” under ACUITY’s policy. ACUITY argued that the policy’s first sentence controlled: because Extreme Lawns had borrowed the truck, the truck could not be a nonowned auto. Kloster argued that the policy’s second sentence expressly included automobiles owned by members of a limited liability company when used in the company’s business. The parties did not dispute that Velde was an Extreme Lawns member or that he was using the truck for company business.

The court distinguished a prior District of Minnesota decision involving a similar policy because that policy did not contain the second sentence expressly including automobiles owned by limited-liability-company members. The court also considered decisions from other courts and Minnesota cases discussing the meaning of “borrow.” Those authorities supported considering whether the insured had borrowed the automobile, but they also supported treating the second sentence as clarifying that member-owned vehicles can be covered when used in the company’s business.

The court rejected ACUITY’s argument that coverage depended on whether the truck’s use was incidental or necessary, explaining that the frequency and duration of use do not determine whether a vehicle was borrowed. The court also rejected ACUITY’s position that any use of a member-owned automobile automatically amounts to borrowing. According to the court, that interpretation would make the policy’s express inclusion of member-owned automobiles meaningless.

The court concluded that the pickup truck was not borrowed by Extreme Lawns. Because Velde, an Extreme Lawns member, used the truck in the company’s business, the truck fell within the policy’s definition of a covered nonowned automobile.

Disposition

The court denied ACUITY’s motion for summary judgment, docket number 18. The court granted Joseph Kloster’s motion for summary judgment, docket number 22. The court directed that judgment be entered accordingly.