Missouri Ins. Guar. Ass'n v. Wal-Mart Stores, Inc.

Decision Date04 June 1991
Docket NumberNo. 58544,WAL-MART,58544
Citation811 S.W.2d 28
CourtMissouri Court of Appeals

F. Douglas O'Leary, Christiana Rush, St. Louis, for appellant.

Joseph M. Kortenhof, St. Louis, for respondent.


The Missouri Insurance Guaranty Association ("MIGA") filed a petition for declaratory judgment against Wal-Mart Stores, Inc. ("Wal-Mart") seeking to recover amounts it had paid on workers' compensation claims in connection with policies of insurance issued to Wal-Mart by Transit Casualty Company, ("Transit") now insolvent. MIGA also sought a declaration that it had no obligation to administer, handle, pay or continue to defend the claims under the Transit policies. The trial court entered an order granting MIGA's motion for summary judgment and assessing damages of $294,657.44, plus interest. Wal-Mart appeals from this judgment. We affirm.

In May 1982, Carlos Miro entered into an agency agreement with Transit. Wal-Mart Stores, Inc. v. Crist, 855 F.2d 1326, 1328 (8th Cir.1988). 1 The agreement authorized Miro to issue and place insurance policies on behalf of Transit. He was supplied blank insurance forms for this purpose. Id.

In late 1982 Wal-Mart sought proposals for workers' compensation insurance. Id. Miro offered to provide insurance covering all Wal-Mart employees at a flat and guaranteed premium of $3,500,000.00. This offer was accepted. Id. at 1329. The policy indicated that the premium had been computed in accordance with standard manual rates on file with appropriate regulatory agencies in the eighteen states in which Wal-Mart had employees. Id. The rates were multiplied by the estimated payroll for each job classification to reach an aggregate premium. Id. If actual payroll figures had been used, however, the premium would have been much higher than the agreed on $3,500,000.00. The payroll figures were, therefore, falsified and reduced to reach the appropriate figure. Id. Both parties were aware that the estimated payroll was depressed, but neither took any action to amend the figures. Id. On February 1, 1984 a similar policy was issued for the same premium. Payroll figures utilized in this renewal policy were also depressed. Id.

In late 1984 problems began to surface. Claims on the Wal-Mart policies turned out to be well beyond expectations. Transit learned that Miro's captive reinsurers, with whom the entire risk on the Wal-Mart policies had been reinsured, had stopped paying claims. Id. at 1329-1330. Transit terminated Miro's agency agreement and demanded additional premium payments from Wal-Mart. Id. at 1330.

Upon receipt of this demand Wal-Mart filed suit in the United States District Court in Arkansas, seeking enforcement of the agreement entered into with Miro. Id. Transit answered alleging that the agreement was unenforceable and contrary to law. Transit also counterclaimed for nearly $20,000,000.00 in additional premiums it claimed Wal-Mart owed pursuant to the terms of the policy.

On or about November 25, 1985, Transit was declared insolvent. Lewis R. Crist, director of the Missouri Division of Insurance, was appointed receiver for Transit.

The district court found that Miro had exceeded his authority, that the agreement with him was illegal and unenforceable, but still ordered Wal-Mart to pay Transit the additional premiums it owed, plus interest. See, Wal-Mart Stores, Inc. v. Crist, 664 F.Supp. 1242 (W.D.Ark.1987).

Wal-Mart appealed and the Eighth Circuit reversed. It held that the agreement and the policies were illegal. Crist, 855 F.2d at 1333-1334. It further held "[i]f the premium term of the contract is illegal and unenforceable ... the coverage portion of the contract is necessarily unenforceable as well." Id. at 1334. It determined that because the parties were in pari delicto, equally culpable, Wal-Mart was not required to pay the additional premiums. Id. at 1335.

Subsequent to Transit's insolvency, but prior to the Eighth Circuit decision in Crist, Wal-Mart's Missouri workers' compensation claims were assigned to MIGA pursuant to Section 375.785, RSMo 1986. MIGA undertook the administration of the claims until it was informed of the Eighth Circuit decision in Crist. At that time, MIGA notified Wal-Mart that it would henceforth deny coverage under the Transit policies.

MIGA commenced this action on October 11, 1988. It sought a declaration that it was not obligated to pay or take any action on any claims under the policies declared illegal and unenforceable in Crist. It further requested that previous payments made pursuant to these policies be returned.

On May 31, 1989, MIGA filed its motion for summary judgment with the supporting affidavit of Paul H. Dygard, MIGA's executive director. In his affidavit Mr. Dygard stated that Wal-Mart's workers' compensation claims and files were forwarded to MIGA immediately after Transit's insolvency. MIGA undertook the handling of the claims, eventually paying out $238,649.98 2 in the administration, handling and payment of claims, in the mistaken belief that the policies were valid and enforceable.

Wal-Mart filed its own motion for summary judgment on February 15, 1990, along with the affidavit of Ronald A. Williams, corporate counsel for Wal-Mart. The affidavit stated that Wal-Mart had been prejudiced by MIGA's actions and that, if MIGA had informed Wal-Mart it intended to deny coverage or had reserved its right to do so, "Wal-Mart would have made different arrangements for handling, administering and covering claims ... that were covered by the Transit policies."

On April 26, 1989, the trial court entered its order granting MIGA's motion for summary judgment and denying Wal-Mart's motion. It found that, pursuant to Crist, the policies were illegal, void and unenforceable, and that Wal-Mart was collaterally estopped from relitigating their validity. It further held the claims under these policies were not "covered claims" under a valid and legally enforceable policy of insurance. MIGA was, therefore, never obligated to pay these claims and should be reimbursed for past expenditures. The court ordered Wal-Mart to pay $294,657.44, plus interest, to MIGA. This appeal followed.

In its first point Wal-Mart argues that the trial court erred in granting MIGA's motion for summary judgment to recover past payments. It asserts that MIGA and Transit were in privity and that MIGA is, therefore, bound by the ruling in Crist. Further, the claims presented to and handled by MIGA were covered claims within the meaning of Section 375.785, RSMo 1986.

Summary judgment is appropriate only if no genuine issue as to any material fact exists and the moving party is entitled to judgment as a matter of law. Rule 74.04(c); Landoll by Landoll v. Dovell, 778 S.W.2d 846, 848 (Mo.App.1989). When reviewing a ruling on a motion for summary judgment we scrutinize the record in the light most favorable to the party against whom the motion was filed, according to that party all reasonable inferences which may be drawn from the evidence. Gast v. Ebert, 739 S.W.2d 545, 546 (Mo. banc 1987). The burden is on the party moving for summary judgment to demonstrate that there is no genuine issue of fact. Id. An order of summary judgment, however, will not be set aside on review if supportable on any theory. Zafft v. Eli Lilly & Co., 676 S.W.2d 241, 243 (Mo. banc 1984).

Wal-Mart's argument is that MIGA is collaterally estopped from recovering past payment under the policies pursuant to Crist because it was in privity with Transit. The doctrine of collateral estoppel applies when, once a court has determined an issue of fact or law necessary to its judgment, that decision may preclude relitigation of the issue in a suit on a different cause of action involving a party to the first cause. Bi-State Dev. Agency v. Whelan Security Co., 679 S.W.2d 332, 335 (Mo.App.1984). The object of this doctrine is to relieve the parties of the cost and vexation of multiple litigations, to conserve judicial resources and to encourage reliance on adjudication by avoiding inconsistent decisions. Shaffer v. Terrydale Management Corp., 648 S.W.2d 595, 608 (Mo.App.1983). Collateral estoppel precludes the same parties, or those in privity, from relitigating issues which have been previously litigated. Nelson v. Missouri Div. of Family Services, 688 S.W.2d 28, 30 (Mo.App.1985).

Four factors are to be considered when determining if the application of collateral estoppel is appropriate. They are: 1) whether the issue decided in the prior adjudication was identical with the issue presented in the present action; 2) whether the prior adjudication resulted in a judgment on the merits; 3) whether the party against whom collateral estoppel is asserted was a party or in privity with a party to the prior adjudication; and 4) whether the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior suit. Sunshine Realty Corp. v. Killian, 702 S.W.2d 95, 98-99 (Mo.App.1985), quoting Oates v. Safeco Ins. Co. of America, 583 S.W.2d 713, 719 (Mo. banc 1979). (emphasis in original).

The issue decided in Crist was the validity of the insurance policies. Crist determined that the policies were illegal and that neither party could gain any relief from the transaction, because they were in pari delicto. Crist, 855 F.2d at 1334. Wal-Mart argues that MIGA cannot obtain relief because it was in privity with Transit.

Parties are in privity for collateral estoppel purposes when the interests of the nonparty are so closely related to the interests of the party, that the nonparty can be fairly considered to have had his day in court. Johnston v. Allis-Chalmers Corp., 736 S.W.2d 544, 549 (Mo.App.1987). Whether the parties are in privity depends mostly on their relationship to the subject matter of the litigation. Clements v. Pittman, ...

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