Franklin Allen v. Wayne Bryers, Atain Specialty Insurance Company
2016 Mo. LEXIS 503
| Mo. | 2016Background
- Allen was shot and rendered paraplegic when Wayne Bryers, the Sheridan Apartments’ property manager (an insured under Frank’s commercial general liability policy issued by Insurer), discharged a handgun while removing Allen from the premises.
- Insurer issued a $1 million liability policy to the property owner; its policy contained assault/battery and expected-or-intended-injury exclusions and a cooperation clause.
- Insurer sent Bryers a reservation-of-rights letter, filed a federal declaratory-judgment action denying coverage, and declined to continue defending after Bryers rejected the reservation; Bryers then executed a § 537.065 agreement with Allen and consented to judgment.
- A state bench trial resulted in a $16 million negligence judgment for Allen against Bryers (finding the shooting accidental, within scope of employment, and not an assault/battery), which became final.
- Allen pursued a Rule 90 garnishment against Insurer; the garnishment court (same judge) found Insurer wrongfully refused to defend and ordered Insurer to pay the full $16 million judgment; Insurer appealed.
- The Missouri Supreme Court held Insurer was bound by the underlying judgment for coverage-related facts because it wrongfully refused to defend, but Allen was entitled only to the $1 million policy limit (plus post-judgment interest on the full judgment until Insurer pays/offers/deposits the limit); several post-judgment rulings re: intervention and setting aside the tort judgment were void for untimeliness.
Issues
| Issue | Plaintiff's Argument (Allen) | Defendant's Argument (Insurer) | Held |
|---|---|---|---|
| Whether Insurer could intervene or later set aside the underlying tort judgment | Insurer untimely or forfeited intervention; judgment stands | Insurer had an interest and should be allowed to intervene and seek relief from the judgment for fraud/collusion | Court: Insurer’s first denial-to-intervene claim was abandoned (no timely appeal); second motion and Rule 74.06 motion were untimely/void because Insurer was not a party when judgment became final — those rulings are dismissed |
| Whether Insurer wrongfully refused to defend Bryers and thereby waived right to contest underlying factual findings | Allen: Insurer denied coverage, filed declaratory action, and effectively refused to defend; so it’s bound by necessary findings | Insurer: Had coverage defenses and a right to litigate coverage; lacked full/fair opportunity to litigate | Court: Insurer wrongfully refused to defend (filed declaratory action and denied coverage); therefore it had opportunity to control but declined and is bound by necessary factual findings from the tort judgment |
| Whether Insurer faced an inherent conflict of interest that excused binding effect of the underlying judgment | Not applicable; no inherent conflict because Allen alleged negligence, not intentional acts | Insurer: conflict existed making it impossible to defend and thus it shouldn’t be bound | Court: No inherent conflict here (facts differ from Cox and James); insurer could have defended without irreconcilable conflict |
| Proper recovery in garnishment: full underlying judgment vs. policy limits and post-judgment interest | Allen: Insurer liable for full $16M because it refused to defend/settle (seeking extra-contractual damages) | Insurer: Garnishment relief limited to present obligation (policy limit); absent bad faith, insurer liable only to policy limit | Court: Because no finding of bad faith, garnishment court erred in awarding $16M; judgment modified to $1M (policy limit) plus post-judgment interest on the full $16M until Insurer pays/offers/deposits the $1M limit |
Key Cases Cited
- Piatt v. Indiana Lumbermen’s Mut. Ins. Co., 461 S.W.3d 788 (Mo. banc 2015) (duty-to-defend analysis comparing policy language to petition and known facts)
- Columbia Cas. Co. v. HIAR Holding, L.L.C., 411 S.W.3d 258 (Mo. banc 2013) (insurer’s duty to defend is broader than duty to indemnify)
- Ballmer v. Ballmer, 923 S.W.2d 365 (Mo. App. W.D. 1996) (insurer’s interest to intervene ripens when indemnity demand becomes actual indemnity)
- Schmitz v. Great Am. Assur. Co., 337 S.W.3d 700 (Mo. banc 2011) (consequences when insurer refuses to defend and insured enters agreement limiting liability to policy limits)
- Landie v. Century Indemnity Co., 390 S.W.2d 558 (Mo. App. K.C. Dist. 1965) (insurer liable to policy limits plus fees/expenses where it refuses to defend)
- Miller v. Secura Ins. & Mut. Co. of Wisconsin, 53 S.W.3d 152 (Mo. App. W.D. 2001) (post-judgment interest on full judgment accrues until insurer pays/offers/deposits policy limit)
- Drennen v. Wren, 416 S.W.2d 229 (Mo. App. 1967) (insurer bound by results of litigation it had opportunity to control)