WireCo WorldGroup v. Liberty Mutual Fire Insurance , 897 F.3d 987 ( 2018 )

United States Court of Appeals
For the Eighth Circuit
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No. 17-1432
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WireCo WorldGroup, Inc.,
lllllllllllllllllll lPlaintiff - Appellant,
v.
Liberty Mutual Fire Insurance Company; The First Liberty Insurance Corporation,
llllllllllllllllll Defendants - Appellees.
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Appeal from United States District Court
for the Western District of Missouri - St. Joseph
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Submitted: November 15, 2017
Filed: July 31, 2018
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Before COLLOTON and GRUENDER, Circuit Judges, and HOLMES,1 District
Judge.
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1
The Honorable P.K. Holmes, III, Chief Judge, United States District Court for
the Western District of Arkansas, sitting by designation.
COLLOTON, Circuit Judge.
WireCo WorldGroup, Inc. brought a five-count action against its workers’
compensation insurance carriers, Liberty Mutual Fire Insurance Company and The
First Liberty Insurance Corporation (collectively, “Liberty”). The lawsuit sought
damages for excess premiums that WireCo allegedly paid on three of Liberty’s
insurance policies.
The district court,2 at the pleading stage, dismissed a claim for vexatious
refusal to pay under Mo. Rev. Stat. § 375.420. The district court then granted
summary judgment for Liberty on WireCo’s remaining breach of contract claims.
WireCo appeals the dismissal of all counts. Although our reasoning differs from that
of the district court in some respects, we ultimately affirm the judgment.
I.
WireCo is a wire and cable company that operates in many States, including
Texas and Missouri. In 2009, WireCo purchased a workers’ compensation insurance
policy from Liberty. The 2009 policy was in effect from June 30, 2009, to June 30,
2010. WireCo purchased renewal policies from Liberty in 2010, 2011, and 2012,
respectively. Each policy contained an “Information Page,” endorsements, and terms
and conditions.
The policies specified that Liberty would calculate the premium for each policy
twice. Before the policy went into effect, Liberty would calculate an estimated
premium, and WireCo agreed to pay this amount before the policy expired. After the
policy expired, Liberty would calculate an actual premium in light of developments
2
The Honorable Roseann A. Ketchmark, United States District Judge for the
Western District of Missouri.
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during the term. If the actual premium differed from the estimate, then the policy
provided that WireCo would make an additional payment or receive a refund, as the
case may be.
Each policy had two sections that explained how premiums would be
calculated. Both sections identified “rating plans” as an element in the calculation.
Item 4 of each policy’s Information Page read: “Premium: The premium for this
policy will be determined by our Manuals of Rules, Classifications, Rates and Rating
Plans.” (Emphasis added). Part Five of each policy’s “General Section” read: “All
premium for this policy will be determined by our manuals of rules, rates, rating
plans and classifications.” (Emphasis added). According to WireCo, the references
to “rating plans” meant the “schedule rating plans” that Liberty had filed with each
State. One point of dispute is whether two particular schedule rating plans from
Missouri and Texas were incorporated by reference into the renewal policies.
Schedule rating is a method of adjusting the premium on workers’
compensation insurance to account for risk characteristics that affect the probability
or severity of future losses. When an insurance policy covers the insured company’s
operations in multiple States, the carrier must calculate a schedule rating factor for
each State in accordance with the schedule rating plan it filed with the State. A
schedule rating factor can take the form of a credit, which lowers the premium on the
policy, or a debit, which increases the premium on the policy.
In its complaint, WireCo alleged that Liberty breached the 2010, 2011, and
2012 renewal policies because it modified the Missouri and Texas schedule rating
factors without complying with the procedures laid out in the Missouri and Texas
schedule rating plans. In relevant part, the Missouri Schedule Rating Plan stated:
2. No Schedule debit or credit can take effect until the evidence
supporting the modification is in our files.
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....
5. The customer will be informed in writing within ninety (90) days of
the policy inception or renewal date, of the basis for any schedule debit
or credit applied. If the policy is subject to any changes in its schedule
debits or credits upon renewal, we will notify the customer.
The Texas Schedule Rating Plan included the following provisions:
4. At the time that the schedule rating factor is applied, the carrier must
have documentation on file detailing the basis for the credit or debit.
5. The effective date of the schedule rating factor must be on or after the
date of the carrier’s receipt of the documentation supporting the basis
for the schedule rating factor.
In the initial 2009 policy, Liberty calculated WireCo’s premium using a
Missouri schedule rating credit of 4.2%, but then adjusted the rating each year as
follows: 2010 (1.3% credit), 2011 (15% debit), 2012 (25% debit). In advance of
each renewal, Liberty provided WireCo with a policy proposal that included the
modified Missouri schedule rating factors. WireCo alleged in Counts I, II, and III,
however, that Liberty failed to give WireCo notice of these modifications in the
manner required by the Missouri Schedule Rating Plan, and thereby breached the
2010, 2011, and 2012 renewal policies, respectively. WireCo contends that it was
damaged by the increased premiums it paid as a “direct and proximate result” of
Liberty’s breaches of contract.
WireCo also objects to Liberty’s modification of the Texas schedule rating
factor in the 2012 renewal policy. In the 2011 renewal policy, Liberty calculated
WireCo’s premium without applying a Texas schedule rating factor, but then applied
a 40% debit in 2012. Liberty included this modified schedule rating factor in the
2012 renewal policy proposal that it provided to WireCo. But WireCo alleged in
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Count IV that Liberty did not have sufficient documentation in its file to support the
schedule rating modification as required by the Texas Schedule Rating Plan, and thus
breached the 2012 renewal policy by modifying the rating factor. WireCo contends
that it was damaged by the increased premiums that resulted from this breach.
As an alternative theory, WireCo alleged in Count V that “[t]he excess
premiums paid by WireCo that Liberty Mutual has refused to refund is ‘loss’ as
contemplated by Mo. Rev. Stat. § 375.420.” This statute provides for the recovery
of a “loss under a policy” that the insurer refuses to pay “without reasonable cause or
excuse.” Mo. Rev. Stat. § 375.420. In total, WireCo contends that Liberty
overcharged on premiums by $545,561.00.
The district court dismissed WireCo’s statutory claim, concluding that WireCo
failed to state a claim on which relief can be granted. The court then granted
summary judgment for Liberty on WireCo’s breach of contract claims. The court
reasoned that the Missouri and Texas schedule rating plans were not incorporated into
the renewal policies, so that Liberty’s alleged violations of the rating plans’ notice
and documentation requirements did not constitute breach of contract.
II.
We review the district court’s grant of a motion to dismiss de novo. In re
Canadian Imp. Antitrust Litig., 470 F.3d 785, 788 (8th Cir. 2006). Dismissal is
proper where the plaintiff’s complaint fails to state a claim on which relief can be
granted. Fed. R. Civ. P. 12(b)(6).
We first address WireCo’s claim that Liberty’s refusal to refund premium
overpayments constituted a “loss” that is recoverable under Missouri’s vexatious
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refusal to pay statute, Mo. Rev. Stat. § 375.420. The district court dismissed this
claim, reasoning that “[t]he plain language and established purpose of the statute
indicate that it applies to claims filed under a policy that relate to a covered loss,” and
that “[a] breach of contract claim of overcharging or of failure to refund premium”
is not a loss contemplated by the statute. We agree with this interpretation of the
statute.
Missouri law permits an insured to recover damages and attorney’s fees when
an insurance company refuses to pay for a “loss under a policy” if the company “has
refused to pay such loss without reasonable cause or excuse.” Mo. Rev. Stat.
§ 375.420.3 WireCo contends that “any loss” includes not only an insurer’s
unreasonable failure to pay claims under the insurance policy, but also an insurer’s
unreasonable refusal to refund excess premiums. WireCo argues that the statute’s use
of the term “loss” rather than “claim” suggests a broader meaning. We agree with the
district court, however, that a “loss” under § 375.420 does not include excess
premium payments.
3
The statute provides in full:
In any action against any insurance company to recover the amount of
any loss under a policy of automobile, fire, cyclone, lightning, life,
health, accident, employers’ liability, burglary, theft, embezzlement,
fidelity, indemnity, marine or other insurance except automobile liability
insurance, if it appears from the evidence that such company has refused
to pay such loss without reasonable cause or excuse, 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; and the court shall enter
judgment for the aggregate sum found in the verdict.
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When “[i]nterpreting state statutes, this court applies that state’s rules of
statutory construction.” Behlmann v. Century Sur. Co., 794 F.3d 960, 963 (8th Cir.
2015). Missouri’s rules provide that where, as here, “statutory language is not
defined expressly, it is given its plain and ordinary meaning, as typically found in the
dictionary.” Derousse v. State Farm Mut. Auto. Ins. Co., 298 S.W.3d 891, 895 (Mo.
2009). Where a dictionary provides multiple definitions, Missouri courts look to the
context in which the term appears to ascertain which definition applies. See, e.g.,
Estate of Williams v. Williams, 12 S.W.3d 302, 306 (Mo. 2000); In re A.S.O., 75
S.W.3d 905, 910 (Mo. Ct. App. 2002); L.C. Dev. Co., Inc. v. Lincoln County, 26
S.W.3d 336, 340 (Mo. Ct. App. 2000). “Most common English words have a number
of dictionary definitions,” but “[o]ne should assume the contextually appropriate
ordinary meaning unless there is reason to think otherwise.” Antonin Scalia & Bryan
A. Garner, Reading Law: The Interpretation of Legal Texts 70 (2012).
Section 375.420 is an insurance provision. When “loss” is defined in the
insurance context, the term ordinarily means “the amount of an insured’s financial
detriment due to the occurrence of a stipulated contingent event (as death, injury,
destruction, or damage) in such a manner as to charge the insurer with a liability
under the terms of the policy.” Webster’s Third New International Dictionary 1338
(2002); see also American Heritage Dictionary 1037 (5th ed. 2016) (defining “loss”
as “[t]he amount of a claim on an insurer by an insured”); Random House Webster’s
Unabridged Dictionary 1137 (2d ed. 1997) (defining “loss” as the “occurrence of an
event, as death or damage of property, for which the insurer makes indemnity under
the terms of a policy”); Black’s Law Dictionary (10th ed. 2014) (defining “loss” as
“[t]he amount of financial detriment caused by an insured person’s death or an
insured property’s damage, for which the insurer becomes liable”). When considered
in proper context, the statutory term “loss” includes claims under an insurance policy,
but does not include financial detriment suffered as a result of excess premium
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payments. We therefore affirm the dismissal of WireCo’s claim under Mo. Rev. Stat.
§ 375.420 for alleged vexatious refusal to pay.4
III.
The parties dispute which of WireCo’s breach of contract theories were
properly before the district court at summary judgment. In its summary judgment
papers, WireCo presented two additional grounds for breach of contract that it had
not pleaded in its complaint: (1) that Liberty breached the renewal policies by failing
to obtain documentation as required by Missouri’s schedule rating plan, and (2) that
Liberty breached the renewal policies by improperly relying on WireCo’s loss
experience in its calculation of the schedule rating factors. The district court declined
to consider these additional theories, reasoning that “[t]he liberal pleading standard
under Federal Rule of Civil Procedure 8(a) does not afford a plaintiff with an
opportunity to raise new claims at the summary judgment stage.” WireCo disputes
the district court’s ruling, arguing that it did not raise new claims but rather new
grounds for breach of contract, and that Rule 8(a) does not require a plaintiff to plead
each separate ground for breach of contract in its complaint.
We conclude that the district court did not abuse its discretion when it
determined that only those theories of breach that WireCo pleaded in its complaint
were before the court. Although the pleading requirements under Rule 8(a) are
relatively permissive, the essential function of notice pleading is to “give the
defendant fair notice of what the . . . claim is and the grounds upon which it rests.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original)
4
Because the meaning of “loss” is clear in context, we need not consider
Liberty’s contention that § 375.420 should be construed “strictly” against the plaintiff
because the statute is penal in nature. See Missouri ex rel. Pemiscot County v. W. Sur.
Co., 51 F.3d 170, 174 (8th Cir. 1995); Morris v. J.C. Penney Life Ins. Co., 895
S.W.2d 73, 78 (Mo. Ct. App. 1995).
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(emphasis added) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); see N. States
Power Co. v. Fed. Transit Admin., 358 F.3d 1050, 1056-57 (8th Cir. 2004); cf.
Satcher v. Univ. of Ark. at Pine Bluff Bd. of Trustees, 558 F.3d 731, 735 (8th Cir.
2009).
WireCo’s complaint was specific as to the nature, bases, and grounds of
Liberty’s alleged breaches of contract. Counts I, II, and III of WireCo’s complaint
alleged that Liberty breached the 2010, 2011, and 2012 renewal policies, respectively,
by failing to comply with the notice requirements of the Missouri Schedule Rating
Plan. Count IV alleged that Liberty breached the 2012 renewal policy by failing to
obtain proper documentation as required by the Texas Schedule Rating Plan. Liberty
had notice of these alleged grounds for the breach of contract claims and was entitled
to tailor its defense accordingly; it was not required to intuit additional theories of
liability that were not apparent from WireCo’s complaint. WireCo contends that
Liberty learned of its new grounds for breach over the course of discovery, but the
materials to which WireCo refers are insufficient to demonstrate new grounds for
relief that were not alleged in the complaint.5
We therefore conclude that the district court did not abuse its discretion when
it declined to consider WireCo’s unpleaded grounds for breach on the eve of
5
WireCo cites interrogatories asking Liberty to specify documents in its files
on which the insurer based the rating factors for Missouri in the 2010 and 2011
renewals. But merely asking about these documents did not notify Liberty that
WireCo intended to pursue a new ground asserting that Liberty breached the renewal
policies by failing to have adequate documentation in its file with respect to Missouri
operations. WireCo also cites the deposition testimony of one of its executives, but
the record citation points to a cover page and fails to specify any testimony. Even if
we were required to search through the excerpts that follow the cover page, none of
them properly placed Liberty on notice that WireCo was asserting a breach on the
ground that the insurer improperly relied on WireCo’s loss experience.
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summary judgment. Like the district court, we limit our review to those grounds and
theories that WireCo properly pleaded in its complaint.
The district court granted summary judgment for WireCo because it concluded
that the Missouri and Texas schedule rating plans were not incorporated into the
renewal policies. As such, the court concluded that Liberty’s alleged incompliance
with the notice and documentation requirements did not constitute breach of contract.
We review this ruling de novo, viewing the record in the light most favorable to
WireCo. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
We have doubt about the district court’s conclusion on incorporation of the
policies. Liberty filed schedule rating plans with both Missouri and Texas that set
forth its procedure for schedule rating in each State. The renewal policies in question
dictate that premiums be determined in accordance with “rating plans.” And in line
with this dictate, each renewal policy contains pages of estimated premium
calculations in which each State’s “Schedule Rating” is one input that goes into the
estimated premium. The renewal policies do not merely mention the rating plans;
they memorialize an agreement between the parties that the premium for each policy
will be determined in part by these rating plans. WireCo thus argues with some force
that the schedule rating plans are incorporated into the policies, and that Liberty was
required to comply with the terms of the plans before changing the rating factors.
Even so, we may affirm on any ground supported by the record, and Liberty
argues alternatively that WireCo failed to present evidence that it suffered damages
from the alleged breaches of contract. In Missouri, “[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. Mo. Military Acad., 304 S.W.3d 98, 104 (Mo. 2010). Thus, even
assuming the rating plans were incorporated into the policies, and that Liberty
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breached the contracts, WireCo must present evidence that Liberty’s alleged breaches
caused WireCo to suffer damages.
The alleged breaches are that Liberty failed to meet the procedural
requirements of the Missouri and Texas schedule rating plans. Specifically, WireCo
claimed that Liberty did not give proper notice before modifying the Missouri
schedule rating factor, and that Liberty did not have proper documentation in its files
when it modified the Texas schedule rating factor.
“The goal in awarding damages is to put the non-breaching party in the same
position as if the contract would have been performed.” Fire Sprinklers, Inc. v. Icon
Contracting, Inc., 279 S.W.3d 230, 235 (Mo. Ct. App. 2009) (quoting Guidry v.
Charter Commc’ns, Inc., 269 S.W.3d 520, 532 (Mo. Ct. App. 2008)). Therefore, the
proper measure of damages in this scenario is the difference between the premiums
that WireCo actually paid under the renewal policies and the premiums that WireCo
would have paid if Liberty had given proper notice of the modification and
maintained proper documentation in its files. That relief would place WireCo in the
same position that it would have enjoyed if Liberty had performed on the contract.
WireCo, however, did not present evidence that proper notice from Liberty of
schedule rating modifications or proper documentation in Liberty’s files would have
resulted in lower insurance premiums for WireCo’s insurance coverage. WireCo
concedes that it is required by law to purchase workers’ compensation insurance. Yet
WireCo submitted no evidence that it could have obtained a less expensive policy
from Liberty or any other insurer in 2010, 2011, or 2012. WireCo’s chief accounting
officer testified that WireCo does not have any proposals or bids from other insurers
for the 2010, 2011, or 2012 calendar years, and he does not know whether WireCo
received any such bids. This officer further testified that he does not know whether
WireCo had an opportunity to purchase workers’ compensation for less than what
Liberty was offering for the years in question. Without evidence that WireCo could
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have obtained workers’ compensation insurance for less than what it actually paid to
Liberty, WireCo has not created a genuine dispute about whether it suffered damages.
WireCo argues that its damages are the difference between (1) the premiums
that WireCo actually paid and (2) the premiums that WireCo would have paid on the
2010, 2011, and 2012 renewal policies if the premiums had been calculated using the
schedule rating factors from prior years. The company argues that its damages can
be calculated by substituting the 4.2% Missouri schedule rating credit from 2009 into
the 2010, 2011, and 2012 renewal policies, and the 0.0% Texas schedule rating factor
from 2011 into the 2012 renewal policy. Under this calculation, WireCo claims it is
entitled to $545,561.00 in damages.
WireCo’s damages theory is flawed, because there is no evidence that WireCo
would have been able to obtain premiums in the disputed years based on the Missouri
2009 schedule rating factor and the Texas 2011 schedule rating factor. Even
assuming WireCo is correct that Liberty failed to provide adequate notice or to
maintain adequate documentation, these failures do not establish that Liberty was
required to offer renewal policies based on outdated rating factors. Liberty’s
underwriting manager averred that the insurer would not have offered the 2011 and
2012 policies based on the rating factors from previous years, and WireCo mustered
no evidence to the contrary.
Proof of damages is an essential element of WireCo’s breach of contract
claims. Because WireCo failed to present evidence that it would have paid lower
premiums if Liberty had complied with the notice and documentation requirements
of the Missouri and Texas schedule rating plans, we conclude that Liberty was
entitled to summary judgment on WireCo’s breach of contract claims.
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The judgment of the district court is affirmed.
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