Dairy Farmers of America v. Travelers Ins. Co.
| Decision Date | 03 June 2002 |
| Docket Number | No. 01-2527.,01-2527. |
| Citation | 292 F.3d 567 |
| Parties | DAIRY FARMERS OF AMERICA, INC., Plaintiff/Appellant, v. TRAVELERS INSURANCE COMPANY, Defendant/Appellee, v. Cabool Transport, Inc., Third Party Plaintiff, Cabool Transport, Inc., Fourth Party Plaintiff, v. National Union Fire Insurance Company, Fourth Party Defendant. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Shirley Ward Keeler, argued, Kansas City, MO, (H. Fred Northcraft, on the brief), for appellant.
Robert W. Cockerham, argued, St. Louis, MO (T. Michael Ward, on the brief), for appellee.
Before MORRIS SHEPPARD ARNOLD, BEAM, and RILEY, Circuit Judges.
Dairy Farmers of America, Inc. (DFA) filed a declaratory judgment action against Travelers Insurance Company (Travelers) seeking a declaration that the liability insurance policy issued by Travelers was excess over a primary policy and an umbrella policy held by Cabool Transport, Inc. and Cabool Leasing (collectively Cabool), with whom DFA had an indemnification agreement. Cabool's primary policy was also issued by Travelers. Cabool's umbrella policy was issued by National Union Fire Insurance Company (National Union). DFA alleged multiple tort claims against Travelers for applying DFA's $1 million policy to settle a personal injury claim before exhausting coverage under Cabool's $5 million National Union umbrella policy. Alternatively, DFA sought equitable reformation of both DFA's and Cabool's policies with Travelers.
DFA and Travelers filed cross motions for summary judgment. The district court granted summary judgment in favor of Travelers. DFA appeals. We reverse in part, affirm in part, and remand.
DFA is a dairy cooperative which contracted with Cabool to ship its milk and dairy products to customers nationwide. The contract required Cabool to indemnify DFA for claims arising out of personal injury or property damage sustained by reason of an act or omission of Cabool or its employees. DFA and Cabool each obtained a $1 million liability policy through Travelers using the same independent broker. Cabool also obtained a $5 million umbrella policy from National Union.
DFA and Cabool intended that Cabool's primary and excess policies would be exhausted before any claim could trigger coverage under DFA's policy. However, the submissions prepared by the broker did not specify this intention. DFA offered evidence that the insurance broker understood the DFA and Cabool business relationship and their transportation agreement containing the indemnity provision. Although the broker believed Travelers also understood the DFA/Cabool relationship, Travelers classified DFA as a trucker "in the business of providing transportation for hire," disqualifying Cabool's indemnity as an "insured contract" in both the Cabool/Travelers and Cabool/National Union policies. In response to the broker's submissions, Travelers prepared insurance quotations which DFA and Cabool accepted.
Travelers's liability policy issued to DFA had a $250,000 deductible. As required by Travelers, DFA deposited $250,000 into a specified insurance reserve account to cover the deductible.
In February 1996, while transporting goods under Cabool's contract with DFA, a Cabool driver was involved in a trucking accident. The Cabool truck hit a car driven by Deborah Ward (Ward), causing her severe injuries. Ward sued the driver, Cabool, DFA, and State Farm Insurance Company for $25 million. Travelers agreed to defend the driver, Cabool, and DFA and retained the same defense counsel for each insured.
In September 1998, Travelers informed DFA that Travelers was applying both the DFA and the Cabool policies to the Ward claim. Travelers settled the Ward claim for $4.4 million in February 1999. Travelers applied the $1 million policy limits from both the DFA policy and the Cabool policy. Travelers deducted $250,000 from the DFA reserve account to cover DFA's deductible. National Union paid the remaining $2.4 million from Cabool's umbrella policy.
In June 1999 DFA brought a declaratory judgment action against Travelers alleging that Travelers had wrongly applied DFA's liability policy and had wrongly applied DFA's $250,000 deductible. DFA asserted multiple tort claims, including breach of fiduciary duty, conversion, negligent misrepresentation, fraudulent non-disclosure, and vexatious refusal. In the alternative, DFA sought equitable reformation of its policy and the Cabool policy with Travelers to reflect their intention and understanding that the DFA/Travelers policy covered claims only after Cabool's primary and excess policies were exhausted.
In November 1999 Travelers filed a third-party complaint against Cabool. Cabool moved to dismiss the third-party complaint. DFA did not object to Cabool's motion. In June 2000 the district court dismissed Travelers's third-party complaint against Cabool.
Both Travelers and DFA filed motions for summary judgment. The district court granted summary judgment in favor of Travelers. The district court framed the essential dispute as "whether [DFA's] policy offers solely excess coverage relative to both of Cabool's policies." The court then narrowed its inquiry to "whether DFA's policy is excess relative to Cabool's umbrella policy with National Union." After reviewing the insurance policies, the district court found that National Union's policy is a "true excess" or umbrella policy; whereas, DFA's policy is primary in nature and excess only by virtue of an "Other Insurance" provision. Relying on Smith v. Wausau Underwriters Insurance Company, 977 S.W.2d 291, 293 (Mo.Ct.App.1998), the district court held that a policy offering excess coverage only through an "other insurance" clause is not considered excess relative to an umbrella policy covering the same loss.
The district court did not determine whether Travelers had erred when, in defending DFA and Cabool, it considered DFA to be a "trucker engaged in the business of providing transportation for hire" and deemed its policy "co-primary" with Cabool's policy for purposes of the Ward personal injury claim.1 The district court found this determination was unnecessary. According to the court, DFA was not prejudiced by any such error because the DFA policy was not excess relative to Cabool's umbrella policy.
Finding that DFA's policy was not excess to the umbrella policy and that DFA sustained no damages, the district court granted summary judgment on DFA's declaratory judgment, conversion, breach of fiduciary duty, and vexatious refusal claims. Because DFA did not resist summary judgment on its negligent misrepresentation and fraudulent non-disclosure claims, the court granted summary judgment on these claims as well.
The district court then considered and rejected DFA's claim for equitable reformation of the DFA policy. The court found the written DFA/Travelers and Cabool/Travelers insurance policies were unambiguous and DFA had an adequate remedy at law, namely a claim against Cabool based on the parties' indemnification agreement. Because the insurance policies had expired and DFA could pursue a direct claim against Cabool under the indemnification agreement, the district court found reformation was unnecessary.
DFA filed an amended motion for reconsideration of the court's order granting summary judgment. In the alternative, DFA sought leave to file an amended complaint adding Cabool as a party. Travelers resisted, and the district court denied the motion.
On appeal, DFA contends the district court (1) erred in granting summary judgment to Travelers on DFA's tort claims; (2) abused its discretion by refusing to reform the DFA policy; and (3) abused its discretion by refusing to permit DFA to amend its pleadings to add Cabool as a defendant.
We review a grant of summary judgment de novo, applying the same standard as the district court. Jeseritz v. Potter, 282 F.3d 542, 545 (8th Cir.2002). When the evidence, viewed in a light most favorable to the non-moving party, demonstrates the existence of no genuine issues of material fact, and the moving party is entitled to judgment as a matter of law, summary judgment shall be granted. See Fed.R.Civ.P. 56(c); Clark v. Kellogg Co., 205 F.3d 1079, 1082 (8th Cir.2000).
DFA contends the district court erred in granting summary judgment on its breach of fiduciary duty, negligent misrepresentation, fraudulent non-disclosure, and conversion claims. Travelers argues DFA's tort claims rest on the erroneous premise that the DFA policy is excess over the Cabool policy and the National Union umbrella policy, and fail as a matter of law for lack of proof of damages. Following our review of the record, we conclude the district court properly granted summary judgment on DFA's conversion claim. Furthermore, because DFA did not resist summary judgment as to its negligent misrepresentation and fraudulent non-disclosure claims, the district court properly granted summary judgment on these claims. However, we do not agree with the district court's ruling that DFA's breach of fiduciary duty claim must fail as a matter of law.
We must apply the law of Missouri, the forum state in this diversity action. Fogelbach v. Wal-Mart Stores, Inc., 270 F.3d 696, 698 (8th Cir.2001). A claim for breach of fiduciary duty has four elements: (1) the existence of a fiduciary relationship between the parties, (2) a breach of that fiduciary duty, (3) causation, and (4) harm. Koger v. Hartford Life Ins. Co., 28 S.W.3d 405, 411 (Mo.Ct.App.2000). A fiduciary is a person having a duty to "act primarily for the benefit of another in matters connected with his undertaking." See Restatement (Second) Agency § 13 cmt. a (1957); Restatement (Second) of Trusts § 2 cmt. b (1959). While Missouri has adopted no precise...
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