United States District Court,

S.D. Florida.

SODIKART USA, Plaintiff,

v.

GEODIS WILSON USA, INC., Defendant.

 

No. 14–CV–22461.

Signed Dec. 9, 2014.

 

David Jon Feingold, Feingold & Kam LLC, Palm Beach Gardens, FL, for Plaintiff.

 

Jordan Scott Cohen, Wicker Smith Tutan O’Hara McCoy Graham & Ford, Fort Lauderdale, FL, Brandon Jay Hechtman, Wicker, Smith, O’Hara, McCoy & Ford, P.A., Coral Gables, FL, for Defendant.

 

REPORT AND RECOMMENDATION TO DISTRICT JUDGE

ALICIA O. VALLE, United States Magistrate Judge.

*1 THIS MATTER is before the Court on Defendant Geodis Wilson USA, Inc.’s Motion for Prevailing Party Attorney’s Fees and Costs (“Motion”) (ECF No. 14), which has been referred to the undersigned for a Report and Recommendation by United States District Judge Beth Bloom. See (ECF No. 15). The Court has reviewed Defendant’s Motion, Plaintiff’s Response (ECF No. 16), Defendant’s Reply (ECF No. 17), and Defendant’s Notice of Filing Fees and Costs Supporting Documentation (ECF No. 18), and is otherwise duly advised in this matter. For the reasons set forth below, and despite concluding that Defendant is statutorily entitled to an award of its reasonable attorney’s fees and costs, the undersigned recommends that Defendant’s Motion be DENIED for failure to comply with Local Rule 7.3.

 

I. BACKGROUND

This case involves two lawsuits predicated on Plaintiff’s use of Defendant’s international shipping services in 2013. Approximately three years ago, Defendant, a freight management company, solicited Plaintiff to begin using its shipping services. See (ECF No. 1–1 ¶ 18). Defendant’s sales pitch included a representation that the cost of Defendant’s shipping services would include “complete insurance coverage against any loss for each and every shipment made by the Plaintiff.” Id. This representation allegedly induced Plaintiff to use Defendant’s shipping services for a number of years without any notable problems. Id.

 

That changed in early 2013, however, when Plaintiff used Defendant to ship approximately $200,000 in go-carts from France to Arizona. Id. ¶¶ 6–7, 13, 18. At some point during the shipping process, the goods were allegedly severely damaged. Id. ¶¶ 11–13. According to Plaintiff, when Plaintiff sought to make an insurance claim, Plaintiff learned that “none of the said insurance … had ever been obtained.” Id. ¶¶ 15, 18. As a result, Plaintiff sued Defendant twice-first in federal and then in state court. Compare Sodikart USA v. Geodis Wilson USA, Inc., No. 13–CV–22626 (S.D.Fla. July 23, 2013) with Sodikart USA v. Geodis Wilson USA, Inc., No. 14–014600–CA–01 (Fla. 11th Cir. Ct. June 5, 2014).

 

A. The Prior CaseFN1

 

FN1. All of the “ECF” citations under this heading are to Sodikart USA v. Geodis Wilson USA, Inc., No. 13–CV–22626 (S.D.Fla.2013).

 

The first case began on July 23, 2013, when Plaintiff filed a one-count federal complaint against Defendant in this Court. See Sodikart USA v. Geodis Wilson USA, Inc., No. 13–CV–22626 (S.D.Fla. July 23, 2013) (ECF No. 1) (the “Prior Case”). Plaintiff claimed that Defendant was liable for the damaged goods under the Carmack Amendment, 49 U.S.C. § 14706, because Defendant had received the goods in an undamaged condition yet delivered them in a damaged condition. Id. ¶ 22. On February 24, 2014, after the deadline for amending pleadings had expired, Plaintiff sought leave to amend its complaint to add a fraud claim. See (ECF No. 18). According to Plaintiff, Defendant had agreed to the amendment. Id. ¶ 2. Relying on Plaintiff’s representation, Magistrate Judge William Turnoff granted Plaintiff leave to amend its complaint. See (ECF No. 19).

 

*2 Shortly thereafter, Defendant appealed the Magistrate Judge’s order to District Judge Kathleen Williams, see (ECF No. 22), denying that it had agreed to the amendment after the deadline and asserting that Plaintiff had filed late to “attempt to gain tactical advantage.” Id. at 2. Construing the dispute as a “miscommunication,” Judge Williams struck Plaintiff’s amended complaint and its fraud claim. See (ECF No. 26 at 3). In doing so, however, Judge Williams advised that since Plaintiff desired to amend its complaint, Plaintiff could move under Federal Rule of Civil Procedure 16(b)(4) to modify the deadline for amending pleadings. Id.

 

Accordingly, Plaintiff moved to extend the deadline for amending pleadings so that Plaintiff could reassert its fraud claim. See (ECF No. 27). As grounds, Plaintiff explained that it had not learned of the facts giving rise to its fraud claim until four days before the original deadline for amending pleadings. Id. at 2–3. Still, Judge Williams denied Plaintiff’s motion, reasoning that because Plaintiff had learned of the factual basis for its fraud claim four days before the original deadline for amending pleadings, Plaintiff could have used those four days to seek leave to amend its complaint. See (ECF No. 30 at 3). Judge Williams thus concluded that, because Plaintiff had failed to act with reasonable diligence in pursuing its fraud claim, no good cause existed to modify the original deadline for amending pleadings. Id. The case was then reassigned to District Judge Beth Bloom. See (ECF No. 31). Judge Bloom subsequently granted summary judgment for Defendant, closing the case on September 30, 2014. See (ECF Nos. 39 and 45).

 

B. The Instant CaseFN2

 

FN2. All of the “ECF” citations under this heading and throughout the remainder of this Order are to the instant case. See Sodikart USA v. Geodis Wilson USA, Inc., No. 14–CV–22461–BLOOM/VALLE (S.D.Fla. July 2, 2014).

 

The second (and instant) case began on June 5, 2014—during the pendency of the Prior Case—when Plaintiff sued Defendant in Florida state court in Miami. See Sodikart USA v. Geodis Wilson USA, Inc., No. 14–014600–CA–01 (Fla. 11th Cir. Ct. June 5, 2014). Plaintiff asserted two claims against Defendant: (1) a statutory claim under the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), Fla. Stat. § 501.201 et seq.; and (2) a common-law fraud claim. See (ECF No. 1–1 ¶¶ 19–34). After Defendant removed the state case to this Court based on diversity jurisdiction, Plaintiff voluntarily dismissed its fraud claim, opting to proceed only on its FDUTPA claim. See (ECF No. 5). The gist of Plaintiff’s FDUTPA claim was that Defendant acted deceptively and unfairly by misrepresenting that shipments would be fully insured when, in fact, they were not. See (ECF No. 1–1 ¶¶ 18, 21).

 

Defendant then moved to dismiss Plaintiff’s FDUTPA claim as barred by the doctrine of res judicata. See (ECF No. 6). Analyzing Defendant’s res judicata argument, Judge Bloom determined that “[s]ave for one sentence, the fraud allegations contained within Plaintiff’s failed amended complaint [in the Prior Case] are identical to those in Plaintiff’s Complaint herein.” (ECF No. 13 at 3). In addition, Judge Bloom found that “Plaintiff’s claim under FDUTPA merely incorporates the same exact factual assertions found in the complaint before the Court in the Prior Case.” Id. Lastly, Judge Bloom found that Plaintiff had been “fully apprised of any and all facts upon which it premises its claim under FDUTPA well before the instant litigation was filed.” Id. at 6. Therefore, Judge Bloom concluded that Judge Williams’ denial of Plaintiff’s untimely efforts to amend its complaint in the Prior Case constituted a final judgment on the merits. Id. As a result, on August 12, 2014, Judge Bloom dismissed Plaintiff’s FDUTPA claim as barred by res judicata. Id. at 6–7.

 

*3 Defendant now moves for an award of its attorney’s fees and costs as the prevailing party in the instant case.

 

II. DISCUSSION

Under the “American Rule,” a prevailing party generally cannot recover its attorney’s fees from its opponent absent a fee-shifting agreement or statute. See, e.g., Rothenberg v. Sec. Mgmt. Co., 736 F.2d 1470, 1471 (11th Cir.1984). Thus, the threshold issue on a motion for attorney’s fees and costs by a purported prevailing party is always entitlement. See, e.g., R.L. v. Miami–Dade Cnty. Sch. Bd., No. 07–20321–CIV, 2012 WL 1441922, at *2 (S.D.Fla. Apr.26, 2012) aff’d, 757 F.3d 1173 (11th Cir.2014). Here, Defendant claims entitlement to an award of its attorney’s fees and costs under FDUTPA. Plaintiff disagrees.

 

A. Defendant is entitled to an award of its attorney’s fees and costs.

Section 501.2105 FN3 of FDUTPA provides for the discretionary award of reasonable attorney’s fees and costs to the prevailing party. Chastain v. N.S.S. Acquisition Corp., No. 08–CV–81260, 2010 WL 5463859, at *2 (S.D.Fla. Dec.29, 2012) (citing Hubbel v. Aetna Cas. & Sur. Co., 758 So.2d 94, 101 n. 10 (Fla.2000)). Because Judge Bloom granted Defendant’s motion to dismiss, Defendant is the prevailing party in the instant case. See, e.g., Howard v. Augusta–Richmond Cnty., Ga., Comm’n, No. CV 114–097, 2014 WL 5827144, at *3 (S.D.Ga. Nov.10, 2014) (“Defendants’ motion to dismiss was granted, and the Plaintiffs’ claims dismissed. Thus, it is clear that Defendants are ‘prevailing parties.’ ”).

 

FN3. Specifically, § 501.2105(1) provides that: “In any civil litigation resulting from an act or practice involving a violation of this part, … the prevailing party, after judgment in the trial court and exhaustion of all appeals, if any, may receive his or her reasonable attorney’s fees and costs from the nonprevailing party.”

 

In exercising discretion to award fees and costs under FDUTPA, courts consider various factors, including:

 

(1) the scope and history of the litigation;

 

(2) the ability of the opposing party to satisfy an award of fees;

 

(3) whether an award of fees against the opposing party would deter others from acting in similar circumstances;

 

(4) the merits of the respective positions-including the degree of the opposing party’s culpability or bad faith;

 

(5) whether the claim brought was not in subjective bad faith but frivolous, unreasonable, groundless;

 

(6) whether the defense raised a defense mainly to frustrate or stall; and

 

(7) whether the claim brought was to resolve a significant legal question under FDUTPA law.

 

Humane Soc. of Broward Cnty., Inc. v. Florida Humane Soc., 951 So.2d 966, 971–72 (Fla. 4th DCA 2007). The majority of these factors weigh in favor of awarding Defendant its reasonable attorney’s fees and costs. While several factors are either inapplicable or neutral, none favor Plaintiff.

 

(1) The scope and history of the litigation favors Defendant.

As to the first Humane Society factor, because the instant case was based on the same factual predicate as the Prior Case, it was a duplicative lawsuit. As Judge Bloom found, Plaintiff should have brought its FDUTPA claim in the Prior Case yet failed to do so “due to Plaintiff’s own lack of diligence and timeliness.” See (ECF No. 13 at 6–7). Plaintiff’s filing of the instant case multiplied and compounded the then-ongoing litigation between the parties in the Prior Case, resulting in substantial additional legal expenses. Therefore, Plaintiff should be held Plaintiff accountable for the expenses generated by its duplicative lawsuit. The first factor thus weighs in favor of awarding Defendant its fees and costs.

 

(2) Plaintiff is able to satisfy an award of fees and costs.

*4 As to the second Humane Society factor, Defendant asserts that Plaintiff appears to be able to satisfy an award of fees and costs. See (ECF No. 14 at 3). Indeed, Plaintiff alleged that it had “shipped millions of dollars” of goods using Defendant’s services over the course of their business relationship. See (ECF No. 1–1 ¶ 29). Because Plaintiff does not dispute Defendant’s claim about its ability to satisfy a fee award, and considering the financial resources typically necessary to ship millions of dollars in goods via a freight management company, the undersigned finds that Plaintiff has the ability to satisfy a fee award. The second factor thus weighs in Defendant’s favor.

 

(3) A fee award against Plaintiff would deter others from acting the same way in similar circumstances.

With respect to the third Humane Society factor, Defendant argues that “awarding fees against [Plaintiff] should discourage future litigants from trying to multiply actions by adding a FDUTPA claim after electing not to assert such a claim in a prior action, and then trying to (re)assert it, in an untimely fashion, in a new venue.” (ECF No. 14 at 3). Although Plaintiff does not respond directly to Defendant’s deterrence argument, Plaintiff does argue in general that a fee award is inappropriate because no trial took place, “the facts on their face support a FDUTPA claim,” and “there was legal precedent” for Plaintiff’s actions. (ECF No. 16 at 5). While it is true that no trial occurred and that the factual allegations arguably could have supported a FDUTPA claim had Plaintiff timely asserted one in the Prior Case, it is not true that legal precedent supported Plaintiff’s attempt to avoid the effect of res judicata.

 

Plaintiff maintains that the instant case “was filed in good faith and specifically based” on Harley v. Health Center of Coconut Creek, Inc., 518 F.Supp.2d 1364 (S.D.Fla.2007). See (ECF No. 16 at 4–5). As Judge Bloom observed, however, Plaintiff’s belief that Harley provided a legal basis to overcome a res judicata bar was due to its own misinterpretation of the law. (ECF No. 13 at 4).

 

First, Plaintiff misinterpreted Harley to mean that a federal court sitting in diversity always applies state res judicata law. See (ECF No. 13 at 4–5). But that is not the law. Harley involved the determination of the effect of a prior state court judgment on a subsequent federal case and, thus, the court applied Florida res judicata law. Id. at 5 (citing Harley, 518 F.Supp.2d at 1368). The instant case, however, involved the determination of the effect of Judge Williams’ dismissal in the Prior (federal) Case on the instant proceeding. Thus, Judge Bloom applied federal (and not Florida) res judicata law. Id. at 4 (citing Empire Fire & Marine Ins. Co. v. J. Transp., Inc., 880 F.2d 1291, 1294 n. 2 (11th Cir.1989)). Hence, Plaintiff was wrong in arguing in response to Defendant’s motion to dismiss that Harley was “directly on point.” See (ECF No. 10 at 3).

 

*5 Second, even assuming that Florida res judicata law applied in the instant case, Plaintiff also misinterpreted Harley to mean that Florida res judicata law only bars claims in a later action that are identical to claims in a prior action. See id. at 4 (Plaintiff arguing that Harley stands for the proposition that “the key is to look at the causes of action and see if they are the same”); see also id. at 5 (Plaintiff arguing that Harley “permits the filing of suits, even if they could have been raised in the first action, so long as the exact cause of action is not repeated”). Once again, Plaintiff’s interpretation of Harley is incorrect, as the application of Florida res judicata law does not turn on such a superficial analysis.

 

While Harley does say that “if the cause of action is not the same, res judicata will not bar issues which could have been raised in the prior suit but were not,” 518 F.Supp.2d at 1369, the very next sentence makes clear that “ ‘[t]he determining factor in deciding whether the cause of action is the same is whether the facts or evidence necessary to maintain the suit are the same in both actions.’ “ Id. (quoting Atl. Shores Resort, LLC v. 507 S. St. Corp., 937 So.2d 1239, 1243 n. 3 (Fla. 3d DCA 2006)). Accordingly, assuming, arguendo, that Florida res judicata law did apply in the instant case, Harley still would not have provided any support for Plaintiff’s argument that its FDUTPA claim was not barred because, as Judge Bloom determined, “[s]ave for one sentence, the fraud allegations contained within Plaintiff’s failed amended complaint [in the Prior Case] are identical to those in Plaintiff’s Complaint” in the instant case. (ECF No. 13 at 3).

 

In sum, Plaintiff filed the instant case based on the same factual predicate underlying the Prior Case—and only after its efforts to amend its complaint to add a fraud claim in the Prior Case had failed. Giving Plaintiff every benefit of the doubt, Plaintiff may have made an honest, albeit serious, mistake in its interpretation of Harley and res judicata law. At worst, however, Plaintiff may have simply ignored the law and filed the instant case in an attempt to circumvent the unfavorable ruling in the Prior Case. At bottom, regardless of whether Plaintiff’s position was taken in good or bad faith, Plaintiff unreasonably duplicated this litigation. As a result, Defendant incurred substantial expenses defending against Plaintiff’s legal attacks on two separate fronts. Considering the inequities of Plaintiff’s litigation conduct, the undersigned concludes that one way to deter such future conduct is by awarding Defendant its fees and costs. The third Humane Society factor thus weighs in favor of Defendant.

 

(4) The remaining factors either weigh in Defendant’s favor or do not apply.

For substantially the same reasons articulated in section (3) above, the fourth and fifth Humane Society factors also weigh in Defendant’s favor. The sixth factor, however, has no bearing on this case, as Defendant was the prevailing party, not the losing party. Finally, the seventh factor is neutral at best, as Plaintiff’s FDUTPA claim was fairly routine and was not brought to resolve a significant legal question.

 

*6 In sum, because the balance of the Humane Society factors weigh in Defendant’s favor, the undersigned concludes that Defendant is entitled to an award of its reasonable attorney’s fees and costs under FDUTPA. Nonetheless, the undersigned recommends that Defendant’s Motion be denied for the reasons set forth below in section B.

 

B. Defendant failed to comply with Local Rule 7.3.

Federal Rule of Civil Procedure 54(d) and Local Rule 7.3 govern the procedure for moving for an award attorney’s fees and related nontaxable expenses in the Southern District of Florida.FN4 Under Local Rule 7.3(a), “[a] motion for an award of attorneys [sic] fees and/or non-taxable expenses and costs arising from the entry of a final judgment or order shall not be filed until a good faith effort to resolve the motion, as described in paragraph (b) below, has been completed.” S.D. Fla. L.R. 7.3(a). Local Rule 7.3(a) further provides that a motion for fees and costs “shall: … certify that a good faith effort to resolve issues by agreement occurred pursuant to Local Rule 7.3(b), describing what was and was not resolved by agreement and addressing separately the issues of entitlement to fees and amount.” S.D. Fla. L.R. 7.3(a)(8).

 

FN4. To the extent the requirements in Local Rule 7.3 about the timing and contents of a motion for attorney’s fees conflict with the requirements in Federal Rule of Civil Procedure 54(d)(2)(B), Local Rule 7.3 controls. See Tire Kingdom, Inc. v. Morgan Tire & Auto, Inc., 253 F.3d 1332, 1335 (11th Cir.2001); compare Fed.R.Civ.P. 54(d)(2)(B)(i) (requiring motion to “be filed no later than 14 days after the entry of judgment”) with S.D. Fla. L.R. 7.3(a)(1) (requiring motion to “be filed within sixty (60) days of the entry of the final judgment or order giving rise to the claim”). This is because Rule 54(d)(2)’s requirements apply “[u]nless a statute or a court order provides otherwise,” and the Eleventh Circuit has held that Local Rule 7.3 is a “court order” that trumps Rule 54(d)(2)’s requirements to the extent they conflict. See Tire Kingdom, Inc., 253 F.3d at 1335.

 

Local Rule 7.3(b), for its part, is entitled “Good Faith Effort to Resolve Issues by Agreement,” and describes exactly what must be done to comply with the conferral requirement.FN5 S.D. Fla. L.R. 7.3(b). Specifically, Local Rule 7.3(b) provides, inter alia, that: “a draft motion compliant with Local Rule 7.3(a)(1)-(8) must be served but not filed at least thirty (30) days prior to the deadline for filing any motion for attorneys [sic] fees and/or costs that is governed by this Local Rule;” and “[w]ithin twenty-one (21) days of service of the draft motion, the parties shall confer and attempt in good faith to agree on entitlement to and the amount of fees and expenses not taxable under 28 U.S.C. § 1920.” Id. (emphases added).

 

FN5. Although Local Rule 7.3(b) also provides that “[i]f a federal statute provides a deadline of fewer than sixty (60) days for a motion governed by Local Rule 7.3(a), the parties need not comply with this paragraph’s requirements,” there is no such federal statute applicable to this case.

 

Here, however, Defendant’s counsel’s “Local Rule 7.3(b) Certificate” merely states that he e-mailed Plaintiff’s counsel in a purported good faith effort to confer, but that Plaintiff’s counsel declined to confer at that time:

 

Counsel for the Defendant has sought to confer with counsel for the Plaintiff in a good faith effort to resolve this fee claim. Counsel for Defendant e-mailed counsel for the Plaintiff on August 26, 2014 and in response, counsel for the [Plaintiff] informed that he declined to confer at this time.

 

(ECF No. 14 at 4).

 

This is not enough to comply with Local Rule 7.3. Defendant’s counsel does not certify, as required, that he served a draft motion on Plaintiff’s counsel at least thirty days before the filing deadline. See S.D. Fla. L.R. 7.3(a)(8) & (b). Nor does Defendant’s counsel certify (again, as required) that he conferred with Plaintiff’s counsel or attempted in good faith to agree on entitlement and the amount of fees and non-taxable expenses within twenty-one days of service of the motion. Id. All that Defendant’s counsel certifies, rather, is that he e-mailed Plaintiff’s counsel, who declined to confer at that time. See (ECF No. 14 at 4). In this District, “[t]hese errors alone are sufficient reason to deny the Motion.” Norych v. Admiral Ins. Co. ., No. 08–60330–CIV–ALTONAGA, 2010 WL 2557502, at *2 (S.D.Fla. June 23, 2010) (denying motion for attorney’s fees “because [movant] failed to comply with Local Rules 7.3(a)(1) and 7.3(b)”) (citing Provide Commerce, Inc. v. Preferred Commerce, Inc., No. 07–80185–CIV–RYSKAMP, 2008 WL 360591, at *2 (S.D.Fla. Feb. 8, 2008) (denying request for attorney’s fees because the movant failed to comply with the Local Rules)); see also J.B. Hunt Transp., Inc. v. S & D Transp., Inc., No. 13–14770, 2014 WL 5011135, at *3 (11th Cir. Oct.8, 2014) (per curiam) (“Because the district court held that J.B. Hunt failed to comply with Local Rule 7.3, which constituted an independently sufficient basis to deny J.B. Hunt’s motions, we affirm.”). As Judge Altonaga said, “there is no exception in the Local Rules for futility: the parties shall make a good faith effort to resolve the motion; the movant must serve a draft motion; and the parties shall confer twenty-one days after service of the motion.” Norych, 2010 WL 2557502 at *2. Indeed, “Local Rule 7.3 would be undermined if a party did not have to serve a draft motion simply because it believed or understood the motion would be opposed.” Id.

 

III. CONCLUSION

*7 For the foregoing reasons, and despite concluding that Defendant is otherwise entitled to an award of its reasonable attorney’s fees and costs in the instant case under FDUTPA, the undersigned RECOMMENDS that Defendant’s Motion for Prevailing Party Attorney’s Fees and Costs be DENIED for failure to comply with Local Rule 7.3.

 

The parties have 14 days from the date of this Report and Recommendation to serve and file any written objections with District Judge Beth Bloom. Failure to timely file objections shall bar the parties from attacking on appeal the factual findings contained herein, except upon grounds of plain error or manifest injustice. See 28 U.S.C. § 636(b)(1); see also Thomas v. Arn, 474 U.S. 140, 149, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985).

 

DONE AND ORDERED.

Supreme Court of Missouri,

en banc.

Scottsdale Insurance Company and Wells Trucking, Inc., Appellants,

v.

Addison Insurance Company and United Fire & Casualty Company, Respondents.

 

No. SC 93792

Opinion issued December 9, 2014

 

APPEAL FROM THE CIRCUIT COURT OF LINN COUNTY, The Honorable Gary E. Ravens, Judge.

Scottsdale and Wells trucking were represented by Kenneth M. Lander of Kortenhof McGlynn & Burns LLC in St. Louis, and Alan B. Yuter of Selman Breitman LLP in Los Angeles.

 

Addison Insurance and United Fire were represented by John G. Schultz, Jill Smith and Suzanne R. Bruss of Franke Schultz & Mullen PC in Kansas City, and John W. Grimm and John C. Steffans of The Limbaugh Firm in Cape Girardeau.

 

Patricia Breckenridge, Judge

*1 Wells Trucking, Inc., and its excess insurer, Scottsdale Insurance Company, filed suit against Wells Trucking’s primary insurer, United Fire & Casualty Company and its wholly owned subsidiary, Addison Insurance Company, (collectively United Fire), asserting United Fire acted in bad faith in refusing to settle within its policy limits a wrongful death action against Wells Trucking. Scottsdale pleaded alternative theories allowing it to raise the bad faith refusal to settle claim, including: (1) assignment from Wells Trucking; (2) conventional subrogation; (3) equitable subrogation; and (4) a duty of good faith owed directly to Scottsdale. The trial court sustained United Fire’s motion for summary judgment on Wells Trucking’s and Scottsdale’s claims, finding that an excess insurer cannot recover from a primary insurer under a claim of bad faith refusal to settle and that bad faith refusal to settle could not be proven because United Fire settled the claim against Wells Trucking and paid its policy limits and Wells Trucking did not suffer an excess judgment. On appeal, this Court finds that an insurer’s ultimate settlement for its policy limits does not negate the insurer’s earlier bad faith refusal to settle and that an excess judgment is not essential to a bad faith refusal to settle action. Therefore, because United Fire failed to negate essential elements of a bad faith refusal to settle action, it was not entitled to judgment against Wells Trucking. United Fire was also not entitled to judgment against Scottsdale because Scottsdale could pursue Wells Trucking’s claim for bad faith refusal to settle under the theories of assignment, conventional subrogation, and equitable subrogation. The judgment is reversed, and the case is remanded.

 

Factual and Procedural Background

In August 2007, a Wells Trucking employee was operating a truck pulling a flatbed trailer when he was involved in an automobile accident that resulted in the death of another motorist. An accident reconstruction report prepared by the Missouri State Highway Patrol identified multiple factors that contributed to the accident, including the employee’s speed, the employee’s failure to drive in the proper lane, and the decedent’s failure to yield to the employee’s right of way.

 

At the time of the accident, Wells Trucking had a primary insurance policy with United Fire that had a liability limit of $1 million. Wells Trucking also had an excess insurance policy with Scottsdale with a liability limit of $2 million. The Scottsdale policy specified that it would not apply unless and until the underlying United Fire policy was exhausted. The Scottsdale policy also provided that if Wells Trucking had any rights to recover any payment Scottsdale made under the policy, those rights would be transferred to Scottsdale.

 

The decedent was survived by his wife and two children. After the accident, the decedent’s family and United Fire entered into negotiations to settle any claims the decedent’s family might have against Wells Trucking and the employee involved in the accident. The decedent’s family eventually filed a wrongful death lawsuit against Wells Trucking and the employee, but settlement negotiations continued. In October 2009, United Fire, Scottsdale, and the decedent’s family participated in mediation, which resulted in United Fire and Scottsdale each tendering $1 million to settle the case for a total of $2 million. Wells Trucking then assigned to Scottsdale its rights to pursue a bad faith refusal to settle claim against United Fire and agreed to pursue a bad faith failure to settle claim for the benefit of Scottsdale.

 

*2 Wells Trucking and Scottsdale filed suit against United Fire for bad faith refusal to settle. Scottsdale raised five alterative theories by which it could bring a bad faith refusal to settle claim: its assignment from Wells Trucking; conventional subrogation; FN1 equitable subrogation; breach of United Fire’s direct duty of good faith to Scottsdale; and as a third-party beneficiary of the United Fire policy. Wells Trucking and Scottsdale also asserted that United Fire committed a prima facie tort and requested a declaratory judgment.

 

FN1. Scottsdale and Wells Trucking’s petition labeled this doctrine as “contractual subrogation,” but it is more commonly referred to as “conventional subrogation.” See Missouri. Pub. Entity Risk Mgmt. Fund v. Am. Cas. Co. of Reading, 399 S.W.3d 68, 74 (Mo.App.2013).

 

In support of their claims that United Fire refused in bad faith to settle the wrongful death action, Wells Trucking and Scottsdale alleged the following:

 

• United Fire was notified of the decedent’s family’s potential claims against Wells Trucking.

 

• United Fire retained defense counsel to represent its interest and the interests of Wells Trucking.

 

• Between April and July 2008, United Fire was given numerous opportunities and extensions of time by the decedent’s family to investigate the wrongful death claim.

 

• The information, facts, and evidence in United Fire’s possession or readily available required United Fire to pay up to its policy limits to settle the wrongful death claim.

 

• Wells Trucking demanded that United Fire settle within its policy limits.

 

• United Fire “willfully, deliberately, maliciously and tortiously failed and refused to [settle for its policy limits], and instead made very low and unreasonable settlement offers … at a fraction of its $1 million limits, thereby breaching its good faith obligations.”

 

• “Because of United Fire’s bad faith failure to settle the [wrongful death claim] within its policy limits, in July 2008, [the decedent’s family] was compelled to file a lawsuit….”

 

• After the filing of the lawsuit, the decedent’s family provided United Fire several opportunities to settle the claim for its policy limits, including extensions of time to pay those limits.

 

• “During that time, … the facts, information and evidence in United Fire’s … possession was by then even more compelling as to Wells Trucking’s exposure to a probable judgment well in excess of the $1 million limits of the United Fire policy….”

 

• United Fire “deliberately and willfully failed and refused, in bad faith, to settle” the claim within its policy limits despite demands from Wells Trucking to settle for the policy limits.

 

• Scottsdale was informed of the lawsuit in September 2008 and, in January 2009, demanded that United Fire settle the lawsuit for up to its policy limits while it still had the opportunity to do so.

 

• “United Fire ignored that demand in bad faith, and instead continued to only make unreasonable and unrealistic ‘low ball’ offers of settlement … in response to policy limit demands communicated to United Fire’s agents….”

 

• In March 2009, the decedent’s family provided United Fire another opportunity to settle for its $1 million policy limits and agreed to leave the demand open for several months.

 

• United Fire again refused to settle.

 

• The decedent’s family eventually withdrew their $1 million settlement demand, raised the demand to $3 million, and refused to accept $1 million in settlement.

 

• The decedent’s family proposed to United Fire that if United Fire agreed to tender its $1 million policy limits toward the $3 million demand, they would negotiate with Scottsdale over payment of the additional $2 million.

 

*3 • “Only then did United Fire agree … to tender its policy limits of $1 million toward a settlement, … which settlement could no longer be achieved within those $1 million limits.”

 

• “[A]t the time it finally agreed to tender its $1 million limits, United Fire knew that amount was not sufficient to settle the [l]awsuit and that Wells Trucking and/or Scottsdale would have to contribute additional sums to settle the [l]awsuit or face exposure to a probable judgment in excess of $1 million….”

 

• At the October 2009 mediation, United Fire agreed to pay its $1 million policy limits but refused to contribute any additional amount.

 

• Scottsdale persuaded the decedent’s family to tentatively accept a total of $2 million in settlement, with United Fire paying $1 million and Scottsdale paying the additional $1 million.

 

On August 30, 2012, United Fire filed a motion for summary judgment on all counts in Wells Trucking and Scottsdale’s petition. In its suggestions in support of summary judgment, United Fire asserted that Scottsdale, as an excess carrier, could not bring a bad faith refusal to settle claim on its own or through Wells Trucking. It further asserted that Scottsdale and Wells Trucking could not establish all the elements of a bad faith refusal to settle claim because United Fire did settle the wrongful death claim within its policy limits and because Wells Trucking never suffered an excess judgment.

 

The deadline for filing a response to the summary judgment motion under Rule 74.04(c)(2) was October 1, 2012.FN2 Wells Trucking and Scottsdale did not file a response by the deadline or seek leave from the court to file a response beyond the deadline. Instead, Wells Trucking and Scottsdale twice obtained consent from United Fire to extend the deadline for filing a response and filed with the trial court memorandums reflecting United Fire’s consent to the extensions. The first memorandum was filed on October 2, and the second was filed on October 5. Wells Trucking and Scottsdale filed their response on October 11.

 

FN2. In its interlocutory order finding Wells Trucking and Scottsdale’s response to United Fire’s summary judgment motion untimely, the court stated that the response was due on September 29, 2012. Because that day fell on a Saturday, the deadline was the following Monday, October 1, 2012. See Rule 44.01(a).

 

On November 1, the trial court entered an interlocutory order finding that Wells Trucking and Scottsdale’s response to United Fire’s summary judgment motion was untimely. It deemed all allegations in United Fire’s summary judgment motion admitted, pursuant to Rule 74.04(c)(2), and directed United Fire to submit a proposed form of judgment.

 

Wells Trucking and Scottsdale filed a motion for reconsideration of the interlocutory order in which they asserted the trial court should have exercised its discretion under Rule 44.01(b) to enlarge the time for them to file a response to United Fire’s motion for summary judgment. They further asserted that summary judgment should be denied because, in its motion for summary judgment, United Fire relied solely on allegations in Wells Trucking and Scottsdale’s petition instead of producing legally cognizable evidence. Wells Trucking and Scottsdale also raised a variety of objections to United Fire’s proposed form of judgment.

 

*4 At a hearing on the motion to reconsider, the trial court sustained United Fire’s summary judgment motion. In its written judgment entered thereafter, the trial court again found that Wells Trucking and Scottsdale’s response to United Fire’s motion for summary judgment was untimely, and it deemed the factual allegations in United Fire’s motion admitted. The court alternatively found that Wells Trucking and Scottsdale’s response did not comply with Rule 74.04(c)(2) in that they merely objected to several paragraphs in United Fire’s statement of uncontroverted facts without admitting or denying those paragraphs as required. The court further stated that Wells Trucking and Scottsdale’s statement of additional material facts consisted of facts that were either immaterial or did not create a genuine issue of material fact.

 

The trial court then found that the elements of a bad faith refusal to settle claim could not be met by Wells Trucking or Scottsdale because “United Fire did not refuse, in bad faith or otherwise, to settle the claim within the liability limits of the policy” and because “Wells Trucking was not subjected to a judgment in excess of the policy limits.” The court also found that there is no duty of good faith between primary and secondary insurers, that Missouri law does not permit the assignment of an insured’s bad faith refusal to settle claim, and that Missouri law does not permit an excess insurer to bring an action for bad faith refusal to settle based on equitable or conventional subrogation. Lastly, the court found that Scottsdale was not a third-party beneficiary of the United Fire policy and Wells Trucking and Scottsdale could not state a claim for prima facie tort. Accordingly, the trial court entered judgment for United Fire on all counts in the petition.

 

Wells Trucking and Scottsdale appealed. After an opinion by the court of appeals, the case was transferred to this Court. Mo. Const. art. V, sec. 10. Wells Trucking and Scottsdale assert four points on appeal: (1) the trial court erred in granting summary judgment because Missouri law permits an excess insurer to sue a primary insurer for bad faith refusal to settle under the theories of assignment, conventional subrogation, equitable subrogation, and a direct duty of good faith from primary insurers to excess insurers; (2) the trial court erred in granting summary judgment because United Fire did not show it was entitled to judgment as a matter of law based on facts supported by “legally cognizable evidence”; (3) the trial court erred in failing to recognize its authority to enlarge the time to respond to a summary judgment motion due to excusable neglect; and (4) the trial court erred in not treating Wells Trucking and Scottsdale’s motion for reconsideration as a motion for relief from a judgment due to excusable neglect.FN3

 

FN3. Scottsdale and Wells Trucking do not assert on appeal that the trial court erred in granting summary judgment on their prima facie tort claim, their claim for declaratory judgment, or Scottsdale’s claim that it was a third-party beneficiary.

 

Untimely Response to Summary Judgment Motion

Because Wells Trucking and Scottsdale’s fourth point relied on affects the scope of the record for summary judgment, it will be considered first. Wells Trucking and Scottsdale assert that the trial court erred in failing to recognize its authority to enlarge the time for Wells Trucking and Scottsdale to respond to United Fire’s summary judgment motion and in not treating their motion for reconsideration of its interlocutory order as a motion for relief from the late filing of their response due to excusable neglect. A court’s decision on a party’s request for additional time is reviewed for an abuse of discretion. Crabtree v. Bugby, 967 S.W.2d 66, 72 (Mo. banc 1998), overruled on other grounds by Templemire v. W & M Welding, Inc., 433 S.W.3d 371, 373 (Mo. banc 2014).

 

*5 In its judgment, the trial court found “that the requirements in Rule 74.04(c)(2) are mandatory” and that Wells Trucking and Scottsdale “never requested an extension of time to file [their] response[ ] … until doing so orally on Dec. 4, 2012 during the hearing on [their] motion for Reconsideration.” The court then declined to enlarge the time period for Wells Trucking and Scottsdale to respond, stating that the court had no authority to do so.

 

The trial court misstated the law when it found it had no authority to enlarge the period for Wells Trucking and Scottsdale to respond. Rule 74.04(c)(2) requires the non-moving party to file a response to the summary judgment motion within 30 days. There is another rule, however, that gives the trial court authority to expand the time period. Rule 44.01(b) provides:

 

When by these rules or by a notice given thereunder or by order of court an act is required or allowed to be done at or within a specified time, the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if request therefor is made before the expiration of the period originally prescribed or as extended by a previous order or (2) upon notice and motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect; but it may not extend the time for taking any action under Rules 52.13, 72.01, 73.01, 75.01, 78.04, 81.04, 81.07, and 84.035 or for commencing civil action.

 

While Rule 44.01(b) identifies several rules under which a time period may not be extended, Rule 74.04 is not one of them. Consequently, trial courts have authority to grant an extension of time for a non-moving party to file a response under Rule 74.04(c)(2) for excusable neglect after the time period expires. See id.; Crabtree, 967 S.W.2d at 72.

 

Nevertheless, once the original time period has expired, there must be a motion upon which the court can act. Rule 44.04(b). The trial court found that Wells Trucking and Scottsdale did not request an extension of time until it did so orally at the hearing on their motion to reconsider. While Wells Trucking and Scottsdale asserted in their written motion to reconsider that the court has discretion to grant an extension of time under Rule 44.04(b), they never requested that extension of time. Rather, Wells Trucking and Scottsdale seemed to argue that the trial court erred in not exercising its discretion earlier, notwithstanding that the court did not have a motion upon which to grant an extension of time. Contrary to their claim, the court did not abuse its discretion in not treating Wells Trucking and Scottsdale’s motion for reconsideration as a motion requesting an extension of time to file a response to United Fire’s summary judgment motion.

 

United Fire Failed to Negate Essential Elements of Bad Faith Refusal to Settle Claim

Despite Wells Trucking and Scottsdale’s failure to respond timely, United Fire bore the burden of showing that it was entitled to summary judgment. See DeBaliviere Place Ass’n v. Veal, 337 S.W.3d 670, 674 (Mo. banc 2011). Summary judgment is appropriate only when the moving party demonstrates there is no genuine dispute regarding material facts and, under the undisputed facts, the moving party is entitled to judgment as a matter of law. Rule 74.04(c)(6); ITT Commercial Fin. Corp. v. Mid–Am. Marine Supply Corp., 854 S.W.2d 371, 380 (Mo. banc 1993). A defending party can demonstrate entitlement to summary judgment by showing: (1) facts negating any of the claimant’s necessary elements; (2) the claimant, after an adequate period of discovery, has been unable, and will not be able, to produce evidence sufficient to allow the trier of fact to find the existence of any one of the claimant’s elements; or (3) there is no genuine dispute of the existence of facts required to support the defending party’s properly pleaded affirmative defense. ITT Commercial, 854 S.W.2d at 381. This Court’s review of summary judgment is de novo. Roe v. Replogle, 408 S.W.3d 759, 763 (Mo. banc 2013).

 

*6 In its motion for summary judgment, United Fire asserted that Wells Trucking and Scottsdale could not prove a bad faith refusal to settle claim because the essential elements of the claim were not met. Specifically, United Fire asserted that because it ultimately tendered its $1 million policy limits to settle the claim against Wells Trucking, Wells Trucking and Scottsdale could not prove that United Fire refused to settle or that it acted in bad faith and, because the wrongful death action was settled, United Fire and Scottsdale could not prove that Wells Trucking suffered an excess judgment. The trial court agreed, finding that United Fire did not refuse, in bad faith or otherwise, to settle the claim against Wells Trucking and that Wells Trucking did not suffer an adverse judgment in excess of the policy limits. Neither of these facts negates elements essential to an action for bad faith refusal to settle. FN4

 

FN4. Wells Trucking and Scottsdale argue that United Fire failed to meet its burden under Rule 74.04(c)(1) because United Fire relied solely on allegations in the petition instead of legally cognizable evidence attached to the motion. The Court need not address this issue because, even assuming United Fire sufficiently supported its statement of uncontroverted facts under Rule 74.04(c)(1), United Fire failed to demonstrate entitlement to judgment as a matter of law under those facts.

 

This Court first recognized a bad faith refusal to settle action in Zumwalt v. Utilities Insurance Co., stating:

 

[W]here the insurer in a liability policy reserves the exclusive right to contest or settle any claim brought against the assured, and prohibits him from voluntarily assuming any liability or settling any claims without the insurer’s consent, except at his own costs, and the provisions of the policy provide that the insurer may compromise or settle such a claim within the policy limits, no action will lie against the insurer for the amount of the judgment recovered against the insured in excess of the policy limits, unless the insurer is guilty of fraud or bad faith in refusing to settle a claim within the limits of the policy.

 

360 Mo. 362,228 S.W.2d 750, 753 (1950). Accordingly, a bad faith refusal to settle action will lie when a liability insurer: (1) reserves the exclusive right to contest or settle any claim; (2) prohibits the insured from voluntarily assuming any liability or settling any claims without consent; and (3) is guilty of fraud or bad faith in refusing to settle a claim within the limits of the policy.FN5 See id.

 

FN5. While United Fire admits that both Wells Trucking and Scottsdale demanded that United Fire settle, it asks this Court to expressly require an insured to demand that the insurer settle. United Fire cites Bonner v. Automobile Club Inter–Insurance Exchange, 899 S.W.2d 925, 928 (Mo.App.1995), in which the court of appeals listed a demand for settlement by the insured as an essential element of a bad faith refusal to settle claim. See also State Farm Fire & Cas. Co. v. Metcalf, by Wade, 861 S.W.2d 751, 756 (Mo.App.1993); Dyer v. Gen. Am. Life Ins. Co., 541 S.W.2d 702, 704 (Mo.App.1976). This Court has never required the insured to make a demand for settlement and declines United Fire’s invitation to do so. The existence of a demand is, nevertheless, highly relevant in determining whether an insurer acted in bad faith in refusing to settle.

 

For the purpose of damages, United Fire argues that Zumwalt and other Missouri cases require that there be a judgment against the insured for an amount in excess of the policy limits. United Fire notes language in Zumwalt stating that where a bad faith refusal to settle action lies, the insurer will be liable “for the amount of the judgment recovered against the insured in excess of the policy limits.” Id. In making this statement, the Court was ruling on the facts of that case because the plaintiff in Zumwalt was seeking to recover the amount of the excess judgment as its damages. Id. at 752. Similarly, in other cases discussing an insurer’s liability for the excess judgment, there was an excess judgment against the insured. See Shobe v. Kelly, 279 S.W.3d 203, 207 (Mo.App.2009); Johnson v. Allstate Ins. Co., 262 S.W.3d 655, 658 (Mo.App.2008); Truck Ins. Exch. v. Prairie Framing, LLC, 162 S.W.3d 64, 74 (Mo.App.2005); Bonner, 899 S.W.2d at 927; Metcalf, 861 S.W.2d at 752; Ganaway v. Shelter Mut. Ins. Co., 795 S.W.2d 554, 560 (Mo.App.1990); Landie v. Century Indem. Co., 390 S.W.2d 558, 560 (Mo.App.1965). United Fire interprets the holdings of these cases to require an excess judgment rather than as ruling on the facts of damages present in those cases.

 

*7 This Court has described bad faith as “the intentional disregard of the financial interest of [the] insured in the hope of escaping the responsibility imposed upon [the insurer] by its policy.” Zumwalt, 228 S.W.2d at 754 (emphasis added). The insurer’s duty is to protect the insured’s financial interests, which are impacted by an insurer’s breach of duty whether the breach results in an excess judgment or an excess settlement. Requiring an excess judgment would force the insured to go to trial after its insured wrongfully refuses to settle instead of permitting the insured to protect itself from further liability by settling. There is “no attraction to a rule that rewards bad faith by relieving the insurer of excess liability if it forces harsh choices onto an insured facing a huge judgment.” See Truck Ins. Exch., 162 S.W.3d at 93. Allowing a bad faith refusal to settle claim when the insured settles fosters Missouri’s policy encouraging settlements. See Lowe v. Norfolk and W. Ry. Co., 753 S.W.2d 891, 894–95 (Mo. banc 1988).FN6

 

FN6. Several other courts have allowed a bad faith refusal to settle action when there is an excess settlement. Fortman v. Safeco Ins. Co. of Am., 221 Cal.App.3d 1394, 271 Cal.Rptr. 117, 119 (1990); Cont’l Cas. Co. v. Reserve Ins. Co., 307 Minn. 5, 238 N.W.2d 862, 867 (1976); Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Cont’l Illinois Corp., 673 F.Supp. 267, 274 (N.D.Ill.1987); Williams v. Am. Family Mut. Ins. Co., 101 F.Supp.2d 1337, 1341 (D.Kan.2000); Rupp v. Transcon. Ins. Co., 627 F.Supp.2d 1304, 1324 (D.Utah 2008).

 

Further, an insurer’s obligation to act in good faith when settling a third-party claim is part of what the insured pays for with its premiums. Truck Ins. Exch., 162 S.W.3d at 93. “When the insurer refuses to settle, the insured loses the benefit of an important obligation owed by the insurer.” Id. This loss is suffered regardless of whether there is an excess judgment or settlement. Therefore, an excess judgment is not required to maintain an action against an insurer for bad faith refusal to settle.

 

Just as the absence of an excess judgment is not fatal to a bad faith refusal to settle action, neither is United Fire’s ultimate settlement for its policy limits. In its motion, United Fire argued that United Fire’s tendering of $1 million at the mediation negates the required elements that it refused to settle and that it acted in bad faith. United Fire’s argument misses the point. A bad faith refusal to settle action arises from an insurer’s breach of its duty to settle third-party claims in good faith. Shobe, 279 S.W.3d at 209. An insurer “may be liable over and above its policy limits if it acts in bad faith … in refusing to settle the claim against its insured within its policy limits when it has a chance to do so.” Landie, 390 S.W.2d at 563 (emphasis added).

 

The crux of Wells Trucking’s and Scottsdale’s claims is that United Fire had numerous opportunities to fully settle the wrongful death claim against Wells Trucking for United Fire’s policy limits of $1 million but that United Fire wrongfully refused to do so. Wells Trucking and Scottsdale have claimed that it was not until after United Fire acted in bad faith in refusing to settle that United Fire finally agreed to tender its $1 million policy limits. By that time, however, the decedent’s family would not settle for $1 million, and United Fire’s $1 million policy limits could no longer fully settle the wrongful death claim. If, as Wells Trucking and Scottsdale allege, United Fire’s failure to act on the decedent’s family’s earlier settlement demands was in bad faith and caused Wells Trucking to lose its opportunity to fully settle the claim within United Fire’s policy limits, United Fire should not be able to evade liability by later agreeing to pay its policy limits. United Fire’s mere payment up to the policy limits does not make Wells Trucking whole or put Wells Trucking in the same position as if United Fire had performed its obligations to settle in good faith. See Truck Ins. Exch., 162 S.W.3d at 93.

 

*8 While it is undisputed that United Fire ultimately settled the claim against Wells Trucking for its policy limits, Wells Trucking and Scottsdale’s petition alleged that United Fire acted in bad faith in refusing to settle earlier, which United Fire did not negate in its summary judgment motion. “[S]ummary judgment may not be granted in a case where the evidentiary facts set forth in the matters supporting the motion fail to negate a material issue raised by the pleadings, even where the opposing party has failed to file an appropriate response.” Labor Disc. Ctr., Inc. v. State Bank & Trust Co. of Wellston, 526 S.W.2d 407, 429 (Mo.App.1975). Because the uncontroverted facts in United Fire’s summary judgment motion do not show that Wells Trucking would be unable to prove the essential elements of a bad faith refusal to settle the action, United Fire was not entitled to judgment as a matter of law.

 

Scottsdale May Pursue a Bad Faith Refusal to Settle Claim

While Wells Trucking, as the insured, has a claim against United Fire for bad faith refusal to settle, the remaining question is whether Scottsdale also can assert such a claim. In its motion for summary judgment, United Fire asserted Scottsdale was unable to prove the elements of a cause of action for bad faith refusal to settle because Missouri law does not recognize an action for bad faith refusal to settle between a primary insurer and an excess insurer.

 

It was well established that an insurer owes to its insured a duty to act in good faith in settling a claim against the insured and that the insurer may be liable to the insured when it breaches this duty. Zumwalt, 228 S.W.2d at 753. When an insured has a policy providing excess coverage, however, the excess insurer may be obligated to pay the excess judgment or settlement amount caused by the primary insurer’s bad faith refusal to settle. Scottsdale argues that an excess insurer should be able to recover the excess judgment amount from the primary insurer for the insured’s bad faith refusal to settle under the theories of assignment, conventional subrogation, and equitable subrogation or by raising its own claim based on a direct duty of good faith owed by primary insurer to an excess insurer.

 

A. Assignment

Scottsdale asserts that it may bring a bad faith refusal to settle claim because Wells Trucking assigned to Scottsdale its right to bring a bad faith refusal to settle claim against United Fire. An action for bad faith refusal to settle is a tort. Id. at 756. “[C]hoses in action for torts may be assigned, provided they arise from wrongs causing injury to real or personal property, or from frauds, deceits and other torts by which an estate, real or personal, has been injured, diminished, or damaged.” State ex rel. Park Nat. Bank v. Globe Indem. Co., 332 Mo. 1089, 61 S.W.2d 733, 736 (1933). Conversely, actions “for torts for personal injuries, and for wrongs done to the person, the reputation, or the feelings of the injured party, and those based on contracts of a purely personal nature, such as promises of marriage” are not assignable. Id.

 

An insurer’s duty to act in good faith in settling third-party claims arises from the insurer’s reservation in the policy of the exclusive right to contest and settle third-party claims. Zumwalt, 228 S.W.2d at 753. An action for the breach of that duty, while a tort, arises from a contract of insurance, which is not of a purely personal nature. Therefore, a bad faith refusal to settle action falls within the category of assignable torts. See Globe Indem., 61 S.W.2d at 736.

 

This finding is consistent with the majority of other jurisdictions that have found a bad faith refusal to settle action is assignable. See Kaplan v. Harco Nat’l Ins. Co., 708 So.2d 89, 92 (Miss.Ct.App.1998).FN7 Some of these jurisdictions recognize its assignability because such an action is “either in contract arising from breach of implied terms of the insurance policy, or in tort for non-personal injuries.” Little, 443 P.2d at 693 n. 2; Comunale, 328 P.2d at 202; Aaron, 559 So.2d at 277; Groce, 448 P.2d at 557.

 

FN7. See also Gen. Accident Fire & Life Assurance Corp. v. Little, 103 Ariz. 435, 443 P.2d 690, 693 n. 2 (1968); Comunale v. Traders & Gen. Ins. Co., 50 Cal.2d 654, 328 P.2d 198, 202 (1958); Aaron v. Allstate Ins. Co., 559 So.2d 275, 277 (Fla.Dist.Ct.App.1990); Cotton States Mut. Ins. Co. v. Brightman, 256 Ga.App. 451, 568 S.E.2d 498, 501 (2002); Glenn v. Fleming, 247 Kan. 296, 799 P.2d 79, 90–91 (1990); Terrell v. W. Cas. & Sur. Co., 427 S.W.2d 825, 827 (Ky.Ct.App.1968); Keith v. Comco Ins. Co., 574 So.2d 1270, 1276 (La.Ct.App.1991); Med. Mut. Liability Ins. Soc’y of Maryland v. Evans, 330 Md. 1, 622 A.2d 103, 116–17 (1993); DiMarzo v. Am. Mut. Ins. Co., 389 Mass. 85, 449 N.E.2d 1189, 1195 n. 8 (1983); Dumas v. State Farm Mut. Auto. Ins. Co., 111 N.H. 43, 274 A.2d 781, 783 (1971); Groce v. Fidelity Gen. Ins. Co., 252 Or. 296, 448 P.2d 554, 557 (1968); Gray v. Nationwide Mut. Ins. Co., 422 Pa. 500, 223 A.2d 8, 13 (1966); Mello v. Gen. Ins. Co. of Am., 525 A.2d 1304, 1306 (R.I.1987).

 

*9 United Fire, alternatively, argues that even if assignable, Wells Trucking and, therefore, Scottsdale have no action for bad faith refusal to settle. “The only rights or interests an assignee acquires are those the assignor had at the time the assignment was made. Because an assignee merely steps into the shoes of the assignor, an assignee must allege facts showing that the assignor would be entitled to relief.” Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 128 (Mo. banc 2010) (internal citation omitted) (emphasis in original). United Fire contends that, because Wells Trucking never suffered damages, Wells Trucking did not have a bad faith refusal to settle claim to assign to Scottsdale. This Court has already found that a cause of action for bad faith refusal to settle can be maintained even though the insurer settled for its policy limits and no judgment was entered. Because an action for bad faith refusal is assignable and because Wells Trucking has an action of bad faith refusal to settle, Scottsdale may pursue a bad faith refusal to settle claim under its assignment from Wells Trucking.

 

B. Conventional Subrogation

Scottsdale also asserts that the trial court erred in concluding that an excess insurer cannot raise a bad faith refusal to settle claim against a primary insurer by way of conventional subrogation. Subrogation is the substitution of another in the place of a creditor “so that the party in whose favor subrogation is exercised succeeds to the rights of the creditor.” Messner v. Am. Union Ins. Co., 119 S.W.3d 642, 648 (Mo.App.2003); see also 16 Couch 3d, section 222:5. Subrogation is classified as either equitable, the right to which is imposed by law, or conventional, the right to which arises from a contract. Kroeker v. State Farm Mut. Auto. Ins. Co., 466 S.W.2d 105, 110 (Mo.App.1971). Scottsdale asserts it has a right to subrogation arising out of its policy with Wells Trucking.

 

Scottsdale’s policy with Wells Trucking states:

 

If [Wells Trucking] has rights to recover all or part of any payment [Scottsdale has] made under this Coverage Part, those rights are transferred to [Scottsdale]. [Wells Trucking] must do nothing after loss to impair them. At [Scottsdale’s] request, [Wells Trucking] will bring “suit” or transfer those rights to [Scottsdale] and help [Scottsdale] enforce them.

 

This provision grants Scottsdale a right to subrogate any recovery by Wells Trucking of payment Scottsdale made under the policy. There is nothing in the nature of the relationship between primary insurer, the insured, and the excess insurer that precludes application of conventional subrogation. Because Scottsdale paid $1 million toward the settlement of the wrongful death claim under the policy, it has a right under the policy to recover that amount through Wells Trucking and, therefore, is able to invoke the doctrine of conventional subrogation. See Anison v. Rice, 282 S.W.2d 497, 504 (Mo.1955). The trial court erred in finding Scottsdale could not bring a bad faith refusal to settle claim under the doctrine of conventional subrogation.

 

C. Equitable Subrogation

In addition to its right to subrogation arising out of the insurance contract, Scottsdale asserts it has a right to equitable subrogation. “Subrogation exists to prevent unjust enrichment.” Keisker v. Farmer, 90 S.W.3d 71, 75 (Mo. banc 2002). It is used:

 

[W]henever the person making the payment stands in such relations to the premises or to the other parties that his interests, recognized either by law or by equity, can only be fully protected and maintained by regarding the transaction as an assignment to him, and the lien of the mortgage as being kept alive, either wholly or in part, for his security and benefit.

 

Anison, 282 S.W.2d at 503. Determination of whether a party has a right to equitable subrogation depends on the facts of the case. Ethridge v. TierOne Bank, 226 S.W.3d 127, 134 (Mo. banc 2007).

 

Dating back to the nineteenth century, Missouri has recognized the doctrine of equitable subrogation. See Evans v. Halleck, 83 Mo. 376, 376 (Mo.1884). In the case of first party insurance, subrogation arises when the insurer pays its insured’s loss and allows the insured to recover from any third party who may have caused the loss. Benton House, LLC v. Cook & Younts Ins., Inc., 249 S.W.3d 878, 882 (Mo.App.2008). Additionally, it has been used by an excess insurer to recover from a primary insurer a portion of the insured’s settlement that the primary insurer was obligated to pay under its policy.FN8 Mo. Pub. Entity Risk Mgmt. Fund v. Am. Cas. Co. of Reading, 399 S.W.3d 68, 76 (Mo.App.2013).

 

FN8. While persuasive, Missouri Public Entity Risk Management Fund applied subrogation under different factual circumstances. In Missouri Public Entity Risk Management Fund, the excess insurer sought to recover amounts within the primary policy limits based on the primary insurer’s breach of its duty to defend and its duty to settle in good faith. 399 S.W.3d at 76. Here, Scottsdale seeks to recover from United Fire an amount in excess of the limits based on United Fire’s refusal to settle in good faith.

 

*10 Here, the question is whether an excess insurer who pays a third-party claim on behalf of its insured after a primary insurer refuses in bad faith to settle the claim has a right to equitable subrogation to obtain the amount paid from the primary insurer. A right to equitable subrogation belongs to “one, not a volunteer, who pays another’s debt, to recover the amount paid, which in good conscious should be paid by the one primarily responsible for the loss.” Id. at 74 (quoting 4 New Appleman Law of Liability Ins. sec. 42.01 (2012)). Scottsdale paid $1 million to settle the claim against Wells Trucking. Scottsdale did not do so as a volunteer but because it was obligated to do so under its policy with Wells Trucking. See id. at 75.

 

Additionally, good conscience requires that United Fire, not Scottsdale, be the party to suffer the loss. The excess settlement amount was allegedly caused by United Fire’s bad faith. Normally, United Fire would face liability for this loss in an action brought by the insured on its own behalf because United Fire breached its duty to act in good faith. See Zumwalt, 228 S.W.2d at 753. An insurer’s duty to act in good faith does not simply disappear when a prudent insured has obtained excess coverage. Regardless of the existence of an excess insurer, a primary insurer should be held liable when it acts in bad faith in refusing to settle within its policy limits. Therefore, Scottsdale, as the party that actually paid the loss caused by United Fire’s bad faith, should be equitably subrogated to the rights of Wells Trucking and able to bring a bad faith refusal to settle action in the name of Wells Trucking. FN9

 

FN9. In Ethridge, this Court stated that equitable subrogation is “usually allowed only in extreme cases bordering on if not reaching the level of fraud.” 226 S.W.3d at 134 (internal quotations omitted). Ethridge was not an insurance case but involved a lender who sought to place a lien on proceeds from the sale of real estate. Id. Assuming, without deciding, that Ethridge applies in other contexts, application of equitable subrogation to allow an excess insurer to sue for bad faith refusal to settle is not inconsistent with Ethridge because bad faith constitutes conduct “bordering on … the level of fraud.” Id.

 

Equitable subrogation has been recognized by a majority of jurisdictions as a proper claim for an excess insurer to recover from a primary insurer’s wrongful refusal to settle.FN10 Other jurisdictions recognize that allowing an excess insurer to bring a bad faith refusal to settle claim against the primary insurer promotes the “fair and reasonable settlement of lawsuits by discouraging primary [insurers] from ‘gambling’ with the excess [insurer’s] money when potential judgments approach the primary insurer’s policy limits.” Commercial Union Ins. Co., 393 N.W.2d at 483 (Mich.1986); see Lowe, 753 S.W.2d at 894–95. It also prevents an unfair distribution of losses between the primary and excess insurers. See Hartford Accident & Indem. Co., 792 P.2d at 753. Importantly, allowing an excess insurer to bring an action under equitable subrogation does not create a new duty or impose new obligations on the primary insurer; it merely substitutes the excess insurer for the insured. See Am. Centennial, 843 S.W.2d at 483. Therefore, an excess insurer may be equitably subrogated to its insured’s claim against the primary insurer for refusing in bad faith to settle.

 

FN10. See Hartford Accident & Indem. Co. v. Aetna Cas. & Sur. Co., 164 Ariz. 286, 792 P.2d 749, 754 (1990); Commercial Union Assurance Cos. v. Safeway Stores, Inc., 26 Cal.3d 912, 164 Cal.Rptr. 709, 610 P.2d 1038, 1040–41 (1980); Gen. Accident Fire & Life Assurance Corp., Ltd. v. Am. Cas. Co. of Reading, Pa., 390 So.2d 761, 765 (Fla.Dist.Ct.App.1980); Home Ins. Co. v. N. River Ins. Co., 192 Ga.App. 551, 385 S.E.2d 736, 740 (1989); Great Sw. Fire Ins. Co. v. CNA Ins. Cos., 557 So.2d 966, 967 (La.1990); Hartford Cas. Ins. Co. v. New Hampshire Ins. Co., 417 Mass. 115, 628 N.E.2d 14, 19 n. 7 (1994); Fireman’s Fund Ins. Co. v. Cont’l Ins. Co., 308 Md. 315, 519 A.2d 202, 205 (1987); Commercial Union Ins. Co. v. Med. Protective Co., 426 Mich. 109, 393 N.W.2d 479, 484 (1986); Cont’l Cas. Co. v. Reserve Ins. Co., 307 Minn. 5, 238 N.W.2d 862, 864 (1976); Estate of Penn v. Amalgamated Gen. Agencies, 148 N.J.Super. 419, 372 A.2d 1124, 1126 (App.Div.1977); Centennial Ins. Co. v. Liberty Mut. Ins. Co., 62 Ohio St.2d 221, 404 N.E.2d 759, 761 (1980); Maine Bonding & Cas. Co. v. Centennial Ins. Co., 298 Or. 514, 693 P.2d 1296, 1300 (1985); Am. Centennial Ins. Co. v. Canal Ins. Co., 843 S.W.2d 480, 481–82 (Tex.1992); Truck Ins. Exch. of Farmers Ins. Grp. v. Century Indem. Co., 76 Wash.App. 527, 887 P.2d 455, 460 (1995); Greater New York Mut. Ins. Co. v. N. River Ins. Co., 85 F.3d 1088, 1097 (3d Cir.1996); Nat’l Sur. Corp. v. Hartford Cas. Ins. Co., 493 F.3d 752, 756–57 (6th Cir.2007); Certain Underwriters of Lloyd’s and Cos. Subscribing to Excess Aviation Liability Ins. Policy No. FL–20959 A & B v. Gen. Accident Ins. Co. of Am., 909 F.2d 228, 232 (7th Cir.1990).

 

D. Direct Duty

*11 Lastly, Scottsdale invites this Court to recognize a cause of action for breach of a primary insurer’s independent duty to settle in good faith to an excess insurer. The duty to settle in good faith arises from the insurance contract between the insured and the insurer, Zumwalt, 228 S.W.2d at 753, but there is no contractual relationship between primary and excess insurers. While an excess insurer’s bad faith claim under equitable subrogation subjects the excess insurer’s claim to any defenses the primary insurer could assert against the insured, a direct cause of action between primary and excess insurers would not necessarily be subject to those defenses and, therefore, might give excess insurers greater rights to recover than an insured. Truck Ins. Exch. of Farmers Ins. Grp., 887 P.2d at 460. Because this Court finds that a bad faith refusal to settle action may be assigned and that an excess insurer may recover for an insurer’s breach of its duty to the insured under contractual and equitable subrogation, the Court declines to find primary insurers owe a duty directly to excess insurers.

 

Conclusion

Because an excess judgment is not an essential element and because an insurer’s ultimate payment of its policy limits does not negate an earlier bad faith refusal to settle, United Fire failed to show that it was entitled to judgment as matter of law on Wells Trucking’s bad faith refusal to settle claim. United Fire also was not entitled to judgment on Scottsdale’s bad faith refusal to settle claim based on equitable subrogation because Scottsdale could properly pursue Wells Trucking’s bad faith refusal to settle claim under the theories of assignment, contractual subrogation, or equitable subrogation. Scottsdale cannot, however, maintain a bad faith refusal to settle claim based on a duty owed directly to Scottsdale. Therefore, this Court reverses the trial court’s judgment and remands the case.

 

All concur.