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Pitt v. Leonberger

Court of Appeals of Missouri, Eastern District, Second Division

February 7, 2017

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.

         Appeal from the Circuit Court of the City of St. Louis Honorable David L. Dowd

          SHERRI B. SULLIVAN, P.J.


         Missouri 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.

         Factual and Procedural Background

         Leonberger 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.

         At the 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 Coverage Territory."

         On 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."

         On 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."

         On 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 agree."

         MUSIC 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.

         On May 20, 2011, a local prosecutor charged Leonberger with second-degree involuntary manslaughter under Section 565.024.3.[1] 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.

         In the 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.

         On November 28, 2011, Hurwitz stated "the felony plea appears to wipe out MUSIC coverage for [Leonberger] under exclusion 19(o)." Exclusion 19(o) reads:

         This Coverage Agreement does not apply to and we are not liable for:

Any fraudulent, dishonest, malicious, criminal or intentional wrongful act or omission by a Covered Party.

         MUSIC 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 coverage."

         UE 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.

         On December 20, 2011, the Pitts demanded MUSIC's policy limits. MUSIC said it wanted to mediate but the Pitts refused.

         On 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 apply."

         On 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 Court.

         On 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]."

         Noce, 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."

         On 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]."

         Walker, 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.

         On 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.

         The 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 later.

         On 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 $395k."

         On July 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.[2] 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.

         On July 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."

         UE's 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."

         On July 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.

         In 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.

         On 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.

         On 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."

         On 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.

         On 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.

         With 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 ...

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