Columbia Cas. Co. v. HIAR Holding, L.L.C.

Decision Date13 August 2013
Docket NumberSC93026
PartiesCOLUMBIA CASUALTY COMPANY, Appellant, v. HIAR HOLDING, L.L.C., and HMA RIVERPORT, L.L.C., and KAREN S. LITTLE, L.L.C., Individually and on Behalf of the Other Members of the Certified Class, as Assignees, Respondents.
CourtMissouri Supreme Court

APPEAL FROM THE CIRCUIT COURT OF ST. LOUIS COUNTY

The Honorable Mark D. Seigel, Judge

An insurer that refused to defend its insured challenges its liability for damages that were agreed to in a settlement between the insured and a class of plaintiffs that brought suit alleging that the insured violated the Telephone Consumer Protection Act (TCPA), 47 U.S.C. section 227 et seq. After the class and the insured reached a settlement, the class filed a garnishment action against the insurer. The insurer sought a declaratory judgment that its policy with the insured did not provide coverage, and its arguments included that there was no coverage for damages awarded related to theTCPA. The trial court ultimately entered judgments in favor of the class, holding that the insurer wrongly had refused to defend the insured and was liable to indemnify the insured by paying the settlement amount plus interest. The insurer appeals, and this Court affirms.1

I. Background

The TCPA, 47 U.S.C. section 227 et seq., is intended "to protect the privacy interests of residential telephone subscribers by placing restrictions on unsolicited, automated telephone calls to the home and to facilitate interstate commerce by restricting certain uses of facsimile ([f]ax) machines and automatic dialers." Sen. Rep. No. 102-178, at 1 (1991). The act allows a private right of action for recipients of unsolicited communications that violate the act. 47 U.S.C. section 227(b)(3). The recipients can bring "an action to recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation, whichever is greater." 47 U.S.C. section 227(b)(3)(B). Further, the act provides for treble damages if, in the trial court's discretion, it is shown that the defendant "willfully or knowingly" violated the act. 47 U.S.C. section 227(b)(3).2 Violations of the TCPA underlie this appeal.

Hotel proprietor HIAR Holdings LLC used a marketing services company to send approximately 12,500 unsolicited advertising facsimiles—"junk faxes"—to recipients in the 314 and636 area codes in October 2001.3 About 10,000 of the junk faxes were received. Karen S. Little LLC4 brought a class action suit under the TCPA, seeking injunctive relief and statutory damages of $500 per occurrence (per fax sent).

At the time it had sent the junk faxes, HIAR was insured under a commercial general liability insurance policy from Columbia Casualty Company (Columbia). The policy's provisions included coverage for property damage and advertising injury.

After the class filed suit, HIAR tendered defense of the suit to Columbia. Columbia, however, refused to defend in a letter sent in December 2002. It asserted that it would not defend the suit or provide HIAR coverage under its policy because the claims of the class were outside the policy provisions. Another refusal to defend letter was sent to HIAR after it again requested a defense in October 2003.

In March 2005, the class made a settlement offer to HIAR for an amount within its insurance policy limits.5 HIAR forwarded it to Columbia, which again refused to defend or cover the claims, and Columbia rejected the formal settlement offer and refused to participate in subsequent settlement negotiations. Columbia's rejection and refusal letter asked that HIAR inform it of any revisions to the class's complaint in the case, but HIAR did not receive further correspondence fromColumbia. Ultimately, HIAR defended the suit at its own expense for five years before agreeing to a class-wide settlement for $5 million in January 2007.6

The class moved for preliminary approval of the settlement. Evidence was provided to the court as to the reasonableness of the settlement, and it granted preliminary approval and determined that notice could be sent to the class regarding the settlement. Claim forms in the matter were to be returned by July 23, 2007, and 488 claim forms were returned seeking payment under the settlement proceeds. No objections from the class were received.

In April 2007, a final approval hearing was held regarding the settlement. The hearing included evidence of the reasonableness of the settlement, and the trial court approved the settlement. The trial court entered findings indicating that it had determined the settlement to be fair, reasonable, and not a product of collusion. It entered a judgment for the class, and it approved HIAR's assignment to the class of its claims against Columbia and any other insurer. The trial court's order indicated that the settlement proceeds not paid to the class claimants or for attorney fees would be distributed via cy pres to charitable organizations.

The class thereafter sought to collect on the settlement judgment by bringing a garnishment action against Columbia. The garnishment action sought the settlement amount plus post-judgment interest.7 Columbia contends that HIAR failed to communicate anything to it about the case after the initial formal settlement offer was refused. Columbia maintains that it was informed about HIAR's settlement with the class only by way of the garnishment action. The class's pleadings highlighted that HIAR's insurance policy with Columbia provided coverage for "advertising injury" and "property damage." Columbia, however, objected to the applicability of its coverage, and it sought a declaratory judgment clarifying its duties to defend and indemnify the class's claims underHIAR's policy. The class's garnishment action was stayed pending resolution of the declaratory action.

In the declaratory action, the trial court first found that Columbia owed HIAR a duty to defend in the class action because it determined that the class's claims were covered under Columbia's policy provisions for "advertising injury" and "property damage."8

Cross-motions for summary judgment were filed regarding Columbia's duty to indemnify HIAR. The trial court entered a judgment in favor of the class's motion for summary judgment on the indemnity issues, finding that Columbia had a duty to indemnify HIAR for the full settlement plus interest.9 The trial court cited this Court's holding in Schmitz v. Great American Assurance Co. for the proposition that an insurer that wrongly refuses to defend cannot thereafter litigate the reasonableness of an indemnification amount and becomes liable for the entire underlying judgment as damages flowing from its breach of its duty to defend. See 337 S.W.3d 700, 708-09 (Mo. banc 2011). The trial court found that Columbia acted unreasonably and in bad faith in handling HIAR's claim for coverage in the TCPA action initiated by the class. Its judgment reiterated that the class's and HIAR's settlement was reasonable and negotiated in good faith.

The trial court overruled a motion by Columbia to add a party—HIAR's excess insurer—as a defendant. Columbia sought to add the excess insurer as a defendant to obtain a declaration of rights and obligations for the TCPA action as to the excess insurer's policy. The trial court also rejected Columbia's motion that it amend and reconsider its judgment.

Columbia appeals. It raises a number of arguments asserting that summary judgment in favor of the class was in error because the trial court concluded wrongly that Columbia has a duty to indemnify HIAR for its settlement with the class for HIAR's TCPA violations. Columbia maintains that HIAR's insurance coverage was inapplicable, particularly because HIAR's TCPA violations were intentional and resulted in statutory damages that are akin to fines and penalties. Columbia also alleges that the trial court erred in refusing to allow HIAR's excess insurer to be added as a party.

II. Standard of review

Columbia's arguments challenging the trial court's entry of summary judgment in favor of the class are reviewed de novo. See ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). The record is viewed in the light most favorable to the party against whom judgment was entered. Id.

Summary judgment is appropriate when the moving party has demonstrated, on the basis of facts as to which there is no genuine dispute, a right to judgment as a matter of law. Id. A defendant can establish that he is entitled to summary judgment by showing: (1) facts negating any one of the claimant's elements necessary for judgment; (2) that the claimant, after an adequate period of discovery, has not been able to—and will not be able to—produce evidence sufficient to allow the trier of fact to find the existence of one of the claimant's elements; or (3) facts necessary to support his properly pleaded affirmative defense. Id. at 381. A summary judgment, like any trial court judgment, can be affirmed on appeal by any appropriate theory supported by the record. Turner v. School Dist. of Clayton, 318 S.W.3d 660, 664 (Mo. banc 2010).

Non-summary judgment arguments, however, require application of a different standard. Columbia's argument that the trial court erred in denying its motion to add HIAR's excess insurer asa party is reviewed for abuse of discretion. See Clark v. St. Louis Transfer Ry. Co., 30 S.W. 121, 124 (Mo. 1895) (discussing that a motion to amend a petition is a decision that "rest[s] largely in the discretion of the trial court" and the appeals court "will not interfere unless it is apparent that the discretion has been arbitrarily and unjustly exercised"); Asmus v. Capital Region Family Practice, 115 S.W.3d 427, 432 (Mo. App. 2003) ("Motions to amend to add or substitute a party should be freely granted when justice so requires. ... [A] party may amend his pleadings at any time by leave of the court and that such leave should be freely given....

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