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Axis Specialty Insurance Co. v. New Hampshire Insurance Co.

United States District Court, W.D. Missouri, Western Division

August 11, 2016

AXIS SPECIALTY INSURANCE COMPANY, and THE YOUNG MEN’S CHRISTIAN ASSOCIATION OF GREATER KANSAS CITY, Plaintiffs,
v.
NEW HAMPSHIRE INSURANCE COMPANY, Defendant.

         ORDER AND OPINION (1) GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNT II AND YMCA’S CLAIMS; (2) GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT ON PRAYERS FOR ATTORNEYS’ FEES, COSTS, AND CONSEQUENTIAL DAMAGES; (3) GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT ON THE PRAYER FOR PREJUDGMENT INTEREST; AND (4) DENYING DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNT III

          ORTRIE D. SMITH, SENIOR JUDGE

         Pending are four motions for partial summary judgment filed by Defendant New Hampshire Insurance Company (“NHIC”): Motion for Partial Summary Judgment on AXIS Specialty Insurance Company’s (“AXIS”) Prayers for Attorneys’ Fees, Costs, and Consequential Damages (Doc. #39); Motion for Partial Summary Judgment on the Prayer for Prejudgment Interest (Doc. #42); Motion for Partial Summary Judgment on The Young Men’s Christian Association of Greater Kansas City’s (“YMCA”) Claims and On Count II for Equitable Subrogation (Doc. #44); and Motion for Partial Summary Judgment on Count III for Vexatious Refusal (Doc. #45).

         I. BACKGROUND

         The following facts are undisputed. This lawsuit arises out of an underlying personal injury lawsuit filed by Isaiah Rider against the YMCA (hereinafter, “Rider lawsuit”). NHIC defended its insured, the YMCA, in the Rider lawsuit. Doc. #46, at 7; Doc. #59, at 5. AXIS provided excess insurance coverage beyond the $1, 000, 000 limits of NHIC’s primary policy. Doc. #46, at 7; Doc. #46-2; Doc. #59, at 5. The Rider trial took place in May 2013 in the Circuit Court of Jackson County, Missouri. Doc. #46, at 7-8; Doc. #59, at 6. The jury returned a verdict finding the total amount of damages was $5, 906, 525, but that amount was reduced to $590, 625.50 because the jury found Rider was 90% at fault. Doc. #46, at 7-8; Doc. #46-4; Doc. #59, at 6, 11; Doc. #72, at 10.

         The Missouri Court of Appeals found the trial court erred in submitting a jury instruction for comparative fault for failure to keep a careful lookout. Rider v. The Young Men’s Christian Ass’n of Greater Kan. City, 460 S.W.3d 378, 383-88 (Mo.Ct.App. 2015); Doc. #46-5. The Court of Appeals reversed the trial court’s judgment, and entered judgment to reflect YMCA was 100% at fault and that Rider’s damages award was $5, 906, 525, the full amount assessed by the jury. Id. at 388. NHIC paid the limits of its policy toward this judgment. Doc. #46, at 8; Doc. #46-6; Doc. #59, at 7-8; Doc. #72, at 2. AXIS paid the remainder of the judgment. Doc. #46, at 8; Doc. #59, at 7.

         In June 2015, the YMCA executed an assignment assigning AXIS any and all causes of action arising out of the claims alleged against and judgment entered against the YMCA in the Rider lawsuit. Doc. #46, at 8; Doc. #46-7; Doc. #59, at 7. The assignment stated the YMCA was assigning claims it had “arising out of or related to that certain policy of liability insurance issued by New Hampshire Insurance Company…issued to the YMCA….” Doc. #46-7. The agreement indicated AXIS may pursue the claims in its own name as well as the name of the YMCA. Doc. #59, at 7, 12; Doc. #72, at 11; Doc. #46-7, at 2. It is undisputed that the claims in this lawsuit are included in the YMCA’s assignment. Doc. #46, at 8; Doc. #59, at 7.

         AXIS and YMCA filed this lawsuit[1] alleging bad faith failure to settle by assignment (Count I), equitable subrogation (Count II), and vexatious refusal to pay (Count III). Doc. #1-2. NHIC seeks summary judgment on the YMCA’s claims, AXIS’s claims under Counts II and III, and Plaintiffs’ prayers for relief for attorneys’ fees, consequential damages, costs, and prejudgment interest.

         II. STANDARD

         A moving party is entitled to summary judgment on a claim only if there is a showing that “there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” See Williams v. City of St. Louis, 783 F.2d 114, 115 (8th Cir. 1986). “[W]hile the materiality determination rests on the substantive law, it is the substantive law’s identification of which facts are critical and which facts are irrelevant that governs.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Thus, “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Wierman v. Casey’s Gen. Stores, 638 F.3d 984, 993 (8th Cir. 2011) (quotation omitted). In applying this standard, the Court must view the evidence in the light most favorable to the non-moving party, giving that party the benefit of all inferences that may be reasonably drawn from the evidence. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588-89 (1986); Tyler v. Harper, 744 F.2d 653, 655 (8th Cir. 1984). However, a party opposing a motion for summary judgment “may not rest upon the mere allegations or denials of the… pleadings, but… by affidavits or as otherwise provided in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial.” Fed.R.Civ.P. 56(e).

         III. DISCUSSION

         A. NHIC’s Motion for Partial Summary Judgment on YMCA’s Claims and Count II (Doc. #44)

         NHIC seeks summary judgment on the YMCA’s claims (Counts II and III) as well as AXIS’s claim for equitable subrogation under Count II.[2]

         (1) YMCA’s Claims

         NHIC argues the YMCA is not the real party in interest and lacks standing to bring this lawsuit. In a diversity action, state law determines who is a real party in interest. Kuelbs v. Hill, 615 F.3d 1037, 1041 (8th Cir. 2010). “The general rule is that an absolute assignment of an entire right or interest works as a divestiture of all right or interest of the assignor; and, for the purpose of maintaining a civil action, the assignee becomes the real party in interest.” Daniele v. Mo. Dep’t of Conservation, 282 S.W.3d 876, 880 (Mo.Ct.App. 2009) (quoting McMullin v. Borgers, 806 S.W.2d 724, 731 (Mo.Ct.App. 1991)); see also Home Serv. Oil Co. v. Hess, 485 S.W.2d 616, 618 (Mo. banc 1972); Cantor v. Union Mut. Life Ins. Co., 547 S.W.2d 220, 225 (Mo.Ct.App. 1997).[3]

         It is undisputed the YMCA assigned all claims it may have arising out of or related to its NHIC insurance policy applicable to the Rider lawsuit to AXIS. Doc. #46, at 8; Doc. #46-7; Doc. #59, at 7. While the agreement stated AXIS could pursue claims in its own name as well as the name of the YMCA, Plaintiffs have not cited (and the Court has been unable to locate) a case where a complete assignment of rights permitted both the assignor and the assignee to bring the same claims in a lawsuit. Missouri case law is clear that a complete assignment of claims divests the assignor’s right to bring the claims, and the assignee becomes the real party in interest. Daniele, 282 S.W.3d at 880; Home Serv. Oil Co., 485 S.W.2d at 618; Cantor, 547 S.W.2d at 225. The Court finds the YMCA is not the real party in interest and does not have standing to bring the claims it has alleged against NHIC. Thus, NHIC’s motion for partial summary judgment on the YMCA’s claims is granted.

         (2) AXIS’s Claim for Equitable Subrogation

         NHIC also contends that because there was a complete assignment, AXIS cannot maintain Count II for equitable subrogation. NHIC argues assignment and subrogation cannot co-exist; either there is an assignment or subrogation. AXIS maintains it is permitted to pursue an equitable subrogation claim.

         Missouri recognizes a cause of action for equitable subrogation. Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 831 (Mo. banc 2014) (citation omitted). “[S]ubrogation arises when the insurer pays its insured’s loss and allows the insured to recover from any third party who may have caused the loss.” Id. (citing Benton House, LLC v. Cook & Younts Ins., Inc., 249 S.W.3d 878, 882 (Mo.Ct.App. 2009)). Subrogation has been utilized “by an excess insurer to recover from a primary insurer a portion of the insured’s settlement that the primary insurer was obligated to pay under its policy.” Id. (citation omitted). With regard to equitable subrogation, that right belongs to “one, not a volunteer, who pays another’s debt, to recover the amount paid, which in good conscience should be paid by the one primarily responsible for the loss.” Id. at 832 (citation omitted).

         The question facing this Court is the same question the Missouri Supreme Court recently addressed: “whether an excess insurer who pays a third-party claim on behalf of its insured after a primary insurer refuses in bad faith to settle the claim has a right to equitable subrogation to obtain the amount paid from the primary insurer.” Id. at 831-32. When the insured had assigned its claims to its excess carrier, the Missouri Supreme Court found the excess carrier, which paid for the loss caused by the primary insurer, “should be equitably subrogated to the rights of [the insured] and able to bring a bad faith refusal to settle action….” Id. at 832. The Missouri Supreme Court further noted “allowing an excess insurer to bring an action under equitable subrogation does not create a new duty or impose a new obligation on the primary insurer; it simply substitutes the excess insurer for the insured.” Id. at 833.

         This Court is persuaded by the Missouri Supreme Court’s ruling in Scottsdale Insurance Company. Accordingly, NHIC’s motion for summary judgment on AXIS’s claim of equitable subrogation is denied.

         B. NHIC’s Motion for Partial Summary Judgment on ...


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