Quick v. National Auto Credit
| Decision Date | 02 November 1995 |
| Docket Number | A-C,Nos. 94-3989,95-1045,s. 94-3989 |
| Citation | 65 F.3d 741 |
| Parties | Kathleen QUICK, assignee of Kendrick Wilhite, Appellee, v. NATIONAL AUTO CREDIT, formerly known as Agency Rent-ar, Inc., Appellant. Missouri Organization of Defense Lawyers, Amicus Curiae. Enterprise Rent-ar, Inc., 1 Amicus Curiae. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Kenneth Slavens, St. Louis, MO, argued (James B. James and Timothy W. Luft, on the brief), for appellant.
Jeams Newberry, Springfield, MO, argued (Thomas W. Millington, on the brief), for appellee.
Before McMILLIAN, BEAM, and HANSEN, Circuit Judges.
In July 1992, Kendrick Wilhite was involved in a car accident while driving a vehicle leased to him by Agency Rent-a-Car (Agency). A wrongful death action stemming from the accident was filed against Wilhite. Without an appearance by Wilhite or anyone on his behalf, a default judgment was entered. The wrongful death plaintiffs obtained an assignment of Wilhite's claims against Agency and prosecuted the present action, alleging breach of contract and bad faith refusal to settle. A jury found Agency liable, and the district court denied various post-trial motions. Agency appeals. We affirm in part, reverse in part, and remand with directions.
In July 1992, Wilhite rented a car from Agency in Lincoln, Nebraska, so that he could drive to his home in St. Louis, Missouri. On the return trip to Lincoln, Wilhite was involved in a car accident in Missouri. Eleven-year-old Anne Quick was killed in the accident. Others were injured in varying degrees.
Anne's mother, Kathleen Quick, retained Cynthia MacPherson to handle the wrongful death claim. One week after the accident, MacPherson contacted Agency and spoke with Steve Ockajick, who worked in Agency's claims department. MacPherson testified that she offered to accept $25,000 from Agency, the amount of protection afforded by the rental contract.
Two weeks later, Ockajick sent Wilhite a letter informing him that the maximum protection under the rental agreement was $25,000 per person and $50,000 per occurrence. The letter notified Wilhite that portions of the claims might exceed these limits and advised him to contact his insurance carrier and personal legal counsel. Wilhite acknowledges receiving this letter.
Between September 1992 and March 1993, MacPherson and other counsel for Kathleen Quick attempted to negotiate with Agency and settle the claim. 2 When these attempts failed, Quick filed the wrongful death action against Wilhite. On March 23, 1993, Wilhite was served with a summons and petition. Wilhite did not notify Agency of the summons and did nothing on his own.
On March 30, 1993, MacPherson called Ockajick. She informed Ockajick that the wrongful death action had been filed in Wright County, that Wilhite had been served process, and that time was running for an answer to be filed. Ockajick told MacPherson that he had turned the file over to the legal department and that someone would get back to her once the file had been reviewed.
After speaking to MacPherson, Ockajick called Wilhite and left a message on his answering machine asking Wilhite to return the call. Wilhite testified that he never received the message from Ockajick. He also testified that when his roommates came home before him, they would sometimes erase the messages and sometimes leave them on the tape.
As indicated, no appearance was entered in the wrongful death action. On April 27, 1993, a default judgment was rendered against Wilhite for $6.5 million. Agency learned of the default judgment one week later. Agency then attempted, unsuccessfully, to contact Wilhite.
On September 23, 1993, Wilhite and Quick entered into an agreement. Under the terms of the agreement, Wilhite assigned to Quick his claims against Agency. In return, Quick agreed to forbear enforcing the judgment against Wilhite "until and unless all legal and equitable remedies are exhausted against Agency."
In November 1993, Quick, as assignee for Wilhite, filed the present diversity action in federal district court. Quick alleged that Agency had breached its contract with Wilhite by failing to defend him in the wrongful death action and that Agency had acted in bad faith by refusing to settle within the contractual limits prior to the entry of default judgment. Agency filed a declaratory judgment action in state court. Agency asked the district court to stay the trial until the declaratory judgment action was concluded, but the district court refused.
The trial was held in September 1994, and the jury returned a verdict in favor of Quick. The jury awarded Quick $6.5 million in actual damages, plus interest from the date of the default judgment, and $885,000 in exemplary damages. 3 In addition, the district court enjoined Agency from proceeding with the declaratory judgment action in state court. Agency filed a motion for new trial or, in the alternative, for judgment as a matter of law. The district court denied the motion.
In Missouri, a breach of the duty to defend sounds in contract, while a breach of the duty to settle sounds in tort. 4 Ganaway v. Shelter Mut. Ins. Co., 795 S.W.2d 554, 556 (Mo.Ct.App.1990); Landie v. Century Indem. Co., 390 S.W.2d 558, 562-63 (Mo.Ct.App.1965). The district court denied Agency judgment as a matter of law on both the breach of contract and the bad faith claims. We review these denials de novo. Chicago Title Ins. Co. v. Resolution Trust Corp., 53 F.3d 899, 904 (8th Cir.1995).
In its brief, Agency concedes that under the rental contract it had a duty to defend Wilhite up to the limits of the protection provided by the contract. Agency breached this duty by failing to arrange for counsel to enter an appearance for Wilhite in the wrongful death action. Agency contends, however, that the breach of contract claim should not have been submitted to the jury because Wilhite failed to plead or prove that he substantially performed the contract. The contract requires Wilhite to "fully cooperate" with Agency in investigating and defending claims arising from his use of the rental car but does not specifically require him to notify Agency of receipt of summons. Nevertheless, Agency argues that Wilhite violated the cooperation clause by failing to notify Agency of service of process. 5 We disagree.
Well within the time to plead, Agency was informed that a petition had been filed and that Wilhite had been served. Agency could have verified this information with a single phone call to the clerk of court. Under these circumstances, Wilhite's failure to notify Agency did not constitute a violation of the cooperation clause. See Thompson v. Columbia Mut. Ins. Co., 820 S.W.2d 626, 632 (Mo.Ct.App.1991) (). Agency is not entitled to judgment as a matter of law on the breach of contract claim. Therefore, Agency is liable for the protection Quick was due under the rental contract--$25,000.
Agency contends that the bad faith claim should not have been submitted to the jury. In support of this contention, Agency presents several arguments related to the substance of the bad faith claim.
Agency first argues that demand by the insured is an essential element of a bad faith claim and that Quick has failed to establish such a demand. Missouri has long recognized the tort of bad faith failure to settle. See Zumwalt v. Utilities Ins. Co., 228 S.W.2d 750, 755 (Mo.1950). Missouri courts have generally held that a bad faith plaintiff must prove, among other things, that "the insured has demanded that the insurer settle the claim brought against the insured." See, e.g., Dyer v. General Am. Life Ins. Co., 541 S.W.2d 702, 704 (Mo.Ct.App.1976). Nevertheless, some Missouri opinions have suggested that demand is not required if the insurer has failed to notify the insured of an offer of settlement. See Ganaway, 795 S.W.2d at 564 (); c.f. State Farm Fire & Cas. Co. v. Metcalf, 861 S.W.2d 751, 758 (Mo.Ct.App.1993) (Shrum, J., concurring) ().
Agency did not notify Wilhite of Quick's offers to settle the claim within the policy limits. In fact, after Agency had been informed of the pending wrongful death action and before the entry of default judgment, Agency made only one attempt to contact Wilhite, leaving a message on his answering machine and apparently giving up when Wilhite failed to respond. In these circumstances, we are reluctant to find that Quick's claim fails for lack of a demand although that may be the law of Missouri. For the sake of discussion of other issues, we will assume, without deciding, that Wilhite was not required to demand settlement.
Agency also argues that it is not an insurance company and, as such, it is not liable for a bad faith failure to settle. On a simplistic level, Agency is partially correct. Agency is a rental car company, not an insurance company, and it has not attempted to comply with the innumerable statutes and regulations governing the business of insurance. Quick would have us hold that, because Agency is a qualified "self-insurer" under Missouri's Motor Vehicle Financial Responsibility Law, Agency is the functional equivalent of an insurance company, and thus a bad faith claim will lie. Such a holding would be contrary to the teachings of the Missouri Supreme Court.
According to Missouri's Motor Vehicle Financial Responsibility Law, a self-insurer must promise to pay the same judgments in the same...
To continue reading
Request your trial
-
Champlain Cas. Co. v. Agency Rent-A-Car, Inc.
...652, 656 (1993) (self-insurer provided insurance under other insurance clause in the driver's policy); with Quick v. National Auto Credit, 65 F.3d 741, 743 (8th Cir.1995) (qualification as self-insurer under state financial responsibility law did not constitute other valid and collectible i......
-
Scottsdale Ins. Co. v. Addison Ins. Co.
...issue of the assignability of [bad faith failure to settle] claims seems to me to be less than certain."). But see Quick v. Nat'l Auto Credit, 65 F.3d 741, 746 (8th Cir. 1995) (holding that Missouri law does not permit the assignment of a bad faith failure to settle claim). It is generally ......
-
Johnson v. Allstate Ins. Co.
...under the terms of the bankruptcy act the claim was assignable. Id. at 564-65. Ganaway was discussed in Quick v. Nat'l Auto Credit, 65 F.3d 741, 746-47 (8th Cir.1995) (applying Missouri law) (holding that in that case—where the defendant did not have an exclusive right to control settlement......
-
AMERICAN GUARANTEE & LIA. v. US Fidelity & Guar.
...has previously concluded that Missouri law does not permit the assignment of a bad faith failure to settle claim. Quick v. Nat'l Auto Credit, 65 F.3d 741 (8th Cir.1995). In Quick, after Wilhite caused the death of a young girl, a default judgment was entered against him. Id. at 743. Wilhite......