414 S.W.3d 546
Mo. Ct. App.2013Background
- Dr. Brand (employee) alleged Dr. Freilich and KCGH intentionally removed him from group health coverage, filed suit raising disability discrimination, wrongful discharge, negligence per se (under §376.421), and other claims; jury awarded damages later adjusted and partially reversed on appeal.
- At the time of Brand’s 2007 petition, Freilich/KCGH had a Travelers CGL policy with an Employee Benefits Liability (EBL) provision covering damages from "negligent act, error, or omission" in administration of an "employee benefit program," and promising a duty to defend "suits" seeking those damages.
- Travelers reviewed Brand’s petition and Freilich’s responses, concluded the allegations alleged intentional conduct (not negligence) in terminating Brand and removing him from benefits, and declined to defend or indemnify.
- The underlying litigation produced various rulings, an appellate reversal of a negligence-per-se verdict, and a settlement that resulted in a remanded judgment of $300,000 on Count VI (framed by the trial court with general negligence findings despite pleadings premised on intentional conduct).
- Brand, Freilich, and KCGH sued Travelers under Mo. Rev. Stat. §379.200 and bad-faith theories seeking coverage; Travelers moved for summary judgment asserting no duty to defend because the underlying allegations alleged intentional acts, not a covered negligent act.
- The trial court granted summary judgment for Travelers; the court of appeals affirmed, holding (1) the duty-to-defend is determined at the outset by comparing policy language to pleadings and known facts, and (2) Brand’s petition and Freilich’s admissions showed intentional conduct outside EBL coverage, so Travelers had no duty to defend or indemnify.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Travelers had a duty to defend Freilich/KCGH under the EBL provision | Brand/Freilich: Count VI (negligence per se) and other allegations created a potential for EBL coverage because they mention negligence and concern administration of group health insurance | Travelers: Complaint and communications showed intentional acts (terminating/excluding Brand) not "negligent acts, errors, or omissions" covered by the EBL provision; insurer had no duty to defend | Held: No duty to defend; pleadings and known facts showed intentional conduct, which is excluded from EBL coverage |
| Whether Travelers is bound to indemnify under the remanded $300,000 judgment | Plaintiffs: Because Travelers wrongfully refused defense, it is bound by the underlying judgment that reflects general negligence within EBL coverage | Travelers: At outset it had no notice of a general-negligence theory; duty to indemnify depends on duty to defend and known facts at commencement; no duty if no duty to defend | Held: No duty to indemnify; because no duty to defend based on facts known at outset, Travelers not liable to indemnify |
Key Cases Cited
- McCormack Baron Mgmt. Servs., Inc. v. Am. Guarantee & Liability Ins. Co., 989 S.W.2d 168 (Mo. banc 1999) (insurer’s duty to defend measured at outset by comparing complaint to policy and known facts)
- Zipkin v. Freeman, 436 S.W.2d 753 (Mo. banc 1969) (actual facts known at commencement control duty-to-defend inquiry)
- Katz Drug Co. v. Commercial Standard Ins. Co., 647 S.W.2d 831 (Mo. Ct. App. 1983) (motivation behind act is crucial; intentional motivation can preclude coverage under EBL-type provisions)
- Easley v. American Family Mut. Ins. Co., 847 S.W.2d 811 (Mo. Ct. App. 1992) (intentional infliction of damage is not covered by liability insurance as matter of public policy)
- State Farm Fire & Casualty Co. v. Caley, 936 S.W.2d 250 (Mo. Ct. App. 1997) (insurer not liable when insured acted volitionally with intent to injure)
- Metropolitan Property & Casualty Ins. Co. v. Ham, 930 S.W.2d 5 (Mo. Ct. App. 1996) (intentional conduct cannot later be recast as negligence because resulting harm differed)
- American States Ins. Co. v. Herman C. Kempker Construction Co., 71 S.W.3d 232 (Mo. Ct. App. 2002) (where no duty to defend exists at outset, no duty to indemnify)