Wireco Worldgroup, Inc. v. Liberty Mut. Fire Ins. Co.

• Decision Date: 31 July 2018
• Docket Number: No. 17-1432,17-1432
• Citation: 897 F.3d 987
• Parties: WIRECO WORLDGROUP, INC., Plaintiff–Appellant, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY; The First Liberty Insurance Corporation, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

897 F.3d 987

WIRECO WORLDGROUP, INC., Plaintiff–Appellant,

v.LIBERTY MUTUAL FIRE INSURANCE COMPANY; The First Liberty Insurance Corporation, Defendants–Appellees.

No. 17-1432

United States Court of Appeals, Eighth Circuit.

Submitted: November 15, 2017

Filed: July 31, 2018

Rehearing Denied September 13, 2018

Counsel who presented argument on behalf of the appellant was Charles L. Philbrick, of Wheaton, IL. In addition to Mr. Philbrick, the following attorney(s) appeared on the appellant’s brief; Jeffrey Allan Kennard, of Kansas City, MO., and Scott R. Ast of Kansas City, MO.

Counsel who presented argument on behalf of the appellees was Bruce A. Moothart, of Kansas City, MO. In addition to Mr. Moothart, the following attorney(s) appeared on the appellees' brief; Daniel Omar Ramon, of Kansas City, MO.

Before COLLOTON and GRUENDER, Circuit Judges, and HOLMES,¹ District Judge.

COLLOTON, Circuit Judge.

WireCo WorldGroup, Inc. brought a five-count action against its workers' compensation insurance carriers, Liberty Mutual Fire Insurance Company and The First Liberty Insurance Corporation (collectively, "Liberty"). The lawsuit sought damages for excess premiums that WireCo allegedly paid on three of Liberty’s insurance policies.

The district court,² at the pleading stage, dismissed a claim for vexatious refusal to pay under Mo. Rev. Stat. § 375.420. The district court then granted summary judgment for Liberty on WireCo’s remaining breach of contract claims. WireCo appeals the dismissal of all counts. Although our reasoning differs from that of the district court in some respects, we ultimately affirm the judgment.

I.

WireCo is a wire and cable company that operates in many States, including Texas and Missouri. In 2009, WireCo purchased a workers' compensation insurance policy from Liberty. The 2009 policy was in effect from June 30, 2009, to June 30, 2010. WireCo purchased renewal policies from Liberty in 2010, 2011, and 2012, respectively. Each policy contained an "Information Page," endorsements, and terms and conditions.

The policies specified that Liberty would calculate the premium for each policy twice. Before the policy went into effect, Liberty would calculate an estimated premium, and WireCo agreed to pay this amount before the policy expired. After the policy expired, Liberty would calculate an actual premium in light of developments during the term. If the actual premium differed from the estimate, then the policy provided that WireCo would make an additional payment or receive a refund, as the case may be.

Each policy had two sections that explained how premiums would be calculated. Both sections identified "rating plans" as an element in the calculation. Item 4 of each policy’s Information Page read: "Premium: The premium for this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans ." (Emphasis added). Part Five of each policy’s "General Section" read: "All premium for this policy will be determined by our manuals of rules, rates, rating plans and classifications." (Emphasis added). According to WireCo, the references to "rating plans" meant the "schedule rating plans" that Liberty had filed with each State. One point of dispute is whether two particular schedule rating plans from Missouri and Texas were incorporated by reference into the renewal policies.

Schedule rating is a method of adjusting the premium on workers' compensation insurance to account for risk characteristics that affect the probability or severity of future losses. When an insurance policy covers the insured company’s operations in multiple States, the carrier must calculate a schedule rating factor for each State in accordance with the schedule rating plan it filed with the State. A schedule rating factor can take the form of a credit, which lowers the premium on the policy, or a debit, which increases the premium on the policy.

In its complaint, WireCo alleged that Liberty breached the 2010, 2011, and 2012 renewal policies because it modified the Missouri and Texas schedule rating factors without complying with the procedures laid out in the Missouri and Texas schedule rating plans. In relevant part, the Missouri Schedule Rating Plan stated:

2. No Schedule debit or credit can take effect until the evidence supporting the modification is in our files.

....

5. The customer will be informed in writing within ninety (90) days of the policy inception or renewal date, of the basis for any schedule debit or credit applied. If the policy is subject to any changes in its schedule debits or credits upon renewal, we will notify the customer.

The Texas Schedule Rating Plan included the following provisions:

4. At the time that the schedule rating factor is applied, the carrier must have documentation on file detailing the basis for the credit or debit.

5. The effective date of the schedule rating factor must be on or after the date of the carrier’s receipt of the documentation supporting the basis for the schedule rating factor.

In the initial 2009 policy, Liberty calculated WireCo’s premium using a Missouri schedule rating credit of 4.2%, but then adjusted the rating each year as follows: 2010 (1.3% credit), 2011 (15% debit), 2012 (25% debit). In advance of each renewal, Liberty provided WireCo with a policy proposal that included the modified Missouri schedule rating factors. WireCo alleged in Counts I, II, and III, however, that Liberty failed to give WireCo notice of these modifications in the manner required by the Missouri Schedule Rating Plan, and thereby breached the 2010, 2011, and 2012 renewal policies, respectively. WireCo contends that it was damaged by the increased premiums it paid as a "direct and proximate result" of Liberty’s breaches of contract.

WireCo also objects to Liberty’s modification of the Texas schedule rating factor in the 2012 renewal policy. In the 2011 renewal policy, Liberty calculated WireCo’s premium without applying a Texas schedule rating factor, but then applied a 40% debit in 2012. Liberty included this modified schedule rating factor in the 2012 renewal policy proposal that it provided to WireCo. But WireCo alleged in Count IV that Liberty did not have sufficient documentation in its file to support the schedule rating modification as required by the Texas Schedule Rating Plan, and thus breached the 2012 renewal policy by modifying the rating factor. WireCo contends that it was damaged by the increased premiums that resulted from this breach.

As an alternative theory, WireCo alleged in Count V that "[t]he excess premiums paid by WireCo that Liberty Mutual has refused to refund is ‘loss’ as contemplated by Mo. Rev. Stat. § 375.420." This statute provides for the recovery of a "loss under a policy" that the insurer refuses to pay "without reasonable cause or excuse." Mo. Rev. Stat. § 375.420. In total, WireCo contends that Liberty overcharged on premiums by $545,561.00.

The district court dismissed WireCo’s statutory claim, concluding that WireCo failed to state a claim on which relief can be granted. The court then granted summary judgment for Liberty on WireCo’s breach of contract claims. The court reasoned that the Missouri and Texas schedule rating plans were not incorporated into the renewal policies, so that Liberty’s alleged violations of the rating plans' notice and documentation requirements did not constitute breach of contract.

II.

We review the district court’s grant of a motion to dismiss de novo . In re Canadian Imp. Antitrust Litig. , 470 F.3d 785, 788 (8th Cir. 2006). Dismissal is proper where the plaintiff’s complaint fails to state a claim on which relief can be granted. Fed. R. Civ. P. 12(b)(6).

We first address WireCo’s claim that Liberty’s refusal to refund premium overpayments constituted a "loss" that is recoverable under Missouri’s vexatious refusal to pay statute, Mo. Rev. Stat. § 375.420. The district court dismissed this claim, reasoning that "[t]he plain language and established purpose of the statute indicate that it applies to claims filed under a policy that relate to a covered loss," and that "[a] breach of contract claim of overcharging or of failure to refund premium" is not a loss contemplated by the statute. We agree with this interpretation of the statute.

Missouri law permits an insured to recover damages and attorney’s fees when an insurance company refuses to pay for a "loss under a policy" if the company "has refused to pay such loss without reasonable cause or excuse." Mo. Rev. Stat. § 375.420.³ WireCo contends that "any loss" includes not only an insurer’s unreasonable failure to pay claims under the insurance policy, but also an insurer’s unreasonable refusal to refund excess premiums. WireCo argues that the statute’s use of the term "loss" rather than "claim" suggests a broader meaning. We agree with the district court, however, that a "loss" under § 375.420 does not include excess premium payments.

When "[i]nterpreting state statutes, this court applies that state’s rules of statutory construction." Behlmann v. Century Sur. Co. , 794 F.3d 960, 963 (8th Cir. 2015). Missouri’s rules provide that where, as here, "statutory language is not defined expressly, it is given its plain and ordinary meaning, as typically found in the dictionary." Derousse v. State Farm Mut. Auto. Ins. Co. , 298 S.W.3d 891, 895 (Mo. 2009). Where a dictionary provides multiple definitions, Missouri courts look to the context in which the term appears to ascertain which definition applies. See, e.g. , Estate of Williams v. Williams , 12 S.W.3d 302, 306 (Mo. 2000) ; In re A.S.O. , 75 S.W.3d 905, 910 (Mo. Ct. App. 2002) ; L.C. Dev. Co., Inc. v. Lincoln County , 26 S.W.3d 336, 340 (Mo. Ct. App. 2000). "Most common English words have a number of dictionary definitions," but "[o]ne should assume the contextually appropriate ordinary meaning unless there is reason to think otherwise." Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 70 (2012).

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