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Insurance Law Update
November 2014
In This Issue
Case Law Updates
Co-Employee Exclusion Upheld
In a well-reasoned opinion, the Southern District of the Missouri Court of Appeals in Southerly v. United Fire & Cas. Co., No. SD33165 (Mo. App. S.D. Oct. 27, 2014), enforced a co-employee exclusion and held that the insurer's primary and umbrella policies did not cover a $4 million judgment taken under a Section 537.065 agreement. In so ruling, the Court rejected the judgment creditor's argument that the exclusion had no application because he was a "temporary worker." The Southern District held that the Missouri Supreme Court's decision in Mendenhall v. Prop. & Cas. Ins. Co. of Hartford, 375 S.W.3d 90 (Mo. banc 2012), was not controlling because the judgment creditor's employment at the time of his injury was the not the result of a third-party referral. The court explained that simply because a friend recommended an employee for a job does not always support a finding that the friend "furnished" the employee to the employer for purposes of "temporary worker" coverage. In this case, the judgment creditor was injured two seasons and two hirings after his initial employment by the referral.
Attorney Malpractice Carrier Held Bound by the Trial Court's Findings in an Uncontested Proceeding  
In another coverage denial case, the Missouri Court of Appeals in Taylor v. Bar Plan Mut. Ins. Co., WD76380 (Mo. App. W.D. April 29, 2014), found coverage by holding the insurer bound by the trial court's findings entered in an uncontested bench trial held after the insured lawyer and his ex-client entered into a Section 537.065 agreement. In ruling in favor of coverage for the underlying judgment, the Court of Appeals held the trial court's factual findings in the underlying lawsuit concerning the lawyer's malpractice necessarily predisposed a ruling in favor of coverage. The Court, in rejecting the insurer's coverage defenses, explained that the fact of the lawyer's malpractice and coverage was not an issue in the equitable garnishment action. This was because the issue was determined in the underlying action in a manner that bound the insurer and negated its policy exclusion. The Court's decision was not unanimous. One judge on the three-member panel wrote a lengthy and strongly-worded dissent.
City Operating a Recreational Soccer League Has Sovereign Immunity
In an unpublished decision, the Missouri Court of Appeals in Broniec v. City of Dellwood, No. ED100404 (Mo. App. E.D. June 24, 2014), held that a municipality was protected by sovereign immunity for an injury sustained by a soccer player during a game sponsored by the municipality's youth soccer league. The Court, in ruling for the municipality, noted that the plaintiff had failed to adequately plead facts establishing the "proprietary function" exception to sovereign immunity.
Wrongful Death Aggravating Circumstances Damages Are Not Subject to Punitive Damage Cap
Despite longstanding precedent holding aggravating circumstances damages under Missouri's wrongful death statute are the substantive equivalent of punitive damages, the Western District of the Missouri Court of Appeals in Mansfield v. Horner, No. WD76310 (Mo. App. W.D. June 17, 2014), held that they are not subject to the Missouri General Assembly's statutory cap on punitive damages. The Court explained that when the legislature passed the statutory cap on punitive damages, it limited its enactment to "punitive damages" only. The caps are inapplicable to "aggravating circumstances damages" because they are not mentioned in the statute. Under Mansfield, there is now no limitation on exemplary damages awarded in wrongful death cases in Missouri. The Missouri Supreme Court did not disagree with the Court of Appeals' decision. On October 28, 2014, the Supreme Court denied post-opinion review in the Mansfield case.
Vicarious Liability and Assumption of the Risk Considered In Kansas City Royals Hot-Dog-in-the-Eye Case
In the never-ending Kansas City Royals mascot "Hot Dog Launch" case, the Missouri Supreme Court, in its second opinion in the case, reversed a jury verdict for the Kansas City Royals. The court held that the Royals were barred as a matter of law from submitting an assumption-of-the-risk instruction against the plaintiff. The Supreme Court, in Coomer v. Kansas City Royals Baseball Corp., No. SC93214 (Mo. banc June 24, 2014), explained that the risks assumed by patrons at a professional baseball game do not include the risk of injury from the actions of a team mascot in throwing a hot dog because that risk is not inherent in the sporting event involved. On another question before the Supreme Court in the same case, the Court reaffirmed the rule in McHaffie v. Bunch, No. 891 S.W.2d 822 (Mo. banc. 1995), and held that once the Royals admitted the mascot's agency, the plaintiff was barred from submitting any causes of action to the jury other than a vicarious liability claim. (This case, in addition to its unusual and somewhat humorous facts, makes for recommended reading on the issues of assumption of the risk, vicarious liability, and alternative theories of recovery.)
Court Enforces Pre-Suit Settlement Agreement and Awards Costs Against Plaintiff
In Matthes v. Wynkoop, No. WD76668 (Mo. App. W.D. June 30, 2014), the Missouri Court of Appeals upheld a $17,000 pre-suit settlement that was reached by the plaintiff's counsel and the defendant's insurer. After detailing the law requiring clear and convincing evidence to establish proof of a settlement, the court held that the defendant had met this standard to establish that an enforceable settlement had been reached. The Court also addressed in detail the concept of "prevailing party," and held that the defendant was the prevailing party and therefore entitled to recover court costs as a matter of law.
Court Broadly Applies Indemnity Agreement and Awards Damages and Attorney Fees
In a lengthy opinion addressing multiple issues, the Missouri Court of Appeals in Scheck Industrial Corp. v. Tarlton Corp., No. ED100371 (Mo. App. E.D. July 15, 2014), continued the broad application of indemnity agreements by Missouri's courts. The court's decision, which upheld a judgment awarding damages and attorney fees in a breach of contract action, provides an excellent discussion of indemnity agreements as related to damages and liability. The court's decision also reinforces the importance of careful consideration of demands for indemnity made by parties to contracts containing indemnity provisions.
Pollution Exclusion Bars Coverage for Workplace Fumes from Cleaning Chemicals
In United Fire & Cas. Co. v. Titan Contractors Serv., Inc., No. 13-1307 (8th Cir. May 13, 2014), the United States Court of Appeals for the Eighth Circuit held that the pollution exclusion barred coverage for personal injury claims brought by claimants exposed to fumes resulting from the application of an acrylic concrete floor sealant. The Eighth Circuit, in so ruling, explained that the fumes from the cleaning compound contained a chemical that the federal government had classified as a pollutant. The exclusion barred coverage for the claimants' claims brought against the contractor that had used the sealant.
Course and Scope of Employment Does Not Include an Intentional Criminal Act
Although the employee was on duty at the time he raped the plaintiff, the Missouri Court of Appeals held that his employer had no liability because the employee's actions were not within the course and scope of his employment. In Gilley v. Missouri Public Entity Risk Mgm't Fund, No. WD76933 (Mo. App. W.D. April 22, 2014), the court held the employer's liability insurance policy did not cover the employee because under no set of circumstances could his actions be considered to further his employer's business or interests.
Automobile Umbrella Policy Does Not Cover Permissive User
The United States Court of Appeals for the Eighth Circuit Court in Allstate Indem. Co. v. Rice, No. 13-1878 (8th Cir. June 17, 2014), held the insurer's policy did not cover permissive users as insureds under its policy because the policy's "insured" definition did not include permissive drivers.
Recent Trial Results
Irene Marusic brought in a Defendant's verdict on behalf of her bar/restaurant client in Jefferson County, Missouri. The plaintiff, who had $30,000 in medical bills, claimed a raised platform near a dance floor caused her fall. A unanimous jury found that the bar had no fault for the fall.
A St. Clair County Court granted a summary judgment and entered an order dismissing a breach of contract claim with prejudice in a medical malpractice claim defended by

Ken Burke and Tucker BlaserThe case involved a physician and his practice group. Ken and Tucker filed a Motion to Dismiss the medical malpractice claims on the grounds that the plaintiff's proffered certificate of merit was insufficient under the requirements of the Illinois Healing Arts Malpractice Act. The court agreed as to the insufficiency of the proffered certificate, granted the motion, and entered an order dismissing the medical malpractice claims with prejudice. The summary judgment motion, with regard to the remaining breach of contract claim, argued that the alleged oral contract that formed the basis of the breach of contract claim lacked consideration and/or was rescinded through subsequent performance of the parties.  Upon granting the summary judgment motion and entering an order to dismiss the breach of contract claim, the case was effectively resolved. 

A St. Louis County jury returned a Defendant's verdict for Kevin Glynn's client, a general contractor in a gas pipeline damage case. Kevin's client was sued by Laclede Gas for $180,000 in damages to the pipeline because of allegedly defective work.

Justin Chapell and Brad Zaffiri obtained summary judgment in the Circuit Court of Clay County on behalf of an insurance company in a breach of fiduciary duty claim. This was following the insurer's decision to settle a minor automobile accident claim despite the insured-plaintiff's demand that the company contest liability. The insured-plaintiff alleged that the settlement was improper and based upon an inadequate investigation. The court held that: 

  • The policy vested the insurer with complete control over the claim, and that the insurer could settle whenever it deemed it appropriate to do so. 
  • The insurer's subsequent failure to produce the claim file on request was not actionable because the insured-plaintiff suffered no damages as a result of the insurer's conduct. 
  • It was not a breach of fiduciary duty for an insurer to submit the claim history to a centralized underwriting agency. 

Finally, the court dismissed the insured-plaintiff's claim that the insurer breached its fiduciary duties by failing to prevent a default judgment against the insured-plaintiff, where the default was later voided at inception and could therefore cause the insured-plaintiff no compensatory damages. 

Irene Marusic convinced a St. Louis City jury to find for her Defendant client in a red light/green light dispute. There was a dispute over which driver had the green light. The jury believed Irene's client and returned a Defendant's verdict.   
Kenny Goleaner and David Bub persuaded a court that an anti-stacking provision in a business auto liability policy was clear and unambiguous, and obtained summary judgment for their insurance company client.

Justin Chapell, Nick Cammarata, and Morgan Williams obtained summary judgment in a property damage case where the plaintiff argued that a frozen waterline was covered under the policy's provision for "sudden and accidental discharges" of water. Because the policy contained a specific provision for freezing and bursting pipes, the court refused to apply the more general provision, and held that the specific provision applied to and excluded the loss. The court also rejected the plaintiff's negligent misrepresentation claim, holding that the policy specifically addressed the allegedly negligent representation and, therefore, the plaintiff could not maintain a separate cause of action for negligent misrepresentation.  

The United States District Court for the Western District of Missouri upheld a pollution exclusion in a declaratory judgment action handled by Russell Watters and Patrick Bousquet. Russ and Patrick convinced the court that domestic animal waste was a "pollutant" under the policy. In so doing, they successfully rebuffed the insured's argument that the waste was a byproduct of its business and not "pollution" according to the normal meaning of the word.
Jackie Kinder convinced the United States District Court for the Eastern District of Missouri that there was no uninsured motorist coverage for a 25-year old living with an insured under an automobile policy because he did not meet the definition of a "household member." The 25-year old had lived with the insured as a foster child from ages 15-17 and then moved away. He returned when he was 24, and the court decided as a matter of law he was not the insured's "ward," thus not entitled to coverage.
Brad Hansmann, with Stacey McCullough's assistance, won summary judgment for a municipality in an employment contract case. The city manager contended the city breached its employment contract by terminating the manager. The court held as a matter of law that there was no contract because it had never been approved by the city council, as required by law.
Jon Morrow and Matt Haas obtained summary judgment in a first-party property damage case when as a matter of law, the court held that the insured had intentionally misrepresented the theft claim.
In The News

Peter Spataro recently appeared as a guest lecturer with Dr. William Peck, past Dean and Executive Vice Chancellor for Medical Affairs at Washington University School of Medicine. Peter and Dr. Peck, at the invitation of Dr. Gregory Polites, Course Master at Washington University School of Medicine, provided insights on medical malpractice litigation and the state of malpractice tort reform in the United States to Washington University medical and pre-medical students.

Contact us with any questions:

T. Michael Ward
Managing Principal
314-242-5306
Russell F. Watters
Principal
314-242-5252
Brown & James, P.C. is a Midwest regional law firm with more than 100 attorneys representing companies in litigation, appeals and insurance coverage matters.
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