Milburn v. Zurich Am. Ins. Co.

• Decision Date: 12 August 2020
• Docket Number: Case No. 4:19-cv-02719-SNLJ
• Parties: Chris MILBURN and Anita Milburn, Plaintiffs, v. ZURICH AMERICAN INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Missouri

478 F.Supp.3d 789

Chris MILBURN and Anita Milburn, Plaintiffs,

v.ZURICH AMERICAN INSURANCE COMPANY, Defendant.

Case No. 4:19-cv-02719-SNLJ

United States District Court, E.D. Missouri, Eastern Division.

Signed August 12, 2020

Andrew S. Buchanan, James V. O'brien, Buchanan and Williams PC, Brentwood, MO, for Plaintiffs.

Larry David Fields, Meredith A. Webster, Kutak Rock Llp, Kansas City, MO, for Defendant.

MEMORANDUM AND ORDER

STEPHEN N. LIMBAUGH, JR., SENIOR UNITED STATES DISTRICT JUDGE

This matter comes before the Court on cross-motions for summary judgment by plaintiffs, Chris and Anita Milburn, and defendant, Zurich American Insurance Company. (ECF #26, 27). Also before the Court is plaintiffs’ motion to strike the declaration of Allen H. Motter. (ECF #34). For the reasons that follow, plaintiffs’ motion (ECF #26) is GRANTED and Zurich's motion (ECF #27) is DENIED . Plaintiffs’ motion to strike is DENIED AS MOOT .¹

I. BACKGROUND

This is a declaratory judgment action by plaintiffs seeking a ruling against Zurich that its claimed right of subrogation is invalid and unenforceable under Missouri law. For its part, Zurich seeks to be reimbursed from the proceeds of a separate personal injury action filed by plaintiffs. Beyond certain factual details pertaining to the formation of their contract together, the parties otherwise agree on the facts, as set forth below.

In 2014, plaintiffs moved to Missouri and formed ACM Transportation, LLC., a Missouri limited liability company, for the "purpose of working as commercial truck drivers." In 2015, ACM contracted with Panther II Transportation, Inc., an Ohio corporation, to "haul freight" that "Panther paid ACM for the loads." As part of that relationship, Panther "required [plaintiffs] to purchase and pay for liability insurance." Specifically, Panther instructed plaintiffs to enroll in a Zurich "Group Occupational Accident Policy." That policy was issued to ACM for a policy period beginning September 1, 2015, and ending September 1, 2016. It contains a choice-of-law provision stating that it is "subject to the laws of the Contract Situs in which it is issued." Plaintiffs concede the "contract situs" is Ohio. The policy also contains a subrogation clause explaining

Subrogation . We have the right to recover all payments which We have made to a Covered Person from anyone liable for the Injury. If the Covered Person recovers from anyone liable for the Injury, We will be reimbursed first from such recovery to the extent of Our payments to the Covered Person.

On April 27, 2016, plaintiffs were involved in a vehicle accident in Roane County, Tennessee. Plaintiffs filed suit against the other parties involved—non-parties, here—seeking to recover for personal injuries they sustained. Zurich has paid $189,670.71 to plaintiffs for their medical expenses and disability arising out of the accident and seeks to recover these payments. However, plaintiffs claim that Missouri law bars Zurich from seeking a recovery through any funds collected in their personal injury action.

II. STANDARD OF REVIEW

Summary Judgment involves the "threshold inquiry of determining whether there is a need for trial." Walls v. Petrohawk Properties, LP ., 812 F.3d 621, 624 (8th Cir. 2015) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). In other words, summary judgment is appropriately granted if, in viewing the record in a light most favorable to the nonmoving party, there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a). The movant bears the initial burden of demonstrating both the absence of a genuine issue of material fact and his or her entitlement to judgment as a matter of law. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once this initial burden is met, the nonmoving party must then set forth, by affidavit or other rebuttal evidence, specific facts showing that a genuine issue of material fact actually exists. Grey v. City of Oak Grove, Mo ., 396 F.3d 1031, 1034 (8th Cir. 2005) ; FED. R. CIV. P. 56(e). To satisfy this burden, the nonmoving party must "do more than simply show there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp ., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Scott v. Harris , 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007) (quoting Anderson , 477 U.S. at 247-248, 106 S.Ct. 2505 ). Thus, "when opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonably jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion to dismiss." Id . Moreover, even when a dispute is genuine—such that a jury could reasonably favor either side—it must also be the case that the disputed facts are material in that they "might affect the outcome of the suit under the governing law." Anderson , 477 U.S. at 248, 106 S.Ct. 2505.

In a case where cross-motions for summary judgment are filed, the calculus generally remains the same. "The filing of cross motions for summary judgment does not necessarily indicate that there is no dispute as to a material fact, or have the effect of submitting the cause to a plenary determination on the merits." Wermager v. Cormoran Tp. Bd. , 716 F.2d 1211, 1214 (8th Cir. 1983). The "court must evaluate each party's motion on its own merits." Int'l Union, United Auto., Aerospace & Agric. Implement Workers Of Am. v. Honeywell Int'l, Inc ., 954 F.3d 948, 954 (6th Cir. 2020) Only when cross-motions are filed under stipulated facts is "one of the moving parties [necessarily] entitled to judgment as a matter of law." Master Insulators of St. Louis v. Int'l Ass'n of Heat & Frost Insulators & Asbestos Workers, Local No. 1 , 925 F.2d 1118, 1120 (8th Cir. 1991).

III. ANALYSIS

The parties’ dispute comes down to the question of what state law applies. Ohio permits conventional subrogation clauses in insurance contracts, explaining that "contractual interpretation should not be decided on the basis of what is just or equitable." See N. Buckeye Edn. Council Group Health Benefits Plan v. Lawson , 814 N.E.2d 1210, 1216 (Ohio 2004) ; Blue Cross & Blue Shield Mut. of Ohio v. Hrenko , 72 Ohio St.3d 120, 647 N.E.2d 1358, 1360 (Ohio 1995) ; Callihan v. Niles , 2012 WL 34437 at *2 (Ohio App. Jan 6, 2012). Missouri does not, emphasizing that such clauses "amount to an impermissible assignment of the insured's rights," which is "against public policy." Nevils v. Grp. Health Plan, Inc. , 418 S.W.3d 451, 453 (Mo. 2014), cert. granted, judgment vacated sub nom. Coventry Health Care of Missouri, Inc. v. Nevils , 576 U.S. 1048, 135 S. Ct. 2886, 192 L.Ed.2d 918 (2015) ; Jos. A. Bank Clothiers, Inc. v. Brodsky , 950 S.W.2d 297, 303 (Mo. App. E.D. 1997) ; Buatte v. Gencare Health Sys., Inc. , 939 S.W.2d 440, 441-442 (Mo. App. E.D. 1996).² As this Court has held, Missouri's anti-subrogation laws are "very broad" and continue to apply even after the "claim to be subrogated is eventually reduced to a judgment." Auto-Owners Ins. Co. v. Pruitt , 2015 WL 687131 at *5-6 (E.D. Mo. Feb. 18, 2015).

Given the disparity between Missouri and Ohio law on the issue of subrogation, it is not surprising to find that the parties focus much of their briefing on the appropriate standard to be applied in a choice-of-law analyses. Zurich says the lex loci contractus doctrine controls—the idea that the state law where the master policy is delivered controls, which in this case would be Ohio. To the contrary, plaintiffs say lex loci contractus has been supplanted by the "most significant relationship test," which takes a more evaluative approach to determine applicable law based on a number of factors favoring one forum over another. See Generally Williamson v. Hartford Life and Acc. Ins. Co. , 2012 WL 2368473 at *3 (W.D. Mo. June 21, 2012) (discussing the most significant relationship test and lex loci contractus in the context of group insurance policies under Missouri law). There is also, of course, the fact that the policy contains an express choice-of-law provision favoring Ohio law.

Even assuming, however, that Zurich is correct about the insurance policy being an Ohio contract that applies Ohio law, Missouri public policy can dictate a different outcome. Long ago, the Missouri Supreme Court made clear that public policy can override "the terms of an insurance policy normally subject to the laws of another state where such enforcement will conflict with the public policy of the state of the forum." Asel v. Order of United Commercial Travelers of Am. , 355 Mo. 658, 197 S.W.2d 639, 645 (Mo banc. 1946) (emphasis added). Thus, public policy is a matter above and beyond a choice-of-law analysis and can act to override it entirely. See , e.g., Sturgeon v. Allied Professionals Ins. Co ., 344 S.W.3d 205, 210 (Mo. App. E.D. 2011) (Missouri public policy against mandatory arbitration in insurance contracts was "dispositive" even before reaching a conflicts-of-law analysis); Langston v. Hayden , 886 S.W.2d 82, 86 (Mo. App. W.D. 1994) ("If the law of a foreign state violates our public policy, as a general rule, it will not be enforced by our state courts"); RESTATEMENT ( SECOND ) OF CONFLICTS OF LAW § 187 (1971) (even law of the state chosen by the parties in a contract can be overridden by "fundamental policy of the [forum] state").

The public policy at issue here, Missouri's anti-subrogation rule, is rather unique. Missouri law favors "freedom of contract in liability insurance," therefore "[w]hen the contract language is clear"—and, here, it expressly favors Ohio law—"exceptions...