Sprint Lumber, Inc. v. Union Ins. Co.
| Decision Date | 06 April 2021 |
| Docket Number | C/w WD 82939,WD 82930 |
| Citation | 627 S.W.3d 96 |
| Court | Missouri Court of Appeals |
| Parties | SPRINT LUMBER, INC., Scott Laderoute, Jerry Downey, Sheila Higdon, Jess Reynolds, and Ray Meng, Appellant-Respondents, v. UNION INSURANCE COMPANY, Continental Western Group, LLC., Respondent-Appellants. |
Benjamin Creedy, St. Joseph, MO, Counsel for Appellant-Respondents.
Michael Taylor, St. Joseph, MO, Co-Counsel for Appellant-Respondents.
Kenneth Siemens, St. Joseph, MO, Co-Counsel for Appellant-Respondents.
Susan Robertson, Kansas City, MO, Counsel for Respondent-Appellants.
J. Zachary Bickel, Kansas City, MO, Co-Counsel for Respondent-Appellants.
Before Division One: Alok Ahuja, P.J., Thomas H. Newton, and Thomas N. Chapman, JJ.
This appeal and cross-appeal arise from the judgment of the Circuit Court of Jackson County on Sprint Lumber, Inc., its owner and president, and certain employees’ (collectively "Sprint Lumber Parties") claims against Union Insurance Company and Continental Western Group LLC (collectively "Union") for declaratory judgment, breach of contract, and breach of fiduciary duty involving Union's duty to defend and indemnify them under a commercial general liability policy in a federal lawsuit brought by a competitor. The Sprint Lumber Parties raise three points on appeal challenging the trial court's partial summary judgment in favor of Union on their claim for breach of fiduciary duty and the trial court's calculation of damages. In its cross-appeal, Union raises five points challenging the trial court's partial summary judgment in favor of the Sprint Lumber Parties finding Union had a duty to defend and its judgment against Union to indemnify the Sprint Lumber Parties. The judgment is affirmed in part and reversed in part, and the case is remanded for further proceedings.
Sprint Lumber, Inc. ("Sprint Lumber") and Porters Building Centers, Inc. ("Porters") are competitors in the lumber and building supplies business in Northwest Missouri and Northeast Kansas. Scott Laderoute ("Laderoute") is the owner of Sprint Lumber. Jerry Downey ("Downey"), Sheila Higdon ("Higdon"), Jess Reynolds ("Reynolds"), and Ray Meng ("Meng") (collectively "Former Employees") are former Porters employees who left Porters for Sprint Lumber in 2016. Union issued a commercial general liability policy ("Policy") to Sprint Lumber for the period of October 1, 2015, to October 1, 2016, policy number CPA 3109148-20.1 The Policy provided coverage for bodily injury and property damage liability and personal and advertising injury liability.
On May 9, 2016, Porters filed suit against Sprint Lumber, Laderoute, Downey, Higdon, Reynolds, and Meng (again collectively "Sprint Lumber Parties") in the United States District Court for the Western District of Missouri ("Underlying Suit"). The Underlying Suit sought damages and injunctive relief for violation of the Computer Fraud and Abuse Act, violation of the Missouri computer tampering statutes, violation of the Missouri Uniform Trade Secrets Act, breach of restrictive covenants, breach of duty of loyalty, tortious interference with business expectancy, and civil conspiracy. Porters alleged that while still employed by Porters, Former Employees conspired with Sprint Lumber and Laderoute to misappropriate, and then delete from Porters's systems, Porters's proprietary information, trade secrets, and customer contact information and lists. It further alleged that Former Employees "affirmatively undercut" Porters's business as they directly competed against Porters and worked to solicit Porters's customers for Sprint Lumber. The same day, Porters also filed a motion for temporary restraining order and request for preliminary injunction to prevent further irreparable injury and to maintain the status quo during the pendency of the litigation.
On May 23, 2016, Porters filed a first amended petition, which included the seven claims from the original petition and added an antitrust claim under the Sherman Act and a trespass claim. The antitrust claim alleged that the Sprint Lumber Parties intended to put Porters out of business and to monopolize the industry in St. Joseph and the surrounding region.
The Sprint Lumber Parties notified Union of their claim for coverage and sent it Porters's original petition in the Underlying Suit on May 17, 2016. On May 18, 2016, at 10:50 a.m., Laura Williams ("Williams"), a CWG claims adjuster, opened a claim for the Underlying Suit. By 2:34 p.m. that same day, Williams concluded that On May 25, 2016, Union received Porters's first amended petition. On June 13, 2016, Williams sent a disclaimer letter to Sprint Lumber and its attorney stating that Union "will not make any defense or indemnity payment under your policy because there is no coverage for this loss." Specifically, the letter stated that Porters's allegations did not meet the definition of "personal and advertising injury" in the Policy and that even if such coverage was triggered, exclusions in the Policy precluded coverage. Williams's supervisor, Brandon Fahey ("Fahey") approved the letter.
On October 14, 2016, Porters filed a second amended petition, which reasserted all of the prior claims except for breach of restrictive covenants, which was dropped. Five days later on October 19, 2016, Porters filed a second motion for preliminary injunction. Union received Porters's second amended petition on November 28, 2016, and Williams reopened the claim on December 5, 2016. Fahey reviewed the second amended petition on January 10, 2017, and decided that there was no coverage and no duty to defend. Williams sent a second disclaimer letter to Sprint Lumber and its attorney on January 23, 2017, again disclaiming coverage for the claim.
On October 3, 2017, Sprint Lumber and Laderoute's attorney sent a letter to Williams to present additional materials relevant to demonstrating coverage under the personal and advertising coverage of the Policy, specifically, Sprint Lumber's motion for summary judgment and the pleadings and exhibits on the motion from the Underlying Suit and the court's order denying most of the motion. The letter also notified Williams about the jury trial scheduled in the Underlying Suit for December 4, 2017, and reiterated a demand for a defense and indemnification. Following receipt of the October 3, 2017 letter, Williams requested an explanation of why coverage is afforded under the Policy. On October 13, 2017, counsel for Sprint Lumber and Laderoute sent a nine-page letter to Williams explaining that there was coverage under the personal and advertising portion of the Policy and that none of the exclusions in the Policy defeated coverage. Again, the letter demanded that Union provide a defense, reimburse for attorney fees and expenses incurred, and provide coverage under the Policy for any judgment or settlement that may be entered or reached in the Underlying Suit.
On November 2, 2017, Union's attorney wrote to counsel for Sprint Lumber and Laderoute extending Union's offer to defend them in the Underlying Suit under a reservation of rights. Counsel for Sprint Lumber and Laderoute responded with a letter the same day rejecting the offer to defend under reservation of rights and demanding a defense without reservation. The letter also indicated that Porters was willing to settle for an amount "well into the $700,000s" but that a settlement had to be reached that day. The letter further explained that Porters was claiming lost profit damages in the range of $1,550,000 to $2,000,000; that there was damaging evidence of the Sprint Lumber Parties’ disparaging Porters to steer its customers away to Sprint Lumber and providing Sprint Lumber with Porters's confidential information; and that there was a significant risk of a verdict exceeding $2,000,000, not including punitive damages.
Later on November 2, 2017, the Sprint Lumber Parties reached an agreement with Porters to settle the Underlying Suit. Counsel for Sprint Lumber and Laderoute informed Union's attorney of the settlement that day stating, part:
Sprint Lumber and Laderoute paid Porters $775,000 to settle the Underlying Suit. Union refused the demand for reimbursement of attorney fees and expenses incurred in defending the Underlying Suit and for indemnification of the settlement.
On October 25, 2017, Sprint Lumber Parties filed the instant lawsuit against Union. Their second amended petition asserted three claims. Count I sought a declaration that the Policy's personal and advertising injury coverage provided coverage to the Sprint Lumber Parties and that Union wrongfully refused to provide coverage and a defense. Count II alleged breach of contract for Union's refusal to provide coverage under the Policy and sought damages and statutory penalties and attorney fees under Missouri's vexatious refusal statutes. Count III alleged breach of fiduciary duty for Union's refusal to defend the Sprint Lumber Parties in the Underlying Suit and to pay Porters a settlement within the Policy limits and sought compensatory and punitive damages.
The parties filed cross-motions for summary judgment addressing whether Union had a duty to defend and indemnify the Sprint Lumber Pa...
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