Court of Appeals of Missouri, Eastern District, Second Division
MATTHEW WALTER PITT and KIMBERLY JEAN YANCEY-PITT, Plaintiffs/Garnishors/Respondents,
WILLIE LEONBERGER, Defendant/Judgment Debtor/ Respondent, and MISSOURI UNITED SCHOOL INSURANCE COUNCIL, Defendant/Garnishee/Appellant.
from the Circuit Court of the City of St. Louis Honorable
David L. Dowd
B. SULLIVAN, P.J.
United School Insurance Council (MUSIC) appeals from three
trial court judgments. First, MUSIC appeals from the trial
court's January 6, 2015 Order Granting Garnishors'
(Matthew Walter Pitt and Kimberly Jean Yancey-Pitt,
collectively the Pitts) Motion for Partial Summary Judgment
and Denying MUSIC's Motion for Summary Judgment on the
issue of coverage for the Pitts' negligent wrongful death
judgment against school bus driver Willie Leonberger
(Leonberger) for negligently causing the death of the
Pitts' son, Hunter Pitt, by failing to instruct Hunter
Pitt how to safely disembark the school bus Leonberger was
driving and then negligently running him over (Points I-IV).
Second, MUSIC appeals from the trial court's May 12, 2015
Order and Judgment finding MUSIC liable for the entire
negligent wrongful death judgment, including the 5.25%
post-judgment interest awarded on the $11, 494, 637.38
wrongful death judgment in favor of the Pitts against
Leonberger on December 21, 2012 by the wrongful death court
and 9% prejudgment interest issued by the garnishment court
on the original judgment plus post-judgment interest
accumulated to date from the time the original judgment
became final and payable on January 21, 2013, but unpaid by
MUSIC, which exceeds the $2, 500, 000 contractual liability
limit of coverage for accidents (Point V). In its May 12,
2015 Order and Judgment, the garnishment court also issued a
Pay-In-Order directing MUSIC to pay the total amount into the
court's registry, which it refused to do, leading to the
next judgment. Third, MUSIC appeals from the trial
court's July 27, 2015 Final Judgment in Garnishment
against MUSIC awarding prejudgment interest and including the
accumulated amount of post-judgment interest imposed by the
wrongful death court on the Pitts' original negligent
wrongful death judgment of $11, 494, 637.38 against
Leonberger on December 21, 2012 for a total of $15, 618,
946.12 (Points VI and VII). We affirm in part, modify in
part, and remand for further proceedings.
and Procedural Background
drove a school bus for the North Callaway R-1 School District
(District). On January 18, 2011, Leonberger was driving the
bus when he accidentally struck and killed six-year-old
student Hunter Pitt after he disembarked the bus. Hunter Pitt
and his older sister, Dakota Yancey, were two of the students
on Leonberger's daily bus route. After exiting the bus in
the afternoon, Hunter Pitt would usually cross the street
first and his sister would follow. On January 18, 2011, after
Hunter Pitt and Dakota Yancey had exited the bus, Leonberger
saw that Dakota had crossed and assumed Hunter had also
crossed. Hunter Pitt had not yet crossed and when the bus
pulled forward it struck him. Hunter Pitt died from his
injuries. Leonberger was unaware the bus had struck Hunter
Pitt until another student told him to stop.
time, Leonberger was insured by the District under a general
liability and automobile liability insurance policy issued by
MUSIC, a business entity that insures school districts and
their employees. The "2011 MUSIC Plan Document"
(the Policy) provided coverage which was occurrence-based and
the Policy defined "occurrence" to mean
"accident, " but did not define
"accident." The Policy had limits of $2, 500, 000,
and MUSIC had contracted with insurer United Educators (UE)
to provide all coverage in excess of $500, 000. Leonberger, a
district school bus driver, was a "Covered Party"
under the Policy. Coverage A of the Policy provided: "We
will pay on behalf of a Covered Party all Damages up to the
Limit of Liability as a result of an Occurrence in the
January 19, 2011, MUSIC was informed of the accident and
immediately accepted coverage for the loss. Claims adjuster
Debra Walker (Walker) told Leonberger he was covered under
the Policy, MUSIC would hire a lawyer for him, and MUSIC
would take care of it. MUSIC completed its investigation on
January 26, 2011, concluding: "Coverage is
applicable…No exclusions apply… investigation
revealed 90 to 100% fault on the bus driver. Lost sight of
claimant and rolled forward over him."
February 3, 2011, MUSIC notified UE of the accident, which
assigned claims attorney Rhonda Hurwitz (Hurwitz) to the
file. Nearly three months later, MUSIC learned a local
prosecutor was considering charging Leonberger with
second-degree involuntary manslaughter for Hunter Pitt's
death, premised upon grossly negligent conduct related to
Leonberger's driving. When it learned of this, internal
documents revealed MUSIC believed Hunter Pitt's death was
a "horrible accident" and a "mistake, "
but "not criminal." Nonetheless, MUSIC concluded it
would "be in our interests to defend" and
"control ... the criminal matter ... since the outcome
could impact [the civil] claim."
March 30, 2011, MUSIC further noted: "We recently
learned that the prosecuting attorney is looking at the case
for pressing charges against the bus driver. Clearly
[Leonberger] made a mistake, but it certainly is not
criminal." MUSIC later noted: "hopefully any jury
will see this as it is, a horrible accident and not
criminal." Walker discussed the possibility of a charge
with her supervisor, Anita Khiene (Khiene), noting, "I
talked with [Khiene] about the same, she said it would be in
our interest to defend him should that occur and I
learned the Pitts had retained counsel on April 4, 2011.
MUSIC retained counsel Gerard Noce (Noce) to represent
Leonberger and UE requested a separate attorney, Robert
Numrich (Numrich), represent the District for any civil
litigation brought by the Pitts.
20, 2011, a local prosecutor charged Leonberger with
second-degree involuntary manslaughter under Section
565.024.3. MUSIC hired criminal attorney Rusty Antel
(Antel) to represent Leonberger in the criminal proceeding.
MUSIC stated it thought it was prudent to exercise control
over the criminal matter since the outcome could impact the
claim. After the charge, MUSIC's supervising adjuster
Chris Brading (Brading) directed Walker to try and get a
demand from the Pitts' counsel because she thought it
would be better to settle the case prior to the outcome of
the criminal charge.
criminal proceeding, Antel, the attorney MUSIC hired to
represent Leonberger, advised Leonberger to plead guilty.
MUSIC learned Leonberger would do so in October of 2011.
Prior to the plea, Leonberger requested MUSIC settle all
claims against him within the policy limits if the
opportunity arose. At no time prior to the plea did MUSIC
tell Leonberger that following Antel's advice would
affect his coverage. On November 21, 2011, Leonberger pled
guilty to the charge of second-degree involuntary
manslaughter upon Antel's advice.
November 28, 2011, Hurwitz stated "the felony plea
appears to wipe out MUSIC coverage for [Leonberger] under
exclusion 19(o)." Exclusion 19(o) reads:
Coverage Agreement does not apply to and we are not liable
Any fraudulent, dishonest, malicious, criminal or intentional
wrongful act or omission by a Covered Party.
responded: "I had expressed some concern over the
'criminal act' exclusion when we conferenced last
week. I thought we could leverage it with [the Pitts] as
indicated in the call. I thought it may help us get around
[the Pitts' attorney] if [Leonberger] ends up with no
requested a draft reservation of rights letter. MUSIC noted
in an internal document that:
Our [i]ntention all along was to get this to mediation. Now
however, it appears UE may want to issue a reservation of
rights due to the alleged criminal act of [Leonberger]. He
may have been charged due to pressure by the family in this
matter, but he was not convicted. This 79-year-old man pled
out to keep from going to prison for involuntary
manslaughter. The fact of the matter is, he was still in the
course and scope of his duties as a district employee when
this unfortunate accident occurred.
December 20, 2011, the Pitts demanded MUSIC's policy
limits. MUSIC said it wanted to mediate but the Pitts
January 18, 2012, the Callaway County Circuit Court sentenced
Leonberger to four years, suspended execution of sentence
subject to five years of unsupervised probation and community
service. At the sentencing hearing, the circuit court stated:
"[a]nd everybody agrees on one thing, this was an
accident." After the plea, MUSIC continued to note that
"coverage is applicable…[n]o exclusions
January 20, 2012, Walker noted "we are going to discuss
strategy going forward as [the Pitts] absolutely decline
mediation. [Numrich] has relayed to [the Pitts' attorney]
that MUSIC is not going to tender their limits." On
February 14, 2012, the Pitts filed their wrongful death suit
against Leonberger, the District, the District transportation
manager and superintendent, alleging two separate claims
against Leonberger for negligence and negligence per se. The
negligence count asserted 16 separate acts of negligence
against Leonberger with regard to both his driving and his
failure to train Hunter Pitt on how to exit the bus and cross
the street safely. The Pitts alleged at least one of these
negligent acts directly and proximately caused Hunter
Pitt's death. The venue of the lawsuit was changed four
times until it ended up in the City of St. Louis Circuit
February 18, 2012, MUSIC learned the Pitts had filed suit and
noted: "[Leonberger] pleaded guilty to the
[second-degree involuntary manslaughter charge in Callaway
County] and now [UE] is advising that since [Leonberger]
pleaded guilty to stay out of jail, [UE] says now there is no
coverage for [Leonberger]."
Leonberger's civil counsel provided by MUSIC, stated,
"I do believe this was an accident without any reckless
behavior on the part of Leonberger." On March 1, 2012,
Noce emailed Walker and Khiene stating he had scheduled a
meeting with Leonberger to review the petition. Khiene
responded, "Frankly if we do not have the issue with UE
resolved prior to the meeting, I am not certain I would want
[Walker] there either. I will ask [Brading] to see if we can
get a call scheduled with UE counsel [Hurwitz] asap."
March 6, 2012, the conference between MUSIC and UE took
place. On March 6, 2012, Walker noted regarding the
conference held between MUSIC and UE that day:
"Conference call was held. The plan going forward is
[to] take the stance that coverage will be denied to
[Leonberger]. This will leave [the Pitts'] recovery
limited to the statutory cap which is now about $395K. That
will give us leverage going forward to force this to
mediation. We can say either go to mediation or coverage will
be denied to [Leonberger]."
on behalf of MUSIC, prepared a reservation of rights letter.
The letter advised MUSIC had a right to deny coverage based
on Exclusion 19(o). Walker stated "it just makes me sick
at heart to do it…." The letter was not sent to
Noce or Leonberger.
March 8, 2012, Noce entered his appearance in the wrongful
death case filed by the Pitts against Leonberger. On March
16, 2012, Noce filed an Answer for Leonberger at MUSIC's
direction, which admitted liability.
Pitts made a second policy limits demand on April 4, 2012.
MUSIC issued the reservation of rights letter that same day.
However, it never sent the reservation of rights letter to
Noce or Leonberger. Noce and Leonberger did not learn MUSIC
was reserving its right to deny coverage until three months
April 20, 2012, MUSIC stated, "In addition, we have had
to issue a reservation of rights to [Leonberger] as UE will
deny coverage for his 'criminal act.' That has been
sent out. [Numrich] has let [the Pitts' attorney] know
that if he proceeds, coverage to the bus driver will be
denied and he will be left with the statutory cap of
10, 2012, the Pitts' counsel contacted Noce to advise
that if there was a reservation of rights, the Pitts would be
interested in a Section 537.065 agreement. Noce told MUSIC
he was not aware of a reservation of rights. UE counsel
Hurwitz responded that a reservation of rights had been
issued. This was the first time Noce or Leonberger became
aware there was a reservation of rights. Likewise, this was
the first time Leonberger learned there was any issue
regarding his coverage.
19, 2012, Noce demanded the reservation of rights be
withdrawn. In response, Walker emailed UE's counsel
Hurwitz the following: "It is my recommendation we
rescind the reservation of rights and defend this matter.
Otherwise, we are on the hook for not only the policy limits,
but a Bad Faith Claim against MUSIC."
Hurwitz refused, and then contrary to its own recommendation,
MUSIC decided, "At this time we are going to file [a
declaratory judgment] action to get ruling if bus driver is
covered and not withdrawing our reservation of rights letter.
We are going to offer cap plus interest to [Noce] with him
knowing that there might be chance there is no coverage for
[Leonberger] to sign the [Section 537.065 agreement] because
if there is no coverage for him, he cannot sign a form
requesting MUSIC to tender limits."
31, 2012, MUSIC told Noce and Leonberger it would not
withdraw the reservation of rights. Leonberger then executed
a Section 537.065 agreement with the Pitts.
September of 2012, MUSIC filed a declaratory judgment action
in Callaway County seeking a declaration that the Policy
afforded no coverage to Leonberger. It then settled the
claims as to the District, transportation manager and
superintendent, but not Leonberger. On April 30, 2013, the
Callaway County Circuit Court dismissed the declaratory
judgment action with prejudice based on the pending
garnishment proceedings in the circuit court of the City of
St. Louis, which would decide the matter of coverage.
December 3, 2012, the Pitts tried their negligence claim
against Leonberger in the City of St. Louis Circuit Court
(sometimes referred to as "wrongful death court").
Prior to the commencement of the bench trial, the Pitts
dismissed Count II of their first amended petition, leaving
only Count I, alleging wrongful death based in negligence.
The trial court received evidence pertaining only to Count I
of the Pitts' first amended petition, including
allegations that Leonberger negligently drove the bus and
failed to train Hunter Pitt.
December 21, 2012, the trial court in the City of St. Louis
entered its Amended Findings as to Certain Issues and Final
Judgment in favor of the Pitts and against Leonberger in the
amount of $11, 494, 637.38, with costs taxed against
Leonberger and post-judgment interest at a rate of 5.25% per
annum. In paragraph 3 of its judgment, the trial court
specifically found Leonberger's duties included the duty
to train school bus riders, including Hunter Pitt, the
established safety procedures for unloading a school bus and
crossing the street, including the requirement that, each
time one exited the bus, he or she must walk ten steps
forward and away from the front of the bus and remain there
until given a hand signal by the bus driver indicating it was
safe to cross the street. The trial court found this duty was
an established and continuing duty of which Leonberger was
aware from 2010 up until and through the day of the accident
on January 18, 2011, and which he failed to fulfill. The
trial court found Leonberger breached this duty and his
failure to train Hunter Pitt was a "failure to use that
degree of care that an ordinarily careful person would use
under the same or similar circumstances, " resulting in
actionable negligence. The court explicitly noted
"[Leonberger's] negligence, as herein found to
exist, is based upon mere tort negligence and was not
'criminal negligence' as that term is defined by
RSMo. 562.016; and 'criminal negligence' is not an
element of [Leonberger's] negligent failure to train
Hunter Pitt in the manner referenced to in paragraph 3."
January 21, 2013, the date the underlying judgment became
final, the Pitts filed a Rule 90 garnishment proceeding
against MUSIC for the full amount of the underlying judgment
and interest in the City of St. Louis Circuit Court (Case No.
1222-CC09848). On June 3, 2015, Leonberger filed his first
amended petition against MUSIC and UE for bad faith failure
to settle, bad faith failure to defend, and breach of the
fiduciary duty between insurer and insured in the City of St.
Louis Circuit Court (Case No. 1322-CC01344). The parties
filed cross-motions for summary judgment on the issue of
coverage in both the garnishment case (the Pitts versus
MUSIC) and in the bad faith case (Leonberger versus MUSIC and
UE). The motions were argued simultaneously, and the trial
court took judicial notice of its files in both cases.
January 6, 2015, the trial court sustained the Pitts'
motion for summary judgment on coverage based on four
separate grounds and denied MUSIC's cross-motion for
summary judgment alleging no coverage. This judgment is on
appeal in this case in Points I - IV. On the same date, the
trial court sustained Leonberger's motion for summary
judgment on coverage in his bad faith case on the same
grounds and denied MUSIC and UE's cross-motion for
summary judgment. This case is still pending.
coverage resolved, the Pitts (Garnishors), Leonberger, and
MUSIC (Garnishee) appeared before the court on February 3,
2015, to discuss resolution of the Pitts' garnishment
action. All parties stipulated Garnishors and Garnishee would
each file a proposed "Pay-In-Order" with the court.
The court found when the underlying wrongful death judgment,
including its post-judgment interest issued by the wrongful
death court on January 21, 2012, became final on January 21,
2013, the amount owed by MUSIC became fixed, liquidated and
readily determinable. Accordingly, pursuant to Section
408.020, the garnishment court awarded prejudgment interest
at the rate of 9% per annum from January 21, 2013, the date
the underlying judgment became final. The court determined
the underlying judgment was $11, 494, 637.38; the
post-judgment interest awarded against Leonberger as part of
the wrongful death judgment at a rate of 5.25% had
accumulated to $1, 441, 703.76; the 9% prejudgment interest
the garnishment court adjudged applicable to the garnishment
judgment in the garnishment proceeding pursuant to Section
408.020 amounted to $2, 682, 604.98; for a grand total of
$15, 618, 964.12. On May 12, 2015, the court entered an Order
and Judgment finding MUSIC liable for extra-contractual
damages above and beyond the Policy's coverage limits
based on MUSIC's wrongful denial of coverage, failure to
settle and defend, and pursuit of a declaratory judgment in
Callaway County Circuit Court ...