The Blakelys' homeowner's insurer, EMC Insurance Companies, paid $203,247.49 for the property damage and then brought suit against Entergy, alleging that the utility's equipment had caused the 2014 fire and asserting subrogation claims for damages “in excess of $203,247.49.”

The case proceeded to a jury trial. At the close of EMC's evidence, the U.S. District Court for the Western District of Arkansas granted Entergy's motion for judgment as a matter of law.

EMC appealed to the Eighth Circuit.

The Eighth Circuit's Decision

The circuit court affirmed.

In its decision, the Eighth Circuit explained that, Arkansas, in applying equitable subrogation principles, had adopted a “made whole” doctrine that required “that the insured be made whole before the insurer's right to subrogation will arise.”

The Eighth Circuit rejected EMC's argument that the made whole doctrine did not apply to property damage claims, concluding that the Supreme Court of Arkansas would apply this equitable doctrine to property loss subrogation claims.

The circuit court then pointed out that, under Arkansas law, when both the insured and an insurer who had partially reimbursed the insured had claims against an alleged tortfeasor, the insured was the real party in interest and the insurer was a proper but not a necessary party plaintiff.

The Eighth Circuit added, however, that an insured who had been paid in full was not the real party in interest, and the insurer had to sue the third party tortfeasor in its own name. Therefore, the circuit court reasoned, EMC had standing to bring its action against Entergy.

The Eighth Circuit nevertheless affirmed the district court's decision dismissing EMC's action, explaining that its complaint failed to allege that the Blakelys had been made whole or to attach an agreement with the Blakelys to that effect.

The Eighth Circuit concluded that because EMC did not argue to the district court or on appeal that it presented adequate proof – before or during trial – that the Blakelys had been made whole, an issue on which EMC had the burden of proof, the issue was not properly preserved for appeal.

Accordingly, it affirmed the district court's ruling that, as a matter of law, a reasonable jury could not have found that EMC proved an essential element of its subrogation claim.

The case is EMC Ins. Companies v. Entergy Arkansas, Inc., No. 18-2327 (8th Cir. May 14, 2019). Attorneys involved include: For EMC Insurance Companies, Plaintiff – Appellant: Ben C. Hall, BARBER LAW FIRM, Little Rock, AR; Andy L. Turner, TURNER LAW FIRM, Cabot, AR. For Entergy Arkansas, Defendant – Appellee: James C. Baker, Jr., Kimberly Dickerson Young, FRIDAY & ELDREDGE, Little Rock, AR; William Webster Darling, II, ENTERGY SERVICES, INC., Little Rock, AR.