King Louie Bowling Corp. of Missouri v. Missouri Ins. Guar. Ass'n, WD

• Decision Date: 09 June 1987
• Docket Number: No. WD,WD
• Citation: 735 S.W.2d 35
• Parties: KING LOUIE BOWLING CORPORATION OF MISSOURI, Appellant, v. MISSOURI INSURANCE GUARANTY ASSOCIATION, Respondent. 38570.
• Court: Missouri Court of Appeals

Page 35

735 S.W.2d 35

KING LOUIE BOWLING CORPORATION OF MISSOURI, Appellant, v. MISSOURI INSURANCE GUARANTY ASSOCIATION, Respondent.

No. WD 38570.

Missouri Court of Appeals Western District.

June 9, 1987.

As Modified Aug. 4, 1987.

Motion for Rehearing and/or Transfer to Supreme Court Denied

Aug. 4, 1987.

Gardiner B. Davis, Teresa A. Woody, Kansas City, for appellant.

Edward W. Mullen, Daniel J. Ryan, Deacy & Deacy, Kansas City, for respondent.

Before CLARK, C.J., and DOWD and REINHARD, Special Judges.

CLARK, Chief Judge.

Appellant as plaintiff below sued for a declaration of rights and duties under the Missouri Insurance Guaranty Act, § 375.785, RSMo.1986, ¹ and for reimbursement of money paid to settle claims made against appellant by third parties. The petition was dismissed, on motion, for failure to state a cause of action, and this appeal followed.

The issue presented is whether a covered claim, as that term is used in the statute, includes indemnification of an insured of an insolvent member insurer for amounts the insured has paid to settle third party claims otherwise within the liability policy issued by the defaulting insurer.

The facts of the case are taken from the allegations of the petition, admitted for purposes of the motion. In December, 1978, Proprietors Insurance Company was obligated under its policy of insurance issued to appellant to indemnify appellant, to stated limits, for amounts appellant became liable to pay in consequence of injuries sustained by third parties on appellant's premises. During that month, two patrons of appellant fell in separate incidents, suffered injuries and made claims against appellant. Proprietors investigated the claims and, when suits were later filed, assumed the defense. Before either claim was settled or concluded, Proprietors became insolvent and was liquidated in a proceeding before an Ohio court.

After Proprietors' insolvency, appellant undertook to settle the claims paying $1,000.00 to the first claimant and $11,000.00 to the other. Each claimant had previously declined to file a claim with respondent association, electing instead to pursue the suits against appellant. After the settlements were made, appellant filed claims against respondent to recoup the payments. The claims were rejected. It is conceded that before liquidation and cessation of its business, Proprietors was a member of respondent association and had paid its required contributions.

Appellant presents two arguments which contend the trial court erred in dismissing the petition, but a common thread joins the two. These parallel contentions track the two claims of the petition, the first for declaratory judgment interpreting § 375.785 of the Act as it existed when Proprietors' default occurred, and the second for indemnification of the settlement payments as described. Each contention depends on whether a settlement payment made to a third party, as negotiated by appellant here, qualified as a covered claim within the benefits provided by the statute.

Considering first the contention that appellant was entitled to a declaration of rights for its own benefit and for the benefit of others similarly situated, appellant argues that its petition meets the test for applicability of the statute relative to declaratory judgments. Section 527.010, RSMo.1986. Citing Missouri Department of Social Services v. AGI-Bloomfield Convalescent Center, Inc., 682 S.W.2d 166 (Mo.App.1984), it points out that the three requisite elements are pleaded, the existence of a justiciable controversy admitting of specific relief by way of a decree, the presence of a legally protectable interest, and the existence of a question ripe for judicial resolution. The trial judge's order of dismissal notes that under the pleaded facts, " * * * the provisions of Section 375.785, RSMo. do not apply to the facts before this Court." It is assumed this entry denotes a disposition based on the substantive question, whether appellant would prevail in its contention that the settlements were covered claims under the statute, and not whether the elements of a cause of action in declaratory judgment were pleaded. Broadly construed, the first point on appeal suggests that the trial court erred in entering the dismissal by reaching a decision on the ultimate question of liability without first permitting the issues to be posed under an otherwise sufficient pleading for declaratory judgment.

The dismissal was appropriate for two reasons. In the first place, the court was correct in looking to the substantive question as presented by respondent's motion. If it appears plaintiff can have no relief against defendant, the latter should not be forced into litigation which can have no possible final result in favor of plaintiff. State ex rel. Chilcutt v. Thatch, 359 Mo. 122, 221 S.W.2d 172, 176 (Mo. banc 1949). The trial court decided that the statute was not applicable to the subject claims and, consequently, no purpose would be served by embarking on a trial destined to reach a foreordained result.

Secondly, and perhaps more importantly, the appendage of the declaratory judgment count did not alter the fact that the suit was merely an action on a rejected claim and was intended only to enforce payment of the demand for reimbursement. There was no allegation of any other specific instances of pending disputes over interpretation and application of the statute, no assertion that any insured of an insolvent insurer was at jeopardy because of uncertainty in the law and no claim that future action by appellant was dependent on resolution of the question.

The declaratory judgment act is not a general panacea for all legal ills nor is it a substitute for existing remedies. It is not to be invoked where an adequate remedy already exists. Glick v. Allstate Insurance Co. 435 S.W.2d 17, 21 (Mo.App.1968). The distinctive function of declaratory judgment is to dispel uncertainty as to legal rights before actual loss has occurred thereby preserving to the parties the opportunity for negotiation with a view to dispensing with litigation in the case. Higday v. Nickolaus, 469 S.W.2d 859, 863 (Mo.App.1971).

On both conditions, the putative declaratory judgment count in this case fails. There is no showing at all that the second count, seeking recovery for appellant of the sums it advanced in settling the two claims, would not fully redress the complaint and would be an adequate remedy without recourse to declaratory judgment. The allegations that other insureds and other claims may put the same statute to test are mere hypothetical examples without alleged substance. In addition, the rendition of a declaratory judgment could not further any negotiation or settlement of the subject controversy either between appellant and the third party claimants or between appellant and respondent. The losses have all accrued and therefore the essential function of declaratory judgment may no longer be invoked. The trial court was correct in ordering dismissal of the declaratory judgment count. The remedy simply is not applicable in the fact situation presented by the petition allegations.

Turning now to the second count, appellant argues that its demand for reimbursement of the settlement payments constitutes a covered claim under § 375.785.3(2), RSMo.1986 ² which respondent is obligated to honor pursuant to § 375.785.4(1)(a). Appellant relies on the statute and on two cases decided by the Eastern District, Qualls v. Missouri Insurance Guaranty Association, 714 S.W.2d 732 (Mo.App.1986), and Hankins Construction Co. v. Missouri Insurance Guaranty Association, 724 S.W.2d 583 (Mo.App.1986).

Analysis of the Qualls case, which most nearly parallels the facts here, will aid in identifying the problem. Qualls was insured for automobile liability by Kenilworth, a company later declared insolvent. Prior to the liquidation of Kenilworth, Qualls was involved in an accident with two other vehicles. He was sued, Kenilworth denied coverage ³ and default judgments were rendered against Qualls. He then brought action against the association to seek payment of the sums equal to those evidenced by the judgments rendered in favor of the liability claimants.

The two issues dealt with in the Qualls opinion were (1) May an insured of an insolvent insurance carrier recover indemnity from the association if the insured...