Federal Insurance Company; Zurich American Insurance Company Plaintiffs - Appellees
Great American Insurance Company Defendant-Appellant
Submitted: January 9, 2018
from United States District Court for the Eastern District of
Missouri - St. Louis
GRUENDER, MELLOY, and SHEPHERD, Circuit Judges.
MELLOY, Circuit Judge.
case arises from a tragic, yet avoidable, incident. At this
juncture, however, there is only one dispositive legal
question: Does repeatedly shooting, and encouraging others to
shoot, a handgun "in the general direction" of a
small lake in a residential area of Kansas City, Missouri,
which results in a young child's death, qualify as
"gross negligence"? We believe it does. For this
reason, we vacate the judgment of the district court and
remand for further consideration.
Lake Limited Partnership owned an apartment complex in a
residential area of Kansas City, Missouri. Yarco Company,
Inc., managed apartment complexes for others. Whispering Lake
and Yarco entered into a contract, the "Management
Agreement," where Yarco agreed to manage Whispering
Lake's apartment complex.
the Management Agreement, Whispering Lake appointed Yarco as
the "exclusive agent for the management of the
[apartment complex]." The agreement also included
indemnity provisions (the "Indemnity Clause"),
allocating liability between Whispering Lake and Yarco
depending on the type of liability:
(a) Except for fraud, willful misconduct or gross negligence
on the part of [Yarco], [Whispering Lake] shall hold and save
[Yarco] (and [Yarco]'s directors, officers, employees,
shareholders, partners and affiliates) free and harmless from
any claim, cause, proceeding, or suit arising out of, or in
connection with, any actions by [Yarco] in accordance with
this Agreement or acting under the express or implied
direction of [Whispering Lake]. Subject to the same
exceptions, [Whispering Lake] shall reimburse [Yarco], upon
demand, for all costs and expenses (including reasonable
attorneys' fees) and for any monies which [Yarco] is
required to pay in connection therewith or shall, if
requested in writing by [Yarco], defend promptly and
diligently, at the sole expense of [Whispering Lake], any
claim, action or proceeding against [Yarco] which arises out
of, or in connection with, the foregoing.
(b) [Yarco] shall assume sole responsibility for and hold and
save [Whispering Lake] free and harmless from any claim,
cause or proceeding or suit and any costs or expenses
incurred by [Whispering Lake] arising out of, or in
connection with, any fraud, gross negligence or willful
misconduct on the part of [Yarco] or any of its employees or
affiliates. [Yarco] shall reimburse [Whispering Lake] upon
demand for all costs and expenses (including reasonable
attorneys' fees) and for any monies which [Whispering
Lake] is required to pay in connection therewith or shall, if
requested in writing by [Whispering Lake], defend promptly
and diligently, at the sole expense of [Yarco], any claim,
action or proceeding against [Whispering Lake] which arises
out of, or in connection with, the foregoing.
Lake and Yarco each acquired insurance policies covering
commercial liability. Each acquired a "primary"
policy and an "excess" or "umbrella"
policy, extending coverage to itself and certain others.
Whispering Lake acquired a primary insurance policy with
Indian Harbor Insurance Co. and an umbrella policy with Great
American Insurance Co. The Indian Harbor policy provided $1
million in coverage,  and the Great American policy provided $10
million in coverage. Similarly, Yarco acquired a primary
policy with Zurich American Insurance Co. and an umbrella
policy with Federal Insurance Co. The Zurich policy provided
$1 million in coverage, and the Federal policy provided $25
million in coverage.
incident giving rise to this case occurred on Independence
Day, July 4, 2011. On that day, Yarco's employee, Aaron
Sullivan, worked at the apartment complex's pool as a
"pool monitor." In this role, Sullivan had a
"responsibility to watch over the pool area and to take
steps to keep a peaceful area around the pool." During
his shift, Sullivan retrieved a handgun. To supposedly
"celebrate" Independence Day, Sullivan proceeded to
shoot the handgun an unknown number of times. He also allowed
other individuals to shoot the handgun numerous times.
Sullivan instructed those individuals to direct their shots
"away from the pool [and] in the general direction of
[a] lake" bordering the apartment complex's
property. This property, again, was located in a residential
area of Kansas City. One of the bullets traveled across the
lake and struck an eleven-year-old girl in the neck,
shattering a cervical vertebra and damaging her spinal cord.
The girl died the next day.
State of Missouri later charged Sullivan (but not the others)
for the incident. Sullivan pleaded guilty to Involuntary
Manslaughter in the First Degree (Reckless Killing), Mo. Rev.
Stat. § 565.024.
girl's mother brought a wrongful-death lawsuit against
Sullivan and Yarco. The insurers stepped in, based on their
duties to defend their insureds. The parties eventually
settled the suit for a confidential amount. Each of the
insurers paid a part of the settlement, but each reserved its
rights to litigate its respective obligation for the
then filed this action in federal district court, seeking a
declaratory judgment determining the parties' obligations
and any priority of coverage. Zurich filed a claim as well,
and the court eventually realigned the parties (with Federal
and Zurich as plaintiffs and Great American as the
defendant). Federal and Zurich filed motions for summary
judgment on their claims against Great American. Great
American filed cross-motions for summary judgment on
Federal's and Zurich's claims. The district court
entered an order (and then a judgment), granting
Federal's and Zurich's motions and denying Great
American's cross-motions. The court held that Great
American was obligated to reimburse Federal and Zurich for
the amounts they contributed to ...