Ferrell v. West Bend Mut. Ins. Co.

• Decision Date: 04 January 2005
• Docket Number: No. 03-2846.,No. 03-1307.,03-1307.,03-2846.
• Citation: 393 F.3d 786
• Parties: Phillip FERRELL; Thomas Ferrell; Clay Lowry; Donny Lowry, Appellees, v. WEST BEND MUTUAL INSURANCE COMPANY, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

393 F.3d 786

Phillip FERRELL; Thomas Ferrell; Clay Lowry; Donny Lowry, Appellees, v. WEST BEND MUTUAL INSURANCE COMPANY, Appellant.

No. 03-1307.

No. 03-2846.

United States Court of Appeals, Eighth Circuit.

Submitted: April 13, 2004.

Filed: January 4, 2005.

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Jeffrey Leavel, argued, Racine, WI, for appellant.

James B. McMath, argued, Little Rock, AR, for appellee.

Before RILEY, HANSEN, and COLLOTON, Circuit Judges.

COLLOTON, Circuit Judge.

In these consolidated appeals, West Bend Mutual Insurance Company ("West Bend") appeals an adverse decision of the district court¹ following a bench trial, and also challenges the court's imposition of attorney's fees and prejudgment interest. We affirm.

I.

In 1999, Arkansas tomato growers Phillip and Tommy Ferrell and Clay and Donny Lowry ("the tomato growers" or "growers") purchased from Hi-Tech Film, Inc. ("Hi-Tech") a plastic film meant to prevent soil from splashing onto their plants and causing blight. The tomato growers rolled the film over their fields, but after the tomato plants were planted, the film began to deteriorate, leaving large holes in some places. The holes made it difficult to irrigate the plants properly, because the exposed soil dried out quickly, while the covered areas became waterlogged. The holes also allowed rainwater to splash dirt on the plants, causing early blight. These problems resulted in stunted plants that produced less fruit, and the tomatoes that did grow were smaller than normal and suffered from sunburn, rain damage, and cracked stems. Phillip Ferrell testified that the quality of the crop with the defective film was worse than if no film had been used at all.

In August 2000, the tomato growers sued Hi-Tech in United States District Court in Arkansas, and a jury found that Hi-Tech had breached implied warranties of merchantability and fitness. The district court awarded the tomato growers $165,365 in damages and $70,950 in attorney's fees, for a total award of $236,315. West Bend, Hi-Tech's commercial general liability ("CGL") insurance provider, defended Hi-Tech in the tomato growers' suit under a reservation of right to dispute coverage. Based on diversity jurisdiction the tomato growers then commenced the instant action in federal court seeking indemnity from West Bend. The district court conducted a bench trial, after which it awarded the tomato growers the underlying judgment, plus attorney's fees and costs, a penalty, prejudgment interest, and postjudgment interest. West Bend appeals on several grounds.

II.

West Bend first argues that it was not subject to personal jurisdiction in the district court because the insurance company lacked sufficient contacts with Arkansas. In the district court, a West Bend attorney attested to several facts in support of this contention: West Bend is a Wisconsin company with its principal place of business in Wisconsin; it does not conduct business or have an office, employees, agents, or representatives in Arkansas; it has no bank accounts or property in Arkansas and does not solicit business there; and it is not licensed to conduct business in Arkansas. In addition, West Bend was not a party to the contract between the tomato growers and Hi-Tech, or to the underlying action against Hi-Tech. Hi-Tech's insurance policy with West Bend was sold and paid for in Wisconsin.

The insurance policy, however, contained a territory-of-coverage clause stating that the policy insured Hi-Tech against injury or property damage from occurrences in "[t]he United States of America (including its territories and possessions), Puerto Rico, and Canada." The district court reasoned that "West Bend purposefully engaged in a contract of insurance with Hi-Tech," and that "[i]n the position of scrivener and with a highly sophisticated knowledge of risk and benefit, West Bend crafted a policy whereby West Bend chose to extend the policy's coverage into Arkansas and certain other distant forums but chose to exclude some forums." The court observed that the extension of coverage to various forums made the policy more marketable, and concluded that it was "grossly reasonable" for the insurance company to anticipate litigation concerning its policies. The district court thus held that the exercise of personal jurisdiction was "fair and just and proper." Upon de novo review, we agree.

"A federal court may assume jurisdiction over a foreign defendant only to the extent permitted by the forum state's long-arm statute and by the Due Process Clause of the Constitution." Dakota Indus., Inc. v. Ever Best Ltd., 28 F.3d 910, 915 (8th Cir.1994). Arkansas's long-arm statute extends personal jurisdiction over nonresidents to the extent permitted by the Constitution. Ark.Code Ann. § 16-4-101(B) (Michie 1999). The Due Process Clause requires the existence of "minimum contacts" between a defendant and the forum State. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). The requisite minimum contacts must be based upon "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958)). In addition, even where "minimum contacts" are established, the Due Process Clause also forbids the exercise of personal jurisdiction where it nonetheless would be inconsistent with "traditional notions of fair play and substantial justice." Asahi Metal Indus. Co. v. Superior Court of Calif., 480 U.S. 102, 113, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)).

We conclude that the insurance policy's territory-of-coverage clause establishes sufficient contact between West Bend and Arkansas to satisfy the strictures of the Due Process Clause. West Bend purposefully contracted with Hi-Tech to provide insurance coverage within foreign States, including Arkansas. As the district court observed, West Bend presumably offered a broad "coverage territory" in order to make its policies more marketable and profitable. Thus, not only was it foreseeable that West Bend might be sued in Arkansas in connection with a dispute relating to its policy, but the "expectation of being haled into court in a foreign state is an express feature of its policy." Rossman v. State Farm Mut. Auto. Ins. Co., 832 F.2d 282, 286 (4th Cir.1987). Stated differently, "litigation requiring the presence of the insurer is not only foreseeable, but it was purposefully contracted for by the insurer." Farmers Ins. Exch. v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 914 (9th Cir.1990). If West Bend wished to avoid lawsuits by a third party in any particular forum, then it could have excluded that forum from its territory-of-coverage clause, although such an exclusion likely would have made its policies less marketable. We thus follow the reasoning of our sister circuits in Rossman and Farmers in holding that the nationwide territory-of-coverage clause that West Bend included in its policy with Hi-Tech establishes sufficient minimum contacts with Arkansas to satisfy due process. See also Payne v. Motorists' Mut. Ins. Cos., 4 F.3d 452, 455-56 (6th Cir.1993).

West Bend relies on OMI Holdings, Inc. v. Royal Insurance Co. of Canada (OMI), 149 F.3d 1086, 1092-95 (10th Cir.1998), which criticized the analysis in Farmers and Rossman for placing what the Tenth Circuit believed was undue emphasis on the foreseeability of a lawsuit in a foreign forum. Ultimately, however, the court in OMI concluded that a territory-of-coverage clause did create minimum contacts with the forum state, id. at 1095, and later found that personal jurisdiction was lacking only because it would be unreasonable and inconsistent with notions of fair play and substantial justice under the circumstances of that case. Id. at 1095-98. Thus, the decision in OMI does not conflict with our finding of minimum contacts here.

We also conclude that the district court's assertion of jurisdiction comported with traditional notions of fair play and substantial justice. See Lakin v. Prudential Sec., Inc., 348 F.3d 704, 713 (8th Cir.2003). West Bend presumably had the wherewithal to defend itself in Arkansas, given that it was obligated to (and did) defend Hi-Tech in Arkansas, and the burden of litigating in Arkansas rather than Wisconsin was not unreasonable. Arkansas had an interest in the dispute, which involved Arkansas plaintiffs and Arkansas land, and the tomato growers had an interest in obtaining relief because a court already had determined that they suffered damages. There is no reason to believe that another forum would have been more efficient for resolving the dispute. Our situation is quite different from the circumstances of the Kansas lawsuit in OMI, where the defendants were Canadian, "the forum state ha[d] virtually no interest in litigating the case, the dispute [was] governed by Canadian law, and Kansas would not provide a more efficient forum in which to litigate." 149 F.3d at 1096 n. 2. Accordingly, we conclude that the district court did not offend traditional notions of fair play and substantial justice by assuming personal jurisdiction over West Bend in Arkansas.

III.

West Bend next contends that the tomato growers had no cause of action against the insurance company under Arkansas law. The growers' complaint asserted a right of action under an Arkansas statute that provides for direct actions against insurers based on "[a]ny policy of insurance issued or delivered in this state." Ark.Code Ann. § 23-89-101. This statute permits those Arkansas residents who have been issued or presented with policies in Arkansas to sue their insurers in Arkansas,...