Allstate Ins. Co. v. Blount, 06-3628.

• Decision Date: 26 June 2007
• Docket Number: No. 06-3628.,06-3628.
• Citation: 491 F.3d 903
• Parties: ALLSTATE INSURANCE COMPANY, Appellant, v. Tonja BLOUNT; Nathan Smith; Andrew J. Grimes; Barbara Grimes; Mitchell Y. Choi, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

491 F.3d 903

ALLSTATE INSURANCE COMPANY, Appellant, v. Tonja BLOUNT; Nathan Smith; Andrew J. Grimes; Barbara Grimes; Mitchell Y. Choi, Appellees.

No. 06-3628.

United States Court of Appeals, Eighth Circuit.

Submitted: March 15, 2007.

Filed: June 26, 2007.

Counsel who presented argument on behalf of the appellant was Paul Hasty, Jr. of Overland, KS. Also appearing on the brief was Allison G. Ross.

Counsel who presented argument on behalf of the appellee was Jeff M. Bauer of Springfield, MO. Also appearing on the brief were Steve Garner and Patricia A. Keck.

Before COLLOTON, HANSEN and GRUENDER, Circuit Judges.

GRUENDER, Circuit Judge.

Allstate Insurance Company ("Allstate") brought a declaratory judgment suit seeking a determination that the homeowner's insurance policy it issued to Barbara Grimes ("Grimes") did not provide coverage for damages awarded against her in a wrongful death suit. The district court held that the damages were covered by the policy and granted summary judgment against Allstate. For the reasons that follow, we affirm in part and reverse in part.

I. BACKGROUND

This case arises out of the underlying wrongful death suit Tonja Blount filed in the Circuit Court for Greene County, Missouri, against Nathan Smith, Grimes, Andrew Grimes and Mitchell Y. Choi (collectively, "defendants"), alleging that defendants negligently caused or contributed to the death of her son, Jeffrey Cale Gormley, who had became ill, and eventually died, after drinking alcohol and using drugs while at Grimes's home.¹

At the time of the alleged actions, Grimes was insured under a homeowner's insurance policy with Allstate. The policy covered "damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an occurrence to which the policy applies" ("damages provision"). Allstate defended Grimes under a reservation of rights in the wrongful death proceeding.² At the same time, however Allstate filed the instant declaratory judgment suit in federal court seeking a determination that the negligence claims in the wrongful death suit were not covered by the damages provision and, alternatively, were excluded under the policy's exclusion for "bodily injury or property damage intended by, or which may be reasonably expected to result from the intentional or criminal acts or omissions of, any insured person" ("criminal acts exclusion").

While the wrongful death and declaratory judgment suits were pending, Grimes faced state criminal charges related to the death of Gormley. In the criminal proceeding, Grimes pled guilty to first-degree involuntary manslaughter, a violation of Mo. Rev. Stat. § 565.024.1.³ Specifically, Grimes admitted to "recklessly caus[ing] the death of Jeffrey Cale Gormley by providing her home to minors for the consumption of alcohol and/or controlled substances without adult supervision."

At the guilty plea hearing, the prosecutor recited the factual basis for the charge. Following the prosecutor's factual recitation, Grimes admitted to the facts and entered her guilty plea.⁴ The admitted facts established that Choi, Smith, Andrew Grimes and Gormley drove to a convenience store where they purchased two cases of beer and a bottle of bourbon. The boys then drove to Grimes's home where they arrived around 7:30 p.m. There, Gormley drank alcohol and consumed Xanax. At some point during the evening Gormley fell and hit his head, creating a knot above his eye. Thereafter, Gormley laid down underneath a coffee table where he passed out. Around 11:00 p.m. that evening, Smith called Tracie Whitlock, Gormley's girlfriend, to inform her that Gormley was "having problems." Andrew Grimes called her around 1:00 a.m. to tell her that Gormley did not "look right" and was having trouble breathing. Whitlock instructed Andrew Grimes to alert his mother of Gormley's condition and to call her back if the problems persisted. Whitlock did not receive any other phone calls. Grimes was aware that Gormley was sixteen years old and had been drinking and doing drugs in her home. Her only instruction to the boys was to move the coffee table so that Gormley would not break it when he awoke. Eventually, emergency personnel arrived at Grimes's home where they pronounced Gormley dead. Gormley died from respiratory failure resulting from intoxication. The medical examiner concluded that had Gormley received medical attention he would have lived.

Following Grimes's criminal conviction, Allstate moved for summary judgment against Grimes, Andrew Grimes and Blount in the declaratory judgment suit. In effect, Allstate argued for the application of non-mutual collateral estoppel,⁵ asserting that Grimes's guilty plea and resulting criminal conviction prevented her from challenging the fact that the policy's damages provision does not apply and that the criminal acts exclusion does apply, thereby precluding coverage for any damages awarded against her in the wrongful death suit. The district court denied Allstate's summary judgment motion, holding that the negligence cause of action pled in the wrongful death suit was "separate and distinct" from the conduct established by the guilty plea and conviction and that "it is likely coverage exists for this separate cause of action."

Also subsequent to Grimes's criminal conviction, Blount, Grimes and Andrew Grimes entered into an agreement under Mo.Rev.Stat. § 537.065 with respect to the wrongful death suit. An agreement under this provision "expressly authorizes an insured to settle a personal injury or wrongful death action by agreeing that the plaintiff may collect the settlement only against the insurer." Esicorp, Inc. v. Liberty Mut. Ins. Co., 193 F.3d 966, 971 (8th Cir. 1999). It does not determine the insured's liability but merely limits enforceability of a judgment. O'Donnell v. St. Luke's Episcopal Presbyterian Hosps., 800 F.2d 739, 741 (8th Cir.1986). In the present case, the agreement provided that:

[Blount] agrees that to satisfy and judgment which may obtained against [Grimes or Andrew Grimes] by [Blount], [Blount] will execute garnish or collect solely from any available liability insurance coverage under Allstate Insurance Company homeowner's policy. . . .

The § 537.065 agreement also provided that the parties agreed to allow a consent judgment of $1,500,000 to be entered in favor of Blount and against Grimes and Andrew Grimes, jointly and severally. Finally, the agreement noted that Grimes and Andrew Grimes expressly denied all liability. The parties waived a trial by jury. The trial court stated that:

[h]aving heard the evidence, and with the consent of defendants Andrew Grimes and Barbara Grimes, [the court] finds the issues in favor of plaintiff Tonja Blount for the wrongful death of [Gormley]. . . . The Court, also with the consent of defendants Andrew Grimes and Barbara Grimes, awards damages in the amount of $1,500,000 . . . and further finds this amount to be fair and reasonable.

The trial court then entered a consent judgment consistent with the § 537.065 agreement.

Thereafter, Grimes, Andrew Grimes and Blount moved for summary judgment in the declaratory judgment suit, asserting that the judgment in the wrongful death suit "serves as res judicata as to the issue of the validity of the claims of negligent failure to render aid." They argued that because it had been conclusively established that Grimes acted negligently and because negligence constitutes an "occurrence" under the policy's damages provision, there was no genuine issue of material fact as to whether the civil damages award was covered under that provision. The district court agreed and entered summary judgment in favor of Grimes, Andrew Grimes and Blount.

The next day, the district court issued an order directing the parties to show cause as to why the suit should not be dismissed as to defendants Smith and Choi, neither of whom were parties to the motions for summary judgment. No party filed a response. Consequently, the district court dismissed these two defendants. Allstate now appeals the district court's denial of summary judgment in favor of Allstate, its entry of summary judgment in favor of Grimes, Andrew Grimes and Blount (collectively, "Appellees"), and its dismissal of Smith and Choi.

II. DISCUSSION

1. Standard of Review

"In reviewing the district court's grant of summary judgment, we review de novo its conclusions of law, including the availability of issue preclusion," also called collateral estoppel. Liberty Mut. Ins. Co. v. FAG Bearings Corp., 335 F.3d 752, 757 (8th Cir.2003) (internal citations omitted); see also Boudreau v. Wal-Mart Stores, Inc., 249 F.3d 715, 719 (8th Cir.2001) ("A trial court's determination as to whether the legal prerequisites for issue preclusion have been met on the facts before it is a mixed question of law and fact, subject to de novo review by this court.").

Interpretation of an insurance policy and application of collateral estoppel are matters of state law. Am. Family Mut. Ins. Co. v. Co Fat Le, 439 F.3d 436, 439 (8th Cir.2006); FAG Bearings, 335 F.3d at 758. It is undisputed that the issues in this case are governed by Missouri law. "In interpreting state law, we are bound by the decisions of the state's highest court." Minn. Supply Co. v. Raymond Corp., 472 F.3d 524, 534 (8th Cir.2006) (internal quotation omitted). "When a state's highest court has not decided an issue, it is up to this court to predict how the state's highest court would resolve that issue." Id. "Decisions of intermediate state appellate courts are persuasive authority that we follow when they are the best evidence of what state law is." Id.

2. Appellees's Motion for Summary Judgment

Although Appellees's motion for summary judgment was filed and decided after Allstate's motion, we choose to address it first. Once the district court had denied Allstate's motion for summary judgment— concluding that Grimes's guilty...