Redland Ins. Co. v. Shelter Gen. Ins. Companies, 96-4003

• Decision Date: 15 August 1997
• Docket Number: No. 96-4003,96-4003
• Citation: 121 F.3d 443
• Parties: REDLAND INSURANCE COMPANY, as Assignee of Charlene Harvell and Lonnie Joe Harvell, Appellant, v. SHELTER GENERAL INSURANCE COMPANIES, Robert McAdams, Douglas G. Voyles, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 443

121 F.3d 443

38 Fed.R.Serv.3d 925

REDLAND INSURANCE COMPANY, as Assignee of Charlene Harvell and Lonnie Joe Harvell, Appellant, v. SHELTER GENERAL INSURANCE COMPANIES, Robert McAdams, Douglas G. Voyles, Appellees.

No. 96-4003.

United States Court of Appeals Eighth Circuit.

Submitted May 21, 1997.

Decided Aug. 15, 1997.

D.P. Marshall, Jr., Jonesboro, AR, argued (Paul D. Waddell, Jonesboro, AR, and Ira S. Lipsius, New York City, Jeffrey Scott Rogoff, Schindel, Farman and Lipsius, LLP, New York City, on the brief), for appellant.

J.V. Phelps, Jonesboro, AR, argued (G.S. Perkins, Jonesboro, AR, and A. Lorenzo Bryan, New York City, on the brief), for appellee.

Before MURPHY, HEANEY, and MAGILL, Circuit Judges.

HEANEY, Circuit Judge.

This is an action brought by an insurance company to collect on an underlying judgment for which its insured was one of three tortfeasors jointly and severally liable. The district court, faced with cross motions for summary judgment, dismissed the complaint for failing to state a claim. Although the court properly concluded that the plaintiff failed to state a claim under its novel assignment theory, an alternative cause of action in the complaint is broad enough to state a claim on which relief could be granted. Therefore, the court should not have dismissed the complaint in its entirety. We reverse in part and remand with instructions for the court to permit the lawsuit to proceed on the plaintiff's alternative contribution theory.

I.

A jury awarded Charlene and Lonnie Joe Harvell $500,000 for injuries Charlene Harvell sustained in a collision between the Harvells' car and a tractor-trailer. According to the jury's findings, the judgment totaling $509,895.11 with interest and costs was the joint and several obligation of three tortfeasors: Douglas G. Voyles, the driver of the tractor-trailer; Robert McAdams, the owner of the tractor-trailer; and CDS Transport, Inc. ("CDS"), which had leased both the services of Voyles and the tractor-trailer from McAdams.

Redland Insurance Company ("Redland") insured CDS and Shelter General Insurance Company ("Shelter") insured McAdams. Neither policy, however, covered the vehicle involved in the accident. Nonetheless, both Redland and Shelter were conditionally obligated for the judgment as a result of a federally-mandated MCS-90 endorsement each insurance company provided as part of its policy. In the endorsement, the insurance company agreed to pay "any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use" of any of its insured's motor vehicles in interstate commerce. The insured, in turn, agreed to reimburse the insurance company for all sums paid under the endorsement that the company would not have been required to pay absent the endorsement.

After judgment was entered for the Harvells, Redland approached Shelter to discuss apportionment of the judgment. Shelter took the position that it had no obligation to contribute toward paying the judgment. Redland entered an agreement with the Harvells in which it paid the Harvells $505,782.21, an amount virtually equal to the entire judgment, in return for a purported assignment of the judgment from the Harvells. According to the agreement, the Harvells released Redland and CDS, but no other party, from any liability as a result of the accident.

Redland then initiated this lawsuit in federal district court against Shelter, McAdams, and Voyles. Redland's complaint alleges two causes of action. In the first, Redland broadly asserts:

A dispute and actual controversy has arisen and now exists between Plaintiff and Shelter concerning their respective rights, duties, obligations and privileges under the Shelter policy of insurance with regard to the Harvell action. The controversy poses an issue for judicial determination involving the substantial rights of the parties.

(Jt.App. Tab 2 at 7 (Pl.'s Compl. at p 18).) In a second cause of action, Redland claims that, as "assignee" of the Harvells, it is entitled to recover the entire $509,895.11 from Shelter for the final judgment rendered against McAdams. (Id. at 8 (Pl.'s Compl. at p 21).)

In its answer, Shelter admitted the material facts alleged in Redland's complaint and asserted, among other defenses, that the complaint failed to allege facts on which the court could grant Redland relief. In its subsequent motion for summary judgment, Shelter argues that as an insurance company, not a member of the general public, Redland cannot recover against Shelter under the MCS-90 endorsement in Shelter's policy with McAdams. Moreover, according to Shelter, the money Redland paid to the Harvells fully satisfied the Harvells' judgment against CDS which Redland was obligated to pay under the terms of the MCS-90 endorsement in its policy with CDS. Redland filed a cross-motion for summary judgment, reasserting its theory that, as the Harvells' assignee, it had the right to enforce the judgment against any of the defendants, including McAdams, and that Shelter agreed to satisfy any judgment against McAdams by virtue of its MCS-90 endorsement. In plain language: Each insurance company asserted that the other was responsible for 100% of the $509,895.11 judgment.

The district court responded by dismissing the case for failing to state a claim and denying all pending motions, including those for summary judgment, as moot. The court expressed strong concern about Redland's legal...