Court Opinion

ID: 6936161
Source: CourtListenerOpinion
Date Created: 2022-07-24 00:34:10.87811+00
Date Added: 2024-06-11T16:07:28.606944
License: Public Domain

McMILLIAN, Circuit Judge,
specially concurring.
I concur in the panel opinion on the breach of the duty to defend and the nonassignability of the bad faith refusal to settle issues. I write separately, however, because I do not agree that Agency as a certified self-insurer has no duty to settle. I do not think the Missouri legislature intended self-insurers to escape certain liabilities, such as for breach of the duty to settle, that would attach to third-party insurers.
As noted by the panel opinion, at 745, Agency is a car rental company, not an insurance company. It is a self-insurer under Missouri law. For the reasons discussed below, I think a self-insurer is much closer to an insurance company than does the panel opinion, particularly with respect to the duty to settle.
First, I would construe the rental contract to reserve to Agency a sufficient degree of control of the right to settle claims, although admittedly not an expressly exclusive right, especially when considered in light of the other provisions of the rental contract as well as Agency’s actions under the rental contract. As noted by the panel opinion, id. at 745^46, the rental contract in the present case does not use language as restrictive as that in Ganaway v. Shelter Mutual Insurance Co., 795 S.W.2d 554, 556 (Mo.Ct.App.1990) (Ganaway), much less as restrictive as that in Zumwalt v. Utilities Insurance Co., 360 Mo. 362, 228 S.W.2d 750, 752 (1950). Nonetheless, the rental contract does provide that “Agency will settle or defend, as it considers appropriate, any claim or suit seeking damages” and does not qualify or condition settlement or defense upon any notification or consultation with the lessee (the ear rental customer). As noted by the panel opinion, at 746, the rental agreement does not expressly prohibit the customer, or the customer’s insurer, from negotiating a settlement. The rental contract does not contain a provision like that in Ganaway explicitly barring the insured, except at his or her own cost, from voluntarily making any payment, assuming any obligation or incurring any expense other than for immediate medical expenses. 795 S.W.2d at 557. The rental contract does, however, provide that its indemnification and hold harmless agreement “shall not apply ... to any obligation assumed by the Customer or driver under any contract of whatever nature,” a condition which arguably would penalize the customer, or the customer’s insurer, from negotiating a settlement, without the approval of Agency.
Other provisions of the rental contract support an insurance relationship. The rental contract includes an indemnification agreement under which Agency agrees to protect the customer against claims for damages for bodily injury or property damage, up to the *748minimum dollar amount required for one rental automobile per occurrence, as required by the applicable motor vehicle financial responsibility law. The rental contract also requires customers to notify Agency of any accidents occurring while they operate the rental vehicles and to cooperate with Agency, its agents or employees in the investigation, defense or prosecution of any claim or legal proceeding arising out of the operation or use of the rental vehicle. Agency investigates claims made by injured persons against its customers and employs claims adjusters and attorneys to investigate and resolve those claims.
Here, Agency has conceded that under the rental contract it had a duty to defend its customers, up to the limits of its liability. Agency’s claims adjuster investigated the accident, negotiated with plaintiffs representatives about a possible settlement, and consulted Agency’s legal department about the settlement. In addition, during the litigation of the present case, Agency advanced defenses typical of insurers, such as failure to notify and failure to cooperate, as well as failure to make a demand for settlement.
Next, as noted by the panel opinion, under Missouri law, self-insurers do not automatically assume all the rights and duties that would exist under an insurance policy. Op. at 745, citing American Family Mutual Insurance Co. v. Missouri Power & Light Co., 517 S.W.2d 110, 113-14 (Mo.1974) (banc) (Missouri Power). I have no quarrel with Missouri Power under the facts of that ease. I would not, however, read Missouri Power to permit a self-insured to escape liability under the facts of the present case.
In Missouri Power an employee had an accident while driving a company car, with the employer’s permission, on personal business. The employer was a self-insurer. The Missouri Supreme Court held that the employer’s statutory obligation, as a self-insurer, to pay the same judgments and in the same amounts that an insurer would have been obligated to pay under an owner’s motor vehicle liability policy if it had issued such a policy to said self-insurer, did not constitute “other valid and collectible insurance” within the meaning of the employee’s liability policy. Id., citing Home Indemnity Co. v. Humble Oil & Refining Co., 314 S.W.2d 861, 865-66 (Tex.Ct.Civ.App.1958) (Humble Oil). The majority opinion in Missouri Power emphasized the employee-employer relationship, the employer’s lack of liability at common law for an accident involving an employee that occurred outside the scope of employment, the employee’s primary liability at common law for his negligent driving, and the inability of the employee, and the employee’s insurer, to recoup damages paid for the employee’s negligence from the employer. 517 S.W.2d at 113-14, citing Humble Oil, 314 S.W.2d at 865-66. The dissenting opinion criticized what it characterized as the majority opinion’s unsuccessful “attempt to mix apples and oranges — the general rule as to indemnity in a respondeat superior situation with liability of an insurer under the standard omnibus clause.” 517 S.W.2d at 114 (Seiler, J., dissenting); see Hillegass v. Landwehr, 176 Wis.2d 76, 499 N.W.2d 652 (1993) (Hillegass) (employee-employer context; holding self-insurer provided “insurance” within meaning of other insurance clause in liability policy).
I believe the dissenting opinion in Missouri Power has the better argument.1 Accepting the analysis of the majority opinion, however, I would distinguish Missouri Power from the present case on its facts, that is, the absence of the employee-employer relationship emphasized by the majority opinion in Missouri Power. In the customer-car rental agency context, concerns about the doctrine of respondeat superior and employer liability for an employee’s personal business outside the scope of employment are irrelevant. Despite Agency’s disclaimer that it is not an *749insurance company, the rental contract and Agency’s actions establish that Agency functions substantially like an insurance company, at least with respect to indemnification and settlement of claims against its customers. It is irrelevant to the customer whether the ear rental agency is self-insured or obtains insurance from a third-party. See Missouri Power, 517 S.W.2d at 114-17 (Seiler, J., dissenting); Hillegass, 176 Wis.2d at 82-86, 499 N.W.2d at 655-56 (same); see also Gavaghan v. Replacement Rent-A-Car, Inc., 811 F.Supp. 1077, 1081 (E.D.Pa.1992) (Pennsylvania law; rental ear customer); Nathanson v. Hertz Corp., 183 Cal.App.3d 78, 84, 227 Cal.Rptr. 799, 803 (1986) (California law; rental car customer); Chambers v. Agency Rent-A-Car, Inc., 878 P.2d 1164, 1165-67 & n. 4 (Utah Ct.App.1994) (Utah law; rental car customer).
[T]he legislative decision to permit companies to select the manner in which they are to be “insured” or financially responsible for liability to others should not be confused with [the self-insurer’s] contention that self-insured companies be permitted to avoid the obligations and duties that arise from operating motor vehicles [within the state]. Insofar as [the self-insurer] operates motor vehicles within the state ..., it is subject to the risks and liabilities attending that operation — whether it self-retains the risk or contractually shifts the risk to a third-party.
Hillegass, 176 Wis.2d at 83, 499 N.W.2d at 655.
The eases cited involved liability claims, not claims for bad faith refusal to settle. Nonetheless, I think a self-insurer should be required to pay both liability claims and any claims related to its mishandling of those liability claims to the same extent as would a third-party insurer.

. The Missouri motor vehicle financial responsibility statute defines "motor vehicle liability policy” to include the usual omnibus coverage found in the standard automobile liability policy whereby the insurer covers the named insured and also any other person using any of the specified motor vehicles with the permission of the named insured. Mo.Stat.Rev. § 303.190 (1994). The statute also provides that the self-insurer will pay the same judgments and amounts that an insurer would have been obligated to pay under an owner’s motor vehicle liability policy had it issued one to the self-insurer. Id. § 303.160.1(4).