Benton House v. Cook & Younts

• Citation: 249 S.W.3d 878
• Decision Date: 15 April 2008
• Docket Number: No. WD 68052.,WD 68052.
• Court: Court of Appeal of Missouri (US)
• Parties: BENTON HOUSE, LLC, Appellant, v. COOK & YOUNTS INSURANCE, INC., and James E. Younts, Respondents.

249 S.W.3d 878

BENTON HOUSE, LLC, Appellant, v. COOK & YOUNTS INSURANCE, INC., and James E. Younts, Respondents.

No. WD 68052.

Missouri Court of Appeals, Western District.

April 15, 2008.

Teresa Young, St. Louis, MO, for appellant.

Robert H. Houske, Kansas City, MO, for respondents.

Before VICTOR C. HOWARD, C.J., LISA WHITE HARDWICK, and JAMES EDWARD WELSH, JJ.

JAMES EDWARD WELSH, Judge.

Benton House, LLC, sued Cook & Younts Insurance, Inc., and James E. Younts¹ for negligence and breach of contract claiming that Younts had failed to procure the proper insurance for Benton House's business operations. The circuit court granted summary judgment in favor of Younts, and Benton House appeals. Benton House asserts that the circuit court erred in concluding that Benton House sustained no damages resulting from Younts's failure to procure insurance coverage. We affirm the circuit court's judgment.

When considering appeals from summary judgments, we review the record in the light most favorable to the nonmoving party, and we afford that party the benefit of all reasonable inferences. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). The record established that Younts procured a commercial liability insurance policy from Essex Insurance Company on behalf of Benton House. The Essex policy contained a Classification Limitation Endorsement, which said: "The coverage provided by this policy applies only to those operations specified in the application for insurance on file with the company and described under the `description' or `classification' on the declarations of the policy." The Commercial Property Coverage Part Declarations identifies Benton House's business description as "Office Rentals" and provides a description of the premises as "3 Story Masonry Occupied as Office Buildings."

At the time when Younts procured the Essex policy, Benton House was using its building as an office building. In April 2003, Benton House began using its building as a residential care facility. In September 2003, Benton House notified Younts that it was operating as a residential care facility and that it had residents at its facility. Younts thereafter began attempting to procure a professional liability policy on behalf of Benton House.

On October 18, 2003, Augustine Montgomery died while a resident of Benton House. Following the death of Montgomery, Dennis Goodden, an attorney for Montgomery's heirs, sent a demand letter informing Benton House that his clients were pursuing a wrongful death and survivor's claim against Benton House and requesting that Benton House's insurer settle all claims for the policy limits of one million dollars.

In response to the demand letter, Essex sent a reservation of rights letter to Benton House. However, before Montgomery's heirs filed a lawsuit against Benton House, Essex settled the claim for $500,000. In conjunction with the settlement, Essex entered into an Advance Agreement with Benton House, wherein Benton House agreed that the payment of $500,000 to Montgomery's heirs may have to be repaid under certain circumstances. The Advance Agreement provided in part:

Benton House, James Gamble and Judy Chase² agree that the advance may be repayable to Essex Insurance Company in the event of:

1. A determination that James Gamble and/or any representative of Benton House did not inform and/or tell James Younts and/or representatives of Cook & Younts Insurance Inc, prior to the date of the death of Augustine Montgomery Sr., that Benton House had changed it's [sic] business operation to that of one of accepting residential care patients;

2. A determination that James Gamble and/or any representatives of Benton House did not rely on and follow the advice and counsel of James Younts and/or Cook and Younts Insurance Inc with respect to insurance issues, specifically whether a new insurance policy should be obtained or an existing insurance policy should be revised in light of the fact that Benton House was accepting residential care patients, or

3. Any recovery by Benton House, James Gamble and Judy Chase pursuant to any action, cause of action, demand and/or claim made upon Cook & Younts Insurance Inc, James Younts, Cook & Younts Insurance Inc. representatives and/or Cook & Younts Insurance Inc.'s insurer with respect to insurance coverage.³

Although Essex agreed to pay Montgomery's heirs $500,000, Essex noted in the Advance Agreement that no coverage existed under its insurance policy issued to Benton House for "the claim asserted that arose out of the death of Augustine Montgomery Sr."

Thereafter, on January 21, 2005, Benton House filed a petition against Younts for negligence and breach of contract alleging that Younts failed to procure the proper insurance for Benton House's business operations. Benton House and Younts filed cross-motions for summary judgment. The circuit court entered summary judgment for Younts. The circuit court found that, because Essex voluntarily settled the Montgomery claim, Benton House was under no obligation to reimburse Essex for the settlement. The circuit court, therefore, concluded that Benton House had suffered no damages and could not maintain a claim against Younts. Benton House appeals.

Benton House contends that the circuit court erred in concluding that Benton sustained no damages resulting from Younts's failure to procure insurance coverage for Benton House's operation of a residential care facility. Benton House asserts that the material undisputed facts and the law show that it sustained damage from Younts's failure to procure insurance because (1) Benton House remains liable to Essex for the sums that Essex paid in the Montgomery settlement, (2) Essex paid the Montgomery claim under duress and, therefore, did not waive its right to seek reimbursement from Benton House, and (3) the Essex policy did not cover the Montgomery wrongful death claim.

We review the circuit court's granting of a summary judgment de novo. ITT Commercial, 854 S.W.2d at 376. "The propriety of summary judgment is purely an issue of law." Id. Because the circuit court's judgment is based on the record submitted and the law, we need not defer to the circuit court's order granting summary judgment. Id. We will affirm the circuit court's grant of summary judgment if no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Id. at 380; Rule 74.04(c)(6).

The circuit court correctly concluded that Benton House sustained no damages resulting from Younts's failure to procure insurance coverage. First, under the terms of the Advance Agreement, we fail to see how Benton House remained exposed to liability to Essex for the money that Essex paid to settle the Montgomery claim. Essex is entitled to repayment if Benton House has any recovery "pursuant to any action, cause of action, demand and/or claim made upon" Younts with respect to insurance coverage. This provision does not give Essex the right to file an action against Benton House to seek repayment. Essex can only recover if Benton House recovers anything in an action against Younts. Moreover, the other provisions in the Advance Agreement, which purportedly give rise to Benton House's obligation to repay, merely appear to be calculated to ensure that Benton House's testimony on its claim against Younts remains consistently favorable.

Second, to prevail on its claims for negligence and for breach of contract, Benton House had to show that it suffered damages. See Ostrander v. O'Banion, 152 S.W.3d 333, 338 (Mo.App.2004), and Shirley's Realty, Inc. v. Hunt, 160 S.W.3d 804, 807 (Mo.App.2005). In this case, Benton House suffered no damages from Younts's failure to procure insurance coverage for Benton House's operation of a residential care facility because Benton House's insurer, Essex, settled the Montgomery claim. In light of Essex's voluntary payment of the claim, Missouri law prohibits Essex from seeking reimbursement from Benton House, its own insured, for the money paid to settle the claim. Indeed, as this court said in American Motorists Insurance Co. v. Shrock, 447 S.W.2d 809, 811-12 (Mo. App.1969):

"It is a universally recognized rule that money voluntarily paid under a claim of right to the payment, and with knowledge of the facts by the person making the payment, cannot be recovered back on the ground that the claim was illegal, or that there was no liability to pay in the first instance. This is true even though the payor makes the payment and expressly reserves his right to litigate his claim, or under protest, or under the impression that the demand was legal." Missouri courts have uniformly followed that rule since 1868 when the Supreme Court first applied it in Claflin v. McDonough, 33 Mo. 412, stating: "The rule of law is well established, both in England and in this country, that a person who voluntarily pays money with full knowledge of all the facts in the case, and in the absence of fraud and duress, cannot recover it back, though the payment is made without a sufficient consideration, and under protest." With specific reference to the law of insurance, it is considered by standard authority that payment by the insurer, with knowledge of facts to support a policy defense, amounts to a waiver of its right to rely thereupon or to recover the payment made.

Id. at 811-12 (citation omitted); see also 22 Eric Mills Holmes, HOLMES' APPLEMAN ON INSURANCE 2d § 137.1(E) (2003).

Prior to settling the Montgomery claim, Essex never declined or denied coverage to Benton House for the Montgomery claim. Moreover, Essex was aware that it had an option of filing a declaratory judgment action to obtain a determination as to whether or not coverage existed under Benton House's policy for the Montgomery claim, but Essex chose not to pursue such an action. Essex, therefore, voluntarily paid the Montgomery claim on behalf of Benton House...