Missouri Public Entity Risk v. Investors Ins.

• Decision Date: 23 September 2004
• Docket Number: No. 03-4153-CV-C-NKL.,03-4153-CV-C-NKL.
• Citation: Missouri Public Entity Risk v. Investors Ins., 338 F.Supp.2d 1046 (W.D. Mo. 2004)
• Parties: MISSOURI PUBLIC ENTITY RISK MANAGEMENT FUND, Plaintiff, v. INVESTORS INSURANCE COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — Western District of Missouri

Page 1046

338 F.Supp.2d 1046

MISSOURI PUBLIC ENTITY RISK MANAGEMENT FUND, Plaintiff, v.INVESTORS INSURANCE COMPANY OF AMERICA, Defendant.

No. 03-4153-CV-C-NKL.

United States District Court, W.D. Missouri, Central Division.

September 23, 2004.

COPYRIGHT MATERIAL OMITTED

Michael G. Berry, Hendren & Andrae, L.L.C., Jefferson City, MO, for Plaintiff.

Larry E. Hepler, Michael L. Young, Theodore J. MacDonald, Burroughs, Hepler, Broom, MacDonald, Hebrank & True, LLP, Edwardsville, IL, for Defendant.

ORDER

LAUGHREY, District Judge.

Pending before the Court is Plaintiff Missouri Public Entity Risk Management Fund's ("MOPERM")Motion for Partial Summary Judgment[Doc. # 32] and Investors Insurance Company of America's ("Investors")Motion for Summary Judgment[Doc. # 34].For the reasons set forth below, the Court grants MOPERM's Motion and denies Investors' Motion.

I.Factual Background

MOPERM is a statutorily-created corporation that provides insurance coverage for public entities and their employees.MOPERM contracted with Investors to obtain an excess insurance policy.Under the excess insurance policy, Investors agreed to insure claims against MOPERM where the damages exceeded $900,000 for a single incident or $6 million for the annual aggregate of all claims.Thus, if MOPERM's liability exceeded these threshold amounts, Investors agreed to pay the excess damages.

Investors' excess insurance policy requires Investors to "pay those sums that the Insured becomes legally obligated to pay as damages because of a `Wrongful Act' to which this coverage applies."(Pl. Mot. Summ. J., App. A (hereinafter "App.A"), p. 73.)Wrongful Act is defined as "any alleged or actual act, error or omission, or breach of duty, or violation of any federal, state, or local civil rights by an insured while acting within the scope of his/her duties...."(App.A, p. 78.)The policy defines an insured as: "Member Agencies of MOPERM and any elected or appointed official of the Member Agency, [or] any employee ... of the Member Agency all while acting within the course and scope of his duties."(App.A, p. 73.)

In 1997, Investors' excess insurance policy was modified at the request of MOPERM to include Endorsement 19.In that endorsement, Investors agreed to provide coverage for claims involving "discrimination prohibited by law."(App.A, p. 11.)

Because Investors' policy is an excess coverage policy, it only covers claims that are covered by MOPERM's policy.MOPERM's policy covers, among other things, personal injury liability, which includes "(f) discrimination prohibited by law or violation of federal civil rights law."(App.A, p. 41.)

The parties do not dispute the underlying facts about this case.However, they dispute whether Investors' excess insurance policy provides coverage for the four claims outlined below.

A. Laverne Belk

Laverne Belk("Belk") sued the City of Eldon, Missouri ("Eldon"), and its four aldermen.Belk alleged the aldermen retaliated against her by discharging her for publicly criticizing Eldon's city administrator.She also alleged gender discrimination in that the aldermen discharged her but gave the city administrator several weeks' notice that his contract would not be renewed.Belk's complaint alleged violations of 42 U.S.C. § 1983,Title VII, and the MHRA, based on gender and First Amendment retaliation.After a trial, a jury awarded damages to Belk only on her First Amendment retaliatory discharge claim.

B. Gail Rucker

Gail Rucker("Rucker") filed suit against the Junior College District of Saint Louis Missouri ("College District"), wherein she alleged that her employer, the College District, retaliated against her when she reported that the organization's president sexually harassed her.Rucker's complaint alleged the College District violated Title VII of the Civil Rights Act of 1964("Title VII") and the Fifth and Fourteenth Amendments of the United States Constitution.MOPERM settled with Rucker before trial.

C. DeClue-Schejbal

Like Rucker, DeClue-Schejbal sued the College District and alleged the organization's president retaliated against her after she complained about a co-worker.DeClue-Schejbal alleged the retaliation was racially motivated because the president and the co-worker were the same race.DeClue-Schejbal's complaint alleged the College District violated 42 U.S.C. § 1981,Title VII, the Missouri Human Rights Act ("MHRA"), and the First Amendment of the United States Constitution.MOPERM settled with DeClue-Schejbal before trial.

D. Darlene Hellerich

Darlene Hellerich("Hellerich") filed suit in state court against Jerome Biggs("Biggs"), the prosecuting attorney for Andrew County, Missouri, alleging that he sexually harassed her while she was employed as his assistant.Hellerich's two-count complaint alleged intentional and negligent infliction of emotional distress.MOPERM settled with Hellerich before trial.

In addition to her state claims against Biggs, Hellerich filed administrative charges of gender discrimination with the Equal Employment Opportunity Commission("EEOC") and the Missouri Commission on Human Rights("MCHR") against Andrew County arising out of her employment with Biggs.Hellerich dismissed her administrative charges against Andrew County as a condition of her settlement with Andrew County.That settlement provides that the cost of the mediator selected by the parties will be paid by Biggs and Andrew County.

II.Discussion

This Court's subject matter jurisdiction is based on diversity of citizenship pursuant to 28 U.S.C. § 1332(a).When courts exercise diversity jurisdiction, they apply substantive state law.Am. Home Assurance Co. v. Pope,360 F.3d 848, 851(8th Cir.2004).Therefore, the Court will look to Missouri law to guide its interpretation of MOPERM's and Investors' insurance policies.¹

Under Missouri law, courts must give effect to the plain meaning in insurance contracts.Trans World Airlines, Inc. v. Associated Aviation Underwriters,58 S.W.3d 609, 622(Mo.Ct.App.2001).In determining the plain meaning of the language, courts construe the words in accordance with "what a reasonable layperson in the position of the insured would have thought they meant."Niswonger v. Farm Bureau Town & Country Ins. Co. of Missouri,992 S.W.2d 308, 316(Mo.Ct.App.1999).If the language is ambiguous, then courts construe the ambiguous language in favor of the insured.Heringer v. Am. Family Mut. Ins. Co.,140 S.W.3d 100, 103(Mo.Ct.App.2004);Liberty Mut. Ins. Co. v. Havner,103 S.W.3d 829, 832(Mo.Ct.App.2003).A term is ambiguous if it is susceptible to two or more interpretations because it is duplicitous, indistinct, or uncertain.Ware v. Geico General Ins. Co.,84 S.W.3d 99, 102(Mo.Ct.App.2002).Missouri adopts this interpretation policy which favors the insured because insurance is designed to furnish protection instead of defeating it.Id.

Of particular importance in this case is the Missouri law concerning concurrent and proximate causes for a loss.If an insured risk and an excluded one constitute concurrent and proximate causes for a loss, a liability insurer is liable so long as the insured can demonstrate that one of the causes is covered by the policy.Centermark Properties, Inc. v. Home Indemnity Co.,897 S.W.2d 98, 101(Mo.App.1995)(quotingBraxton v. U.S. Fire Ins. Co.,651 S.W.2d 616, 619(Mo.App.1983)).Thus, if the Court finds that any part of the four claims at issue here were covered by Investors' excess insurance policy and that part was the proximate and concurrent cause of MOPERM's loss, then MOPERM is entitled to coverage.

Investors has multiple and sometimes overlapping reasons why its excess insurance policy does not cover any of the four claims.The Court will address these arguments in the context of each claim.²

A. Belk Claim

1.Investors' Motion for Summary Judgment

a. Public Policy

Investors argues that MOPERM's claim based on the Belk litigation should be rejected because Missouri public policy prohibits insurance coverage for intentional acts.Under Investors' theory, an employer cannot insure itself against intentional discrimination in its workplace, but can insure itself against unintentional discrimination.Such unintentional discrimination would include disparate impact cases and cases where an employer is held vicariously liable for the intentional wrongdoing of its employees.According to Investors, because the Eldon city aldermen intentionally discriminated against Belk, public policy prevents insurance coverage for their acts.

In response, MOPERM points to a Missouri case that authorized policemen to insure themselves against claims for punitive damages in police brutality cases.Colson v. Lloyd's of London,435 S.W.2d 42, 47(Mo.App.1968).The Colson court concluded that Missouri's policy against insuring intentional conduct would discourage public service and potentially expose public entities to financial devastation.The Missouri Court of Appeals concluded that these competing public policies were best resolved by permitting coverage for police brutality claims.

The court's rationale in Colson is equally applicable to this case, even though the respective insurance policies cover different situations.The court in Colson noted that virtually all police brutality cases involve allegations of intentional conduct and a claim for punitive damages.Id. at 47.Similarly, almost all employment discrimination cases, including those against public entities, involve some allegation of intentional misconduct.By adopting Investors' argument, the Court would effectively limit employment practices insurance to disparate impact cases, which are very rare, and cases arising from vicarious liability.Such a limitation, however, would ignore the reality of employment litigation.Whether an action is motivated by unlawful discrimination is difficult to determine and different judges and juries may arrive at...