ACUITY v. Bryan C. Johnson, etc.
2015 U.S. App. LEXIS 622
| 8th Cir. | 2015Background
- Bryan Johnson owned two semi-tractors (1986 and 1987) insured by Acuity but insured only the truck he was driving; he called Acuity's agent (Holden) several times to switch which truck was covered.
- In February 2010 Holden's records show a change removing the 1986 truck from Acuity's policy; Johnson denied authorizing that change and continued operating the 1986 truck.
- On December 5, 2010, Johnson's 1986 truck pulling a J&B trailer (insured by Western National) crashed, causing a death; Acuity defended and later paid $561,000 to settle the tort claim and sought reimbursement.
- Dispute turned on the crucial factual question whether Johnson instructed Holden in February 2010 to remove the 1986 truck; if Holden changed the policy without consent, Acuity remained primary; if Johnson requested the change, Western National would be primary and Acuity excess under MCS-90.
- Acuity sued Western National and Johnson; Western National and Johnson counterclaimed for a declaration Acuity was primary. Acuity settled with Johnson at trial start but Johnson nevertheless participated; a jury found Johnson did not request the February 2010 change and the district court entered judgment requiring Acuity to provide primary coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Characterization: contract reformation vs. contract modification | Acuity: Western National seeks to reform (rewrite) a contract to add the 1986 truck. | Western National: case is factual—whether the insured authorized a change; if change was without consent it is void. | Court: Case is one of contract modification (fact issue whether Holden changed policy with consent); not a reformation case. |
| Standing of Western National to challenge Acuity's contract | Acuity: Western National, not a party to Acuity–Johnson policy, lacks standing to seek contract relief. | Western National: as potential excess insurer its liability depends on primary insurer’s obligations; therefore it has standing. | Court: Western National has standing as a potential excess insurer to challenge primary coverage. |
| Jury instructions / burden on reformation | Acuity: Jury should be instructed that Western National must prove elements of contract reformation. | Western National: This is not a reformation case; the jury should decide the factual question of authorization. | Court: Denied instruction on reformation; jury properly instructed to decide whether Johnson authorized the February 2010 removal. |
| Effect of settlement and Johnson's participation | Acuity: After settlement Johnson should have been dismissed; his continued participation prejudiced Acuity. | Western National: Cross-claims remained; participation appropriate. | Court: Although dismissal was arguably appropriate, Johnson’s participation was de minimis and Acuity showed no prejudice; no new trial. |
Key Cases Cited
- Harrod v. Farmland Mut. Ins. Co., 346 F.3d 1184 (8th Cir. 2003) (standard for reviewing mixed questions of law and fact)
- Linden v. CNH America, LLC, 673 F.3d 829 (8th Cir. 2012) (preservation of issues on appeal not necessarily dependent on postverdict motions)
- Shake v. Westchester Fire Ins. Co., 196 N.W. 804 (Minn. 1924) (unauthorized modification of insurance coverage restores original coverage)
- Rhone-Poulenc, Inc. v. Int'l Ins. Co., 71 F.3d 1299 (7th Cir. 1995) (interdependency of primary and excess insurer liability supports standing of excess insurer to litigate primary insurer obligations)
- Kashmark v. Western Ins. Co., 344 N.W.2d 844 (Minn. 1984) (court may not effectively rewrite an insurance policy without proof meeting reformation elements)