Brian Foster v. Integrity Mutual Insurance ( 2021 )

United States Court of Appeals
For the Eighth Circuit
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No. 20-1132
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Brian Foster
lllllllllllllllllllllPlaintiff - Appellant
v.
Integrity Mutual Insurance Company
lllllllllllllllllllllDefendant - Appellee
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Appeal from United States District Court
for the Southern District of Iowa - Des Moines
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Submitted: January 14, 2021
Filed: June 7, 2021
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Before LOKEN, GRASZ, and KOBES, Circuit Judges.
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KOBES, Circuit Judge.
Brian Foster was injured in a cab driven by a drunk driver. Integrity Mutual
Insurance Company insured the taxi company, United Cab. Foster sued Integrity for
negligent performance of an undertaking, alleging that Integrity should have done a
better background check on the cab driver. We affirm the district court’s1 grant of
summary judgment to Integrity because it did not owe any duty to Foster under Iowa
law.
I.
Mohamed Diriye, drunk and driving a United Cab taxi, drove off a Des Moines
road and crashed into a creek, killing one passenger and injuring Brian Foster. Diriye
pleaded guilty to two state felonies and an aggravated misdemeanor. Foster found out
that the taxi company’s insurer, Integrity, requested Diriye’s driving record before the
accident.
United Cab, through an independent insurance broker, submitted an insurance
application to Integrity in October 2016. As part of that application process, Integrity
received motor vehicle records (MVRs) of all United Cab drivers. Diriye’s MVR
showed that he had a valid Iowa chauffeur driver’s license, no restrictions on his
license, and one minor speeding offense. His MVR referred to a search inquiry for
“mohamed derive” and flagged the inquiry as a “possible MVR mismatch, please
review to verify.” Integrity reviewed the records and issued United Cab a business
and commercial liability policy a few weeks later.
The MVR did not show Diriye’s 2012 Fourth Degree Driving While Impaired
conviction from Minnesota. In 2016, this would have made Diriye ineligible to drive
a cab under a Des Moines city ordinance,2 which did not allow cab drivers to have a
driving-while-intoxicated conviction within ten years.
1
The Honorable John A. Jarvey, Chief Judge, United States District Court for
the Southern District of Iowa.
2
Des Moines, Iowa, Ordinance 15,354 § 126-231(e)(8) (Mar. 9, 2015) (repealed
Jan. 1, 2017).
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After the accident, Integrity split the full policy limit between Foster and the
estate of the other passenger. Foster, having reserved his right to sue, filed a state
court lawsuit against Integrity for negligent performance of an undertaking. Integrity
removed the case to federal district court under diversity jurisdiction and, after
limited discovery, filed a motion for summary judgment. Foster now appeals the
district court’s grant of summary judgment to Integrity.
II.
We review the district court’s summary judgment decision and its interpretation
of Iowa state law de novo. Washburn v. Soper, 319 F.3d 338, 340 (8th Cir. 2003).
An Iowa negligence claim has four elements: “the existence of a duty to conform to
a standard of conduct to protect others, a failure to conform to that standard,
proximate cause, and damages.” Thompson v. Kaczinski, 774 N.W.2d 829, 834 (Iowa
2009) (citation omitted) (cleaned up).
The first question in any negligence case is “whether the defendant owed the
plaintiff a legally recognized duty of care.” Jain v. Iowa, 617 N.W.2d 293, 297 (Iowa
2000). Iowa defines duty “by the relationship between individuals; it is a legal
obligation imposed upon one individual for the benefit of another person or
particularized class of persons.” Sankey v. Richenberger, 456 N.W.2d 206, 209 (Iowa
1990). “Because the existence of a duty under a given set of facts is a question of law
for the court, it is properly resolvable by summary judgment.” Overturff v. Raddatz
Funeral Servs., Inc., 757 N.W.2d 241, 245 (Iowa 2008).
Foster learned of the 2012 Minnesota DWI as part of the criminal investigation.
We assume, without deciding, that Integrity could have discovered Diriye’s 2012
Minnesota DWI, even though the Iowa Department of Transportation issued a
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chauffeur’s license in 2015 and did not show the DWI on his Iowa MVR, either when
the policy was issued or in 2018 when Integrity moved for summary judgment.
The Iowa Supreme Court adopted the Restatement (Second) of Torts § 324A
(Am. Law Inst. 1965) in Thompson v. Bohlken. 312 N.W.2d 501, 507 (Iowa 1981).
That section describes a claim to third parties for negligent performance of an
undertaking as:
One who undertakes, gratuitously or for consideration, to render
services to another which he should recognize as necessary for the
protection of a third person or his things, is subject to liability to the
third person for physical harm resulting from his failure to exercise
reasonable care to protect his undertaking, if
(a) his failure to exercise reasonable care increases the risk of
such harm, or
(b) he has undertaken to perform a duty owed by the other to the
third person, or
(c) the harm is suffered because of reliance on the other or a third
party upon the undertaking.
§ 324A.
Foster says that Integrity’s duty to United Cab’s passengers arises because it
increased his risk of harm by negligently checking Diriye’s driving record, and,
alternatively, because Foster and United Cab relied on Integrity’s review of the
driving records. See § 324A(a) and (c).
A.
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Foster first argues that because Integrity required the MVRs for United Cab’s
drivers before issuing insurance and because Iowa law requires United Cab to carry
liability insurance, Integrity increased Foster’s risk of injury. According to Foster,
a reasonable juror could infer that Integrity’s negligence in not finding the Minnesota
DWI increased Foster’s risk under Section 324A(a).
The Thompson court explained that when the insurer’s inspection made no
recommendation about safety conditions, it did not increase the employee’s risk under
Section 324A(a). 312 N.W.2d at 508. Similarly, the Iowa Supreme Court analyzed
a parallel provision from Section 323(a) in Jain. 617 N.W.2d at 299–300.3 The Jain
court explained that for there to be a duty, “the defendant’s negligent performance
must somehow put the plaintiff in a worse situation than if the defendant had never
begun performance.” Id. at 299 (quoting Power v. Boles, 673 N.E.2d 617, 620 (Ohio
Ct. App. 1996)) (cleaned up). In Jain, the Iowa Supreme Court did not find a duty
for a university with a policy of informing parents of self destructive behavior when
it did not follow the policy. 617 N.W.2d at 299. The court found that while the
student “may have been at risk of harming himself,” “[n]o affirmative action by [the
university] . . . increased that risk of self-harm.” Id.This case is similar. Foster was at risk of injuries from a taxi driver’s
negligence. United Cab hired Diriye, requested its own MVR and criminal record
check, repeated the investigation annually, and sent him on the call to pick up Foster
and his companion. Integrity’s MVR review provided information for its
underwriting risk, but, like in Jain, not informing United Cab of a driving violation
was an omission rather than a “sin[] of commission.” Id. (citation omitted). Even
assuming that Integrity could have discovered the Minnesota DWI, Integrity’s review
3
Comment a of Section 324A provides that “[t]he rule stated in this Section
parallels the one stated in § 323, as to the liability of the actor to the one to whom he
has undertaken to render services. This Section deals with the liability to third
persons.”
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of Diriye’s records did not put Foster in a worse situation because United Cab put
Diriye behind the wheel. Foster fails to establish a duty as a matter of law under
Section 324A(a).
B.
Next, Foster argues that Integrity undertook a duty to passengers under
Section 324A(c) because either Foster or United Cab relied on Integrity to screen taxi
drivers. At the district court, Foster argued that “[a] reasonable jury could find that
Integrity breached its duty of care . . . and that Plaintiff, like the general public,
reasonably relied on the insurance company to screen taxicab drivers for any
inordinate risk or law violation that would render a prospective driver effectively
uninsurable.” D. Ct. Dkt. 20-2 at 10. The district court found that United Cab did not
rely4 on Integrity’s background check because it continued to “conduct[] pre-hire and
annual reviews of its drivers’ MVRs, despite the fact that the company knew that
Integrity also reviewed the records.” D. Ct. Dkt. 24 at 12.
The comment to the Restatement explains that “[w]here the reliance of the
other, or of the third person, has induced him to forgo other remedies or precautions
against such a risk, the harm results from the negligence as fully as if the actor had
created the risk.” § 324A, cmt. e. In Thompson, the Iowa Supreme Court found that
an insurer had a duty of reasonable care to an injured employee of a business who
relied on the insurer’s semiannual safety surveys, assessments, and recommendations.
4
On appeal, Integrity argues that Foster waived this argument because he did
not raise this issue in his Response in Opposition to Summary Judgment. But the
district court addressed United Cab’s purported reliance in its order and we find no
record that Integrity objected until this appeal. We will consider it. See Combs v. The
Cordish Co., Inc., 862 F.3d 671, 678–679 (8th Cir. 2017) (exercising the court’s
discretion to address a newly raised argument that requires no additional factual
development and is a purely legal question).
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312 N.W.2d at 508. There, the insurer undertook a duty to the injured employee
under Section 324A(c) because the company considered the insurer to have greater
safety knowledge, asked it to conduct a safety school, and relied on the insurer’s site
inspections. Id.Foster argues that a reasonable juror could find that United Cab “relied upon
and deferred to [Integrity].” Foster Br. 33. But Foster shows us no evidence that
United Cab decided to forgo its own screening process or that Foster gave up other
transportation because Integrity insured United Cab. This set of undisputed facts is
different from Thompson and establishes no duty under Section 324A(c).
III.
Because Foster cannot show that the insurer increased his risk or that he or the
taxi company relied on the insurer’s background checks, we find that Integrity did not
undertake a duty to United Cab’s passengers. Even if Integrity negligently missed an
out-of-state offense, it is not liable to Foster as a matter of law. We affirm the district
court’s grant of summary judgment.
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