Mo. Pub. Entity Risk Mgmt. Fund v. Am. Cas. Co. of Reading, WD 75446.

• Decision Date: 30 April 2013
• Docket Number: No. WD 75446.,WD 75446.
• Citation: 399 S.W.3d 68
• Parties: MISSOURI PUBLIC ENTITY RISK MANAGEMENT FUND, Appellant, v. AMERICAN CASUALTY COMPANY OF READING, Pennsylvania, Respondent.
• Court: Missouri Court of Appeals

399 S.W.3d 68

MISSOURI PUBLIC ENTITY RISK MANAGEMENT FUND, Appellant,

v.AMERICAN CASUALTY COMPANY OF READING, Pennsylvania, Respondent.

No. WD 75446.

Missouri Court of Appeals, Western District.

April 30, 2013.

Michael G. Berry, Jefferson City, MO, for appellant.

David P. Ellington, Kevin J. Adrian and Teresa M. Young, St. Louis, MO, for respondent.

Before Division One: GARY D. WITT, Presiding Judge, THOMAS H. NEWTON, Judge and MARK D. PFEIFFER, Judge.

GARY D. WITT, Judge.

Missouri Public Entity Risk Management Fund (“MOPERM”) sued American Casualty Company (“ACC”) on claims arising out of the settlement of a wrongful death action. MOPERM sought “a declaration as to the amount of ACC's obligation to contribute toward settlement” and judgment in that amount “for the value of the benefit conferred upon ACC.” In an amended petition, MOPERM alleged three separate theories of recovery: unjust enrichment, equitable contribution, and equitable subrogation. Both parties filed cross-motions for summary judgment. The trial court entered summary judgment in favor of ACC on all counts, and MOPERM appeals. We reverse and remand.

FACTUAL AND PROCEDURAL HISTORY¹

This lawsuit arose after a settlement involving MOPERM regarding a wrongful death claim brought against a nursing home and six of its employees. In the wrongful death action giving rise to the settlement, the son and estate of a deceased patient sued after the patient had injured her neck and died due to a bathroom fall and was determined to have had excessive morphine in her system. The plaintiffs in that action sued all seven defendants for joint and several liability.

MOPERM is an entity created by the State of Missouri pursuant to sections 537.700 to 537.756,² and it was formed to provide liability coverage for local governments and their officers and employees when engaged in their official duties. MOPERM functions like a liability insurance carrier and issues to each insured a “memorandum of coverage.”

MOPERM provided primary liability coverage for six of the defendants: five individual defendants and the nursing home. ACC,³ a private insurance company, provided primary liability coverage for the seventh defendant, a charge nurse (“Nurse”), with a policy limit of $1,000,000 per claim. MOPERM provided excess coverage for Nurse, in addition to its primary coverage for the additional six defendants, and its total limit of coverage was $2,000,000 per occurrence. ACC provided no coverage, primary or excess, to the other six defendants.

MOPERM and ACC agreed to provide a joint defense to Nurse in the wrongful death action, and ACC funded a portion of the cost. The defense counsel (“Joint Counsel”) represented all of the defendants in the underlying action. Early in the case and before the defendants were obligated to answer discovery, Joint Counsel ⁴ received a settlement demand as to all claims against all defendants for a lump sum of $450,000.

Contemporaneous with the settlement demand, Joint Counsel also gave MOPERM and ACC a summary of Joint Counsel's investigation into the claim, which disclosed that: (1) Nurse admitted she falsified training records for the certified nurse assistants at the home; (2) Nurse falsely verified training records showing that other defendants had received 16 hours of training, when in fact their training was only “10 to 12 hours”; (3) Nurse “reviewed” and “signed off” on medication records of the patient in question without discovering that the deceased patient was overdosed with morphine; (4) the medications technician who was responsible for calculating the morphine dosage that the deceased received “was not properly trained in dosage calculations and in fact miscalculated the dosage of morphine given to [the deceased]”; (5) Joint Counsel could not confirm whether Nurse also trained the medications technician involved, but Nurse “is responsible for training some med techs”; and (6) the death certificate showed that the death was caused by “morphine and fentanyl intoxication” and a “fracture” to the deceased's neck. Because discovery was not yet due to plaintiffs, they appeared to be unaware of many of these damaging facts when they made the settlement demand.

Joint Counsel provided MOPERM and ACC the following opinion and information about damages and settlement value: Nurse's admissions about falsifying training records “will double the jury appeal and therefore, double the value” of the wrongful death case; the family's legal counsel would likely increase settlement demand as time invested in the suit increased; $450,000 was a reasonable starting point; the family knew about two defendants attempting to cover up the deceased fall; the family did not know yet about Nurse's role in falsifying training records, did not know about Nurse approving incorrect medication dosages, and did not know that Nurse may have been responsible for training the medication technician that incorrectly calculated the morphine dosage. Joint Counsel indicated that it was imperative to get a settlement in place as soon as possible to “stop all discovery.” Joint Counsel asked MOPERM and ACC for authority to settle for a maximum of $400,000. Nurse's separate counsel, around this same time frame, made a written demand that ACC “exercise all diligent and good faith efforts to accomplish settlement of the claims asserted against [Nurse] within the applicable policy limits.” ⁵

After this report from Joint Counsel, but before the settlement was finalized, MOPERM and ACC exchanged electronic communication as to how the two companies would apportion their respective liability under any settlement. Because the suit for wrongful death alleged joint and several liability as to all defendants, MOPERM argued that ACC was liable for half of the settlement even though Nurse was one of seven defendants. MOPERM's claims representative based that figure on a telephone conference with the Joint Counsel, who stated that Nurse was fifty percent at fault, in large part because Nurse was a professional and the remaining individual defendants were aids and were “more of the uneducated, low paid, and they would maybe hold [Nurse] to a higher standard.”

ACC wrote to MOPERM that it was defending Nurse on a reservation of rights and planned to deny coverage based on exclusions within the policy issued to Nurse. ACC stated that “issues revolving around [Nurse's] coverage should not prevent you from resolving this case if MOPERM feels this is appropriate.” ACC also wrote that MOPERM had “over-evaluated [Nurse's] role in the case” and that “ this is a case for MOPERM to resolve ” (emphasis added). ACC also indicated that language in Nurse's policy “ raises questions whether this policy is primary for MOPERM ” (emphasis added).⁶ ACC ultimately offered $75,000 to be applied toward any settlement. Two days before ACC wrote this email, however, ACC's coverage counsel had determined and notified ACC that a coverage suit with MOPERM would probably result in a finding that ACC provided primary coverage for Nurse and that this claim was covered by the policy.

Later that month, ACC requested MOPERM to report “where we are regarding settlement of the case” and MOPERM responded that the case had been finally settled for a lump sum of $350,000 for all defendants. ACC responded that it was “pleased to hear that this matter has been resolved. Please send me a copy of proposed settlement documents and advise of detail of payment on behalf of [Nurse].” MOPERM responded that it had not changed its position that ACC owes fifty percent of the settlement, which amounted to $175,000, and wrote: “If you are not in agreement with that split, please contact me so we can discuss how we are going to resolve this issue.”

When an agreement could not be reached, MOPERM filed this suit against ACC the day before the release settling the underlying wrongful death action was executed and filed of record. In its suit, MOPERM sought “a declaration as to the amount of ACC's obligation to contribute toward settlement” and sought judgment in that amount “for the value of the benefit conferred upon ACC.” In an amended petition, MOPERM alleged theories of unjust enrichment, equitable contribution, and equitable subrogation. Both parties filed cross-motions for summary judgment, and the court granted summary judgment in favor of ACC on all counts, without any analysis or reasoning for its decision. MOPERM appeals.

STANDARD OF REVIEW

“The standard of review of appeals from summary judgment is essentially de novo.” Lafarge N. Am., Inc. v. Miller, 375 S.W.3d 852, 854 (Mo.App. W.D.2012) (citations omitted). We “will review the record in the light most favorable to the party against whom judgment was entered.” Id. Summary judgment shall be entered if “there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law.” Rule 74.04(c)(6). “A ‘genuine issue’ is a dispute that is real, not merely argumentative, imaginary or frivolous.” ITT Commercial Fin. v. Mid–Am. Marine Supply Corp., 854 S.W.2d 371, 382 (Mo. banc 1993).

ANALYSIS

In its two points on appeal, MOPERM claims that the trial court erred in entering summary judgment in favor of ACC and that MOPERM is entitled to judgment against ACC as a matter of law. MOPERM argues that because ACC failed to either pay an amount which was within ACC's coverage or to tender its insured an unqualified defense, ACC breached its duty to the insured, giving rise to a right of (1) equitable subrogation, (2) unjust enrichment, and (3) equitable contribution by MOPERM against ACC.

Duty to Defend, Duty to Settle in Good Faith, Duty to Indemnify

To understand the merits of the claims, we begin by briefly exploring sources of ACC's potential liability. Though ACC argued initially that it was not the primary insurer for Nurse but was an excess carrier and that MOPERM was the primary carrier for Nurse, it finally withdrew this issue...