Allen v. Bryers
| Decision Date | 20 December 2016 |
| Docket Number | No. SC 95358,SC 95358 |
| Citation | 512 S.W.3d 17 |
| Parties | Franklin ALLEN, Respondent, v. Wayne BRYERS, Defendant, Atain Specialty Insurance Company, Appellant. |
| Court | Missouri Supreme Court |
Nikki Cannezzaro, Franke, Schultz & Mullen PC, Kansas City, for Atain Specialty Insurance Company.
Kirk R. Presley, Presley & Presley LLC, G. Michael Fatall, G. Michael Fatall LLC, Kansas City, for Franklin Allen.
Franklin Allen (hereinafter, "Allen") obtained a $16 million personal injury award against Wayne Bryers (hereinafter, "Bryers") after Bryers' handgun discharged and severely injured him. Allen subsequently filed a Rule 90 garnishment action in aid of execution seeking proceeds from an insurance policy issued by Atain Specialty Insurance Company (hereinafter, "Insurer"), which insured the premises where the shooting occurred.1 Insurer appeals the garnishment court's judgment and the denial of its motions to intervene and to set aside the underlying tort judgment on the basis of fraud.
This Court holds that the garnishment court's rulings on Insurer's motions to intervene and to set aside the judgment were void. Insurer's appeal with respect to those claims is dismissed. This Court further holds that Insurer, who wrongfully refused to defend Bryers, is bound by the result of the underlying tort action, including the findings related to coverage, because it had the opportunity to control and manage the litigation but declined to so do. However, the garnishment court exceeded its authority in ordering Insurer to pay $16 million to Allen because he failed to demonstrate Insurer engaged in bad faith in refusing to defend or settle his claim. Accordingly, Allen is only entitled to receive the $1 million policy limit from Insurer. The remainder of the garnishment court's judgment is affirmed as modified, and the cause is remanded to the garnishment court for entry of a judgment awarding Allen $1 million plus post-judgment interest on the entire $16 million underlying tort judgment until Insurer pays, offers to pay, or deposits in court its 1 million policy limit.2
John Frank (hereinafter, "Frank") owns the Sheridan Apartments in Kansas City, Missouri. Insurer issued a commercial general liability policy to Frank d/b/a The Sheridan Apartments in 2011 with a $1 million limit for liability claims filed against an insured for personal injury. The policy's definition of "insured" included "employees" but only covered "acts within the scope of their employment by [the insured] or while performing duties related to the conduct of [the insured's] business." The policy applied to an "occurrence," which is defined as "an accident." The policy contained several exclusions. One exclusion was for an "expected or intended injury," which excluded coverage for " ‘[b]odily injury’ or ‘property damage’ expected or intended from the standpoint of the insured ... [but] does not apply to ‘bodily injury’ resulting from the use of reasonable force to protect persons or property." The policy also contained an exclusion for "assault and battery" by any insured, any employee of the insured, or any other person.
On June 10, 2012, Allen was at the Sheridan Apartments when he was injured severely by the discharge of a handgun carried by Bryers, the property and security manager for the apartment complex, as Bryers was removing Allen from the premises. Allen was rendered a paraplegic from a gunshot that severed his spinal cord. Bryers cooperated with police and several witnesses were interviewed, but no criminal charges were filed against Bryers in connection with the incident.
On August 27, 2012, Allen's attorney sent a letter to Frank advising him that Allen intended to assert a negligence claim against Frank's employee, Bryers. Shortly thereafter, Allen's attorney sent a similar letter to Insurer, informing it of the severity of Allen's injury and Allen's claim against Frank and Bryers.
On September 12, 2012, Insurer sent a letter to Bryers that set forth a full reservation of rights. The letter stated that Insurer's investigation revealed that Bryers, acting as the Sheridan Apartments property manager, was involved in an altercation with Allen that resulted in Allen's injury due to Bryers firing a handgun. Insurer informed Bryers that it believed there may not be coverage for Bryers' action under the policy pursuant to the bodily injury provision and the exclusions for expected or intended injuries, employment-related practices, and assault and battery. Insurer explained it had a right and duty to defend Bryers, but only if the claims were covered by the policy. Insurer reserved its right to deny coverage based on the above-mentioned exclusions. Insurer informed Bryers of the $1 million policy limit and his duty to cooperate in the investigation, handling, and potential settlement of the claim. Insurer concluded the letter by stating, "[Insurer] denies any and all coverage under the policy in connection with the claim described above and furthermore denies that it has any legal obligation to indemnify you in the event a lawsuit is filed and a judgment is entered against you."
On October 22, 2012, Insurer filed a declaratory judgment action in federal district court to determine coverage issues. Insurer maintained the policy did not provide Bryers coverage due to the assault and battery exclusion, the expected or intended injury exclusion, and that the claimed damages did not result from an "occurrence" under the policy.3 Shortly thereafter, Allen sent Insurer a demand letter seeking the policy limit in exchange for releasing all claims against Bryers and Insurer.
On November 8, 2012, Allen's attorney sent a letter to Insurer stating:
As a result of the filing of the declaratory judgment action, the purported defense of Bryers pursuant to a reservation of rights and the rejection of the demand to settle within policy limits, [Allen has] agreed in principle to enter into a [section] 537.065 agreement4 with ... Bryers and will have the specific agreement executed by next week.
On December 4, 2012, Allen filed a petition for damages against Bryers, alleging "[t]his is a negligence cause of action that arises out of the unintentional and accidental discharge of a weapon that occurred" at the Sheridan Apartments while Allen "was being escorted off and/or physically removed" from the premises by Bryers, "who managed the Sheridan Apartments for the benefit and as the agent of the owner of the Sheridan Apartments ... Frank ...." The petition stated that Bryers did not intend to discharge the handgun nor did Bryers engage in any act that foreseeably could cause injury to Allen. To the extent Bryers used force in attempting to escort off and/or physically remove Allen from the premises, the petition claimed Bryers used only that amount of force that was reasonably necessary to protect persons and property located in or around the Sheridan Apartments. Allen's petition stated his injury was not caused or contributed to be caused by an assault, battery or an expected or intentional act. The petition further contended Bryers was acting in the scope and course of his employment, and Bryers purchased the handgun at Frank's direction. Allen contemporaneously filed a declaratory judgment action against Bryers and Insurer seeking a declaration that the policy provided coverage for Allen's injury.
Insurer sent correspondence to Bryers on December 14, 2012, notifying Bryers that Allen had filed suit and Insurer retained counsel on Bryers' behalf "with [Insurer's] reservation of rights to deny coverage as set forth by the facts and policy provisions" outlined in its September 12, 2012 letter. Insurer informed Bryers that it filed a declaratory judgment action and it believed several exclusions were present that precluded coverage. Insurer reiterated that it was reserving its rights, reminded Bryers about the cooperation clause, and stated again that the policy may not provide coverage.
On January 4, 2013, Insurer's retained counsel filed an answer to Allen's petition on Bryers' behalf. The answer generally denied all of Allen's claims and raised affirmative defenses that Allen's injuries were a result of his own negligence. However, Bryers refused to accept Insurer's reservation of rights defense, and Insurer's retained counsel withdrew from the case. Shortly thereafter, Bryers withdrew the answer filed by retained counsel and consented to the entry of judgment against him consistent with the section 537.065 agreement he executed with Allen.
Insurer filed a motion to intervene on April 5, 2013, requesting intervention for the limited purpose of seeking a stay of the personal injury action until Allen's declaratory judgment action was resolved.5 Insurer also sought intervention to litigate coverage issues and assert that an inherent conflict of interest existed between Bryers and Insurer that warranted Insurer's intervention. The circuit court overruled Insurer's motion, finding because Insurer denied any and all coverage related to Bryers, it had no authority to contest the terms of the section 537.065 agreement. Insurer did not appeal from this ruling.
The circuit court held a bench trial on Allen's negligence claim on April 18, 2013. Allen presented evidence from an evaluating physician who provided a prognosis and testified about Allen's need for future medical care and services. Allen entered into evidence his deposition testimony and that of his girlfriend. Allen also offered into evidence Bryers' judicial admissions, which admitted the allegations set forth in Allen's petition. Bryers did not object to any of the testimony, the depositions, or the exhibits offered at the bench trial. Bryers did not conduct cross-examination or present any of his own evidence. Allen made a closing argument regarding liability and damages and requested the circuit...
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