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Rodenburg LLP v. Certain Underwriters at Lloyd's London

United States District Court, D. North Dakota, Eastern Division

January 9, 2020

Rodenburg LLP, doing business as Rodenburg Law Firm, Plaintiff,
Certain Underwriters at Lloyd's, London, Syndicate No. 4020, subscribing to Policy No. DCLPLA 00574-00; and The Cincinnati Insurance Company, Defendants.



         Before the Court are cross motions for summary judgment filed by Plaintiff Rodenburg LLP (“Rodenburg” or the “law firm”) and Defendant The Cincinnati Insurance Company (“Cincinnati”). Doc. Nos. 46, 52. Defendant Certain Underwriters at Lloyd's, London (“Lloyd's”) filed a separate motion for summary judgment on January 8, 2020, which the Court will address after briefing has concluded. Doc. No. 61. Rodenburg filed its initial summary judgment motion on August 30, 2019. Doc. No. 46. Cincinnati responded on September 19, 2019, simultaneously filing a summary judgment motion of its own. Doc. Nos. 52, 56. Rodenburg filed a combined response/reply brief on October 10, 2019, and Cincinnati submitted its final reply on October 24, 2019. Doc. Nos. 58, 60. Rodenburg seeks a judgment declaring that Cincinnati wrongfully denied coverage under an insurance policy, as well as damages for breach of contract. Cincinnati asks for the inverse - a declaration that it properly denied coverage and dismissal of the complaint. For the reasons below, Cincinnati's motion for summary judgment is granted, and Rodenburg's motion is denied.

         I. BACKGROUND

         Rodenburg is a North Dakota law firm that primarily engages in debt collection. Doc. No. 50, ¶ 1. Cincinnati issued a North Dakota CinciPak Policy (“CinciPak Policy”) to Rodenburg effective from May 1, 2015 through May 1, 2018. See Doc. No. 54-2. The CinciPak Policy included Commercial General Liability Coverage (“CGL Policy”) and Commercial Umbrella Liability Coverage (“Umbrella Policy”). See id.

         The pending motions represent the culmination of an interconnected web of three separate lawsuits. The first is the present action in which Rodenburg seeks a declaration that Cincinnati improperly denied coverage under the Umbrella Policy. Second is an underlying lawsuit against Rodenburg that is the subject of the insurance claim. And third is a debt collection action the law firm pursued that started the chain of litigation.

         The dispute traces back to June 2010, when Portfolio Recovery Associates, LLC (“PRA”) purchased the rights to a defaulted consumer credit card account. Doc. No. 54-1, ¶ 7. As alleged, an individual named Charlene Williams (“Williams”) owed the debt.[1] Doc. No. 1-4, ¶ 10. PRA assigned the account to Rodenburg in January 2011 for collection. Id. When providing the account information to Rodenburg, PRA listed an address in Coon Rapids, Minnesota, that belonged to an individual named Charlene Williams-Mumbo (“Williams-Mumbo”). Id. ¶¶ 10-11. Based on this information, Rodenburg proceeded to commence an action in Minnesota state court, ostensibly against Williams. Id. ¶ 10. However, Rodenburg served the summons and complaint on Williams-Mumbo at the Coon Rapids address. Id. ¶ 11. The Minnesota state court entered a default judgment on December 6, 2011. Doc. No. 54-1, ¶ 20. Williams-Mumbo retained an attorney to vacate the default judgment, but the attorney did not respond to Rodenburg's inquiries regarding the judgment and apparently withdrew from the representation. Doc. No. 1-4, ¶ 12; Doc. No. 54-1, ¶ 19. Because Williams never received notice of the lawsuit, Rodenburg did not obtain a valid judgment against her.

         Attempting to collect on the judgment debt, Rodenburg served a notice of intent to garnish wages at the Coon Rapids address on November 8, 2016. Doc. No. 54-1, ¶ 42. After receiving no response, Rodenburg served Williams' employer with garnishment papers on November 22, 2016. Doc. No. 1-4, ¶ 13. Williams, who had never lived at the Coon Rapids address, learned from her employer that Rodenburg intended to garnish her wages in December 2016. Doc. No. 54-1, ¶¶ 43, 59. Williams subsequently informed Rodenburg of the wrongful garnishment multiple times, first contacting the law firm on December 21, 2016. Doc. No. 1-4, ¶ 14. Williams asserted that she did not owe the debt and had never received notice of the lawsuit or the judgment before the garnishment commenced. Doc. No. 54-1, ¶ 63. Additionally, she filed complaints against Rodenburg with the Minnesota Attorney General's Office and the Consumer Financial Protection Bureau in January 2017. Doc. No. 1-4, ¶ 14. Despite these protests, Rodenburg continued to garnish a total of $656.93 from four of Williams' paychecks between December 29, 2016 and February 9, 2017. Doc. No. 54-1, ¶ 68. Rodenburg determined that Williams was not the judgment debtor later in February 2017, ceasing collection efforts that same month and eventually returning the improperly garnished funds. Id. ¶ 77.

         On October 31, 2017, Williams filed suit against Rodenburg in the U.S. District Court for the District of Minnesota. See Doc. No. 54-1. Williams' complaint alleged nine counts, including violations of 15 U.S.C. § 1692, commonly known as the Fair Debt Collection Practices Act (“FDCPA”), as well as various Minnesota statutory and common-law claims. See id. In addition to the loss of her improperly garnished wages, the injuries Williams claimed included “extreme emotional distress, anxiety, and fear, ” as well as “confusion, inconvenience, humiliation, embarrassment and annoyance.” Id. ¶¶ 88, 91. She also asserted a claim that Rodenburg violated her right of privacy. Id. ¶¶ 140-48.

         After Williams filed her lawsuit, Rodenburg sought coverage under the CinciPak Policy. Doc. No. 50, ¶ 5. Cincinnati denied coverage in March 2018, refusing to defend or indemnify Rodenburg under both the CGL Policy and Umbrella Policy. See Doc. No. 54-3. Rodenburg undertook its own defense and ultimately entered into a settlement with Williams in November 2018. Doc. No. 50, ¶ 8. Not long after, Rodenburg filed the present action in North Dakota state court, seeking a declaratory judgment and damages stemming from Cincinnati's denial of coverage. See Doc. No. 1-4. Cincinnati and Lloyd's timely removed the case to federal court on January 30, 2019. See Doc. No. 1.


         “In a case of actual controversy within its jurisdiction, ” a federal court “may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). Summary judgment is required “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “An issue is ‘genuine' if the evidence is sufficient to persuade a reasonable jury to return a verdict for the nonmoving party.” Schilf v. Eli Lilly & Co., 687 F.3d 947, 948 (8th Cir. 2012) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “A fact is material if it ‘might affect the outcome of the suit.'” Dick v. Dickinson State Univ., 826 F.3d 1054, 1061 (8th Cir. 2016) (quoting Anderson, 477 U.S. at 248). Courts must afford “the nonmoving party the benefit of all reasonable inferences which may be drawn without resorting to speculation.” TCF Nat'l Bank v. Mkt. Intelligence, Inc., 812 F.3d 701, 707 (8th Cir. 2016) (quoting Johnson v. Securitas Sec. Servs. USA, Inc., 769 F.3d 605, 611 (8th Cir. 2014)). “At summary judgment, the court's function is not to weigh the evidence and determine the truth of the matter itself, but to determine whether there is a genuine issue for trial.” Nunn v. Noodles & Co., 674 F.3d 910, 914 (8th Cir. 2012) (citing Anderson, 477 U.S. at 249). If the movant demonstrates the absence of a genuine issue of material fact, “[t]he nonmovant ‘must do more than simply show that there is some metaphysical doubt as to the material facts,' and must come forward with ‘specific facts showing that there is a genuine issue for trial.'” Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)).

         Neither party seriously disputes the facts here. The only question for resolution is whether the Umbrella Policy imposed duties on Cincinnati to defend and indemnify Rodenburg in Williams' lawsuit. The parties agree that North Dakota law governs this question. Accordingly, the Court will apply North Dakota Supreme Court precedent and attempt to predict how that court would decide any state-law questions it has yet to resolve. See Stuart C. Irby Co., Inc. v. Tipton, 796 F.3d 918, 922 (8th Cir. 2015).

         “Insurance policy interpretation is a question of law.” Forsman v. Blues, Brews & Bar-B-Ques, Inc., 2017 ND 266, ¶ 10, 903 N.W.2d 524 (citing K & L Homes, Inc. v. Am. Family Mut. Ins. Co., 2013 ND 57, ¶ 8, 829 N.W.2d 724). The North Dakota Supreme Court has consistently explained its approach to interpreting insurance policies this way:

We look first to the language of the insurance contract, and if the policy language is clear on its face, there is no room for construction. If coverage hinges on an undefined term, we apply the plain, ordinary meaning of the term in interpreting the contract. While we regard insurance policies as adhesion contracts and resolve ambiguities in favor of the insured, we will not rewrite a contract to impose liability on an insurer if the policy unambiguously precludes coverage. We will not strain the definition of an undefined term to provide coverage for the insured. We construe insurance contracts as a whole to give meaning and effect to each clause, if possible. The whole of a contract is to be taken together to give effect to every part, and each clause is to help interpret the others.

Borsheim Builders Supply, Inc. v. Manger Ins., Inc., 2018 ND 218, ¶ 8, 917 N.W.2d 504 (citation omitted).

         The basic task is to determine if the insurance policy's affirmative coverage provisions apply, and if so, to then look at whether any exclusions bar coverage. “It is axiomatic that the burden of proof rests upon the party claiming coverage under an insurance policy.” Forsman, 2017 ND 266, ¶ 12, 903 N.W.2d 524 (citation omitted). “If and only if a coverage provision applies to the harm at issue will the court then examine the policy's exclusions and limitations of coverage.” Borsheim Builders, 2018 ND 218, ¶ 9, 917 N.W.2d 504 (citation omitted). “While the insured bears the initial burden of demonstrating coverage, the insurer carries the burden of establishing the applicability of exclusions.” Id. ¶ 10 (citation omitted). “Exclusions from coverage . . . must be clear and explicit and are strictly construed against the insurer.” Id. ¶ 8 (ellipses in original) (citation omitted).

         Rodenburg argues that Williams' lawsuit triggered both a duty to defend and a duty to indemnify. The duties to defend and indemnify “are two separate and distinct contractual obligations . . . determined by applying different standards.” Tibert v. Nodak Mut. Ins. Co., 2012 ND 81, ¶ 33, 816 N.W.2d 31 (citing Hanneman v. Cont'l W. Ins. Co., 1998 ND 46, ¶ 39, 575 N.W.2d 445). “While the duty to defend focuses on the complaint's allegations, the duty to indemnify generally is determined by the actual result in the underlying action.” Forsman, 2017 ND 266, ¶ 32, 903 N.W.2d 524 (citing Tibert, 2012 ND 81, ¶ 33, 816 N.W.2d 31).

         “An insurer's duty to defend is broader than its duty to indemnify.” Id. ¶ 31 (citing Farmers Union Mut. Ins. Co. v. Decker, 2005 ND 173, ¶ 13, 704 N.W.2d 857). As a corollary to this principle, if there is no duty to defend, there is no duty to indemnify. See Selective Ins. Co. of Am. v. Smart Candle, LLC, 781 F.3d 983, 985 (8th Cir. 2015) (citations omitted). “An insurer does not have a duty to defend an insured if there is no possibility of coverage under the policy.” Decker, 2005 ND 173, ¶ 14, 704 N.W.2d 857 (citing Schultze v. Cont'l Ins. Co., 2000 ND 209, ¶ 8, 619 N.W.2d 510). “When several claims are made against the insured in the underlying action, the insurer has a duty to defend the entire lawsuit if there is potential liability or a possibility of coverage for any one of the claims.” Tibert, 2012 ND 81, ¶ 30, 816 N.W.2d 31 (citations omitted). “Any doubt about whether a duty to defend exists must be resolved in favor of the insured.” Id. ¶ 31 (citations omitted).

         With this foundation in mind, a truncated summary of the CinciPak Policy is useful to frame the issues. Both the CGL Policy and Umbrella Policy provide Rodenburg with insurance for damages resulting from three types of injuries: “bodily injury, ” “personal and advertising injury, ” and “property damage.” Doc. No. 54-2, p. 22; id. at 70. For coverage to apply, the injuries must result from an “occurrence, ” meaning for practical purposes, an accident.[2]Id. at 40, 85. Two exclusions are at play as well. The first bars coverage for injuries that Rodenburg “expected or intended” to cause, while the second bars coverage if Rodenburg's conduct violated certain categories of statutes. Id. at 62, 91 (expected or intended injury exclusions); id. ...

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