McDonald v. Ins. Co. of Pa.

• Decision Date: 31 March 2015
• Docket Number: WD 77854
• Citation: 460 S.W.3d 58
• Parties: Randel McDonald, et al., Appellants, v. Insurance Company of the State of Pennsylvania, et al., Respondents.
• Court: Missouri Court of Appeals

460 S.W.3d 58

Randel McDonald, et al., Appellants
v.
Insurance Company of the State of Pennsylvania, et al., Respondents.

WD 77854

Missouri Court of Appeals, Western District.

OPINION FILED: March 31, 2015
Motion for Rehearing and/or Transfer to Supreme Court Denied April 28, 2015

Paul Hasty, Jr., Counsel, Kathryn O'Shea, Co–Counsel, Overland Park, KS, for Appellants.

Aaron French, Counsel, St. Louis, MO, Meghan Lewis, Co–Counsel, Overland Park, KS, for Respondents.

Before Division Three: Victor C. Howard, P.J., James Edward Welsh, and Gary D. Witt, JJ.

Opinion

James Edward Welsh, Judge

Randel and Kathryn McDonald, doing business as McDonald Marketing Services, appeal the circuit court's judgment in an equitable garnishment action finding that Insurance Company of the State of Pennsylvania (ICSOP) is entitled to a credit in the amount of $62,500 for amounts paid to the McDonalds by two different insurance carriers in an underlying lawsuit. The McDonalds assert six points on appeal. The McDonalds contend that the circuit court erred: (1) by admitting evidence of payments by their insurance carrier, Charter Oak Fire Insurance Company, because evidence of payments from a collateral source is inadmissible and prejudicial, (2) by admitting evidence of their settlement with Charter Oak because the settlement was irrelevant, immaterial, and prejudicial and may not be used to mitigate the damages owed by ICSOP, (3) by finding that ICSOP is entitled to a credit for their settlement of claims against Charter Oak and Certain Underwriters at Lloyd's of London because ICSOP cannot re-litigate the liability of its insured in the underlying lawsuit and is bound by the judgment entered in the underlying lawsuit, (4) by failing to enter judgment in their favor and against ICSOP for the entirety of the judgment entered by the court in the underlying lawsuit because the judgment is binding on ICSOP in an equitable garnishment action, (5) by failing to award them prejudgment interest because they are entitled

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to prejudgment interest pursuant to section 408.020, RSMo 2000, and (6) by failing to assess court costs against ICSOP because they are entitled to costs pursuant to section 514.060, RSMo 2000, and Rule 77.01. We reverse the circuit court's judgment and remand for the circuit court to determine whether it wants to exercise its discretion to award prejudgment interest and costs in this case in light of our reversal.

On December 3, 2012, the McDonalds filed suit in the District Court of Wyandotte County, Kansas, against Bam, Inc. (Bam); Certain Underwriters at Lloyd's of London (Lloyd's), and Charter Oak Fire Insurance Company (Charter Oak). Through the petition, the McDonalds alleged that they contracted with Bam to transport frozen food from a warehouse in Independence, Missouri, to a warehouse in Wyandotte County, Kansas. According to the petition, the goods were frozen when placed onto Bam's trailer and had to remain frozen to be edible and useable food products. The petition further alleged that Bam delayed the transportation of the products and that when the products arrived in Kansas City, Kansas, the products were no longer frozen. The McDonalds claimed that Bam was insured under a policy of insurance issued by Lloyd's and that they were entitled to pursue a direct case of action against Lloyd's. They also asserted that they were insured under a policy of property insurance issued by Charter Oak. The McDonalds stated that claims had been made on both insurance companies for the loss, but neither insurance company had agreed to pay. The McDonalds prayed for damages in the amount of $75,000 against Bam, Lloyd's, and Charter Oak and requested costs and attorney's fees.

After filing the petition, the McDonalds settled with Lloyd's in the amount of $25,000 in exchange for the McDonalds' dismissing Lloyd's from the underlying lawsuit with prejudice. The McDonalds also settled with Charter Oak in the amount of $37,250 in exchange for the McDonalds' dismissing Charter Oak from the underlying lawsuit with prejudice.

Service in the underlying lawsuit was effectuated on Bam by serving the Missouri Secretary of State. Bam did not answer or otherwise respond to the McDonalds' petition in the underlying lawsuit and did not file any pleading in the matter.

In the meantime, Bam's insurer, ICSOP, was notified of the McDonalds' suit in the District Court of Wyandotte County, Kansas. On April 29, 2013, ICSOP notified Bam that “there was no coverage” under its policy for the claims filed by the McDonalds, and ICSOP refused to defend Bam in the underlying lawsuit.

On July 23, 2013, the District Court of Wyandotte County, Kansas held a default hearing in the underlying lawsuit. Kathryn McDonald offered testimony regarding the claim for damages. The evidence established that Bam delivered a trailer to a warehouse in Independence, Missouri. Bam's driver opened the doors to the trailer and backed the trailer into the loading dock in such a manner that prevented the doors on the trailer from closing. The driver then disconnected the trailer from the truck and left the warehouse. The McDonalds' employees then loaded the frozen food into the trailer. Bam's driver did not return, even though numerous telephone calls were made to Bam. During that time, the frozen food products were sitting in the trailer with the doors open and no way to refrigerate them. After several hours, a different driver for Bam arrived at the Independence warehouse to transport the food to the Wyandotte County, Kansas, warehouse. It was at this time that the doors to the trailer could be

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closed and that the refrigeration on the trailer activated. As a result of the delay caused by Bam, the formerly frozen food products thawed to the point that they could not be sold as edible food product and had to be destroyed.

Kathryn McDonald claimed that they lost frozen food valued at $70,472.75; incurred additional labor costs as the result of the unreasonable delay in the amount of $693.75, lost profit from the inability to sell the inventory in the amount of $27,085.73, and lost business as a result of customers having to find other frozen food products in the amount of $18,412.43. The District Court of Wyandotte County, Kansas, entered a default judgment against Bam for the above noted amounts, for a total judgment of $116,664.66.

On August 28, 2013, the McDonalds filed their petition for equitable garnishment against ICSOP and Bam, seeking to satisfy the default judgment entered against Bam by garnishing the policy of insurance issued by ICSOP. The McDonalds claimed that they were entitled to judgment against ICSOP in the amount of $116,664.66 and entitled to costs, attorney's fees, and prejudgment interest on the liquidated sum. ICSOP filed its answer denying that the ICSOP policy could be garnished and asserted an affirmative defense stating:

To the extent [the McDonalds] have received full or partial payment for the damages claimed in the Petition from any party or nonparty, including, but not limited to Charter Oak Fire Insurance Company and/or Certain Underwriters at Lloyd's London, by way of assistance, payment settlement, judgment, or otherwise, ICSOP is entitled to a setoff in the amount of such payment(s).

The McDonalds filed a motion for summary judgment seeking the circuit court's determination that the damages awarded to them by the District Court of Wyandotte County, Kansas, were covered under ICSOP's policy of insurance. The circuit court granted the McDonalds' motion for summary judgment finding that the policy of insurance issued by ICSOP provided coverage to Bam. Specifically, the circuit court found that, “since the frozen goods were not in the care, custody and control of Bam at the time the frozen goods were damaged, the ‘care, custody and control’ exclusion in the policy of insurance did not apply and the injury was covered by the policy of insurance issued by [ICSOP].” The circuit court, however, denied the McDonalds' motion for partial summary judgment on ICSOP's claim for a credit or set-off and set the matter for trial.

During trial, the circuit court granted ICSOP's motion to amend its affirmative defense by interlineation to read:

To the extent plaintiffs have received full or partial payment for the damages claimed in the Petition from any party or nonparty, including, but not limited to Charter Oak Fire Insurance Company and/or Certain Underwriters at Lloyd's London, by way of assistance, payment settlement, judgment, or otherwise, ICSOP is entitled to a setoff in the amount of $37,250 and/or $25,000 paid, respectively, by Charter Oak Fire Insurance and Certain

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