American Railcar Industries, Inc. v. Hartford Insurance Co.

United States Court of Appeals
For the Eighth Circuit
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No. 16-1900
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American Railcar Industries, Inc.
lllllllllllllllllllll Plaintiff - Appellant
v.
Hartford Insurance Company of the Midwest
lllllllllllllllllllll Defendant - Appellee
Specialty Risk Services, LLC; Randy P. Murphy
lllllllllllllllllllll Defendants
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Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
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Submitted: January 12, 2017
Filed: February 7, 2017
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Before WOLLMAN, MURPHY, and MELLOY, Circuit Judges.
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MURPHY, Circuit Judge.
George Tedder worked at American Railcar Industries (ARI). He was injured
while he was on a break from work. After his workers compensation claim was
denied, he filed a civil action in federal court against ARI and was awarded over $1.5
million in damages. ARI then filed this insurance coverage action against Hartford
Insurance Company (Hartford). The district court1 granted Hartford summary
judgment after concluding that the policy did not cover Tedder's injuries and that
ARI's breach of the notification provision in the policy also barred coverage. ARI
appeals, and we affirm.
I.
George Tedder worked for ARI in Arkansas. While Tedder was on a break
from work on April 24, 2008, he was struck by a golf cart driven by a coworker. The
accident injured Tedder's lower back. At the time of the accident, ARI carried
workers compensation and employers' liability insurance that had been issued by
Hartford. Part one of the policy insured ARI against workers compensation claims.
Under part one Hartford agreed to pay "the benefits required of [ARI] by the workers
compensation law." Part two of the policy insured ARI against bodily injury that
arose "out of and in the course of the injured employee's employment." Part two also
stated that "[t]here will be no right of action against [Hartford] under this insurance
unless: 1. [ARI has] complied with all the terms of this policy." Part four required
ARI to "[p]romptly give [Hartford] all notices, demands, and legal papers related to
the injury, claim, proceeding or suit."
Tedder filed a workers compensation claim on June 6, 2008. ARI promptly
notified Hartford of Tedder's injury and his workers compensation claim. The claim
was referred to Georgia Diemer at Specialty Risk Services (SRS). SRS was a division
of Hartford at the time of Tedder's injury. Diemer hired an attorney to defend
Tedder's claim against ARI. Throughout the workers compensation proceedings,
1
The Honorable Charles A. Shaw, United States District Judge for the Eastern
District of Missouri.
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Tedder's attorney told Diemer that he believed that Tedder's workers compensation
claim would not prevail because Tedder had been on break at the time of the accident.
Tedder's attorney indicated that he was neverthless required to pursue the workers
compensation claim in order to exhaust Tedder's administrative remedies before filing
a civil tort action. An administrative law judge (ALJ) determined that Tedder's claim
was not compensable under the Arkansas Workers' Compensation Act because he had
not been performing employment services at the time of the accident. The full
Arkansas Workers' Compensation Commission affirmed the ALJ's decision.
On September 2, 2009, Tedder filed a tort action in federal district court against
ARI. ARI did not promptly forward this complaint to Hartford. On September 21,
ARI's counsel in the tort action sent a letter to Hartford's lawyer in the workers
compensation action asking him for copies of any relevant discovery. Attached to the
letter was the answer ARI had filed in the tort action. An ARI employee testified at
his deposition that he thought he had notified Diemer in approximately October 2009
that, "hey, this has gone civil." That employee could however not "recall with
certainty" if this happened and stated that it was "just a conversation. It wasn't to
report it . . . ." A jury awarded Tedder $2,284,88.20 in 2012, but the district court
later reduced the award to $1,547,388.20. We affirmed. See Tedder v. Am. Railcar
Indus., Inc., 739 F.3d 1104 (8th Cir. 2014).
ARI filed the present insurance coverage action against Hartford in 2013. ARI
claimed that Hartford had breached part two of the insurance policy by refusing to
cover its losses resulting from the Tedder civil action. The district court granted
Hartford summary judgment after concluding that part two of the policy did not cover
Tedder's injuries because he had been on a break when the injury occurred. It
additionally concluded that ARI had failed to notify Hartford of the civil action and
that this breach of the policy obviated Hartford's coverage obligations. ARI appeals.
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II.
ARI argues that the district court erred by concluding that it breached the
insurance policy by not promptly notifying Hartford of Tedder's civil action. We
review a district court's "grant of summary judgment de novo and consider the facts
in the light most favorable to the nonmoving party." Nichols v. Tri-Nat'l Logistics,
Inc., 809 F.3d 981, 985 (8th Cir. 2016). A district court's grant of "[s]ummary
judgment is only appropriate when 'there is no genuine dispute as to any material fact
and the moving party is entitled to judgment as a matter of law.'" Id. (quoting Pinson
v. 45 Dev., LLC, 758 F.3d 948, 951–52 (8th Cir. 2014)). We review de novo
questions of contract interpretation. Anderson v. Hess Corp., 649 F.3d 891, 896 (8th
Cir. 2011).
It is undisputed that Arkansas law governs this action. If an insurance policy
treats the giving of notice of a lawsuit as a condition precedent to recovery, "the
insured must strictly comply with the notice requirement, or risk forfeiting the right
to recover from the insurance company." Fireman's Fund Ins. Co. v. Care Mgmt.,
Inc., 361 S.W.3d 800, 803 (Ark. 2010). If the notice requirement is a condition
precedent, the "insurance company need not show that it was prejudiced by any
delays in or lack of notification." Id. The notice requirement in the policy here is a
condition precedent to recovery because part two provides that ARI does not have a
cause of action against Hartford unless ARI complies with all of the policy's terms.
ARI would therefore forfeit any right to recover from Hartford if it did not strictly
comply with the policy's notice requirement.
Under part four of the insurance policy, ARI was required to "[p]romptly give
[Hartford] all notices, demands, and legal papers related to the injury, claim,
proceeding or suit." ARI argues that Tedder's claims throughout the workers
compensation proceedings that he would file a civil action, ARI's counsel's
September 21 letter to Hartford's workers compensation counsel, and an ARI
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employee's conversation with Diemer all put Hartford on notice that Tedder had filed
a civil action against ARI. It is undisputed, however, that ARI did not forward to
Hartford all of the notices, demands, or legal papers related to Tedder's tort action.
It therefore did not strictly comply with the policy and forfeited any right to recover
from Hartford.
ARI alternatively argues that it was not required to comply strictly with the
notice provision because Hartford had repudiated coverage. In Arkansas, an insurer
is estopped from enforcing its notice provision if the insured can show that the insurer
had unambiguously denied coverage and that the denial induced the insured's failure
to comply with the notice provision. See Kimbrell v. Union Standard Ins. Co., 207
F.3d 535, 538 (8th Cir. 2000); Am. Fid. & Cas. Co. v. Ne. Ark. Bus Lines, 146
S.W.2d 165, 165–67 (Ark. 1941). ARI argues that Diemer's notes and Hartford's
workers compensation attorney's statements to the ALJ denied coverage. Diemer's
notes indicate that she had told Tedder's workers compensation attorney that Hartford
did not belief the claim was compensable. Her notes do not however indicate that
Hartford had informed ARI that it would deny coverage under part two of the policy
if Tedder filed a tort action. At the workers compensation hearing the ALJ asked
Hartford's attorney whether it had insured ARI "for both comp and premises liability."
Hartford's attorney responded, "No, Your Honor." Since the policy here only insured
ARI for workers compensation and employers liability, the Hartford attorney's
response was accurate and was not an unambiguous denial of coverage.
III.
For the reasons stated above, we affirm the judgment of the district court.
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