Waterbury v. Progressive N. Ins. Co.

Decision Date07 September 2016
Docket NumberNo. C15-0112-LTS,C15-0112-LTS
PartiesBRETT WATERBURY, Plaintiff, v. PROGRESSIVE NORTHERN INSURANCE COMPANY, Defendant.
CourtU.S. District Court — Northern District of Iowa
ORDER REGARDING PROPOSED JURY INSTRUCTIONS AND CHOICE OF LAW

Attached to this order is my preliminary set of jury instructions. These instructions are a combination of the parties' proposed instructions and my standard civil jury instructions. Also incorporated into the preliminary set of jury instructions is my ruling on the parties' choice of law dispute, which is addressed below.

I. BACKGROUND

This case involves a boat insurance policy. It is undisputed that the plaintiff, an Iowa resident, had a boat and that the defendant provided an insurance policy for the boat. Plaintiff alleges that in April 2014, the boat was damaged in an accident in Missouri. Plaintiff filed a claim with defendant. Defendant denied coverage, finding that the damage occurred due to normal wear and tear, which is not covered, rather than an accident.

On May 26, 2015, plaintiff filed this case in the Circuit Court for Camden County, Missouri (the location of the alleged accident). In his two-count petition, plaintiff alleged breach of contract and vexatious refusal to pay an insurance claim. Doc. No. 1-2 at 3-5. On July 13, 2015, defendant removed the case to the United States District Court for the Western District of Missouri. Doc. No. 1.1 On September 10, 2015, defendant filed a motion to transfer venue to this court. Doc. No. 16. Plaintiff did not resist the motion. On October 16, 2015, United States District Judge Nanette K. Laughrey transferred the case to this court. Doc. No. 21.

Plaintiff then retained Iowa counsel. Doc. No. 26. On November 19, 2015, plaintiff filed a motion to transfer venue back to Missouri. Doc. No. 32. Plaintiff argued that his previous counsel had erred in failing to resist the motion to transfer venue and that several factors weighed in favor of returning this case to Missouri. Doc. No. 32-1 at 2-5. Chief Judge Linda R. Reade, to whom this case was initially assigned upon its arrival, denied the motion on January 4, 2016. Doc. No. 36 at 4-5. Judge Reade stated:

When evaluating the interests of justice, court can consider "(1) judicial economy, (2) the plaintiff's choice of forum, (3) the comparative costs to the parties of litigating in each forum, (4) each party's ability to enforce a judgment, (5) obstacles to a fair trial, (6) conflict of law issues, and (7) the advantages of having a local court determine questions of local law." Terra Int'l, 119 F.3d at 696. Progressive argues that several of these factors support denying the Motion, stating that this case should be heard in Iowa because "this case revolves around an Iowa insurance contract dispute between an Iowa resident and a business operating in Iowa" and that the costs of litigation are similar in either forum. See Brief in Support of the Resistance at 7. Waterbury argues that because three witnesses live in Missouri, it would be more expensive to have to travel to Missouri for depositions or for those witnesses to travel to Iowa for trial. However, there are at least four other witnesses, including Waterbury himself, located in Iowa. Therefore, the comparative costs appear substantially similar. Waterbury also argues that he preferred the case to remain in Missouri.
Although "[i]n general, federal courts give considerable deference to a plaintiff's choice of forum and thus the party seeking transfer . . . typically bears the burden of proving that a transfer is warranted," that maxim does not apply to the instant Motion because Waterbury already had a chance to resist the initial transfer of this case. In re Apple, 602 F.3d at 913 (quoting Terra Int'l, Inc., 119 F.3d at 695) (first alteration in original). The fact that his former counsel failed to resist Progressive's Motion to Transfer Venue and to inform Waterbury about such motion does not result in this court analyzing the Motion as a resistance to Progressive's initial motion. Instead, Waterbury must demonstrate that transfer of this case is appropriate, not that the previous transfer was inappropriate. The court finds that Waterbury has not met this burden. The convenience of the parties, the convenience of the witnesses and the interests of justice do not favor transfer. Additionally, there is nothing in the instant scenario that constitutes "impelling or erroneous circumstances" warranting re-transfer of the case. See In re Cragar Indus., Inc., 706 F.2d at 505 (quoting Koenig, 290 F.2d at 173 n.11).

Doc. No. 36 at 4-5.

II. CHOICE OF LAW

The parties dispute whether Iowa or Missouri substantive law applies to this case. The parties agree that the insurance contract does not contain a choice of law clause. Doc. No. 42 at 4; Doc. No. 41 at 3. Plaintiff argues the court should apply Missouri law, stating:

Waterbury left his boat in Missouri during the boating season that year. Plaintiff's Ex. 12 p. 4 "Brought IV Back Down A Couple Weeks Ago To Lake Of The Ozarks." The evidence should show that Waterbury has a second residence on or near Lake of the Ozarks, thus the insured risk was principally located in the State of Missouri because that's where he used it. Missouri law applies.

Doc. No. 41 at 3. Defendant advocates for the application of Iowa law, stating:

When parties do not select the law to apply to contract, Iowa applies the "most significant relationship" test of the Restatement (Second) of Conflictof Laws § 188. Dethmers Mfg. Co., Inc. v. Automatic Equipment Mfg. Co., 23 F.Supp.2d 975, 1002 (N.D. Iowa 1998). . . . Under the most significant relationship rule, the appropriate law is that of the state of Iowa. The place of contracting and negotiation is Iowa. The policy is an Iowa policy. The place of performance is Iowa. The policy and renewals were mailed to Waterbury in Iowa. The agent and office are located in Iowa. Waterbury lives in Iowa. The subject matter of the contract, the watercraft, was located in Missouri at the time of the incident. All factors, except the location of the watercraft at the time of the incident support Iowa law. The most significant relationship is with Iowa.

Doc. No. 42 at 4-5.

A. Standard
A court makes four analytical steps in resolving a choice-of-law issue: (1) characterize the nature of the cause of action; (2) decide if a conflict of law exists; (3) identify the law that applies based on the forum state's choice-of-law principles; and (4) determine which state's substantive law applies based on the application of the forum state's choice-of-law principles. See Jackson v. Travelers Insurance Co., 26 F.Supp.2d 1153, 1156-57 (S.D. Iowa 1998).

Weitz Co., LLC v. Lexington Ins. Co., 982 F. Supp. 2d 975, 982 (S.D. Iowa 2013), aff'd, 786 F.3d 641 (8th Cir. 2015).

Federal district courts must apply the choice of law rules of the state in which they sit when jurisdiction is based on diversity of citizenship. Klaxon Co. v. Stentor Elec. Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 1021-22, 85 L. Ed. 1477 (1941).

Whirlpool Corp. v. Ritter, 929 F.2d 1318, 1320 (8th Cir. 1991).

B. Analysis

The first question is the character of the case. As set out above, this case presents two basic issues: (1) did defendant breach the insurance contract by failing to payplaintiff's claim, and, if so, (2) was the breach vexatious? Second, I must I decide if a conflict of law actually exists. Under Missouri law:

Under Missouri law, "[a] breach of contract action includes the following essential elements: (1) the existence and terms of a contract; (2) that plaintiff performed or tendered performance pursuant to the contract; (3) breach of the contract by the defendant; and (4) damages suffered by the plaintiff." [Keveney v. Missouri Military Acad., 304 S.W.3d 98, 104 (Mo. 2010)].

Smith Flooring, Inc. v. Pennsylvania Lumbermens Mut. Ins. Co., 713 F.3d 933, 941 (8th Cir. 2013). An insured can recover for vexatious denial if:

In any action against any insurance company to recover the amount of any loss under a policy...if it appears from the evidence that such company has refused to pay such loss without reasonable cause, the court or jury may, in addition to the amount thereof and interest, allow the plaintiff damages not to exceed twenty percent of the first fifteen hundred dollars of the loss, and ten percent of the amount of the loss in excess of fifteen hundred dollars and a reasonable attorney's fee. . . . Mo. Rev. Stat. § 375.420.

Axis Specialty Ins. Co. v. New Hampshire Ins. Co., 2016 WL 4257369, at *3 (W.D. Mo. 2016).

Under Iowa Law:

To prevail on a breach of contract claim, [plaintiff is] required to prove: (1) the existence of a contract, (2) the terms and conditions of the contract, (3) that [plaintiff] has performed all the terms and conditions required under the contract, (4) the defendant's breach of the contract in some particular way, and (5) that plaintiff has suffered damages as a result of defendant's breach. Molo Oil Co. v. River City Ford Truck Sales, Inc., 578 N.W.2d 222, 224 (Iowa 1998).

Royal Indem. Co. v. Factory Mut. Ins. Co., 786 N.W.2d 839, 846 (Iowa 2010). Iowa does not have an exact analog to Mo. Rev. Stat. § 375.420. Instead, under Iowa common law, an insured may recover additional damages if the insurer denies a claim in bad faith:

To prevail on a claim for an insurer's bad faith, a plaintiff must prove "(1) that the insurer had no reasonable basis for denying benefits under the policy and, (2) that the insurer knew, or had reason to know, that its denial was without basis." McIlravy v. N. River Ins. Co., 653 N.W.2d 323, 329 (Iowa 2002) (citation omitted) (emphasis added).[] "The first element is objective; the second is subjective." United Fire & Cas. Co. v. Shelly Funeral Home, Inc., 642 N.W.2d 648, 657 (Iowa 2002) (citation omitted).[] "A reasonable basis exists for the denial of policy benefits if the insured's claim is fairly debatable either on a matter of fact of
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