Nationwide Agribusiness Insura v. Toni Dugan

In the
United States Court of Appeals
For the Seventh Circuit
No. 14-1913
NATIONWIDE AGRIBUSINESS
INSURANCE COMPANY,
Plaintiff-Appellee,
v.
TONI L. DUGAN and JAMES R. DUGAN,
Defendants-Appellants.
Appeal from the United States District Court for the
Southern District of Illinois.
No. 3:12-cv-01205-MJR-SCW — Michael J. Reagan, Chief Judge.
ARGUED NOVEMBER 5, 2014 — DECIDED JULY 21, 2015
Before BAUER, ROVNER, and TINDER, Circuit Judges.
BAUER, Circuit Judge. At the heart of this diversity action is
an automobile insurance policy that plaintiff-appellee, Nation-
wide Agribusiness Insurance Company, issued to defendants-
appellants, Toni L. Dugan and James R. Dugan. The parties
filed cross-motions for summary judgment to resolve a dispute
as to Nationwide’s underinsured motorist coverage obligations
under the policy. The district court granted Nationwide’s
2 No. 14-1913
motion for summary judgment and denied the Dugans’ cross-
motion, holding that Nationwide did not owe the Dugans
underinsured motorist coverage. The Dugans appeal. For the
reasons that follow, we affirm.
I. BACKGROUND
The facts are not in dispute. In late December 2010, Toni
Dugan was involved in an automobile accident with a vehicle
owned by Chelsea Rainey. The Dugans claimed upwards of
$200,000 in damages as a result of the collision. Rainey’s
insurer, American Family Mutual Insurance Company, offered
$100,000 (the limit under Rainey’s policy) to Toni Dugan and
her husband James Dugan, who claimed loss of consortium
due to his wife’s injuries, to settle their claims. The Dugans
accepted the settlement.
The Dugans then sought additional recovery from Nation-
wide pursuant to the underinsured motorist provisions of their
Nationwide policy. That policy insured four vehicles, includ-
ing the vehicle Toni Dugan was driving at the time of the
accident, and provided underinsured motorist coverage limits
of $100,000 per person and $300,000 per accident for each of the
four covered vehicles. The policy declarations page, repro-
duced below, lists each of the four covered vehicles separately
along with the separate underinsured motorist limit applicable
to each vehicle and the separate premium charged for each
vehicle.
No. 14-1913 3
COVERAGE AND LIMITS OF LIABILITY (In Dollars)
Coverage is provided where a premium or limit of liability
is shown for coverage.
PREMIUMS (In Dollars)
The Dugans made a demand on Nationwide for the
payment of $400,000, the aggregate limit of the four under-
insured motorist coverage limits listed on the declarations
page. Nationwide denied payment on the ground that express
language in the Dugans’ policy limited their recovery to
$100,000, less the $100,000 payment that they received from
American Family.
4 No. 14-1913
In January 2013, Nationwide commenced this action,
seeking a declaratory judgment that it owed no underinsured
motorist coverage to the Dugans. The Dugans counterclaimed,
seeking a declaratory judgment as to Nationwide’s under-
insured motorist coverage obligations. The parties stipulated
to the pertinent facts and filed cross-motions for summary
judgment.
Nationwide argued that anti-stacking language in the
policy, which we set forth in our discussion, unambiguously
limited the Dugans’ recovery to $100,000—the limit of liability
for a single vehicle. So, after setting off the $100,000 American
Family payment from this limit, Nationwide claimed that it did
not owe the Dugans underinsured motorist coverage. Nation-
wide also argued that, even if the policy permitted stacking,
Illinois precedent calls for the $100,000 American Family
payment to be setoff against each $100,000 limit of liability
prior to stacking, resulting in no underinsured motorist
coverage.
The Dugans contended that, because the policy’s anti-
stacking language was ambiguous, they were entitled to
aggregate, or “stack,” the underinsured motorist limits
applicable to each of their four covered vehicles, for an
aggregate coverage limit of $400,000. The Dugans conceded
that the policy’s provisions and Illinois law permit Nationwide
to setoff the $100,000 American Family payment from its
underinsured motorist coverage obligation, but argued that
Nationwide was entitled to apply this setoff only a single time
against the policy’s aggregate limit, post-stacking. Accord-
ingly, the Dugans claimed that Nationwide owed them
No. 14-1913 5
$300,000 in underinsured motorist coverage—the aggregate, or
“stacked,” limit ($400,000) less the setoff amount ($100,000).
The district court determined it could dispose of the parties’
cross-motions without deciding whether the anti-stacking
language in the policy permits or prohibits stacking. The court
treated each of the four coverage limits listed on the policy
declarations page as a “separate, stackable policy,” and held
that, even if the policy permitted stacking, Illinois law entitles
Nationwide to apply its setoff—the $100,000 payment that the
Dugans received from American Family—four times, once
against each “separate, stackable policy” limit, thereby
exhausting Nationwide’s underinsured motorist coverage
obligation. Accordingly, the district court granted Nation-
wide’s motion for summary judgment and denied the Dugans’
cross-motion. This appeal followed.
II. DISCUSSION
We review a district court’s grant of summary judgment
de novo. As a federal court sitting in diversity jurisdiction, our
task is to predict how the Illinois Supreme Court would decide
the issues presented here.1 Knight v. Enbridge Pipelines (FSP)
L.L.C., 759 F.3d 675, 677 (7th Cir. 2014). Where the Illinois
Supreme Court has not ruled on an issue, decisions of the
Illinois Appellate Courts control, unless there are persuasive
indications that the Illinois Supreme Court would decide the
issue differently. Allen v. Transamerica Ins. Co., 128 F.3d 462, 466
(7th Cir. 1997).
1
The parties agree that Illinois law governs this dispute.
6 No. 14-1913
On appeal, the Dugans contend that the district court erred
in interpreting Illinois law as permitting Nationwide to apply
its setoff four times, once against each coverage limit, as
opposed to a single time against the total policy limit. We
decline to decide that question of state law. Instead, we affirm
on the alternative ground that the policy unambiguously
prohibits stacking. See Grochocinski v. Mayer Brown Rowe &
Maw, LLP, 719 F.3d 785, 794 (7th Cir. 2013) (“We may affirm
the grant of summary judgment on ‘any alternative basis found
in the record as long as that basis was adequately considered
by the district court and the nonmoving party had an opportu-
nity to contest it.’”) (quoting Best v. City of Portland, 554 F.3d
698, 702 (7th Cir. 2009)). The parties acknowledge that this
issue—whether the policy prohibits or permits stacking—was
fully briefed in the parties’ cross-motions for summary
judgment below, and we believe it presents a more direct and
secure path to affirmance.
Whether an insurance policy prohibits or permits stacking
is a legal issue. Hobbs v. Hartford Ins. Co. of the Midwest, 823
N.E.2d 561, 564 (Ill. 2005). An insurance policy is a contract,
and the general rules governing the interpretation of other
types of contracts also govern the interpretation of insurance
policies. Id. “If the policy language is unambiguous, the policy
will be applied as written, unless it contravenes public policy.”
Hobbs, 823 N.E.2d at 564. The Illinois Supreme Court “has
determined that antistacking clauses in general do not contra-
vene public policy,” id., and the Dugans do not contest the
anti-stacking provisions at issue in this case on public policy
grounds. Whether an ambiguity exists turns on whether the
policy language is susceptible to more than one reasonable
No. 14-1913 7
interpretation. Id. Although “creative possibilities” may be
suggested, only reasonable interpretations will be considered
and we will not strain to find an ambiguity where none exists.
Id. In determining whether an ambiguity exists, all the provi-
sions of the contract should be read together and not in
isolation. Glidden v. Farmers Auto. Ins. Ass’n, 312 N.E.2d 247,
250 (Ill. 1974). If an ambiguity exists, it must be resolved in
favor of the insured and in favor of coverage. Hobbs, 823
N.E.2d at 564.
Nationwide identifies two provisions in the policy issued
to the Dugans which it argues unambiguously prohibit
stacking of underinsured motorist coverage. The first anti-
stacking provision identified by Nationwide reads in relevant
part:
LIMIT OF LIABILITY
A[.] The limit of liability shown in the [d]eclarations for
each person for Underinsured Motorists Coverage is
our maximum limit of liability for all damages[,]
including damages for care[,] loss of services[,] or death
arising out of bodily injury sustained by any one person
in any one accident[.] …
This is the most we will pay regardless of the number of[:]
1[.] Insureds[;]
2[.] Claims made[;]
3[.] Vehicles or premiums shown in the [d]ecla-
rations[;] or
4[.] Vehicles involved in the accident.
8 No. 14-1913
As previously mentioned, the “[d]eclarations” referenced
in the “Limit of Liability” provision quoted above, lists each of
the Dugans four covered vehicles separately along with the
separate underinsured motorist limit applicable to each vehicle
and the separate premium charged for each vehicle.
The Dugans contend that, although the anti-stacking
provision may appear unambiguous when read in isolation,
the clause is rendered ambiguous when read in conjunction
with the declarations page. They insist that a long line of
Illinois authority dictates that, where the anti-stacking provi-
sion refers to the limit of liability listed on the declarations
page as the maximum the insurer will pay, and the declara-
tions page lists separate underinsured motorist limits for each
of the covered vehicles, the anti-stacking provision is ambigu-
ous, and stacking is permitted. We agree. Three cases in
particular, and the Illinois Appellate Courts’ subsequent
treatment of these three cases, convince us that the Illinois
Supreme Court would consider the “Limit of Liability”
provision to be ambiguous.
The seminal case in the interpretation of anti-stacking
clauses is Bruder v. Country Mutual Ins. Co., 620 N.E.2d 355 (Ill.
1993). In what has now become known as the “Bruder dicta,”
the Illinois Supreme Court stated that “[i]t would not be
difficult to find an ambiguity” where an anti-stacking provi-
sion ties the limit of liability to the limit shown on the declara-
tions page, and the declarations page lists multiple vehicles
along with the separate coverage limit applicable to each
vehicle and the separate premium charged for each vehicle. Id.
at 362. The court noted that, in such a case, it is “reasonable to
assume that the parties intended” that, in return for each
No. 14-1913 9
premium paid, the coverage limit corresponding to each
premium may be stacked, regardless of language indicating
otherwise in the policy. Id. Then, in Yates v. Farmers Auto. Ins.
Ass'n, 724 N.E.2d 1042 (Ill. App. Ct. 2000), the Illinois Appel-
late Court faced the situation contemplated by the Bruder dicta.
The Yates court held that the “Limit of Liability” provision,
which was nearly identical to the provision at issue here, was
rendered ambiguous when read in conjunction with the
declarations page, which listed multiple vehicles along with
separate coverage limits and separate premiums for each
vehicle. Id. at 1044–45. Five years later, in Hobbs, the Illinois
Supreme Court reaffirmed its commitment to Bruder’s reason-
ing and the Bruder dicta. See Hobbs, 823 N.E.2d at 566–69. The
court also approved the Illinois Appellate Court’s decision in
Yates, finding that, “[u]nder Bruder, the policy at issue in Yates
was ambiguous.” Id. at 569. In reaching this conclusion, the
court explained:
The declarations page in Yates … listed the
underinsured-motorist limits twice– once for each of
the two covered vehicles. Although the appellate
court in the instant case [Hobbs] found this factual
distinction immaterial, we do not. As noted above in
our discussion of Bruder, where the antistacking
clause limits liability to the limit shown on the
declarations page, and the declarations page lists the
limit of liability twice, it would not be difficult to
find an ambiguity. Id.Since Hobbs was decided, every Illinois Appellate district
that has faced the issue presented in the case at bar has held, in
line with Bruder’s dicta and Hobbs’ discussion of the Bruder
10 No. 14-1913
dicta, that an anti-stacking provision, containing language
similar to the provision at issue here, which refers to the limit
of liability shown on the policy declarations page, is rendered
ambiguous when the declarations page lists multiple limits. See
Bowers v. General Cas. Ins. Co., 20 N.E.2d 843, 848 (Ill. App. Ct.
2014) (3d District); Progressive Premier Ins. Co. v. Kocher, 932
N.E.2d 1094, 1102 (Ill. App. Ct. 2010) (5th District); Johnson v.
Davis, 883 N.E.2d 521, 529 (Ill. App. Ct. 2007) (5th District);
McElmeel v. Safeco Ins. Co. of Am., 851 N.E.2d 99, 103 (Ill. App.
Ct. 2006) (1st District).
Nationwide argues that our decision in Grinnell Select Ins.
Co. v. Baker, 362 F.3d 1005 (7th Cir. 2004), requires that we
deviate from this mass of Illinois authority. Grinnell, however,
is distinguishable from the instant case in a way that the
Illinois Supreme Court in Bruder and Hobbs considered
material—the declarations page at issue in Grinnell listed the
underinsured motorist coverage limit only one time. See
Grinnell Select Ins. Co. v. Baker, No. 4:02-cv-04090, at *3 (S.D. Ill.
May 29, 2003) (setting out the declarations page at issue in
Grinnell); Hobbs, 823 N.E.2d at 566, 569; Bruder, 620 N.E.2d at
362; see also Johnson, 883 N.E.2d 608–609 (“The distinction
between listing the limits of liability once and listing them
more than once was crucial to our supreme court’s determina-
tion in Hobbs … .”). Simply stated, the court in Grinnell did not
face the issue presented in this appeal. For this reason, we
reject Nationwide’s argument and, in accordance with our
duty as a federal court sitting in diversity, decline to deviate
from the Illinois Supreme Court’s dicta in Bruder, its reaffirma-
tion of the Bruder dicta in Hobbs, and what the Illinois Appel-
late Courts have unanimously said on the issue post-Hobbs.
No. 14-1913 11
Accordingly, the “Limit of Liability” clause is of no help to
Nationwide.
The second provision that Nationwide points to as unam-
biguously prohibiting stacking reads, in relevant part, as
follows:
OTHER INSURANCE
If there is other applicable underinsured motorists
coverage available under one or more policies or
provisions of coverage[:]
1[.] Any recovery for damages under all such policies or
provisions of coverage may equal[,] but not exceed[,]
the highest applicable limit for any one vehicle under
any insurance providing coverage on either a primary
or excess basis[.]
2[.] Any insurance we provide with respect to a vehicle
you do not own shall be excess over any collectible
insurance providing such coverage on a primary basis[.]
3[.] If the coverage under this policy is provided[:]
a[.] On a primary basis we will pay only our
share of the loss that must be paid under insur-
ance providing coverage on a primary basis[.] …
b[.] On an excess basis we will pay only our
share of the loss that must be paid under insur-
ance providing coverage on an excess basis[.] …
Nationwide argues that the introductory sentence and
clause 1, read in tandem, unambiguously limit coverage to “the
highest applicable limit for any one vehicle,”—here, $100,000.
12 No. 14-1913
We agree; the “Other Insurance” provision, when read with the
policy as a whole, unambiguously bars stacking.
As an initial matter, we note that the “Other Insurance”
provision’s anti-stacking language resembles the language of
the section of the Illinois Insurance Code that expressly
authorizes anti-stacking provisions in motor vehicle insurance
policies. See 215 ILCS 5/143a–2(5). The Illinois Insurance Code
states:
Nothing herein shall prohibit an insurer from setting
forth policy terms and conditions which provide
that if the insured has coverage available under this
Section under more than one policy or provision of
coverage, any recovery or benefits may be equal to,
but may not exceed, the higher of the applicable
limits of the respective coverage, and the limits of
liability under this Section shall not be increased
because of multiple motor vehicles covered under
the same policy of insurance. Id.The “Other Insurance” provision, by mirroring the lan-
guage used in this section of the Illinois Insurance Code,
admits a clear anti-stacking function. The provision applies
whenever there is “other applicable underinsured motorists
coverage available under one or more policies or provisions of
coverage.” And, when applicable, the provision operates to limit
recovery to “the highest applicable limit for any one vehicle
under any insurance providing coverage.” Here, the Dugans
seek to stack the underinsured motorist coverage limits
provided for each of their four covered vehicles. In other
words, the Dugans claim that they are entitled to recover not
No. 14-1913 13
only under the provision of coverage for the vehicle Toni
Dugan was driving at the time of the accident, but also under
the provisions of coverage for their three covered vehicles
which were not involved in the accident. The “Other Insur-
ance” provision, however, unambiguously states that in such
a situation—where “there is other applicable underinsured
motorists coverage available under one or more … provisions
of coverage”—the insured’s recovery “under all such …
provisions of coverage may equal[,] but not exceed[,] the
highest applicable limit for any one vehicle.” Since the highest
applicable limit for any one vehicle in this case is $100,000, the
“Other Insurance” provision limits the Dugans recovery to that
amount.
This conclusion is also supported by the Illinois Appellate
Courts’ decisions in McElmeel and Willison v. Economy Fire &
Cas. Co., 690 N.E.2d 1073 (Ill. App. Ct. 1998) (4th District). In
McElmeel, the insured owned a policy with Safeco that covered
three vehicles and provided underinsured motorist coverage
for each of the three covered vehicles. 851 N.E.2d at 101. The
declarations pages listed each of the three covered vehicles
along with the separate underinsured motorist limit applicable
to each vehicle and the separate premium charged for each
vehicle. Id. The policy contained a “Limit of Liability” provi-
sion and an “Other Insurance” provision, both of which were
nearly identical to the “Limit of Liability” and “Other Insur-
ance” provisions at issue in this appeal. Id. at 102. The court
first determined that the “Limit of Liability” provision did not
prohibit stacking because it tied the limit of liability to the limit
shown on the declarations pages that listed multiple coverage
limits, one corresponding to each covered vehicle. Id. at 103.
14 No. 14-1913
The court then determined that the “Other Insurance” provi-
sion was unambiguous and that it resolved “the ambiguity in
the declarations pages and the antistacking clauses that incor-
porate[d] them.” Id. at 104. Accordingly, the court held that the
“Other Insurance” provision, when read in conjunction with
the policy as a whole, barred stacking. Id.In Willison, the Illinois Appellate Court considered the anti-
stacking effect of an ”Other Insurance” provision that con-
tained language virtually identical to the language of the
“Other Insurance” provision at issue here. Willison, 690 N.E.2d
at 1074. The plaintiff in that case argued that the “OTHER
INSURANCE” provision did not prohibit stacking because it
applied only to policies issued by different carriers, not to
multiple policies issued by the same carrier. Id. The court
disagreed, stating that the provision’s language “clearly
applies to any type of stacking of [underinsured motorist]
coverages, whether multiple policy, multiple carrier, or
multiple policy, single carrier or multiple vehicle, single carrier.”
Id. at 1076 (emphasis added). The court went on to hold
that the “OTHER INSURANCE” provision unambiguously
prohibited the plaintiff from stacking underinsured motorist
coverages. Id. at 1076–77.
The Dugans first argue that the “Other Insurance” provi-
sion in their policy does not prohibit stacking because, as the
Illinois Supreme Court stated in Kaufmann v. Econ Fire & Cas.
Co., 389 N.E.2d 1150, 1153 (Ill. 1979), the purpose of such
provisions is to “make certain that one company does not pay
a disproportionate amount of a loss which is to be shared with
another company.” This argument is unavailing. A number of
Illinois cases, including Menke v. Country Mut. Ins. Co., 401
No. 14-1913 15
N.E.2d 539, 541 (Ill. 1980), have held that “Other Insurance”
provisions may simultaneously serve a proration function and
an anti-stacking function. See State Farm Mut. Auto. Ins. Co. v.
McFadden, 979 N.E.2d 551, 556 (Ill. App. Ct. 2012) (“the
proration clause at the end of the antistacking provision does
not introduce ambiguity”); Armstrong v. State Farm Mut. Auto.
Ins. Co., 595 N.E.2d 172, 176 (Ill. App. Ct. 1992) (“The presence
of a ‘proration clause’ at the end of the provision does not
introduce ambiguity into the clear language of the ‘anti-
stacking’ provision.”). Here, the “Other Insurance” provision’s
anti-stacking function is clear on its face; and it is further
evidenced by the resemblance between the provision’s lan-
guage and the language used in Section 143a–2(5) of the Illinois
Insurance Code.
The Dugans next argue that the “Other Insurance” provi-
sion should not be given intra-policy effect. They acknowledge
the Illinois Appellate Court’s statement in Willison that the
“Other Insurance” provision at issue in that case, which was
virtually identical to the provision at issue in this case, should
be given effect in the “multiple vehicle, single carrier” context,
but argue that the Willison court may have intended the phrase
to mean a single carrier insuring multiple vehicles under
multiple policies. Again, we disagree. The Willison court
specifically included “multiple policy, single carrier” as one of
the contexts in which the “Other Insurance” provision should
be given effect. Willison, 690 N.E.2d at 1076. By also including
“multiple vehicle, single carrier,” we think that the Willison
court unequivocally intended that the provision be given effect
where, as here, a single policy insures multiple vehicles. Id.Furthermore, the Dugans’ argument ignores the Illinois
16 No. 14-1913
Appellate Court’s holding in McElmeel, where the court gave
effect to an “Other Insurance” provision in the single policy,
multiple vehicle context. Lastly, the Dugans do not indicate
how the “Other Insurance” provision’s reference to “one or
more policies” or “provisions of coverage” can be read to apply
to multiple policies, yet not to a single policy with multiple
provisions of coverage.
The Dugans also argue that the “Other Insurance” provi-
sion does not resolve the ambiguity as to the policy’s limit of
liability. Even if the provision is given intra-policy effect, and
Nationwide’s obligation is reduced to the “highest applicable
limit for any one vehicle,” the Dugans argue that the provision
does not answer what the “limit of liability” for a vehicle under
the policy is. Not so. The declarations page plainly shows the
limit of liability for each of the covered vehicles, and the
“Other Insurance” provision reduces Nationwide’s under-
insured motorist coverage obligation to the vehicle with the
highest applicable limit, which in this case is $100,000.
Finally, the Dugans argue that Nationwide’s interpretation
of the “Other Insurance” provision robs the “Limit of Liability”
provision of any meaning. But, as previously explained, we
agree with the Dugans that the Illinois Supreme Court would
most likely consider the “Limit of Liability” provision to be
ambiguous. From a conceptual standpoint, it is hard to see
how an ambiguous clause can be robbed of meaning. At any
rate, the Dugans do not direct our attention to any Illinois case
in which one anti-stacking provision was rendered invalid by
virtue of the fact that the policy contained another anti-
stacking provision. Perhaps it would be more apt to say, as the
Illinois Appellate Court said in McElmeel, that the “Other
No. 14-1913 17
Insurance” provision resolves any ambiguity occasioned by the
interplay between the “Limit of Liability” provision and the
declarations page. See McElmeel, 851 N.E.2d at 104.
Because the “Other Insurance” provision unambiguously
limits the Dugans’ recovery to $100,000, we hold that Nation-
wide, after applying its setoff, does not owe the Dugans
underinsured motorist coverage under the policy.
III. CONCLUSION
For the foregoing reasons, the district court’s decision is
AFFIRMED.