West American Insurance Co v. RLI Insurance Company
698 F.3d 1069
8th Cir.2012Background
- Miller, a Kansas resident, rear-ended a Missouri vehicle, injuring Andrade and O’Dell-Wilson; West issued a primary policy and RLI issued an excess policy.
- Arbitration resolved with damages near $1.35 million; judgments entered; underlying claimants garnished Miller; West and RLI satisfied judgments.
- West sued in diversity seeking to recover defense expenses; alleged vexatious/bad-faith/refusal-to-pay and related claims against RLI and ASCK; RLI counterclaimed for bad-faith refusal-to-settle and subrogation.
- District court dismissed several claims; later granted summary judgment on some defenses; at issue was whether Kansas or Missouri law applies to RLI’s counterclaim.
- Court held choice-of-law issue favored Kansas law; reversed to allow RLI’s counterclaim to proceed, remanding for further proceedings; other aspects largely affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Which state law governs RLI’s counterclaim? | West argues Missouri law applies. | RLI argues Kansas law applies due to Miller’s residence and insured relationship. | Kansas law applies; counterclaim may proceed. |
| Can an excess insurer sue for bad-faith or negligent refusal to settle as subrogee under Kansas law? | West contends no independent duty and no subrogation right bars recovery. | RLI asserts subrogation to Miller’s rights permits a bad-faith/refusal-to-settle claim against West. | Yes; Kansas would permit subrogation-based bad-faith/refusal-to-settle claims. |
| Are West’s claims against ASCK and related misrepresentation/negligence claims viable? | West seeks indemnity, negligence, and misrepresentation-based recovery. | ASCK owed no duty to West; misrepresentation reliance questions foreclose recovery. | Claims against ASCK are dismissed; certain defenses preserved for remand. |
| Does West have viable prima facie tort claim against RLI? | West asserts intentional or reckless wrongs by RLI. | RLI argues insufficient evidence of actual intent under Missouri law or nonexistence under Kansas law. | Prima facie tort claim is not viable under either regime; district court affirmed dismissal. |
Key Cases Cited
- American Guarantee & Liability Ins. Co. v. U.S. Fid. & Guar. Co., 668 F.3d 991 (8th Cir. 2012) (choice-of-law in excess-insurer subrogation context)
- Bollinger v. Nuss, 449 P.2d 502 (Kan. 1969) (insurer duty to settle in good faith; potential liability beyond policy limits)
- Glenn v. Fleming, 799 P.2d 79 (Kan. 1990) (high/low agreements; insurer liability for excess judgments)
- Heinson v. Porter, 772 P.2d 778 (Kan. 1989) (insurer liability limited to insured’s actual damage; pre-Glenn view)
- Twin City Fire Ins. Co. v. Country Mut. Ins. Co., 23 F.3d 1175 (7th Cir. 1994) (efficiency of settlement; subrogation and good-faith considerations)