United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 18-2327
                        ___________________________

                            EMC Insurance Companies

                        lllllllllllllllllllllPlaintiff - Appellant

                                           v.

                               Entergy Arkansas, Inc.

                       lllllllllllllllllllllDefendant - Appellee
                                      ____________

                     Appeal from United States District Court
                 for the Western District of Arkansas - El Dorado
                                  ____________

                            Submitted: January 16, 2019
                               Filed: May 14, 2019
                                  ____________

Before LOKEN, GRASZ, and STRAS, Circuit Judges.
                           ____________

LOKEN, Circuit Judge.

      A fire seriously damaged the home of Milton and Norma Blakely in Crossett,
Arkansas, in October 2014. Entergy Arkansas, Inc., provided electric power to the
home. In August 2015, the home was completely destroyed by a second fire while
being repaired without electric power service. The Blakelys’ homeowner’s insurer,
EMC Insurance Companies, paid $203,247.49 for their total property damage and
then brought this diversity action against Entergy, alleging the utility’s equipment
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 plaintiff EMC’s
evidence, the district court1 granted Entergy’s motion for judgment as a matter of law,
concluding that EMC “does not have standing to pursue its subrogation claim”
because “it failed to obtain a legal determination that its insureds had been made
whole . . . prior to initiating this subrogation action.” EMC appeals. We affirm,
though on a different ground.

                           I. The Made Whole Doctrine.

       We apply the substantive law of Arkansas in this diversity action. “Under
Erie,2 we are obligated to apply governing precedent from the Arkansas Supreme
Court. When there is no state supreme court case directly on point, our role is to
predict how the state supreme court would rule if faced with the same issue before
us.” Blankenship v. USA Truck, Inc., 

, 856 (8th Cir. 2010) (cleaned up).

       “Subrogation at its essence is the substitution of one party for another in the
exercise of some legal right.” Welch Foods, Inc. v. Chicago Tit. Ins. Co., 

, 470 (Ark. 2000). “Subrogation is a normal incident of indemnity insurance” that
“assures against unjust enrichment by way of double recovery.” S. Farm Bureau Cas.
Ins. Co. v. Tallant, 

, 471 (Ark. 2005). In applying equitable
subrogation principles, the Supreme Court of Arkansas has adopted a “made whole”
doctrine that has also been adopted, with significant variations, in many jurisdictions.
The made whole doctrine in Arkansas reflects the principle that “equity will require
that the insured be made whole before the insurer’s right to subrogation will arise.”
Franklin v. Healthsource of Ark., 

, 839 (Ark. 1997) (quotation

      1
       The Honorable Susan O. Hickey, United States District Judge for the Western
District of Arkansas.
      2
          Erie R.R. v. Tompkins, 

(1938).

                                          -2-
omitted). Thus, “[t]he general rule is that an insurer is not entitled to subrogation
unless the insured has been made whole for his loss.” Riley v. State Farm Mut. Auto.
Ins. Co., 

, 848 (Ark. 2011). Whether the insured has been made
whole is an issue of equity for the court. 

.

       In Riley, typical of situations in which the made whole issue commonly arises,
an insurer paid the injured insured’s medical bills and then asserted the right to a
statutory reimbursement lien on the insured’s settlement recovery from a tortfeasor’s
insurer. The insured sought injunctive relief to invalidate the lien on the ground that
the third party settlement had not made her whole. Ruling on a certified question, the
Supreme Court held that, “absent an agreement or settlement between the parties, an
insurer’s right to subrogation does not accrue until there has been a legal
determination by a court that the insured has been made 

.
The Court therefore remanded for resolution of the made whole issue. 

presents the made whole doctrine in a different setting. EMC is
not asserting a subrogation right to share in the Blakelys’ recovery from a third party.
Rather, EMC is asserting its right to subrogation directly against Entergy, the alleged
tortfeasor, claiming as damages all amounts paid its insureds for property losses from
two fires (the second of which was unrelated to the first and could not have been
caused by Entergy’s negligent provision of electrical services). EMC’s Complaint
did not allege that its insureds have been made whole. Though Milton and Norma
Blakely testified at trial, the made whole issue was not addressed. When Entergy
raised the made whole issue in its motion for judgment as a matter of law, EMC
argued (i) the made whole doctrine does not apply to property damage claims, and (ii)
Entergy was barred from arguing the made whole defense by the doctrine of
inconsistent positions. Relying on broad statements in Riley and Tallant, the district
court concluded that EMC lacked standing and granted Entergy judgment as a matter
of law because “EMC failed to obtain a legal [made whole] determination . . . prior
to initiating this subrogation action.”

                                          -3-
                     II. The Made Whole Doctrine Applies.

       On appeal, EMC first argues that the made whole doctrine does not apply to
property damage claims. Citing no secondary authority or supporting precedent from
other jurisdictions, EMC argues that no Arkansas state court has ever applied the
doctrine to property loss claims, and it is illogical to do so. We disagree.

      The Supreme Court of Washington has cogently explained why there are few
cases applying the made whole doctrine to property loss subrogation claims:

      Property loss subrogation caused few disputes between the insurer and
      the insured, because once the insured had recovered from the insurer the
      economic value of the loss, the insured had little or no interest in
      competing with the insurer for the right to sue the tortfeasor; economic
      damages could make the insured whole.

                                 *    *    *    *   *

      By contrast . . . in a personal injury case, the [insured’s] claimed
      noneconomic damages typically amount to many multiples of the
      economic damages and are almost always disputed . . . . Thus, rather
      then stepping aside and allowing the insurer to pursue the tortfeasor by
      means of subrogation . . . the injured insured will often sue the tortfeasor
      to recover noneconomic damages, and include in the claim the medical
      expenses [paid by the insurer]. In effect, the injured insured does not
      abandon its shoes, and its insurer thus has no shoes to step into to pursue
      subrogation.

Mahler v. Szucs, 

, 641 (Wash. 1998).

      We conclude that the fact that the made whole issue infrequently arises does
not mean the Supreme Court of Arkansas would not apply this equitable principle to
property loss cases. Indeed, in Green v. Ford Motor Co., No 1:08-CV-01032, 2011

                                          -4-
WL 2666198 at *3 (W.D. Ark. June 15, 2011), adopted, 

(W.D.
Ark. July 6, 2011), the parties did not even dispute that the made whole doctrine
applied to defeat property loss subrogation claims. Over many years, other
jurisdictions have applied the doctrine to resolve disputes over whether a property
insurer’s payments had fully compensated the insured for its property losses. See
Ortiz v. Great S. Fire & Cas. Ins. Co., 

, 343 (Tex. 1980); Garrity v.
Rural Mut. Ins. Co., 

, 514 (Wis. 1977); Washtenaw Mut. Fire Ins. Co.
v. Budd, 

(Mich. 1919). Like the district court, we conclude the
Supreme Court of Arkansas would apply this equitable doctrine to property loss
subrogation claims. However, this conclusion does not predict how the Court would
apply the doctrine procedurally to a property insurer’s direct subrogation claim
against an alleged tortfeasor, an issue of first impression in Arkansas.

               III. EMC Had Standing To Commence This Action.

      The district court in effect ruled that an insurer can never assert a subrogation
claim against an alleged tortfeasor such as Entergy without first obtaining either the
insured’s agreement or a court determination that the insured has been made whole.
We conclude this ruling conflicts with what appears to be well-settled Arkansas law.

       “In pursuing a subrogation claim, an insurer is not limited to action in
intervention, but may bring a separate independent action to recover directly from a
third-party tortfeasor.” 17 Couch on Ins. 3d § 241:32; cf. Ark. Code Ann. § 23-79-
146(a). Under Arkansas law, when both the insured and an insurer who has partially
reimbursed the insured have claims against an alleged tortfeasor, as is common, the
insured is the real party in interest and the insurer is a proper but not a necessary party
plaintiff. See Argenia v. Blasingame, 

(Ark. App. 1995); Ark. R. Civ.
P. 17(a). However, an insured who has been paid in full is not the real party in
interest, and the insurer must sue the third party tortfeasor in its own name.
McGeorge Contracting Co. v. Mizell, 

(1950).

                                           -5-
       In Ark-Homa Foods, Inc. v. Ward, after the insured sued an alleged tortfeasor,
it “became apparent from the pleadings and interrogatories” that the insurer had paid
the full amount of the insured’s property losses. 

, 910 (1971). The
Supreme Court of Arkansas affirmed the dismissal of the insured’s claim because it
was not the real party in interest. It also affirmed the denial of a motion to substitute
the insurer as plaintiff because substitution of the proper party plaintiff was a time-
barred new action. 

In other words, the Court held that the insurer was the
proper party plaintiff at the outset of the action, even though the fact that its insured
had been made whole was not determined until the lawsuit had commenced. Thus,
the district court’s determination that EMC lacked standing was contrary to Ark-
Homa, a decision in no way undermined by later decisions such as Riley and Tallant
that applied the made-whole doctrine to disputes between insurers and their insureds,
not between insurers and third party tortfeasors. Accord Progressive Halcyon Ins. v.
Saldivar, 

at 3, 7, 

at *2, 4 (Ark. 2013) (reversing
summary dismissal of insurer’s subrogation suit against tortfeasor for lack of a prior
made whole determination or agreement).

       This conclusion is not contrary to the statement in Riley that a legal
determination or agreement that the insured has been made whole “must occur before
the insurance company is entitled to recover in 

(emphasis added). Riley dealt with an insurer that attempted to enforce its
subrogation lien based on a unilateral determination its insured had been made whole.
The Court rejected that attempt and remanded for resolution of the made whole issue.
Riley clearly stands for the proposition that EMC could not recover on its subrogation
claim against Entergy -- or, as stated earlier in the Riley opinion, that its right to
subrogation did not accrue -- without establishing that the Blakelys had been made
whole and therefore were not the real parties in interest. But, as the remand and the
concurring opinion in Riley signaled, the Court did not decide whether the issue must
be resolved before rather than during the prosecution of a subrogation lawsuit by an
insurer suing the alleged tortfeasor in its own name, a lawsuit the insurer has standing

                                          -6-
to pursue under Ark-Homa if it is the real party in interest. We conclude we need not
decide this unresolved issue because EMC failed to prove its insureds were made
whole either before or during this lawsuit.

          IV. EMC Failed To Preserve the Relevant Made Whole Issue.

        EMC filed its Complaint in April 2016, almost five years after the Supreme
Court of Arkansas decision in Riley and at least two decades after that Court adopted
the made whole doctrine as an equitable principle governing subrogation claims by
insurers. Yet EMC’s Complaint did not allege the Blakelys had been made whole,
nor did EMC obtain and attach an agreement with the Blakelys to that effect. Even
when Entergy gave notice on the eve of trial that the decision in Riley would be a
contested issue of law, EMC did not present a made whole agreement with the
Blakelys or even address the issue in its case-in-chief at trial. When Entergy made
its motion for judgment as a matter of law at the close of plaintiff’s case, EMC’s only
responses were (i) the made whole doctrine does not apply to property loss claims;
and (ii) Entergy was estopped to raise the made whole issue because it also argued
that the Blakelys’ loss should be capped at $36,000, the amount Milton Blakely
testified he spent before the second fire.3 It did not argue to the district court, and
does not argue on appeal, that it presented adequate proof -- before or during trial --
that its insureds had been made whole, an issue on which the insurer bears the burden
of proof. See Lopez v. United Auto Ins. Co., 

, 158 (Ark. App. 2013),
citing 

.



      3
       This contention, which EMC pursues on appeal, is frivolous. There is nothing
inconsistent or unfair in arguing that EMC failed to prove its insureds had been made
whole and, in the alternative, that its damages should be limited to the insureds’ out-
of-pocket expenses before the second fire, whether or not EMC’s claim is subject to
the made whole doctrine. See Dupwe v. Wallace, 

, 471-72 (Ark.
2004) (elements of an inconsistent positions claim).

                                         -7-
       On this record, we can only conclude that EMC intentionally failed to develop
a fact record demonstrating that it satisfied the made whole doctrine. A logical
inference is that it did not seek a made whole agreement or judicial determination
before submitting its damage claim to the jury because resolution of the made whole
issue might suggest or even determine that EMC’s subrogation claim was limited to
the $36,000 spent by the Blakelys before the second fire, rather than the $125,628.60
that EMC’s expert testified it would have cost to remedy damages caused by the first
fire had the second fire not occurred. But whatever the tactical or strategic reasons
for the case it chose to present, EMC did not argue to the district court, and does not
argue on appeal, that it in fact satisfied the made whole doctrine before submitting its
case to the jury, either with evidence at trial or during the pretrial proceedings.
Therefore, this issue was not properly preserved for appeal. See N.Y. Marine & Gen
Ins. Co. v. Cont’l Cement Co., 

, 840 (8th Cir. 2014). Accordingly, 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 must be affirmed.

                                   V. Conclusion.

      For the foregoing reasons, the judgment of the district court is affirmed.
                      ______________________________




                                          -8-