Aspen Square, Inc. v. American Automobile Insurance Company

Filing 29

MEMORANDUM AND ORDER granting 21 AAIC's Motion for Summary Judgment; denying 23 Aspen Square's Motion for Summary Judgment. Plaintiff's case is dismissed in its entirety. Signed by Chief District Judge Julie A. Robinson on 3/11/2019. (heo)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
ASPEN SQUARE, INC.,
Plaintiff,
v.

Case No. 2:18-CV-02255-JAR-JPO

AMERICAN AUTOMOBILE INSURANCE
COMPANY,
Defendant.

MEMORANDUM & ORDER
Plaintiff Aspen Square, Inc. (“Aspen Square”) brings this action against Defendant
American Automobile Insurance Company (“AAIC”) for breach of contract, bad faith, and
equitable garnishment to satisfy a judgment entered in Aspen Square’s favor against Rainmaker
Surveying, Inc. (“Rainmaker Surveying”), a company insured by AAIC. This insurance dispute
is before the Court on Plaintiff’s Motion for Summary Judgment (Doc. 23) and Defendant’s
Motion for Summary Judgment (Doc. 21). Aspen Square and AAIC both seek summary
judgment on each of Aspen Square’s claims. For the reasons discussed in detail below, the Court
denies Aspen Square’s motion and grants AAIC’s motion.
I.

Summary Judgment Standard
Summary judgment is appropriate if the moving party demonstrates that there is no

genuine dispute as to any material fact and that it is entitled to judgment as a matter of law.1 In
applying this standard, the court views the evidence and all reasonable inferences therefrom in
the light most favorable to the nonmoving party.2 “There is no genuine issue of material fact

1

Fed. R. Civ. P. 56(a); see also Grynberg v. Total, 538 F.3d 1336, 1346 (10th Cir. 2008).

2

City of Harriman v. Bell, 590 F.3d 1176, 1181 (10th Cir. 2010).

unless the evidence, construed in the light most favorable to the nonmoving party, is such that a
reasonable jury could return a verdict for the nonmoving party.”3 A fact is “material” if, under
the applicable substantive law, it is “essential to the proper disposition of the claim.”4 An issue
of fact is “genuine” if “the evidence is such that a reasonable jury could return a verdict for the
non-moving party.”5
The moving party initially must show the absence of a genuine issue of material fact and
entitlement to judgment as a matter of law.6 In attempting to meet this standard, a movant that
does not bear the ultimate burden of persuasion at trial need not negate the other party’s claim;
rather, the movant need simply point out to the court a lack of evidence for the other party on an
essential element of that party’s claim.7
Once the movant has met this initial burden, the burden shifts to the nonmoving party to
“set forth specific facts showing that there is a genuine issue for trial.”8 The nonmoving party
may not simply rest upon its pleadings to satisfy its burden.9 Rather, the nonmoving party must
“set forth specific facts that would be admissible in evidence in the event of trial from which a
rational trier of fact could find for the nonmovant.”10

3

Bones v. Honeywell Int’l, Inc., 366 F.3d 869, 875 (10th Cir. 2004).

4

Wright ex rel. Tr. Co. of Kan. v. Abbott Labs., Inc., 259 F.3d 1226, 1231–32 (10th Cir. 2001) (citing Adler
v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998)).
5

Thomas v. Metro. Life Ins. Co., 631 F.3d 1153, 1160 (10th Cir. 2011) (quoting Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986)).
6
Spaulding v. United Transp. Union, 279 F.3d 901, 904 (10th Cir. 2002) (citing Celotex Corp. v. Catrett,
477 U.S. 317, 322–23 (1986)).
7

Adams v. Am. Guar. & Liab. Ins. Co., 233 F.3d 1242, 1246 (10th Cir. 2000) (citing Adler, 144 F.3d at
671); see also Kannady v. City of Kiowa, 590 F.3d 1161, 1169 (10th Cir. 2010).
8

Anderson, 477 U.S. at 256; Celotex, 477 U.S. at 324; Spaulding, 279 F.3d at 904 (citing Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
9

Anderson, 477 U.S. at 256; accord Eck v. Parke, Davis & Co., 256 F.3d 1013, 1017 (10th Cir. 2001).

10
Mitchell v. City of Moore, Okla., 218 F.3d 1190, 1197–98 (10th Cir. 2000) (quoting Adler, 144 F.3d at
671); see Kannady, 590 F.3d at 1169.

2

The facts “must be identified by reference to an affidavit, a deposition transcript, or a
specific exhibit incorporated therein.”11 Rule 56(c)(4) provides that opposing affidavits must be
made on personal knowledge and shall set forth such facts as would be admissible in evidence.12
The non-moving party cannot avoid summary judgment by repeating conclusory opinions,
allegations unsupported by specific facts, or speculation.13
Finally, summary judgment is not a “disfavored procedural shortcut;” on the contrary, it
is an important procedure “designed to secure the just, speedy and inexpensive determination of
every action.”14 In responding to a motion for summary judgment, “a party cannot rest on
ignorance of facts, on speculation, or on suspicion and may not escape summary judgment in the
mere hope that something will turn up at trial.”15
II.

Uncontroverted Facts
The following material facts are uncontroverted or stipulated to in the parties’ Joint

Stipulation of Facts.16
Dennis Lee Smith is a land surveyor, who at all relevant times did business as Rainmaker
Surveying. Defendant AAIC issued professional liability insurance policy number #8 91 MZO
80494814, with a Policy Period from April 15, 2015 to April 15, 2016, and a Retroactive Date of
April 15, 2015, to Dennis Lee Smith, PLS d/b/a Rainmaker Surveying (the “Policy”).17 The
Policy’s Professional Liability coverage provides in relevant part:

11

Adams, 233 F.3d at 1246.

12

Fed. R. Civ. P. 56(c)(4).

13

Id.; Argo v. Blue Cross & Blue Shield of Kan., Inc., 452 F.3d 1193, 1199 (10th Cir. 2006) (citation

omitted).
14

Celotex, 477 U.S. at 327 (quoting Fed. R. Civ. P. 1).

15

Conaway v. Smith, 853 F.2d 789, 794 (10th Cir. 1988).

16

Doc. 20.

17

Doc. 20 ¶ 2; Doc. 20-1.

3

Land Surveyors, Civil Engineers and Landscape Architects
Professional
Liability - 143086 10 09
THIS IS A CLAIMS-MADE AND REPORTED POLICY.
PLEASE REVIEW THE POLICY CAREFULLY. COVERAGE
APPLIES ONLY TO A CLAIM FIRST MADE AGAINST THE
INSURED AND REPORTED TO US DURING THE POLICY
PERIOD OR, IF APPLICABLE, DURING THE EXTENDED
REPORTING PERIOD, AND IN ACCORDANCE WITH THE
REPORTING REQUIREMENTS OF THIS POLICY. CLAIM
EXPENSES ARE IN ADDITION TO THE LIMIT OF
LIABILITY.
***
Throughout this Policy the words You and Your refer to the
Named Insured stated in the Policy Declarations, and any other
person or organization qualifying as a Named Insured under this
Policy. The words We, Us and Our refer to the Company
providing this Policy. Other words and phrases that appear in
boldfaced print have special meaning. Refer to Section III,
Definitions.18
The Policy’s Insuring Agreement provides in relevant part:
I. INSURING AGREEMENT
A. Coverage
We will pay those sums the Insured becomes legally obligated to
pay as Damages due to a Claim arising from a Wrongful Act in
the rendering of or the failure to render Professional Services or
due to a Pollution Incident arising from the rendering of or failure
to render Professional Services to which this insurance applies.
1. This coverage applies to Wrongful Acts or Pollution Incidents
taking place during the Policy Period, but then only if the Claim
is first made against the Insured and reported to Us during the
Policy Period or Extended Reporting Period, if applicable, in
accordance with Section VI, Condition N, Reporting of Potential
Claims and Actual Claims.
2. This coverage applies to Wrongful Acts or Pollution Incidents
taking place prior to the effective date of this Policy, but after the
Retroactive Date, if any, stated in the Declarations, provided that
a. As of the effective date of this Policy, an Insured does
not have actual or constructive knowledge of any
circumstances, Wrongful Act or Pollution Incident which
could reasonably be expected to result in a Claim;
b. There is no other valid and collectible insurance available to the
18

Doc. 20 ¶ 4; Doc. 20-1 at 13.

4

Insured for any such Wrongful Act or Pollution Incident; and
c. The Claim is first made against the Insured and reported to Us during
the Policy Period or Extended Reporting Period, if applicable.
B. Defense, Investigation and Settlement of a Claim
1. We have the right and duty to defend the Insured against any Suit for which
coverage under this Policy applies. However, We will have no duty to defend the
Insured against any Suit for which there is no coverage under this Policy. . . .19
The Policy’s Definitions section provides in relevant part:
III. DEFINITIONS
***
B. Claim means:
1. Any written demand the Insured receives for Damages due to a
Wrongful Act or Pollution Incident arising out of Professional
Services, including but not limited to, the institution of arbitration
proceedings against the Insured;
2. Any Suit seeking Damages against the Insured due to a
Wrongful Act or Pollution Incident arising out of Professional
Services, commenced by the service of a complaint or similar
pleading; or
***
D. Damages means compensatory damages, whether part of an
award or settlement.…Damages shall include attorney’s fees of
the person or organization bringing the Claim only if such fees are
awarded in conjunction with, or are part of a settlement of a Claim
covered under this Policy, all costs awarded against the Insured in
a Suit, and prejudgment interest and post judgment interest on that
portion of the Damages We pay…
***
K. Policy Period means the period of time from the Inception date
of this Policy to the Expiration date stated in the Declarations, or,
if applicable, any earlier termination date. The Policy Period does
not include the Extended Reporting Period, if any.
[ITEM 4. POLICY PERIOD: FROM: 04/15/2015 12:01 A.M. TO:
4/15/2016 12:01 A.M.]
***
N. Professional Services means services rendered by or on behalf
of the Insured for others in the conduct of the Named Insured’s
profession as a land surveyor, landscape architect, civil engineer,
or photogrammetrist. …
***
P. Retroactive Date means
1. The date stated under Retroactive Date in the Declarations…
19

Doc. 20 ¶ 5; Doc. 20-1 at 13–14.

5

[ITEM 7. RETROACTIVE DATE: 4-15-2015]
Q. Suit means a civil proceeding seeking compensatory monetary
damages.
….
***
S. Wrongful Act means any actual or alleged negligent act, error
or omission, or negligent misstatement or misleading statement by
the Insured in the rendering of or failure to render Professional
Services.20
The Policy’s Conditions section provides in relevant part:
J. Extended Reporting Periods
***
4. Basic Extended Reporting Period
a. A Basic Extended Reporting Period is automatically provided
without additional charge. This period starts at the date of Policy
termination or the end of the Policy Period, whichever is earlier,
and lasts for sixty (60) days.
b. The Basic Extended Reporting Period applies to Claims arising
out of a Wrongful Act that was committed or Pollution Incident
that took place during the Policy Period or after the Retroactive
Date, if any, stated in the Declarations, and which are first made
against the Insured during the Policy Period and reported to Us, in
writing, within sixty (60) days after Policy termination or the end
of the Policy Period, whichever is earlier.
***
K. Legal Action Against Us
No one shall sue Us unless the following conditions precedent
have been met:
1. There has been full compliance with all the terms of this Policy;
and,
2. The amount of the Insured’s obligation to pay shall have been
finally determined either by judgment against the Insured after
actual and contested trial on the merits, or by written agreement of
the Insured, the claimant, and Us.
Any person or organization or the legal representative thereof who
has secured such judgment or written agreement shall thereafter be
entitled to recover under this Policy to the extent of the insurance
afforded by this policy.
***
N. Reporting of Potential Claims and Actual Claims
***
2. Reporting of Actual Claims
20

Doc. 20 ¶ 6; Doc. 20-1 at 15–18.

6

The Insured shall provide notice to Us as soon as practicable after
a Claim is first made against the Insured, and in no event after the
end of the Policy Period or Extended Reporting Period, if
applicable. This notice shall be deemed sent to Us only if it is
received by Us via facsimile or electronic mail or sent by the
Insured by prepaid registered or return-receipt-requested mail
properly addressed to Us at the address shown in or attached to this
Policy.21
The Policy’s 60-day Basic Extended Reporting Period expired on June 15, 2016.
Rainmaker Surveying performed Professional Services for Aspen Square between March
1, 2015 and March 15, 2016, at the Corbin Park Dave & Buster’s construction site in Overland
Park, Kansas. Rainmaker Surveying was first notified on or after July 21, 2016 that its negligent
conduct at the Dave & Buster’s worksite damaged Aspen Square and resulted in a claim.
On October 13, 2016, Aspen Square filed a professional negligence claim against
Rainmaker Surveying in the lawsuit captioned Aspen Square, Inc. v. Green Engineering
Services, Inc., et al., 16CV05664 (the “Underlying Lawsuit”), in the District Court of Johnson
County, Kansas, seeking damages for Rainmaker Surveying’s negligent conduct at the Dave &
Buster’s worksite.22 AAIC first received notice of the Underlying Lawsuit on November 17,
2016 from insurance agent Teresa Foster, who acted on behalf of Rainmaker Surveying.
Rainmaker Surveying did not notify or report Aspen Square’s professional negligence claim or
the Underlying Lawsuit against Rainmaker Surveying to AAIC before November 17, 2016.
AAIC denied defense and coverage to Rainmaker Surveying for the Underlying Lawsuit because
Aspen Square’s claim was not first made and reported before the Policy’s Basic Extended
Reporting Period expired.23

21

Doc. 20 ¶ 7; Doc. 20-1 at 22–24.

22

Doc. 20-2.

23

Doc. 20-3.

7

On September 21, 2017, Aspen Square named Dennis Lee Smith as defendant to the
professional negligence claim against Rainmaker Surveying in the Underlying Lawsuit.24
Rainmaker Surveying provided AAIC with 90 days-notice, certified by mail, of a proposed
settlement between Aspen Square and Rainmaker Surveying, and of Rainmaker Surveying’s
agreement that in the absence of coverage by AAIC it would give Aspen Square a judgment of
$127,348.16, plus $20,000 in costs. After AAIC denied coverage to Rainmaker Surveying,
Aspen Square and Rainmaker Surveying entered into an agreement whereby Rainmaker
Surveying agreed to give Aspen Square the $127,348.16 judgment, assigned any claims against
AAIC under the Policy, and limited Aspen Square’s recovery of the judgment to AAIC. On
February 14, 2018, an Agreed and Stipulated Judgment was entered in Aspen Square’s favor and
against Rainmaker Surveying in the Underlying Lawsuit, awarding Aspen Square $127,348.16,
plus $20,000 in costs.25 Aspen Square is Rainmaker Surveying’s assignee and the judgment
creditor of the judgment against Rainmaker Surveying in the Underlying Lawsuit.
III.

Discussion
Aspen Square and AAIC dispute the nature of the Policy and whether the Policy covers

Aspen Square’s claim against Rainmaker Surveying. Aspen Square argues that the Policy should
be construed as an occurrence policy, and that summary judgment should be awarded in its favor
because AAIC wrongfully denied coverage of Aspen Square’s claim against Rainmaker
Surveying. By contrast, AAIC argues that the Policy is a claims made policy, and that summary
judgment should be awarded in its favor because the Policy did not cover Aspen Square’s claim
against Rainmaker Surveying. As explained below, the Court finds that the Policy is a claims

24

Doc. 20-4.

25

Doc. 20-5.

8

made policy. Accordingly, the Court grants summary judgment in favor of AAIC and denies
Aspen Square’s motion for summary judgment.
The parties agree that Missouri law applies to this coverage dispute. The interpretation of
an insurance policy is a question of law.26 Under Missouri law, “[i]nsurance policies are to be
given a reasonable construction and interpreted so as to afford coverage rather than to defeat
coverage.”27 When interpreting insurance policy provisions under Missouri law, the court must
give the language “the meaning which would be attached by an ordinary person of average
understanding if purchasing insurance[.]”28 “[T]he words must be given their plain meaning,
consistent with the reasonable expectations, objectives, and intent of the parties.”29 “Exceptions
and limitations contained in insurance policies should be construed strictly against the insurer.”30
“Absent an ambiguity, an insurance policy must be enforced according to its terms.”31
“[A]mbiguity exists when there is duplicity, indistinctness or uncertainty in the meaning of the
language used in the policy.”32 Any ambiguity must be resolved in favor of the insured.33
“Courts will not create an ambiguity in order to distort the language of an unambiguous

26

Taylor v. Bar Plan Mut. Ins. Co., 457 S.W.3d 340, 344 (Mo. 2015) (en banc) (citing Floyd-Tunnell v.
Shelter Mut. Ins. Co., 439 S.W.3d 215, 217 (Mo. 2014) (en banc)).
27

Country Mut. Ins. Co. v. Cronin, 17 F. Supp. 3d 900, 905 (E.D. Mo. 2014) (quoting Nixon v. Life
Investors Ins. Co. of Am., 675 S.W.2d 676, 679 (Mo. Ct. App. 1984)).
28

Seeck v. Geico Gen. Ins. Co., 212 S.W.2d 129, 132 (Mo. 2007) (en banc); see also Haulers Ins. Co. v.
Wyatt, 172 S.W.3d 880, 884 (Mo. Ct. App. 2005) (quoting Tapley v. Shelter Ins. Co., 91 S.W.3d 755, 757 (Mo. Ct.
App. 2002)).
29

Standard Artificial Limb, Inc. v. Allianz Ins. Co., 895 S.W.2d 205, 209 (Mo. Ct. App. 1995) (quoting
Chase Resorts, Inc. v. Safety Mut. Cas. Corp., 869 S.W.2d 145, 150 (Mo. Ct. App. 1993)).
30

Id. (quoting Chase Resorts, Inc., 869 S.W.2d at 150).

31

Lang v. Nationwide Mut. Fire Ins. Co., 970 S.W.2d 828, 830 (Mo. Ct. App. 1998) (citing Robin v. Blue
Cross Hosp. Serv., Inc., 637 S.W.2d 695, 698 (Mo. 1982) (en banc)).
32

Haggard Hauling & Rigging Co. v. Stonewall Ins. Co., 852 S.W.2d 396, 399 (Mo. Ct. App. 1993) (citing
Krombach v. Mayflower Ins. Co., Ltd., 827 S.W.2d 208, 210 (Mo. 1992) (en banc)).
33

Seeck, 212 S.W.3d at 132 (en banc).

9

insurance policy.”34 Moreover, “[m]ere disagreement by the parties regarding a contract term’s
interpretation does not render the term ambiguous.”35
A.

Interpreting the Policy

The dispositive question in this case is whether the Policy is a claims made or an
occurrence policy. Under Missouri law, “a claims made policy provides coverage when the act
or omission is discovered and brought to the attention of the insurer, regardless of when the act
or omission occurred.”36 “Claims made policies place special reliance on notice,”37 and thus
under a claims made policy, “if there is no timely notice, there is no coverage.”38 By contrast, an
occurrence policy “generally provide[s] for coverage for an event that occurs during the policy
period, regardless of when a claim is asserted.”39 “[C]overage is triggered by negligent acts or
omissions that occur during the policy, irrespective of when the acts or omissions are discovered
and reported to the insurer.”40 Thus, “[t]he basic distinction between claims made and
occurrence policies is that while the occurrence policy is triggered by the insured’s liabilityproducing conduct, the claims made policy is triggered by the presentation of a claim.”41 In

34
Krombach, 827 S.W.2d at 210 (citing Rodriguez v. Gen. Accident Ins. Co., 808 S.W.2d 379, 382 (Mo.
1991) (en banc)).
35

Lindsay v. Safeco Ins. Co., 463 F.3d 827, 832 (8th Cir. 2006).

36

Wittner, Proger, Rosenblum & Spewak, P.C. v. Bar Plan Mut. Ins. Co., 969 S.W.2d 749, 754 (Mo. 1998)
(en banc) (internal quotation marks omitted); see also Lexington Ins. Co. v. St. Louis Univ., 88 F.3d 632, 634 (8th
Cir. 1996).
37

Landry v. Intermed Ins. Co., 292 S.W.3d 352, 356 (Mo. Ct. App. 2009).

38

Lexington Ins. Co., 88 F.3d at 634.

39

H&R Block, Inc. v. Am. Int’l Specialty Ins. Co., 546 F.3d 937, 939 (8th Cir. 2008) (quoting Wittner, 969
S.W.2d at 952)).
40

Landry, 292 S.W.3d at 356 (citing Continental Cas. Co v. Maxwell, 799 S.W.2d 882, 886 (Mo. Ct. App.

41

Continental Cas. Co., 799 S.W.2d at 886 (citation omitted).

1990)).

10

Landry, the Court of Appeals for the Western District of Missouri explained that a claims made
policy emphasizes notice:
Notice must be given to the insurer during the policy period. If the
insured does not give notice within the contractually required
policy period, there is simply no coverage under a claims made
policy, whether or not the insurer was prejudiced. This is because
the event which invokes coverage in a claims made policy is
transmittal of notice of the claim to the insurer. “The very essence
of a claims made policy is notice to the carrier within the policy
period.”42
“[C]overage under most claims made policies is triggered when a negligent act or
omission is discovered and reported to the insured during the policy period.”43 As this extends
coverage to lawsuits brought after a policy expires “so long as the insured provides notice to the
insured during the policy period of potential claims,” a claims made policy offers the insured
additional protection for claims not in litigation before the expiration of the policy.44 Thus, the
insured is responsible for reporting acts and occurrences that could become claims in accordance
with the notice requirement that “sets the parameters of coverage under the policy.”45
Here, neither AAIC nor Aspen Square allege that the Policy is ambiguous or
unenforceable. Specifically, neither party argues that the coverage provision is ambiguous. The
Policy’s coverage provision states:
1. This coverage applies to Wrongful Acts or Pollution Incidents
taking place during the Policy Period, but then only if the Claim
is first made against the Insured and reported to Us during the
Policy Period or Extended Reporting Period, if applicable, in
accordance with Section VI, Condition N, Reporting of Potential
Claims and Actual Claims.46
42

Landry, 292 S.W.3d at 356 (citing and quoting Continental Cas. Co., 799 S.W.2d at 886–87).

43

Id. (citing Continental Cas. Co., 799 S.W. 2d at 886).

44

Id. (citing F.D.I.C. v. St. Paul Fire & Marine, Ins. Co., 993 F.2d 155, 158 (8th Cir. 1993).

45

Id. (citing F.D.I.C., 993 F.2d at 158).

46

Doc. 20 ¶ 5.

11

The Court finds that the Policy is unambiguous, and therefore enforces it according to its terms.
The parties disagree about the interpretation of the Policy. The Court finds that, as a
matter of law, the Policy is a claims made policy. The language of the Policy makes this clear
with the statement:
THIS IS A CLAIMS-MADE AND REPORTED POLICY,
PLEASE REVIEW THE POLICY CAREFULLY. COVERAGE
APPLIES ONLY TO A CLAIM FIRST MADE AGAINST THE
INSURED AND REPORTED TO [THE INSURER] DURING
THE POLICY PERIOD OR, IF APPLICABLE, DURING THE
EXTENDED REPORTING PERIOD[.]47
Moreover, pursuant to the Policy, (1) the “coverage applies to Wrongful Acts or Pollution
Incidents taking place during the Policy Period, but then only if the Claim is first made against
the Insured and reported to Us during the Policy Period or Extended Reporting Period;”48 (2) the
Policy Period was from April 15, 2015 through April 15, 2016; (3) the Extended Reporting
Period lasted until June 15, 2016—“sixty (60) days after Policy termination or the end of the
Policy Period;”49 and a claim is defined as “[1] Any written demand the Insured receives for
Damages due to a Wrongful Act or Pollution Incident arising out of Professional Services [or
2] [a]ny Suit seeing Damages against Insured due to a Wrongful Act or Pollution Incident
arising out of Professional Services, commenced by the service of a complaint or similar
pleading . . . .”50
While Aspen Square asserts that the Policy is an occurrence policy because Rainmaker’s
“liability-inducing conduct” triggered the Policy, this is contrary to the unambiguous language of

47

Id. ¶ 4.

48

Id. ¶ 5.

49

Id. ¶ 7.

50

Id. ¶ 6.

12

the Policy. The Policy explicitly states that it is a “claims-made and reported policy” and
specifically explains that “coverage applies only to a claim first made against the insured and
reported to [the insurer] during the policy period . . . .” Moreover, under a reasonable reading of
the unambiguous language of the Policy, coverage is triggered not merely by the liabilityinducing act occurring between April 15, 2015 and April 15, 2016, but by the claim being made
and reported by June 15, 2016. Thus, not only must the liability-inducing conduct occur during
the Policy Period, but the claim—which the Policy defines as distinct from the conduct itself—
must be made and reported to AAIC before the end of the Basic Extended Reporting Period.
Aspen Square has not pointed to any language demonstrating that the Policy does not function as
a claims made policy, and there is no language in the Policy indicating that notice of a liabilityinducing occurrence alone determines whether a claim is covered. Indeed, the Policy’s coverage
is triggered by a claim—defined as either a written demand to the insured for damages or a suit
seeking damages against the insured—being made and reported to AAIC. Accordingly, the
Policy is not only titled as, but also functions as a claims made policy.
Aspen Square further argues that the Policy acts as an occurrence policy because AAIC
cannot show that the Policy provided for “retroactive ‘claims-made’ liability during the policy
period.”51 Aspen Square appears to rely on a New Jersey case quoted in Continental Casualty
Co. v. Maxwell52 for this proposition. In Zuckerman v. National Union Fire Insurance Co., the
New Jersey Supreme Court discussed whether insurance companies must prove prejudice to
avoid coverage in a claims made policy when the claim is reported after the policy expires, and
explained that “[i]n exchange for limiting coverage only to claims made during the policy period,

51

Doc. 24 at 10.

52

799 S.W.2d 882 (Mo. Ct. App. 1990).

13

the carrier provides the insured with retroactive coverage for errors and omissions that took place
prior to the policy period.”53
However, while retroactive coverage for liabilities arising before a policy period began
often exist in claims made policies, this Court has found no Missouri law to support Aspen
Square’s notion that a claims made policy must contain a retroactive clause that effectively
covers claims for liabilities that arose before a policy’s effective date. To the contrary, a claims
made policy with limited retroactive coverage, or with a retroactive date that is the same as a
policy’s commencement date, is enforceable.54 In fact, “[i]t is commonplace for issuers of
claims-made policies to limit retroactive coverage by specifying a cut-off date, such as the date
of the first claims-made policy issued by the insurer to this insured, so that claims based on
occurrences before that date are excluded from coverage; for protection against old occurrences,
the insured must look to his occurrence policies.”55 Retroactive dates benefit insurers because
insurers limit their liability exposure “by inserting a ‘retroactive date’ into the policy, prior to
which the insured’s act are not covered.”56 Therefore, the absence of retroactive coverage is not
fatal to the determination that the Policy is a claims made policy.

53

495 A.2d 395, 406 (N.J. 1958).

54

See, e.g., H&R Block, Inc. v. Am. Int’l Specialty Ins. Co., 546 F.3d 937, 942 (8th Cir. 2008) (quotation
omitted) (“Even a claims made policy with no prior acts coverage is not illusory, that is, ‘hopelessly or deceptively
one-sided,’ ‘if the insurance premium were correspondingly small.’”); Edwards v. Lexington Ins. Co., 507 F.3d 35,
41 (1st Cir. 2007) (citing Alt. Energy, Inc. v. St. Paul Fire & Marine Ins. Co., 267 F.3d 30, 35 (1st Cir. 2007))
(finding that a claims made policy without retroactive coverage was unambiguous and enforceable, and noting that
“a claims-made insurance policy is not rendered ambiguous simply because it does not resemble all policies in its
class”); Truck Ins. Exchange v. Ashland Oil, Inc., 951 F.2d 787, 790 (7th Cir. 1992) (citing Nat’l Cycle, Inc. v.
Savoy Reinsurance Co., 938 F.2d 61, 62 (7th Cir. 1991)).
55
Edwards, 507 F.3d 35, 41 (1st Cir. 2007) (quoting Ashland Oil, Inc., 951 F.2d at 790); see also 7 Steven
Plitt et al., Couch on Ins. § 126:26 (3d ed. 2018) (citation omitted).
56

Capson Physicians Ins. Co. v. MMIC Ins. Inc., 829 F.3d 951, 953 n.2 (8th Cir. 2016) (quoting 3 New
Appleman on Insurance Law Library Edition § 16.07[5][a] (Jeffrey E. Thomas & Francis J. Mootz III eds.,
LexisNexis 2015)).

14

B.

Coverage of Aspen Square’s Claim Against Rainmaker Surveying

As a matter of law, the Policy is a claims made policy—specifically a claims made and
reported policy. Accordingly, AAIC was not required to provide coverage for a claim against
Rainmaker Surveying if it was not made and reported to AAIC by the end of the Basic Extended
Reporting Period.
AAIC denied defense and coverage to Rainmaker Surveying for the Underlying Lawsuit
because Aspen Square’s claim was not first made and reported before the Policy’s Basic
Extended Reporting Period expired. It is undisputed that the claim was not reported to AAIC
until November 17, 2016—over five months after June 15, 2016, the Basic Extended Reporting
Period’s expiration date. Rainmaker Surveying was first notified on or after July 21, 2016 that
its negligent conduct damaged Aspen Square and resulted in a claim. On October 13, 2016,
Aspen Square filed a professional negligence claim against Rainmaker Surveying in the
Underlying Lawsuit, seeking damages Rainmaker Surveying’s negligent conduct at the Corbin
Park Dave & Buster’s worksite in Overland Park, Kansas. AAIC first received notice of the
Underlying Lawsuit on November 17, 2016 from insurance agent Teresa Foster, on behalf of
Rainmaker Surveying, and it is undisputed that Rainmaker Surveying did not report Aspen
Square’s professional negligence claim or the Underlying Lawsuit to AAIC before November
17, 2016. Therefore, as matter of law, the Policy does not cover Aspen Square’s claim against
Rainmaker Surveying.
C.

Prejudice

Pursuant to Missouri Insurance Department regulations, an insurer must show prejudice
when denying defense and coverage of a claim based on untimely written notice.57 An insurer is

57

Mo. Code Regs. Ann. tit. 20, § 100-1.020 (2007) (“No insurer shall deny any claim based upon the
insured’s failure to submit a written notice of loss within a specified time following any loss, unless this failure

15

only required to prove prejudice, however, when the coverage at issue is in an occurrence
policy.58 Federal and state courts applying Missouri law “have long held that Missouri law does
not require an insurer to show prejudice under a claims made policy.”59 “Because the reporting
requirement helps define the scope of coverage under a claims made policy, to excuse a delay in
notice beyond the policy period would alter a basic term of the insurance contract.”60 As the
Policy is a claims made policy, AAIC is not required to prove prejudice to deny coverage of the
claim. Accordingly, AAIC rightfully denied the claim against Rainmaker Surveying in
accordance with the Policy, and the Court grants summary judgment in favor of AAIC on each
of Aspen Square’s claims, as explained below.
D.

Summary Judgment on Aspen Square’s Claims

As Rainmaker Surveying’s judgment creditor, Aspen Square stands in the shoes of
Rainmaker Surveying—the insured-debtor—and has no greater rights than Rainmaker

operates to prejudice the rights of the insurer.”); see also Tuterri’s Inc. v. Hartford Steam Boiler Inspection and Ins.
Co., 894 S.W.2d 266, 268–69 (Mo. Ct. App. 1995) (discussing the prejudice requirement and refusing to enforce a
written notice of claims provision in an insurance contract when the insurer could not prove that untimely notice
resulted in actual prejudice); Weaver v. State Farm Mut. Auto Ins. Co., 936 S.W.2d 818, 820–21 (Mo. 1997) (en
banc).
58

See, e.g., Ins. Placements, Inc. v. Utica Mut. Ins. Co., 917 S.W.2d 592, 597 (Mo. Ct. App. 1996)
(citations omitted) (discussing the differences between occurrence and claims made policies, and finding that
because the policy at issue was a claims made policy, the insurer was not required to “prove it was prejudiced to
avoid coverage due to lack of notice[.]”); Lexington Ins. Co. v. St. Louis Univ., 88 F.3d 632, 634 (8th Cir. 1996)
(citations omitted) (“The Missouri Courts of Appeals [have held] that an insurer need not prove prejudice to avoid
coverage under a claims made policy if the claim was not reported until after the policy expired); Philadelphia
Consol. Holding Corp. v. LSi-Lowery Sys. Inc., No. 4:12CV1005 CDP, 2013 WL 5567719, at *5 (E.D. Mo. Oct. 9,
2013) (citations omitted) (“Defendants also cite Missouri regulation 20 CSR 100–1.020, which states: ‘No insurer
shall deny any claim based upon the insured's failure to submit a written notice of loss within a specified time
following any loss, unless this failure operates to prejudice the rights of the insurer.’ However, this exact argument
has been considered and rejected by the Eighth Circuit in Lexington Ins. Co. v. St. Louis Univ. . . . and I find no
reason to depart from that holding here.”).
59

See Ins. Placements, Inc., 917 S.W.2d at 597; Lexington Ins. Co., 88 F.3d at 634; Philadelphia Consol.
Holding Corp., 2013 WL 5567719, at *5.
60

Ins. Placements, Inc., 917 S.W.2d at 597 (citations omitted).

16

Surveying.61 Aspen Square brings breach of contract, bad faith and equitable garnishment
claims against AAIC, and seeks summary judgment in its favor on all three claims. AAIC
asserts that because the Policy is a claims made policy, it appropriately denied coverage of the
claim arising from Rainmaker Surveying’s wrongful conduct, and therefore is entitled to
summary judgment on Aspen Square’s claims. The determination that the Policy is a claims
made and reported Policy is dispositive, and AAIC is entitled to summary judgment on all three
claims.
1.

Breach of Contract

Aspen Square asserts a breach of contract claim based on AAIC denying coverage of its
claim against Rainmaker Surveying. Under Missouri law, an action for breach of contract
requires “(1) the existence and terms of a contract; (2) that plaintiff performed or tendered
performance pursuant to the contract; (3) breach of the contract by the defendant; and (4)
damages suffered by the plaintiff.”62 Because the Policy is a claims made policy and did not
cover Rainmaker’s liability, AAIC did not breach a contract by denying coverage of the claim as
a matter of law.63 Accordingly, AAIC is entitled to summary judgment on the breach of contract
claim.

61

Meyers v. Smith, 375 S.W.2d 9, 15 (Mo. 1964) (citation omitted) (“[I]n an action by the injured party
against the insurer, after a judgment has been obtained by the injured party against the insured, the injured party
stands in the shoes of the insured and his rights are no greater and no less than the insured’s would have been in an
action between the insured and the insurer, if the insured had paid the judgment to the injured party.”).
62

Keveney v. Mo. Military Acad., 304 S.W.3d 98, 104 (Mo. 2010) (citing Howe v. ALD Servs., Inc., 941
S.W.2d 645, 650 (Mo. Ct. App. 1997)).
63

See id.

17

2.

Bad Faith

Aspen Square alleges that AAIC “has no good faith basis for denying coverage and has
acted in bad faith in denying Aspen’s claim against Rainmaker.”64 AAIC argues that Aspen
Square cannot succeed on its bad faith claim because it cannot prove the Policy covers the claim
against Rainmaker Surveying. The Court finds that, as a matter of law, Aspen Square’s bad faith
claim fails.
Under Missouri law, derivative theories of liability such as bad faith claims fail as a
matter of law when there is no coverage under the insurance policy at issue.65 Here, the Policy
does not cover the claim against Rainmaker Surveying because the Policy is a claims made
policy, and the claim was not made and reported before the expiration of the Policy’s Basic
Extended Reporting Period. Accordingly, Aspen Square’s derivative bad faith claim fails as a
matter of law, and summary judgment is granted in favor of AAIC.
Additionally, the record does not support the requirements for bad faith refusal to settle.
Under Missouri law, bad faith refusal to settle an action only exists when a liability insurer “(1)
reserves the exclusive right to contest or settle any claim; (2) prohibits the insured from
voluntarily assuming any liability or settling any claims without consent; and (3) is guilty of
fraud or bad faith in refusing to settle a claim within the limits of the policy.”66 Here, AAIC

64

Doc. 1-2 ¶ 34.

65

Stone v. Farm Bureau Town & Country Ins. Co. of Mo., 203 S.W.3d 736, 749 (Mo. Ct. App. 2006)
(determining that because the insurance policy was cancelled, the derivative theories of liability failed because the
policy did not provide coverage); Columbia Mut. Ins. Co. v. Epstein, 200 S.W.3d 547, 551–52 (Mo. Ct. App. 2006)
(finding that if the insurer did not have a duty to defend and indemnify, “it would obviously preclude” the insured’s
bad faith counterclaim); Elec. Power Sys. Int’l, Inc. v. Zurich Am. Ins. Co., No. 4:15 CV 1171 CDP, 2016 WL
4990498, at *5 (E.D. Mo. Sept. 6, 2016) (citing Purscell v. TICO Ins. Co., 959 F. Supp. 2d 1195, 1200–01 (W.D.
Mo. 2013)) (granting summary judgment “because there was no coverage under the Policy, [defendant] cannot be
found to have acted in bad faith in failing to settle the claim”).
66
Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 827 (Mo. 2014) (en banc) (citing Zumwalt v.
Utilities Ins. Co., 228 S.W.2d 750, 753 (Mo. 1950)).

18

denied defense and coverage to Rainmaker Surveying for the Underlying Lawsuit because Aspen
Square’s claim was not first made and reported before the expiration of the Policy’s Basic
Extended Reporting Period. Therefore, AAIC did not reserve the exclusive right to contest or
settle the Underlying Lawsuit. Moreover, the Record shows that AAIC did not prevent
Rainmaker Surveying from voluntarily assuming liability or settling the claims of the Underlying
Lawsuit without its consent, as demonstrated by Rainmaker Surveying’s settlement agreement
with Aspen Square and the Agreed and Stipulated Judgment.
3.

Equitable Garnishment

Lastly, Aspen Square asserts a claim for equitable garnishment based on its judgment
against Rainmaker Surveying and AAIC’s alleged obligation under the Policy to cover the claim
against Rainmaker Surveying. However, the Court finds that, as a matter of law, AAIC is not
obligated to pay the judgment and grants AAIC summary judgment on the equitable garnishment
claim.
“An equitable garnishment action is ‘a suit in equity against the insurance company to
seek satisfaction of one’s judgment under an insurance policy.’”67 To recover for equitable
garnishment, a plaintiff “must prove that he obtained a judgment in his favor against the
insurance company’s insured, the policy was in effect when the incident occurred and that the
injury is covered by the insurance policy.”68 Here, the claim against AAIC fails the third prong.
Although it is undisputed that Aspen Square obtained a judgment against Rainmaker Surveying,
AAIC’s insured, and that the Policy was in effect when Rainmaker Surveying’s wrongful
conduct occurred, the Policy does not cover Aspen Square’s claim against Rainmaker Surveying.

67

McDonald v. Ins. Co. of Pa., 460 S.W.3d 58, 67 (Mo. Ct. App. 2015) (quoting Little v. Am. States Ins.
Co., 179 S.W.3d 433, 432 n.2 (Mo. Ct. App. 2005)).
68

Id. (quoting Kotini v. Century Sur. Co., 411 S.W.3d 374, 377 (Mo. Ct. App. 2013)).

19

As previously discussed, the Policy is a claims made and reported policy, and the claim was not
made and reported to AAIC until after the Basic Extended Reporting Policy expired. Thus, the
Policy does not cover the claim. Accordingly, Aspen Square cannot garnish the Policy as a
matter of law, and AAIC is entitled to summary judgment on Aspen Square’s equitable
garnishment claim.
IT IS THEREFORE ORDERED BY THE COURT that Aspen Square’s Motion for
Summary Judgment (Doc. 23) is denied and that AAIC’s Motion for Summary Judgment (Doc.
21) is granted. Plaintiff’s case is dismissed in its entirety.
IT IS SO ORDERED.
Dated: March 11, 2019
S/ Julie A. Robinson
JULIE A. ROBINSON
CHIEF UNITED STATES DISTRICT JUDGE

20