Citizens Ins. Co. of America v. Leiendecker, 71213

CourtCourt of Appeal of Missouri (US)
Citation962 S.W.2d 446
Docket NumberNo. 71213,71213
PartiesCITIZENS INSURANCE COMPANY OF AMERICA, Plaintiff/Respondent, v. Gary J. LEIENDECKER and Charlotte Ann Redel Leiendecker, Defendants, and Great American Reserve Insurance Co., Defendant/Appellant.
Decision Date24 February 1998

Page 446

962 S.W.2d 446
Gary J. LEIENDECKER and Charlotte Ann Redel Leiendecker,
Defendants, and Great American Reserve Insurance
Co., Defendant/Appellant.
No. 71213.
Missouri Court of Appeals,
Eastern District,
Division Two.
Feb. 24, 1998.

Page 447

Frank J. Kaveney, Richard D. Schreiber, St. Louis, for appellant.

Russell F. Watters, Steven H. Schwartz, T. Michael Ward, Brown & James, P.C., St. Louis, for respondent.

CRANE, Presiding Judge.

This declaratory judgment action involves a question of coverage for emotional distress under the "bodily injury" coverage of a homeowners insurance policy. The insureds, Gary Leiendecker and Charlotte Leiendecker, were covered by a homeowners policy issued by plaintiff Citizens Insurance Company of America (Citizens). The insureds had used and recommended to other individuals the services of Richard Martin. Martin obtained

Page 448

monies from these individuals for single premium life insurance policies, but he did not obtain the policies.

Damage Action

In 1992 these individuals (hereinafter the claimants) filed nine actions in the Circuit Court of the City of St. Louis against Jefferson National Life Insurance Company (JNL), the predecessor of defendant Great American Reserve Insurance Company (both of which will be referred to as JNL), other life insurance companies, Martin, and a bank. The claimants alleged that between 1985 and 1991 Martin had defrauded them into giving him monies to purchase single premium life insurance policies from various insurance companies, including JNL. The claimants alleged fraud, conversion, breach of contract, promissory estoppel and negligent misrepresentation against the life insurance companies. The claimants sought damages from the life insurance companies on the theories that the life insurance companies were vicariously liable for Martin's acts and were negligent in hiring and retaining Martin as their agent.

The claimants also alleged that the conduct of each of the insurance companies and the bank, individually and through their agents, involved an unreasonable risk of causing them to suffer emotional distress, that the emotional distress was directly caused by each defendant's conduct, "and is medically diagnosable and of sufficient severity so as to be medically significant."

JNL filed third-party claims for contribution against the insureds in each of the city circuit court actions alleging that the insureds were negligent in recommending Martin to the claimants. Citizens provided an attorney to defend the insureds while reserving its right to deny coverage and to seek a declaration of no coverage.

On January 2, 1996 the insureds and JNL entered into an agreement pursuant to Section 537.065 RSMo 1994 in which JNL agreed not to execute on any judgment it might eventually obtain against the insureds except to the extent of their insurance coverage under the Citizens policy. The agreement provided:

JNL agrees, in the event it obtains judgment on its Motions for Summary Judgment against the Leiendeckers, that neither JNL nor any person, firm or corporation claiming by or through it, shall levy execution or garnishment or otherwise provided by law attempting to collect personally either individually or jointly against the Leiendeckers or any of their assets, except as against Citizens or any other insurer which might insure the legal liability of the Leiendeckers with respect to the claims asserted by JNL in the Third-Party Petitions.

JNL filed a motion for summary judgment against the insureds who admitted the allegations made therein. The trial court entered a partial summary judgment as to liability, but reserved ruling as to damages. JNL settled with all claimants with cash payments.

Declaratory Judgment Action

While the damage action was proceeding, Citizens filed a petition for declaratory judgment against JNL and the insureds in the Circuit Court of St. Louis County. Citizens sought a declaration that the Citizens homeowners policy did not provide coverage or indemnity for the claims asserted in defendant's third-party petition. After JNL had settled with the claimants, Citizens moved for summary judgment on the grounds that its homeowners policy did not cover any of JNL's claims for contribution against the insureds. In its response JNL agreed that there was no coverage for economic damages and that there were no allegations of personal injury or property damage. However, JNL contended that the allegations of emotional distress in each petition constituted "bodily injury" as that term is defined in Citizens' policy.

Thereafter, with the consent of all parties, Citizens dismissed without prejudice its claims against the insureds. The trial court granted summary judgment in Citizens' favor finding that there is no coverage under Citizens' homeowners policy for any of the allegations made against the insureds in JNL's third party actions. JNL appeals from this judgment.

Page 449


On appeal JNL asserts the trial court erred in entering summary judgment because there was no justiciable controversy and Citizens did not have standing to bring suit against JNL. JNL also argues that there were general issues of material fact on whether some of the underlying claims for damages for emotional distress were claims for "bodily injury" within the meaning of the policy and that the underlying claims for damages caused by negligent infliction of emotional distress were claims for "bodily injury" within the meaning of the policy. We find no error and affirm. 1

I. Justiciable Controversy

In its first point JNL claims that there was no justiciable controversy because the claims for contribution (a) had not been reduced to judgment, (b) imposed no present duty of indemnification upon Citizens, and (c) remained hypothetical and speculative. JNL contends that the trial court should not have decided the matter until the amount, if any, of the Leiendeckers' liability to JNL for emotional distress damages arising from negligence was conclusively established.

The insured first accepted Citizens' tender of a defense under a reservation of rights, but later, when Citizens filed this declaratory judgment action, substituted their own counsel. When insureds exercise their right to reject defense by their insurer, the insurer may file a declaratory judgment action to determine the scope of its policy's coverage. Ballmer v. Ballmer, 923 S.W.2d 365, 369 (Mo.App.1996); State ex rel. Mid-Century Ins. Co., Inc. v. McKelvey, 666 S.W.2d 457, 459 (Mo.App.1984). See also Whitehead v. Lakeside Hosp. Assn., 844 S.W.2d 475, 479 (Mo.App.1992). Accordingly, it is not necessary that the underlying lawsuit be fully resolved before the declaratory judgment action may be decided.

Further, the claims for contribution were not hypothetical or speculative. JNL settled the claimants' lawsuits in lump sum amounts without allocating damages according to any particular theory of liability. JNL's contribution claim against the insureds alleges that it is entitled to recover up to 100% of any damages assessed against it from the insureds. Partial summary judgment on liability has been entered against the insureds. The declaratory judgment action presented a justiciable controversy. Point one is denied.

II. Standing

For its second point JNL contends that Citizens had no standing to sue JNL once Citizens had dismissed its insureds from the action. JNL did not raise standing in the trial court. However, lack of standing cannot be waived and may be considered by the court sua sponte. Brock v. City of St. Louis, 724 S.W.2d 721, 725 (Mo.App.1987).

Standing is a concept utilized to determine if a party is sufficiently affected so as to insure that a justiciable controversy is presented to the court. Farmers Ins. Co., Inc. v. Miller, 926 S.W.2d 104, 106 (Mo.App.1996). Under the Declaratory Judgment Act, a party has standing to have any question of construction or validity arising under the contract determined if the person is "[a]ny person interested under a ... written contract ... or whose rights, status or other legal relations are affected by a ... contract." Section 527.020 RSMo 1994. Under this statute a plaintiff must be a party or a third party beneficiary of the contract. Farmers Ins. Co., 926 S.W.2d at 107.

JNL relies on Farmers Ins. Co., St. Paul Fire & Marine v. Med. Protective Co., 675 S.W.2d 665 (Mo.App.1984), and American Economy Ins. Co. v. Ledbetter, 903 S.W.2d 272 (Mo.App.1995) to support its claim that Citizens has no standing. However, in these cases the respective plaintiffs were not parties to or beneficiaries of the insurance policy in which the plaintiffs sought declaratory relief. In contrast, in this case, Citizens seeks a determination of coverage under its own policy, a contract to which Citizens is a party. JNL's status as a defendant does not affect

Page 450

Citizens' standing to bring a declaratory judgment action to construe its own policy.

Likewise the absence of the insureds does not affect Citizens' standing to bring this action. Rather, that is a question of whether all persons who have or claim any interest which would be affected by the declaration have been joined. 2 Rule 87.04. The rules of civil practice and procedure relating to the joinder of necessary and indispensable parties apply to declaratory judgment actions. A person is a necessary party if that person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may, as a practical matter, impair or impede the person's ability to protect that interest. Rule 52.04. JNL had agreed not to execute on the insureds or their assets and to collect only against the insurance proceeds. The insureds did not claim any interest in the matter at the time they were dismissed from the declaratory judgment action. JNL...

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