Piatt v. Ind. Lumbermen's Mut. Ins. Co.

• Decision Date: 28 April 2015
• Docket Number: No. SC 94364,SC 94364
• Citation: 461 S.W.3d 788
• Parties: Katina Piatt, et al., Appellants, v. Indiana Lumbermen's Mutual Insurance Company, et al., Respondents.
• Court: Missouri Supreme Court

461 S.W.3d 788

Katina Piatt, et al., Appellants

v.Indiana Lumbermen's Mutual Insurance Company, et al., Respondents.

No. SC 94364

Supreme Court of Missouri, en banc .

Opinion issued April 28, 2015

Rehearing Denied June 30, 2015

The survivors were represented by Thomas G. Pirmantgen and John H. Lake of Lake Law Firm LLC in Jefferson City, (573) 761–4790.

The insurance company was represented by John R. Weist and Robert J. Luder of Luder & Weist LLC in Overland Park, Kansas, (913) 491–9300.

Opinion

Zel M. Fischer, Judge

Prior to this insurance dispute, Linda Nunley was killed while working for a charcoal manufacturer. The plaintiffs obtained a judgment for wrongful death against Junior Flowers, the company's sole owner, director, and executive officer. Flowers assigned his insurance claims to the plaintiffs, and they sued the insurer for breach of duties to defend and indemnify under commercial general liability (CGL) and umbrella policies. The circuit court applied the policies' employee exclusions, which prevented coverage for work-related injuries to employees of the insured, and granted summary judgment for the insurer. This Court agrees, and the circuit court's judgment is affirmed.

Standard of Review

This Court reviews a grant of summary judgment de novo. Goerlitz v. City of Maryville, 333 S.W.3d 450, 452 (Mo. banc 2011). Summary judgment is appropriate if there is no genuine issue as to any material fact, and the movant is entitled to judgment as a matter of law. Rule 74.04(c)(6). The Court views assertions of fact in the light most favorable to the non-movant and draws all reasonable factual inferences in that party's favor. Goerlitz, 333 S.W.3d at 453. The Court may affirm summary judgment on any appropriate theory supported by the record. Columbia Cas. Co. v. HIAR Holding, L.L.C., 411 S.W.3d 258, 264 (Mo. banc 2013).

Factual and Procedural Background

Ms. Nunley was killed while working for Missouri Hardwood Charcoal, Inc. The manufacturing process involved kilns with gigantic steel doors. Company policy required removing the doors from time to time and leaning them upright against the kilns. Tragically, one of the doors was blown over by the wind and crushed Ms. Nunley.

Her three children and her mother filed a wrongful death action against Junior Flowers, the company's sole owner, director, and executive officer at the time of Ms. Nunley's death. The petition alleged that Flowers, while engaged as an agent or employee of the company, was negligent in ordering employees to lean the kiln doors upright, even though he knew it was unsafe. The petition also alleged that Flowers breached a “personal duty of care owed to Linda Nunley” and that his actions were “something more” than a breach of the company's duty to provide a safe workplace for employees.

Flowers requested a defense from Indiana Lumbermen's Mutual Insurance Company (ILM). He made this request with respect to two insurance policies: a CGL policy with a limit of $1 million per occurrence and an umbrella policy adding another $5 million per occurrence. Both policies insure Missouri Hardwood and its executive officers but exclude liability for a work-related injury to an “employee of the insured.” Both policies also have “separation-of-insureds” provisions, stating that the insurance applies “[s]eparately to each insured against whom claim is made or suit is brought.” ILM declined to defend Flowers, and he retained other counsel.

After litigation not pertinent here,¹ Flowers and the plaintiffs came to an agreement under § 537.065.² Pursuant to the agreement, the plaintiffs promised not to collect from Flowers personally, only from his insurance policies. In return, Flowers agreed to setting the case for trial at the circuit court's earliest convenience; to testify truthfully; to waive his rights to a jury trial; to waive his rights to present evidence and make objections and arguments; and to assign his claims against ILM to the plaintiffs. A bench trial on the wrongful death claim resulted in the circuit court entering a $7 million judgment in favor of the plaintiffs. The circuit court's judgment determined Flowers was liable for negligence in maintaining the kiln door policy, “acting under his duties as president, executive officer, and director of Missouri Hardwood Charcoal, Inc.” It also found that “Linda Nunley was not Mr. Flowers' employee, but instead she was an employee of the corporation Missouri Hardwood Charcoal, Inc. at all relevant times.”

The plaintiffs then sued ILM and Flowers in this action for equitable garnishment under § 379.200, breach of contract for refusal to defend, declaratory judgment, and vexatious refusal to pay. The plaintiffs and ILM both moved for summary judgment. The circuit court granted summary judgment for ILM. It found that Flowers was Ms. Nunley's employer within the meaning of the insurance policies and based its ruling on the policies' employee exclusions, along with several alternative grounds that need not be discussed. The circuit court's judgment states:

Under the undisputed facts, Missouri Hardwood Charcoal was Flowers' business. He owned it. He controlled it. He was the sole officer and director. Under these facts, to the extent that Flowers was negligent in failing to provide a safe work environment to Nunley (as stated in the judgment) then Nunley was, in substance, “an ‘employee’ of the insured [Flowers],” and her injury and death arose out of Flowers' “performing duties related to the conduct of the insured's business.”

(Alteration in original.) The plaintiffs appealed, the court of appeals issued an opinion, and this Court ordered transfer. The Court has jurisdiction. See Mo. Const. art. V, § 10.

Analysis

The plaintiffs argue that the circuit court erred by overruling their motion for summary judgment and granting summary judgment for ILM because ILM was required to defend and indemnify Flowers as an insured “executive officer.” They contend that, because Missouri Hardwood was Ms. Nunley's employer, the employee exclusions cannot apply in favor of Flowers. This Court holds that the employee exclusions apply. Regardless of whether Flowers is an insured, Ms. Nunley was an employee, and the injuries that resulted in her death were the result of an unsafe workplace—the claim alleged could only have been brought against an employer.

I. Duties to Defend and Indemnify

A liability insurer's duties to defend and indemnify are distinct. Allen v. Continental W. Ins. Co., 436 S.W.3d 548, 552 (Mo. banc 2014). The duty to indemnify is simply the insurer's obligation to pay for the insured's actual liability if it is covered by the policy. See 3 New Appleman on Insurance Law Library Edition, § 16.06[1], [3][a] (2014); 14 Couch on Insurance, § 200:3 (3d ed. 2014). If there is coverage, § 379.200 allows a judgment creditor to “proceed in equity against the defendant and the insurance company” to recover insurance proceeds.

The duty to defend is broader than the duty to indemnify. Allen, 436 S.W.3d at 552. However, it arises only when there is a possibility or potential for coverage at the outset of the case. Id. It hinges on facts: “(1) alleged in the petition; (2) the insurer knows at the outset of the case; or (3) that are reasonably apparent to the insurer at the outset of the case.” Id. at 553. Unless these facts support some reasonably apparent theory of recovery against the insured that would give rise to coverage, the insurer has no duty to defend. See id. at 553 n.4. The Court assumes Flowers could assign his claim of breach of contract for failure to defend to the plaintiffs because the issue is not in dispute.

II. Contract Interpretation

“The interpretation of an insurance policy is an issue of law, subject to de novo review.” Id. at 553. This Court applies the meaning “an ordinary person of average understanding if purchasing insurance” would attach. Id. at 553–54. The general rule of interpretation is to give the policy language its plain meaning. Id. at 554. Unless the Court finds ambiguity, it does not resort to other principles of interpretation to resolve the dispute. Id. “ ‘Definitions, exclusions, conditions, and endorsements are necessary provisions in insurance policies. If they are clear and unambiguous within the context of the policy as a whole, they are enforceable.’ ” Id.

III. CGL and Umbrella Insurance

CGL insurance is generally not intended to cover liability for injuries to employees. See Ward v. Curry, 341 S.W.2d 830, 835 (Mo.1960). The purpose of CGL insurance is to protect businesses against the potentially vast liability that can arise from accidentally injuring members of the public . Id. at 838–39. Accordingly, CGL policies typically exclude liability for injuries to employees: (1) arising out of the scope of employment; or (2) that are covered by workers' compensation laws. See id. at 835, 838–39 ; see alsoGear Auto. v. Acceptance Indem. Ins. Co., 709 F.3d 1259, 1262, 1264–65 (8th Cir.2013) (citing Am. Family Mut. Ins. Co. v. Tickle, 99 S.W.3d 25, 29 (Mo.App.2003) ); 3 New Appleman, §§ 16.02 [3][a][vi][C], 18.03[5]; 9A Couch, § 129:10 to 11.

Umbrella policies are supplemental. They increase the amount of coverage beyond the limits of an underlying primary policy, although they often also fill gaps in primary coverage. See Selimanovic v. Finney, 337 S.W.3d 30, 39–40 (Mo.App.2011) ; Haggard Hauling & Rigging Co. v. Stonewall Ins. Co., 852 S.W.2d 396, 399 n.1 (Mo.App.1993) ; 4 New Appleman, § 24.02[2][a], [3], [4]; 15 Couch, § 220:32. Ultimately, an insurance policy's language determines coverage. Selimanovic, 337 S.W.3d at 40 ; Haggard, 852 S.W.2d at 399 n.1 ; see Allen, 436 S.W.3d at 553.

IV. The Insurance Policies

The CGL and umbrella policies at issue here cover liability for bodily injuries, including death, and define “insureds” to include executive officers. Under the CGL policy, insureds include “executive officers and directors ... but only with respect to their duties as your officers or...