United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 97-3769
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Cretcher-Lynch & Company; *
Steve Hatcher, *
*
Plaintiffs-Appellants, *
* Appeal from the United States
v. * District Court for the Western
* District of Missouri.
National Council on Compensation *
Insurance, Inc., * [PUBLISHED]
*
Defendant-Appellee.
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Submitted: April 13, 1998
Filed: July 10, 1998
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Before RICHARD S. ARNOLD, Chief Judge,1 LAY and LOKEN, Circuit Judges.
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PER CURIAM.
Cretcher-Lynch & Co. (“CLC”) and Steve Hatcher (“Hatcher”) filed this suit
against the National Council on Compensation Insurance, Inc. (“NCCI”), alleging
NCCI failed to properly bind workers compensation insurance for Hatcher’s sole
proprietorship, Prestige Homes and Additions, Paramount State of the Art Roofing
1
The Hon. Richard S. Arnold stepped down as Chief Judge of the United States
Court of Appeals for the Eighth Circuit at the close of business on April 17, 1998. He
has been succeeded by the Hon. Pasco M. Bowman II.
(“Prestige/Paramount”). The district court granted summary judgment in favor of
NCCI. Hatcher and CLC now appeal. We affirm, but for reasons different than those
stated by the district court.
Factual and Procedural Background
NCCI administers the Missouri Workers Compensation Insurance Plan (“Plan”).
Using an assigned risk method,2 the Plan provides workers compensation insurance to
Missouri employers who cannot obtain such coverage on the voluntary market.
Hatcher could not obtain workers compensation coverage for Prestige/Paramount on
the voluntary market, so he applied for coverage under the Plan. CLC is an insurance
brokerage that assisted Hatcher in the application process.
On July 15, 1992, CLC submitted Hatcher’s application for coverage to NCCI.
The application named Prestige/Paramount as the entity seeking coverage, and it
indicated Prestige/Paramount was a sole proprietorship. Hatcher’s brother, Dan
Hatcher, signed the application as the representative of Hatcher, and he also signed an
accompanying third-party finance agreement. Dan Hatcher owned Hatcher
Construction, Inc., which had ceased operations sometime before the formation of
Prestige/Paramount. Dan Hatcher previously had obtained workers compensation
insurance through the Plan, and apparently he owed outstanding premium to one of the
Plan’s servicing carriers. The Plan’s procedures provide that an employer with an
outstanding obligation for workers compensation insurance is not entitled to Plan
insurance. See J.A. at 209, 231.
2
Under this assigned risk method, NCCI processes an employer’s application,
binds coverage, selects a servicing carrier, and forwards the employer’s application and
premium deposit to that servicing carrier. See J.A. at 208. This servicing carrier then
issues a policy under its company name and provides the same insurance services to
the Plan policyholder as it provides to its other policyholders. See id.
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After reviewing the application and its records regarding Dan Hatcher and
Hatcher Construction, Inc., NCCI determined it needed more information regarding the
ownership of Prestige/Paramount. NCCI returned Hatcher’s application to CLC along
with a letter dated July 30, 1992. The letter stated, in relevant part:
This application is being returned to you for the reason(s) listed below.
If a deposit premium was submitted with the application, the original
binding date may be honored provided the application, with complete
information, is postmarked within fifteen (15) calendar days following the
date of this letter and the risk is otherwise deemed eligible for coverage.
The original binding date will be void unless all items requested below are
provided.
OUR RECORDS INDICATE A CHANGE HAS OCCURRED IN
OWNERSHIP, NAME, LEGAL STATUS, MERGER OR
ADDITIONAL NAMED INSURED. IN ORDER TO DETERMINE
ELIGIBILITY FOR COVERAGE, THE ENCLOSED ERM-14 FORM
MUST BE COMPLETED IN FULL AND SIGNED.
SIS [sic] THIS RISK OPERATE UNDER A DIFFERENT NAME AT
ONE TIME.
J.A. at 244 (emphasis added).
Gayle Brunner, a CLC employee, received the letter on August 3, 1992 and
observed the letter requested the ERM-14 form be returned within fifteen days of July
30, 1992. CLC did not return the form to NCCI within fifteen days, because the letter
and form “got caught in the shuffle of paper on [Gayle Brunner’s] desk.” See J.A. at
312 (reprinting parties’ Joint Stipulation of Facts). CLC did not forward the form to
Hatcher until August 19, 1992, and CLC did not inform Hatcher of the fifteen-day
deadline.
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On August 27, 1992, one of Hatcher’s employees was injured on the job and
sometime thereafter, filed a workers compensation claim. On August 31, 1992, CLC
received the completed ERM-14 form and forwarded the form and Hatcher’s other
application materials to NCCI. NCCI bound coverage effective September 5, 1992 and
asserts Hatcher’s employee’s workers compensation claim that arose in the interim was
not insured by the Plan. Hatcher asserted a claim against CLC for indemnity against
any loss resulting from the uninsured workers compensation claim. In turn, CLC
demanded indemnity from NCCI, which NCCI refused to provide. CLC’s professional
liability insurer eventually settled the workers compensation claim on behalf of
Hatcher.
On August 23, 1996, Hatcher and CLC filed suit in state court, alleging NCCI
breached its duty to bind coverage upon its receipt of Hatcher’s initial application
materials. The complaint asserted NCCI was directly liable to Hatcher and secondarily
liable to CLC as Hatcher’s equitable subrogee. See J.A. at 11-17. On September 30,
1996, NCCI removed the action to federal district court. On July 31, 1997, NCCI
moved for summary judgment, contending Hatcher could not make out a prima facie
case as to NCCI’s liability, and CLC was not entitled to equitable subrogation. On
September 18, 1997, the district court3 granted NCCI’s motion for summary judgment,
finding there was no contract between NCCI and Hatcher, and NCCI did not breach
any duty it owed to Hatcher. Cretcher-Lynch & Co. v. National Council on Compens.
Ins., Inc., No. 96-1016-CV-W-4, slip op. at 8-9 (W.D. Mo. Sept. 15, 1997).
Moreover, the court rejected CLC’s equitable subrogation claim, concluding CLC’s
equitable subrogation rights depended upon Hatcher having rights against NCCI, and
Hatcher had no rights against NCCI in either contract or tort. Id. at 9.
3
The Honorable Gary A. Fenner, United States District Judge for the Western
District of Missouri.
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Real Party In Interest
The first issue we address is whether CLC and Hatcher are proper parties to this
action. At oral argument, NCCI alleged that Hatcher has no claim against NCCI
because he suffered no damages. NCCI further alleged that CLC has no independent
legal rights against NCCI. On the other hand, CLC asserts it has a legitimate claim
against NCCI under the doctrine of equitable subrogation.
Even if we assume CLC has a valid claim of equitable subrogation by reason of
paying Hatcher’s injured employee workers compensation benefits, see American
Nursing Resources, Inc. v. Forrest T. Jones & Co., 812 S.W.2d 790, 794 (Mo. Ct.
App. 1991) (defining subrogation), under Missouri law, CLC is nonetheless not the real
party in interest to bring the claim against NCCI. The law of Missouri has long held
that in a claim for equitable subrogation, in the absence of an assignment, the subrogee
owns only an equitable interest in the claim. See Kroeker v. State Farm Mut. Auto. Ins.
Co., 466 S.W.2d 105, 110 (Mo. Ct. App. 1971). Thus, in the present case, it is
Hatcher who holds legal title to any claims against NCCI. See id. Even though
Hatcher has been paid, as trustee, he was obligated to prosecute these claims and to
cooperate with CLC in that regard. See id.
Accordingly, CLC’s claim is dismissed without prejudice on the basis that it is
not the real party in interest. However, we also conclude that the NCCI is incorrect in
stating Hatcher has no claim against it because CLC’s payment of the workers
compensation claim means Hatcher has not been damaged. See Waterwiese v. KBA
Constr. Managers, Inc., 820 S.W.2d 579, 584-85 (Mo. Ct. App. 1991). CLC’s
payment on behalf of Hatcher did not extinguish Hatcher’s legal title to his claims
against NCCI. Thus, Hatcher remains a proper party to this action.
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Hatcher’s Complaint
Hatcher’s claim as set forth in his original petition neither mentions breach of
contract nor explicitly alleges that NCCI was negligent. Instead, Hatcher’s claim is
based on the theory that NCCI has breached its duty to bind coverage of his workers
compensation insurance upon receipt of his application, which he alleges was
forwarded to NCCI in good faith.
In its order granting summary judgment in favor of NCCI, the district court
characterized Hatcher’s claim as a “contract and/or tort claim against NCCI.”
Cretcher-Lynch & Co., No. 96-1016-CV-W-4, slip op. at 6. The court rejected
Hatcher’s contract claim upon the basis that there was no mutuality of agreement
between NCCI and Hatcher. Id. at 6-8. The court also rejected Hatcher’s negligence
claim, finding NCCI “has a duty to ‘promptly review all applications as received[,] [t]o
issue binders promptly to all employers who appear to be qualified for coverage under
the Plan’” and “that in promptly reviewing Hatcher’s application for coverage, alerting
him to what was necessary to be qualified for coverage, and in making him aware of
the deadline by which the information must be received in order that he be promptly
bound, NCCI did not breach its duty.” Id. at 8-9.
On appeal, Hatcher asserts he “do[es] not predicate NCCI’s liability upon a
contract theory.” Hatcher Reply Br. at 12. Instead, Hatcher asserts that there was an
immediate duty of NCCI to automatically bind coverage for all applicants who applied
in good faith. He asserts that he made his application in good faith and that NCCI now
concedes the original application contained all of the material information necessary
to bind the application. In effect, Hatcher urges that notwithstanding NCCI’s request
for additional information, under the terms of the Plan and the Plan’s Information and
Procedures Handbook (“Handbook”), coverage was bound upon receipt of the
application as there was no showing that the application was not submitted in good
faith. Hatcher asserts that under these circumstances, NCCI’s unilateral request for
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additional information did not affect the original date of binder placed on the
application.4
Breach of Contract
Hatcher does not argue that he has filed a breach of contract claim; nonetheless,
under the facts stipulated we view his complaint and argument as one for breach of
contract. However, we need not resolve any contract issues on appeal, because
Hatcher has abandoned any breach of contract claim by asserting he does not
“predicate NCCI’s liability upon a contract theory” and, therefore, did not respond to
NCCI’s argument on this point. It is not our duty to question such abandonment.
Abandonment may be made for various reasons, but it is fundamental, at least in this
court, that if a party, by and through counsel, has abandoned a claim, this court will not
review the same. See Jasperson v. Purolator Courier Corp., 765 F.2d 736, 740 (8th
Cir. 1985); Fed. R. App. P. 28(a).
Negligence
Thus, Hatcher’s claim on appeal, as he has asserted it, is that NCCI was
essentially negligent in failing to bind the coverage upon receipt of his application. The
argument is made that under the terms and conditions of the Plan and Handbook, NCCI
had a duty to provide coverage and failed to comply with that duty. Assuming that
NCCI had such a duty, it is clear to us that this duty rested solely upon the claim that
the parties consensually contracted for coverage through Hatcher’s application and
4
The evidence demonstrates that NCCI marked the application in the right-hand
corner with the abbreviation “Bd 7 16 92,” indicating that was the effective date of the
coverage. See J.A. at 47. Hatcher’s employee who was injured on the job incurred his
injury on August 27, 1992. At that time, the ERM-14 form had not been returned to
CLC or NCCI.
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tender of the premium, the alleged acceptance by NCCI by binding the coverage
pursuant to the Plan and Handbook, and the retention of the deposit premium. Under
Missouri law, the mere non-performance of a contract does not provide a basis for tort
liability. See Preferred Physicians Mut. Management Group v. Preferred Physicians
Mut. Risk Retention, 918 S.W.2d 805, 814 (Mo. Ct. App. 1996) (citing Khulusi v.
Southwestern Bell Yellow Pages, 916 S.W.2d 227, 2[30] (Mo. Ct. App. 1995)).
Hatcher’s claim is simply one of non-performance of a promise. It is clear that there
was no duty apart from the alleged contract to perform, and under the circumstances,
Hatcher’s claim for negligence must be dismissed.
Although it is for different reasons than those set forth by the district court, we
affirm the judgment of dismissal.
JUDGMENT AFFIRMED.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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