Robinson v. MFA Mut. Ins. Co.

• Decision Date: 11 September 1980
• Docket Number: No. 79-1845,79-1845
• Citation: 629 F.2d 497
• Parties: Juanita ROBINSON, Appellant, v. MFA MUTUAL INSURANCE COMPANY and Countryside Casualty Company d/b/a MFA Insurance Companies, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 497

629 F.2d 497

Juanita ROBINSON, Appellant, v. MFA MUTUAL INSURANCE COMPANY and Countryside Casualty Company d/b/a MFA Insurance Companies, Appellees.

No. 79-1845.

United States Court of Appeals Eighth Circuit.

Submitted April 18, 1980.

Decided June 12, 1980.

Rehearing Denied Sept. 11, 1980.

Troy Henry, Parker, Henry & Walden, Jonesboro, Ark., for appellant.

Tom D. Womack, Barrett, Wheatley, Smith & Deacon, Jonesboro, Ark., for appellees.

Before STEPHENSON, Circuit Judge, KUNZIG, ^* Judge, and McMILLIAN, Circuit Judge.

KUNZIG, Judge.

Plaintiff-appellant in this diversity action seeks compensatory and punitive damages against the defendant-appellee insurance company for its allegedly wrongful refusal to pay and its allegedly deceitful defense against appellant's claim under the uninsured motorist provisions of an automobile insurance policy. The district court ¹ granted appellee's motion to dismiss under Fed.R.Civ.P. 12(b)(6), concluding the complaint failed to state a claim for relief cognizable under the law of Arkansas. A case decided by the Court of Appeals of Arkansas after the district court's dismissal of appellant's complaint, ² however, persuades us the district court erroneously predicted Arkansas law. We therefore reverse.

Appellant, Juanita Robinson, an insured of appellee, was involved in an automobile accident July 24, 1974, when the vehicle she was operating was apparently struck by a hit and run vehicle. Appellee, d/b/a MFA Insurance Companies (hereinafter, MFA) had provided Robinson uninsured motorist coverage with a maximum limit of $10,000 for injuries or damages sustained by the insured for which an uninsured motorist would be legally liable. Under appellant's policy, a hit and run vehicle is included within the definition of an uninsured motorist. To recover under the uninsured motorist provision, however, there must have been "physical contact" between the hit and run vehicle and the insured's vehicle.

MFA resisted payment of Robinson's claim and she retained counsel. By letter of August 27, 1974, J. Murl Smith, a branch claims manager of MFA, wrote appellant's attorney offering to settle her claim. The August 27, 1974, letter stated:

We hereby extend to you an offer of $4,600.00, less the insured's $100.00 deductible in settlement of the damages to the insured vehicle.

We will not at this time entertain any type of uninsured motorist settlement as it is our contention the insured's statement as well as the State Police said there was no physical contact between the insured vehicle and allegedly unknown vehicle.

Settlement attempts were evidently unsuccessful for in January 1975 appellant filed the first (not the instant case) of two suits against MFA in the United States District Court (E.D.Ark.). ³ In that case appellant sought the full amount of policy coverage, $10,000, plus interest, attorney's fees and a 12% penalty amount provided by Arkansas law awarded when an insurance company has wrongfully refused or delayed payment of a claim. Ark.Stat.Ann. § 66-3238, (Supp.1977). MFA defended on three grounds: (1) that there was no "physical contact" between the insured's vehicle and the alleged hit and run vehicle; (2) that appellant's negligence was at least partially responsible for the accident; (3) that appellant did not sustain damages in the amount claimed under the policy.

The case proceeded to trial by jury in November 1977. On November 9, 1977, appellant's attorney elicited the following testimony from Mr. Floyd Langston, an MFA employee:

. . . and ask you to read the last paragraph there to the jury, please.

A. The last paragraph on this?

Q. Yes.

A. 'We will not at this time entertain any type of uninsured motor settlement, and it is our contention that the insured's statement, as well as the State Police, said there was no physical contact between the insured vehicle and an allegedly unknown vehicle.'

Q. Mr. Keton said yesterday under oath that she never said there was no contact, didn't he? (sic)

A. Yes, sir.

Q. The state policeman said he never said it was because he didn't know, didn't he? So, that's just completely false, isn't it?

A. Yes.

Each of MFA's three defenses, including the physical contact issue, was submitted to the jury which rendered a verdict for Robinson of $7,500. Judgment was entered for that amount, no appeal was taken from the judgment and it was satisfied in full. Robinson's claim for the 12% statutory penalty and attorney's fees was defeated because she did not recover the full amount for which she sued, a requirement under Arkansas law. See Cassady v. United Insurance Co. of America, 370 F.Supp. 388, 398-99 (W.D.Ark.1974).

On February 16, 1978, appellant filed her second suit, the one now before us. The complaint alleges the insurance company wrongfully and deceitfully refused to pay appellant uninsured motorist benefits under her policy, though the company knew her claim to be wholly valid. Various theories of recovery are advanced by appellant, including deceit, intentional infliction of emotional distress and outrageous conduct, and the tort of bad faith, committed by the insurance company when it failed to deal in good faith with the insured. To support her allegation appellant points to the letter of the MFA claims manager of August 27, 1974, denying her claim for the reason that the insured and the state police officer said "there was no physical contact between the insured vehicle and allegedly unknown vehicle." Yet, appellant argues, Floyd Langston, another MFA employee, admitted during trial that these statements were false. Appellant contends the insurance company knew all the time it had no tenable defense to her claim but nevertheless deceitfully raised a defense it knew to be false, forcing appellant to sue for her recovery. Compensatory damages of $5,000 are claimed for appellant's attorney's fees, litigation expenses, interest, value of time, embarrassment and distress. Punitive damages of $500,000 are sought for the insurance company's deceitful and malicious conduct.

MFA moved to dismiss appellant's complaint under Fed.R.Civ.P. 12(b)(6) on the primary ground that appellant's tort action did not state a cause of action under Arkansas law. By Memorandum and Order filed August 30, 1979, the district court granted MFA's motion to dismiss. Briefly, the district court first ruled that the Arkansas Supreme Court has not adopted, and predicted it would not adopt, the tort concept of "bad faith" as a basis for imposing liability on an insurer wrongfully denying policy benefits to insureds. Second, even if the Arkansas Supreme Court were to permit a tort bad faith cause of action, the allegations of appellant's complaint are insufficient to state such cause of action. Finally, the district court ruled appellant's complaint to be barred by res judicata and estoppel, for if Robinson had genuinely believed she had been deceived by the insurance company, the time to raise the issue was during trial of her claim for coverage.

Challenging the district court's dismissal, appellant argues the Arkansas Supreme Court would join the growing number of states which now recognize an action in tort by an insured against an insurer for bad faith refusal to pay a valid claim. Appellant also relies on a recent decision of the Arkansas Supreme Court, M. B. M. Company, Inc. v. Counce, 596 S.W.2d 681 (Ark.Sup.Ct.) wherein the Court held that one who wilfully causes severe emotional distress to another by outrageous conduct is subject to liability for such distress and attendant bodily harm. Appellee's argument relies for the most part on the district court's opinion.

While the opinion of the district court is both thorough and persuasive, we conclude two factors require its reversal. First, the district court gave insufficient deference to the standards applicable to a motion to dismiss under Fed.R.Civ.P. 12(b)(6). More importantly, however, a recent decision in the Court of Appeals of Arkansas, Sturgeon v. American Family Life Assurance Company of Columbus, 589 S.W.2d 207 (Ark.App.1979) persuades us appellant's complaint states a claim for relief under the law of Arkansas. Discussion of these two issues follows.

I. Standards for a Motion to Dismiss

This court recently had occasion to review the standards applicable to a motion to dismiss under Fed.R.Civ.P. 12(b)(6) in Garland v. City of St. Louis, 596 F.2d 784 (8th Cir.), cert. denied, 444 U.S. 899, 100 S.Ct. 208, 62 L.Ed.2d 135 (1979). Appellant's complaint in Garland alleged the City of St. Louis effected a taking of his property (a leasehold) by the destruction of buildings surrounding appellant's location, leaving appellant under a cloud of condemnation for five years and otherwise rendering appellant's leasehold useless. The district court dismissed the complaint because plaintiff had failed to allege any physical invasion or appropriation of his property. The significant feature of the decision for present purposes is its emphasis on standards governing a motion to dismiss under Fed.R.Civ.P. 12(b)(6). The opinion began by quoting at length from the opinion in Jackson Sawmill Co. v. United States, 580 F.2d 302, 306 (8th Cir. 1978), cert. denied, 439 U.S. 1070, 99 S.Ct. 839, 59 L.Ed.2d 35 (1979), a quotation we repeat in full:

(A) complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.

(A) complaint should not be dismissed merely because a plaintiff's allegations do not support the particular legal theory he advances, for the court is under a duty to examine the complaint to determine if the allegations provide for relief on any possible theory. Nor should a complaint be dismissed that does not state with precision all elements that give rise to a legal basis for recovery. Finally, a complaint should not be dismissed merely because the...