Cnty. of Scot. v. Mo. Pub. Entity Risk Mgmt. Fund

• Citation: 537 S.W.3d 358
• Decision Date: 17 October 2017
• Docket Number: WD 80518
• Parties: COUNTY OF SCOTLAND, Missouri, Respondent, v. MISSOURI PUBLIC ENTITY RISK MANAGEMENT FUND, Appellant.
• Court: Missouri Court of Appeals

537 S.W.3d 358

COUNTY OF SCOTLAND, Missouri, Respondent,

v.MISSOURI PUBLIC ENTITY RISK MANAGEMENT FUND, Appellant.

WD 80518

Missouri Court of Appeals, Western District.

OPINION FILED: October 17, 2017

CORRECTED October 23, 2017

Motion for Rehearing and/or Transfer to Supreme Court Denied November 16, 2017

Application for Transfer Denied January 23, 2018

Scott L. Templeton, Kirksville, MO, for respondent.

Michael G. Berry, Jefferson City, MO, for appellant.

Before Division One: Mark D. Pfeiffer, Chief Judge, Presiding, James E. Welsh, Judge and Cynthia L. Martin, Judge

Cynthia L. Martin, Judge

Missouri Public Entity Risk Management Fund ("MOPERM") appeals from the grant of summary judgment entered in favor of the County of Scotland, Missouri ("Scotland") and against MOPERM. MOPERM argues that the trial court erred in entering judgment in favor of Scotland and against MOPERM because two insurance policy exclusions negated MOPERM's duties to defend and indemnify Scotland. MOPERM also contends that the trial court erred in entering judgment in favor of Scotland because the underlying judgment against Scotland, and for which indemnity was sought, was unenforceable. We reverse and vacate the trial court's judgment, and enter judgment in favor of MOPERM.

Factual and Procedural Background¹

Scotland is a legal subdivision of the State of Missouri pursuant to article VI, section 1 of the Missouri Constitution. MOPERM is a public corporate body created pursuant to section 537.700.² MOPERM provides liability coverage to local governments and their officers and employees when engaged in official duties. Mo. Pub. Entity Risk Mgmt. Fund v. Am. Cas. Co. of Reading , 399 S.W.3d 68, 71 (Mo. App. W.D. 2013).

In exchange for premium payments, MOPERM provided liability coverage to Scotland as set forth in a Memorandum of Coverage ("Memorandum"). Under the Memorandum, MOPERM agreed to defend and indemnify Scotland, its officials, and its employees, subject to limitations and exceptions explained in the Memorandum. Section IV.K of the Memorandum provides that coverage does not apply:

To claims for loss or damage arising out of or in connection with the principles of eminent domain, proceedings to condemn property or inverse condemnation by whatever name ...; or any action, proceeding or challenge by whatever name to enforce or invalidate, modify or change any zoning ordinance or land use plan.

Additionally, Section IV.R states that coverage does not apply "[t]o injunctive relief or relief other than monetary damages."

In August 2011, Gavin Hauk ("Hauk") applied to the Scotland County Commission ("Commission") for a county health permit to construct and operate a concentrated animal feeding operation ("CAFO"). The Commission denied Hauk's permit application because it did not meet the required distance set forth in a setback provision of the applicable ordinance, which stated "No CAFO shall be located within two miles of a populated area."³

On April 18, 2012, while the Memorandum was in full force and effect, Hauk filed a two-count petition ("Hauk Petition") against the Commission and its commissioners in their official capacities⁴ asserting that the Commission's decision to deny his permit was unconstitutional, unlawful, unreasonable, arbitrary, capricious and involved an abuse of discretion. In Count I, the Hauk Petition sought judicial review pursuant to section 536.150, and alleged that the denial of Hauk's permit deprived him of his right to establish a CAFO on his property. The Hauk Petition asserted that as a result of the denial of his permit, Hauk was unable to establish a CAFO on his property and suffered immediate and irreparable injury, loss, or damage. Count I of the Hauk Petition sought declaratory and injunctive relief, and an award of costs. In Count II, the Hauk Petition alleged that the ordinance, as applied to Hauk, violated his due process and equal protection rights, and "constitute [d] an unconstitutional regulatory taking of his property." Pursuant to 42 U.S.C. section 1983, Count II of the Hauk Petition sought to enforce the rights guaranteed to Hauk under the Fifth and Fourteenth Amendments of the United States Constitution. The Hauk Petition alleged that the ordinance, as applied by the Commission, "constitute[d] an unlawful and improper denial of property rights without just compensation within the meaning of the Fifth and Fourteenth Amendments to the United States Constitution." The Hauk Petition claimed that as a result of the Commission's denial of his permit, Hauk was "deprived of his constitutionally protected First, Fifth, and Fourteenth Amendments rights and ha[d] been damaged in an amount in excess of $25,000.00, plus attorneys' fees and costs." The Hauk Petition sought compensation in Count II for Hauk's costs, attorneys' fees, and actual damages sustained.

Scotland notified MOPERM of Hauk's lawsuit. MOPERM refused to provide the Commission and the individual commissioners a defense, and denied coverage for the claims asserted in the Hauk Petition, citing the exclusions set forth in Sections IV.K and IV.R of the Memorandum.

Following a bench trial in the Hauk lawsuit, a judgment, styled as "Judgment on Count I," was entered against the Commission, finding the Commission's denial of Hauk's permit to be unconstitutional, unreasonable, arbitrary, capricious, and an abuse of discretion ("Hauk Judgment").⁵ The Hauk Judgment ordered the issuance of a permit to Hauk for his proposed CAFO. Though Count I of the Hauk Petition had not sought monetary relief, the Hauk Judgment nonetheless awarded Hauk $178,566.00 for damages sustained as a direct result of the Commission's unlawful denial of his permit application.⁶ The Hauk Judgment was affirmed on appeal.⁷ Scotland incurred legal expenses in defending the Hauk lawsuit in the amount of $102,427.95.

Scotland filed the present cause of action against MOPERM for breach of contract on July 31, 2015. MOPERM denied that it was obligated under the Memorandum to defend or indemnify the Commission or the individual commissioners, and cited the above referenced exclusions as affirmative defenses. Subsequently, the parties filed a joint stipulation of facts and competing motions for summary judgment. Relevant to this appeal, the parties' competing motions for summary judgment contested whether MOPERM's duties to defend and indemnify were excluded by Sections IV.K and IV.R.

The trial court entered an amended judgment ("Judgment") granting Scotland's motion for summary judgment and denying MOPERM's motion for summary judgment. The Judgment awarded Scotland $294,545.95 plus interest at the statutory rate.⁸ The trial court found as a matter of law that the Hauk lawsuit "was not for inverse condemnation nor was it a challenge to [Scotland's] land use plan." The trial court concluded that "[a]t best [the Hauk lawsuit] was a challenge to the constitutional propriety of the actions of the individual commissioners in implementing the land use plan." The trial court thus found Hauk's Petition insufficient to invoke a policy exclusion.

This timely appeal followed.

Standard of Review

Appellate review of the grant of summary judgment is de novo. Burns v. Smith , 303 S.W.3d 505, 509 (Mo. banc 2010). "In reviewing the decision to grant summary judgment, this Court applies the same criteria as the trial court in determining whether summary judgment was proper." Goerlitz v. City of Maryville , 333 S.W.3d 450, 452 (Mo. banc 2011). "Summary judgment is only proper if the moving party establishes that there is no genuine issue as to the material facts and that the movant is entitled to judgment as a matter of law." Id. "A defending party ... may establish a right to summary judgment by demonstrating ... ‘that there is no genuine dispute as to the existence of the facts necessary to support movant's properly pleaded affirmative defense.’ " Id. at 453 (quoting ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp. , 854 S.W.2d 371, 381 (Mo banc 1993) ).

Here, the Judgment was based on stipulated facts. "Because the case was submitted on stipulated facts ... ‘the only question before his court is whether the trial court drew the proper legal conclusions from the facts stipulated.’ " Archey v. Carnahan , 373 S.W.3d 528, 531 (Mo. App. W.D. 2012) (quoting Schroeder v. Horack , 592 S.W.2d 742, 744 (Mo. banc 1979) (other citations omitted)). The legal conclusions drawn from the stipulated facts in this case involve the interpretation of an insurance policy. "The interpretation of an insurance policy, and the determination whether coverage and exclusion provisions are ambiguous, are questions of law that this Court reviews de novo. " Burns , 303 S.W.3d at 509.

Analysis

MOPERM raises three points on appeal. In Point I, MOPERM claims that the trial court erred in granting summary judgment for Scotland and against MOPERM because the exclusions in Sections IV.K and IV.R negated any duty to indemnify Scotland for the Hauk Judgment. In Point II, MOPERM argues that the same exclusions negated any duty to defend Scotland in the Hauk lawsuit. In Point III, MOPERM contends that the trial court erred in granting summary judgment against MOPERM because the court in the Hauk Judgment lacked authority to enter a monetary judgment against Scotland. Because the duty to defend is broader than the duty to indemnify, our analysis will begin with Point II. Fischer v. First Am. Title Ins. Co. , 388 S.W.3d 181, 188 (Mo. App. W.D. 2012) (citing Penn-Star Ins. Co. v. Griffey , 306 S.W.3d 591, 596 (Mo. App. W.D. 2010) ).

Point II

MOPERM's second point on appeal asserts that the exclusions in Sections IV.K and IV.R applied to negate MOPERM's duty to defend Scotland in the Hauk lawsuit, rendering the grant of Scotland's motion for summary judgment erroneous as a matter of law. MOPERM argues that Section IV.K applied to exclude coverage because the exclusion was unambiguous and because all of the claims in the Hauk Petition arose from the...