United States Court of Appeals
For the Eighth Circuit
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No. 16-3427
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Food Market Merchandising, Inc., a Minnesota corporation
lllllllllllllllllllll Plaintiff - Appellant
v.
Scottsdale Indemnity Company
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: March 9, 2017
Filed: May 25, 2017
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Before LOKEN, MURPHY, and BENTON, Circuit Judges.
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BENTON, Circuit Judge.
Food Market Merchandising, Inc. sued Scottsdale Indemnity Company for
coverage under a Business and Management Indemnity Policy. Both parties moved
for summary judgment. The district court1 granted Scottsdale’s motion. Having
jurisdiction under 28 U.S.C. § 1291, this court affirms.
I.
The policy covers “only claims first made against the insured during the policy
period . . . and reported to the insurer pursuant to the terms of the relevant coverage
section.” The “Notification” provision of the coverage section at issue states:
The Insureds shall, as a condition precedent to their rights to payment
under this Coverage Section only, give Insurer written notice of any
Claim as soon as practicable, but in no event later than sixty (60) days
after the end of the Policy Period.
Section E.1. (bolded words in original, defined in policy).
In January 2014, former employee Robert Spinner sued Food Market, seeking
unpaid commissions. In June, a court granted partial summary judgment for Spinner,
awarding twice the unpaid commissions and attorney’s fees. It did not reduce the
award to judgment. (The parties settled two years later).
In August 2014—during the policy period—Food Market notified Scottsdale
of the Spinner lawsuit. It sought defense and indemnification under the “Employee
Insuring” provision of the Employment Practices coverage:
Insurer shall pay the Loss of the Insureds which the Insureds have
become legally obligated to pay by reason of an Employment Practices
Claim first made against the Insureds during the Policy Period or, if
1
The Honorable Richard H. Kyle, United States District Judge for the District
of Minnesota.
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elected, the Extended Period, and reported to the Insurer pursuant to
Section E.1. herein, for an Employment Practices Wrongful Act
taking place prior to the end of the Policy Period.
In September, Scottsdale tentatively denied coverage.
In June 2015, Food Market sued Scottsdale for coverage, asserting claims for
breach of contract, breach of the covenant of good faith and fair dealing, and
declaratory judgment. A week later, Scottsdale formally denied coverage, stating
Food Market’s notice was untimely and its claim outside the policy’s scope.
Both parties moved for summary judgment. The district court granted
summary judgment to Scottsdale, finding “no genuine issue that [Food Market] failed
to notify Scottsdale of the Spinner Litigation as soon as practicable. Because timely
notice is a condition precedent to payment under the Policy, Scottsdale’s duty to
defend/indemnify was never triggered, and Scottsdale is entitled to judgment as a
matter of law.”
This court “review[s] de novo the district court’s interpretation of state law and
its grant of summary judgment.” Babinski v. American Family Ins. Group, 569 F.3d
349, 351 (8th Cir. 2009). “Summary judgment is appropriate when ‘there is no
genuine issue as to any material fact and [] the movant is entitled to judgment as a
matter of law.’” Id. (alteration in original), quoting Fed. R. Civ. P. 56(c). “Because
this case is in federal court based on diversity jurisdiction, Minnesota’s substantive
law controls [the court’s] analysis of the insurance policy.” Id. at 351-52. This court
may affirm summary judgment “on any grounds supported by the record.” Moyle v.
Anderson, 571 F.3d 814, 817 (8th Cir. 2009).
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II.
Food Market argues the district court erred in finding it did not provide timely
notice under the policy.
A.
Food Market believes its notice was timely because it had a “claims-made”
policy and gave notice within the claims period. Under Minnesota law, “[a] claims-
made policy requires the insured to give notice of the claim during the policy period.”
Cargill, Inc. v. Evanston Ins. Co., 642 N.W.2d 80, 86 n.3 (Minn. Ct. App. 2002),
review denied (Minn. June 26, 2002). Here, the “policy did not require notice to be
given during the policy period, but instead only required that notice be given as soon
as practicable,” id., but “in no event later than sixty (60) days after the end of the
Policy Period.” “As such, it does not precisely fit the definition of a claims-made
policy in Minnesota.” Id. “Ultimately, classification of the [] policy is irrelevant to
an analysis of the issue needing decision: did [Food Market] give notice as soon as
practicable?” Id.
B.
Food Market contends the district court erred in finding no genuine issue of
material fact about the timeliness of notice. The policy required Food Market give
Scottsdale written notice of any claim “as soon as practicable, but in no event later
than sixty (60) days after the end of the Policy Period.” “Generally, whether the
notice was given as soon as practicable is a fact-dependent question for a jury to
determine.” Id. at 86, citing St. Paul Fire & Marine Ins. Co. v. Wabash Fire & Cas.
Ins. Co., 264 F. Supp. 637, 642-43 (D. Minn. 1967). “A court may grant summary
judgment, however, when there is no genuine issue of material fact.” Id. at 87, citing
DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997). “There is no genuine issue of
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material fact when the nonmoving party presents evidence creating only a
metaphysical doubt as to a factual issue or the evidence is not sufficiently probative
to permit reasonable persons to draw different conclusions.” Id., citing DLH, 566
N.W.2d at 71.
Food Market presented no evidence that providing notice over seven months
after Spinner sued was “as soon as practicable.” As the district court found:
Here, Spinner sued [Food Market] on January 13, 2014, and [Food
Market] did not tender the matter to Scottsdale until August 22,
2014—some seven months later. During that time, [Food Market] hired
counsel, litigated the case, and negotiated with Spinner, all without
seeking Scottsdale’s involvement. [Food Market] has failed to explain
its delay, averring only that it “did not deliberately refrain from making
an insurance claim at an earlier date. It retained representation to defend
it in the Spinner litigation, and in the course of that representation,
[Food Market]’s attorneys provided notice to Scottsdale.” Nowhere
does it identify facts from which a reasonable factfinder could conclude
it provided notice to Scottsdale “as soon as practicable.”
(citations omitted).
Food Market says the court failed to consider whether: (1) the insurer’s ability
to investigate the claim was inhibited; (2) the underlying claim had yet been reduced
to judgment; or (3) any facts in the underlying claim changed from when the insured
knew of the claim until the insurer received notice. But these address whether the
delay prejudiced Scottsdale, a showing both parties admit is not required where, as
here, notice is a condition precedent to coverage. See id. (“Evanston should not be
required to make a showing of prejudice. If the ‘notice of loss is a condition
precedent of liability under the insurance contract, noncompliance with that provision
is fatal to recovery.’”), quoting Sterling State Bank v. Virginia Sur. Co., 173 N.W.2d
342, 346 (Minn. 1969). The policies in Food Market’s cases do not have the
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“condition precedent” notice language here, and thus do not control. See Cary v.
National Sur. Co., 251 N.W. 123, 126 (Minn. 1933); Hooper v. Zurich Am. Ins. Co.,
552 N.W.2d 31, 36-37 (Minn. Ct. App. 1996). See also North Star Mut. Ins. Co. v.
Midwest Family Mut. Ins. Co., 634 N.W.2d 216, 220 n.1 (Minn. Ct. App. 2001)
(noting that the language “as soon as reasonably possible” alone “does not create a
condition precedent”).
In Cargill, Inc. v. Evanston Insurance Co., the court of appeals addressed
notice “as soon as practicable” as a condition precedent. That court reversed
summary judgment for the insurer on the issue of timely notice, finding a question of
fact:
In this case, Cargill claims it waited as long as it did to notify Evanston
due to the presence of a $1 million deductible provision in the Evanston
policy. Cargill argues that it would have been pointless to notify
Evanston at an earlier time because Cargill’s costs in relation to the
cleanup had not exceeded the $1 million limit. This court makes no
assessment regarding the ultimate success of this argument. We
conclude, however, that it would not be wholly unreasonable for a
fact-finder to determine that, under the circumstances, it was practical
for Cargill to wait until the $1 million deductible was exceeded. Cargill
should have been permitted to make its argument to a fact-finder.
Cargill, 642 N.W.2d at 87.
The district court here cited Cargill, stating that “[a] fact issue may be present, for
example, where an insured offers some plausible reason for its delay.” Unlike
Cargill, the court found Food Market offered no reasons for delay.
The district court properly found no genuine issue of material fact about the
timeliness of notice.
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C.
Food Market asserts the policy’s notification provision is ambiguous.
“Whether a contract is ambiguous is a question of law.” Babinski, 569 F.3d at 352.
Deciding whether an ambiguity exists, the court must read the policy “as a whole.”
Mutual Serv. Cas. Ins. Co. v. Wilson Twp., 603 N.W.2d 151, 153 (Minn. Ct. App.
1999). “Language in a policy is ambiguous if it is susceptible to two or more
reasonable interpretations.” Carlson v. Allstate Ins. Co., 749 N.W.2d 41, 45 (Minn.
2008). While “any ambiguity in the insurance contract must be construed in favor of
the insured,” a “court has no right to read an ambiguity into the plain language of an
insurance policy.” State Farm Ins. Cos. v. Seefeld, 481 N.W.2d 62, 64 (Minn. 1992).
Citing Cargill, Food Market claims the phrase “as soon as practicable” is
ambiguous. But, in Cargill, the court found the phrase unambiguous: the “policy
unambiguously states that [a]s a condition precedent to his right to the protection
afforded by this policy, the Insured shall, as soon as practicable, give the Company
written notice of any claim made against him.” Cargill, 642 N.W.2d at 87. Applying
the unambiguous condition precedent to the facts of that case, the court concluded
that “it would not be wholly unreasonable for a fact-finder to determine that, under
the circumstances, it was practical for Cargill to wait until the $1 million deductible
was exceeded [before giving notice].” Id. Cargill refutes Food Market’s proposition
that “the phrase ‘as soon as practicable’ is inherently susceptible to more than one
reasonable meaning.” Rather, it shows how an unambiguous provision creates a
question of fact if the insured offers reasons for delay.
Food Market also relies on George K. Baum & Co. v. Twin City Fire Ins. Co.,
760 F.3d 795 (8th Cir. 2014). Although Baum has similar language—“as soon as
practicable, but in no event later than sixty (60) days after the POLICY
EXPIRATION DATE”—it is distinguishable. Id. at 801. First, it is based on New
York law. Id. at 797. Second, this court held the policy was “ambiguous regarding
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any timely notice requirement applicable to later liabilities arising from a timely
original claim.” Id. at 801 (emphasis added). This court did not address the issue
here: whether the phrase “as soon as practicable” is ambiguous regarding timely
notice for an original claim. In fact, Baum found the insurer’s interpretation of the
policy unreasonable because it ignored “in no event later than sixty (60) days after
[the policy’s expiration],” a phrase the court found “textually applies to, and limits,
the preceding ‘as soon as practicable.’” Id. at 802. Similarly, Food Market’s
interpretation ignores the phrase “as soon as practicable.” As the district court
concluded, Food Market’s interpretation of the condition precedent—requiring notice
only within 60 days of the policy’s expiration—“render[s] the phrase ‘as soon as
practicable’ meaningless.”
The district court properly found the policy unambiguous.
D.
Food Market thinks Scottsdale waived its timeliness argument by failing to
assert notice as a reason for denying coverage. See Minnesota Farm Bureau Serv.
Co. v. American Cas. Co. of Reading, Pa., 167 F. Supp. 315, 319 (D. Minn. 1958),
reversed on other grounds, 270 F.2d 686 (8th Cir. 1959) (“It is the law in Minnesota
and many other jurisdictions that a refusal by an insurer to pay a claim or to defend
an action on the grounds that the loss occurred in consequence of risk not covered by
the policy is in itself a waiver of the policy provisions requiring notice.”). This
argument is not supported by the record. Although Food Market says Scottsdale
“tentatively denied coverage based on scope,” not notice, the district court found, and
Food Market does not dispute, that “Scottsdale’s denial letter explicitly cited untimely
notice as one of the reasons Scottsdale had denied coverage.” No precedent requires
waiver based on tentative coverage conversations. The district court properly
concluded “Scottsdale expressly relied upon the notice provision when denying
coverage.” There is no waiver.
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III.
For the first time in the reply brief , Food Market argues “the Policy’s condition
precedent affects [its] rights to payment only” and not its duty to defend. It also
argues, for the first time, that the district court erred in granting summary judgment
to Scottsdale on Food Market’s good faith and fair dealing claim. “As a general rule,
[this court] will not consider arguments raised for the first time in a reply brief,” and
declines to do so here. Barham v. Reliance Standard Life Ins. Co., 441 F.3d 581,
584 (8th Cir. 2006).
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The judgment is affirmed.
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