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A Review of Allen v. Bryers

ABSTRACT: Recently, the Supreme Court of Missouri handed down its decision in Allen v. Bryers, 512 S.W.3d 17 (Mo. banc 2016), an appeal arising from a $16M personal injury judgment against a property and security manager for an apartment complex.

Recently, the Supreme Court of Missouri handed down its decision in Allen v. Bryers, 512 S.W.3d 17 (Mo. banc 2016). The appeal arose from a $16,000,000 personal injury judgment against Wayne Bryers, the property and security manager for an apartment complex. The judgment resulted from an uncontested bench trial following a §537.065 R.S.Mo. agreement between the injured plaintiff, Franklin Allen, and Bryers. Bryers was the employee of John Frank d/b/a The Sheridan Apartments, Atain Specialty Insurance Company’s (“Atain”) named insured.

The factual and procedural history leading to the Court’s decision takes up nearly nine pages of the opinion. Highly summarized, the opinion explains that Bryers shot Allen while he was removing Allen from the Sheridan Apartments. Less than four months later, Atain filed a declaratory action in Federal District Court. In response, Allen’s attorney sent Atain a demand letter offering a release of both Bryers and Atain in consideration for Atain’s $1,000,000 policy limit. Atain refused the settlement offer. In that letter, Allen’s lawyer also noted that Allen and Bryers had agreed, in principle, to enter a §537.065 contract.
Thereafter, Allen filed his Petition against Bryers alleging a single count of “negligence” arising out of Bryers’s “unintentional and accidental” discharge of a weapon. The pleading further alleged that Bryers acted in the course and scope of his employment while escorting plaintiff from the insured premises. The Petition expressly alleged that the Allen’s injury was not caused by an assault, battery, or any expected or intentional act. Atain offered to defend the Petition under reservation of rights. Allen also filed his own declaratory judgment action against Bryers and Atain seeking a declaration of coverage for Bryers.
One month later, an attorney retained by Atain to defend Bryers filed an Answer on behalf of Bryers. Bryers then rejected Atain’s defense under reservation, and retained defense counsel withdrew from the case. Therefore, Atain filed a motion to intervene. The trial court denied Atain’s motion. Atain did not appeal this ruling.
Eventually, the court held a bench trial on Allen’s negligence claim against Bryers. At that hearing, Atain again moved for leave to intervene, but its oral motion was denied. Allen introduced evidence and asked the court to award a judgment in the amount of $20,000,000. The circuit court took the case under advisement and ultimately entered judgment in the amount of $16,000,000. In so doing, the trial court found that Bryers negligently discharged his weapon, injuring Allen, and that Bryers was acting in the course and scope of his employment when he did so. The circuit court also found that Bryers was under the influence of alcohol at the time.
Allen then filed a “Rule 90” garnishment on the judgment. Under Missouri law, a judgment creditor may proceed to collect a judgment from a liability insurer in one of two ways, either under Rule 90 of the Missouri Rules of Civil Procedure and Chapter 525 of the Missouri Revised Statutes or under §379.200 R.S.Mo., commonly referenced as Missouri’s “Equitable Garnishment” statute. As explained by the Court, a Rule 90 garnishment is an action “in aid of execution” and is incidental to the underlying judgment. A Rule 90 garnishment takes place under the same case number as the underlying judgment and requires strict compliance with the Rule 90 procedure. Ultimately, the Court held that a plaintiff in a Rule 90 proceeding is limited to collection of any applicable liability insurance coverage limits and attorneys fees, and not the full amount of the underlying judgment if in excess of such limits.
The same is true for an “equitable garnishment” action under §379.200 R.S.Mo., except that the plaintiff in such action, or the insured as a mandatory nominal co-defendant under §379.200 R.S.Mo., may assert additional claims against the insurer, beyond the statutory request to “reach and apply” the insurer’s policy limit. For instance, a judgment creditor holding an assignment of a “bad faith” claim against the insurer may assert such claim as an additional count in the same action. Whereas, no such additional claim may be asserted in a Rule 90 garnishment.
Moreover, the Supreme Court of Missouri expressly held that neither an insured nor a judgment creditor as assignee of the insured may collect amounts in excess of the insurer’s liability policy limit (plus attorneys fees, expenses, etc.) absent a finding of “bad faith.” The court sought to distinguish Allen from the Court’s earlier decision in Columbia Casualty v. HIAR Holding, Inc. There, the Court affirmed declaratory judgment that Columbia Casualty owed the entirety of a $5,000,000 class action settlement, even though such amount exceeded the insurer’s policy limit, because the insurer wrongly refused to defend its insured in a TCPA class action lawsuit. As indicated below, the basis on which the Court sought to distinguish its earlier decision in HIAR is a bit confusing, but nonetheless controlling.
In addition to the basic holding in Allen, the Court’s Opinion raises several other interesting issues and suggests several possible defenses to similar “lay down”-type judgments and related claims for extra-contractual liability. For instance, the Opinion reflects that Atain filed, perhaps prematurely, a declaratory judgment action before Allen filed his personal injury lawsuit against Bryers. 1 The Opinion relates that the insurer’s declaratory action proceeded alongside a separate state court declaratory action filed by Allen, which the insurer also removed to federal court. However, footnote “5” of the Opinion states that both the insurer’s declaratory action and the companion declaratory action filed by Allen were dismissed after the circuit court entered summary judgment in Allen’s favor in the Rule 90 garnishment proceeding.
A Concurring Opinion written by Judge Wilson is very critical of the insurer’s “abandonment” of the declaratory actions. Judge Wilson suggests that Atain had a chance to litigate its coverage issues in the declaratory actions but discarded that opportunity. The Concurrence, however, conflicts with numerous decisions from federal courts in Missouri holding that an insurer’s declaratory action must be stayed or dismissed once a state court garnishment action is “eminent.” See e.g. Empire Fire & Marine Ins. Co. v. Scheibler, 2016 WL 6524341 (E.D. Mo. November 3, 2016) (citing Indem. Corp. v. Haverfield, 218 F.3d 872, 874 (8th Cir. 2000)). The Concurring Opinion’s criticism that Atain “abandoned” its declaratory action seems harsh, where federal courts have routinely, if not uniformly, refused to exercise discretion over declaratory judgment actions filed by insurers, where the case at issue has been reduced to judgment and is subject to garnishment in the state court.
The Court also addressed Atain’s arguments that it should not be bound by the trial court’s “findings” in the uncontested trial after the insured’s decision to reject Atain’s defense under reservation and, instead, enter into a Section 537.065 contract. Atain twice sought to intervene in the underlying action to protect its right to litigate the facts bearing on its coverage obligations, but both such motions were refused. The Court was critical of Atain’s failure to appeal the trial court’s denial of Atain’s motions for leave to intervene, although it should be noted that Missouri’s appellate rules do not specifically address the appellate procedure applicable to a proposed intervenor whose motion to intervene is denied. Nevertheless, the Court held, “Insurer had the right to appeal the circuit court’s denial of its application to intervene as a matter of right when the circuit court entered its final judgment in the underlying tort action.” Citing State ex rel. Koster v. ConocoPhillips Co., 493 S.W.3d 397, 401 (Mo. 2016). The Court found that the insurer did not seek any appellate relief from the circuit court’s ruling on its motion to intervene after judgment was entered on behalf of Allen and that the insurer offered no explanation of its failure to appeal the adverse ruling on its motion to intervene. Therefore, the Court found, “insurer abandoned any claim it had regarding the propriety of the circuit court’s ruling on its first motion to intervene.” 2
The Court’s criticism raises the possibility that Missouri may be willing to revisit the hard line that Missouri courts have taken against allowing liability insurers the opportunity to intervene in lawsuits against their insureds, even where the insured has entered a §537.065 R.S.Mo. contract with the plaintiff. See e.g. Flippin v. Coleman Trucking, Inc., 18 S.W.3d 17, 21 (Mo. App. E.D. 2000)(quoting Whitehead v. Lakeside Hosp. Ass’n., 844 S.W.2d 475, 479 (Mo. App. W.D. 1992)(“The ‘interest’ [supporting a motion to intervene] must be such an immediate and direct claim upon the very subject matter of the action that the intervenor will either gain or lose by the direct operation of the judgment that may be rendered therein” (emphasis in original)). See also, Griffitts v. Campbell, 426 S.W.3d 684 (Mo. App. S.D. 2014)(citing Augspurger v. MFA Oil Co., 940 S.W.2d 934, 937-938 (Mo. App. W.D. 1997)). It is worth mentioning that nearly all of the significant authority on the subject of intervention predates Assurance Co. of Am. v. Secura Ins. Co., 384 S.W.3d 224 (Mo. App. E.D. 2012). There, the Court of Appeals extended the rule in Schmitz v. Great Am. Assur. Co., 337 S.W.3d 700, 709 (Mo. banc. 2011), that an insurer which has the opportunity defend its insured, but does not, is “bound by the result of the litigation” against its insured to mean that the liability carrier is bound by specific findings of fact included in uncontested judgments following §537.065 R.S.Mo. contracts. An inference may be drawn from Allen that insurers should seek to revisit the issue of intervention by appealing adverse rulings, given the development of Missouri law since Whitehead. At a minimum, the Court was critical of Atain’s failure to do so.
Perhaps most significantly, the Court addressed the extent to which Atain should be bound by the judgment in underlying litigation. Citing Assurance Company of America v. SECURA Insurance Company, the Court held that an insurer is conclusively bound to “those issues and questions necessarily determined in the underlying judgment”, if the insurer has wrongfully refused to defend its insured. Atain argued that it should not be so bound because there was an inherent conflict of interest between it and Bryers. This made it impossible for Atain to litigate the factual issues bearing on coverage to its benefit in the underlying action, while at the same time defending Bryers. The Court rejected Atain’s argument, because Allen’s Petition did not present any uncovered claim that would have given rise to a conflict of interest. Again, Allen’s only claim against Bryers was for mere “negligence”. Allen did not allege that Bryers committed assault or battery or that Bryers otherwise acted intentionally. Therefore, the Court reasoned, there was no conflict.
For reasons that are not entirely clear, the Court chose to address Atain’s conflict argument in two lengthy footnotes rather than in the body of the Opinion. Those footnotes were used to distinguish the case from Cox v. Steck, 992 S.W.2d 221 (Mo. App. E.D. 1999), and James v. Paul, 49 S.W.3d 678 (Mo. 2001). In Cox, the plaintiff who was injured in a bar fight alleged “assault, and, in the alternative, negligence” against the purported insured defendant. The Court distinguished Cox because Allen’s Petition was limited to a single claim of “negligence” against Bryers. The Court’s analysis in footnote “9”, strongly suggests that, if an insurer is truly faced with both covered and uncovered claims against an insured and defends under reservation of rights, it may not be bound by the findings in the underlying action. This is because any defense of its insured in that action would present a conflict of interest. Such conflicts effectively preclude an insurer from controlling the underlying litigation and protecting its interest on issues of fact overlaying both coverage and liability. Then, the Court recognized that Cox found “these theories [assault and negligence] were inherently conflicting, thus resulting in the insurer not having a full and fair opportunity to litigate the issues in the underlying action…this conflict was an exception to the general rule that an insurer that elects not to defend an insured under a contractual duty to do so is bound by the underlying judgment.” (Citing Cox at 225-226)
Accordingly, footnote “9” in Allen may be fairly cited for the proposition that an insurer should not be bound by uncontested “findings and conclusions” in a judgment arising out of a petition alleging both covered and uncovered claims against an insured. Such inconsistent claims necessarily result in a conflict of interest. If the insurer defends its insured under reservation of rights, its retained counsel is effectively precluded from asserting facts favorable to the insurer’s coverage position at the expense of the insured client. 3
Finally, with respect to the Court’s analysis distinguishing HIAR Holding, the Court noted that HIAR Holding arose out of a declaratory action. The Opinion states that the declaratory judgment in HIAR “explicitly found the insurer engaged in bad faith, when it both refused to defend and settle the claim and that such determination was not “challenged on appeal.” It is difficult to find a basis for the Court’s analysis in this regard, since bad faith damages are not ordinarily the subject of a declaratory judgment. Moreover, HIAR Holding notes that Columbia Casualty argued its insured settled and dismissed with prejudice its claims for “breach of contract and bad faith” against Columbia Casualty two years prior to the Supreme Court’s Opinion. Under the circumstances, it is not surprising that Columbia Casualty would fail to address the declaratory judgment Court’s “finding” of bad faith against Columbia Casualty, where it believed it had previously settled that claim and the claim had been dismissed, with prejudice. 4
Nevertheless, the Supreme Court of Missouri’s holding that extra-contractual damages are not available to a plaintiff in garnishment, absent some additional claim and proof of “bad faith” is significant. It is also significant that no such claim may be asserted in any form a Rule 90 garnishment action. Perhaps more importantly, however, the Opinion provides some guidance for insurers seeking to establish their coverage position by means of declaratory judgment or seeking to intervene in cases where their interests conflict with the interests of their insured. The opinion is also important to the insurers seeking to avoid inequitable, incomplete, or inaccurate “findings” of fact, if they have been effectively precluded from participation in the underlying lawsuit due to a conflict or by their insured’s rejection of the insurer’s defense under reservation of rights.
Should you have any questions concerning the nuances of The Supreme Court of Missouri’s opinion in Allen or if we can be of assistance in any other matters, please do not hesitate to contact our office.

1. A declaratory action filed prior to the filing of a lawsuit against the putative insured arguably does not present a “case or controversy” for the Court. Certainly there would be no pleading to compare with the insurer’s policy to determine whether the insurer owed any duty to defend its alleged insured.
2. The insurer’s second motion to intervene was in the form of a Motion for Reconsideration on the morning of trial. Missouri Civil Procedure does not expressly countenance a “Motion for Reconsideration.” Insurer also filed a motion to intervene for purposes of setting aside the judgment more than 30 days after it was entered, but the Court found this Motion for Leave to Intervene was untimely.
3. The Court engaged in a similar analysis of James where the insured was convicted of battery, thereby precluding application of the “general rule” of equitable estoppel binding an insurer to the necessary findings on issues of fact in an underlying case it has the opportunity to defend.
4. Other information outside the opinion suggests that such settlement may not have been binding on the claim representative as assignee.