Opinion
No. WD 55546.
Filed: June 20, 2000.
Appeal from the Circuit Court of Jackson County, Honorable Jack E. Gant, Judge.
Phillip Grubaugh, Kansas City, MO, for Appellant.
Michael Blanton, Lexington, MO, Michael Manners, Independence, MO, for Respondent.
Before Patricia A. Breckenridge, Presiding Judge, Harold L. Lowenstein, Judge, Robert G. Ulrich, Judge, Forest W. Hanna, Judge, Paul M. Spinden, Judge, James M. Smart, Jr., Judge, Joseph M. Ellis, Judge, Laura D. Stith, Judge, Edwin G. Smith, Judge, Victor C. Howard, Judge, and Albert A. Riederer, Judge.
This case arises out of a garnishment action instituted by Danny T. James against State Farm Fire and Casualty Insurance Company, and State Farm's insured, Robert M. Paul. The garnishment action follows an uncontested tort judgment pursuant to § 537.065, RSMo 1994, obtained by plaintiff James against Paul, who has not appealed.
The factual events giving rise to the underlying tort action occurred on the evening of June 8, 1989, when Mr. Paul suspected that his estranged wife, Kayleen Paul, was seeing another individual. After consuming a considerable amount of alcohol, Mr. Paul went to her residence in Independence, Missouri. He observed her through the window having sex with Danny James. Mr. Paul attempted, unsuccessfully, to break in the front door. He returned to his truck where he retrieved a knife, went through the garage where he broke the kitchen window and climbed into the house. He saw Ms. Paul in the kitchen and continued to the front room where he found Mr. James. He stabbed Mr. James three times with the knife. Both were taken to the hospital where Mr. James was treated for serious stab wounds and Mr. Paul was treated for the injuries he received from breaking the glass window.
Their dissolution of marriage hearing was scheduled for the next day.
Because of the incident, Paul was charged with first-degree assault, a class B felony pursuant to Section 565.050. He pleaded guilty to this offense on August 8, 1989. During the course of the plea hearing, Paul told the court that he was pleading guilty "because [he was] in fact guilty." Paul was sentenced to five years imprisonment. The execution of Paul's sentence was suspended and he was placed on probation for five years. A condition of his probation included incarceration for 14 days in the Jackson County Jail.
All statutory references are to Missouri Revised Statutes 1994, unless otherwise noted.
At the time of this incident, Paul had a policy of homeowner's insurance with State Farm, which provided Paul with personal liability insurance coverage. Section II, coverage L, of the policy provided in relevant part:
If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage to which this coverage applies, caused by an occurrence, we will:
Bold face words are shown as they appear in the policy and indicate that they are defined in the policy.
1. pay up to our limit of liability for the damages for which the insured is legally liable; and
2. provide a defense at our expense by counsel of our choice.
The word "occurrence" was defined in the policy as: "[A]n accident . . . which results in . . . bodily injury . . . during the policy period." Section II of the policy also contained the following exclusions from liability coverage:
SECTION II — EXCLUSIONS
Coverage L . . . [does] not apply to:
(a) bodily injury or property damage
(1) which is either expected or intended by an insured; or
(2) to any person or property which is the result of willful and malicious acts of an insured.
Following the stabbing incident, Paul notified State Farm of the potential claim and sought liability coverage for himself for any claims made by James. Eventually, State Farm denied coverage.
On February 9, 1992, James filed a civil action in the Circuit Court of Jackson County alleging that Paul negligently stabbed James. He charged Paul with carelessly and negligently causing the injury in that he failed to knock before entering the residence while in possession of a knife, entered the residence while his ability to reason was impaired by shock, or intoxication, and failed to exercise reasonable care in handling the knife when he inflicted the stab wound on James. State Farm was not a party to the underlying tort action. Paul, through his attorney, and State Farm wrote a series of letters culminating in State Farm's denial of coverage. State Farm informed Paul that the assault was not within State Farm's coverage for an accidental "occurrence," but instead, that the occurrence was the result of Paul's willful and malicious acts, and that the injury suffered by James was the expected and intended consequence of Paul's deed.
Following State Farm's denial of coverage, Paul and James entered into a § 537.065 settlement agreement and covenant not to execute against Paul for any monies assessed in a consent judgment. The settlement agreement provided that Paul would waive a jury and not present evidence at the trial.
Section 537.065 states in relevant part: Any person having an unliquidated claim for damages against a tort-feasor, on account of bodily injuries or death, may enter into a contract with such tort-feasor or any insurer in his behalf or both, whereby, in consideration of the payment of a specified amount, the person asserting the claim agrees that in the event of a judgment against the tort-feasor, neither he nor any person, firm, or corporation claiming by or through him will levy execution, by garnishment or as otherwise provided by law, except against the specific assets listed in the contract and except against any insurer which insures the legal liability of the tort-feasor for such damage and which insurer is not excepted from execution, garnishment or other legal procedure by such a contract.
The case was subsequently called for hearing. Paul did not appear. A psychiatrist's written report was a part of the record. The written report noted that Paul admitted drinking almost a 12-pack of beer immediately before the incident at Ms. Paul's house, and that the alcohol contributed to the violent acts. The report further stated that Paul was unable to formulate an intent to harm James. The court concluded that Paul did not intend or expect to injure James, thereby finding that he acted negligently. Specifically, it found in part that:
At the time Plaintiff, Danny T. James, was injured, Defendant, Robert M. Paul, was not capable of appreciating or comprehending the nature or consequences of his conduct. Defendant, Robert M. Paul, did not intend or expect for Plaintiff, Danny T. James, to be injured.
The Honorable Jack Gant of the Jackson County Circuit Court entered judgment for James in the amount of $285,000, plus prejudgment interest of $45,886.31 and costs.
Thereafter, James instituted a garnishment action against State Farm. State Farm contends that Paul's actions were "intentional," expected or intended and, therefore, coverage was excluded under the terms of the policy. It filed a motion for summary judgment. James filed a cross-motion for summary judgment, arguing that the garnishment court was bound by the factual findings and decision of the court in the uncontested hearing. After the court denied both motions, the parties refiled their motions for summary judgment. On the eve of trial, the court sustained James' summary judgment motion and denied State Farm's motion. The court held that the coverage question had been resolved in the underlying tort action and ordered State Farm to pay the judgment. The court's rationale for its ruling was that State Farm had a duty to defend Paul in the underlying action and its failure to defend prevented it from litigating whether Paul's actions were expected, intended, willful or malicious and thus, his actions were excluded from coverage. State Farm appealed.
State Farm contends that James' injuries were either expected or intended by Paul's actions and the findings and decision of the court in the underlying tort action are not binding on it because it was not a party to the lawsuit. Thus, State Farm argues it has a right to litigate the issue of coverage in the garnishment action. Moreover, its argument continues, the trial court's decision violates Missouri's public policy that liability insurance does not cover intentional acts. James responds that the circuit court decided that Paul's actions were negligent and that the circuit court's factual findings cannot be relitigated. James contends, therefore, that the decision in the uncontested hearing, that the injuries occurred as a result of Paul's negligence, is binding on State Farm in the garnishment proceeding.
ISSUE
The issue, therefore, is whether State Farm is bound by the findings of fact and decision in the uncontested tort action to which State Farm was not a party. In concluding that the appropriate disposition is to permit the insurer the right to contest the coverage issue in the subsequent garnishment proceeding, we necessarily discuss the insurer's duty to defend, public policy considerations, and conflict of interest concerns.
STANDARD OF REVIEW
In reviewing the grant of a summary judgment, the first consideration is whether there is any genuine issue of material fact. ITT Commercial Finance Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo.banc 1993). Because there are no material facts in dispute, our review is whether the prevailing party was entitled to a judgment as a matter of law. Id.
LIABILITY v. COVERAGE
Historically, an insurer is prohibited from contesting its coverage in the underlying tort action because, as a matter of policy, the courts will not impose upon the plaintiff the attendant delay that results. Lodigensky v. American States Preferred Ins. Co., 898 S.W.2d 661, 666-67 (Mo.App. 1995). Missouri courts have repeatedly disallowed an insurer's intervention in the underlying action. Augspurger v. MFA Oil Co., 940 S.W.2d 934, 937 (Mo.App. 1997); Estate of Langhorn, 905 S.W.2d 908, 910-11 (Mo.App. 1995).
Our courts have made it clear that when an insurer denies coverage, the coverage question is postponed to a later date. State ex rel. Farmers v. Weber, 273 S.W.2d 318, 324 (Mo.banc 1954). In Drennen, the court summarized this issue by holding that:
While prior judgments are conclusive as to all litigated issues, they were not tried to prove nor did the judgments establish that the loss was within the coverage of the policy. . . . The insurer should have the right to dispute the questions, which make it liable on its contract.
Drennen v. Wren, 416 S.W.2d 229, 234 (Mo.App. 1967) (emphasis added) (citing State ex rel. State Farm Mutual Automobile Ins. Co. v. Craig, 364 S.W.2d 343, 347 (Mo.App. 1963)). See also, Butters v. City of Independence, 513 S.W.2d 418, 425 (Mo. 1974).
A number of Missouri cases have established the procedure by which an insurance company may challenge the coverage question. See Augspurger, 940 S.W.2d at 937; Lodigensky, 898 S.W.2d at 665; Whitehead v. Lakeside Hospital Ass'n, 844 S.W.2d 475, 479-80 (Mo.App. 1992) ; Drennen v. Wren, 416 S.W.2d at 234. A garnishment proceeding is one forum in which Missouri courts have held that an insurer is entitled to raise a policy defense of the insured's intentional conduct. See Eakins v. Burton, 423 S.W.2d 787, 790 (Mo. 1968); State ex rel. Farmers Mutual Automobile Ins. Co. v. Weber, 273 S.W.2d at 324; Auspurger, 940 S.W.2d at 937; Lodigensky, 898 S.W.2d at 664; Whitehead, 844 S.W.2d at 479. The Eastern District recently decided this precise issue on identical facts. Cox v. Steck, 992 S.W.2d 221, 222 (Mo.App. 1999).
The determination of Paul's tort liability at the uncontested hearing, and State Farm's coverage question, as determined by the contract between the parties, are two different issues. The liability of an insurer to an injured party for damages becomes fixed and final by virtue of the judgment in the underlying lawsuit. The liability of the insurer to pay on its contract with the insured, however, presents a different issue. Drennen, 416 S.W.2d at 234. The insurance company's coverage is fixed by the insurance policy. Id. The garnishment action is concerned with the contract between the parties, not, as Paul contends, upon tort principles. Id. See also, Perkins v. Becker, 157 S.W.2d 550, 552-53 (Mo.App. 1942).
In State ex rel. Farmers v. Weber, the Missouri Supreme Court held that the insurer did not have an "interest" under the intervention statute and, therefore, was not entitled to intervene in the underlying tort action. 273 S.W.2d at 322. In reaching that decision, the court found that the insurer had the right after the decision in the underlying suit to litigate the question of coverage. Id. Specifically, the Weber court stated that the insurer had "the right to some day in some proper forum [to] litigate its liability upon the policy." Id.
In Lodigensky, this court again held that an insurer who has refused to provide a defense is bound by the determination of liability of its insured and resulting damages in the personal injury lawsuit, but such a determination does not bind it on the separate issue of coverage. 898 S.W.2d at 664-65. In reaching this conclusion, the court stated that the insurance company's argument that it had a right to intervene in the underlying action was "based on the [insurance company's] erroneous assumption that [the insurer] will or may be bound by a determination of coverage in this case." Id. at 664 (emphasis added). The court reasoned, "[A]n insurer who has refused to defend nonetheless historically has been permitted to try the coverage issue separately." Id. at 665.
The Augspurger court held that an excess insurance carrier could not intervene in the underlying action, because the insurer had "nothing to gain or lose from the direct operation of that judgment." 940 S.W.2d at 937. In determining whether an insurance company had the right to intervene, this court held that there were two contingencies. The first contingency involves the insured's liability, and the second contingency "is a question of coverage." Id. The court emphasized that the question of coverage is an issue that "has yet to be resolved and which [the insurer] is entitled to litigate in the pending garnishment proceedings." Id. The insurer was denied the right to have a determination of its coverage decided in the underlying action as well as in the declaratory judgment action, because its coverage of the insured was "an open question." Id. at 937-38.
Finally, Cox was decided on facts almost identical to those here. Cox sued Steck as a result of injuries he sustained during a bar brawl. 992 S.W.2d at 222. Steck was insured by State Farm, and State Farm withdrew from representation of Steck in the underlying tort claim, explaining that Cox's injuries were "expected or intended" by Steck and, therefore, not covered. Cox and Steck advised the trial court that they agreed that Steck negligently injured Cox and proceeded under a § 537.065 agreement. The trial court found that the defendant "negligently injured" Cox and entered a judgment for damages against Steck. Cox subsequently instituted garnishment proceedings. State Farm raised its policy defense that the injuries were intentionally caused in a barroom fight. The garnishment court determined that State Farm was bound by the trial court's holding in the underlying action that Steck acted negligently and sustained Cox's motion for summary judgment. State Farm appealed. The Eastern District held that "[a]n insurer has the right to contest the policy question in a subsequent garnishment action." Id. at 226. (citing Whitehead, 844 S.W.2d at 479, and State ex rel. Farmers v. Weber, 273 S.W.2d at 322). The court specifically held that the insurer was not barred by the trial court's determination of liability in the underlying action. Id. (citing State ex rel. Farmers v. Weber, 273 S.W.2d at 322). See also, State ex rel. Rimco v. Dowd, 858 S.W.2d 307, 308-09 (Mo.App. 1993). ( See also, Houston General Ins. Co. v. Lackey, where the court held that "[t]he question of coverage under the policy, however, was not addressed in the underlying tort suit and is not barred by res judicata." 907 S.W.2d 177, 179 (Mo.App. 1995).
Any attempt to distinguish Cox on the grounds that the plaintiff in Cox pleaded both negligence and intentional conduct, is without merit, particularly since the parties in Cox, in the underlying action, agreed that the insured's actions were negligent. The only factual distinction between this case and Cox is that, in the case before us, another court had earlier made a factual finding that Paul's actions were intentionally committed, by virtue of his guilty plea to the specific intent felony of assault.
Weber, Lodigensky, Augspurger, Cox, and the other cases cited, stand for the proposition that an insurer is entitled, as a matter of law, to present its policy defenses in the garnishment action. In each of these cases, the court emphasized that a garnishment proceeding was an appropriate place to litigate the issue of coverage. State ex rel. Farmers v. Weber, 273 S.W.2d at 322; Lodigensky, 898 S.W.2d at 664-65; Augspurger, 940 S.W.2d at 937-38; Cox, 992 S.W.2d at 296.
Nothing in this opinion devaluates or destroys an insurer's duty to defend a lawsuit brought against its insured, as the dissent argues. Its refusal to defend deprives the company of the right to contest the insured's liability and resulting damages. Its failure to defend does not nullify coverage nor does it create coverage.
The garnishment court held that because State Farm failed to defend the action against Paul, it breached its contract with Paul. As such, the garnishment court found, and James argues, it lost the opportunity to contest whether the injuries were negligently or intentionally inflicted.
The insurer's duty to defend is broader than its duty to indemnify. McCormack Baron Management Services, Inc. v. American Guarantee Liability Ins. Co., 989 S.W.2d 168, 170 (Mo.banc 1999). However, by failing to defend, it is not barred from presenting its policy defenses in a subsequent hearing. If an insurer fails to defend, it does so at its peril, irrespective of its good faith. Landie v. Century Indemnity Co., 390 S.W.2d 558 (Mo.App. 1965). The consequence for wrongful failure to defend is that an insurer forfeits the right to challenge the liability and resulting damages. Eakins v. Burton, 423 S.W.2d at 790. When the coverage question is at issue in a garnishment action, the insured's liability and the resulting damages have already been established. Whitehead, 844 S.W.2d at 480.
However, an insurer has no duty to defend if there is no coverage. Travelers Ins. Co. v. Cole, 631 S.W.2d 661, 664 (Mo.App. 1982). In Travelers v. Cole, the plaintiff pled that the insured's negligent acts were within the purview of coverage. Id. at 665. The court held that the "duty to defend does not depend alone upon the allegations of the petition filed against the insured." Id. Rather, the actual facts known to the insurer or which should have been reasonably known "also affect its duty to defend." Id.
See also Standard Artificial Limb, Inc. v. Allianz Ins. Co., 895 S.W.2d 205, 210 (Mo.App. 1995); Hawkeye-Security Ins. Co. v. Iowa National Mutual Ins. Co., 567 S.W.2d 719, 720-21 (Mo.App. 1978) (holding that if additional facts are ascertained which show that the action is not within the coverage of the policy, the insurer is also not obligated to afford a defense); Cox, 992 S.W.2d at 223 (the parties in the underlying action agreed that the actions of the insured were committed negligently).
CONFLICT OF INTEREST
James and the dissent contend that because the insurance company failed to assume control of the defense in the underlying tort lawsuit, it waived its right to contest the circuit court's determination regarding whether Paul negligently injured James. The dissent states it as follows: "[h]ad it chosen to defend Paul, State Farm could have interposed the defense that James' injuries were not caused by Paul's negligence, the proof of which would have defeated James' negligence action." (p. 17). Alternatively, the dissent suggests that the problem would be resolved by hiring, and paying, a second set of attorneys to represent the insured.
Neither James nor the dissent offers any procedure as to how an insurer would challenge a claim that the insured's conduct was intentional, where the pleading set forth a claim in negligence. James and the dissent would foreclose an insurer from presenting its defenses, irrespective of the egregious nature of the insured's acts, whenever a claimant and the defendant cooperate to make appropriate, legal use of the opportunities presented them by § 537.065.
James fails to recognize the conflict between the insurer, the insured, and the attorney, once the insurance company assumes control of the litigation. Varnal v. Weather, 619 S.W.2d 825, 827-28 (Mo.App. 1981). The argument, under this factual situation, ignores the conflict that arises once the insurance company takes control of the lawsuit. Craig v. Iowa Kemper Mutual Ins. Co., 565 S.W.2d 716, 723-24 (Mo.App. 1978) (overruled on other grounds); Duncan v. Andrew County Mutual Ins. Co., 665 S.W.2d 13, 18 (Mo.App. 1983).
The conflict of interest discussed in Cox is identical to the conflict that the insurer faced in the present case. Cox, 992 S.W.2d at 225. The Cox court found that an insurer's presence in the underlying action creates an untenable conflict between the insurer and the insured where the issue of coverage turns on whether the insured acted negligently as opposed to intentionally. Id. An insurer is not permitted to show an absence of negligence by proof that the insured's actions were intentional. In the adversarial position that the parties find themselves in the garnishment action, however, the insurer may properly prove that the action complained of was intentional. Id. (citing State Farm Bureau Mutual Automobile Ins. Co. v. Hammer, 177 F.2d 793, 801 (4th Cir. 1949)). Accordingly, the court held that it would be inequitable to apply collateral estoppel to bar an insurer from litigating the issue of coverage in a garnishment hearing. Id.
James argument that State Farm could have entered its appearance and controlled the defense is meaningless in the context of this case. Missouri does not permit an insurer "to try the coverage issue in the underlying personal injury lawsuit in which it has refused to provide a defense." Lodigensky v. American States Preferred Ins. Co., 898 S.W.2d at 665. In State ex rel. Mid-Century Ins. Co. v. McKelvey, the court addressed the "conflict of interest" issue:
There would in many instances be a conflict of interest on the insurance company's part, or a division of interest, with the insurance company being as much interested in establishing facts which would result in non-coverage as in establishing facts showing the insured's non-liability. The defense would be encumbered by the overhanging issue of policy coverage.
666 S.W.2d 457, 459 (Mo.App. 1984). This conflict does not disappear because the insurance company hires and pays additional lawyers.
In light of the inherent conflict of interest, any issue of controlling the defense is meaningless. State Farm could not have preserved its policy defenses and at the same time defended against James' lawsuit without creating far more serious problems.
PUBLIC POLICY
The issue presented here involves significant public policy considerations, but not in terms of unfairness to one party, or unilateral decisions that are made without assuming any risk. This court recently reaffirmed the public policy that an insured is prohibited from insuring against the consequences of its intentional acts. State Farm Fire Casualty Co. v. Caley, 936 S.W.2d 250, 251(Mo.App. 1997). The court's holding was based on the public policy that "permitting an insured to insure himself against his [intended or expected] acts would enable him to insure himself from bearing the consequences of his intentional acts." Id. at 253 (quoting Easley v. American Family Mutual Ins. Co., 847 S.W.2d 811, 812 (Mo.App. 1992)).
In Easley, the public policy question was again an issue. 847 S.W.2d at 812. Easley was seriously injured after the insured hit him in the chin with his fist. Id. This court held that a homeowner's insurance policy would not cover the injuries because the insured's conduct was "excluded both by the policy's exclusionary clause and by public policy which prohibits an insured from insuring against the consequences of his intentional acts." Id. at 814.
In both Caley and Easley, the courts noted that coverage is barred if it is shown that (1) the insured intended the acts causing the injury, and (2) injury was intended or expected from these acts. American Family v. Franz, 980 S.W.2d at 57-58 (citing American Family Mutual Ins. Co. v. Pacchetti, 808 S.W.2d 369, 371 (Mo.banc 1991)). See also State Farm v. Caley, 936 S.W.2d at 251; Easley, 847 S.W.2d at 812.
Adoption of Paul's position would nullify Missouri's longstanding public policy that an individual cannot insure himself against his intentional infliction of injury to another. Frequently a petition for damages will allege negligent acts, even though the facts may strongly suggest that they were committed intentionally. It is for this reason that intentional acts, when masqueraded as negligence, may have the effect of nullifying the well-established rule that as a matter of public policy "an insured's intentional infliction of damage cannot be covered by liability insurance." State Farm v. Caley, 936 S.W.2d at 253; Easley 847 S.W.2d at 812; Keeler v. Farmers and Merchants Ins. Co., 724 S.W.2d 307, 309 (Mo.App. 1987); Fidelity and Casualty Co. of New York v. Wrather, 652 S.W.2d 245, 247 (Mo.App. 1983).
We hold that the garnishment court erred when it determined that the findings and decision of the earlier decision were binding in the later garnishment proceeding.
There remains the final point regarding the circuit court's ruling of State Farm's motion for summary judgment. We presume that the basis for its ruling was that State Farm was bound by the court's finding in the uncontested hearing. We have determined that ruling to be in error.
In the present case, the facts are undisputed. Paul went to his wife's house, unsuccessfully attempted to break down the front door, retrieved a knife from his truck, broke out a window, entered the house, and stabbed Paul in the abdomen three times. In due course, Paul was charged and pled guilty to the class B felony of assault in the first degree. Section 565.050.
In the underlying tort action, the written psychiatric report was part of the evidence. It was the sole basis from which the trial court could find that Paul's actions were negligent and not intentional. However, the report provided no legal basis permitting the court to find that Paul could not formulate an intent to harm. We conclude, as discussed infra, that the law of this state prohibits a court from excusing an individual's intentional acts under the guise of diminished capacity caused from an overindulgence of alcohol.
The psychiatrist's report stated that "[a]t the time Mr. James was injured, Mr. Paul was incapacitated in that Mr. Paul was not capable of appreciating or comprehending the nature or consequences of his conduct." After determining that State Farm was not permitted to relitigate the issue, the garnishment court, based on this finding in the underlying tort action, concluded that Paul was not able to formulate an intent to harm James. The question then is whether the psychiatrist's written report set up a genuine factual dispute of Paul's intent. ITT Commercial Finance Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d at 376. The resolution of the issue entails a discussion of the facts surrounding the injury, and Paul's guilty plea to the specific intent felony of assault in the first degree.
The psychiatrist gave this opinion based on investigative police reports, Paul's deposition, and records from the Comprehensive Mental Health Services. The psychiatrist never interviewed or treated Paul. Nevertheless, we accept the doctor's conclusion for purposes of this point.
In cases involving exclusionary clauses, intent can be inferred as a matter of law, when the nature and circumstances of the insured's intentional acts are such that harm is substantially certain to result. American Family Mutual Ins. Co. v. Franz, 980 S.W.2d 56, 58 (Mo.App. 1998); United Services Automobile Association Casualty Ins. Co. v. Sorrell, 910 S.W.2d 774, 777-78 (Mo.App. 1995). "[T]he nature of the act itself is outrageous or egregious" so as to leave no other conclusion but that the act of stabbing the victim in the stomach three times was intentional. American Family v. Franz, 980 S.W.2d at 58. In such instances, the "courts are reluctant to rely solely upon an insured's own self-serving testimony about the intention behind the act, since such an approach would render the exclusion meaningless." Id. (citing Truck Ins. Exchange v. Pickering, 642 S.W.2d 113, 116 (Mo.App. 1982)).
The nature and circumstances of the insured's intentional acts were such that harm was substantially certain to result. American Family v. Franz, 980 S.W.2d at 58; United Services v. Sorrell, 910 S.W.2d at 777-78. The undisputed facts are that Paul went to his truck, obtained a knife, returned to the rear of the house, broke a window, searched for the victim, and then stabbed him in the stomach three times. These acts leave no other conclusion but that Paul knew and intended the injury that resulted. Thus, the psychiatrist's written report presented in the underlying tort action did not convert an intentional act into one of negligence upon a theory that the actor's capacity was diminished.
Another factor must be considered. The psychiatrist's observation that alcohol was a contributing factor to Paul's diminished capacity does not permit the court to draw the legal conclusion lessening his culpability. Missouri does not recognize alcohol, or drugs of any type, to excuse one's intentional conduct. Travelers Ins. Co. v. Cole, 631 S.W.2d at 664. It is irrelevant to the issue of his intention.
The psychiatrist's conclusion of "diminished capacity" was based in part on Paul's admission that he had drunk almost a 12-pack of beer and, specifically, that alcohol contributed to the violent crime. The court in Cole held that Travelers was not required to defend Cole under his homeowner's insurance policy, even though the insured may have been under the influence of codeine, ampicillin, and alcohol. Id. at 664. Dismissing Cole's defense that he was under the influence of codeine, ampicillin, and alcohol, the court stated that "the law must not permit the use of such stimuli to become a defense for one's actions." Id. (quoting Hanover Ins. Co. v. Newcomer, 585 S.W.2d 285, 289 (Mo.App. 1979)).
In Hanover Ins. Co. v. Newcomer, this court held that swinging a machete around his residence, which resulted in an injury to the plaintiff, was an intentional act regardless of the fact that he was under the influence of intoxicants and marijuana. 585 S.W.2d at 289. The court explained that his intoxicated condition was of no consequence, as it provided no defense that his actions were unintentional. Id. In both Travelers Ins. Co. v. Cole and Hanover Ins. Co. v. Newcomer, the courts refused to permit either the influence of alcohol or drugs to affect the expected or intended results of the insured's conduct. Accordingly, the psychiatrist's report that alcohol contributed to his opinion that Paul did not intend to intentionally injure James must not be permitted "to become a defense for one's actions." Id.
Also, the guilty plea cannot be ignored. We note at the outset that a guilty plea to a criminal charge is admissible as evidence of a person's intent, although not conclusive. Curtain v. Aldrich, 589 S.W.2d 61, 65 (Mo.App. 1979). It may be explained; however, it remains "a solemn confession of the truth of the charge." Pruiett v. Wilform, 477 S.W.2d 76, 80 (Mo. 1972).
Assault in the first degree, § 565.050, is a specific intent felony. State v. Gonzales, 652 S.W.2d 719, 722-23 (Mo.App. 1983). A person who pleads guilty to assault in the first degree admits to knowingly causing or attempting to cause serious physical injury to another person. State v. Thomas, 972 S.W.2d 309, 312-13 (Mo.App. 1998). A person acts knowingly with respect to his conduct "when he is aware of the nature of his conduct or that those circumstances exist; or . . . with respect to a result of his conduct when he is aware that his conduct is practically certain to cause that result." Section 562.016.3. By pleading guilty to assault in the first degree, Paul admitted to knowingly causing injury to James.
Economy Fire and Casualty Co. v. Haste addresses the precise point under consideration here. 824 S.W.2d 41, 46-47 (Mo.App. 1991). In Haste, this court considered whether Robert Berdella's homeowner's insurance provided liability coverage for the tortured deaths of the insured's victims. The lawsuits included claims for all four individuals for personal injuries suffered before they died, and a wrongful death claim for each. Berdella pled guilty to murder in the first degree of Mr. Sheldon, and to murder in the second degree of the three other individuals. The guilty plea included evidence that Berdella "expected or intended to harm the victims by torturing them with physical, sexual and psychological abuse." Id. at 45.
With respect to the personal injuries sustained by each of the decedents, the court held that the evidence gleaned from the record showed that Berdella's actions in torturing them left no genuine issue of fact. Id. at 46. This court noted that because it was clear that he intended the injuries, the insurance coverage was invalidated. Id.
However, with respect to the wrongful death lawsuits, the court noted that Berdella pleaded guilty to second degree murder of three of the victims,. These pleas left open the issue of his intent to kill. Id. at 46. Berdella had testified that he had not meant to kill the men but rather to keep them alive so that he could torture them further. The court further noted that Berdella's guilty plea to second degree murder did not require, as an element, a specific intent to kill. Thus, the court held that there was a genuine issue of material fact with respect to Berdella's intent to kill these three men. Id.
The court reached a different result regarding Mr. Sheldon's death. According to the evidence, Mr. Sheldon's death was caused by Berdella placing a plastic bag over his head and securing the bag with a rope. Id. at 45. This court held that summary judgment in favor of the insurance company was proper because Berdella's act in causing Mr. Sheldon's death was expected and intended. Id. at 47.
Aside from the fact that Paul's alcohol consumption did not legally reduce his intentional acts to a state of "diminished capacity," and disregarding his guilty plea to a specific intent felony, and that his guilty plea testimony dispelled any notion that he was not of sound mind at the time of the crime, stabbing another individual in the stomach three times amounted to intentional conduct in that harm was substantially certain to result, thereby excluding coverage as a matter of law.
For the plea of guilty to be accepted by the court, it must be given voluntarily, which includes the issue of an individual's mental health. "All persons are presumed to be free of mental disease or defect excluding responsibility." Section 552.030.6. Section 552.030.1 instructs that an individual who pleads not guilty to a crime by reason of mental disease or defect is not responsible for his criminal conduct if, at the time he committed the crime, the individual "was incapable of knowing and appreciating the nature, quality, or wrongfulness of his conduct." Implicit in the voluntariness of a guilty plea is a finding that the individual is free of mental disease or defect at the time of the crime. Absent that determination, the plea court cannot accept the plea. In that respect, the plea court must determine that the individual pleading guilty is free of mental disease and defect at the time of the crime. Paul testified at his hearing that he was seeing a counselor "just to get through" this time. He also told the court that when he saw his estranged wife, he "snapped", and that "it just enraged me." On two separate occasions during his guilty plea, Paul testified that he did not have a history of mental or emotional problems and that he was in good mental health. Therefore, the guilty plea, and the plea court's finding, dispels any notion that Paul was not of sound mind at the time of the crime.
Accordingly, the judgment, in all respects, is reversed and the case is remanded with directions to set aside the summary judgment in favor of the garnishor and enter judgment for State Farm.
Lowenstein, Ulrich, Spinden, Smart, Judges, concur.
Smart, Judge, concurs in separate opinion.
Smith, Judge, concurs in separate opinion.
Ellis, Judge, dissents in separate opinion, in which Breckenridge, Chief Judge, Stith and Howard, Judges, concur.
Albert A. Riederer, Judge, not voting, as he resigned from the court prior to disposition.
Although I concur with the majority in reversing the judgment for James, I write separately to express separate grounds for doing so. And, although I agree with the majority in reversing the judgment and remanding, I disagree that on remand that the trial court should be directed to enter judgment for State Farm. Rather, for reasons discussed, infra, I would remand for further proceedings to determine the issue of coverage.
Both the majority and the dissent agree that State Farm is entitled to litigate the issue of coverage in this garnishment action. The disagreement is over whether in litigating this issue, State Farm should be allowed to litigate certain underlying factual issues, which it claims are essential to a determination of coverage. Of course, some of the implicated factual issues would be relevant not only to a determination of coverage, but to a determination of liability in the underlying tort action. The dissent would hold that State Farm, due to its failure to defend the insured in the underlying tort action, is precluded from re-litigating the issues of liability and damages, and the essential facts found in determining the same.
In its discussion regarding State Farm being limited in the garnishment action as to what factual issues it can litigate in determining if there is coverage, it is unclear whether the dissent is relying on public policy considerations or the doctrine of collateral estoppel. It cites three cases in support of limiting what factual issues State Farm can litigate in determining the coverage question, Lodigensky v. American States Preferred Insurance Co. , 898 S.W.2d 661, 664-65 (Mo.App. 1995); Whitehead v. Lakeside Hospital Ass'n , 844 S.W.2d 475, 480-82 (Mo.App. 1992); and Finkle v. Western Automobile Insurance Co. , 26 S.W.2d 843, 849 (Mo.App. 1930). Citing Whitehead and Finkle , the court in Lodigensky stated that as a "matter of public policy" an insurer "forfeits" its right to litigate its insured's liability where it has previously refused to defend. Lodigensky , 898 S.W.2d at 664-65 n. 4. The court does not explain what public policy is being furthered. The courts in the other two cases did not indicate whether they were relying on public policy or collateral estoppel in holding as they did.
As to the rule in question being a matter of public policy, I can certainly see the equity of preventing an insurer, that had an opportunity to manage and control the underlying action, but chose not to defend, from re-litigating issues that were determined in that action in a subsequent proceeding in which the insured is a real party in interest. However, in a garnishment action, such as here, where the insured has no personal exposure as to the satisfaction of the judgment on which execution is sought, I fail to see how public policy is served in allowing the plaintiff to use the rule of preclusion, espoused by the dissent, to satisfy the judgment it received in the uncontested action below. Why should the plaintiff benefit from a breach by an insurer as to a duty owed to an insured? As a matter of public policy, where the insured does not benefit in any fashion by the enforcement of the rule in question, I would hold that it has no application. Hence, in the instant case I do not believe that the rule should be invoked to limit what factual issues State Farm can litigate in determining coverage, as the dissent would do.
As to collateral estoppel, neither the dissent nor the cases on which it relies invoke the doctrine as a rationale for limiting State Farm's evidence in the instant action. In Lodigensky , the court did, in a footnote, discuss collateral estoppel as a basis for such a limitation, citing Oates v. Safeco Insurance Co. of America , 583 S.W.2d 713, 719 (Mo. banc 1979). Lodigensky , 898 S.W.2d at 665 n. 5. However, given the conflict between State Farm and its insured in the underlying action, as discussed by the majority and the dissent, fairness would dictate that they were not in sufficient privity so as to invoke the doctrine here to limit what State Farm can litigate. Oates , 583 S.W.2d at 719-21.
The dissent does cite to 14 Lee R. Russ Thomas F. Segalla, Couch on Insurance 3d § 202:12 (1999) for the proposition that the insurer, where it is established that it has a duty to defend and refuses to do so, is bound in a subsequent coverage proceeding, under the doctrine of collateral estoppel, by the factual determinations which were essential to the judgment of tort liability found in the underlying action.
The majority, having concluded that the garnishment court erred in granting summary judgment to James, would reverse and remand with instructions for the court to enter summary judgment for State Farm. Although I would reverse, I would remand for further proceedings. This is so in that I believe that there are disputed material facts as to whether there is in fact coverage.
Although it is unnecessary to my concurrence, it is worth noting that in Whitehead , cited favorably by the dissent, this court opined that: "Where the claim is actually outside the policy coverage, the refusal of the insurer to defend is a justified refusal, the insurer is not guilty of a breach of contract and incurs no legal liability by its action." Whitehead , 844 S.W.2d at 481. This would appear to be contrary to McCormack Baron Management Services, Inc. v. American Guarantee Liability Insurance Co. , 989 S.W.2d 168, 170 (Mo. banc 1999), which the dissent cites for the proposition that it is the "potential or possible liability" of coverage, based solely on the language of the petition, that determines a duty to defend.
I concur in the majority opinion. I write simply to say that the majority's discussion of the issue of conflict of interest is, in my view, not necessary to resolution of the issue before the court, and I do not concur in that discussion. This case is resolved simply by the common sense rule that it is only when an insurer wrongly refuses to provide a defense that the insurer is recluded from relitigation of the issues actually litigated in the underlying preceeding. Whitehead v. Lakeside Hosp. Ass'n , 844 S.W.2d 475, 481 (Mo.App. 1992). When, as here, the refusal to provide a defense is justified, the insurer is bound by nothing and may relitigate any issue in the garnishment proceeding.
I respectfully dissent. For the first time ever, the majority today holds that an insurance company, having a duty to defend its insured in the event of suit by the express terms of the insurance contract it has drafted, may unilaterally breach that contractual obligation to provide a defense without consequence. The majority position is contrary to, and unsupported by, existing case law, including decisions of our Supreme Court.
While the majority says the result it reaches is necessary in order to avoid creating a conflict of interest for the insurer, this is factually incorrect. Any purported conflict can be avoided simply by the insurer hiring an independent attorney to defend the insured in the tort action, without the insurer managing or controlling the litigation. This would eliminate any potential conflict, would allow the insurer the right to litigate liability in the coverage suit, and, most importantly, would avoid the undesirable approach of the majority decision, which relieves the insurer of its duty to defend in any case in which the insurer believes the insured's intent is an issue.
I. FACTS
A recitation of the factual background, including certain key facts not mentioned by the majority, is essential to a complete understanding of the basis for the trial court's finding in the tort action that Paul did not act intentionally and the reasons the garnishment court held it was bound by this factual determination, just as it was bound by other factual determinations in the underlying tort action.
On June 8, 1989, Robert M. Paul was insured through a policy of insurance with State Farm which provided, inter alia, personal liability coverage in the amount of $300,000 per occurrence. The coverage was described in the policy as follows:
Coverage L — Personal liability. If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage to which this coverage applies, caused by an occurrence, we will: (1) pay up to our limit of liability for the damages for which the insured is legally liable; and (2) provide a defense at our expense by counsel of our choice. We may make any investigation and settle any claim or suit that we decide is appropriate. Our obligation to defend any claim or suit ends when the amount we pay for damages resulting from the occurrence equals our limit of liability.
Reference to State Farm's policy is to the Homeowner's Extra policy, form FP-7195 (6/86).
Under "Section II — Exclusions" the policy described those occurrences not covered: "(1) bodily injury or property damage which is expected or intended by an insured; or (2) to any person or property which is the result of willful and malicious acts of an insured." The term "occurrence" was defined in the policy as "an accident, including exposure to conditions, which results in: a. bodily injury; or b. property damage during the policy period."
A. TORT ACTION
On February 9, 1992, Danny James filed an action against Paul in the Circuit Court of Jackson County alleging that Paul carelessly and negligently caused injury to James on June 8, 1989, and praying for an award of money damages. Paul forwarded the petition to State Farm on February 13, 1992, and State Farm responded by letter on February 24, 1992 reserving its right to deny coverage because it was questionable whether the allegations met the definition of "occurrence," whether the injury was expected or intended, and whether the injury was the result of a willful or malicious act.
Shortly after the incident of June 8, 1989 which formed the basis of James' suit, Paul had filed a claim with State Farm seeking liability coverage for himself for any injury claims made by James. State Farm responded on June 27, 1989, reserving its right to deny coverage to Paul based on questions of whether the bodily injury was expected or intended by an insured, and whether it was the result of a willful and malicious act of any insured. On September 26, 1989, State Farm again reserved its right to deny coverage based upon the two reasons previously cited, with the additional reason that any injury James received was not caused by an "occurrence" as defined in the policy. After receiving a letter from counsel representing James dated October 19, 1989, State Farm finally denied coverage for the claim on October 24, 1989. In a letter to Paul, it stated that the facts determined by its investigation did not meet the insuring agreement with respect to the definition of an "occurrence," and the bodily injury alleged by James was either expected or intended by an insured or the result of a willful or malicious act caused by an insured. The letter went on to request that Paul submit lawsuit papers to the insurance company should he receive any in the future.
State Farm's letter recommended that Paul retain an attorney to represent him against a possible judgment in excess of the policy limit or in the form of punitive damages. It did not indicate that Paul should seek representation to defend against a judgment of actual damages within the policy limit. However, State Farm informed Paul that it had not yet made a decision about coverage and would not defend the suit on his behalf until it made a decision, which it anticipated to be no later than March 6, 1992.
As noted previously, the lawsuit was filed on February 9, 1992. State Farm did not provide a defense for Paul while conducting its coverage investigation. On March 12, 1992, and again on March 20, 1992, State Farm denied coverage for the lawsuit, citing the definition of "occurrence" and the company's decision that James' injury was either expected, intended, or the result of a willful and malicious act. At the same time, State Farm issued another letter to Paul, also dated March 20, 1992, acknowledging receipt of the lawsuit and reserving its rights under the policy, and stating that coverage was "questionable."
On April 1, 1993, counsel for James submitted a settlement demand to State Farm, which was rejected on April 8, 1993. State Farm again instructed Paul to forward to it any amended petition he might receive for further review. On July 29, 1993, James filed a First Amended Petition, which was in one count and which State Farm concedes in its Brief alleged a cause of action based solely on negligence. The Amended Petition was forwarded to State Farm, and coverage was denied on August 23, 1993. However, on September 2, 1993, State Farm informed Paul's attorney that it might provide a defense to the lawsuit if Paul forwarded a copy of his deposition and allowed State Farm to take another recorded statement, to which counsel agreed. Hearing nothing further from State Farm, Paul subsequently entered into settlement negotiations with James and notified State Farm on two occasions that he was doing so. State Farm did not bother to respond until November 16, 1993, at which time it advised that it had made no reaffirmation of any denial of coverage, but did not indicate whether it had decided to provide Paul a defense. There is no indication in the record of any further contact from State Farm.
After more than a year of negotiations, on September 30, 1994, Paul entered into a settlement agreement and covenant not to execute with James pursuant to § 537.065. On January 13, 1995, the case proceeded to trial in Jackson County Circuit Court. Evidence was presented, including expert medical evidence from doctors at Midwest Psychiatric Consultants regarding Paul's mental condition. At the conclusion of the trial, the court found in favor of James and entered judgment against Paul for $285,000 plus prejudgment interest of $45,886.31 and costs. Among its findings, the trial court stated:
This and all subsequent statutory references are to RSMo (1994) unless otherwise indicated. Section 537.065 states in pertinent part:
Any person having an unliquidated claim for damages against a tort-feasor, on account of bodily injuries or death, may enter into a contract with such tort-feasor or any insurer in his behalf or both, whereby, in consideration of the payment of a specified amount, the person asserting the claim agrees that in the event of a judgment against the tort-feasor, neither he nor any person, firm or corporation claiming by or through him will levy execution, by garnishment or as otherwise provided by law, except against the specific assets listed in the contract and except against any insurer which insures the legal liability of the tort-feasor for such damage and which insurer is not excepted from execution, garnishment or other legal procedure by such contract.
On June 8, 1989, Defendant, ROBERT M. PAUL, suffered from the medical conditions of alcoholism, adjustment disorder with depression, anxiety and obsessive disorder with the result of diminished mental capacity.
On June 8, 1989, Defendant, ROBERT M. PAUL, sustained physical injuries and was intoxicated, which, together with his medical disorders then affecting him, caused him to be in shock, and rendered Defendant, ROBERT M. PAUL, unable to control or appraise the nature of his conduct.
On June 8, 1989, Defendant, ROBERT M. PAUL, while incapacitated and unable to control or appraise his conduct, wounded Plaintiff, DANNY T. JAMES, in three places, with a knife.
The violent events of June 8, 1989, during which Plaintiff was injured, were the result of ROBERT M. PAUL's sudden disinhibition and loss of control resulting from a combination of fragile borderline personality structure, acute adjustment reaction to emotional distress and intoxication with alcohol.
At the time Plaintiff, DANNY T. JAMES, was injured, Defendant, ROBERT M. PAUL, was not capable of appreciating or comprehending the nature or consequences of his conduct. Defendant, ROBERT M. PAUL, did not intend or expect for Plaintiff, DANNY T. JAMES, to be injured (emphasis added).
Thus, the trial court in the underlying tort action found that Paul did not act intentionally because he was unable to appreciate the nature or consequences of his conduct. Accordingly, the court entered judgment in favor of James based on the claim of negligence.
B. GARNISHMENT AND COVERAGE ISSUES
James subsequently instituted a garnishment action against State Farm for the amount of the judgment. State Farm defended the action on the basis of its policy exclusion for intentional acts, as well as the definition of "occurrence." Both parties filed motions for summary judgment. On January 29, 1998, the garnishment court granted James' motion for summary judgment and denied that of State Farm, and ordered State Farm to pay the judgment amount of $330,886.31 plus post-judgment interest of $90,728.08. The court issued 52 findings of fact and conclusions of law, some of which incorporated the findings of the January 13, 1995 judgment. Among its findings, the court stated:
28. The First Amended Petition filed by Plaintiff, DANNY T. JAMES, against Defendant, ROBERT M. PAUL, on July 29, 1993, did state a claim that was a covered claim under the language of the homeowner's insurance policy issued by Garnishee, STATE FARM, to Defendant, ROBERT M. PAUL, which policy was in full force and effect on June 8, 1989.
29. STATE FARM did have a duty to defend the First Amended Petition filed by Plaintiff, DANNY T. JAMES, in the underlying tort action.
30. . . . The failure of STATE FARM to provide a defense of the Amended Petition was a breach of the duty to defend owed by STATE FARM to Defendant, ROBERT M. PAUL, under the homeowner's insurance contract.
32. STATE FARM had notice of the First Amended Petition filed by Plaintiff against Defendant, ROBERT M. PAUL, and that it specifically contained a claim that Defendant, ROBERT M. PAUL, did not intend or expect to injure Plaintiff on June 8, 1989.
33. STATE FARM did have an opportunity to defend and to control the defense of the Plaintiff's claim that Defendant could not control or appraise the nature of his conduct at the time that he injured DANNY T. JAMES, and that the injuries were negligently inflicted, which was specifically plead and at issue in the First Amended Petition filed in the underlying action.
34. STATE FARM did freely and voluntarily make the decision not to defend the First Amended Petition filed by Plaintiff against Defendant, ROBERT M. PAUL, with full knowledge of the facts alleged, the terms and provisions by which it was bound in the homeowner's insurance contract, and its rights, duties and obligations as insurer of Defendant, ROBERT M. PAUL.
The garnishment court also addressed the intent issue and how it affected coverage in its findings and conclusions, stating:
35. In the underlying tort action it was necessary for this court to determine whether or not Defendant, ROBERT M. PAUL, suffered from medical conditions of alcoholism, adjustment disorder with depression, anxiety and obsessive behavior with the result of diminished capacity; and whether or not, Defendant, ROBERT M. PAUL, suffered from physical injury that caused him to be in shock. The court was required to determine whether or not the medical conditions afflicting Defendant, ROBERT M. PAUL, prevented him from being able to control or appraise the nature of his conduct, and therefore whether or not he expected or intended to injure Plaintiff, DANNY T. JAMES, because the case was plead and submitted on the theory of unintentional conduct.
40. . . . ROBERT M. PAUL did not act willfully or maliciously at the time DANNY T. JAMES was injured (emphasis added).
41. From the perspective of Defendant, ROBERT M. PAUL, the injury to Plaintiff, DANNY T. JAMES, was not expected or intended (emphasis added).
47. The events of June 8, 1989, wherein Plaintiff, DANNY T. JAMES, was injured by Defendant, ROBERT M. PAUL, do constitute an occurrence as that term is defined in Homeowner's Insurance Policy Number 25-62-6343-2. ROBERT M. PAUL did not intend or expect to cause injury to DANNY T. JAMES. The injury was accidental because ROBERT M. PAUL did not intend or expect to injure DANNY T. JAMES (emphasis added).
49. The claim for personal injury brought by Plaintiff, DANNY T. JAMES, against Defendant, ROBERT M. PAUL, in his First Amended Petition filed in the underlying tort action in this case which resulted in this Court's Judgment entered on the 13th day of January, 1995, is not excluded by the Exclusion to Coverage L contained in Homeowner's Insurance Policy Number 25-62-6343-2, which provides that coverage will not apply to bodily injury that is either expected or intended by an insured, or that is the result of willful and malicious acts of an insured (emphasis added).
52. STATE FARM has a contractual duty of indemnity created by its Homeowner's Insurance Policy Number 25-62-6343-2, which requires STATE FARM to pay the judgment entered by this court on the underlying tort claim that was entered in this action on the 13th day of January, 1995, together with accrued post-judgment interest.
II. STANDARD OF REVIEW
Our review of the summary judgment below is essentially de novo. ITT Commercial Fin. v. Mid-Am. Marine , 854 S.W.2d 371, 376 (Mo.banc 1993). We review the facts in the light most favorable to the party against whom summary judgment was entered, and accord that party the benefit of all reasonable inferences from the record. Bryan v. Missouri State Highway Patrol , 963 S.W.2d 403, 406 (Mo.App.W.D. 1998). We will affirm the trial court's ruling if we find that no genuine issues of material fact exist and the movant was entitled to a judgment as a matter of law. Blevins v. State Farm Fire Cas. Co. , 961 S.W.2d 946, 948 (Mo.App.W.D. 1998). If the trial court's ruling is correct as a matter of law under any theory, we will affirm the grant of summary judgment even though it may have been entered for the wrong reason. Barker v. Danner , 903 S.W.2d 950, 954 (Mo.App.W.D. 1995); Advance Concrete Asphalt Co. v. Ingels , 556 S.W.2d 955, 958 (Mo.App.W.D. 1977).
III. ANALYSIS
A. DUTY TO DEFEND
In this case, James' First Amended Petition was in one count. State Farm concedes in its Brief that the First Amended Petition alleged a cause of action based solely on negligence. As detailed, supra, State Farm was provided a copy of the First Amended Petition and was requested to provide a defense on several occasions. It refused. At the hearing, unrefuted evidence supporting the allegations of negligence was presented, including expert evidence from a medical doctor at Midwest Psychiatric Consultants. From the evidence, the trial court expressly found that Paul neither intended nor expected James to be injured, and accordingly found Paul liable in negligence for James' injuries and awarded damages.
In the subsequent garnishment proceeding, State Farm claimed that it was not liable for the judgment. It raised what it asserted were "coverage" issues, arguing that (a) the incident giving rise to the judgment was not an "occurrence" as defined in the policy and/or (b) the incident resulting in the judgment was encompassed within the policy exclusions because (1) the injuries were either expected or intended by the insured, or (2) the result of willful and malicious acts by the insured.
The majority holds that the garnishment court erred in granting summary judgment to James because it deprived State Farm of the opportunity to present these "policy" defenses. In its brief reference to the duty to defend, the majority cites Travelers Ins. Co. v. Cole , 631 S.W.2d 661 (Mo.App.E.D. 1982) and several other Court of Appeals decisions, suggesting that the duty to defend is not dependent solely on the allegations of the petition. Maj. Op. at 11. In so doing, and contrary to the mandate of Art. V, § 2 of the Missouri Constitution that we follow our Supreme Court's most recent controlling decision, the majority wholly disregards the clear, cogent and concise teachings of our Supreme Court. Schumann v. Missouri Highway Transp. Comm'n , 912 S.W.2d 548, 552 (Mo.App.W.D. 1995).
An insurer's duty to defend is broader than its duty to indemnify. McCormack Baron Management Serv., Inc. v. American Guarantee Liab. Ins. Co. , 989 S.W.2d 168, 170 (Mo.banc 1999). Any suggestion '"that the insured must prove the insurer's obligation to pay before the insurer is required to provide a defense would make [the duty to defend] provision a hollow promise.'" Id . ( quoting 13 John A. Appleman Jean Appelman, Insurance Law and Practice, § 4684 (rev.vol. 1976)).
"The duty to defend arises whenever there is a potential or possible liability to pay based on the facts at the outset of the case and is not dependent on the probable liability to pay based on the facts ascertained through trial." Id . The duty to defend is determined by comparing the language of the insurance policy with the allegations in the complaint. See Butters v. [City of Independence] , 513 S.W.2d 418, 424 (Mo. banc 1974); Zipkin v. Freeman , 436 S.W.2d 753, 754 (Mo.banc 1968). If the complaint merely alleges facts that give rise to a claim potentially within the policy's coverage, the insurer has a duty to defend. See Butters , 513 S.W.2d at 424; Zipkin , 436 S.W.2d at 754.
McCormack Baron , 989 S.W.2d at 170-71. Moreover, where a petition states some grounds of liability covered by a policy, the duty to defend is triggered even if some of the allegations or claims of the petition are uninsured or beyond the coverage. Butters , 513 S.W.2d at 424-25; Wood v. Safeco Ins. Co. of America , 980 S.W.2d 43, 47 (Mo.App.E.D. 1998); Scottsdale Ins. Co. v. Ratliff , 927 S.W.2d 531, 534 (Mo.App.E.D. 1996); Harold S. Schwartz Assoc., Inc. v. Continental Cas. Co. , 705 S.W.2d 494, 497 (Mo.App.E.D. 1985).
When an insurer breaches its duty to defend, among other things, it is bound by the determinations of liability and damages made in the case it refused to defend. Lodigensky v. American States Preferred Ins. Co. , 898 S.W.2d 661, 664-65 (Mo.App.W.D. 1995); Whitehead v. Lakeside Hosp. Ass'n , 844 S.W.2d 475, 480-82 (Mo.App.W.D. 1992); Finkle v. Western Auto. Ins. Co. , 26 S.W.2d 843, 849 (Mo.App.E.D. 1930). While the insurer may challenge any coverage finding made in the underlying tort action, it is, of necessity, bound by the factual determinations essential to a finding of liability and is not free to re-litigate those issues in a subsequent garnishment action.
In applying these principles, the majority separates out the factual element of "intent" from other factual elements, and argues that intent can be decided separately and independently in the garnishment action because it is a coverage issue. It is erroneous to do so. Intent is a factual issue, and while it may be essential for proof of coverage, it is also essential for proof of liability in the tort action.
Generally, where an insurer refuses to defend an action under circumstances where it has a duty to defend, the insurer is bound under the doctrine of collateral estoppel by the facts determined in the trial of such action which are essential to judgment of liability , unless the judgment was procured by the fraud and collusion of the insured and the injured parties, and bound by the underlying complaint in determining its duty to defend. However, a party will not be precluded from litigating policy coverage in a subsequent proceeding if the question of coverage turns on facts which are nonessential to judgment of tort liability .
14 Couch on Insurance 3d, § 202:12 (1999) (emphasis added).
The majority would permit State Farm to re-litigate intent simply by saying that it was essential in both cases. If such were the law, issues such as causation and other individual facts which might affect coverage could also be re-litigated. Indeed, any issue relevant to both liability and coverage could be re-litigated. This would clearly conflict with and render void the promise that upon breach of the duty to defend, an insurer is bound by the determinations of liability and damages made in the case it refused to defend.The correct application of the principles relating to the effect of a breach of the duty to defend compels the conclusion that the garnishment court's grant of summary judgment was correct.
In the instant appeal, State Farm's policy defined an "occurrence" as "an accident." "[W]hen a liability policy defines 'occurrence' as meaning "accident' . . . Missouri courts [consider this] to mean injury caused by the negligence of the insured.'" Wood , 980 S.W.2d at 49 ( quoting Great Am. Ins. Co. v. Pearl Paint Co. , 703 S.W.2d 601, 602 (Mo.App.E.D. 1986). Accordingly, under Missouri case law, an "occurrence" for purposes of State Farm's policy means "'an injury caused by the negligence of the insured.'" Id .
James' petition in the tort action was a single count based on negligence. Therefore, there could be no liability imposed on Paul in that case without a finding of negligence. The finding of liability in the tort case necessarily involved a determination of negligence by the trial court. Indeed, as noted supra, the trial court expressly found that Paul suffered from diminished capacity at the time of the incident and was not capable of appreciating or comprehending the nature and consequences of his conduct, and that he did not intend or expect for James to be injured.
The garnishment court had before it, considered and relied on the pleadings, testimony and evidence presented in the underlying tort action and the findings and judgment therein. As pointed out, supra, when an insurer breaches its duty to defend, among other things, it is bound by the determinations of liability and damages made in the case it refused to defend. Lodigensky , 898 S.W.2d at 664-65; Whitehead , 844 S.W.2d at 480-82; Finkle , 26 S.W.2d at 849. Since it chose not to defend in the underlying tort case, State Farm was bound by the determination of liability in that case which necessarily was dependent on the factual findings essential to a determination of negligence, including the findings of causation, diminished capacity and lack of intent.
These findings of fact are the ones which were binding in the subsequent garnishment action. It was then up to the garnishment court to decide the coverage issue, i.e., whether, in light of these findings, the incident constituted an "occurrence." This coverage issue had not been previously decided. However, in ruling on the question, the garnishment court necessarily was bound by the facts found in the tort case that an incident occurred, caused by Paul, and it was not willful but the result of diminished capacity. These findings were essential to the judgment of liability and, as it turns out, were dispositive of the coverage issue, for it meant that the incident was an "occurrence" under State Farm's policy. See 14 Couch on Insurance 3d, § 202:12 (1999) .
Contrary to the majority's position, State Farm was given the opportunity to present its policy defense that the incident was not an occurrence in the garnishment. However, because of the applicable law, the garnishment court properly ruled the issue against it. James was entitled to summary judgment on that issue as a matter of law.
For the same reason, James was entitled to summary judgment on the other coverage issues raised by State Farm in the garnishment court. First, State Farm contended that the policy exclusion for intentional conduct was applicable. It is axiomatic that "negligent" and "intentional" conduct are contradictory and mutually exclusive. Gallatin v. W.E.B. Restaurants Corp. , 764 S.W.2d 104, 105 (Mo.App.W.D. 1988). Being bound by the negligence-based liability determination, the garnishment court could only decide State Farm's coverage claim based on the intentional conduct exclusion in favor of James.
Similarly, State Farm's contention that the willful and malicious acts exclusion was applicable also fails. Depending upon the circumstances, an act may be negligent or it may be willful and malicious misconduct but it cannot be both "at one and the same time because the ultimate 'proof of negligence necessarily disproves willfulness and vice versa.'" Ervin v. Coleman , 454 S.W.2d 289, 291 (Mo.App.S.D. 1970) ( quoting Agee v. Herring , 298 S.W. 250, 252 (Mo.App.W.D. 1927). As it is bound by the negligence-based liability determination, State Farm's coverage claim based on willful and malicious acts was properly ruled against it.
Thus, contrary to the majority's and State Farm's assertions, State Farm was given an opportunity to present its "coverage" defenses in the garnishment action. However, because it breached its duty to defend, it was precluded from contesting the factual determinations essential to the ultimate finding of liability made in the underlying tort action. Accordingly, as discussed above, James was entitled to judgment as a matter of law on State Farm's coverage issues, and the garnishment court did not err in granting James' motion for summary judgment.
The rationale which compels the conclusions here reached has been developed in our case law over the last fifty or more years. In this case, State Farm was notified of James' action against Paul and provided with copies of the petition. Numerous requests were made for it to defend the action. Had it done so, it could have controlled the litigation. It refused, and in so doing breached its duty to defend.
The decision by the insurer, as to whether it will refuse to defend because the claim upon which the action against the insured grounded is outside the coverage of the policy, is attended with risk.
* * *
Where the claim comes within the policy coverage, and so within the duty of the insurer to defend, the refusal of the insurer to do so is unjustified, and the insurer is guilty of a breach of contract. That the refusal of the insurer to defend on the ground that the claim is outside the policy is an honest mistake, nevertheless constitutes an unjustified refusal and renders the insurer liable to the insured for all resultant damages from that breach of contract.
Whitehead , 844 S.W.2d at 481. When an insurer is bound to protect another from liability, it is bound by the result of the litigation to which such other is a party so long as it had the opportunity to control and manage the litigation. Drennen v. Wren , 416 S.W.2d 229, 234-35 (Mo.App.S.D. 1967) ( quoting Listerman v. Day and Night Plumbing Heating Serv. , 384 S.W.2d 111, 118-119 (Mo.App.S.D. 1964)).
"We recognize that certain issues between insurer and insured, e.g., fraud in the procurement of the policy or breach of an essential condition, are not litigable in the main case against the insured in a negligence action * * * and that such issues would survive inter partes an adverse judgment in the main suit." Grain Dealers Mut. Ins. Co. v. Quarrier 175 So.2d 83, 86 (Fla.App. 1965). "While the judgment will be conclusive on him as far as concerns the facts of the rendition of the judgment, its amount, and the cause of action on which it was rendered, it will not determine the question whether he is in fact responsible over; nor will it preclude him [the indemnitor] from setting up any defenses which from the nature of the action or the pleadings he could not have interposed in the first action * * *" 50 C.J.S. Judgments § 811b, pp. 362-363.
Drennen , 416 S.W.2d at 235 (emphasis added). Had it chosen to defend Paul, State Farm could have interposed the defense that James' injuries were not caused by Paul's negligence, the proof of which would have defeated James' negligence action. Since it breached its duty to defend by its refusal to provide a defense, it was bound by the decision it made.
B. CONFLICT OF INTEREST
The conflict of interest issue addressed by the majority is more relevant, for in at least some cases a potential for a conflict of interest could exist between an insured and its insurer. The majority is incorrect, however, when it says the only way to resolve such a potential conflict is to allow the insurer an opportunity for a second bite at the apple by giving it a chance to litigate the liability issue in the garnishment action despite the fact that it refused to defend the insured in the underlying tort suit. To the contrary, the insurer could still honor its contractual duty to defend while avoiding any conflict between itself and its insured by providing the insured with a defense at its expense without managing or controlling the litigation. In that instance, having fulfilled its duty to defend, but not being a party to the tort suit, it would not be bound by the result of the tort action and could separately litigate the issue of liability in the garnishment action. Where, as here, however, the insurer has chosen not to provide a defense, it has violated its contractual obligations and, as a result, is bound by the decision in the tort case and is not free to re-litigate liability in the garnishment action.
Other courts have taken this approach, holding that a potential conflict of interest does not relieve an insurer of its contractual obligation to defend its insured. Howard v. Russell Stover Candies, Inc. , 649 F.2d 620, 625 (8th Cir. 1981). "To avoid the potential conflict of interest, [the insurer] 'must either provide an independent attorney to represent the insured or pay the costs incurred by the insured in hiring counsel of [the insured's] own choice.'" Id . ( quoting U.S. Fidelity Guar. Co. v. Louis A. Roser Co. , 585 F.2d 932, 939 n. 6 (8th Cir. 1978). Had State Farm followed this path, it would not have breached its contractual duty to provide Paul with a defense, and it would not have been bound by the determinations as to liability and damages because it did not manage or control the litigation. In other words, it would have performed under the contract while preserving its right to litigate its policy defenses, including the factual issues supporting the determinations as to liability and damages. State Farm chose not to do so.
The majority nevertheless relies on Cox v. Steck State Farm Gen. Ins. Co. , 992 S.W.2d 221 (Mo.App.E.D. 1999) to support its position. In Cox , Cox and Steck were involved in an altercation. Id. at 222. Cox suffered a skull fracture. Id. He brought an action against Steck alleging assault, or in the alternative, negligence. Id. Steck filed an answer including a counterclaim against Cox alleging assault, or alternatively, negligence. Id. Steck was insured by State Farm, which initially undertook defense of Cox's action under a reservation of rights, and later withdrew representation and denied coverage on Cox's claims. Cox , 992 S.W.2d at 222-23. Thereafter, Cox and Steck entered into a § 537.065 agreement, limiting Cox's ability to recover on any judgment against Steck to the State Farm policy. Id. at 223. Trial was subsequently held. Id. The court found that Steck negligently injured Cox and awarded Cox $25,000 in damages. Id. Cox then brought a garnishment action against State Farm, which resulted in a judgment ordering it to pay the underlying tort damages. Id.
On appeal, the Eastern District held that State Farm's theory that Steck's actions were intentional created a conflict of interest between the insured and insurer because the underlying tort action was pled in two alternative counts, one in negligence and one for assault. Cox , 992 S.W.2d at 224. The Cox court confirms that a liability insurer's duty to defend a suit against its insured is measured by the language of the policy and the allegations in the petition. Id . at 224. It further states that where an insurer is bound to protect another from liability, it is bound by the result of litigation to which another is a party. Id . at 224-25. However, the court states that these principles "may not apply in situations where the insurer has an inherent conflict of interest with the insured." Id . at 225. Relying on Oates v. Safeco Ins. Co. of America , 583 S.W.2d 713 (Mo.banc 1979), the Cox court found such "inherent conflict of interest." Cox , 992 S.W.2d at 224.
In Oates , the court found a conflict of interest in an uninsured motorist claim brought by the insured against its own insurer, where the insurer was simultaneously being called upon to defend a counterclaim arising out of the same incident against its insured. Oates , 583 S.W.2d at 719-21. Such conflict is inherent in the policy provisions, wherein "in order to comply with the terms of its insurance policy, [the insurer must] undertake to defend its insured in the tort action, while at the same time becoming an adversary against its insured to protect itself against the insured's establishing that he is legally entitled to recover against the uninsured motorist." Id . at 720 (emphasis added).
The Cox court found an inherent conflict of interest because State Farm was being called upon to defend Steck in Cox's action for negligence when it believed and wanted to defend that action based on the conduct being intentional. However, if it did so, it would establish its insured's liability to Cox in his alternate count based on assault. Thus, the court considered the situation to be the same as that presented in Oates . The court held that " under the specific facts before us , State Farm is not barred from litigating the issue of liability and policy coverage since an inherent conflict of interest prevented it from raising these issues in the underlying action. " Cox , 992 S.W.2d at 226 (emphasis added).
I respectfully submit that the Cox court erred in finding that Oates was determinative of that issue. In Oates , as noted previously, a conflict of interest was inherent in the policy provisions, because "[I]n order to comply with the terms of its insurance policy, [the insurer was required to] undertake to defend its insured in the tort action, while at the same time becoming an adversary against its insured to protect itself against the insured's establishing that he is legally entitled to recover against the uninsured motorist ." Oates , 583 S.W.2d at 720 (emphasis added). The conflict in the uninsured motorist situation is thus based on express alternative contractual obligations undertaken by the insurer. It has bound itself to defend the insured if he is sued for negligence on the one hand, and on the other, it has bound itself to pay him for injuries he sustained as a result of the negligence of an uninsured motorist. Accordingly, in that rare instance, such as under the facts in Oates , when the insurer is called upon to provide both benefits based on a single occurrence, an "inherent conflict of interest" exists.
However, the principle expoused in Cox , that the duty to defend will be negated whenever the insurer believes that it is likely that an exemption applies and there is no coverage, is different from that recognized in Oates and is inconsistent with and contrary to the principles underlying our Supreme Court's recent decision in McCormack Baron , 989 S.W.2d 168. In that case, McCormack Baron had purchased a comprehensive commercial insurance policy from American Guarantee which was in force at the time of the events in question. Id . at 169. Among other things, the policy provided coverage for injury arising out of "oral . . . publication of material that . . . disparages a person's . . . services." Id . at 170. It also contained a provision that excluded from coverage an injury "arising out of oral . . . publication of material, if done by or at the direction of the insured with knowledge of its falsity." Id . McCormack Baron was sued by a former employee of its security guard service under a count entitled "Tortious Interference with a Contractual Relationship," and in which the employee alleged that he was fired as a direct result of statements made by McCormack Baron's agent to the employee's supervisor. Id . at 169. McCormack Baron notified American Guarantee and called upon it to defend, but American Guarantee refused. McCormack Baron , 989 S.W.2d at 170. McCormack Baron then filed a declaratory judgment action seeking a declaration that American Guarantee was obligated to provide a defense to the suit and indemnification against liability. Id. The trial court entered summary judgment in favor of American Guarantee and McCormack Baron appealed. Id.
In its analysis, our Supreme Court noted that the case involved "two separate duties, the duty to defend and the duty to indemnify." Id . It pointed out that "the duty to defend is broader than the duty to indemnify." Id . Based on its analysis of the employee's petition and the policy language, the Court found that American Guarantee had a duty to defend. McCormack Baron , 989 S.W.2d at 172. It then observed, however, that "[t]he duty to indemnify is determined by the facts as they are established at trial or as they are finally determined by some other means. . . ." Id . at 173. The Court then stated:
"The insurer's duty to pay arises only after the suit by the third party is successful and the insurer becomes obligated to pay the resulting judgment." Appelman, section 4684. The facts before the Court, at this time, consists of Bennett's complaint. We cannot know what facts will be established at trial or whether those facts will fall within the coverage of the policyor trigger any policy exclusions. McCormack's claim for indemnity is not ripe for ruling at this time.
Id . at 173-74.
As noted previously, the American Guarantee policy contained a provision excluding from coverage an injury "arising out of oral . . . publication of material, if done by or at the direction of the insured with knowledge of its falsity." The employee's petition alleged, among other things, that McCormack Baron, through its agent, "acted 'willfully, maliciously, and without justification, in a conscious disregard of [the employee's] rights. . . .'" Id . at 169.
While conflict of interest was not argued in the case, it is apparent that a potential for a conflict might exist for American Guarantee because of the exclusion. However, the Court disregarded any potential conflict and held that American Guarantee had a duty to defend because of the allegations of the petition, and that any duty to indemnify could only be determined after it is known "what facts will be established at trial or whether those facts will fall within the coverage of the policy or trigger any policy exclusions." Id . at 173. The same potential conflict that existed in Cox and, according to the majority that exists in this case, was present in McCormack Baron , yet our Supreme Court found a duty to defend.
Unlike the facts in Oates , the conflict of interest, if any, in Cox, McCormack Baron , and the instant case, was not inherent and could have been avoided quite easily. For these reasons, I believe Cox was incorrect in suggesting that the only method of avoiding the conflict was to allow the insurer to breach its duty to defend, and then be rewarded by being permitted to re-litigate liability in the subsequent garnishment action. This potential conflict could have been avoided if the insurer had simply hired separate counsel to represent the insured in the underlying tort case. This follows from the fact that in Cox , and McCormack Baron , as here, any conflict that exists arises only because the insurer is trying to defeat its liability to a third party based on exclusions or other provisions of the policy. The insurer makes a unilateral determination that the incident giving rise to the claim is based on intentional conduct. There is nothing inherent about such a conflict, as there was in Oates . The insurer can meet its duty to its insured by providing independent counsel and not managing or controlling the litigation, or even by defending under a reservation of rights. As noted supra, the duty to defend is of greater breadth than the duty to indemnify. McCormack Baron , 989 S.W.2d at 170. "[W]here an injured party's petition states some grounds of liability covered by a policy, the insurer has a duty to defend, despite its contention that some of the allegations of the petition state a claim beyond its policy coverage." Harold S. Schwartz Assoc., Inc. , 705 S.W.2d at 497.
See also Superior Equip. Co., Inc. v. Maryland Cas. Co. , 986 S.W.2d 477, 482 (Mo.App.E.D. 1998) ("The presence of some potentially insured claims in complaint gives rise to a duty to defend, even though claims beyond coverage may also be present."); Union Pacific Railroad Co. v. American Family Mut. Ins. Co. , 987 S.W.2d 340, 345-46 (Mo.App.E.D. 1998) ("This duty [to defend] exists without regard to the merits of any claim, and is present without diminution notwithstanding alternate statements of the plaintiffs' claims."); Ratliff , 927 S.W.2d at 534 ("The presence of some insured claims in the homeowners' petition gives rise to a duty to defend, even though uninsured claims or claims beyond the coverage may also be present.").
The decision in Cox effectively eviscerates the insurer's duty to defend. The insured pays a premium for the insurer's agreement to provide the insured with a defense any time the insured is sued based on a claim of negligence. Under the reasoning of Cox , and the majority in this case, the insurer can avoid its contractual obligation to provide a defense by merely making a unilateral determination that the facts giving rise to the suit are not within the policy coverage, notwithstanding the allegations of the petition, and it can do so without assuming any risk. All risk is transferred to the insured. He must retain counsel and undertake a defense that he has already paid a premium to receive. Yet if the insured is unsuccessful, the insurer can re-litigate the issue of liability in a subsequent garnishment proceeding. The insurer has received a windfall by receiving a premium for providing a defense, which it then refuses to provide, with absolutely no risk. Thus, I would decline to follow Cox because it results in an unjustified, unnecessary and unfair transfer of risk and expense from the insurer to its insured, all of which could be avoided by the simple expedient of hiring independent counsel to undertake the insurer's admittedly existing contractual duty to defend.
In the instant case, State Farm delayed a decision on coverage for four months until the claimant hired legal counsel, at which time it denied coverage. When suit was filed, State Farm informed its insured that it would not provide a defense until it made a decision on coverage, which would be sometime in the future. The insured was helpless to obtain a commitment from the company as to whether it would uphold its obligations. Eighteen months later, State Farm informed its insured that it might defend him if he submitted to further demands. When he agreed, they did not respond. By that time, the insured was left with few options.
C. PUBLIC POLICY
The majority also offers a public policy argument to support its decision. It points to our public policy prohibiting an insured from insuring against the consequences of his or her intentional acts and then proceeds to hold that the trial court erred when it determined as a matter of law that the findings and decision of the default hearing that Paul acted negligently were binding on State Farm in the later garnishment proceeding. Maj. Op. at 15. In reaching this conclusion, the majority totally disregards, as it does throughout, that State Farm had a duty to defend which was broader than its duty to indemnify, McCormack Baron , 989 S.W.2d at 170, and that State Farm breached that duty, resulting in it being bound by the determinations of liability and damages made in the underlying tort action. This case has nothing to do with violating the public policy against insuring oneself against intentional acts. Rather, it has everything to do with State Farm being required to abide by the terms of the insurance contract it drafted and sold to Paul. As found by the courts below, State Farm is not required to provide coverage for intentional acts. However, it is obligated to live up to its bargain of providing coverage for negligent ones.
Nonetheless, the majority not only reverses the garnishment court's grant of summary judgment, but takes the unusual step of holding that State Farm is entitled to summary judgment and directing that same be entered. In doing so, it blatantly substitutes its own conclusions that any reasonable person must understand the natural and probable consequences of his acts, for the considered holding of the trial court that Paul did not understand the consequences of his acts. The majority does not claim that a person unable to appreciate the wrongfulness of their conduct is considered to have acted intentionally or willfully. It simply does not believe Paul fits in that category. However, that is not for this court to decide. The issue was in the province of the tort court and was decided by it. There is no claim of fraud or bad faith. Rather, State Farm has belatedly decided that it did not anticipate the result and does not like it, so it wants to contest it now. It is too late. The only bases for litigating a § 537.065 settlement are bad faith, collusion and reasonableness of damages. Gulf Ins. Co. v. Noble Broadcast , 936 S.W.2d 810, 815 (Mo.banc 1997). State Farm is not entitled to re-litigate the liability determination.
The majority's doubts about whether the proper result was reached in this specific case does not provide a reasoned basis to upset Missouri law by ruling that intent issues can be re-litigated in the context of coverage in every case even if they were already decided as factual issues in the underlying tort litigation which the insurer chose not to defend.
IV. CONCLUSION
The majority's decision in this case will work a dramatic and significant change in existing law. The decision goes far beyond any of the cases on which the majority relies and which generally state that an insurer has the right to litigate its policy defenses in a garnishment proceeding. See Augspurger v. MFA Oil Co. , 940 S.W.2d 934 (Mo.App.W.D. 1997); Lodigensky , 898 S.W.2d 661; Whitehead , 844 S.W.2d 475. Those cases involve true coverage issues, such as whether the claim was made within the term of a claims made policy, Whitehead , 844 S.W.2d at 477, whether the insured obtained the policy through misrepresentation or violated the cooperation conditions of the contract, Drennen , 416 S.W.2d at 235, and breach of the policy condition requiring cooperation. Finkle , 26 S.W.2d at 849. In the instant case, the issue goes much further. It involves the ultimate issue of the insured's liability. I have found no case which permits the insurer to refuse to provide a defense and then re-litigate the issue of liability in the garnishment proceeding. I respectfully decline to join the majority in setting such a new and dangerous precedent.
Accordingly, I would affirm the trial court's grant of summary judgment.
Joseph M. Ellis, Judge
Breckenridge, C.J., Stith and Howard, JJ., concur in the dissenting opinion.