Jeffrey Henry v. Farmers Insurance Company, Inc.

Citations: 444 S.W.3d 471; 2014 Mo. App. LEXIS 786; 2014 WL 3579526Docket: WD76953

Court: Missouri Court of Appeals; July 22, 2014; Missouri; State Appellate Court

Original Court Document: View Document

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Jeffrey Henry and Elizabeth Edmundson (Appellants) appealed a summary judgment favoring Farmers Insurance Company, Inc. (Respondent) regarding their claims for declaratory judgment, attorney's fees, and breach of fiduciary duty. The Appellants argued that the circuit court wrongly granted summary judgment by asserting their declaratory judgment claim was still valid, they met the criteria for attorney's fees, and they demonstrated the necessary harm for their breach of fiduciary duty claim. They also contended the court incorrectly denied their own summary judgment motion and ruled that Farmers had no legal obligation to train its agents based on two specific Missouri insurance cases. 

The case's background includes an August 2010 motor vehicle accident involving Edmundson and another party, Lucius Oliver. At that time, Farmers insured both Edmundson and Henry. After investigating Oliver's claim for vehicle damage, Farmers denied it in November 2010, stating Edmundson was not at fault. Subsequently, Oliver pursued an "intercompany arbitration," and Farmers agreed to defend the Appellants. Throughout the arbitration process, communication occurred between Appellants' counsel and Farmers' claims representative, Cory Cannon, regarding the evidence and arguments from both sides. Cannon stated that evidence would not be shared between parties and described the limitations on disclosing certain documents, citing work product protections and confidentiality regarding the arbitration decision. Ultimately, the court affirmed the summary judgment in favor of Farmers.

Appellants' counsel argued that the arbitration process is integral to the liability claims process, referencing Grewell v. State Farm Mutual Automobile Insurance Company, which established that the claims file belongs to the insured and is not protected by work product privilege. Following the arbitration that ruled in favor of Farmers, Appellants' counsel requested access to the entire claims file, citing a lack of communication from Cannon regarding evidence and claims from the adverse party. Despite some documents being provided by Farmers' representative, significant portions of the requested claims file were withheld. Consequently, Appellants filed suit against Farmers in June 2011, alleging three counts: Count I sought a declaratory judgment for the production of the claims file; Count II claimed breach of fiduciary duty constituting constructive fraud, with a request for attorney's fees under the Declaratory Judgment Act; Count III asserted that Farmers failed to adequately train its agents on relevant Missouri law, alleging this failure was in bad faith and seeking both actual and punitive damages.

In August 2011, Farmers' counsel agreed to provide the entire claims file to Appellants. After a delay, the file was produced in September 2011, following Appellants' initial request. In November 2012, Appellants filed a motion for summary judgment on their declaratory judgment claim, asserting that Farmers improperly refused to admit certain facts regarding their fiduciary relationship under Missouri law, including the right to access the claims file. Farmers countered with a cross-motion for summary judgment, arguing that the production of the claims file made the declaratory judgment claim moot. The circuit court granted Farmers' cross-motion in March 2013, ruling that the claim was moot and no factual dispute existed.

In May 2013, Farmers sought summary judgment on Appellants' remaining claims, arguing against attorney's fees and breach of fiduciary duty claims. Farmers maintained that Appellants could not recover attorney's fees as the case did not warrant deviation from the norm, and they admitted to no identifiable damages that would support the breach of fiduciary duty claim or punitive damages. Appellants filed a motion for partial summary judgment on these claims, reiterating that Farmers' refusals constituted admissions. The court ultimately granted Farmers' motion and denied Appellants' motion, concluding that Appellants were not entitled to attorney's fees since they did not receive a declaratory judgment in their favor.

Appellants did not demonstrate any unusual circumstances to justify their request for attorney's fees. The court noted that there is no legal obligation for Farmers to train agents regarding the Grewell cases. It concluded that a breach of fiduciary duty claim, which is treated as fraud, requires pecuniary damages, implying that nominal damages are insufficient for such claims. Consequently, the court ruled in favor of Farmers regarding the claims for attorney's fees and breach of fiduciary duty, leading to the current appeal.

In reviewing the summary judgment, the appellate court employs a de novo standard, assessing the record favorably towards the non-moving party. Summary judgment is warranted when the moving party has established a right to judgment as a matter of law without genuine factual disputes. The defendant can achieve this by disproving any claim elements, demonstrating the claimant's inability to produce necessary evidence following adequate discovery, or providing facts supporting a valid affirmative defense.

Appellants raised five points on appeal, focusing on Point III regarding their declaratory judgment claim. They contended the circuit court wrongly found the claim moot after Farmers provided the claims file, arguing that while this may have addressed their request for coercive relief, it did not resolve their entire declaratory judgment claim, which included a declaration of ownership of the claims file and Farmers' fiduciary duty to grant access. Missouri courts do not rule on moot issues and require a currently existing controversy for specific relief. If a court’s decision would not practically affect an ongoing controversy, the case is deemed moot and typically dismissed.

Appellants sought a declaratory judgment requiring Farmers to produce all documents and information from the liability claims files. They claimed a lack of adequate remedy at law, but their request was limited to coercive relief without seeking specific declarations regarding their entitlement to the claims file. Farmers provided the complete claims file three months after the petition was filed, rendering the request for an order compelling production unnecessary and moot, as acknowledged by Appellants in their legal filings.

Regarding attorney's fees, Appellants contended that the circuit court erred by granting summary judgment in favor of Farmers. They argued that there were sufficient facts to award attorney's fees based on "special circumstances." Missouri adheres to the American Rule, where each party typically bears its own attorney's fees unless a statute or contract provides otherwise. Appellants cited Sections 527.080 and 527.100 of the Declaratory Judgment Act, which allow for additional relief and equitable costs, respectively. However, these sections do not explicitly authorize attorney's fees, which can only be awarded in rare and very unusual circumstances.

Citing relevant case law, the excerpt notes that courts have seldom found circumstances justifying such awards absent a clear statutory or contractual basis. Appellants argued that the situation in Grewell II, which they claimed had similar facts, favored their position, asserting that Farmers' actions were more egregious. The court, however, disagreed, highlighting that Grewell II involved prior actions against the same insurer, which was a significant distinguishing factor.

The insurer was ordered by the Supreme Court to provide the insureds access to their file but continued to refuse, repeating arguments that had previously been rejected. Additionally, the insurer claimed a privilege it had already waived, prompting the insureds to file an amended declaratory judgment action on the same issues as the prior successful case. Unlike the insurer in Grewell II, Farmers did not violate any court orders or force the Appellants into further litigation and did eventually produce the claims file. The court noted that the circumstances in Grewell II that justified attorney's fees were absent in this case. Under the American Rule, only the prevailing party can receive attorney's fees, and the Appellants were found not to be the prevailing party since their declaratory judgment claim was deemed moot, leading to the circuit court granting summary judgment in favor of Farmers regarding attorney's fees.

In their breach of fiduciary duty claim, Appellants argued against the court's summary judgment ruling, asserting that nominal damages should be awarded despite the intrinsic requirement for damages in such claims. They contended that breaches of fiduciary duty inherently imply damages and sought emotional distress damages. To succeed in a breach of fiduciary duty claim, a plaintiff must demonstrate the existence of a fiduciary relationship, a breach of that duty, and resultant harm. However, the Appellants did not claim any pecuniary harm from Farmers' actions, acknowledging that one claimant settled her case and received full compensation, while the other claimant was not involved in the relevant incident or lawsuit.

Appellants claimed entitlement to nominal damages due to Farmers' alleged breach, asserting that nominal damages are appropriate when a legal right is violated without actual damages. Nominal damages arise from common law actions for trespass and related torts where harm is presumed. However, in cases where pecuniary loss is a necessary element, such as fraud and deceit, nominal damages are not applicable. Breach of fiduciary duty, categorized as constructive fraud, also requires proof of pecuniary damage for recovery, which the circuit court correctly determined precluded the possibility of nominal damages for Appellants. Additionally, Appellants sought damages for emotional distress, but Missouri law requires such distress to be medically diagnosable and significant to be compensable. Appellants acknowledged their inability to meet this standard, as they did not seek treatment and their evidence of emotional distress was limited to their own testimony of frustration and anger regarding Farmers' actions.

Evidence of emotional distress was deemed inadequate to support a claim for damages in the case of Fetick, where the plaintiff only reported untreated distress. Although the appellants did not incur pecuniary damages in their case, scenarios exist where insured parties could experience such losses. Insurers should not interpret this ruling as an endorsement to disregard the Supreme Court's directives in Grewell I. A situation where the insured suffers financial damages due to the insurer's failure to provide a claims file could yield a different outcome.

The appellants contended that Fetick is inapplicable because it focused on emotional distress damages in actual fraud cases, while their case involves breach of fiduciary duty, categorized as constructive fraud. The court disagrees, noting that emotional damages are not inherently expected from breach of fiduciary duty, unlike in cases involving assault and battery, where emotional harm is a foreseeable outcome. The law requires proof of actual damages for fraud claims, including both actual and constructive fraud based on fiduciary breaches.

The court emphasized that, unlike assault and battery, emotional damages from a breach of fiduciary duty are not automatically presumed. The appellants failed to provide evidence that their emotional distress was significant or medically diagnosable. As a result, their breach of fiduciary duty claim lacks the necessary evidence of harm or damages and fails legally. Therefore, the circuit court's summary judgment favoring Farmers on this claim is upheld.

The judgment is affirmed, and the court declines to address other claims related to agent training and partial summary judgment since these are moot given the failure of the breach of fiduciary duty claim.