Simmons Foods, Inc. v. Indus. Risk Insurers

• Decision Date: 11 July 2017
• Docket Number: No. 15-3845,No. 15-3755,15-3755
• Citation: 863 F.3d 792
• Parties: SIMMONS FOODS, INC., Plaintiff-Appellee v. INDUSTRIAL RISK INSURERS, an Unincorporated for Profit Association; Swiss Reinsurance America Corporation; Westport Insurance Corporation; Ironshore Specialty Insurance Company, Defendants-Appellants Simmons Foods, Inc., Plaintiff-Appellant v. Industrial Risk Insurers, an Unincorporated for Profit Association; Swiss Reinsurance America Corporation; Westport Insurance Corporation; Ironshore Specialty Insurance Company, Defendants-Appellees
• Court: U.S. Court of Appeals — Eighth Circuit

863 F.3d 792

SIMMONS FOODS, INC., Plaintiff-Appellee
v.
INDUSTRIAL RISK INSURERS, an Unincorporated for Profit Association; Swiss Reinsurance America Corporation; Westport Insurance Corporation; Ironshore Specialty Insurance Company, Defendants-Appellants

Simmons Foods, Inc., Plaintiff-Appellant
v.
Industrial Risk Insurers, an Unincorporated for Profit Association; Swiss Reinsurance America Corporation; Westport Insurance Corporation; Ironshore Specialty Insurance Company, Defendants-Appellees

No. 15-3755
No. 15-3845

United States Court of Appeals, Eighth Circuit.

Submitted: January 11, 2017
Filed: July 11, 2017

Counsel who presented argument on behalf of the appellants/cross-appellees was Joseph H. Lang, Jr., of Tampa, FL. The following attorney(s) also appeared on the brief; Marshall S. Ney and Angela C. Artherton, of Rogers, AR, Edie R Ervin of Little Rock, AR, James V. Chin and Jane Warring, of Atlanta, GA, and Nicholas A. Brown of Tampa, FL.

Counsel who presented argument on behalf of the appellee/cross-appellant was John L. Elrod of Fayetteville, AR. The following attorney(s) also appeared on the brief; Todd P. Lewis, Vicki D. Bronson, and Kerri E. Kobbeman, of Fayetteville, AR.

Before RILEY,¹ Chief Judge, LOKEN and BENTON, Circuit Judges.

RILEY, Chief Judge.

In 2011, Simmons Foods, Inc., made a claim under two property insurance policies it had with Industrial Risk Insurers and Ironshore Specialty Insurance Company

863 F.3d 795

(collectively, the insurers).² The insurers denied a portion of the claim that related to one of Simmons's damaged properties in Oklahoma, which eventually resulted in Simmons filing suit in Arkansas where Simmons is headquartered. The insurers moved to dismiss the action based on policy provisions requiring any action be brought within one year of the date of loss, a window that had closed some time earlier. The district court applied Arkansas law—which voids such contractual provisions, unlike Oklahoma law—and denied the motion. The case went to trial, and after the jury verdict Simmons recovered $2,817,380.11 of the $3,584,041.90 it sought. The district court then ordered the insurers to pay prejudgment interest. The district court rejected Simmons's attempt to recover an additional 12% in damages and also attorney fees, finding Simmons failed to clear the statutory threshold. See Ark. Code Ann. § 23-79-208. Neither side is satisfied with how things were resolved. The insurers appeal the denial of their motion to dismiss and the award of prejudgment interest. Simmons cross-appeals the decision not to award statutory damages or attorney fees. We affirm the denial of the insurers' motion to dismiss, reverse and vacate the award of prejudgment interest, and affirm the rejection of Simmons's claims for statutory damages and attorney fees.

I. BACKGROUND

Simmons is a large, family-owned poultry and pet-food company that is incorporated in Arkansas and headquartered in Benton County, Arkansas. The insurers issued two materially identical property insurance policies to Simmons, with a coverage term from September 1, 2010, to September 1, 2011, and a joint liability limit of $100 million. According to Simmons's Assistant Risk Manager, the policies were "negotiated, entered, issued, and delivered to Simmons at its corporate office in Benton County, Arkansas," and the policy premiums were paid from Arkansas. The policies covered 51 properties Simmons owned, specifically: 21 in Arkansas, 13 in Oklahoma, and 17 scattered throughout Kansas, Missouri, New Jersey, and Canada.

In February 2011, a snowstorm swept through Oklahoma and Missouri and damaged several of Simmons's covered buildings and farms. Simmons made a claim for all of its damaged properties under the policies, which provided that the insurers' liability "shall not exceed the smaller of the following: 1. the cost to repair, rebuild or replace on the same site with new materials of like kind and quality, whichever is the smallest; 2. the actual expenditure incurred in repairing, rebuilding or replacing on the same or another site, whichever is the smallest." The parties resolved most of the claim without issue. The exception was a dispute about Simmons's can-making facility in Fort Gibson, Oklahoma, a 300-foot by 400-foot metal structure that sustained considerable damage to its roof and supporting columns. The parties disagreed on how the policies covered the situation—Simmons contended it was entitled to recover the cost to rebuild the structure, while the insurers asserted they were only obligated to pay for the cost to repair specified damages. Simmons elected to rebuild the facility despite this impasse, and eventually submitted invoices to the insurers

863 F.3d 796

totaling $7,367,859.12. The insurers maintained their position and remitted their final payment in July 2013, having paid only the $3,879,097.99 they initially offered Simmons.³ Simmons sent a letter stating its disagreement and demanding $3,584,041.90. The insurers rejected this last-ditch effort to avoid litigation.

Simmons filed suit in the Western District of Arkansas on September 20, 2013, seeking $3,584,041.90 for the insurers' alleged breach of contract.⁴ See 28 U.S.C. § 1332(a)(1) (diversity jurisdiction). The insurers moved to dismiss the action, see Fed. R. Civ. P. 12(b)(6), based on a time-limitation provision in the policies that provided: "No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity ... unless commenced within twelve months next after inception of the loss ." (Emphasis added). If enforced, the limitation provision could bar Simmons's suit given that the lawsuit was filed over 31 months after the snowstorm (i.e., 19 months too late). Simmons countered that Arkansas law applied, making the provision unenforceable and the action timely. The district court agreed with Simmons and denied the motion because it considered "the timeliness of the suit [to be] a procedural matter" and therefore "governed by the law of the forum." The insurers disagreed with this classification and asked the district court to certify to our court whether the timeliness issue is procedural or substantive. See 28 U.S.C. § 1292(b) (interlocutory appeal). The district court declined to do so, reasoning that regardless of whether the issue was procedural (as the district court initially found) or substantive (as the insurers urged) it would be governed by Arkansas law. The case moved forward.

At trial, the parties presented conflicting evidence on the two issues the jury needed to decide. First, the parties continued their quarrel over whether the facility could have been repaired. Second, if the rebuild were proper, the parties disputed whether Simmons was entitled to the full $3,584,041.90 it sought. On this point the insurers claimed Simmons's figure included certain "betterments" that were not covered by the policies—for example a new dock door, additional exhaust fans, and higher-quality steel—while Simmons posited these expenses were either required by local code or would save money in the long run. Following the jury's findings, Simmons was entitled to $2,817,380.11 in damages. The district court later awarded Simmons prejudgment interest. See Ark. Code Ann. § 4-57-101(d) (prejudgment interest); see also Woodline Motor Freight, Inc. v. Troutman Oil Co., Inc. , 327 Ark. 448, 938 S.W.2d 565, 568 (1997). The district court rejected Simmons's request for additional relief under Ark. Code Ann. § 23-79-208 (statutory damages and attorney fees), finding Simmons fell short of the statutory threshold "[b]y the slightest of margins." We must now determine whether the district court was correct to: (1) apply Arkansas law and deny the insurers' motion to dismiss; (2) award Simmons prejudgment interest; and (3) reject Simmons's request for statutory

863 F.3d 797

damages and attorney fees. See 28 U.S.C. § 1291 (appellate jurisdiction).

II. DISCUSSION

A. Motion to Dismiss

The insurers first contend Simmons's suit was untimely and therefore should have been dismissed. Whether this contention has merit hinges largely on which state's law we must apply. Under Arkansas law, an insured has five years to sue an insurer for breach of a property insurance policy and "[a]ny stipulation or provision in the policy or contract requiring the action to be brought within any shorter time or be barred is void." Ark. Code Ann. § 23-79-202 ; id. § 16-56-111(a). Thus, under Arkansas law, Simmons's suit was timely, and the insurers do not suggest otherwise. The insurers argue Oklahoma law applies, and Oklahoma law allows courts to enforce limitation provisions like the one here.⁵ See , e.g. , Clipperton v. Allstate Ins. Co. , 151 Fed.Appx. 652, 655 (10th Cir. 2005). The district court applied Arkansas law and denied the motion to dismiss, both of which are decisions we review de novo. See , e.g. , Carton v. Gen. Motors Acceptance Corp. , 611 F.3d 451, 454-55 (8th Cir. 2010). In deciding what law applies, federal courts exercising diversity jurisdiction apply the forum state's choice-of-law principles—here, that is Arkansas. See Am. Fire & Cas. Co. v. Hegel , 847 F.3d 956, 959 (8th Cir. 2017).

With...