Opposition Brief — Quick v. National Auto Credit, Inc.
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No. 95-1016 E F )
1998
InThe
Supreme Court of the Anited States
6
October Term, 1995
KATHLEEN QUICK,
Petitioner,
vs.
NATIONAL AUTO CREDIT, INC. f/k/a AGENCY RENT-A-
CAR, INC.,
Respondent.
On Petition for Writ of Certiorari to the United States Court
of Appeals for the Eighth Circuit
RESPONDENT?’S BRIEF IN OPPOSITION
KENNETH A. SLAVENS WAYNE C. DABB, JR.
TIMOTHY W. LUFT Counsel of Record
BROWN & JAMES BAKER & HOSTETLER
705 Olive Street 1900 East 9th Street
Suite 1100 Suite 3200
St. Louis, Missouri 63101-2270 Cleveland, Ohio 44114-3485
(314) 421-3400 (216) 861-7456
Attorneys for Respondent
8163
(800) 3 APPEAL * (800) 5 APPEAL « (800) BRIEF 21
RS owvices, inc.
i
QUESTIONS PRESENTED
1. Did the Eighth Circuit correctly reverse the judgment
in favor of the petitioner on her state-law tort claim for bad
faith refusal to settle when the Eighth Circuit determined that
the petitioner had no such claim as a matter of Missouri law?
2. Did the Eighth Circuit correctly determine that the
petitioner’s tort claim for bad faith refusal to settle did not lie
under Missouri law because Missouri law did not impose on
the defendant car rental company a fiduciary duty to settle a
claim against a renter when the defendant had not reserved to
itself in its car rental contract the exclusive right to accept an
offer to compromise a claim and settle all claims?
3. Did the Eighth Circuit correctly conclude that the
petitioner, as the purported assignee of the renter’s state-law
tort claim for bad faith refusal to settle, had no such claim
because such aclaim is not assignable as a matter of Missouri
law?
4. Did the Eighth Circuit correctly reverse the district
court’s award of tort-based damages (including punitive
damages), and correctly direct the district court to enter
judgment only for the amount of contract damages allowable
under Missouri law, when the Eighth Circuit reversed the
judgment below on the petitioner’s tort claim and affirmed
only on the petitioner’s breach of contract claim?
ii
STATEMENT PURSUANT TO RULE 29.6
Respondent National Auto Credit, Inc., formerly known
as Agency Rent-A-Car, Inc., has no parent corporation and no
non-wholly-owned subsidiaries.
iii
TABLE OF CONTENTS
EE re Pre
Statement Pursuant to Rule 29.6 ...................
I ececeseeevedsaed
ee ccueebbeeaebese
Constitutional Provisions and Statute Involved ......
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Reasons for Denying the Writ .....................
I. This Case Presents No Constitutional Question
But Only Questions Of Missouri Law. ........
A. The Seventh Amendment Right To A Jury
Trial Is Not Implicated Because The Eighth
Circuit Reversed On Questions Of Missouri
Law, Not On Issues Of Fact .............
B. The Fifth Amendment Rights To Due
Process And Equal Protection Are Not
PEG: Gubsddeeensdsteccdeesecceas
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The Ejighth Circuit’s Judicial
Determination That Petitioner's
Purported Bad Faith Tort Claim Did
Not Exist As A Matter Of Law
Accorded Petitioner Full Due Process
And Did Not Deprive Her Of A
Property Imterest ... 2... cccccccces.
ill
iv
Contents
Page
2. The Eighth Circuit’s Limitation Of
Petitioner’s Damages On Her Contract
Claim For Failure To Defend To Those
Allowable By Missouri Law Did Not
Deny Her Equal Protection ......... 7
II. The Eighth Circuit Correctly Decided This Case
Under the Applicable Missouri Law, So There Is
No Need For This Court To Exercise Its
Supervisory Powers Over The Appellate Court.
III. There Is No Conflict With Other Circuits, Within
The Eighth Circuit, Or With Missouri Law As To
The Proper Measure Of Damages: Any Apparent
Conflict Results From The Application Of The
Disparate Law Of Different States In Diversity
Actions, Or From The Different Claims Involved
PRG: hank ss subacsaddeeaaneeeauss 11
SAL. 6a 0 ed We eka cae ees 14
TABLE OF CITATIONS
Cases Cited:
Barron v. Baltimore, 32 U.S. (7 Pet.) 243 (1833) ...... 6
Beall v. Farmers’ Exch. Bank, 76 S.W. 2d 1098 (Mo.
SPSS) ccc cvcnnccensesncsertnesseceshesasenene 9
Vv
Contents
Page
Bolling v. Sharpe, 347 U.S. 497 (1954) ...........4.5. 6
Boyd v. Bulala, 877 F.2d 1191 (4th Cir. 1989) ........ 5
Buckley v. Valeo, 424 U.S. 1 (1976) ..............4.. 6
Carpenter v. Automobile Club Interinsurance Exch.,
Se Pee Ae Gee Ga FO) inca be ceeeesans: 13
Coleman v. Holecek, 542 F.2d 532 (10th Cir. 1976) ... 12
Columbia Mut. Ins. Co. v. Fiesta Mart, Inc., 987 F.2d
1124, reh’g en banc denied, 992 F.2d 326 (Sth Cir.
BOOED <6 ccéccscccateodcvecsieeuneeecanueaaenres 12
Consolidated Amer. Ins. Co. v. Mike Soper Marine
Servs., 951 F.2d 186 (9th Cir. 1991) .............. 11,12
Davis v. Omitowoju, 883F.2d 1155 (3d Cir. 1989) ..... 5
DCPB, Inc. v. City of Lebanon, 957 F.2d 913
(Rat Cae Bee 26 46dcbeus becuse 8
District of Columbia v. Carter, 409 U.S. 418, reh’g
Gantad, 440 U.S. Sar CFT ay) i ccicceanvvccsasvecns 6
Dixon v. Love, 431 U.S. 105 (1977) ................. 7
Duke Power Co. v. Carolina Envtl. Study Group, 438
U.S. 59, reh’g denied, 439 U.S. 884(1978) ........ 7
vi
Contents
Page
Eastern Atl. Transp. & Mach. Eng’g, Inc. v. Dingman,
727 S.W. 24d 418 (Mo. App. 1987) ..........500405. 9
Ex parte Peterson, 253 U.S. 300(1920) ............. 4
Ferri v. Ackerman, 444 U.S. 193 (1979) ............. 6
Fidelity & Deposit Co. v. United States, 187 U.S. 315
(SPUD ccccccovdccsctdccusssdusaseuseeeree 4
Forsthove v. Hardware Dealers Mut. Fire Ins. Co.,
416 S.W. 2d 208 (Mo. App. 1967) ..............4. 9,10
Freeman v. Berberich, 60 S.W. 2d 393 (Mo. 1933) .... 9
Fuller v. Lloyd, 714 S.W. 2d 698 (Mo. App. 1986) .... 12,13
Galloway v. United States, 319 U.S. 372, reh'g denied,
DOO Ue SHO CEPES) cccciccccssécneasstsebanbes 4
Ganaway v. Shelter Mut. Ins. Co., 795 S.W. 2d 554
(GO. Age. 19FGD cccceccccveccecesascsncessave 8,9, 10
Garrett v. Faust, 183 F.2d 625 (3d Cir. 1950),
cert. denied, 340 U.S. 931, reh'g denied,
341 UB. SEF CEPSE). occccedaccccagsenenassanat 5
Gray v. Grain Dealers Mut. Ins. Co., 871 F.2d 1128
(DS. GRE. BRO o6000606bentssecesss0ee ee 11,12
Green v. J.C. Penney Auto Ins. Co., 806 F.2d 759
(Pia Cie. SBGBD ccc cccccenscescestsesteneneeee 12
- Ltn ay lat a A Nt el le, alla alll te ela, Bell a ll le mc la
vii
Contents
Page
Hepner v. United States, 213 U.S. 103 (1908) ........ 4
Insurance Co. v. Piaggio, 83 U.S. 378 (1873) ........ 5
Landie v. Century Ins. Co., 390 S.W. 2d 558 (Mo.
PN PPPPPTTP PT OTT TTT OTT ere eee Tre rere 10,12
Luke v. American Family Mut. Ins. Co., 476 F.2d 1015,
cert. denied, 414 U.S. 856 (8th Cir. 1973) ......... 13
Martinez v. California, 444 U.S. 277, reh'g denied, 445
TPE: bb cucnseanecondéadenndsineneera 6
Mobil Oil Corp. v. Higginbotham, 436 U.S. 618 (1978)
PEP CTE ETT ye TEE TPE TTT Py Ee Terr Terre rere 7
Neely v. Martin K. Eby Constr. Co., 386 U.S. 317, reh'g
Se Bs See ED 0. 66000 s6ensseeeuees 4
Parklane Hosiery Co. v. Shore, 439 U.S. 322 (1979) .. 4
Property Exch. & Sales, Inc. v. Bozarth, 778 S.W. 2d 1
CRED. AG, SHEED ccc ccccccccccctovescvscciocess 9
Southwestern Bell Tel. Co. v. Western Casualty & Sur.
Co., 269 F. Supp. 315 (E.D. Mo. 1967), modified, 396
Pe Se Gs BD cn vasccceusnccescesetess 10,12
Sun Oil Co. v. Wortman, 486 U.S.717(1988) ........ 7
Union Pacific R.R. Co. v. Sheehan, 439 U.S. 89 (1978)
viii
Contents
Page
Zumwait v. Utilities Ins. Co., 228 S.W. 2d 750 (Mo.
SOND cbc benscccecetecnsscscsesccnecesacce 8,9, 10,12
Statutes Cited:
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DORs DOOD na cscnccedacerrisaasdiivoccdedees 1.3
United States Constitution Cited:
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ix
Contents
APPENDIX
Appendix A —Defendant’s Motion for Judgment as a
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Appendix B — Excerpts of Defendant’s Motion for
Judgment as a Matter of Law at the Close of All the
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Appendix C — Excerpts of Defendant's Motion for a
New Trial or in the Alternative for Judgment as a
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Appendix D — Excerpts of Brief of Appellant National
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Appendix E — Excerpts of Reply Brief of Appellant
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CONSTITUTIONAL PROVISIONS AND
STATUTE INVOLVED
No constitutional provision is involved. This is a
diversity case involving only issues of Missouri law.
The Eighth Circuit’s direction of the entry of the
appropriate judgment was authorized by 28 U.S.C.§ 2106,
which reads as follows:
The Supreme Court or any other court of
appellate jurisdiction may affirm, modify,
vacate, set aside or reverse any judgment,
decree, or order of a court lawfully brought
before it for review, and may remand the
cause and direct the entry of such
appropriate judgment, decree, or order, or
require such further proceedings to be had
as may be just under the circumstances.
STATEMENT OF THE CASE
Petitioner’s tortured reading of the Eighth Circuit's
opinion grossly mischaracterizes what the appellate court held
in an effort to manufacture constitutional issues where none
exist. A fair reading of that opinion (reported at 65 F.3d 741)
shows that the Eighth Circuit did not reverse any finding of
fact implied by the jury verdict or substitute its own, and did
not deprive petitioner of due process or equal protection. The
court merely held that petitioner had no bad faith tort claim as a
matter of Missouri law. Likewise, the appellate court’s
reduction of the damage award to the amount of contract
damages allowable under Missouri law on the petitioner’s
breach of contract claim, on which judgment was affirmed,
was not “without explanation” but was soundly based on the
2
reversal of the judgment on the petitioner’s tort claim. (Pet.
App. 5, 8-13.)
In the decision below, the Eighth Circuit analyzed
Missouri law and Agency’s car rental contract and held that the
trial court erred, as a matter of law, in failing to grant Agency's
motions for judgment as a matter of law on the petitioner’s
alleged tort claim for bad faith refusal to settle, on two
different legal grounds. (Jd.). First, the appellate court
determined, as a matter of law, that Agency’s car rental
contract did not reserve to Agency the exclusive right to settle
claims against its renter, and therefore that under Missouri law,
Agency did not have a fiduciary duty to settle such claims.
Accordingly, the court held that the petitioner had no bad faith
tort claim, as a matter of Missouri law, because Agency could
not have breached a duty which it did not have. (Pet. App. 8-
11; see also Pet. App. 38-39.)
Second, the Eighth Circuit held that the petitioner, as the
purported assignee of the renter’s alleged tort claim for bad
faith refusal to settle, had no such claim on which to sue, as a
matter of law, because the renter’s alleged tort claim for bad
faith refusal to settle was not assignable to the petitioner under
Missouri law. (Pet. App. 11-12.) Therefore, Agency was
entitled to judgment as a matter of law on the petitioner's
alleged bad faith tort claim on both grounds. (Pet. App. 12.)
Because the Eighth Circuit determined that the judgment
below included tort damages (including punitive damages),
and the petitioner had no tort claim under Missouri law, the
appellate court consequently reversed the damage award as
well. (Pet. App. 5, and n.3, 7, 13.) But since the appellate
court affirmed the judgment for the petitioner on her breach of
contract claim (Pet. App. 6-7), the court directed the district
court to enter judgment for the amount of contract damages
3
allowable under Missouri law based on Agency’s contractual
limit of liability. (Pet. App. 7, 13.)
Additionally, petitioner asserts incorrectly that Agency
did not complain of the district court’s errors in the district
court or on appeal. (Pet. 8-9, 16.) In fact, Agency moved for
judgment as a matter of law at the close of the petitioner's
evidence, and at the close of all evidence, on the same grounds
on which the Eighth Circuit reversed (except assignability).
(Resp. App. la-8a; see Pet. App. 5.) Agency again raised these
grounds in its motion for a new trial or for judgment as a matter
of law. (Resp. App. 9a-10a; see Pet. App. 5.) Finally, Agency
raised all of the grounds on which the Eighth Circuit reversed
in its briefs in that court. (Resp. App. 11a-44a.))
REASONS FOR DENYING WRIT
I.
THIS CASE PRESENTS NO CONSTITUTIONAL
QUESTION BUT ONLY QUESTIONS OF MISSOURI
LAW.
Petitioner has bent, twisted, and warped the decision of
the appellate court in an effort to force it into a constitutional
mold. The simple truth, however, is that neither the Seventh
Amendment right to a jury trial nor the Fourteenth (actually
Fifth) Amendment right due process or equal protection is
implicated here at all. The cases cited by the petitioner to
support her constitutional arguments (Pet. 9-10, 14, 15, 17) are
not on point.
4
A. The Seventh Amendment Right To A Jury Trial Is Not
Implicated Because The Eighth Circuit Reversed On
Questions Of Missouri Law, Not On Issues Of Fact.
In reversing the judgment below on the bad faith tort
claim, the Eighth Circuit did not reverse any implied finding of
fact by the jury, or substitute any factual finding of its own. On
the contrary, the appellate court, after analyzing Missouri law
and the car rental contract involved in this case (Pet. App. 9-
11), concluded that the alleged bad faith tort claim simply did
not lie and was not assignable as a matter of law. (Pet. App. 11.)
These determinations were legal determinations based
upon Missouri law and the language of the particular contract
involved. (Pet. App. 9-11.) No finding of fact implied by the
jury verdict was reversed, and no finding of fact of its own was
substituted by the Eighth Circuit. Consequently, the Seventh
Amendment right to a jury trial is not implicated at all. Neely v.
Martin K. Eby Constr. Co., 386 U.S. 317, 322, reh’g denied,
386 U.S. 1027 (1967) (appellate court’s grant of judgment
n. o.v., after reversing trial court’s denial of judgment n. o. v.,
does not violate Seventh Amendment right to jury trial). See
Galloway v. United States, 319 U.S. 372, 388-93, 396, reh’g
denied, 320 U.S. 214 (1943) (directed verdict does not violate
Seventh Amendment); Hepner v. United States,213 U.S. 103,
115 (1908) (same); Fidelity & Deposit Co. v. United States,
187 U.S. 315, 319-21 (1902) (summary judgment does not
violate Seventh Amendment); Parklane Hosiery Co. v. Shore,
439 U.S. 322, 335-37 (1979) (application of collateral
estoppel does not violate Seventh Amendment); Ex parte
Peterson, 253 U.S. 300, 310 (1920) (no right to jury trial where
no issues of fact to be determined).
Nor is the Seventh Amendment right to a jury trial
implicated by the Eighth Circuit’s reversal of the damage
5
award and its instructions to enter judgment in a specified
amount. The judgment below was based on both the bad faith
tort claim and a breach of contract claim, and included both
contract and tort damages, including punitive damages. (Pet.
App. 4-5 & n.3.) As a result of the reversal of the judgment
based on the petitioner’s bad faith tort claim, the Eighth
Circuit correctly reversed the damage award insofar as it
included tort-based damages, and instructed the district court
to enter judgment in the amount of contract damages allowable
under Missouri law on the breach of contract claim for failure
to defend (see discussion below at p. 10), the judgment on
which claim alone was affirmed. (Pet. App. 5,n.3, 6-7, 13.) 28
U.S.C. § 2106; Insurance Co. v. Piaggio, 83 U.S. 378, 386-388
(1873); Davis v. Omitowoju, 883 F.2d 1155, 1159-65 (3d Cir.
1989); Boyd v. Bulala, 877 F.2d 1191, 1196 (4th Cir. 1989);
Garrett v. Faust, 183 F.2d 625, 629 (3d Cir. 1950), cert. denied,
340 U.S. 931, reh’g denied, 341 U.S.917, 933 (1951).
Because the amount of damages to be awarded on the
breach of contract claim was limited under Missouri law to the
contractual limit of liability (id.) and that amount was
undisputed (Pet. App. 4-5), the correct amount of damages on
the breach of contract claim was simply a question of the
application of law to fact by the court, and not a question of fact
for the jury. Insurance Co.,83 U.S. at 386-88; Davis, 883 F.2d
at 1159-65; Boyd, 877 F.2d at 1196; Garrett, 183 F.2d at 629.
Again, the Seventh Amendment right to a jury trial was not
implicated.
B. The Fifth Amendment Right To Due Process And
Equal Protection Are Not Implicated.
Although the petitioner purports to rely on the Fourteenth
Amendment due process and equal protection clauses, it is
plain from its terms and well-established case law that the
6
Fourteenth Amendment applies only to the states, and not to
the federal government. U.S. Const. Amend. XIV, § 1; District
of Columbia v. Carter, 409 U.S. 418, 423-24, reh'g denied, 410
U.S. 959 (1973); Bolling v. Sharpe, 347 U.S. 497, 499 (1954).
Since the action about which the petitioner complains was
taken by a federal court, it is actually the Fifth Amendment due
process clause which would be applicable if any due process or
equal protection right were implicated. U.S. Const. Amend. V;
see District of Columbia, 409 U.S. at 424; Buckley v. Valeo,
424 U.S. 1, 93 (1976); Bolling, 347 U.S. at 499; Barron v.
Baltimore, 32 U.S. (7 Pet.) 243, 249 (1833). None is, however.
Indeed, the petitioner did not raise a due process claim in the
Eighth Circuit (see Pet. App. 60-76) although she attempts to
do so now. (Pet. 14, 15-16.)
1. The Eighth Circuit’s Judicial Determination That
Petitioner's Purported Bad Faith Tort Claim Did Not Exist As
A Matter Of Law Accorded Petitioner Full Due Process And
Did Not Deprive Her OfA Property Interest.
The Eighth Circuit’s legal determination that a tort claim
for bad faith refusal to settle did not exist as a matter of
Missouri law did not deprive the petitioner of any property
right without due process of law for two reasons. First, the
petitioner does not have any “property interest” in a purported
legal claim which does not exist as a matter of state law. Board
of Regents v. Roth, 408 U.S. 564, 569-70, 577 (1972) (mere
unilateral expectation is not a property interest protected by
due process; property interests are created and defined by
existing rules or understandings from a source, such as state
law, that secure certain benefits and support claims of
entitlement to them); see Martinez v. California, 444 U.S. 277,
282 and n. 5, reh’g denied, 445 U.S. 920 (1980); Ferri v.
Ackerman, 444 U.S. 193, 198 (1979).
7
Second, the petitioner was accorded full due process in the
Eighth Circuit, and has pointed to no element of due process—
notice, a hearing, an unbiased decision-maker—that was
denied her by the appellate court. See generally, Dixon v. Love,
431 U.S. 105, 113-14 (1977). The petitioner’s real complaint
is that the appellate court rejected her legal arguments; but that
is not a denial of due process. See generally, Sun Oil Co. v.
Wortman, 486 U.S. 717, 730-32 (1988) (even erroneous
construction of state law by court does not deny due process);
Union Pacific R.R. Co. v. Sheehan, 439 U.S. 89, 91-92 (1978)
(no denial of due process where petitioner’s arguments were
considered).
2. The Eighth Circuit’s Limitation Of Petitioner's
Damages On Her Contract Claim For Failure To Defend To
Those Allowable By Missouri Law Did Not Deny Her Equal
Protection.
Nor is the Eighth Circuit’s instruction to the district court
to enter judgment in the amount of contract damages allowable
under Missouri law on the petitioner's contract claim for
failure to defend, the judgment on which claim alone was
affirmed, a denial of equal protection. The measure of
damages on a contract claim for failure to defend is prescribed
by Missouri law. See below p. 10. The appellate court's
holding that the petitioner was limited to that measure of
damages on her contract claim did not deny her equal
protection. See Duke Power Co. v. Carolina Envtl. Study
Group, 438 U.S. 59, 82-88 and n. 32, reh'g denied, 439 U.S.
884 (1978) (sustaining limitations on compensatory damages
for tort claims in certain circumstances); Mobil Oil Corp. v.
Higginbotham, 436 U.S. 618 (1978) (upholding limitation of
damages for wrongful death on high seas to pecuniary
damages and therefore eliminating loss of society damages).
Indeed, another appellate court has described a similar equal
8
protection argument as “puerile.” DCPB, Inc. v. City of
Lebanon, 957 F.2d 913,916, n. 3 (1st Cir. 1992).
Accordingly, this case presents no issue of constitutional
law to be decided by the Court. It presents only matters of
Missouri law which were correctly decided by the appellate
court.
THE EIGHTH CIRCUIT CORRECTLY DECIDED
THIS CASE UNDER THE APPLICABLE MISSOURI
LAW, SO THERE IS NO NEED FOR THIS COURT TO
EXERCISE ITS SUPERVISORY POWERS OVER THE
APPELLATE COURT.
Under Missouri law, a tort action for bad faith failure to
settle a claim requires a particular balance of power between
the parties to a contract: only when one party assumes
exclusive control of the right to settle claims does that party
have the duty to exercise good faith in considering offers to
compromise a claim. Ganaway v. Shelter Mut. Ins. Co., 795
S.W. 2d 554, 556 (Mo. App. 1990). As a result, a tort claim for
bad faith refusal to settle does not lie unless the defendant
reserved to itself the exclusive right to accept an offer to
compromise a claim and to settle a dispute. Jd. at557; Zumwalt
v. Utilities Ins. Co., 228 S.W. 2d 750, 753 (Mo. 1950). The
Eighth Circuit correctly so held, citing Ganaway and Zumwalt.
(Pet. App. 9.)
The Eighth Circuit compared the language of the
insurance contract in Ganaway to the car rental contract
involved in this case and determined, as a matter of law, that
Agency had not reserved to itself the exclusive right to settle in
this case. (Pet. App. 9-11.) As aresult, the court concluded, as
9
a matter of law, that “Agency lack[ed] the total control over the
settlement process which would be necessary to impose upon
Agency the duty to settle in good faith.” (Pet. App. 11.) The
appellate court, therefore, held that “[bJecause Agency did not
have the exclusive right to settle claims arising from [the
renter’s] use of its rental car, Agency did not have a fiduciary
duty to give good faith consideration to offers to settle” and
therefore “could not have breached a fiduciary duty it did not
have.” (/d.) This holding is correct under the applicable
Missouri law. Ganaway, supra, and Zumwalt, supra. There is,
therefore, no need for this Court to exercise its supervisory
jurisdiction over the Eighth Circuit.
The same is true for the Eighth Circuit’s additional
holding that the petitioner had no bad faith tort claim on which
to sue because such claim (which purportedly had been
assigned to her) was not assignable under Missouri law and
therefore the purported assignment of such claim to her was
invalid as a matter of law. (Pet. App. 11-12.) The general rule
in Missouri is that personal injury actions are not assignable.
Beail v. Farmers’ Exch. Bank, 76 S.W. 2d 1098, 1099 (Mo.
1934); Freeman v. Berberich, 60 S.W. 2d 393, 401 (Mo. 1933);
Property Exch. & Sales, Inc. v. Bozarth, 778 S.W.2d1,2n. 1
(Mo. App. 1989); Forsthove v. Hardware Dealers Mut. Fire
Ins. Co., 416 S.W. 2d 208, 217 (Mo. App. 1967). See also
Eastern Atl. Transp. & Mach. Eng’g, Inc. v. Dingman, 727
S.W. 2d 418,423 (Mo. App. 1987). But see Ganaway,795S.W.
2d at 565.
Although the petitioner relies on Ganaway and other cases
for her argument to the contrary (Pet. 14-15), the other cases
either are not on point, involve the law of a different state, or
actually support the Eighth Circuit’s holding. Ganaway
involved an assignment of a bad faith tort claim by a
bankruptcy trustee under the 1978 Bankruptcy Act. While the
10
Ganaway court stated that the “general law” also allowed such
an assignment, that court cited no Missouri case to that effect
(795 S.W. 2d at 565), and such statement is overwhelmingly
contradicted by the Missouri cases cited above. Asa result, the
Eighth Circuit correctly decided not to follow Ganaway.
Forsthove, 416S.W.2dat213.
Finally, the Eighth Circuit correctly reversed the damage
award and instructed the district court to enter judgment in the
amount of damages allowable under Missouri lew on the
petitioner's breach of contract claim. Under Missouri law, the
damages that may be awarded on acontract claim for failure to
defend are limited to the contractual limit of liability, plus
attorney fees, other defense costs, and interest where the
plaintiff defended the underlying suit and paid the underlying
judgment at his own expense. See Zumwalt, 228 S.W. 2d at
753, 756; Landie v. Century Ins. Co., 390 S.W. 2d 558, 562,
564, 565 (Mo. App. 1965); Southwestern Bell Tel. Co. v.
Western Casualty & Sur. Co.,269 F. Supp. 315, 318 (E.D. Mo.
1967), modified, 396 F.2d 351, 355 (8th Cir. 1968). In this
case, Agency's liability was limited by contract to $25,000
(Pet. 4-5; Pet. App. 38); attorney fees, other defense costs, and
interest were not an issue since the petitioner's assignor (the
renter) did not defend the case or pay the judgment. (Pet. 5-7.)
The cases cited by the petitioner for “[t}he general rule on
the measure of damages” (Pet. 11) are not on point and have no
application here. One is acivil rights action under federal law.
The other two, although involving breach of contract, do not
deal with a contract to defend and indemnify, like the one
involved here. For such contracts Missouri has developed a
special ruie that limits damages to the contractual limit of
liability, plus attorney fees, other defense costs, and interest
incurred by the plaintiff in defending the underlying suit and
paying the underlying judgment. See Zumwailt, supra; Landie,
supra; and Southwestern Bell, supra.
1]
Accordingly, the Eighth Circuit's decision in this case is
correct under Missouri law, and there is no need for this Court
to exercise its supervisory powers over the appellate court.
Ill.
THERE IS NO CONFLICT WITH OTHER
CIRCUITS, WITHIN THE EIGHTH CIRCUIT, OR WITH
MISSOURI LAW AS TO THE PROPER MEASURE OF
DAMAGES: ANY APPARENT CONFLICT RESULTS
FROM THE APPLICATION OF THE DISPARATE LAW
OF DIFFERENT STATES IN DIVERSITY ACTIONS, OR
FROM THE DIFFERENT CLAIMS INVOLVED IN
EACH CASE.
The asserted conflict between the Eighth Circuit's
decision on the appropriate measure of damages on a contract
claim for failure to defend in this case and the decisions of
other circuits in other cases (Pet. 12) is only apparent, and not
real. A review of the cases relied on by the petitioner to
establish the purported conflict reveals that they were all
diversity cases decided, respectively, under Texas, California,
Illinois, North Carolina, and Kansas law. This case, however,
was decided under Missouri law. Thus, any apparent conflict
between the circuits is the result of the application of the
disparate law of different states, and not the result of any
inconsistency among the circuits requiring conformation by a
decision of this Court.
Moreover, none of those cases are even on point.
Consolidated Amer. Ins. Co. v. Mike Soper Marine Servs., 951
F.2d 186 (9th Cir. 1991), and Gray v. Grain Dealers Mut. Ins.
Co., 871 F.2d 1128 (D.C. Cir. 1989), both affirmed awards of
damages in excess of the contractual liability limits, not on a
contract claim for failure to defend, but on a tort claim for bad
12
faith refusal to settle. Consolidated Amer., 951 F.2d at 190;
Gray, 871 F.2d at 1130. Similarly, Green v. J.C. Penney Auto
Ins. Co., 806 F.2d 759, 762-64 (7th Cir. 1986), and Coleman v.
Holecek, 542 F.2d 532, 534, 536-38 (10th Cir. 1976), allowed
an award of damages in excess of the contractual limit of
liability only where there was fraud, bad faith, or negligence in
failing to settle. Here, of course, the Eighth Circuit held that
the petitioner had no tort claim for bad faith refusal to settle.
This difference is critical as the Missouri courts have
recognized in Zumwalt, supra; Landie, supra; and
Southwestern Bell, supra; which are discussed above. In
Columbia Mut. Ins. Co. v. Fiesta Mart, Inc., 987 F.2d 1124,
1129, reh’g en banc denied, 992 F.2d 326 (Sth Cir. 1993), the
court reversed a summary judgment for the insured, and
rendered judgment for the insurer. It did not even discuss the
measure of damages.
Nor is there any conflict between the Eighth Circuit’s
decision in this case and the other Missouri or Eighth Circuit
decisions cited by the petitioner. Landie involved both a
contract claim for failure to defend and a tort claim for bad
faith refusal to settle. 390 S.W. 2d at 561, 563. The court held
that the damages on the contract claim for failure to defend
were limited to the contractual limit of liability, plus attorney
fees, other defense costs, and interest the plaintiff had incurred
in defending the underlying case, but that damages on the tort
claim for bad faith refusal to settle could exceed the
contractual limit of liability. Jd. at 562-66. Only because the
court found that the jury could have found that the insurance
company refused to settle in bad faith did the court affirm the
judgment for damages in excess of the contractual limit of
liability. Jd. at 566.
In Fuller v. Lloyd, 714S.W. 2d 698, 700 (Mo. App. 1986),
there was no discussion of the contractual limit of liability, and
ie ar
13
it seems apparent that the judgment on the contract claim for
failure to defend did not exceed any contractual limit since that
judgment was only for $25,000—the minimum amount of
insurance coverage required by Méissouri’s Financial
Responsibility Law. R.S. Mo. § 303.190(2)(2) (Pet. App. 29).
The additional amount awarded to the insured was not for
failure to defend but for wrongful denial of coverage which
caused the insured to lose his driver's license. 714 S.W. 2d at
702. No similar claim was involved in our case.
Luke v. American Family Mut. Ins. Co., 476 F.2d 1015,
cert. denied, 414 U.S. 856 (8th Cir. 1973), presents no conflict
for two reasons. First, even though it also was decided by the
Eighth Circuit, Luke was decided under South Dakota law, not
under Missouri law. /d. at 1018-22, 1023. Second, the damage
award was affirmed in Luke based on the insurance company’s
bad faith refusal to settle, not on a contract claim for failure to
defend, and based on a specific South Dakota statute
prescribing the measure of damages. /d. at 1020-21, 1023.
Carpenter v. Automobile Club Interinsurance Exch., 58
F.3d 1296 (8th Cir. 1994), likewise presents noconflict. It was
decided under Arkansas law, not Missouri law, and was a bad
faith refusal to settle case, not a breach of contract failure to
defend case. /d. at 1302-03. As aresult, there is no conflict for
this Court to resolve.
14
CONCLUSION
This case presents no constitutional question, no conflict
between circuits, within the Eighth Circuit, or with Missouri
law, and no need for this Court to exercise its supervisory
power over the Eighth Circuit. This case presents only
questions of Missouri law, which were correctly decided by the
Eighth Circuit. Accordingly, the writ should be denied.
Respectfully submitted,
WAYNEC. DABB, JR.
Counsel of Record
BAKER & HOSTETLER
1900 East 9th Street
Suite 3200
Cleveland, Ohio 44114-3485
(216) 861-7456
KENNETHA. SLAVENS
TIMOTHY W. LUFT
BROWN & JAMES, P.C.
705 Olive Street
Suite 1100
St. Louis, Missouri 63101-2270
(314) 421-3400
Attorneys for Respondent
la
APPENDIX A — DEFENDANT’S MOTION FOR
JUDGMENT ASA MATTER OF LAW
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
SOUTHERN DIVISION
Case No. 93-3455-CV-S-4
KATHLEEN QUICK, an individual, assignee of Kendrick
Wilhite,
Plaintiff,
v.
AGENCY RENT-A-CAR, INC., a Delaware Corporation,
Defendant.
JUDGMENT AS A MATTER OF LAW
Comes now defendant, Agency Rent-A-Car, and pursuant
to Rule 50(a)(1) of the Federal Rules of Civil Procedure moves
this court for Judgment as a Matter of Law on plaintiffs’
complaint in that there is no legally sufficient evidentiary
basis for a reasonable jury to find for plaintiff on any issues in
their Complaint and for further grounds states as follows:
FACTS
Plaintiffs’ entire case is based on their allegation that the
rental agreement required that a policy of insurance be
provided to Kendrick Wilhite or that Agency Rent-A-Car Inc.,
2a
Appendix A
is or should be treated as an automobile liabiiity insurance
company. Plaintiffs have failed to prove and, in fact, there has
been no evidence whatsoever that defendant ever had a duty to
provide a policy of automobile insurance.
Additionally, plaintiffs’ recovery depends on a duty owed
by a liability insurance company to its insured under a policy
of automobile liability insurance. Plaintiffs have not
presented any evidence that Agency Rent-A-Car was a
automobile liability insurance company or that Kendrick
Wilhite was a policy owner or an insured under any policy of
insurance.
Plaintiffs’ claim for bad faith and refusal to settle is a tort
arising out of the actions of an automobile liability insurance
company in dealing with its insureds. The tort of bad faith does
not exist as such through any other relationship arising out of
any other contract than that between an automobile insurance
company and insured. Plaintiff has not presented any evidence
supporting a duty on the part of Agency Rent-A-Car to have
settled the claims against Kendrick Wilhite prior to a judgment
being entered.
LAW AND ARGUMENT
Section 379.110 of the Revised Statutes of Missouri
defines an insurer under the section which governs and
regulates insurance companies other than life insurance
companies.
Subparagraph (1), of that section defines insurer as “any
insurance company, association or exchange authorized to
issue policies of automobile insurance in the State of
3a
Appendix A
Missouri.” The Eighth Circuit Court of Appeals has held that
private indemnity agreements collateral to the main business
or transaction between the parties is not an insurance contract.
St. John’s Regional Health Center v. American Casualty
Company of Reading, Pennsylvania, 980 F.2d 1222 (8th Cir
1992).
Further, in Missouri, it is clear that a certificate of self
insurance filed with the state in compliance the financial
responsibility laws does not require the defendant to assume
all the obligations of a liability insurance company. American
Family Mutual Insurance Co. v. Missouri Power and Light
Co.,517S.W.2d 110 (Mo banc 1975).
There is no Missouri case which imposes liability for the
tort of bad faith on any entity other than an insurance company
for its dealings with its insured. Since plaintiff has not
presented any evidence that Agency Rent-A-Car is an
insurance company or that there was a policy of insurance
entered into between plaintiff’s assignor, Kendrick Wilhite,
and Agency Rent-A-Car, there can be no tort of bad faith in the
dealings between the two entities and defendant is entitled to
judgment as a matter of law on plaintiff’s claim of bad faith
under this theory.
Plaintiff’s claim for punitive or exemplary damages
should be dismissed in that there is no cause of action
recognized in Missouri for punitive damages arising strictly
from a breach of contract action and plaintiff has not presented
any evidence to support the allegation that Agency Rent-A-
Car is an insurance company subject to the provisions of the
tort of bad faith or punitive or exemplary damages arising
therefrom.
4a
Appendix A
As to plaintiff’s claim for breach of contract, defendant is
also entitled to judgment as a matter of law. Plaintiffs have not
presented any evidence that there was a breach of any duty
owed to Kendrick Wilhite under the rental agreement.
Kendrick Wilhite, as indemnitee, has not been called on to pay
any amount of the judgment and the rental contract
specifically states that Agency Rent-A-Car will pay up to
$25,000 of any amount that Kendrick Wilhite is required to
pay by way of judgment or settlement.
Moreover, any damage to Kendrick Wilhite was due to his
own breach in failing to notify Agency of the summons and
complaint served on him and his failure to appear on the date
indicated to protect his own interest and the interest of the
indemnitor, Agency Rent-A-Car Inc. as required in the rental
agreement.
Wherefore, Agency Rent-a-Car Inc., moves this court for
Judgment as a Matter of Law on plaintiff's claims of breach of
Contract, Bad Faith, and Tortious Breach of Contract, and for
its costs and attorney’s fees herein expended pursuant to the
rental agreement.
s/ KennethA. Slavens
KennethA. Slavens #28081
BROWN & JAMES, P.C.
Attorneys for Defendant
Agency Rent-A-Car, Inc.
705 Olive Street, Suite 1100
St. Louis, Missouri 63101
(314) 421-3400
Sa
APPENDIX B — EXCERPTS OF DEFENDANT’S
MOTION FOR JUDGMENT AS A MATTER OF LAW AT
THE CLOSE OF ALL THE EVIDENCE
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
SOUTHERN DIVISION
Case No. 93-3455-CV-S-4
KATHLEEN QUICK, an individual, assignee of Kendrick
Wilhite,
Plaintiff,
. &
AGENCY RENT-A-CAR, INC., a Delaware Corporation,
Defendant.
JUDGMENT AS A MATTER OF LAW AT THE CLOSE
OF ALL THE EVIDENCE
Comes now defendant, Agency Rent-A-Car, and pursuant
to Rule 50(a)(1) of the Federal Rules of Civil Procedure moves
this court for Judgment as a Matter of Law on plaintiffs’
complaint in that there is no legally sufficient evidentiary
basis for a reasonable jury to find for plaintiff on any issues in
their Complaint and for further grounds states as follows:
FACTS
Plaintiffs’ entire case is based on their allegation that the
rental agreement required that a policy of insurance be
6a
Appendix B
provided to Kendrick Wilhite or that Agency Rent-A-Car Inc.,
is or should be treated as an automobile liability insurance
company. Plaintiffs have failed to prove and, in fact, there has
been no evidence whatsoever that defendant ever had a duty to
provide a policy of automobile insurance.
Additionally, plaintiffs’ recovery depends on a duty owed
by a liability insurance company to its insured under a policy
of automobile liability insurance. Plaintiffs have not
presented any evidence that Agency Rent-A-Car was a
automobile liability insurance company or that Kendrick
Wilhite was a policy owner or an insured under any policy of
insurance.
Plaintiffs’ claim for bad faith and refusal to settle is a tort
arising out of the actions of an automobile liability insurance
company in dealing with its insureds. The tort of bad faith does
not exist as such through any other relationship arising out of
any other contract than that between an automobile insurance
company and insured. Plaintiff has not presented any evidence
supporting a duty on the part of Agency Rent-A-Car to have
settled the claims against Kendrick Wilhite prior to a judgment
being entered.
LAW AND ARGUMENT
Section 379.110 of the Revised Statutes of Missouri
defines an insurer under the section which governs and
regulates insurance companies other than life insurance
companies.
Subparagraph (1), of that section defines insurer as “any
insurance company, association or exchange authorized to
7a
Appendix B
issue policies of automobile insurance in the State or
Missouri.” The Eighth Circuit Court of Appeals has held that
private indemnity agreements collateral to the main business
or transaction between the parties is not an insurance contract.
St. John’s Regional Health Center v. American Casualty
Company of Reading, Pennsylvania, 980 F.2d 1222 (8th Cir
1992).
Further, in Missouri, it is clear that a certificate of self
insurance filed with the state in compliance the financial
responsibility laws does not require the defendant to assume
all the obligations of a liability insurance company. American
Family Mutual Insurance Co., v. Missouri Power and Light
Co.,517S.W. 2d 110 (Mo banc 1975).
There is no Missouri case which imposes liability for the
tort of bad faith on any entity other than an insurance company
or its dealings with its insured. Since plaintiff has not
presented any evidence that Agency Rent-A-Car is an
insurance company or that there was a policy of insurance
entered into between plaintiff’s assignor, Kendrick Wilhite,
and Agency Rent-A-Car, there can be no tort of bad faith in the
dealings between the two entities and defendant is entitled to
judgment as a matter of law on plaintiff's claim of bad faith
under this theory.
Plaintiff’s claim for punitive or exemplary damages
should be dismissed in that there is no cause of action
recognized in Missouri for punitive damages arising strictly
from a breach of contract action and plaintiff has not presented
any evidence to support the allegation that Agency Rent-A-
Car is an insurance company subject.to the provisions of the
tort of bad faith or punitive or exemplary damages arising
therefrom.
8a
Appendix B
As to plaintiff’s claim for breach of contract, defendant is
also entitled to judgment as a matter of law. Plaintiffs have not
presented any evidence that there was a breach of any duty
owed to Kendrick Wilhite under the rental agreement.
Kendrick Wilhite, as indemnitee, has not been called on to pay
any amount of the judgment and the rental contact specifically
states that Agency Rent-A-Car will pay up to $25,000 of any
amount that Kendrick Wilhite is required to pay by way of
judgment or settlement.
9a
APPENDIX C — EXCERPTS OF DEFENDANT’S
MOTION FORA NEW TRIAL ORIN THEALTERNTIVE
FOR JUDGMENTASA MATTER OF LAW
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
SOUTHERN DIVISION
Case No. 93-3455-CV-S-4
KATHLEEN QUICK, an individual, assignee of Kendrick
Wilhite,
Plaintiff,
v.
AGENCY RENT-A-CAR, INC., a Delaware Corporation,
Defendant.
DEFENDANT AGENCY RENT-A-CAR INC.’S MOTION
FORA NEW TRIAL OR IN THE ALTERNATIVE,
MOTION FOR JUDGMENT AS A MATTER OF LAW
Comes now defendant, Agency Rent-A-Car, and pursuant
to Rules 59 and 50 of the Federal Rules of Civil Procedure
moves this court to set aside and hold for naught the verdict
and judgment entered in favor of plaintiff and against
defendant, and grant a new trial, or in the alternative, enter
judgment as a matter of law on behalf of Defendant, and for
grounds therefore states as follows:
1. The court erred in denying defendant’s Motion for a
Judgment as a Matter of Law in its favor at the close of
10a
Appendix C
plaintiff's case because, as a matter of law, plaintiff is not
entitled to recover as more fully set out in the motion.
2. The court erred in denying defendant’s Motion for a
Judgment as Matter of Law in its favor at the close of all the
evidence because, as a matter of law, plaintiff is not entitled to
recover as more fully set out in the motion.
3. The evidence is insufficient to support a finding in
favor of plaintiff and against defendant.
4. Defendant is entitled to judgment in its favor as a
matter of law.
5. The verdict is contrary to law.
6. The verdict is contrary to the evidence.
7. The verdict is contrary to the law and the evidence.
* * *
lla
APPENDIX D — EXCERPTS OF BRIEF OF APPELLANT
NATIONAL AUTO CREDIT, INC.
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
No. 95-3989 WMS
KATHLEEN QUICK, ASSIGNEE OF
KENDRICK WILHITE
Appellee,
vs.
NATIONALAUTO CREDIT, INC.
f/k/a AGENCY RENT-A-CAR, INC.
Appellant.
Appeal from the United States District Court
for the Western District of Missouri
Southern Division
Honorable Russell G. Clark, District Judge
BRIEF OFAPPELLANT NATIONAL AUTO CREDIT, INC.
Kenneth A. Slavens #2808 1
James B. James #37108
Timothy W. Luft #40506
BROWN & JAMES, P.C.
705 Olive, Suite 1100
St. Louis, MO 63101
(314) 421-3400
ATTORNEYS FOR APPELLANT
NATIONALAUTO CREDIT, INC.
12a
Appendix D
* = ~
[Page 20]
* . +
Missouri law does not recognize a claim of bad faith
outside the insurance company and insured context. In fact,
counsel has found no Missouri cases that recognize the tort
cause of action of bad faith in the noninsurance context.
Although recognized in California, courts outside of
California have almost unanimously refused to apply the tort
claim of bad faith in the noninsurance situation. See Alabama,
Peninsular Life Ins. Co. v. Blackmon, 476 So. 2d 87 (Ala
1985); Colorado, Strey v. Hunt Int'l Resources Corp., 749 F.2d
1437 (10th Cir. 1984); Illinois, Chicago College of
Osteopathic Medicine v. George A. Fuller Co., 719 F.2d 1335
(7th Cir. 1983); Nevada, Aluevich v. Harrah's, 660 P.2d 986
(Nev. 1983), cert. denied, 465 U.S. 1006 (1984); New York,
French American Banking Corp. v. Flota Mercante
Grancolombiana, S.A., 609 F. Supp 1352 (S.D.N.Y. 1985);
Ohio, Battista v. Lebanon Trotting Ass'n, 538 F.2d 111 (6th
Cir. 1976); Pennsylvania, Jron Mountain Sec. Storage Corp. v.
American Specialty Foods. Inc., 457 F.Supp. 1158 (E.D. Pa.
1978); Texas, Exxon Corp. v. Atlantic Richfield Co., 678
S.W.2d 944 (Tex. 1984); Wisconsin, Jack Walters & Sons
Corp. v. Morton Bldg., 737 F.2d 698 (7th Cir. 1984).
Assuming arguendo, that Agency is not a rental car
company, but rather a liability insurer, and Quick could jump
that essential first hurdle, her claim still must fail as she did
not establish the four elements of a claim of bad faith under
Missouri law.
13a
Appendix D
[Page 23]
Ill. THE JUDGMENT IN FAVOR OF PLAINTIFF
SHOULD BE REVERSED AND REMANDED WITH
DIRECTIONS TO ENTER JUDGMENT IN FAVOR OF
AGENCY BECAUSE THE TRIAL COURT ERRED BY
OVERRULING AGENCY’S MOTION FOR A
DIRECTED VERDICT AT THE CLOSE OF ALL THE
EVIDENCE AND MOTION FOR JUDGMENT
NOTWITHSTANDING THE VERDICT, OR IN THE
ALTERNATIVE, THE COURT ERRED _IN
OVERRULING DEFENDANT’S MOTION FOR A NEW
TRIAL, BECAUSE PLAINTIFF DID NOT HAVE
STANDING TO PROSECUTE CLAIMS OF KENDRICK
WILHITE UNDER MISSOURI LAW, AND
THEREFORE, NO CAUSE OF ACTION WAS BEFORE
THE COURT AND THE TRIAL COURT LACKED
SUBJECT MATTER JURISDICTION AND ANY
ACTION WHICH THE COURT TOOK WAS NULLAND
VOID.
The tort of bad faith refusal to settle is not assignable
under Missouri common law. State ex rel Park Nat. Bank v.
Globe Indemnity Co., 61 S.W.2d 733, 736 (Mo. 1933). There
have been two situations in which the courts have allowed the
common law rule of nonassignability of torts to be
circumvented by holding that there is support in the
Bankruptcy Code or the Probate Code that would support their
assignability. In Ganaway, the court stated that the 1978
l4a
Appendix D
Bankruptcy Act supports the proposition that the bad faith
cause of action is assignable. Ganaway v. Shelter Mutual
Insurance Company, 795 S.W.2d 554 (Mo.App.S.D. 1990).
The court stated that since “all legal or equitable interests of
the debtor” become part of the estate in bankruptcy, then the
cause of action is capable of being assigned. Ganaway v.
Shelter Mutual Insurance Company, 795 S.W.2d at 564 (citing
11 U.S.C.A. Sec. 541 (a)(1) (West 1979)). This iegal fiction
has no application to this suit. Clearly a claim for personal
injuries in Missouri survives to the injured/bankrupt’s estate.
However, that same injured person could not sell or assign his
personal injury claim to another individual or a corporation
outside of bankruptcy. Furthermore, the trustee in bankruptcy
cannot put the personal injury claim for sale or assignment to
the highest bidder.
Other courts have held that the test for assignability of a
claim is simply a question of whether the claim could or would
survive the death of the injured person and be available to a
personal representative. They have held if the cle:m would
survive to the personal representative, it is assignable.
Emmendorfer v. Crader Tire & Retread Service, 670 S.W.2d
548 (Mo.App. 1984), (citing State ex rel. Park Nat. Bank v.
Globe Indemnity Company, 61 S.W.2d 733, 735 (Mo. 1933)).
This legal fiction also does not hold true under Missouri law.
While an injured party’s claim survives to his personal
representative, the same claim could not be put on the auction
block by the injured party prior to their death. Moreover, the
personal representative cannot sell this cause of action even
though it becomes part of the decedent’s estate.
Therefore, since the purported assignment was invalid,
plaintiff had no standing to bring to bring a claim in the name
15a
Appendix D
of Wilhite for the tort of bad faith, and any action that the court
took was null and void as that claim was not properly before
the court.
IV. A. IN THE ALTERNATIVE, THE JUDGMENT IN
FAVOR OF PLAINTIFF SHOULD BE REVERSED
AND REMANDED WITH DIRECTIONS TO ENTER
JUDGMENT IN FAVOR OF AGENCY BECAUSE
THE TRIAL COURT ERRED BY OVERRULING
AGENCY’S MOTION FORA DIRECTED VERDICT
AT THE CLOSE OF ALL THE EVIDENCE AND
MOTION FOR JUDGMENT NOTWITHSTANDING
THE VERDICT, OR IN THE ALTERNATIVE, THE
COURT ERRED IN OVERRULING DEFENDANT’S
MOTION FORA NEW TRIAL:
A. BECAUSE PLAINTIFF: DID NOT HAVE
STANDING TO BRING A CLAIM FOR
PUNITIVE DAMAGES UNDER MISSOURI
LAW AND THEREFORE, THAT CAUSE OF
ACTION WAS NOT BEFORE THE COURT AND
THE TRIAL COURT AGREED SUBJECT
MATTER JURISDICTION WITH THAT CLAIM
AND ANY ACTION THE COURT TOOK WITH
REGARD TO PUNITIVE DAMAGES AS NULL
AND VOID; AND THE CAUSE OF ACTION
THAT WAS PURPORTEDLY ASSIGNED FOR
PUNITIVE DAMAGES ' WAS _ INVALID
BECAUSE PUNITIVE DAMAGES IN THIS
CASE ARE PURELY PERSONAL IN NATURE
AND WERE NOT REDUCED TOA JUDGMENT
AND THEREFORE THE ASSIGNEE COULD
NEVER BE ASSIGNED THAT CLAIM UNDER
MISSOURI LAW; AND,
16a
Appendix D
*. * *
In both law and equity, a cause of action sounding in tort
cannot be assigned. Missouri’s common law prohibits the
assignment of causes “for torts for personal injuries, and for
wrongs done to the person, the reputation or the feelings of the
injured party, and those based on contracts of a purely
personal nature ...” State ex rel Park Nat. Bank v. Globe
Indemnity Co., 61 S.W.2d 733, 736 (Mo. 1933).
In this case, plaintiff Kathleen Quick did not have
standing in this suit to bring a claim of punitive damages
against Agency. Again, personal injury causes of action in
Missouri, as in most jurisdictions, are not assignable.
Marshall v. Northern Assurance Co. of America, 854 S.W.2d
608 (Mo.App. 1993); Travelers Indem. Co. v. Chumbley, 394
S.W.2d 418 (Mo.App. 1965); Reese v. Preferred Risk Mut. Ins.
Co., 457 S.W.2d 205 (Mo.App. 1970); and Jones v. Aetna
Casualty & Sur. Co., 497 S.W.2d 809 (Mo. App. 1973). A
complaint “which pleads such an assignment does not plead a
cause of action.” Chuning v. Calvert, 452 S.W.2d 580, 584
(W.D. 1970). Acomplaint that does not plead a cause of action:
is insufficient to call into being the court's
jurisdiction. A verdict will not cure such a
[complaint] and no valid judgment can be
entered upon it, and if entered, cannot be
enforced.
452 S.W.2d at 584.
While courts have acknowledged the nonassignability of
a personal injury action, some courts have made a distinction
17a
Appendix D
between an assignment of the action itself and the assignment
of a claim in which the damages are liquidated and reduced to
a judgment. Marshall v. Northern Assurance Co. of America,
854 S.W.2d at 610 (Mo.App. 1993).
In the instant case, although the assignor Wilhite may
have been able to argue a claim of punitive damages to the jury
himself, his assignee, Kathleen Quick, did not have standing
to prosecute Wilhite’s claim in this regard. Any claim for
punitive damages is “purely personal” and cannot be assigned.
The same is true if the assignee attempted to bring a claim on
behalf of Wilhite for “negligent infliction of emotional
distress,” as Missouri law prohibits the assignability of sucha
personal claim not reduced to a judgment. Forsthove v.
Hardware Dealers Mut. Fire Ins. Co., 416 S.W.2d 208
(Mo.App. 1965).
Unliquidated claims for punitive damages and other
purely personal torts have also been held not assignable by
courts in California, which has been at the forefront of the tort
of bad faith and has extended the bad faith cause of action to
first party and commercial breach of contract scenarios.
Reichert v. General Insurance Company of America, 68 Cal.2d
822, 834 (1968). Dugar v. Happy Tiger Records Inc., 41...
* * *
[Page 28]
In this diversity action, the trial court must correctly state
the law in the jury instructions and the verdict director must
properly set forth the elements of the plaintiff's prima facie
case and inform the jury of the proper legal standard. Bersett v.
18a
Appendix D
K-Mart Corporation, 869 F.2d 1131, 1135 (8th Cir. 1989);
Robinson v. Monsanto Company, 758 F.2d 331, 335 (8th Cir.
1985); Hrzenak v. White-Westinghouse Co., 682 F.2d 714, 719
(8th Cir. 1982).
Bad faith as a tort action was first recognized in Missouri
in 1950 in the Missouri Supreme Court case of Zumwalt et al.
v. Utilities Ins. Co., 228 S.W.2d 750 (Mo. 1950). Zumwalt
remains the controlling case on bad faith in the state of
Missouri.
In recognizing this tort, the Court set forth the necessary
criteria for recovery. The Missouri Supreme Court held:
We have reviewed many authorities on
the question and think the weight of
authority is that where the insurer in a
liability policy reserves the exclusive right
to contest or settle any claim brought
against an assured, and prohibits him from
voluntarily assuming any liability or
settling any claims without the insurer’s
consent, except at his own costs, and the
provisions of the policy provide that the
insurer may compromise or settle such a
claim within the policy limits, no action
will lie against the insurer for the amount of
the judgment recovered against the insured
in excess of the policy limits, unless the
insurer is guilty of fraud or bad faith in
refusing to settle a claim within the limits
of the policy.
Zumwalt at 753.
Mee eT ee ae ere eee
eee
PCOS IE Ge ERE MME A A
arin’ Romie NAL Seay on eases wee ery ev ate eG
nh EnCana Stn P= cendaed oR
Pe Lee Tee OS fae Tee A [EC ere EN tT ees CT
bilities ciktitbe. henna
19a
Appendix D
In this action, there is no liability policy of insurance, or,
in other words, an insurance contract which would support the
giving of this instruction. (See Plaintiff’s Exhibit 16 admitted
into evidence). There is only an indemnity agreement. An
indemnity agreement is not an a contract of insurance. Holiday
Inns, Inc. v. Thirteen-Fifty Investment Co., 714 S.W.2d 597,
602 (Mo.App.W.D. 1986). As a result, this defendant cannot
come within the confines of the principles set fort in Zumwalt.
In addition, the agreement between defendant and
plaintiff’s assignee, Wilhite, does not give defendant the
exclusive right to contest or settle any claim brought against
Wilhite. The reverse is equally true in that the agreement does
not prohibit Wilhite from voluntarily assuming any liability or
settling any claims without this defendant’s consent, except at
Wilhite’s own costs.
Under the holding of Zumwalt, the bad faith tort
recognized by the Missouri Supreme Court, by its very
language, could not apply to this defendant. As a result, the
instruction submitted to the jury is not a clear, concise and
correct statement of the law.
The Instructions submitted to the jury improperly allowed
the jury to find plaintiff's assignor’s indemnitor was
controlled by the confines of the bad faith principles
applicable to insurance contracts, contrary to the holdings of
the Missouri Supreme Court.
[Page 32]
20a
Appendix D
VI. THE TRIAL COURT ERRED IN REFUSING TO
SUBMIT INSTRUCTION C AS THAT INSTRUCTION
WAS SUPPORTED BY THE EVIDENCE AND
PROPERLY SETS FORTH AGENCY’S RIGHT TO BE
DISCHARGED UNDER ITS INDEMNITY CONTACT
WITH WILHITE DUE TO WILHITE’S PREJUDICIAL
CONDUCT.
Defendant tendered an instruction, which was refused, to
the court which set forth the obligations of plaintiff's assignor
to Agency under the rental agreement.
The rental agreement contained the following language:
1. Lessor will settle or defend as it
considers appropriate, any claim or suit
seeking damages for bodily injury and or
property damage up to the MINIMUM
dollar amount required for any one (1)
“ental automobile, per occurrence. . . . The
foregoing indemnification and _ hold
harmless provisions shall be applicable
only to losses arising out of the authorized
use of the vehicle... .
See Plaintiffs Exhibit 16, The Rental Agreement, entered into
evidence.
By this language, defendant complies with the Financial
Responsibility Laws of Missouri. See generally, R.S.Mo.
303.010 et seq. The only requirement imposed on a self-
insured? is that it will pay the same judgments in the same
2. “Self insured,” as used in the Motor Vehicle Financial ar
ont’d)
LON EMA NE Se ENR RE REM Te ok
2la
Appendix D
amounts as if it had issued a policy. The agreement provides,
in compliance with this statute, for indemnification of Wilhite
in the event of an occurrence while driving the rental vehicle. |
Missouri recognizes this type of indemnification agreement.
Moberly v. Leonard et al., 99 S.W.2d 58, 63 (Mo. 1936).
Had the Missouri legislature wished to require other
obligations of a “self insured” under the Motor Vehicle
Financial Responsibility Laws, it surely would have set those
obligation out in the statute.
The agreement between Agency and Wilhite does several
things; all of which need to be analyzed separately. The
agreement obligates Agency (1) to defend or (2) to settle the
claims. This obligation is controlled further by Agency’s right
to settle “as it considers appropriate.” The agreement also sets
forth that the (3) indemnification and hold harmless
agreement arises only from the authorized use of the rental
vehicle. The indemnification is provided as compliance with
the applicable motor vehicle financial responsibility laws and
is for the payment of judgments in the same amounts as an
insurer.
Instruction Number 6 places additional obligations on the
defendant pursuant to the indemnification agreement which
are not appropriate.
In sum, Agency’s obligations to Wilhite were: to defend to
(Cont'd)
Law of Missouri, is really to say “uninsured” since upon demonstrating a certain
ability to pay judgments, the “self insured” is permitted to comply with the
Financial Responsibility Law by being uninsured. See generally 303.220
R.S.Mo. 1989.
22a
Appendix D
the limits of the liability protection, to settle within Agency’s
discretion and to indemnify and hold harmless Wilhite to the
minimum financial responsibility law requirements.
None of these obligations constitute insurance or
somehow transform Agency into an insurance company,
particularly in light of the extensive statutory scheme in place
by the Missouri Legislature controlling motor vehicle
insurers. See generally, Revised Statutes of Missouri, Chapter
374, Department of Insurance; Chapter 375, Provisions
Applicable to All Insurance Companies; Chapter 378,
Fraternal Benefits Societies; Chapter 379, Insurance Other
Than Life.
The obligations of the parties must be considered as
parties to an indemnity contract and not as some fictional
creation of an insured/insurer relationship. Contracts of
indemnity are not synonymous with contracts of insurance.
Holiday Inns, Inc. v. Thirteen-Fifty Investment Co., 714
S.W.2d 597, 602 (Mo.App.W.D. 1986), Pennsylvania R. Co. v.
Roydhouse et al., 110A. 277, 278 (Pa. 1920).
This relationship of indemnitor/indemnitee creates duties
on both sides of the contract, not just upon one party.
Given the indemnitor/indemnitee relationship between
Wilhite and Agency, the general rule controlling the
relationship comes into play. That general rule is: any act on
the part of an indemnitee which materially increases the risk,
or prejudices the rights, of an indemnitor, will discharge the
indemnitor under the contract of indemnity. Holiday Inns, Inc.
at 603; American Casualty Company of Reading,
Pennsylvania v. Idaho First National Bank, 328 F.2d 138, 142-
.
23a
Appendix D
43 (9th Cir. 1964); Hiern v. St. Paul-Mercury Indemnity
Company, 262 F.2d 526, 529 (Sth Cir. 1959); Rochelle Bail
Agency, Inc. v. Maryland National Insurance Company, 484
F.2d 877, 878 (7th Cir. 1973).
* # *
24a
APPENDIX E— EXCERPTS OF REPLY BRIEF OF
APPELLANT NATIONAL AUTO CREDIT, INC.
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
Consolidated Nos. 94-3989 and 95-1045
KATHLEEN QUICK, ASSIGNEE OF KENDRICK WILHITE
Appellee,
vs.
NATIONAL AUTO CREDIT, INC. f/k/a AGENCY RENT-A-
CAR, INC.
Appellant.
Appeal from the United States District Court
for the Western District of Missouri
Southern Division
Honorable Russell G. Clark, District Judge
REPLY BRIEF OF APPELLANT NATIONAL
AUTO CREDIT, INC.
Kenneth A. Slavens Wayne C. Dabb, Jr.
James B. James Randall L. Solomon
Timothy W. Luft BAKER & HOSTETTLER
BROWN & JAMES, P.C. 3200 National City Center
705 Olive, Suite 1100 1900 East Ninth Street
St. Louis, MO 63101 Cleveland, OH 44114
(314) 421-3400
ATTORNEYS FOR APPELLANT
NATIONALAUTO CREDIT, INC.
25a
Appendix E
[Page 3]
ARGUMENT.
I. AGENCY IS NOT AN INSURANCE COMPANY AND,
THEREFORE, CANNOT BE HELD LIABLE FOR
THE TORT OF BAD FAITH REFUSAL TO SETTLE.
Under Missouri law, only an insurance company can be
held liable for the tort of bad faith refusal to settle a claim.
Compare Zumwalt v. Utilities Ins. Co., 228 S.W.2d 750, 753
(Mo. 1950), and Siate Farm Fire & Cas. Co. v. Metcalf, by
Wade, 861 S.W.2d 751, 756 (Mo. App. 1993), with Peterson v.
Continental Boiler Works, Inc., 783 S.W.2d 896, 903 (Mo.
1990). As a result, plaintiff was required to prove that Agency
is an insurance company in order to prove her case for bad
faith refusal to settle. Zumwalt, 228 S.W.2d at 753 (“insurer”
only liable for fraud or bad faith in refusing to settle claim
within the limits of the policy); State Farm, 861 S.W.2d at 756
(an element of bad faith claim is that “insurer refuses to settle
the claim within the liability limits of the policy”). This
plaintiff failed to do. Consequently, the district court
incorrectly instructed the jury on the claim of bad faith refusal
to settle. (Instruction 8). The judgment against Agency,
therefore, must be reversed, and judgment entered for
Agency.’
2. It is indisputable that the jury returned a verdict for plaintiff on
plaintiff's claim for bad faith refusal to settle. The jury awarded plaintiff
(Cont'd)
26a
Appendix E
In order to be an insurance company under Missouri law, a
company must be licensed by the Missouri Department of
Insurance to do insurance business in Missouri. See State on
Inf. of McKittrick v. Koon, 201 S.W.2d 446, 452 (Mo. 1947)
(person cannot engage in insurance business without
complying with state statutes regulating same); see also 19 J.
Appleman, Insurance Law & Practice § 10411, p. 261 (1982)
(“No insurance company is entitled to do business within a
state unless it first procures a license or certificate of authority
from the state or proper administrative officials”). See
generally, Mo. Rev. Stat. chs. 374-385 (481 pages of Missouri
statutes, ranging from the general powers of the department of
insurance through regulation of insurance companies and
agents); Code of State Regulation, Tit. 20 (regulations related
to the insurance laws).
The regulation of insurance companies transacting the
business of insurance in the State of Missouri is broad and
comprehensive and touches nearly every aspect of an
insurance company’s operations. To be licensed in Missouri as
an insurance company requires compliance with the numerous
State statutes and regulations. Missouri statutes prohibit any
company from engaging in the business of insurance in this
state without first complying with all provisions of the laws of
Cont'd)
a damages of $885,000, which only could have been awarded on the
claim for bad faith refusal to settle. See Landie v. Century Indemnity Co., 390
S.W.2d 558, 563-66 (Mo. App. 1965) (damages for failure to defend limited to
contract damages; damages for bad faith refusal to settle go beyond contract
damages); Zumwalt, 228 S.W.2d at 756 (action for insurer’s bad faith refusal to
settle “is a tort action”). Plaintiff's only other claim that was submitted to the
jury was for breach of contract for failure to defend, and Missouri law is clear
that punitive damages cannot be awarded for a breach of contract. Peterson, 783
S.W.2d at 902-03; see Zumwalt, 228 S.W.2d at 756.
27a
Appendix E
this state governing the business of insurance. Mo. Rev. Stat.
§ 375.158 (1994).
Moreover, a company is prohibited from transacting any
insurance business in Missouri until it procures from the
Missouri Director of Insurance a certificate stating that it has
complied with the requirements of the insurance laws of this
state and is authorized to do business. Before a certificate of
authority can be issued, a company that wishes to engage in
the insurance business is investigated extensively by the
director of insurance. See generally, Mo. Rev. Stat. § 375.166,
375.183, 375.201-375.226 (1994). Once the extensive
requirements are met, the Missouri Director of Insurance
issues a certificate of authority to do business as an insurance
company in Missouri. Mo. Rev. Stat. § 375.161 (1994). These
certificates of authority are renewed annually. /d. at § 375.161
(1994).
Plaintiff failed entirely to prove that Agency is or was an
insurance company under Missouri law — and could not do so
if she had tried. As is perfectly clear from the record, Agency
is a car rental company, not an insurance company. Thus,
plaintiff did not place in evidence any certificate issued by the
Missouri Director of Insurance authorizing Agency to do
insurance business in Missouri. Nor did plaintiff prove that
Agency met any of the statutory requirements to do insurance
business in Missouri. Plaintiff’s arguments that Agency is
“like an insurance company,” do not prove that Agency is an
insurance company. The indisputable fact is that Agency is a
car rental company, not an insurance company.
Plaintiff’s introduction of Agency’s certificate as a self-
insured under Missouri’s financial responsibility law is of no
28a
Appendix E
moment. “The plain purpose [of the Missouri Financial
Responsibility Law] is to make sure that people who are
injured on the highways may collect damage awards, within
limits, against negligent motor vehicle operators.” Halpin v.
American Family Mut. Ins. Co., 823 S.W.2d 477, 482 (Mo.
1992). The self-insured certificate does not establish that
Agency is an insurance company.
“A self-insurer is not engaged in the insurance business.”
19 J. Appleman, Insurance Law & Practice § 1041i, p. 263
(1982). See Reeves v. Wright & Taylor, 220 S.W.2d 1007, 1010
(Ky. 1949) (car rental company held not to be in insurance
business by complying with state financial responsibility
law). As the highest court in Kentucky held in Reeves, under
the Kentucky Motor Vehicle Safety-Responsibility Act:
Clearly, the owner of the leased
automobiles is not engaged in the insurance
business when he procures a certificate of
self-insurance from the Department of
Revenue in lieu of a liability insurance
policy. The certificate merely shows that he
had produced evidence of financial
responsibility.
Id.
Thus, Agency’s self-insurance certificate does not
establish that Agency was a liability “insurer”; it establishes
exactly the opposite: that Agency was not a liability insurer.
See American Family Mut. Ins. Co. v. Missouri Power & Light
Co., 517 S.W.2d 110, 112-14 (Mo. 1974). In American Family,
the Missouri Supreme Court, after a careful review of the
applicable sections of the Missouri Motor Vehicle Safety
29a
Appendix E
Responsibility Law, held that the statutory obligations of an
automobile self-insurer did not constitute insurance. /d. at
112-14. The Missouri Supreme Court quoted, with approval,
the following pertinent passage from Home Indemnity Co. v.
Humble Oil & Refg. Co., 314 S.W.2d 861, 865-66 (Tex. Civ.
App. 1958):
To say that a self-insurer will pay the same
judgments and in the same amounts as an
insurance company would have to pay is
one thing; while it is obvious that to assume
all the obligations that exist under a
Standard Automobile Liability Policy is
quite another thing. A Standard policy calls
for the assumption of many obligations
other than the payment of a judgment
rendered against the insured...
American Family, 517 S.W.2d at 114.
This Court, applying Missouri law in St. John’s Reg.
Health Ctr. v. American Cas. Co., 980 F.2d 1222, 1224-25 (8th
Cir. 1992) (Beam, J.), recently followed the Missouri Supreme
Court’s decision in American Family, and held that a group of
hospitals’ self-insurance plan also was not insurance. /d. at
1225-27. In reaching this conclusion, this Court appropriately
observed that
Determining the plain meaning of the
term “insurance” is not a straightforward
task, but several courts wrestling with
“other insurance” clauses have noted that
“fajs a matter of common understanding,
usage, and legal definition, an insurance
30a
Appendix E
contract denotes a policy issued by an
authorized and licensed insurance company
whose primary business it is to assume
specific risks of loss of members of the
public at large in consideration of the
payment of a “premium.” [Citations
omitted.} There are other sorts of
risk-shifting agreements which are not
insurance contracts, such as private
indemnity agreements collateral to the
main business or transaction between
parties....
Id. at 1224.3
a The Missouri Supreme Court's decision in American
Family and this Court's decision in St. John’s are in
accord with the majority of cases which have
considered whether self-insurance is insurance.
Annot., “Self-insurance against liability as other
insurance within the meaning of liability insurance
policy,” 46 A.L.R. 4th 707, 710, § 2 (1986)
(“self-insurance against liability has generally been
held not to be ‘other insurance’ within the meaning
of a liability insurance policy, although there is
authority to the contrary. . .”).
The Missouri appeals court decision cited by plaintiff for the proposition that
self-insurance is insurance, Heavens v. Laclede Gas Co., 809 S.W.2d 162 (Mo.
App. 1991), is not only contrary both to the decision of the Missouri Supreme
Court in American Family and to the general rule set forth in the ALR annotation
cited above, but also fails even to cite, let alone discuss, the contrary Missouri
Supreme Court decision in American Family. Heavens thus should not be
considered by this Court — which is obligated to apply Missouri law — as
accurately representing Missouri law. Forsthove v. Hardware Dealers Mut.
(Cont'd)
31a
Appendix E
The latter is precisely the situation here. Agency, as part
of its car rental agreement — and collateral to the main car
rental transaction between it and Wilhite — agreed to settle or
defend, as it considered appropriate, any claim or suit seeking
damages for bodily injury or property damage arising out of
the operation of the rental car by Wilhite to the minimum
amount required by the applicable motor vehicle financial
responsibility law — $25,000. (T.R. 251; Pl. Ex. 16, p.2,4 1.)
Agency did not issue any policy of automobile liability
insurance to Wilhite, or agree to “insure” Wilhite. Agency’s
private indemnity agreement with Wilhite, like the
self-insurance in American Family and St. John’s, is not
insurance.
As the court held in Holiday Inns, Inc. v. Thirteen-Fifty
Inv. Co., 714 S.W. 2d 597, 602 (Mo. App. 1986),
Contracts of indemnity are not synonymous
with contracts of insurance.... Had the
legislature meant to include a contract of
indemnification it would have so stated.
The legislature is not so careless in its
choice of words.
See also, Isaac H. Blanchard Co. v. Hamblin, 144 S.W. 880,
881-82 (Mo. App. 1912):
A contract between a limited number of
(Cont'd)
Fire Ins. Co., 416 S.W. 2d 208, 213 (Mo. App. 1967) (a court of appeals is not
bound to follow the reasoning and rvle of another court of appeals if such
reasoning and rule are not in accord with ine decisions of the Missouri Supreme
Court).
32a
Appendix E
individuals, partnerships, and corporations
engaged in the same line of business by
which they undertake to indemnify each
other against loss by fire, and do not
purpose { issue policies to others not
parties to the contract, is not a contract for
the creation of the insurance business,
within the meaning of that term as
expressed in our statutes. It is to be
classified as an interindemnity contract,
and therefore outside the purview of the
insurance law. ...
Thus, the indemnity clause in Agency’s car rental contract
is not insurance, and Agency is not a “liability insurer,” as
required under Zumwalt and Metcalf to be liable for the tort of
bad faith refusal to settle claims. Furthermore, Agency has
found no Missouri case imposing liability on a self-insured for
the tort of bad faith refusal to settle, and plaintiff has cited
none. Consequently, Agency cannot be held liable for that tort
under Missouri law, and the judgment below should be
reversed.
Although a California case (Nathanson v. Hertz Corp.,
227 Cal. Rptr. 799 (Cal. App. 1986)), and a Pennsylvania case
(Gavaghan v. Replacement Rent-A-Car, Inc., 811 F. Supp.
1077 (E.D. Pa. 1992), hold that self-insured car rental
companies can be liable for the tort of bad faith refusal to
settle, those cases are readily distinguishable on their facts and
on special California and Pennsylvania statutes—which
Missouri does not have.
In Nathanson, Hertz, unlike Agency here, issued a Basic
33a
Appendix E
Automobile Liability Insurance Policy to its renters pursuant
to the rental agreement. 227 Cal. Rptr. at 800, n. 2, 802, 803. In
addition, it was undisputed that Hertz added some
consideration for this coverage to the car rental, and that Hertz
set aside a “reserve” for the payment of claims. 227 Cal. Rptr.
at 802. There is no such evidence in this case.
Furthermore, in California, the duty of an insurance
company to exercise good faith in settling claims of third
parties is imposed by statute—California Insurance Code
§ 790.03(h) * 227 Cal. Rptr. at 800, n.3. Section 790.01 of the
California Insurance Code imposes that statutory duty on
various types of insurance companies, “as well as all other
persons engaged in the business of insurance.” Cal. Ins. Code
§ 790.01; 227 Cal. Rptr. at 800, n.3, 802. The Nathanson court
relied on the quoted language to impose such duty on Hertz.
227 Cal. Rptr. at 802-03.
Referring to paragraph 9 of the Hertz car rental
agreement, the court observed that “Hertz agree[d] to provide
liability coverage For the customer ‘with standard provisions
of a basic automobile liability insurance policy,’ ” and that
this “established that Hertz is collaterally and substantially
engaged in the business of insurance as it relates to its own
rental customers.” Jd. at 803. The court, therefore, held that
Hertz could be liable under the statute for bad faith refusal to
settle.
In the present case, however, plaintiff has not established
4. The California Supreme Court later reversed its earlier position that
there was a private right of action against insurers for bad faith refusal to settle
under this statute. Moradi-Shalal v. Firemen’s Fund Ins. Co., 758 P.2d 58 (Cal.
1988).
34a
Appendix E
any comparable facts or pointed to any comparable Missouri
Statutes. Agency did not issue a basic automobile liability
insurance policy to Wilhite; Agency merely agreed to
indemnify and hold him harmless up to the minimum amount
required by law. Furthermore, plaintiff did not prove that
Agency charged a premium for insurance as part of its rental,
or that Agency established reserves for claims. Finally,
plaintiff has cited no Missouri statute like California
Insurance Code Section 790.01, imposing a statutory duty of
good faith upon “all other persons engaged in the business of
insurance.” As a result, Nathanson likely would not be
followed by the Missouri Supreme Court, particularly in view
of the Missouri Supreme Court’s decision in American Family.
Nathanson, therefore, should not be applied by this Court in
this case.
Likewise in Gavaghan, a specific Pennsylvania statute
(42 Pa. Cons. Stat. § 8371) “create[d] a private cause of action
for bad faith conduct by an insurer against an insured.” 811
F.Supp. at 1079. “Although the Pennsylvania Supreme Court
has yet to address this precise issue (/d. at 1081),” the
Gavaghan court held that it would apply section 8371 to
self-insureds because other decisions showed that
“Pennsylvania courts refuse to distinguish between self
insureds, and those with a policy of insurance when to do so
denies an injured party coverage simply because of a vehicle
owner’s choice to self insure.” /d. at 1082.
The Missouri Supreme Court, however, treats
self-insureds as self-insureds, not as insurance companies.
American Family, 517 S.W.2d at 112-14; see St. John’s, 980
F.2d at 1224-27. The majority rule of other states is the same in
cases deciding whether self-insurance constitutes “other
insurance.” 46A.L.R. at 710 (“self-insurance against liability
35a
Appendix E
has generally been held not to be ‘other insurance’ within the
meaning of a liability insurance policy, although there is
authority to the contrary ...”).° Accordingly, Gavaghan is
based on Pennsylvania decisions that are contrary to the
controlling decision of the Missouri Supreme Court, as well as
the majority rule of other states. Gavaghan, therefore, likely
would not be followed by the Missouri Supreme Court, and
should not be followed by this Court.
Accordingly, this Court should hold that Agency is not an
insurance company and, therefore, cannot be held liable for
the tort of Bad faith refusal to settle under Missouri law.
Because the district court incorrectly submitted plaintiff's
case to the jury on the tort theory of bad faith refusal to settle,
and the jury clearly found for plaintiff on that basis, since it
awarded punitive damages which otherwise were not
permissible in this case, this Court should reverse the
judgment below and enter judgment for Agency.°®
5. The following cases are cited in support: Universal Underwriters Ins.
Co. v. Marriott Homes, Inc., 238 So.2d 730 (Ala. 1970); Southeast Title & Ins.
Co. v. Collins, 226 So.2d 247 (Fla. App.), cert. denied, 232 So.2d 180 (Fla.
1969); Home Indem. Co. v. Humble Oil & Rfg. Co., 314 S.W.2d 861 (Tex. Civ.
App.), aff'd, 317 S.W.2d 515 (Tex. 1958); American Family Mut. Ins. Co. v.
Missouri Power & Light Co., 517 S.W.2d 110 (Mo. 1974); United Nat. Ins. Co.
v. Philadelphia Gas Works, 289 A.2d 179 (Pa. Super. 1972); Allstate Ins. Co. v.
Zellars, 462 S.W.2d 550 (Tex. 1970); St. John's Regl. Health Ctr. v. American
Cas. Co., 980 F.2d 1222 (8th Cir, 1992) (Mo. law); Wake Cty. Hosp. Sys., Inc. v.
National Cas. Co., 804 F. Supp. 768 (E.D.N.C. 1992), aff'd, 1993 U.S. App.
Lexis 15159 (4th Cir. 1993); Aetna Cas. & Sur. Co. v. James J. Benes & Assoc.,
Inc., 593 N.E.2d 1087 (Ill. App.), app. denied, 602 N.E.2d 445 (Ill. 1992).
6. Although plaintiff may argue that the reversal of the judgment below
only on her bad faith tort theory entitles her to a new trial on her remaining
breach of contract claim, plaintiff s assignor’s failure to cooperate with Agency
(Cont'd)
36a
Appendix E
* aa ~
[Page 19]
= ae *
IV. WILHITE’S CLAIMS FOR THE TORT OF BAD
- FAITH AND FOR PUNITIVE DAMAGES WERE
NOT ASSIGNABLE TO PLAINTIFF UNDER
MISSOURI LAW, AND THEREFORE PLAINTIFF
HAD NO SUCH CLAIMS.
A claim for bad faith refusal to settle is a tort claim for
personal injuries. Zumwalt, 228 S.W.2d at 756; Landie, 390
S.W.2d at 565. While a claim for breach of contract is
assignable under Missouri law, a tort claim “based upon
wrongful or negligent acts resulting in personal injuries” is
not. Freeman v. Berberich, 60 S.W.2d 393, 401 (Mo. 1933).
Indeed, an attempt to transfer an unliquidated tort claim for
personal injuries is void and unenforceable as against the
public policy of Missouri. Forsthove v. Hardware Dealers
Mut. Fire Ins. Co., 416 S.W.2d 208, 212-18 (Mo. App. 1967);
Chuning v. Calvert, 452 S.W.2d 580, 584-85 (Mo. App. 1970);
Travelers Indemnity Co. v. Chumbley, 394 S.W.2d 418, 423 &
n. 12 (Mo. App. 1965). Accordingly, the district court erred in
submitting plaintiff’s bad faith refusal and punitive damage
claims to the jury, and this Court should reverse the judgment
below and enter judgment for Agency.'®
(Cont’d)
in connection with the underlying Quick lawsuit forecloses that claim, and thus
a new trial would not be warranted. See discussion under point III below.
10. See discussion in note 6 above.
37a
Appendix E
Plaintiff again cites Ganaway, this time for the
proposition that a claim for bad faith against an insurance
company is assignable. (Apee. Br. at 32.) Although Ganaway
may so hold, it should not be followed by this Court. That
holding in Ganaway is based upon an incorrect analysis of
what interests of a debtor in bankruptcy become part of the
bankrupt’s estate under federal bankruptcy law, and on the
“general law” of other states, which is contrary to the Missouri
law cited above. 795 S.W.2d at 564-65.
The bankruptcy law analysis is faulty: bankruptcy courts
sitting in Missouri have not allowed unliquidated personal
injury tort claims to become a part of the bankruptcy estate. Jn
re Mitchell, 73 B.R. 93, 95 (Bankr.E.D.Mo. 1987) (personal
injury claims); /n re Scarlett, 121 B.R. 578, 579-81 (W.D. Mo.
1990) (legal malpractice claim); Jn re Shahzad, 147 B.R. 34,
36-37 (Bankr.E.D.Mo. 1992) (claims for mental anguish,
humiliation, embarrassment, and damage to credit reputation
as a result of wrongful payment of check on forged
endorsement); /n re Winters, 424 F.Supp 1389, 1390 (E.D. Mo.
1975) (“Ex Delicto unliquidated claims for personal injuries
... do not vest in a trustee in bankruptcy”). Missouri courts
have similarly held that debts for which an attachment may
issue must possess an actual character and not be merely
possible, dependent on a contingency that may never happen.
State Government Employees Ins. Co. v. Lasky, 454 S.W.2d
942, 950 (Mo.App. 1970) (“It would be difficult to imagine a
so-called indebtedness more contingent and speculative than
an action for personal injuries resulting from the alleged
negligence of a defendant”).
Moreover, the “general law” of other states cited by the
Ganaway court is contrary to the Missouri law set forth in the
38a
Appendix E
cases cited above. As a result, Ganaway should not be
followed. Forsthove, 416 S.W.2d at 213 (court of appeais is
not bound to follow rule announced by another court of
appeals when that rule is not in accord with the decisions of the
Missouri Supreme Court).
Plaintiff also cites State ex rel. Park Nat. Bank v. Globe
Indemnity Co., 61 S.W.2d 733 (1933), asserting that it
“actually sets forth a rule indicating in all instances a claim for
bad faith asserted against a liability insurer is assignable.”
(Apee. Br. at 32.) Globe Indemnity does nothing of the sort.
Globe Indemnity does not even deal with the tort of bad faith
refusal to settle; it deals instead with a claim on a notary’s
bond for negligent acknowledgement of a deed of trust. 61
S.W.2d at 734.
Indeed, the language of Globe Indemnity cited by plaintiff
(Apee. Br. at 32-33) actually supports the contrary
proposition: that the purely personal tort of bad faith is not
assignable. Thus, the Missouri Supreme Court held, at the end
of the passage quoted by plaintiff:
“Practically the only classes of choses in
action which are not assignable are those
for torts for personal injuries, and for
wrongs done to the person, the reputation,
or the feelings of the injured party, . . .”
61 S.W.2d at 736, quoting from 2 R.C.L. 596, § 3.
Plaintiff then cites State ex rel. Smith v. Greene, 494
S.W.2d 55 (Mo. 1973), for the proposition that a claim for
punitive damages also is assignable. (Apee. Br. at 33.)
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Plaintiff’s reliance on Greene is seriously mistaken. Greene
did not hold that a claim for punitive damages is always
assignable, as plaintiff asserts. Greene held, instead, that
where a cause of action for which punitive damages might be
recovered survives the death of the plaintiff, the claim for
punitive damages survives as well. /d. at 60. Furthermore, in
that case, the cause of action was a statutory cause of action for
double damages for destruction of personal property (Mo.
Rev. Stat. § 537.330), not a cause of action for personal injury,
and another statute (Mo. Rev. Stat. § 537.010) expressly
provided that the action could be brought by the executor or
administrator of the injured party after his death. 494 S.W.2d
at 57-58. Thus, Greene is wholly inapplicable here. And, even
if it were applicable, it would not support the assignment of
Wilhite’s claim for punitive damages, because the underlying
claim for bad faith refusal to settle is not assignable, in any
event, for the reasons stated above.
Plaintiff further relies on Eastern Atlantic Transp. &
Mech. Eng., Inc. v. Dingham, 727 S.W.2d 418 (Mo. App.
1987), to support her argument that Wilhite’s punitive damage
claim is assignable. (Apee. Br. at 33.) Another court has
analyzed the reasoning in Eastern Atlantic, and found it to be
contrary to Missouri common law and statutes:
The Trustee has cited Eastern Atlantic
Transportation and Mechanical
Engineering, Inc. v. Dingham, 727 S.W.2d
418 (Mo. App. W.D. 1987), which held that
a claim for punitive damages against an
escrow agent for breach of fiduciary duty is
assignable. The escrow agent breached his
fiduciary duty by failing to collect and
40a
Appendix E
distribute funds as he was obligated to do
by the terms of the escrow agreement. The
court stated that “[t]he test used to
determine whether a cause of action is
assignable is whether or not it would
survive to the personal representative.” /d.
at 423. The Eastern Atlantic court's
assignability survivability test (which is
quite the old common law test) would lead
to the conclusion that even claims for
personal injuries are assignable because
such claims survive, by statute, the death of
the tort victim. R.S.Mo. 537.020. As
previously discussed, however, in Globe
Indemnity the Missouri Supreme Court
prohibited the assignment of such claims
which are not repudiated by the enactment
of § 537.020. While the result reached in
Eastern Atlantic may be sound, that
court’s analysis does not square with well
established Supreme Court precedent.
Scarlett v. Barnes, 121 B.R. 578, 581 (W.D. Mo. 1990)
(emphasis added). Because Eastern Atlantic is not in accord
with “well-established Supreme Court precedent,” it need not
be followed by a Missouri Court of Appeals and, therefore,
should not be followed by this Court. Forsthove, 416 S.W.2d
at 208.
Consequently, while Wilhite’s claim for breach of
contract was assignable, his bad faith tort claim and punitive
damage claim were not. Therefore, the verdict has been tainted
by the improper admission of evidence and the submission of
4la
Appendix E
erroneous legal theories to the jury. As a result, this Court
should reverse the judgment below and, for the reasons stated
above (see note 6 above), should enter judgment for Agency.
+ * *
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.