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County of Scotland v. Missouri Public Entity Risk Management Fund

Court of Appeals of Missouri, Western District, First Division

October 17, 2017

COUNTY OF SCOTLAND, MISSOURI, Respondent,
v.
MISSOURI PUBLIC ENTITY RISK MANAGEMENT FUND, Appellant.

         Appeal from the Circuit Court of Cole County, Missouri The Honorable Jon E. Beetem, Judge

          Before: Mark D. Pfeiffer, Chief Judge, Presiding, James E. Welsh, Judge and Cynthia L. Marin, Judge.

          OPINION

          Cynthia L. Martin, Judge

         Missouri Public Entity Risk Management Fund ("MOPERM") appeals from the grant of summary judgment entered in favor of the County of Scotland, Missouri ("Scotland") and against MOPERM. MOPERM argues that the trial court erred in entering judgment in favor of Scotland and against MOPERM because two insurance policy exclusions negated MOPERM's duties to defend and indemnify Scotland. MOPERM also contends that the trial court erred in entering judgment in favor of Scotland because the underlying judgment against Scotland, and for which indemnity was sought, was unenforceable. We reverse and vacate the trial court's judgment, and enter judgment in favor of MOPERM.

         Factual and Procedural Background[1]

         Scotland is a legal subdivision of the State of Missouri pursuant to article VI, section 1 of the Missouri Constitution. MOPERM is a public corporate body created pursuant to section 537.700.[2] MOPERM provides liability coverage to local governments and their officers and employees when engaged in official duties. Mo. Pub. Entity Risk Mgmt. Fund v. Am. Cas. Co. of Reading, 399 S.W.3d 68, 71 (Mo. App. W.D. 2013).

         In exchange for premium payments, MOPERM provided liability coverage to Scotland as set forth in a Memorandum of Coverage ("Memorandum"). Under the Memorandum, MOPERM agreed to defend and indemnify Scotland, its officials, and its employees, subject to limitations and exceptions explained in the Memorandum. Section IV.K of the Memorandum provides that coverage does not apply:

To claims for loss or damage arising out of or in connection with the principles of eminent domain, proceedings to condemn property or inverse condemnation by whatever name . . .; or any action, proceeding or challenge by whatever name to enforce or invalidate, modify or change any zoning ordinance or land use plan.

         Additionally, Section IV.R states that coverage does not apply "[t]o injunctive relief or relief other than monetary damages."

         In August 2011, Gavin Hauk ("Hauk") applied to the Scotland County Commission ("Commission") for a county health permit to construct and operate a concentrated animal feeding operation ("CAFO"). The Commission denied Hauk's permit application because it did not meet the required distance set forth in a setback provision of the applicable ordinance, which stated "No CAFO shall be located within two miles of a populated area."[3]

         On April 18, 2012, while the Memorandum was in full force and effect, Hauk filed a two-count petition ("Hauk Petition") against the Commission and its commissioners in their official capacities[4] asserting that the Commission's decision to deny his permit was unconstitutional, unlawful, unreasonable, arbitrary, capricious and involved an abuse of discretion. In Count I, the Hauk Petition sought judicial review pursuant to section 536.150, and alleged that the denial of Hauk's permit deprived him of his right to establish a CAFO on his property. The Hauk Petition asserted that as a result of the denial of his permit, Hauk was unable to establish a CAFO on his property and suffered immediate and irreparable injury, loss, or damage. Count I of the Hauk Petition sought declaratory and injunctive relief, and an award of costs. In Count II, the Hauk Petition alleged that the ordinance, as applied to Hauk, violated his due process and equal protection rights, and "constitute[d] an unconstitutional regulatory taking of his property." Pursuant to 42

         U.S.C. section 1983, Count II of the Hauk Petition sought to enforce the rights guaranteed to Hauk under the Fifth and Fourteenth Amendments of the United States Constitution. The Hauk Petition alleged that the ordinance, as applied by the Commission, "constitute[d] an unlawful and improper denial of property rights without just compensation within the meaning of the Fifth and Fourteenth Amendments to the United States Constitution." The Hauk Petition claimed that as a result of the Commission's denial of his permit, Hauk was "deprived of his constitutionally protected First, Fifth, and Fourteenth Amendments rights and ha[d] been damaged in an amount in excess of $25, 000.00, plus attorneys' fees and costs." The Hauk Petition sought compensation in Count II for Hauk's costs, attorneys' fees, and actual damages sustained.

         Scotland notified MOPERM of Hauk's lawsuit. MOPERM refused to provide the Commission and the individual commissioners a defense, and denied coverage for the claims asserted in the Hauk Petition, citing the exclusions set forth in Sections IV.K and IV.R of the Memorandum.

         Following a bench trial in the Hauk lawsuit, a judgment, styled as "Judgment on Count I, " was entered against the Commission, finding the Commission's denial of Hauk's permit to be unconstitutional, unreasonable, arbitrary, capricious, and an abuse of discretion ("Hauk Judgment").[5] The Hauk Judgment ordered the issuance of a permit to Hauk for his proposed CAFO. Though Count I of the Hauk Petition had not sought monetary relief, the Hauk Judgment nonetheless awarded Hauk $178, 566.00 for damages sustained as a direct result of the Commission's unlawful denial of his permit application.[6]

          The Hauk Judgment was affirmed on appeal.[7] Scotland incurred legal expenses in defending the Hauk lawsuit in the amount of $102, 427.95.

         Scotland filed the present cause of action against MOPERM for breach of contract on July 31, 2015. MOPERM denied that it was obligated under the Memorandum to defend or indemnify the Commission or the individual commissioners, and cited the above referenced exclusions as affirmative defenses. Subsequently, the parties filed a joint stipulation of facts and competing motions for summary judgment. Relevant to this appeal, the parties' competing motions for summary judgment contested whether MOPERM's duties to defend and indemnify were excluded by Sections IV.K and IV.R.

         The trial court entered an amended judgment ("Judgment") granting Scotland's motion for summary judgment and denying MOPERM's motion for summary judgment. The Judgment awarded Scotland $294, 545.95 plus interest at the statutory rate.[8] The trial court found as a matter of law that the Hauk lawsuit "was not for inverse condemnation nor was it a challenge to [Scotland's] land use plan." The trial court concluded that "[a]t best [the Hauk lawsuit] was a challenge to the constitutional propriety of the actions of the individual commissioners in implementing the land use plan." The trial court thus found Hauk's Petition insufficient to invoke a policy exclusion.

         This timely appeal followed.

         Standard ...


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