Bonner v. Automobile Club Inter-Insurance Exchange

• Decision Date: 13 June 1995
• Docket Number: No. 65586,INTER-INSURANCE,65586
• Citation: 899 S.W.2d 925
• Parties: Paula BONNER, et al., Plaintiffs-Appellants, v. AUTOMOBILE CLUBEXCHANGE, Defendant-Respondent.
• Court: Missouri Court of Appeals

Page 925

899 S.W.2d 925

Paula BONNER, et al., Plaintiffs-Appellants, v. AUTOMOBILE CLUB INTER-INSURANCE EXCHANGE, Defendant-Respondent.

No. 65586.

Missouri Court of Appeals,

Eastern District,

Division Two.

June 13, 1995.

Christopher J. Quinn, Ray B. Marglous, P.C., St. Louis, for plaintiffs-appellants.

F. Douglas O'Leary, Moser and Marsalek, P.C., St. Louis, for defendant-respondent.

PUDLOWSKI, Judge.

Plaintiffs-appellants Paula and Elbert Bonner appeal from a grant of defendant-respondent's motion for summary judgment by the Circuit Court of the City of St. Louis. We transferred this cause after opinion to the Supreme Court because of the importance of the question involved and the general interest in a consistent resolution of the insurance question of coverage. Upon retransfer from the Supreme Court we again affirm. See State Farm Mutual Insurance Co. v. Sylvia Lee Ballmer and Wilbur Ballmer, 899 S.W.2d 523, (Mo. banc 1995). We affirm.

In reviewing the grant of a motion for summary judgment, we first determine whether there is any genuine issue of material fact as construed most favorably to the party against whom summary judgment was entered. If there is no genuine issue of material fact, we, then, determine whether the prevailing party was entitled to a judgment as a matter of law.

From the briefs of the parties, it is apparent that there is no genuine issue of material fact. However, we will review the facts in order to address the salient points of law.

This action arises out of a one-car accident in Guadalupe County, New Mexico on November 8, 1989. Marla Bonner was driving a vehicle which was covered by an insurance policy in the name of Elbert Bonner. The policy was issued by the respondent, Automobile Club Inter-Insurance Exchange (Automobile Club). The policy's liability coverage limits were fifty thousand dollars per person and one-hundred thousand dollars per occurrence. The accident left Elbert ¹ severely injured and rendered his wife, Paula, a quadriplegic.

The Missouri Personal Auto Policy issued to Elbert became effective on August 8, 1989. The policy contained a provision which obligated Automobile Club to settle or defend any claim or suit seeking damages for bodily injury from any covered person using Elbert's vehicle. The policy also contained a "household exclusion" clause which read as follows:

EXCLUSIONS

A. We do not provide liability coverage for any person:

. . . . .

11. For bodily injury to you or any person residing in your household.

Through a letter, counsel for Elbert and Paula first notified Automobile Club of a claim against Marla on December 28, 1989. On January 10, 1990, Automobile Club responded that the "household exclusion" clause contained in the insurance policy precluded coverage for Elbert or Paula.

On June 21, 1990, counsel for Paula and Elbert, via letter, sought settlement of the claim against Marla in light of the decision by the Missouri Supreme Court, American Family Mutual Ins. Co. v. Ward, 789 S.W.2d 791 (Mo. banc. 1990), decided the preceding month. Automobile Club maintained its position that it owed no liability coverage to Marla. Automobile Club based its position on its own interpretation of the insurance policy and on case law.

On July 8, 1991, Paula and Elbert filed suit against Marla seeking damages for bodily injury caused by Marla's negligent operation of Elbert's vehicle. The suit was filed in Guadalupe County, New Mexico, the situs of the 1989 accident in which Paula and Elbert were injured. Two weeks later, Paula and Elbert's counsel sent Automobile Club a copy of the complaint and demanded that Automobile Club provide a defense to Marla. On July 29, 1991, Automobile Club again denied that it had any responsibility and refused to take any action.

After completing service on Marla, Paula and Elbert's attorney sent Automobile Club a copy of the summons and again demanded that Automobile Club provide a defense to Marla. Automobile Club's response was to return the letter with the following message written at the bottom: "Please see my letter of 7-29-91."

In August, 1991, Paula and Elbert's counsel contacted the insurance adjuster by telephone. He again asked Automobile Club to defend Marla or at a minimum seek a declaration of rights under the policy. Again, Automobile Club denied any duty and declined to take any action.

On October 23, 1991, the New Mexico Court granted Paula and Elbert's Motion for Default Judgment against Marla.

On January 28, 1992, the Supreme Court of Missouri handed down Halpin v. American Family Mut. Ins. Co., 823 S.W.2d 479 (Mo. banc 1992) which held that the Motor Vehicle Financial Responsibility Law effective July 1, 1987, partially invalidated a "household exclusion" clause virtually identical to the one in Elbert's policy. Three weeks after the case was handed down, an Automobile Club adjuster contacted Paula and Elbert's counsel and informed him that she was seeking authority to settle Paula and Elbert's claim for twenty-five thousand dollars.

On February 25, 1992, the New Mexico Court assessed Paula's damages at $1,800,000 and Elbert's at $250,000. The order stated that Marla was to be responsible for all damages. On March 17, 1992, Auto Club tendered a settlement draft in the amount of twenty-five thousand dollars payable to Elbert and Paula. The draft stated that it was in payment of "Any and all claims against Marla Bonner arising out of an accident of 11/8/89." Paula and Elbert declined the settlement offer at that time.

Marla subsequently assigned to Paula and Elbert her claims against Automobile Club for bad faith refusal to settle and defend. In the Circuit Court for the City of St. Louis, Paula and Elbert then filed the suit against Automobile Club which is the subject of this appeal.

On February 1, 1994, the Honorable Thomas C. Mummert, III, relying on State Farm Fire & Cas. Co. v. Metcalf, by Wade, 861 S.W.2d 751, (Mo.App.S.D.1993), found Automobile Club owed no duty to Marla and granted its Motion for Summary Judgment. On March 25, 1994, the trial court denied Paula and Elbert's motion for reconsideration. This appeal follows.

In the pleadings below, there are allegations of both bad faith refusal to settle and refusal to defend. In Ganaway v. Shelter Mutual Ins. Co., 795 S.W.2d 554 (Mo.App.S.D.1990), our colleagues in the Southern District stated that "an insurer's duty to defend is distinct and different from its duty to settle a claim against its insured within the policy limits when it has a chance to do so. It is also clear that a 'bad faith' action for refusal to settle sounds in tort, not in contract...." 795 S.W.2d at 556. The duty to defend on the other hand is contractual. Crown Center Redevelopment Corp. v. Occidental Fire & Cas. Co. of North Carolina, 716 S.W.2d 348, 357 (Mo.App.1986).

In Metcalf, supra, the Court of Appeals for the Southern District set out the elements required to recover for the bad faith refusal of an insurance company to settle a claim within policy limits.

The elements of the tort appear to be that: (1) the liability insurer has assumed control over negotiation, settlement, and legal proceedings brought against the insured; (2) the insured has demanded that the insurer settle the claim brought against the insured; (3) the insurer refuses to settle the claim within the liability limits of the policy; and (4) in so refusing, the insurer acts in bad faith, rather than negligently.

Metcalf, 861 S.W.2d at 756 (citing Dyer v. General American Life Ins. Co., 541 S.W.2d 702 (Mo.App.1976)).

These elements were not satisfied in this case. The insured never demanded that the insurer settle the case within the policy limits. Essentially, Paula and Elbert take the position that Marla was a covered person under the policy owned by Elbert. For the purposes of this analysis, Marla was the person who had to make demand to settle because the claims were against her as the driver. Marla never made demand upon Automobile Club to settle the case. All correspondence in the legal file is between Paula and Elbert's personal injury attorney and the insurance company. The record does not contain one instance in which Marla, the covered person, demands settlement of the claims against her.

Even if Marla is...