Maritz Holdings Inc. v. Certain Underwriters
| Decision Date | 30 November 2020 |
| Docket Number | Case No. 4:18-CV-00825 SEP |
| Parties | MARITZ HOLDINGS INC., Plaintiff, v. CERTAIN UNDERWRITERS AT LLOYD'S LONDON SUBSCRIBING TO POLICIES NUMBERED B122F10115115 AND F10115116, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Missouri |
This matter is before the Court on Defendant Certain Underwriters at Lloyd's London Subscribing to Policies Numbered B122F10115115 and F10115116's ("Underwriters") Motion to Dismiss Vexatious Refusal to Pay Claim of Plaintiff Maritz Holdings Inc.'s ("Maritz" or "Plaintiff") Amended Complaint. Doc. [101]. For the reasons stated below, the Motion to Dismiss will be denied.
This case involves a dispute over insurance coverage for alleged losses arising out of cyber-security breaches experienced by Plaintiff, through which certain electronically stored gift card information was stolen. Underwriters issued breach-response insurance coverage to Maritz for 2015 through 2017 under two separate insurance contracts ("Insurance Contracts"). The Insurance Contracts provided coverage for, among other things, certain fees and costs Maritz might incur in responding to such a security breach. Maritz experienced two cyber-security breaches: one in March 2016, and another in February 2017. Maritz submitted claims to Underwriters for expenses it alleges are covered under the Insurance Contracts.
Underwriters denied coverage on Maritz's claims, after which Maritz filed the instant action, asserting claims for breach of contract against all Defendants, and vexatious refusal against Defendant Underwriters, and seeking damages of between approximately $4.5 and 5.5 million. Maritz's complaint was initially filed in state court and was removed to this Court on the basis of diversity of the parties. Doc. [1]. Maritz subsequently filed an Amended Complaint, adding another of its insurers, Affiliated FM, as an additional Defendant. Doc. [45]. Underwriters filed the instant Motion to Dismiss Count II of the Amended Complaint for vexatious refusal to pay pursuant to Federal Rule of Civil Procedure 12(b)(6). Doc. [101].
Because Underwriters filed its Motion to Dismiss after it had already answered the Amended Complaint, a motion to dismiss under subsection (b)(6) of Rule 12 is untimely. See Fed. R. Civ. P. 12(b) (). After Maritz noted this deficiency in its memorandum in opposition to the Motion to Dismiss (Doc. [108]), Underwriters asked the Court to treat its motion as one for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). Because the applicable legal standard under either subsection of Rule 12 is the same, the Court will construe the motion as though it were initially made under Rule 12(c).
The Court applies the same standard of review to a motion for judgment on the pleadings under Rule 12(c) as it does to a motion to dismiss under Rule 12(b)(6). See Gallagher v. City of Clayton, 699 F.3d 1013, 1016 (8th Cir. 2012). The purpose of either such motion is to test the legal sufficiency of a claim. Neitzke v. Williams, 490 U.S. 319, 326 (1989). The Court must view the facts pleaded by the nonmoving party as true and grant all reasonable inferences in favor of that party. Clemons v. Crawford, 585 F.3d 1119, 1124 (8th Cir. 2009). The Court will grant the motion only if the moving party has clearly established that it is entitled to judgment as a matter of law. Waldron v. Boeing Co., 388 F.3d 591, 593 (8th Cir. 2004).
The Insurance Contracts each contain a choice-of-law provision stating:
In case of any dispute arising out of this Insurance, the same shall be governed by the laws of New York and subject to the exclusive jurisdiction of the courts of the United States of America in accordance with the attached wording.
Docs. [4-1] at 5; [4-2] at 5.
Underwriters asserts that Maritz's claim in Count II for vexatious refusal to pay under Mo. Rev. Stat. § 375.4201 is a "dispute arising out of [the] Insurance," and as such, is governed by New York law according to the choice-of-law provision in the Insurance Contracts. See Doc. [102] at 4-5. Underwriters argues that the claim must fail as a matter of law because it is made under Missouri law, and therefore fails to state a claim under the applicable governing law.
Maritz asserts that the "arising out of" language in the Insurance Contracts only applies to disputes involving the interpretation of the two policies. Maritz argues that the vexatious refusal claim is not truly one "arising out of [the] Insurance," but rather, one arising out of Underwriters's allegedly improper conduct in responding to Maritz's claimed losses after it submitted its claim on the breaches.
Maritz also argues that even if this Court were to conclude that the Insurance Contracts' choice-of-law provision applies to its vexatious refusal claim, that still would not preclude its claim, because the deprivation of such claim would be contrary to a fundamental policy of Missouri—protecting its residents from unfair practices by insurers—and Missouri courts apply the law of another jurisdiction only if "th[e] law is not contrary to a fundamental policy of Missouri." Sturgeon v. Allied Pros. Ins. Co., 344 S.W.3d 205, 210 (Mo. Ct. App. 2011).
The Court rejects Maritz's argument that its vexatious refusal claim is not a "dispute arising out of [the] Insurance" policies. The unambiguous wording of the clause is not limited to contractual disputes, but on its face applies to "any" dispute arising out of the Insurance Contracts. Maritz's claim for vexatious refusal to pay is plainly one that arises out of the Insurance Contracts. The claim is predicated on the existence of the policies and could not be brought if they were not in effect. See Thomas Farms, Ltd. v. Nat'l Union Fire Ins. Co. ofPittsburgh, No. 1:18CV00196 AGF, 2019 WL 460503 at *3 (E.D. Mo. Feb. 6, 2019) (); see also Minden v. Atain Specialty Ins. Co., 788 F.3d 750, 756 (8th Cir. 2015) (). That is not the end of the analysis, though. The Court must still determine whether New York law controls and precludes Maritz's claim for vexatious refusal to pay.
A district court sitting in diversity jurisdiction applies the conflict-of-law rules for the state in which it sits. DCS Sanitation Mgmt., Inc. v. Castillo, 435 F.3d 892, 895 (8th Cir. 2006); Inacom Corp. v. Sears, Roebuck & Co., 254 F.3d 683, 687 (8th Cir. 2001) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941)); see also Harris v. Am. Mod. Home Ins. Co., 571 F. Supp. 2d 1066, 1075 (E.D. Mo. 2008) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)) ("A federal district court sitting in diversity jurisdiction must apply the rules of decision that would be applied by the courts of the state in which it sits, including the initial choice of the applicable substantive law."). Thus, we apply Missouri's conflict-of-law rules.
Missouri recognizes that contracting parties may choose the state whose law will govern the interpretation of their contractual rights and duties. See, e.g., Sturgeon, 344 S.W.3d at 209-11 (citing Tri-County Retreading, Inc. v. Bandag Inc., 851 S.W.2d 780, 784 (Mo. Ct. App. 1993)); Nakao v. Nakao, 602 S.W.2d 223, 226 (Mo. Ct. App. 1980). So long as the application of the chosen law is not contrary to the public policy of Missouri, Missouri courts will generally honor the parties' choice-of-law provision. Sturgeon, 344 S.W.3d at 210.
Missouri courts have long recognized, however, that "'a state may not be required to enforce in its own courts the terms of an insurance policy normally subject to the law of another state where such enforcement will conflict with the public policy of the state of the forum.'" Asel v. Ord. of United Com. Travelers of Am., 197 S.W.2d 639, 645 (Mo. banc. 1946) (quoting Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 316-17 (1943)). See also Milburn v. Zurich Am. Ins. Co., 4:19-cv-02719-SNLJ, 2020 WL 4673785, at *3 (E.D. Mo. Aug. 12, 2020) () (internal quotation marks omitted). Consequently, where the application of the chosen law would be contrary to Missouri public policy, Missouricourts may instead choose to apply the law of their own state. See Sturgeon, 344 S.W.3d at 209-11 (). Accordingly, the law of the state chosen by the parties—here, New York—will only govern if its application would not be contrary to the public policy of Missouri.
The Missouri Supreme Court informs us that "exceptions based on public policy must usually find support in . . . statutory provisions," Halpin v. Am. Fam. Mut. Ins. Co., 823 S.W.2d 479, 483 (Mo. banc. 1992), and are applied where "there is some local interest in the forum state to be protected" by its application. Asel, 197 S.W.2d at 645. Additionally, Missouri courts have recognized that the "paramount concern" of Missouri public policy is "the protection of its own citizens." Gilmore v. Attebery, 899 S.W.2d 164, 168 (Mo. Ct. App. 1995).
Maritz asserts that these conditions are met here. Maritz notes...
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