         United States Court of Appeals
                     For the Eighth Circuit
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                         No. 14-1882
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Zup’s of Babbitt-Aurora, Inc.; Security National Insurance Co., Inc.

               lllllllllllllllllllll Plaintiffs - Appellants

                                    v.

           West Bend Mutual Insurance Company, Inc.

               lllllllllllllllllllll Defendant - Appellee
                 ___________________________

                         No. 14-1950
                 ___________________________

Zup’s of Babbitt-Aurora, Inc.; Security National Insurance Co., Inc.

               lllllllllllllllllllll Plaintiffs - Appellees

                                    v.

           West Bend Mutual Insurance Company, Inc.

               lllllllllllllllllllll Defendant - Appellant
                               ____________

            Appeals from United States District Court
            for the District of Minnesota - Minneapolis
                           ____________
                           Submitted: February 10, 2015
                              Filed: May 21, 2015
                                 ____________

Before GRUENDER, SHEPHERD, and KELLY, Circuit Judges.
                        ____________

GRUENDER, Circuit Judge.

       This is a suit to determine how two insurers should pay for the income lost
when a supermarket burned down. On cross-motions for summary judgment, the
district court1 determined that Security National Insurance Co., Inc. (“Security
National”) was liable and West Bend Mutual Insurance Company, Inc. (“West Bend”)
was not. We affirm this holding and dismiss the appeal of West Bend’s counterclaim
as moot.

       Zup’s of Babbitt-Aurora, Inc. (“Zup’s”) owned a strip mall in Babbitt,
Minnesota, where it operated a supermarket and rented the remaining space to other
businesses. When the strip mall burned down in 2011, Zup’s lost income from its
supermarket as well as rent from its tenants. Zup’s had two relevant insurance
policies, one from Security National and one from West Bend. The parties agree that
Security National’s policy covered Zup’s lost supermarket income and West Bend’s
policy covered Zup’s lost rent. The question here is whether West Bend is also
responsible for Zup’s lost supermarket income.

       The Security National policy explicitly covered supermarkets. Most obviously,
it repeatedly referred to “supermarkets.” It charged premiums for “caterers.” And it
had endorsements related to “spoilage” and “liquor liability.” This policy covered


      1
      The Honorable Patrick J. Schiltz, United States District Judge for the District
of Minnesota.

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several Zup’s supermarkets, and one premium was specifically allocated to cover the
income of the Babbitt supermarket.

      As relevant here, the West Bend policy covered Zup’s rental income from
leasing space in the strip mall. The policy did not mention supermarkets or charge
supermarket-specific premiums. Further, the phrase “lessor’s risk only” appeared on
the declarations page. This policy, however, ultimately covered Zup’s “actual loss
of Business Income” without specifically limiting “Business Income” to rent or
excluding business income from the supermarket.

       Both policies had “other insurance” clauses. Such clauses attempt to order
recovery from multiple insurers. As the policies explained in nearly identical
language, “[i]f there is other insurance covering the same loss or damage,” the insurer
“will pay only for the amount of covered loss or damage in excess of the amount due
from that other insurance.” In short, each policy tried to make any others pay first.

       After the fire, Zup’s sought payment from Security National for the lost
supermarket income and payment from West Bend for the lost rent. Security National
then learned of the West Bend policy and concluded that West Bend also had insured
the lost supermarket income. Security National agreed to pay Zup’s fully for the lost
supermarket income. Then (together with Zup’s) Security National sued West Bend
for West Bend’s purported share of the payment.

       The district court faced three primary issues. First, the insurers disputed
whether the West Bend policy covered the lost supermarket income at all. West Bend
insisted that its policy covered Zup’s as a “lessor”—that when the policy covered
“actual loss of Business Income,” that meant loss of rent. After all, West Bend
insisted, if the policy had been meant to cover lost supermarket income, it would have
charged premiums related to supermarkets. Security National, in turn, read the policy
broadly. To Security National, the “Business Income” coverage included lost

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supermarket income, not just rent, because Zup’s was in the supermarket business.
Second, West Bend counterclaimed for reformation. It argued that if the district court
did find that the West Bend policy covered the lost supermarket income, then the
court should excise that coverage because the parties did not intend to contract for it.
And third, the insurers disputed the extent of their liabilities if the West Bend policy
covered the lost supermarket income and the court did not reform the policy. In that
case, both policies would cover the lost supermarket income, but each policy’s “other
insurance” clause would purport to shift the cost onto the other insurer.

       After the insurers filed cross-motions for summary judgment on both Security
National’s claim for payment and West Bend’s counterclaim for reformation, the
district court first concluded that West Bend’s policy covered the lost supermarket
income. It next held that reformation was unwarranted. Finally, the court held that
even though both policies covered the lost supermarket income, Minnesota law made
only Security National responsible for it.

       Although the parties reargue these three issues on appeal, we reach only the last
one. As we will see, even if the West Bend policy covered the lost supermarket
income and even if the policy should not be reformed, Security National alone is
liable. We thus assume that Security National would prevail on the first two issues,
and we address only the situation in which the West Bend policy, unreformed,
covered the lost supermarket income.

      This court reviews a grant of summary judgment de novo. Torgerson v. City
of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). Summary judgment is
proper 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).
Here summary judgment turns on West Bend’s liability for Zup’s lost supermarket
income. The parties agree that this is a matter of Minnesota law, which we also
review de novo. See Integrity Floorcovering, Inc. v. Broan-Nutone, LLC,

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521 F.3d 914, 917 (8th Cir. 2008); U.S. Fid. & Guarantee Ins. Co. v. Commercial
Union Midwest Ins. Co., 430 F.3d 929, 933 (8th Cir. 2005).

      When two insurance policies cover the same loss and their “other insurance”
clauses conflict, “Minnesota courts apply two different tests in apportioning liability.”
U.S. Fid., 430 F.3d at 934. The first is the “total policy insuring intent” analysis, “a
broader test [that] ‘examines the primary policy risks upon which each policy’s
premiums were based and the primary function of each policy.’” Id. (quoting CPT
Corp. v. St. Paul Fire & Marine Ins. Co., 515 N.W.2d 747, 751 (Minn. Ct. App.
1994)). The second test asks which policy was closer to the risk. Id. “The tests are
similar, though application of the total policy insuring intent analysis is less
mechanical than the closer to the risk analysis.” Id. Ultimately a court will determine
whether insurers are concurrently liable or whether coverage should stack. Integrity
Mut. Ins. Co. v. State Auto. & Cas. Underwriters Ins. Co., 239 N.W.2d 445, 446-47
(Minn. 1976). If, as Security National argues, the insurers are concurrently liable,
“each must pay a pro rata share of the entire loss.” Id. at 447. But if one policy is
primary and the other secondary, then coverage stacks; that is, “the primary insurer
must pay up to its limit of liability, and then the secondary insurer must pay for any
excess up to its own limit.” Id. at 447. Here both tests show that Security National’s
policy was primary and West Bend’s only secondary.

       Security National’s “total policy insuring intent” plainly included lost
supermarket income because the policy covered, in its language, “Business Income”
lost by “supermarkets.” Indeed, Security National charged premiums specifically for
supermarkets, and it allocated a premium specifically for the income from the
supermarket that burned. In contrast, the West Bend policy

      does not mention supermarkets or grocery stores, and nothing in the
      policy even hints that [Zup’s] has any business income other than as a
      lessor of space in the strip mall. . . . None of the premium for West


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      Bend’s policy was specifically allocated to coverage of lost business
      income, much less to coverage of lost business income of a particular
      grocery store. An educated layperson who read through the two policies
      would readily discern that the Security National policy insured the
      income of the Babbitt grocery store, but would have no inkling that the
      West Bend policy did likewise.

Zup’s of Babbitt–Aurora, Inc. v. W. Bend Mut. Ins. Co., Inc., No. 12-CV-3084,
2014 WL 1117019, at *6 (D. Minn. Mar. 20, 2014). In short, Security National
provided a policy for supermarkets, and West Bend provided a policy for the strip
mall. We thus have no trouble concluding that Security National’s total policy
insuring intent was to cover lost supermarket income and that West Bend’s was not.
See Interstate Fire & Cas. Co. v. Auto–Owners Ins. Co., 433 N.W.2d 82, 83, 86
(Minn. 1988) (analyzing coverage for a student’s injury during gym class under the
“total policy insuring intent” test and concluding that homeowner’s insurance
covering the student was secondary to the school’s umbrella policy, which
“contemplated coverage for accidents and injuries sustained on school property
during school events”).

      Similarly, Security National’s policy was closer to the risk. This test asks three
questions:


      (1) Which policy specifically described the accident-causing
      instrumentality? (2) Which premium is reflective of the greater
      contemplated exposure? (3) Does one policy contemplate the risk and
      use of the accident-causing instrumentality with greater specificity than
      the other policy—that is, is coverage of the risk primary in one policy
      and incidental to the other?


U.S. Fid., 430 F.3d at 934 (quoting Ed Kraemer & Sons, Inc. v. Transit Cas. Co.,
402 N.W.2d 216, 222 (Minn. Ct. App. 1987)). The first factor is a wash because both


                                          -6-
policies specifically contemplated fire as a cause of accidents. Nor is the second
factor helpful because, though the West Bend policy had higher premiums, those
premiums covered broader risks than the specific premiums in the Security National
policy. Cf. U.S. Fid., 430 F.3d at 936. But the third question, whether risk coverage
was primary in only one policy, weighs heavily in favor of the Security National
policy being closer to the risk. As we just explained, Security National provided a
policy for supermarkets and West Bend provided a policy for the strip mall. See Auto
Owners Ins. Co. v. Northstar Mut. Ins. Co., 281 N.W.2d 700, 704 (Minn. 1979)
(analyzing coverage for a boating accident under the “closeness to the risk” test and
concluding that coverage of the risk was incidental in a homeowner’s policy and
primary in a policy “specifically designed to insure against comprehensive liability
for the accident”). We thus conclude that the “closeness to the risk” test, like the
“total policy insuring intent” test, deems Security National’s coverage primary.2


      Security National does not seriously challenge these dispositive
characterizations. Rather, Security National urges us to follow its reading of Nesheim
v. Iowa Mutual Insurance Co., 305 N.W.2d 320 (Minn. 1981). Security National
argues that under Nesheim, where two policies “are on the same property, [on] the
same interest in the property, in favor of the same party, and against the same risks,”

      2
         In conducting these two tests, the district court considered extrinsic evidence
suggesting that neither Zup’s nor West Bend seemed to think that West Bend insured
the lost supermarket income. Security National objects to the court looking beyond
the language of the policies. Although we have stated that courts do look “beyond
the language of the policies” to determine insurer priority, that statement seems to
have referred to looking beyond the priority rules found in “other insurance” clauses,
not looking beyond the language of the policies as a whole. U.S. Fid.,
430 F.3d at 933 (citing Christensen v. Milbank Ins. Co., 658 N.W.2d 580, 587
(Minn. 2003)). Regardless, we need not address Security National’s concern further.
Here Zup’s and West Bend’s views make no difference; they only confirm that
Security National was the primary insurer of the lost supermarket income. We thus
need not and do not decide whether the district court properly considered those views.

                                          -7-
then those two policies have concurrent “total policy insuring intent,” and a loss falls
pro rata on both. Id. at 321-22. And here, under our assumptions, both the Security
National and West Bend policies did insure the same supermarket’s income in favor
of Zup’s against the risk of fire. Thus, Security National concludes, Nesheim requires
us to allocate the loss pro rata. But this argument simply omits some of Nesheim’s
language. Consistent with the “total policy insuring intent” test, what Neisheim
actually asks is whether “[t]he intent of each policy was to protect the same interest
in the same property in favor of the same person against a casualty loss by fire.” Id.
at 322 (emphasis added). We have answered this question already.


      Because West Bend’s policy was secondary to Security National’s, West Bend
need pay only if Security National’s coverage was exhausted. See Integrity Mut. Ins.
Co., 239 N.W.2d at 447. Security National does not dispute that its coverage was not
exhausted. Accordingly, with respect to Security National’s complaint, we affirm the
grant of summary judgment to West Bend. We dismiss the appeal of West Bend’s
counterclaim as moot.
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