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Smith v. Maryland Casualty Co.

Court of Appeals of Missouri, Southern District, Second Division

January 23, 2015

JOSEPH SMITH, Plaintiff-Respondent,
MARYLAND CASUALTY COMPANY, Defendant-Appellant, and ANDREW SHAYATOVICH, Defendant-Respondent.



Maryland Casualty Company ("Maryland Casualty") appeals from the trial court's entry of summary judgment in an equitable garnishment action. In two related points, Maryland Casualty argues the trial court erred in granting summary judgment based on the assertion of the plaintiff, Joseph Smith ("Smith"), that Maryland Casualty had waived its right to deny coverage. We reverse because Smith's motion for summary judgment and the supporting documents did not demonstrate Smith was entitled to judgment as a matter of law.

Standard of Review

"Appellate review of the grant of summary judgment is de novo." Kinnaman-Carson v. Westport Ins. Corp., 283 S.W.3d 761, 764 (Mo. banc 2009). "Summary judgment will be upheld on appeal if: (1) there is no genuine dispute of material fact, and (2) the movant is entitled to judgment as a matter of law." Id. at 765 (quoting ITT Commercial Finance Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993)). "When reviewing a circuit court's summary judgment, we view the record in the light most favorable to the party against whom the circuit court entered judgment." Taggart v. Maryland Cas. Co., 242 S.W.3d 755, 758 (Mo. App. W.D. 2008). Factual and Procedural Background

The following facts are drawn from the parties' statements of undisputed material facts, viewed in the light most favorable to Maryland Casualty as the non-moving party. In May 2011, Smith sued Team Navigator, LLC ("Navigator"), Andrew Shayatovich ("Shayatovich"), Paul Shayatovich, and Russell Custard. According to the petition, on December 20, 2010 Smith was a passenger in a vehicle being driven by Shayatovich and was injured when that vehicle was involved in an accident. Smith further alleged Shayatovich was working as Navigator's agent at the time of the accident.

Navigator had two insurance policies with Maryland Casualty that were in force on the date of the accident: a commercial auto policy with a limit of $1, 000, 000 and a commercial umbrella policy with a limit of $1, 000, 000. In September 2011, one of Maryland Casualty's representatives sent Shayatovich a letter in which Maryland Casualty offered to defend Shayatovich in the lawsuit Smith filed in May 2011 ("the first lawsuit") informing Shayatovich that Maryland Casualty was not giving up its "right to later deny paying for any judgment entered against" Shayatovich. Maryland Casualty retained attorney George W. Reinbold, IV ("Reinbold") to represent Shayatovich in the first lawsuit. Reinbold filed an answer on Shayatovich's behalf in the first lawsuit. On August 7, 2012, the first lawsuit was dismissed sua sponte without prejudice by the trial court for failure to prosecute.

On August 13, 2012, Smith filed a second lawsuit ("the second lawsuit") against Shayatovich as the sole defendant. Reinbold forwarded the petition in the second lawsuit to Maryland Casualty, telling Maryland Casualty that Shayatovich had authorized Reinbold to accept service in the case on Shayatovich's behalf, and asking Maryland Casualty for permission to accept service of the second lawsuit on behalf of Shayatovich. Despite these events, Shayatovich believed "the action was one continuous lawsuit." Furthermore, while Maryland Casualty told Reinbold after the filing of the second lawsuit, "the defense provided Shayatovich would continue under the same terms and conditions of the defense provided in" the first lawsuit, Maryland Casualty did not send a second reservation of rights letter directly to Shayatovich.

On September 11, 2012, Maryland Casualty filed a petition for declaratory judgment in federal court seeking a determination of whether there was coverage for Shayatovich for the December 2011 accident under the policies Maryland Casualty had issued to Navigator. This suit's summons was served on Shayatovich. Thereafter, Reinbold filed an answer on Shayatovich's behalf in the second lawsuit.

On October 6, 2012, Smith and Shayatovich entered into an agreement pursuant to Section 537.065.[1] In that agreement, Shayatovich asserted he had demanded defense and indemnification from Maryland Casualty for damages claimed in the second lawsuit, but Maryland Casualty had refused and continued to refuse to provide him an unconditional defense without reservation of rights and had indicated prospectively "it will not or may not indemnify [him] as a result of any judgment entered against him[.]" Pursuant to the agreement, Shayatovich informed Maryland Casualty he would no longer accept a defense under a reservation of rights. On October 9, 2012, Shayatovich discharged Reinbold.

On October 11, 2012, attorney Zane Williams ("Williams") filed an entry of appearance and answer on behalf of Shayatovich in the second lawsuit. On October 19, 2012, Reinbold filed a Motion to Withdraw as counsel for Shayatovich in the second lawsuit which the trial court granted. On October 26, 2012, a trial was conducted in the second lawsuit. After the presentation of evidence, the trial court entered judgment for Smith and against Shayatovich in the amount of $1, 834, 298, plus costs and post-judgment interest.

On November 27, 2012, Smith filed a petition for equitable garnishment under Section 379.200[2] against Maryland Casualty and Shayatovich. Maryland Casualty answered, claiming Shayatovich was not an insured under the policies issued to Navigator. In the alternative, Maryland Casualty asserted that a number of exclusions contained within the policy also applied. Shayatovich then filed a cross-claim against Maryland Casualty claiming a bad faith refusal to settle the second lawsuit within the policy limits.

On December 19, 2013, Smith and Shayatovich filed a joint motion for summary judgment against Maryland Casualty. In support of their motion, Smith and Shayatovich argued Maryland Casualty had waived its defenses when it failed to provide Shayatovich with notice that the defense it was providing in the second lawsuit was pursuant to a reservation of rights. In their statement of uncontroverted material facts, they suggested that Navigator owned the vehicle at issue and that the policies issued by Maryland Casualty provided coverage for the vehicle at issue. Maryland Casualty denied these statements and provided references to the exhibits supporting those denials.

The trial court granted the motion for summary judgment. The trial court found Maryland Casualty did not notify Shayatovich it was defending under a reservation of rights before taking control of the defense in the second lawsuit because the communications to Reinbold were not sufficient to show notice to Shayatovich. The trial court concluded Maryland Casualty had thus waived its defenses and entered judgment against Maryland Casualty in the amount of $1, 834, 298. The trial court did not make a ruling with respect to Shayatovich's bad faith claim. Nevertheless, the ...

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