Eighth Circuit Contracts Cases 2011 (Part 4)

by Brian Rogers on December 28, 2011

in U.S. 8th Circuit Contract Cases

Owatonna Clinic — Mayo Health System v. Medical Protective Co. of Fort Wayne, Indiana

Owatonna Clinic — Mayo Health System sued Medical Protective Company, its medical malpractice insurer, for refusing to defend and indemnify it in a malpractice suit. Medical Protective’s defense was that Owatonna had not complied with the insurance policy’s notice requirements. The United States District Court for the District of Minnesota ruled in favor of Owatonna Clinic, and Medical Protective appealed.

A claims-made policy, the clinic’s malpractice policy covered only claims submitted during the policy period. The policy required the insured to provide timely notice of a medical incident including “all reasonably obtainable information with respect to the time, place and circumstances of the professional services from which liability may result and the nature and extent of the injury including the names and addresses of the injured and of available witnesses.” The notice submitted by Owatonna Clinic was timely and was sufficient to put Medical Protective on notice of a claim, but it did not strictly comply with the requirements of the policy.

Medical Protective argued that notice was required to be given in strict accordance with the policy’s requirements because it was a claims-made policy. The Eighth Circuit recognized Minnesota precedent that held that strict compliance with the temporal requirements of notice provisions in claims-made policies must be strictly followed. The court noted, however, that, although the Minnesota Supreme Court had not ruled on the issue of strict compliance of non-temporal requirements of notice provisions in claims-made policies, Minnesota’s Court of Appeals had held that as long as the “notice clearly gave an insurer sufficient information to conclude that the insured had presented a claim for arguable coverage,” the insurer had a duty to investigate and provide coverage if the policy covered the conduct discovered.

The Eighth Circuit concluded that “the law of Minnesota places a burden of inquiry on the insurer when it has notice of facts that would raise a likelihood of a claim, and we are satisfied that this case falls within the ambit of that principle,” and it affirmed the ruling of the district court.

Nutrisoya Foods, Inc. v. Sunrich, LLC

Nutrisoya Foods sued Sunrich for breach of contract for failing to deliver rice milk product under an installment contract. After a jury trial, the United States District Court for the District of Minnesota awarded Nutrisoya damages of a little over $200,000, and the United States Court of Appeals for the Eighth Circuit affirmed.

Nutrisoya, a Canadian corporation that sells rice-based beverage products to retailers, entered into a manufacturing and packaging agreement with Sunrich, a Minnesota company that produces and packages a variety of food products. Under the agreement Sunrich was to manufacture and package an organic rice-based beverage product according to Nutrisoya’s specifications.

The contract required Nutrisoya to provide long-term and short-term forecasts. The parties never followed this requirement and scheduled orders informally instead. For a period of a year and a half Sunrich did not complain, although it requested forecasts on occasion and Sunrich provided them. After Sunrich failed to fill an order for rice milk, Nutrisoya sued for breach of the entire agreement.

In the course of the litigation Sunrich moved for summary judgment arguing that Nutrisoya’s breach of the agreement by failing to provide forecasts excused Sunrich’s performance. Nutrisoya countered that Sunrich had waived the requirement by accepting orders on several occasions without insisting that Nutrisoya follow the formal requirements of the contract. Sunrich pointed to a no-waiver provision in the contract and argued that Sunrich’s acquiescence in Nutrisoya’s informal ordering process did not constitute a waiver of the formal forecasting requirements. The trial court denied Sunrich’s motion.

After the jury returned a verdict in favor of Nutrisoya, Sunrich moved for judgment as a matter of law or, alternatively, for a new trial, and the district court denied the motion.

On appeal the Eighth Circuit held that the trial court did not err by instructing the jury to find that Sunrich had failed to perform an “important part” of the manufacturing and packaging agreement before it could find for Nutrisoya. The appeals court further held that the district court properly declined to instruct the jury on an issue of delegation because the issue was not relevant to the case presented to the jury.

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