Hastings Mutual Ins. Co. v. Mengel Dairy Farms, LLC ( 2021 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 21a0346n.06
Case No. 20-4090
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
FILED
Jul 16, 2021
HASTINGS MUTUAL INSURANCE )
DEBORAH S. HUNT, Clerk
COMPANY, )
)
Plaintiff-Appellee,
) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR
v.
) THE NORTHERN DISTRICT OF
) OHIO
MENGEL DAIRY FARMS, LLC,
)
Defendant-Appellant. )
BEFORE: BATCHELDER, KETHLEDGE, and THAPAR, Circuit Judges.
THAPAR, Circuit Judge. Will Mengel has been a dairy farmer for the past 20 years. He
and his wife, Jennifer Mengel, manage commercial dairy farms in Pennsylvania and Ohio and care
for over 1,000 cows. In 2018, disaster struck the farms when the Mengels’ cows tragically started
to die en masse. And the cows that didn’t die began producing less milk. The Mengels spent
months searching for a possible explanation—they tested the water for contaminants, consulted a
nutritionist, and sought help from various experts. After running into a series of dead ends, the
Mengels asked an electrician to investigate.
As it turned out, a stray electric current on the Mengels’ property was electrocuting the
cows. But it also turned out that the Mengels were prepared. They had insured their cows against
a number of unlikely events—including accidental shooting, attack by wild animals, and, most
relevant here, electrocution.
Case No. 20-4090, Hastings Mutual Ins. Co. v. Mengel Dairy Farms, LLC
The Mengels submitted an insurance claim for the lost cows and reduced milk production.
Their insurer, Hastings Mutual Insurance Company, paid for the loss of the cows, but it refused to
pay for the reduced milk production. So the Mengels sued.
Under the insurance policy, Hastings Mutual must compensate the Mengels for the “loss
of business income . . . due to the necessary suspension of [the Mengels’] operations.” The
Mengels argue that the reduced milk production (and the resulting loss in sales) qualifies as a
“suspension” of their dairy farms’ operations. But Hastings Mutual says that only a complete
shutdown of the farms counts as a “suspension.” The district court agreed with Hastings. It held
that a “suspension” requires a “complete cessation of business activity.” The Mengels now appeal.
We interpret the Mengels’ insurance policy according to Ohio law. See Hayes v. Equitable
Energy Res. Co., 266 F.3d 560, 566 (6th Cir. 2001). The insurance policy does not define the term
“necessary suspension of [] operations,” so we give the phrase its “natural and commonly accepted
meaning.” U.S. Fid. & Guar. Co. v. Lightning Rod Mut. Ins. Co., 687 N.E.2d 717, 719 (Ohio
1997) (citation omitted).
A “suspension” is commonly understood to mean a temporary—but complete—stop in
activity. Webster’s Third New International Dictionary describes “suspension” as “the act of
suspending or the state or period of being suspended, interrupted, or abrogated.” 2303 (Phillip B.
Gove et al. eds., 2002). To “suspend,” in turn, is “to cause (as an action, process, practice, use) to
cease for a time [or] stop temporarily.” Id. In short, a “suspension of operations” occurs when
business operations are temporarily ceased.
Other courts agree. Though Ohio courts have never defined a “suspension of operations,”
several of our sister circuits read the phrase to require a complete shutdown of business operations.
See, e.g., Apartment Movers of Am., Inc. v. One Beacon Lloyds of Texas, 170 F. App’x 901 (5th
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Case No. 20-4090, Hastings Mutual Ins. Co. v. Mengel Dairy Farms, LLC
Cir. 2006) (holding that a “slow down in business” is not “a ‘necessary suspension of []
operations’”); Am. States Ins. Co. v. Creative Walking, Inc., 175 F.3d 1023 (8th Cir. 1999)
(summarily affirming the district court’s holding that a necessary suspension “refers only to a total
cessation of business activity”); Winters v. State Farm Fire & Cas. Co., 73 F.3d 224, 228–29 (9th
Cir. 1995); see also Broad St., LLC v. Gulf Ins. Co., 37 A.D.3d 126, 130 (N.Y. 2006). But see
Maher v. Cont’l Cas. Co., 76 F.3d 535, 539 n.1 (4th Cir. 1996) (noting in dicta that “suspension”
could cover reduced operations). While not binding, we consider it additional, persuasive evidence
that other courts also understand a “suspension of operations” to require a complete shutdown of
business activity.
The Mengels raise several arguments to the contrary, but none is persuasive. First, the
Mengels claim that some courts have interpreted “suspension” to include a lull in business. They
point to two cases: Am. Med. Imaging and ICue Corp.
Start with Am. Med. Imaging. Though the Mengels cite it for support, its logic cuts against
their interpretation. The policy at issue covered business losses stemming from a “necessary or
potential suspension” of operations. Am. Med. Imaging Corp. v. St. Paul Fire & Marine Ins. Co.,
949 F.2d 690, 692 (3rd Cir. 1991). The Third Circuit accepted the business’s argument that it
suffered both a necessary and potential suspension. Id. It noted that the business experienced a
“necessary suspension” when a fire “made it impossible for [it] to continue its business.” Id. By
contrast, the business experienced a “potential suspension” while it operated at a reduced capacity.
Id. Here, it is uncontested that the Mengels’ dairy farms operated only at a reduced capacity.
(Neither party contends that it was impossible for the Mengels to continue their business.) As a
result, under Am. Med. Imaging, the Mengels’ milk reduction would qualify only as a “potential
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Case No. 20-4090, Hastings Mutual Ins. Co. v. Mengel Dairy Farms, LLC
suspension.” And since the Mengels’ policy does not contain a “potential suspension” clause, their
reliance on Am. Med. Imaging is misplaced.
As for ICue Corp., it is a district court case based on a misreading of Am. Med. Imaging.
The court held that under Third Circuit precedent “the term ‘necessary suspension’ should not be
construed to require a total cessation of business operations.” ICue Corp. v. U.S. Fid. & Guar.
Co., 2008 WL 11406046, at *1 n.1 (E.D. Pa. Apr. 23, 2008). But the only Third Circuit caselaw
it cited was Am. Med. Imaging. And as discussed, Am. Med. Imaging did not give “necessary
suspension” such an expansive reading. Rather, it recognized that a “necessary suspension” occurs
when it’s temporarily “impossible for [the insured party] to continue its business.” Am. Med.
Imaging., 949 F.2d at 692. Because ICue Corp. is based only on misapplied caselaw, we decline
to give it any weight.
Second, the Mengels argue that other provisions of the insurance policy contradict our
reading of “suspension.” For example, the policy provides that Hastings Mutual can reduce any
benefits paid out for lost business income if the Mengels “can resume [] operations, in whole or in
part.” The Mengels claim this provision is proof that the term “suspension” can include a reduction
in business: Since the policy continues to provide benefits if they partially reopen, it must also
provide benefits if they only partially close. Not so. The provision establishes that benefits can
be reduced only when a business can “resume” its operations. Yet in order for a business to resume
operations, it must first stop operations. In other words, a business cannot restart something that
never ended. So the provision does not support the Mengels’ interpretation of “suspension.”
The Mengels also point to Hastings Mutual’s obligation to pay “any extra expense to avoid
or minimize the suspension of business and to continue operations.” But they offer no explanation
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Case No. 20-4090, Hastings Mutual Ins. Co. v. Mengel Dairy Farms, LLC
for how this provision supports their reading of “suspension.” As a result, they’ve forfeited the
argument. See McPherson v. Kelsey, 125 F.3d 989, 995–96 (6th Cir. 1997).
Third, the Mengels argue that Ohio law requires courts to construe insurance policies in
favor of the insured party. See Lane v. Grange Mut. Cos., 543 N.E.2d 488, 490 (Ohio 1989). But
that rule applies only when the policy is ambiguous. See id. As discussed, the Mengels have
advanced no other plausible interpretation of “suspension.” See Potti v. Duramed Pharms., Inc.,
938 F.2d 641, 647 (6th Cir. 1991) (“Ambiguity exists only where a term cannot be determined
from the four corners of the agreement or where contract language is susceptible to two or more
reasonable interpretations.”). So the policy here is unambiguous.
Fourth, the Mengels argue that interpreting “suspension” narrowly would make the policy
illusory. They claim that if the policy protects against only a complete cessation of business
activity, it would be “virtually impossible” to qualify for coverage. And Ohio law counsels against
interpretations that “render [an insurance policy] useless.” Talbert v. Cont’l Cas. Co., 811 N.E.2d
1169, 1177 (Ohio Ct. App. 2004). But while a business rarely may be forced to entirely close
shop, the Mengels have offered no explanation for why it is impossible. Nor could they.
Unfortunately, it is all too easy for a large-scale natural disaster like a tornado or wildfire to
effectively (or literally) destroy a small business. Indeed, insurance is designed to protect against
those kinds of unlikely but devastating events. The policy is not illusory.
Finally, the Mengels argue that Hastings Mutual previously covered business losses for a
similar claimant. But it’s not our job to police extra benefits or concessions Hastings Mutual gives
to other customers. Our role is only to faithfully interpret Hastings Mutual’s obligations under the
policy before us. And that policy is unambiguous: A lull in business is not a “suspension of
operations.”
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Case No. 20-4090, Hastings Mutual Ins. Co. v. Mengel Dairy Farms, LLC
Litigation has a way of transforming common-sense questions into impenetrable legal
mazes. But in this case, for once, the issues are just as they seem. A business suspends its
operations when it temporarily stops all business activity. Though the Mengels’ cows produced
less milk, the Mengels never completely shut down their dairy farms. As a result, we affirm.
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