Court Opinion

ID: 3029363
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:42:41.826946+00
Date Added: 2024-06-11T11:48:02.250465
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                    ___________

                                    No. 01-3624
                                    ___________

Loren Martin Hatch,                      *
                                         *
             Appellant,                  *
      v.                                 * Appeal from the United States
                                         * District Court for the Eastern
TIG Insurance Company,                   * District of Missouri.
a California corporation;                *
K&K Insurance Group, Inc.,               *
an Indiana Corporation,                  *
                                         *
             Appellees.                  *
                                    ___________

                              Submitted: June 13, 2002

                                   Filed: August 21, 2002
                                    ___________

Before RILEY, BEAM, and MELLOY, Circuit Judges.
                           ___________

BEAM, Circuit Judge.

       In this diversity action, Loren Martin Hatch appeals the district court's1 order
dismissing, pursuant to Federal Rule of Civil Procedure 12(c), this case arising out
of a discovery dispute during prior, collateral state court litigation. We affirm.

      1
       The Honorable Lewis M. Blanton, United States Magistrate Judge for the
Eastern District of Missouri. The parties consented to trial before a United States
Magistrate Judge, pursuant to 28 U.S.C. § 636(c), with direct review to this court.
I.    BACKGROUND

      Hatch was injured while bungee-jumping at a fair in St. Louis in 1993.
Following a trial and appeal in the Missouri state courts, the case settled when TIG
Insurance Company agreed to pay Hatch $6,180,000 in satisfaction of his claims
against Northstar Entertainment and V.P. Fair Foundation. Northstar and V.P. were
insureds of TIG, under a policy managed by K&K Insurance Group.

       Hatch subsequently brought this action against TIG and K&K for alleged
misstatements and misrepresentations about the extent of liability insurance coverage
involved in the underlying state court litigation. Hatch brought the action in Missouri
state court, and TIG removed the case to federal court pursuant to 28 U.S.C. § 1446
(removal), and 28 U.S.C. § 1332(a)(1) (diversity).

       In this action, Hatch seeks damages for intentional and negligent
misrepresentation, intentional and negligent infliction of emotional distress,
intentional and negligent breach of the duty of fair dealing, and "prima facie tort."
The facts, viewed in the light most favorable to Hatch,2 are as follows. During
discovery in the underlying case, interrogatory number six requested disclosure of the
amount of Northstar's and V.P.'s insurance coverage. Northstar answered by
indicating that it would produce a copy of the declaration page and certificate of

      2
        References to documents not attached to Hatch's petition are properly
considered under the standards of Rule 12(c) because Hatch's petition references and
relies upon such documents as the basis for his claims, and because the documents
are part of the public record from the earlier underlying state court proceedings.
Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (deciding that
on motion for judgment on the pleadings, court may consider materials that are
necessarily embraced by the pleadings or part of the public record which do not
contradict the petition).

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insurance. V.P. and Northstar later filed four supplemental answers to interrogatory
number six.

       The first one, served in April 1996, stated that there existed $1,000,000 of
commercial general liability insurance coverage through TIG. The second, served in
January 1997, stated that there was "a dispute between the insurance carrier and the
insured regarding the amount of coverage." A third, served in February 1997, stated
that there was $5,000,000 of coverage, and elaborated that "[d]efendant is aware that
the insurer has attempted to take the position that the coverage amount is $1,000,000.
Defendant considers this attempt by insurer to be totally without merit." A final
supplemental answer, served on May 15, 1997,3 stated unequivocally that there
existed $5,000,000 of coverage.

        As early as March 1996, Hatch began to inquire directly to TIG regarding
insurance coverage amounts by subpoenaing TIG policy-related documents and
noticing TIG and K&K employees for depositions. The certificates of insurance
produced by TIG indicate that during the summer of 1993, Northstar operated its
bungee-jumping crane at eleven different sites, and certificates were issued for each
site. For the V.P. Fair site, Northstar sent K&K a form requesting $5,000,000 of
insurance coverage. Six different certificates were issued to Northstar between June
17 and June 29, 1993. All six certificates indicate $5,000,000 of general aggregate
liability coverage; five of the certificates indicate $1,000,000 of participant legal
liability coverage; and one indicates $5,000,000 of participant legal liability coverage.

       Summarized and simplified, the undisputed facts indicate that several
certificates of insurance were issued for the V.P. Fair location, indicating either
$5,000,000 or $1,000,000 in insurance. Prior to trial in April 1997, Hatch, at the very

      3
       This supplemental answer indicates that it was notarized on April 14, 1997,
but not served until May 15, 1997.

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least, knew there was a dispute between the insurer and the insured regarding the
amount of coverage available. Certainly prior to settlement in May 1999, Hatch knew
of this dispute and the possibility of $5,000,000 in insurance coverage.

II.   DISCUSSION

       This court reviews the district court's grant of judgment on the pleadings
pursuant to Federal Rule of Civil Procedure 12(c) de novo. Westcott v. City of
Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990). We also review de novo the district
court's application of state law in diversity cases. Lefler v. Gen. Cas. Co., 260 F.3d
942, 945 (8th Cir. 2001).

       The essence of Hatch's seven claims for relief are that TIG and K&K provided
false information, either during discovery or at trial, regarding the amount of
Northstar's and V.P.'s insurance coverage. However, Hatch also undisputably
received all pertinent documents and information regarding the possibility of
$5,000,000 in insurance coverage prior to settlement of that case. Before trial in
April 1997, Hatch was on notice of the dispute over the amount of coverage between
Northstar/V.P. and TIG/K&K. Prior to settlement, Hatch knew of the possible
existence of $5,000,000 of insurance coverage. Missouri law indicates that his claim
is therefore barred. Phipps v. Union Elec. Co., 25 S.W.3d 679 (Mo. Ct. App. 2000).

       In Phipps, the plaintiff from a prior wrongful death lawsuit filed a separate
action against the defendants and their attorneys for fraudulent misrepresentation.
The plaintiff alleged that through the course of discovery in the prior suit, defendants
failed to admit that accident photographs existed, and even after this was later
revealed, only disclosed twenty-seven of thirty-two available photographs. The
remaining five photographs were not revealed until the pre-trial conference, at which
point the trial was postponed, and the litigants eventually settled. The Missouri Court
of Appeals held that "[w]here fraud is alleged to have occurred during the course of

                                          -4-
discovery" and a party becomes aware of this misconduct during the litigation, that
party's sole and exclusive remedy lies in the pursuit of a motion for sanctions during
the litigation in which such alleged conduct occurred. Id. at 681-82. Specifically, the
court stated that such alleged misconduct does not create a separate cause of action
for damages relating to the discovery violation. Id. at 681.

        Likewise, Hatch's exclusive remedy for litigation misconduct in the underlying
case was during the underlying case. Hatch should have sought to redress his claims
against the insurance companies through Missouri Court Rules, such as Rules 61.01
and 55.03, which provide Missouri courts with a remedial scheme for addressing
litigation misconduct during the course of discovery and at trial. Rule 61.01
addresses discovery misconduct, and Rule 55.03 deals with litigation misconduct in
general, and is Missouri's equivalent to Rule 11 of the Federal Rules of Civil
Procedure.

       Hatch argues that neither rule allows significant monetary penalties and
therefore they do not adequately redress his economic damage resulting from TIG and
K&K's conduct. However, in our view, the point of the Phipps holding is that
injuries to plaintiffs like Hatch are adequately redressed when the alleged misconduct
is discovered during the course of the lawsuit. Because Hatch knew prior to
settlement that, at the very least, there was a dispute regarding the amount of
coverage and that $5,000,000 of coverage was a distinct possibility, Hatch was able
to avoid damages which would have resulted if he had only believed there was a
possibility of $1,000,000 of coverage prior to settlement.4 "'"If at the time the parties
entered into the new agreement the facts as to the fraud and deceit were known, it is
to be presumed that both parties acted with that question in view, and the new
agreement was the wiping out of all old scores."'" Phipps, 25 S.W.3d at 682 (quoting

      4
     In fact, we note the settlement amount in excess of $6,000,000 very likely
encompassed the possibility of $5,000,000 of insurance coverage.

                                          -5-
Peck v. Jadwin, 704 S.W.2d 708, 711 (Mo. Ct. App. 1986)) (quoting Brown v. South
Joplin Lead & Zinc Mining Co., 132 S.W. 693, 695 (1910)).

      Hatch also argues that he can pursue this action because he did not release any
claims against TIG and K&K in the underlying settlement agreement. Again, this
misses the point. The termination of the prior action resulted in a waiver of his claims
against TIG and K&K, and he therefore "reserved" nothing. Furthermore, while we
can sympathize with plaintiffs having difficulty getting straight answers from
insurance companies involved in litigation, we believe the policy of the State of
Missouri is that such disputes be settled within the subject action. We are also
confident that Missouri state district courts have wide latitude to fashion a remedy
appropriate to the situation.

       While Hatch correctly points out that in Phipps the underlying misconduct
involved fraud and conspiracy, we disagree that this fact meaningfully distinguishes
it from Hatch's action. Rather, we believe that Phipps stands for the broader
proposition that Missouri courts will not allow litigants to undertake serial litigation
based on disputes which arise out of the underlying litigation. Phipps, 25 S.W.3d at
681-82. Thus, all of Hatch's claims, and not just those alleging fraud, are barred by
the principles announced in Phipps.5

      5
        Hatch's reliance on Vickers v. Progressive Casualty Insurance Co., 979
S.W.2d 200 (Mo. Ct. App. 1998), is misplaced. In Vickers, the plaintiffs brought an
action for negligent misrepresentation against the insurance company. However, the
alleged negligent misrepresentation did not occur during underlying litigation.
Instead, the Vickers plaintiffs sued the insurance company for its conduct during
settlement negotiations which occurred immediately after the automobile accident.
Id. at 202. The insurance company in Vickers was obviously not subject to the
sanctioning power of the district court in a prior action because there was no prior
action.

                                          -6-
        Finally, we agree with the district court that Hatch could have pursued the
remedies contained in Rules 61.01 and 55.03 against TIG and K&K in the underlying
litigation because of the close relationship between insurer and insured. See Simper
v. Trimble, 9 F.R.D. 598, 599-600 (W.D. Mo. 1949) (stating that insurers of
defendants are within jurisdiction of the trial court and subject to the rules of civil
procedure as defacto parties); cf. In re Allstate Ins. Co., 722 S.W.2d 947, 951-52 (Mo.
1987) (en banc) (considering possible conflicts of interest when insurance company's
attorney represents the insured and finding that insurer has vital interest in suit even
though not named and has the right to direct and control the litigation).

III.   CONCLUSION

       Hatch's numerous remaining contentions are without merit. We affirm the
district court.

       A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                          -7-