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  • Missouri Courts Examining Possible Exceptions to When a Plaintiff Can Pursue Other Imputed Theories of Liability Against an Employer Even After Respondeat Superior Liability is Admitted

    Missouri follows the majority rule that a jury cannot generally assess a defendant employer’s fault based on imputed theories of liability, such as “negligent entrustment” or “negligent hiring,” after an employer has admitted the wrongdoer was its agent acting within the scope of his/her agency at the time of the accident. McHaffie v. Bunch, 891 S.W.2d 822, 826–27 (Mo. banc 1995). In other words, in cases where respondeat superior liability is admitted, it is generally improper to allow a plaintiff to proceed against the employer on any other theory of imputed or derivative liability. The rationale is that allowing other theories of imputed liability “serves no real purpose,” wastes the time and energy of the court and litigants because the employer’s liability “is fixed by the amount of liability of the employee,” and opens the door to potentially inflammatory and irrelevant evidence. McHaffie, 891 S.W.2d at 826. Importantly, however, the Missouri Supreme Court in McHaffie left open the possibility for several exceptions to the general rule. Id. at 826. For instance, “an employer or entrustor may be held liable on a theory of negligence that does not derive from and is not dependent on the negligence of an entrustee or employee,” or “an employer or an entrustor may be liable for punitive damages which would not be assessed against the employee/entrustee.” Id.. The contours of these possible exceptions to the general rule are the subject to recent appeals in Missouri.

    First, in Coomer v. Kansas City Royals Baseball Corp., WD73984, 2013 WL 150838 (Mo. App. W.D. Jan. 15, 2013), the Missouri Western District Appellate Court held that negligent supervision and training claims, like negligent hiring and negligent entrustment claims, are based on theories of imputed liability. Imputed liability claims involve those which there is no evidence that the “employer’s lack of care” caused a plaintiff’s injuries “in the absence of the negligence by the employee.” Id. Therefore, negligent supervision and training claims, like negligent hiring and negligent entrustment claims, are generally barred when the issue of agency is admitted.

    Second, whether there is a so-called “punitive damages exception” to the general rule is currently before the Missouri Western Appellate Court. See Wilson v. Image Flooring, LLC, et al., WD 751412012 (Mo. App. W.D. 2012). Although never before formally recognized by a Missouri appellate court, many jurisdictions allow a plaintiff to proceed under other imputed negligence theories after respondeat superior liability is admitted when punitive damages are at issue. Likewise, several federal district courts while applying Missouri law have recognized a “punitive damages exception.” See e.g., Jackson v. Wiersema Charter Serv., Inc., 2009 WL 1310064 (E.D.Mo. 2009); Miller v. Crete Carrier Corp., 2003 WL 25694930 (E.D.Mo. 2003); Burroughs v. Mackie Moving Systems Corp.,  2010 WL 576799 (E.D.Mo. 2010); Kwiatkowski v. Teton Transp., Inc.,  2012 WL 1413154, 4 (W.D.Mo. 2012). These federal decisions, though persuasive and authoritative, are not of course binding on Missouri state courts. The ruling in the Wilson case, which is expected this spring or summer, will likely help resolve whether Missouri allows for a “punitive damages exception.”

  • Nonpermissive Use Exclusion Okay If Included In Definition of Insured, But Not If It Is A Separate Exclusion

    In American Standard Insurance Company of Wisconsin v. Stinson, the Eastern District Court of Appeals addressed the exclusion from coverage of non-permissive users of a motor vehicle.  In this wrongful death case, Son took the car from Father’s auto dealership without Father’s permission.  Son subsequently crashed into a vehicle driven by Ricky Young, who died as a result of the collision.  American Standard insured the vehicle involved in the crash.  The policy at issue defined an insured person as “you or a relative,” but not “any person using a vehicle without the permission of the person having lawful possession.”  American Standard filed a Petition for Declaratory Judgment seeking a declaration of non-coverage on the basis that Son was not a permissive user of the vehicle.  The trial court granted American Standard’s summary of judgment and the wrongful death Plaintiff appealed

    Plaintiff appealed, arguing that the phrase, “any person” as used in the phrase “any person using a vehicle without the permission of the person having lawful possession” was ambiguous.  Plaintiff specifically relied upon the case of Miller’s Classified Insurance Company v. French, 295 SW3d. 524 (Mo. App. Eastern District 2009) in which the Eastern District did find that the phrase “any person,” as used in exclusionary provision of an insurance policy, was reasonably open to different constructions and, therefore, ambiguous.  However, the Eastern District distinguished the instant case by noting that the use of this phrase in the definition of insured was different than the use of the phrase in the exclusionary policy.  An insurance policy is ambiguous when it promises the insured something at one point, but then takes it away at another.  The Eastern District Court of Appeals upheld the trial court’s grant of summary judgment in favor of American Standard, finding that the Son was not an insured person under the policy.  The Eastern District seemed to distinguish French because the use of “any person” in a separate exclusion was different than the use of “any person” in the definition of insured. 

    This appears to be a case where the courts have construed potential ambiguity in favor of an insurance company, rather than against it.  The Eastern District seems to be saying that there is a difference in the analysis of language depending on whether the language is in an insuring provision or an exclusion.  If the alleged ambiguity is contained within the initial grant of coverage, there seems to be less of a chance of finding an ambiguity than where the alleged ambiguous phrase is used in the exclusionary portions of the policy.

    American Standard Insurance Company of Wisconsin v. Stinson

  • Attorneys’ Fees Counted as Damages For Purposes of Punitive Damages Cap

    The Missouri Supreme Court again analyzed portions of the State of Missouri’s 2005 Tort Reform Bill in a recent employment discrimination decision.  In that decision, the Missouri Supreme Court found that attorneys’ fees should be included in the determination of the “net amount of judgment” that is used to calculate the maximum amount of punitive damages pursuant to Section 510.265, RSMo. 

    Section 510.265 limits the amount of punitive damages in most civil cases to the greater of $500,000 or 5 times the net amount of the judgment awarded to the plaintiff against the defendant.  The Missouri Supreme Court ruled that in determining the net amount of the judgment against the defendant, attorneys’ fees should be included.  In other words, actual damages plus any awarded attorneys fees are added together and any appropriate reductions then applied.  This amount is then multiplied by 5 in order to determine the total amount of punitive damages awardable. 

    While punitive damages may not play a significant role in the majority of cases, including attorneys’ fees in the net amount of judgment certainly has the potential to significantly raise the floor on the amount of punitive damages awardable in such cases. 

     Hervey v. Missouri Department of Corrections

  • Facebook Post Results in Removal of Juror

    Mr. and Mrs. Khoury filed a products liability suit against ConAgra for personal injuries Mrs. Khoury suffered. The day prior to voir dire, the trial court and counsel agreed that the attorneys for the parties would investigate the jury panel members’ litigation history on case.net (Missouri’s online court information system) and determine the following morning whether any of the 80 panel members may have failed to answer questions accurately. This was done and the individual jury panel members were questioned about information found on case.net. The parties subsequently exercised their peremptory strikes and strikes for cause and a jury of 12 plus 4 alternates was empaneled.

    Prior to opening statements, counsel for ConAgra informed the court that he had found that one of the selected jurors was “a prolific poster for anti-corporation, organic foods” on Facebook. ConAgra moved for a mistrial or, in the alternative, to strike the juror because of the alleged misconduct and claimed that the juror intentionally failed to disclose information that affected his ability to be a fair and impartial juror. The trial court and counsel for the parties then questioned the juror after which, counsel for ConAgra renewed its motion based upon the juror’s intentional nondisclosure. The trial court denied the motion for mistrial, but sustained the motion to strike. The juror was excused and an alternate replaced him. The jury eventually found in favor of Defendant Con-Agra and Plaintiffs appealed for a number of reasons, including a claim of error in striking the juror after the jury had been empaneled.

     The Western District Court of Appeals found that the striking of the juror for possible bias was within the discretion of the trial court and not a reversible error on appeal. The Western District Court took this opportunity to again remind counsel that any research into a juror’s bias should be brought to the trial court’s attention at the earliest possible moment and should not wait until the case has been submitted to the jury. This case serves as another warning from the courts that attorneys representing parties should make every effort to use all available resources to investigate jurors’ background prior to submitting the case to the jury in order to avoid waiving any claim of bias or prejudice on the part of jurors.

     

    Elaine Khoury and Alex Khoury v. ConAgra Foods, Inc.

  • Underinsured Motorist Case Studies

    Two recent Missouri court cases involving uninsured motorists illustrate that courts are willing to analyze specific language of the insurance policies, and that they tend to favor the injured party seeking coverage.

    In the first example, Vernie Long was killed when the F-350 truck he was driving was negligently struck by a vehicle driven by Lucas Dray. The wrongful death beneficiaries sustained at least $450,000 in damages. At the time of the accident, Dray was insured for automobile liability in the amount of $50,000 per person and that sum was paid in settlement to Long’s wrongful death beneficiaries on behalf of Dray, who was then released from further liability.  Long and his surviving spouse had seven insurance policies issued to them by Shelter Insurance Companies, which were in effect at the time of the accident.  The wrongful death class sued Shelter for payment of underinsured motorist (UIM) benefits. The trial court found that the policies were ambiguously worded and allowed “stacking” (use of all of the UIM benefits). Shelter subsequently appealed.

    All the policies had “Other Insurance in the Company” clauses which provided that Shelter’s “total liability under all [its] policies will not exceed the highest limit of any one policy.” The court, however, found that the “Other Insurance” clauses in the Shelter policies created an ambiguity in all the policies. In essence, the “Other Insurance” clause appeared to allow stacking while the “Other Insurance in the Company” clause appeared to disallow stacking.  Because ambiguities must be resolved in favor of the insured, the Missouri Western District Court of Appeals found in favor of the plaintiffs and affirmed a judgment in the amount of $400,000 in damages.

    In another case, Kyle Stewart was seriously injured in a single car collision as a passenger in a vehicle driven by Zachary Tanner. Stewart was insured by Liberty Mutual through a policy with a $100,000 limit for underinsured motorists (UIM) coverage on four separate vehicles.  Tanner was insured by American Standard Insurance Company of Wisconsin through an automobile policy with a $100,000 limit. Stewart obtained a judgment against Tanner for $500,000.  American Standard paid Tanner’s $100,000 policy limit while Liberty Mutual denied Stewart’s claim for payment under the UIM coverage.

    Stewart subsequently sued Liberty Mutual, contending it breached its contract by failing to pay the UIM policy limit of $100,000 on each of the four covered vehicles for a total of $400,000.  Liberty Mutual denied any obligation to make additional payments based upon anti-stacking provisions in the policy.  The trial court eventually granted Liberty Mutual summary judgment on the claim that it owed Stewart an additional $300,000.

    The key to the decision lay in the “Other Insurance” clause language providing that the UIM coverage was excess over any other collectible insurance, which provided coverage on a primary basis.  Because UIM coverage is not primary coverage, stacking would not be allowed.

    Both cases illustrate that courts will give specific effect to the language contained in the insurance policies when analyzing underinsured motorist coverage. Because underinsured motorist coverage is not a coverage required by statute, courts seem to be more willing to specifically analyze the language of the various clauses effecting coverage.  Courts, however, will still follow the general rules of construction in interpreting insurance policies and tend to favor a finding of coverage.

  • Mandatory Arbitration Clause Undergoes Stress Test in Massage Therapy Case

    What started out as a client’s relaxing session at a local massage therapy office ended up as a headache for the therapist and the risk retention group (“RRG”) insuring her business in Missouri.   In a recent ruling, the Missouri Court of Appeals held that arbitration clauses are not enforceable in insurance policies issued by a RRG, just as they have been found to be unenforceable in other types of insurance policies.

    In this case, a licensed massage therapist was covered by a professional liability insurance policy when the massage table on which she was treating a client collapsed, causing the client to fall. The client sued the therapist for her personal injuries. The insured therapist sought coverage under an insurance policy issued by a RRG who ultimately denied coverage and refused to provide a defense in the underlying personal injury suit.

    The insured filed a breach of contract action against the RRG, seeking damages in the amount of the attorney’s fees incurred as a result of the failure to defend. Defendant filed a motion to compel arbitration seeking to invoke a mandatory arbitration clause in the insurance policy.  The trial court denied the motion, finding that the insured cannot be compelled to arbitrate because Missouri law prohibits mandatory arbitration clauses in insurance contracts.

    Although the Missouri Court of Appeals recognized that contractual arbitration clauses are generally enforceable in cases involving interstate commerce under the Federal Arbitration Act, the case turned on an exception to federal preemption under the McCarran-Ferguson Act, which allows states to regulate the business of insurance.  In confirming the lower court’s ruling, the Court of Appeals upheld the applicability of McCarran-Ferguson and also declined to extend to the RRG protections otherwise not available to insurers under the federal Liability Risk Retention Act.

    Once again, a Missouri court has re-emphasized the general rule that arbitration clauses cannot be used in insurance policies, and broadened it to include risk retention groups.  If the case is further appealed, it is unlikely that the Missouri Supreme Court will carve out an exception to this general rule.

    Sturgeon v. Allied Professionals Ins. Co., Case No. ED 94605 (Mo.App.E.D.) (Decided March 8, 2011).

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