Advantage Bldgs. & Exteriors, Inc. v. Mid-Continent Cas. Co.
| Decision Date | 02 September 2014 |
| Docket Number | No. WD 76880.,WD 76880. |
| Citation | 449 S.W.3d 16 |
| Court | Missouri Court of Appeals |
| Parties | ADVANTAGE BUILDINGS & EXTERIORS, INC., Respondent, v. MID–CONTINENT CASUALTY COMPANY, Appellant. |
Vincent O'Flaherty, Robert Adams, Elizabeth Burke, Kansas City, MO, for Appellant.
David Schatz, Lucinda Luetkemeyer, Kansas City, MO, for respondent.
Before Division Two: VICTOR C. HOWARD, P.J., JAMES EDWARD WELSH, and ANTHONY REX GABBERT, JJ.
Mid–Continent Casualty Company appeals the circuit court's entry of final judgment on a jury verdict in favor of Advantage Buildings & Exteriors, Inc., on Advantage's bad-faith failure-to-settle claim. The jury awarded Advantage both compensatory and punitive damages. We affirm in part and reverse in part.
In July 2008, Advantage was sued by Alsation Land Company, Vallejo, LLC, for breach of warranty, negligence, and property damage as a result of construction defects in a building for which Advantage had supplied the exterior wall panels. Advantage tendered the claim to its insurer, Mid–Continent, with whom it held a Commercial General Liability (CGL) insurance policy, with a $1,000,000 policy limit for each occurrence, and a $2,000,000 umbrella policy.1
Mid–Continent informed Advantage by letter dated August 12, 2008, that it would investigate the claim and perform a coverage analysis but that it was reserving its right to assert that there may be no duty to defend or indemnify against Alsation's claims. In conclusion, the letter stated that Mid–Continent “will promptly advise you of the outcome of our coverage analysis.” On September 2nd, Mid–Continent sent Advantage another letter stating that it would conditionally accept the defense of Advantage in the litigation (while still reserving its rights) and advising that it had hired an attorney, Eric Swanson, to defend Advantage. The second letter promised that “[i]f other facts come to our attention, we will promptly inform you of them.”
Early on, Attorney Swanson recognized that Advantage was exposed to millions of dollars in damages and advised Mid–Continent that “Alsation will ultimately prevail at trial.” He advised Mid–Continent to settle the claims. Despite that advice, Mid–Continent did not make any settlement offers to Alsation on Advantage's behalf. Although Mid–Continent concluded that its coverage was limited to approximately $53,000 in interior damages to Alsation's building, it failed to inform Advantage of that fact.
After more than a year without hearing from Mid–Continent, Advantage hired its own counsel, Phil Richards, who on June 2, 2010, demanded in writing that Mid–Continent settle Alsation's claim within the insurance policy limits due to the likelihood that Advantage would face liability exposure in excess of the policy limits. Mid–Continent did not respond.
Alsation and all the defendants in the underlying litigation participated in a final mediation on July 10, 2010. Mid–Continent attended on behalf of Advantage. Mid–Continent had concluded that Advantage faced substantial “uncovered exposure” in October 2009, nine months earlier, and noted in its case file that Advantage should attend mediation for that reason. Mid–Continent did not advise Advantage of those determinations, however, until five days after the mediation, on July 15.
Alsation sought hundreds of thousands of dollars from Advantage at the mediation, but Mid–Continent gave Swanson the authority to offer only $50,000 on Advantage's behalf. Due to its refusal to make any meaningful effort to settle, the mediator asked Mid–Continent to leave. Alsation settled with Walton and third-party defendant Bratton for $2,400,000.2 This left Advantage as the only defendant in Alsation's upcoming trial with only a few days to prepare.
Two days after the mediation, on July 12, Attorney Richards demanded that Mid–Continent settle the case within policy limits. That same day, Alsation's attorney wrote Advantage and made an offer to settle all of Alsation's claims against Advantage for $800,000. Mid–Continent did not respond to the offer. Alsation made another settlement offer on July 21 for the policy limit of $1,000,000. Mid–Continent did not respond to that offer either, and the final offer to settle within policy limits expired.
On July 14, Mid–Continent filed a declaratory judgment action against Advantage, Alsation, and Walton, seeking a declaration that it had no obligation under the CGL or umbrella policies to defend or indemnify Advantage in connection with Alsation's claims.
The next day, on July 15–four days before the scheduled trial date and nearly two years after Mid–Continent had promised to “promptly” advise Advantage about its coverage analysis—Mid-Continent finally informed Advantage's counsel by letter that its policy did not cover most of Alsation's $3 million claim against Advantage. The expert witness on whom Advantage had intended to rely could not testify for Advantage at trial. Thus, the case was set for trial on July 19th, and Advantage had no expert witness to refute Alsation's claimed damages.
Consequently, Advantage entered into an agreement with Alsation under which it agreed to pay Alsation $500, to sue Mid–Continent for any claims it might have, and to give Alsation the proceeds of those claims. Alsation agreed to not execute on any judgment against Advantage, to fund Advantage's claims against Mid–Continent, and to accept whatever damages Advantage could recover from Mid–Continent in full satisfaction of its claim.
On July 22, 2010, Alsation and Advantage appeared before the circuit court for a bench trial. Following Alsation's presentation of evidence, the court concluded that Advantage was negligent and awarded Alsation $4,604,000 in damages for diminution-in-value, ordering that Advantage “shall receive credit for amounts paid” by Walton and Bratton.
Mid–Continent then amended its declaratory judgment petition, seeking a declaration that it was not contractually liable to Advantage for the amount of the Alsation judgment. Advantage filed a counterclaim against Mid–Continent alleging bad-faith failure to settle.
Mid–Continent moved for summary judgment on its declaratory judgment action and on Advantage's bad-faith claim. In January 2012, the court granted summary judgment for Mid–Continent on its claim that it was not liable to Advantage for the Alsation judgment. The court held that Oklahoma law governed the coverage issue and that, under Oklahoma law, Advantage's policy did not provide coverage for Alsation's claims. The court held that Missouri law applied to Advantage's bad-faith claim and denied Mid–Continent's summary judgment motion on that claim due to the fact that “bad faith is generally a fact question.”
In June 2012, Advantage's bad-faith failure to settle claim against Mid–Continent was tried before a jury. Advantage sought compensatory and punitive damages, and Mid–Continent requested a bifurcated trial, pursuant to section 510.263, RSMo.3 Advantage claimed the $4,604,000 Alsation judgment as its compensatory damages. The court did not permit Mid–Continent to tell the jury about the declaratory judgment ruling that there was no coverage for Alsation's claim.
Following the first stage of trial, the jury found in favor of Advantage on its bad-faith claim, awarded $3,000,000 in damages, and found that Mid–Continent was liable for punitive damages. In the second stage, the jury awarded Advantage $2,000,000 in punitive damages.
Mid–Continent filed a motion for set-off seeking to reduce the jury award by the amount of Alsation's settlements with Walton and Bratton. The court ultimately denied that motion and entered final judgment on the jury's verdicts. The court also denied Mid–Continent's post-trial motions for remittitur and for judgment notwithstanding the verdict (JNOV) or new trial.
Mid–Continent raises ten points on appeal. We first address its claims related to liability for compensatory damages (Points I–III and VII–VIII). In Points I and III, Mid–Continent contends that the circuit court erred in denying its motion for JNOV on Advantage's bad-faith failure to settle claim in which Mid–Continent argued that Advantage did not make a submissible case for bad faith.
We review the denial of a JNOV motion de novo to determine whether the plaintiff made a submissible case. See Rinehart v. Shelter Gen. Ins. Co., 261 S.W.3d 583, 595 (Mo.App.2008). That court explained that:
To make a submissible case, a plaintiff must present substantial evidence regarding every fact essential to liability. Substantial evidence is that which, if true, has probative force upon the issues, and from which the trier of facts can reasonably decide a case. In determining whether a plaintiff has made a submissible case, we presume that the plaintiff's evidence is true and disregard any of the defendant's evidence which does not support plaintiff's case. We view the evidence and all reasonable inferences to be drawn therefrom in the light most favorable to the plaintiff.
Id. (citations omitted). “It is only where there is a complete absence of probative fact to support the jury's conclusion that this Court will decide [that] the plaintiff did not make a submissible case.” Id. (emphasis added).
Under Missouri law, “[a]n insurance company has a duty to defend an insured when the insured is exposed to potential liability to pay based on the facts known at the outset of the case.” Truck Ins. Exch. v. Prairie Framing, LLC, 162 S.W.3d 64, 79 (Mo.App.2005). This is true “no matter how unlikely it is that the insured will be found liable and whether or not the insured is ultimately found liable.” Id. The duty to defend potentially insured claims arises “even though claims beyond coverage may also be present.”4 Id. Coverage is determined by comparing the policy with the...
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