Grinnell Mutual Reinsurance Company v. Sleeper et al

Filing 45

AMENDED ORDER entered by Judge Nanette Laughrey. Plaintiff's Motion for Summary Judgment [Doc. 31 ] is granted. (Rosenbaum, Daniel)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
CENTRAL DIVISION
GRINNELL MUTUAL
REINSURANCE COMPANY,
Plaintiff,
v.
SUSAN SLEEPER, et. al.,
Defendants.

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Case No. 2:15-cv-04078-NKL

ORDER
In this declaratory judgment action, Plaintiff Grinnell Mutual Reinsurance
Company seeks a declaration of its rights and obligations with respect to an insurance
policy held by Defendant Susan Sleeper. 1 Before the Court is Grinnell’s Motion for
Summary Judgment [Doc. 31]. For the following reasons, the motion is granted.

I.

Background
This litigation arises out of a state court dispute between the family members of

Vincil Fry and Willa Fry, both of whom are deceased. In that dispute, plaintiffs Mary
Ellison and Susan Sleeper asserted claims against defendants Linda Fry, Delbert Fry, Fry

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Grinnell also filed this suit against Defendants Linda Fry, Delbert Fry, Fry Grain Enterprises, and
the John Delbert Fry Revocable Intervivos Trust. These defendants failed to plead or defend as required
under Federal Rule of Civil Procedure 55(a), and so the clerk entered default against them on August 12,
2015. See [Doc. 25].
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Grain Enterprises, and the John Delbert Fry Revocable Intervivos Trust. Sleeper and
Ellison asserted they had been unlawfully deprived by these defendants of property that
should have passed to Sleeper and Ellison on the death of Vincil and Willa Fry.
In response, the state court defendants brought a counterclaim for malicious
prosecution against Susan Sleeper. The counterclaim alleged that Sleeper’s claims were
barred by the statute of limitations, that she and her counsel were aware of this
impediment, and therefore that she had brought suit without probable cause and solely as
a means of harassment. In defense Sleeper alleged that the defendants had concealed
their unlawful activity and therefore the statute of limitations had been tolled. In support
of her defense, Sleeper identified a line of Missouri cases to support her defense.
Ultimately, the Missouri Supreme Court acknowledged and abrogated this line of cases in
ruling Sleeper’s claims were barred by the statute of limitations. See Ellison v. Fry, 437
S.W.3d 762, 770 (Mo. 2014).
Sleeper holds an insurance policy with CFM Insurance, Inc. for which Grinnell
Mutual Reinsurance affords potential liability coverage. Grinnell filed suit before the
Court seeking a declaratory judgment that this policy does not cover the malicious
prosecution counterclaim. Pursuant to Federal Rule of Civil Procedure 56, Grinnell now
moves for summary judgment.

II.

Discussion
Grinnell seeks a declaratory judgment that it has no duty to defend or indemnify

the malicious prosecution claim against Sleeper. To determine whether there is insurance
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coverage Court must first interpret Sleeper’s policy. The interpretation of an insurance
policy is a question of law. Columbia Mutual Ins. Co. v. Schauf, 967 S.W.2d 74, 76 (Mo.
banc 1998). When performing this assessment, a court will consider the terms of the
policy, attaching to those terms “the meaning which would be attached by an ordinary
person of average understanding if purchasing insurance.” McCormack Baron Mgmt.
Services, Inc. v. American Guarantee & Liab. Ins. Co., 989 S.W.2d 168, 171 (Mo. banc
1999) (quoting John A. Appleman & Jean Appelman, Insurance Law and Practice § 7384
(rev. vol. 1976)) (internal quotation marks omitted). Sleeper bears the burden of
establishing coverage under her insurance policy. M.A.B. v. Nicely, 911 S.W.2d 313, 315
(Mo. Ct. App. 1995).
Because neither party disputes the contents of Sleeper’s policy or of the
underlying state court case, there are no factual disputes at issue and “the [C]ourt shall
grant summary judgment if [Grinnell] is entitled to judgment as a matter of law.” Wolfe
Auto. Grp., LLC v. Universal Underwriters Ins. Co., 808 F.3d 729, 732 (8th Cir. 2015)
(quoting Fed.R.Civ.P. 56(a)).
A. Interpretation of the Policy
Sleeper’s insurance policy contains a coverage form entitled “Personal Liability
Coverage,” which states in relevant part:
Coverage L – Liability – We pay, up to our limit, all sums for which an
insured is liable by law because of bodily injury or property damage
caused by an occurrence to which this coverage applies. We will defend a
suit seeking damages if the suit resulted from bodily injury or property
damage not excluded under this coverage. We may make investigations
and settle claims or suits that we decide are appropriate. We do not have to
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provide a defense after we have paid an amount equal to our limit as a
result of a judgment or written settlement.
M [Doc. 1-2, p. 57] (emphasis in original).
The policy defines “occurrence” as “an accident.” [Doc. 1-2, p. 56]. It does not,
however, offer a definition for “accident.”
Grinnell argues that “accident” plainly suggests an injury caused by negligence,
which necessarily precludes acts of an intentional nature. 2 See Jackson v. City of Blue
Springs, 904 S.W.2d 322, 329 (Mo. Ct. App. 1995) (defining “negligence” as “the failure
to exercise the degree of care which a reasonably prudent and careful person would use
under the same or similar circumstances”).

See also Brand v. Kansas City

Gastroenterology & Hepatology, LLC, 414 S.W.3d 546, 555 (Mo. Ct. App. 2013) (“The
concepts of negligence and intentional conduct are contradictory and mutually
exclusive.”).
Sleeper does not appear to dispute this argument.

Although she maintains

“accident” is an ambiguous term in the policy, and consequently it should be construed
against Grinnell, she proceeds to offer third-party definitions of “accident” that define the
term as “an unfortunate incident that happens unexpectedly or unintentionally” and “an
unfortunate event resulting from carelessness, unawareness, ignorance or a combination

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Grinnell alternatively argues that Sleeper’s policy does not cover the malicious prosecution
counterclaim because (1) the policy contains an exclusion barring coverage for intentional acts performed
by the insured and (2) the policy contains an exclusion barring coverage for punitive or exemplary
damages. Because the Court finds that the malicious prosecution counterclaim is not an “occurrence”
such that Grinnell has a duty to defend or indemnify Sleeper, it need not address these alternative
arguments premised on exclusions in the policy.
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of causes.”

[Doc. 41, pp. 17-18].

These definitions are consistent with Grinnell’s

argument that an accidental act bespeaks negligence.
These definitions also comport with Missouri precedent. See Hampton v. Carter
Enterprises, Inc., 238 S.W.3d 170, 175 (Mo. Ct. App. 2007); Wood, 980 S.W.2d at 48;
Great American Ins. Co. v. Pearl Paint Co., 703 S.W.2d 601, 602 (Mo. Ct. App. 1986)
(all interpreting an insurance policy where “occurrence” was defined as an “accident,”
but “accident” was not defined; the term “accident” covers negligent acts).
Accordingly Sleeper’s policy provides coverage for injuries caused by negligence.
B. Duty to Defend
An insurer has a duty to defend when “the petition in the underlying action states
some grounds of liability covered by its insurance policy.” Wood, 980 S.W.2d at 46
(citing Butters v. City of Independence, 513 S.W.2d 418, 424 (Mo. 1974)).

If the

underlying action “alleges facts which state a claim potentially within the policy's
coverage, there is a duty to defend.” Standard Artificial Limb, Inc. v. Allianz Ins. Co.,
895 S.W.2d 205, 210 (Mo. Ct. App. 1995). Conversely, “where the underlying claim is
outside the coverage of the insurance policy,” no such duty exists. McDonough v.
Liberty Mut. Ins. Co., 921 S.W.2d 90, 94 (Mo. Ct. App. 1996).
Grinnell argues that the underlying malicious prosecution counterclaim falls
outside the policy’s coverage. Under Missouri law, a claim for malicious prosecution
requires a showing of malice, making malicious prosecution an intentional tort. Shiddell
v. Bar Plan Mut., 385 S.W.3d 478, 483-84 (Mo. Ct. App. 2012). Therefore, Grinnell

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contends, the underlying counterclaim does not assert any injury caused by negligence,
and so it falls outside the coverage of Sleeper’s policy.
In response, Sleeper argues that the malicious prosecution counterclaim lacked
merit. As she points out, although the Missouri Supreme Court ultimately concluded that
Sleeper’s state claims were barred by the statute of limitations, Ellison, 437 S.W.3d at
770, a prior line of Missouri cases had held that overt acts of concealment could toll the
statute of limitations indefinitely. Therefore Sleeper maintains she had probable cause to
file the underlying lawsuit and thus “[t]he only possible way that these counterclaimants
could succeed is under a theory of negligence which would be fully covered by this
policy.”

[Doc. 41, p. 33].

In other words, “[t]hough [the counterclaimants] assert

intentional acts against her, the facts as they have pled them more aptly are stated in
negligence.” [Doc. 41, p. 31].
Yet the Court’s present task is not to reexamine the merits of a state lawsuit by
parsing allegations for factual support.

Rather, the Court must merely look at the

allegations as they are contained in the complaint. Butters v. City of Independence, 513
S.W.2d 418, 424 (Mo. banc 1974). See also Penn-Star, 306 S.W.3d at 599 (“In our
analysis of the duty to defend, we are constrained to refer to the petition without reading
into it any factual assumptions.”).

According to the counterclaim asserted against

Sleeper, she knew her lawsuit fell outside the statute of limitations but filed it anyways
“without just cause or excuse and for the sole purpose of greed.” [Doc. 32-1, p. 7, ¶¶ 5253].

The counterclaim further alleged that Sleeper “lacked probable cause for

prosecution of [these] claims.” [Doc. 32-1, p. 10, ¶¶ 73-74]. At no point does the
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counterclaim suggest Sleeper acted negligently. Instead, regardless of its ultimate merits,
the counterclaim charged Sleeper solely with intentional, malicious acts.
Therefore, the malicious prosecution counterclaim falls outside the coverage of
Sleeper’s policy and Grinnell has no duty to defend.
C. Duty to Indemnify
Unlike the duty to defend, “[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, for
example through summary judgment.” McCormack Baron, 989 S.W.2d at 173. Missouri
courts have found that “[a]n insurer's duty to defend is broader than its duty to
indemnify.” Superior Equip. Co. v. Maryland Cas. Co., 986 S.W.2d 477, 484-85 (Mo.
Ct. App. 1998). Accordingly, “[w]here there is no duty to defend, there is no duty to
indemnify.” Trainwreck W. Inc. v. Burlington Ins. Co., 235 S.W.3d 33, 44 (Mo. Ct. App.
2007) (quoting Am. States Ins. Co. v. Herman C. Kempker Const. Co., 71 S.W.3d 232,
236 (Mo. Ct. App. 2002)).
Given that Grinnell has no duty to defend Sleeper, it follows that Grinnell also has
no duty to indemnify her regarding the malicious prosecution counterclaim.

III.

Conclusion
For the foregoing reasons, Plaintiff Grinnell Mutual Reinsurance’s motion for

summary judgment [Doc. 31] is granted.

s/ Nanette K. Laughrey

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NANETTE K. LAUGHREY
United States District Judge
Dated: March 7, 2016
Jefferson City, Missouri

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