Stacy v. Bar Plan Mut. Ins. Co.

621 S.W.3d 549

Jessica STACY and Brian Stacy, Respondents,

v.The BAR PLAN MUTUAL INSURANCE COMPANY, Appellant.

No. ED 108576

Missouri Court of Appeals, Eastern District, DIVISION THREE.

FILED: January 26, 2021

Application for Transfer Denied June 1, 2021

For Appellant: James C. Leritz, 555 Washington Ave., Ste. 600, St. Louis, MO 63101.

For Respondents: James R. Dowd, Matthew P. O'Grady, 110 E. Lockwood Ave., St. Louis, MO 63119.

KURT S. ODENWALD, Presiding Judge

Introduction

This appeal presents issues relating to the enforcement of a judgment entered following a settlement agreement executed between an attorney and his malpractice victims pursuant to Section 537.065¹ against the attorney's insurance carrier in an equitable garnishment action. Here, the trial court granted summary judgment to Jessica Stacy ("Mrs. Stacy") and Brian Stacy ("Mr. Stacy") (collectively, the "Stacys") on their equitable-garnishment action against The Bar Plan Mutual Insurance Company ("The Bar Plan"). The grant of summary judgment allowed the Stacys to collect from The Bar Plan on the judgment entered in the underlying legal malpractice claim the Stacys brought against their attorney, Jeffrey Witt ("Witt"). Witt carried a policy of professional liability insurance (the "Policy") with The Bar Plan. The Bar Plan raises four points on appeal challenging the trial court's judgment finding that The Bar Plan breached the Policy and is liable for the Stacys’ underlying judgment against Witt pursuant to a Section 537.065 settlement agreement (the "Section 537 Agreement").

In Point One, The Bar Plan challenges the trial court's finding that the Stacys’ demands against Witt constituted multiple claims under the Policy, thereby allowing a multiple-limit recovery under the Policy. The Bar Plan reasons that the limits-of-liability provision of the Policy (the "Limits of Liability") clearly reads that two or more demands arising out of a series of related acts or omissions shall be treated as a single claim, thereby limiting the Stacys’ maximum recovery under the Policy to a single claim. Relatedly, Point Two argues the trial court erred in finding The Bar Plan breached the Policy when it informed the Stacys of its position that the Stacys’ legal malpractice claims against their attorney constituted a single claim under the Limits of Liability in the Policy. Point Three alleges the trial court erred in finding The Bar Plan was bound by the underlying judgment because The Bar Plan's alleged breach of the Policy had no effect on Witt's defense of the malpractice action. In particular, The Bar Plan suggests that because the Stacys were willing to settle all of their claims against Witt within the Limits of Liability for a single claim, The Bar Plan's single-claim position did not factor into Witt's decision to settle with the Stacys. Lastly, Point Four claims insufficient evidence supports the trial court's judgment holding The Bar Plan liable for the full $450,000 of the underlying judgment because the amount of allowable coverage under the Policy was reduced by defense expenses that were not reflected in the record.

Because the word "related" in the Limits of Liability is unambiguous, a reasonable attorney would understand that multiple acts of negligence committed in the course of representing the Stacys in their personal injury claims arising from a single motor vehicle accident are "a series of related acts or omissions" so as to constitute a single claim under the Policy. The trial court erred in finding multiple coverage limits applied to each of the Stacys’ demands against Witt. Correspondingly, the summary-judgment record establishes that The Bar Plan did not unjustifiably refuse to provide coverage to Witt when it informed Witt that it considered the Stacys’ malpractice claims to be a single claim under the Limits of Liability. Accordingly, the trial court erred in granting summary judgment to the Stacys. Furthermore, because Witt's execution of the Section 537 Agreement with the Stacys without The Bar Plan's consent prevented The Bar Plan from controlling the litigation, The Bar Plan is not bound by the underlying judgment entered against Witt. The Bar Plan is therefore entitled to summary judgment in its favor in the equitable garnishment action brought against it by the Stacys. Because Points Three and Four are resolved by the holdings in Points One and Two, we deny Points Three and Four. We reverse the judgment of the trial court and enter summary judgment in favor of The Bar Plan, pursuant to Rule 84.14.²

Factual and Procedural History

The Stacys were involved in a motor vehicle accident in November 2007. The Stacys signed separate representation agreements to retain Witt and the Law Office of Jeffrey M. Witt, LLC to represent them in pursuing personal injury claims against the driver of the other automobile. Unknown to the Stacys, the "attorney" assigned to represent them, Bernard Becton, had been disbarred following convictions for forgery and stealing. Witt was disbarred in 2014.

On June 9, 2011, the Stacys filed a legal malpractice action against Witt and his law office in which they alleged multiple acts of negligence in Witt's representation of them in the personal injury lawsuit. Witt carried a policy of professional liability insurance with The Bar Plan. The Policy, issued April 2011, provides coverage in the amount of $500,000 per claim and $1,500,000 in the aggregate. The Policy includes the following Limits of Liability applicable to multiple insureds, claims, and claimants:

The demand for money or services by more than one person or Entity shall not operate to increase the Company's liability. Two or more demands arising out of a single act or omission or a series of related acts or omissions shall be treated as a single Claim ....

All such demands for money or services shall be considered a single Claim subject to a single Limit of Liability, regardless of the number of Insureds against which the demands are made.

(Emphasis added). The Policy thereafter provides a "non-exhaustive list of a series of related acts or omissions that constitute a single [c ]laim " in which the Limits of Liability of $500,000 for a single claim applies:

a. All activities pertaining to handling a probate estate from its inception to its conclusion, including but not limited to, the advice and preparation of tax returns for the decedent or the estate;

b. All activities, including but not limited to, settlement negotiations, discovery, trial and appeal, conducted on behalf of an injured client pertaining to all possible Claims and theories of recovery against all possible parties arising out of injury or loss to that client;

c. All activities pertaining to the defense of a client in a civil case including but not limited to, settlement negotiations, discovery, trial and appeal;

d. All activities pertaining to the defense of a criminal case, including but not limited to, plea bargaining, discovery, trial, sentencing, and appeal; e. All activities pertaining to a real estate transaction ...; and

f. All activities pertaining to a sale of a business....

The Policy also contains a provision requiring the insured cooperate with the defense (the "Cooperation Clause"), stating:

Each Insured shall cooperate with the Company.... The Insured shall not make any payment, admit any liability, settle any Claims, assume any obligation or incur any expense without the consent of the Company. If our Insured does elect to admit liability, settle a Claim, assume any obligation or incur any expense without the consent of the Company it does so at its own cost and waives coverage for that Claim and any related act or omission.

(Emphasis added).

The Bar Plan agreed to provide Witt a defense to the Stacys’ malpractice action and appointed Brent Baldwin ("Baldwin") to represent him. The Stacys initially offered to settle their claims for $500,000 each. The Bar Plan sent Witt reservation of rights letters, one of which reserved its right to disclaim coverage for any of Witt's acts or omissions giving rise to the malpractice alleged in the Stacys’ petition that took place prior to the retroactive date of the policy. The dates-of-coverage issue was later resolved in favor of coverage. The Bar Plan did not send any letters reserving its rights to disclaim coverage or refuse to indemnify Witt related to taking a single-claim position as to the Limits of Liability.

In correspondence between The Bar Plan and Baldwin, a corporate representative of The Bar Plan noted that the Stacys’ demands exceeded the policy limit for a single claim. On April 25, 2013, Baldwin informed The Bar Plan that the Stacys likely were thinking they had two claims against Witt and thus thought the policy provided two separate limits, one limit for each of their claims.

Trial was scheduled for October 7, 2013. Approximately three weeks prior, the parties engaged in an unsuccessful mediation on September 13, 2013. During the mediation, The Bar Plan explained its view that the Stacys’ demands against Witt constituted only a single claim under the Policy's Limits of Liability.

The summary-judgment record reveals that after the unsuccessful mediation, Witt retained attorney Laurence D. Mass ("Mass") to represent his personal interests. Shortly thereafter, Mass emailed Baldwin requesting that Baldwin terminate his representation of Witt. Mass later presented a settlement offer on behalf of Witt, offering to settle the Stacys’ claims for $400,000. The Bar Plan rejected the demand.

Witt then entered into a Section 537 Agreement with the Stacys on September 23, 2013. The Section 537 Agreement stated that any judgment the Stacys obtained against Witt based on the facts in their first amended petition would be satisfied solely from the proceeds of Witt's Policy with The Bar Plan, thereby limiting collection of any judgment against Witt to that which could be recovered from The Bar Plan. Witt entered into the Section 537 Agreement...