United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 05-1446
                                   ___________

Reliance Insurance Company              *
in Liquidation,                         *
                                        *
             Appellant,                 *
                                        *
      v.                                * Appeal from the United States
                                        * District Court for the Eastern
Stephen Chitwood;                       * District of Missouri.
Continental Western Insurance           *
Company,                                *
                                        *
             Appellees.                 *
                                   ___________

                             Submitted: October 10, 2005
                                Filed: January 10, 2006
                                 ___________

Before ARNOLD, BOWMAN, and MURPHY, Circuit Judges.
                         ___________

ARNOLD, Circuit Judge.

       Reliance Insurance Company sued Stephen Chitwood and Continental Western
Insurance Company for reimbursement for the cost of settling a lawsuit brought by
several people injured in a motor vehicle accident involving Mr. Chitwood. The
district court granted the summary judgment motions of Mr. Chitwood and
Continental Western, and we affirm these orders. We believe, however, that the
district court erred when it determined that Reliance was not entitled to prejudgment
interest on attorney's fees and costs that it incurred while defending Continental
Western's insured. We therefore reverse that part of the district court's judgment and
remand to the district court for further proceedings.

                                           I.
       Mr. Chitwood agreed to lease a tractor-semitrailer that he owned to Foster
Brothers. Under that arrangement, Mr. Chitwood was to deliver Foster Brothers's
products in a number of Midwestern states and Mr. Chitwood promised to indemnify
Foster Brothers for any loss attributable to his negligence. Both Mr. Chitwood and
Foster Brothers obtained liability insurance policies covering the operation of the
truck: Mr. Chitwood bought a policy with a maximum limit of $750,000 from
Continental Western, and Foster Brothers bought a policy providing up to $1 million
in coverage from Reliance. Both policies covered Mr. Chitwood and Foster Brothers
as insured parties.

       The interplay between the two insurance policies became relevant when
Mr. Chitwood's truck collided with another vehicle. Three occupants of that vehicle
were injured in the crash and they sued Foster Brothers. Reliance took the lead in
defending the suit and, after some delay, Continental Western provided an attorney
to participate in the defense. The insurers agree that under the terms of the respective
policies Continental Western was the primary insurer and Reliance was the excess
carrier.

      Shortly before trial was scheduled to begin in the personal injury action,
Continental Western settled with the plaintiffs in that action. In exchange for a
$600,000 payment, the plaintiffs released Continental Western from any liability and
agreed to limit any other recovery against Foster Brothers to the proceeds of the
Reliance insurance policy. The plaintiffs also agreed that they would not look to the
Reliance policy for payment unless they obtained a judgment against Foster Brothers
in excess of $750,000, and that, if they obtained such a judgment, they would seek
recovery from Reliance for only that portion of the judgment that exceeded $750,000.

                                          -2-
Cf. Mo. Rev. Stat. § 537.065. When Reliance received word of Continental Western's
settlement, it reached its own settlement agreement with the plaintiffs in the personal
injury action. Reliance agreed to pay $250,000 in exchange for the plaintiffs'
agreement to dismiss their lawsuit with prejudice.

       The resolution of the personal injury case marked the beginning of the present
action. In its first count, Reliance, as the assignee of Foster Brothers's indemnity
rights under the lease agreement, sought $250,000 from Mr. Chitwood. In its second
count, Reliance alleged that because Continental Western had paid only $600,000 in
the settlement, it had not exhausted its policy limits and therefore owed a duty of
indemnity to Reliance for $150,000. In its third count, Reliance argued that
Continental Western breached a duty of loyalty owed by a primary insurer to a
secondary insurer. Reliance also contended that Continental Western owed
$41,244.25 in attorney's fees that Reliance incurred in the personal injury action.
Reliance sought prejudgment interest on all amounts claimed.

       After all the parties filed motions for summary judgment, the district court,
applying Missouri law, awarded summary judgment to Mr. Chitwood and Continental
Western. The court concluded that the so-called anti-subrogation rule prohibited
Reliance's action against Mr. Chitwood, who was one of its insureds. The court also
determined that Reliance's claims against Continental Western failed because
Continental Western's settlement agreement exhausted its liability, and because
Missouri did not recognize a duty of good faith between primary and secondary
insurers (and even if it did, there was no evidence of any bad faith on Continental
Western's part). Continental Western conceded that it owed the $41,244.25 in
attorney's fees and costs to Reliance, and the district court entered judgment for
Reliance in that amount. Without comment, the district court rejected Reliance's
request for prejudgment interest.




                                         -3-
                                          II.

                                             A.
        We deal first with Reliance's effort to recover from Mr. Chitwood the $250,000
that it paid to settle the personal injury claims against Foster Brothers. Although
Reliance conceded that Mr. Chitwood was covered as an "insured" under its policy,
Reliance nonetheless contends that as the assignee of Foster Brothers's rights it can
enforce Mr. Chitwood's promise to indemnify Foster Brothers for any loss attributable
to his negligence.

       Missouri law recognizes the anti-subrogation rule, which is that "where an
insurance company attempts to recover, as a subrogee, from a coinsured generally
covered under the policy, whose negligent act occasioned the loss, the action must fail
in the absence of design or fraud on the part of the coinsured." Sherwood Med. Co.
v. B.P.S. Guard Services, Inc., 

, 162 (Mo. Ct. App. 1994) (internal
quotation omitted). The Missouri courts have held that "allow[ing] an insurer to sue
for recovery against one of its own insured would violate the basic principles of
subrogation and equity, as well as violate sound public policy." Jos. A. Bank
Clothiers, Inc. v. Brodsky, 

, 303 (Mo. Ct. App. 1997). The anti-
subrogation rule prevents an insurer from passing its loss to the insured, thereby
avoiding coverage for the very risk for which it accepted premiums, and it prevents
insurers from having a conflict of interest that might deprive an insured of a vigorous
defense. 16 Couch on Insurance § 224:3 (3d ed. 1995 & Supp. 2004); see also North
Star Reins. Corp. v. Continental Ins. Co., 

, 294-95, 

,
653 (1993).

       Reliance offers two reasons why the anti-subrogation rule should not apply
here. The first is that this case involves an assignment of rights from Foster Brothers
to Reliance, rather than a traditional subrogation action. Although there are
differences between actions based on assignment and actions based on subrogation,

                                         -4-
see Keisker v. Farmer, 

, 74 (Mo. 2002), those differences are not
relevant in the present circumstances: Reliance is still seeking to recover from its own
insured the cost of the very risk that was the subject of the policy. The purpose of the
anti-subrogation rule is to prevent such actions. Other courts have applied the rule in
cases that were outside the realm of traditional subrogation. See, e.g., ELRAC, Inc.
v. Ward, 

, 76-77, 

, 9 (2001); Jones Lang Wootton USA v.
LeBoeuf, Lamb, Greene & MacRae, 

, 289 (N.Y. App. Div. 1998).
In fact, in a case involving this precise factual situation and, coincidentally, Reliance
itself, the North Carolina Court of Appeals determined that an insurer could not
recover from one of its insureds under the indemnity agreement between a lessor and
lessee of a tractor-trailer. Reliance Ins. Co. v. Morrison, 

,

(1982). We believe that this was the correct result.

        Reliance also maintains that the anti-subrogation rule should not apply because
there is another insurer. Reliance argues that the public policy goals of the anti-
subrogation rule are not implicated when the dispute is between two insurers. That
is true enough. See 16 Couch on Insurance § 224:6. But we are not convinced that
the claim against Mr. Chitwood can be recast as merely a dispute between insurers.
The first count of the complaint filed in the district court sought recovery directly
from Mr. Chitwood. Continental Western is named in the second and third counts of
Reliance's complaint, but not in the first. We cannot ignore the fact that Reliance's
first count is an attempt to hold its own insured responsible for the consequences of
a risk that was covered by Reliance's policy. We therefore affirm the district court's
entry of summary judgment in Mr. Chitwood's favor on that count.

                                            B.
      Reliance sought $150,000 from Continental Western under the theory that
Reliance, as the excess insurer, was not obligated to pay anything until the primary
insurer had paid the full amount of its policy limit. In general, an excess insurer does
not pay until the limit of the insured's primary insurance is "exhausted." Smith v.

                                          -5-
Wassau Underwriters Ins. Co., 

, 293 (Mo. Ct. App. 1998). Reliance
contends that because Continental Western settled the case for $600,000, it did not
exhaust the limits of its $750,000 policy. The district court determined that
Continental Western's settlement, which included the personal injury plaintiffs'
promise to seek from Reliance only the amount that any judgment that they obtained
exceeded $750,000, exhausted its liability and triggered Reliance's obligation as
excess insurer.

       In Handleman v. U.S. Fidelity & Guar. Co., 

, 534-35 (Mo. Ct.
App. 1929), the Missouri Court of Appeals held that exhaustion did not require an
insurer to pay the full dollar value of a policy. Rather, an insurance policy is
exhausted "when the insured proves that claims aggregating the full amount of the
specific policy have been settled thereunder and full liability of the insurer
discharged." 

In U.S. Fidelity & Guar. Co. v. Safeco Ins. Co. of Am.,

, 853 (Mo. Ct. App. 1977), the court cited Handleman and determined
that an excess insurer's obligation was triggered when the primary insurer reached a
settlement for less than the policy limit.

       Reliance attempts to distinguish these cases on the ground that its action against
Continental Western is based on non-contractual indemnity. In support, it cites
several cases in which courts decided that an indemnification agreement between
parties controls which party's insurance is primary. See Federal Ins. Co. v. Gulf Ins.
Co., 

, 164-65 (Mo. Ct. App. 2005); Wal-Mart Stores, Inc. v. RLI Ins.
Co, 

, 588-590 (8th Cir. 2002). In this case, however, there is no dispute
as to which policy is primary.

        The details of the settlement agreement confirm that Continental Western
fulfilled its obligation. Had Reliance elected to proceed to trial, it could have done so
with the assurance that it would not be required to pay the first $750,000 of any
adverse judgment. This is precisely what Reliance bargained for as the excess insurer.

                                          -6-
Reliance's decision to settle does not change the fact that Continental Western
exhausted the limits of its policy. Reliance's contention that Continental Western was
obligated to pay its $750,000 policy limit is inconsistent with the holdings of
Handleman and U.S. Fidelity. We therefore affirm the district court's summary
judgment with respect to the second count in Reliance's complaint.

                                          C.
       Reliance contends that Missouri would recognize the "modern trend for courts
and legislatures to impose duties of good faith and fair dealing on the relationship
between primary and excess carriers," 14 Couch on Insurance § 198:20. Missouri
courts, however, have not recognized a direct duty of good faith between primary and
secondary insurers. They are in good company, as "the majority of jurisdictions
describe the duty owed by the primary insurer to the excess insurer as derivative from
that owed to the insured." Phico Ins. Co. v. Aetna Cas. and Sur. Co. of Am.,

, 989 (S.D. Ind. 2000); see also Twin City Fire Ins. Co. v. Country
Mut. Ins. Co., 

, 1178 (7th Cir. 1994).


       We also note that even if Missouri were to recognize such a duty, Reliance has
not shown that there was a breach of that duty. By obtaining a promise from the
plaintiffs in the personal injury case to execute against Reliance's policy only to the
extent that any judgment obtained exceeded $750,000, Continental Western protected
Reliance's position as excess insurer. Because Continental's settlement was authorized
by Missouri law and did not prejudice Reliance, we affirm the district court's grant of
summary judgment to Continental Western on count three of the complaint.


                                         III.
       Before Continental Western appeared to defend Foster Brothers in the personal
injury case, Reliance incurred $41,244.25 in attorney's fees and costs. Although the



                                         -7-
district court entered judgment in Reliance's favor for this amount, it denied Reliance's
claim for prejudgment interest.


        The availability of prejudgment interest in this case is governed by Mo. Rev.
Stat. § 408.020, which states that "[c]reditors shall be allowed to receive interest at the
rate of nine percent per annum, when no other rate is agreed upon, for all moneys after
they become due and payable, on written contracts, and on accounts after they become
due and demand of payment is made." Continental Western contends that this statute
provides no basis for recovery of prejudgment interest because it had no contract with
Reliance. The Missouri courts, however, have broadly interpreted the term "accounts"
in § 408.020. The Missouri Supreme Court has described "the term 'account' [as]
equivalent to 'claim,' or 'demand' ... The primary idea of account ... is some matter of
debt and credit, or demands in the nature of debt and credit, between parties."
Coleman v. Kansas City, 

, 575 (Mo. 1943) (internal quotations
omitted). The Missouri courts have allowed the recovery of prejudgment interest on
oral contracts for services rendered, Burger v. Wood, 

, 443 (Mo. Ct.
App. 1969), and also on quantum meruit claims for services rendered, Laughlin v.
Boatmen's Nat'l Bank of St. Louis, 

, 979-80 (Mo. 1945).


       Recent case law supports interpreting § 408.020 to allow prejudgment interest
on a claim for indemnity by an excess insurer against a primary insurer. The Missouri
Court of Appeals has allowed prejudgment interest when one insurer paid part of
another insurer's obligation. See Weinberg v. Safeco Ins. Co. of Ill., 

,
62 (Mo. Ct. App. 1995). Applying Missouri law, we have allowed an excess insurer
to recover prejudgment interest on expenses advanced on behalf of the primary
insurer. Federal Ins. Co. v. St. Paul Fire and Marine Ins. Co., 

, 980 (8th
Cir. 1993) (per curiam). These decisions promote one of the general purposes of
prejudgment interest, namely, "to compensate for the use of or loss of use of money
to which a person is entitled." Catron v. Columbia Mut. Ins. Co., 723 S.W.2d

                                           -8-
5, 7 (Mo. 1987). In the instant case, Reliance advanced money on behalf of Foster
Brothers that Continental Western was legally obligated to pay. We believe therefore
that the district court erred in denying Reliance prejudgment interest on that amount.


       Having determined that Missouri law authorizes prejudgment interest, at the
rate of nine percent per annum, on the $41,244.25 judgment in Reliance's favor, it
remains to consider when the prejudgment interest began to accrue. As we noted
above, § 408.020 allows prejudgment interest "on accounts after they become due and
demand of payment is made." Although Reliance asks that prejudgment interest be
calculated from August 4, 2001 (the day after the Reliance settled the personal injury
case against Foster Brothers), the record before us does not reveal whether Reliance
made a demand of payment on or before that date. Absent an earlier demand,
Missouri law considers the date that the lawsuit was filed as the date of demand.
General Aggregate Corp. v. LaBrayere, 

, 910 (Mo. Ct. App. 1984).
Because we cannot determine if Reliance made a demand prior to filing its suit, we
believe a remand to the district court is necessary so it can determine the date on
which prejudgment interest began to accrue on the $41,244.25 that Continental
Western owed Reliance.


                                           IV.
       For the reasons stated, we affirm that part of the district court's order granting
summary judgment in favor of Mr. Chitwood and Continental Western, we reverse the
district court's denial of prejudgment interest on the $41,244.25 that Continental
Western tendered to Reliance, and we remand the case to the district court for a
determination of when prejudgment interest began to accrue and entry of a judgment
in favor of Reliance for the appropriate amount of prejudgment interest.
                        ______________________________




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