Schmitz v. Great American Assurance Co.
337 S.W.3d 700
| Mo. | 2011Background
- Christine Ewing died from injuries after falling from a portable rock climbing wall owned by Marcus Floyd and operated at a CPB minor league baseball game.
- CPB was insured by Virginia Surety (primary, $1 million) and Great American (excess, $4 million); Virginia Surety denied defense due to an amusement device exclusion; Great American likewise denied defense.
- The parents and CPB entered a section 537.065 agreement limiting collection of any judgment against CPB to the insurance policies; a bench trial found CPB liable and awarded damages of $4,580,076; no appeal was taken.
- The parents initiated an equitable garnishment against the insurers; Virginia Surety settled for $1 million (cash $700,000+ release $300,000) and the parents released Virginia Surety’s claims to the full policy; $2,880,076 remained to be pursued against Great American.
- The equitable garnishment court held the $4,580,076 judgment was unreasonable (reasonable damages were $2.2 million) and that Great American was not obligated to pay because the Virginia Surety policy had not been exhausted.
- The Missouri Supreme Court granted transfer and is issued ruling on exhaustion, reasonableness, and enforcement of the 537.065 agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether exhaustion of underlying insurance is required to trigger Great American | Schmitz/Ewing: exhaustion not required by policy terms. | Great American: exhaustion required before excess pays. | Exhaustion not required; policy unambiguous on trigger. |
| Whether the amusement device exclusion applies to a rock climbing wall | Exclusion does not apply to rock climbing wall. | Exclusion encompasses injuries from amusement devices. | Rock climbing wall not an amusement device under policy; exclusion does not apply. |
| Whether Gulf Insurance test applies to the judgment here | Gulf test governs reasonableness of settlements under 537.065. | Gulf test applies because the result is a settlement. | Gulf test does not apply to a judgment entered after a bench trial; not a 537.065 settlement. |
| Whether Great American unjustifiably refused to defend and bound to 537.065 | Great American unjustifiably refused; bound to 537.065 agreement and judgment. | Refusal to defend justified. | Great American unjustifiably refused to defend; bound to the 537.065 agreement and to the trial judgment. |
Key Cases Cited
- Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976) (standard for appellate review of equity judgments)
- Gulf Ins. Co. v. Noble Broadcast, 936 S.W.2d 810 (Mo. banc 1997) (reasonableness standard for 537.065 settlements)
- Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129 (Mo. banc 2007) (contract interpretation; ambiguity governs against insurer)
- Martin v. U.S. Fid. & Guar. Co., 996 S.W.2d 506 (Mo. banc 1999) (definition of amusement device; use of ordinary meaning)
- Drennen v. Wren, 416 S.W.2d 229 (Mo. App. 1967) (insurer bound to result of litigation when obligated to protect insured)
- Whitehead v. Lakeside Hosp. Ass'n, 844 S.W.2d 475 (Mo. App. 1992) (unjustified insurer refusal to defend renders insurer liable for resulting damages)