Schubert v. Auto Owners Insurance
2011 U.S. App. LEXIS 16606
| 8th Cir. | 2011Background
- Auto Owners insured a house owned by Schubert (half interest) that was destroyed by arson in 2008.
- Auto Owners paid half the policy face value ($62,250) and contested recovery of the full face amount ($124,500) under a policy clause limiting payout to the insured's insurable interest at the time of loss.
- Schubert sought the full policy amount, alleging breach of contract; she also asserted vexatious-refusal-to-pay under Missouri law after the insurer did not pay in full.
- Missouri valued policy statute Mo.Rev.Stat. § 379.140 provides that the face value is the measure for total loss unless exceptions apply, and insurable interest can be broad.
- District court held the insurable-interest limitation void under § 379.140 or ambiguously defined, granting judgment for Schubert on the breach claim and denying vexatious-refusal damages; the district court also addressed jurisdiction and amount-in-controversy.
- The Eighth Circuit affirmed jurisdiction and held the policy limitation void or ambiguous, awarding Schubert the full face amount.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the insurable-interest limitation is void under the Missouri valued policy statute | Schubert argues limitation contravenes § 379.140 | Auto Owners contends limit is valid under policy terms | Limit void under § 379.140 (value policy statute) against total loss |
| If the limitation is invalid, whether ambiguity requires full recovery | Ambiguity should favor full recovery | Ambiguity should still match insurable interest limit | Ambiguity resolves in favor of full recovery under MO law |
| Jurisdiction and amount-in-controversy for diversity review | Claim seeks full policy value; post-removal payments do not defeat jurisdiction | Partial payment reduces controversy to below threshold | Jurisdiction proper; vexatious-refusal count supports reaching $75,000 threshold |
| Role of Pemiscot County and Crenshaw in jurisdictional analysis | Pemiscot supports jurisdiction despite partial success | Crenshaw undermines based on complex coverage issues | Pemiscot/Crenhsaw not controlling; good-faith pleadings sustain jurisdiction under the circumstances |
| Whether the district court’s alternative ambiguity approach suffices | If limit stands, ambiguity still supports full recovery | Ambiguity could resolve to partial recovery | Ambiguity resolved in favor of full recovery under JAM Inc. reasoning |
Key Cases Cited
- DeWitt v. American Family Mutual Insurance Co., 667 S.W.2d 704 (Mo. 1984) (valued policy statute applies to complete loss; full policy limits recoverable)
- G.M. Battery & Boat Co. v. L.K.N. Corp., 747 S.W.2d 624 (Mo. 1988) (insurable interest established; insurer cannot downshift on value after policy issuance)
- JAM Inc. v. Nautilus Ins. Co., 128 S.W.3d 879 (Mo. Ct. App. 2004) (ambiguity of undefined terms like 'financial/insurable interest' favors broader recovery)
- Pemiscot County v. Western Surety Co., 51 F.3d 170 (8th Cir. 1995) (jurisdictional assessment; vexatious-refusal standard; complex coverage issues can affect jurisdiction)
- St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283 (1938) (amount-in-controversy determined by potential recovery; not defeated by defenses or later events)