Solon R. Gershman v. American Casualty Company of Reading, Pa, a Pennsylvania Corporation, and Cna Insurance Company, an Illinois Corporation

Citations: 251 F.3d 1159; 2001 U.S. App. LEXIS 11594; 2001 WL 604299Docket: 00-1230EM

Court: Court of Appeals for the Eighth Circuit; June 5, 2001; Federal Appellate Court

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Solon R. Gershman appeals the Eighth Circuit's decision following the District Court's dismissal of his lawsuit against American Casualty Company for failure to state a claim. Gershman claimed that American Casualty failed to fulfill its insurance obligations and vexatiously refused to defend him in a lawsuit filed by the Resolution Trust Corporation (RTC) regarding alleged mismanagement as a director of Missouri Savings Association. The insurance policy included endorsements that limited coverage, specifically the "receivership" endorsement and the "insured v. insured" endorsement, which American Casualty invoked to deny coverage.

Gershman argued that these endorsements were ineffective due to American Casualty's failure to provide written notice to the Missouri Division of Finance, as mandated by Mo. Rev. Stat. 369.124.5. The District Court concluded that while the statute's language was mandatory, it lacked a penalty for noncompliance, suggesting the Missouri legislature did not intend to render unfiled endorsements void. Consequently, the court dismissed Gershman's claims.

On appeal, Gershman contends that the statute's plain language indeed voids the unfiled endorsements, while American Casualty counters that the absence of penalties signifies legislative intent against voiding them. The appellate court reversed the District Court's decision and remanded the case for further proceedings.

Missouri law governs the case, with the court reviewing the district court's application of Missouri law de novo. Under Mo. Rev. Stat. § 369.124.5, savings and loan associations may obtain insurance to protect against claims of negligence or misconduct, and any policy modifications require prior written notice to the director of the division of finance. The issue of whether failure to provide such notice voids an unfiled endorsement has not been addressed by Missouri courts, necessitating a predictive analysis of how they might rule. American Casualty references precedents from other jurisdictions that did not void unfiled endorsements under similar statutes, emphasizing the absence of explicit voidance provisions. However, the court distinguishes Missouri's statute as uniquely applicable to savings and loan institutions, highlighting that the filing requirement is not part of general insurance regulations but specifically outlined in a statute focused on these associations. The statute’s structure and intent indicate that the requirement for notice is critical for the validity of policy modifications.

The statute allows the director of the division of finance to establish a reciprocal organization for liability insurance coverage if such insurance is unavailable or deemed too expensive. Unlike similar statutes in other jurisdictions that focus solely on insurance regulation, Missouri's statute (Mo. Rev. Stat. 369.124) also empowers the director to monitor liability insurance for the savings and loan industry. The court emphasizes adherence to Missouri's rules of statutory construction, stating that unambiguous statutes must be interpreted according to their plain meaning, as established in prior case law. 

In the case at hand, both parties assert that the plain meaning of Mo. Rev. Stat. 369.124.5 supports their positions, but they disagree on its implications. Mr. Gershman argues that any unfiled modifications to the insurance policy are void, while American Casualty contends the statute lacks a specific penalty for such violations. The court interprets the statute to mean that unfiled modifications are not "made" and thus do not become part of the policy, reinforcing that the legislature intended every part of the statute to have effect. The court compares this situation to Missouri's general insurance statute (Mo. Rev. Stat. 379.321), which mandates that insurers file certain documents and provides penalties for noncompliance, suggesting that similar enforcement is necessary to ensure compliance with 369.124.5. This perspective aligns with the statute's purpose of monitoring liability insurance availability and compliance.

Precedent exists within the circuit for invalidating unfiled insurance provisions when a Missouri statute lacks an explicit penalty for noncompliance. In St. Joseph Light & Power Co. v. Zurich Insurance Co., the court determined that the fire insurance company's failure to file required co-insurance rates made the co-insurance clause void. This principle supports Mr. Gershman's argument, leading to the conclusion that American Casualty's failure to file the "receivership" and "insured v. insured" endorsements under Mo. Rev. Stat. 369.124.5 rendered them unenforceable. Consequently, the judgment was reversed, and the case was remanded for further proceedings. The court noted that it did not address other claims, such as Mr. Gershman's allegations of vexatious refusal to defend and indemnify or American Casualty's assertion regarding co-defendant CNA's legal capacity. Both parties acknowledged that the statute does not impose any penalties for failing to file the endorsements. Other referenced cases support the notion that failure to file required endorsements or policies voids them in the absence of statutory penalties.