may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Milbank Insurance Company,
Everald H. Strom, et al.,
Church of the Lutheran Brethren, Inc.
Filed January 14, 1997
Affirmed in part and reversed in part
Otter Tail County District Court
File No. C5-94-2058
Carole Lofness Baab, Johnson & Condon, P.A., 7235 Ohms Lane, Financial Plaza, Minneapolis, MN 55439-2153 (for Respondent J.T.)
Duane A. Lillehaug, Dosland, Nordhougen, Lillehaug & Johnson, P.A., 730 Center Avenue, Suite 203, P.O. Box 100, Moorhead, MN 56561-0100 (for Respondents Strom, et al.)
H. Morrison Kershner, Pemberton, Sorlie, Sefkow, Rufer & Kershner, 110 North Mills Street, P.O. Box 866, Fergus Falls, MN 56538-0866 (for Respondent Church)
Considered and decided by Schumacher, Presiding Judge, Klaphake, Judge, and Amundson, Judge.
Milbank Insurance Company (Milbank) brought this declaratory judgment action against respondents J.T., Sylvia and Everald Strom, and Church of the Lutheran Brethren, Inc., to determine whether it has a duty to defend and indemnify its insured, Sylvia Strom, in an underlying negligence action. In that underlying action, J.T. alleges that he was sexually abused by his uncle, Everald Strom, between 1964 and 1969, and that his aunt, Sylvia Strom, failed to protect him from that abuse.
The district court denied Milbank's motion for summary judgment, concluding that Minnesota follows the "actual injury" theory and that a fact issue existed as to whether J.T. suffered bodily injury during the policy period. After reviewing the parties' additional submissions, including J.T.'s deposition, the district court found that J.T. suffered bodily injury during the policy period and concluded that Milbank therefore has a duty to defend and indemnify Sylvia Strom. The court further ordered Milbank to pay Sylvia Strom's attorney fees and expenses, and judgment was entered. In an amended judgment, the court determined those fees and expenses totalled $5,676.30. Milbank appeals from this amended judgment.
Because we agree that Milbank has a duty to defend and indemnify Sylvia Strom under the terms of its policy and under Minnesota law, we affirm that part of the district court's decision. However, because Milbank has not breached its insurance contract, we reverse the district court's decision awarding Sylvia Strom attorney fees.
2. The interpretation of an insurance policy is a question of law, see Iowa Kemper Ins. Co. v. Stone, 269 N.W.2d 885, 886-87 (Minn. 1978), which we decide de novo, see Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984). An insurance policy must be given its ordinary and usual meaning so as to give effect to the intent of the parties. See Canadian Universal Ins. Co. v. Fire Watch, Inc., 258 N.W.2d 570, 572 (Minn. 1977). Any ambiguity or doubts concerning the meaning of policy language must be resolved in favor of the insured, and the burden falls on the insurer to prove that a claim is not covered. Prahm v. Rupp Constr. Co., 277 N.W.2d 389, 390 (Minn. 1979).
Milbank's policy provided coverage for claims brought against Sylvia Strom for damages because of "bodily injury" caused by an "occurrence." Milbank argues that J.T.'s injuries were not caused by an "occurrence" within the policy period. The policy defined "occurrence" as an "accident * * * which results, during the policy period, in * * * bodily injury." The plain and ordinary reading of this language is that the injury must occur during the policy period. There is no requirement that the negligent act or accident causing the injury also occur during the policy period. Similar policy language has been read to mean that coverage depends not on the timing of the accident or negligent event, but on whether bodily injury resulted during the policy period. See, e.g., Diocese of Winona v. Interstate Fire & Cas. Co., 89 F.3d 1386, 1390 n.5 (8th Cir. 1996), aff'g in part, rev'g in part, 858 F. Supp. 1407, 1420 n.2 (D. Minn. 1994); Northern States Power Co. v. Fidelity & Cas. Co., 523 N.W.2d 657, 662 (Minn. 1994); Singsaas v. Diederich, 307 Minn. 153, 155, 238 N.W.2d 878, 880 (1976). Milbank easily could have drafted its policy to provide coverage for accidents and injuries occurring during the policy period, but it did not do so.
This reading of Milbank's policy is consistent with Minnesota law, which applies the "actual injury" or "injury-in-fact" rule to determine whether an insurance policy is triggered by an occurrence causing damages for which an insured is liable. See Northern States Power, 523 N.W.2d at 662. Under that rule, "the time of the occurrence is not the time the wrongful act was committed but the time the complaining party was actually damaged." Singsaas, 307 Minn. at 155-56, 238 N.W.2d at 880-81. In other words, liability under an insurance policy "accrues when the cause of action arises." Id. at 159, 238 N.W.2d at 882 (quoting Home Mut. Fire Ins. Co. v. Hosfelt, 233 F. Supp. 368, 370 (D. Conn. 1962)).
Milbank insists that the cause of action arose when J.T. was sexually abused in the 1960's because he suffered physical injuries at that time, including stomach pains. J.T.'s cause of action did not accrue until much later, however, when he knew or should have known that his injuries were caused by the abuse. See Minn. Stat. § 541.073, subd. 2(a) (1994) (requires action for damages caused by sexual abuse to be brought within six years of when plaintiff knew or had reason to know that injury was caused by abuse); see also Blackowiak v. Kemp, 546 N.W.2d 1, 3 (Minn. 1996).
Milbank further insists that coverage cannot be triggered by additional or more severe symptoms resulting from the same original tortious acts, unless accompanied by a separate tortious act. This argument ignores the language of Milbank's policy, which specifically defines an occurrence as an "accident * * * which results, during the policy period, in * * * bodily injury" with no requirement that the "accident" happen during the policy period. Acceptance of Milbank's argument also would require us to follow other triggering theories that have been rejected by the Minnesota Supreme Court. See Northern States Power, 523 N.W.2d at 662 (rejecting "manifestation" and "exposure" theories). Under the "actual injury" theory, Milbank is liable for only those damages that occurred during its policy period. Id.
3. Milbank argues that the district court erred in awarding Sylvia Strom attorney fees. "[A]ttorney fees are recoverable in a declaratory judgment action only if there is a breach of a contractual duty or statutory authority exists to support such an award." American Standard Ins. Co. v. Le, 551 N.W.2d 923, 927 (Minn. 1996) (emphasis in original). Similarly, the insured
is not entitled to recover attorney fees incurred in maintaining or defending a declaratory action to determine the question of coverage unless the insurer has breached the insurance contract in some respect--usually by wrongfully refusing to defend the insured.
Id. Because Milbank has not breached it contract and has continually provided Sylvia Strom with a defense in the underlying tort action, Sylvia Strom is not entitled to recover attorney fees in this declaratory judgment action.
4. Sylvia Strom requests attorney fees in connection with this appeal. Because she has provided us with no contractual or statutory basis for such an award, we deny her request.
Affirmed in part and reversed in part.
[ ]1Based upon J.T.'s deposition testimony, the district court found that J.T. suffered bodily injury within the meaning of the policy and within the policy period. These findings are not challenged by Milbank in this appeal.
[ ]2Milbank's policy is an "occurrence-based" policy. Such a policy covers any occurrence happening within the policy period, regardless of when the insured submits the claim. Diocese of Winona v. Interstate Fire & Cas. Co., 858 F.Supp. 1407, 1416 (D. Minn. 1994). By contrast, a "claims-based" policy obligates an insurer to cover only those claims made during the policy period. Id.