Missouri State Contract Cases 2012 (Part 12): Arbitration Agency and Broker Negligence

Missouri Contract Cases

Truman Bank v. New Hampshire Insurance Co.

In this case, Truman Bank’s debtor, a marina, suffered storm damage, repaired the damage using insurance proceeds, later sold the marina, and paid off the bank debt. The bank sued because the insurance company failed to pay the bank directly as a loss payee, seeking a second payment as well as statutory damages for vexatious refusal to pay. Here’s a short excerpt of the appellate court’s narration of the facts. Clearly, the court wasn’t impressed with the bank:

Still, the bank continued to demand that the insurer pay a second time for the storm damage. Undeterred by the fact that the owner had repaired the marina and paid off its loan, the bank filed suit against the insurer. To add insult to injury, the bank sued both for breach of contract and statutory penalties for vexatious refusal to pay.

We need not recite the bank’s evidence of damages because, suffice it to say, the jury did not believe it.

Thus, [the bank] unabashedly maintains, it suffered losses of $384,680.87 — the aggregate amount of the insurance proceeds — because it lost the opportunity to use the funds either to repair the marina or pay down the debt.

Jones v. Paradies

The Missouri Court of Appeals, Eastern District affirmed the judgment of a lower court refusing to compel arbitration. The parties attempting to compel arbitration were members of the board of directors of a corporation who had been sued in their individual capacities. The plaintiffs brought claims of tortious interference and tortious interference conspiracy, alleging that the defendants had acted through improper means, not for the benefit of the corporation, but for their own financial gain and self-interest.

The defendants argued that they should be permitted to enforce a binding arbitration agreement that the corporation was a party to because they had been sued in connection with their activities acting on behalf of the corporation. The appellate court found, however, that the defendants weren’t parties to the arbitration agreement and held that, as a matter of agency law, the agreement of the corporation as a principal did not bind the defendants as the corporation’s agents. The court also held that, because the plaintiffs alleged that the defendants had acted in their individual capacities for their own interests and not on behalf of the corporation, they weren’t being sued based on their actions as corporate directors, and thus shouldn’t be treated as the corporation itself for purposes of the tortious interference claims. Because the defendants weren’t bound by the arbitration provision, they couldn’t enforce it.

Hoover v. Mercy Health

Plaintiff Richard Hoover, M.D. brought a putative class action against St. John’s Mercy Medical Center under the Missouri Merchandising Practices Act, claiming that the hospital had charged him unreasonable fees for medical services he received. The Missouri Court of Appeals, Eastern District affirmed the trial court’s summary judgment in favor of the hospital because the plaintiff had not alleged an “ascertainable loss,” which is a requirement for an action under the MMPA.

The plaintiff had paid $5,300 of the $17,337.29 he had been billed for goods and services the hospital provided; however, he did not sufficiently allege facts that would support his claim that the amount he paid was unreasonable. Regardless of the amount the hospital charged him, “ascertainable loss” is determined based on the amount actually paid, not the amount billed.

Assurance Co. of America v. Secura Insurance Co.

Although the contractor and sub-contractor in this case had not entered into a written agreement, their previous business dealings established a course of dealings that included indemnification agreements, and their arrangement was thus an insured contract under the sub-contractor’s commercial general liability policy.

Gateway Hotel Holdings, Inc. v. Chapman-Sander, Inc.

Reversing the trial court, the Missouri Court of Appeals, Eastern District held that there was a genuine issue of material fact where an insured presented evidence that it had requested its broker to procure insurance to cover the participants of a boxing match and the broker failed to do so. At issue was whether the broker had fully performed its obligations to the insured by procuring insurance and whether the broker had negligently procured insurance.

The appellate court noted: “A broker, who, with a view to earning a commission, undertakes to procure insurance for another and negligently fails to do so, will be liable in tort or contract for damages suffered by his client. This is true because such a broker is the agent of insured and owes him a duty to exercise reasonable skill and diligence in its performance.”

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