United States District Court, E.D. Missouri, Eastern Division
ALLIED WORLD SPECIALTY INSURANCE COMPANY, f/k/a Darwin Select Insurance Company, Plaintiff,
THE CITY OF FERGUSON, MISSOURI, Defendant.
MEMORANDUM AND ORDER
L. WHITE, UNITED STATES DISTRICT JUDGE
matter is before the court on Defendant The City of Ferguson,
Missouri's Motion to Dismiss or to Strike Plaintiffs
Complaint for Declaratory Judgment or Alternative Motion to
Abstain (ECF No. 11). This matter is fully briefed and ready
Allied World Specialty Insurance Company, formerly known as
Darwin Select Insurance Company ("Allied") seeks a
declaration that it has no duty to defend or indemnify the
City of Ferguson (the "City") under a public
officials liability insurance policy (the "Policy")
issued to the City by Allied. Allied issued a Public
Officials Liability and Employment Practices Liability
Insurance Policy, No. 0202-2994, to the City for the Policy
Period of July 1, 2014 through July 1, 2015.
underlying lawsuit for which the City is seeking coverage is
Carter et al. v. City of Ferguson, No. 14SL-CC04195
(Circuit Court of St. Louis County, State of Missouri). In
the Carter lawsuit, the plaintiffs allege the City
"charges a variety of illegal fees, designed to profit
the municipal corporation at the expense of the general
welfare." The allegedly illegal fees include a
"warrant recall" fee, a "letter" fee, and
a "failure to appear" or "FTA" Fee
(collectively, the "Fees"). The Carter
lawsuit alleges that the Fees are "statutorily
prohibited, are void because they were enacted for profit and
not to promote the welfare of the public, and violate the
Missouri Constitutional rights of Plaintiff and Class."
The Carter lawsuit further alleges the Fees are
"not a tax" and are not "related to actual
costs incurred," but rather are "charged by [the
City] as a means of profiting from the issuance of traffic
tickets and other violations," and that the Fees are
"not designed to promote healthy, safety, peace,
comfort, or general welfare of the public. [They are]
designed to generate profit." The Carter
lawsuit seeks to recoup from the City certain fees that were
charged by the City, allegedly in violation of Missouri
statutory law and plaintiffs' rights under the
is defending the City in the Carter lawsuit, subject
to a full and complete reservation of Allied's rights
pursuant to the terms and conditions of the Policy. The City
has made demand upon Allied to pay the limits of the Policy
in settlement of the claims asserted in the Carter lawsuit.
31, 2018, Allied filed this action in this Court. Allied
brings claims for: Count I-Declaratory Judgment (Uncovered or
Uninsurable Loss) and Counts II-VI seek Declaratory Judgment
pursuant to various exclusions under the Policy.
survive a motion to dismiss, a complaint "must contain
sufficient factual matter, accepted as true, to 'state a
claim to relief that is plausible on its face.'"
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct.
1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic
Corp., v. Twombly, 550 U.S. 544, 570 (2007). A
"formulaic recitation of the elements of a cause of
action" will not suffice. Twombly, 550 U.S. at
555. "The plausibility standard is not akin to a
'probability requirement,' but it asks for more than
a sheer possibility that a defendant has acted
unlawfully." Iqbal, 556 U.S. at 678 (quoting
Twombly, 550 U.S. at 556).
City has filed a motion to dismiss Allied's declaratory
judgment claims. In its Motion, the City argues that
Allied's Complaint fails to state plausible claims for
Allied argues that the Policy requires Allied to defend the
City until some court concludes that Allied is not liable
under the Policy and, therefore, the counts seeking to find
Allied has no defense obligation should be stricken. (ECF No.
12 at 4-5). Further, the City asks the Court to apply the
"innocent taxpayer" rule to find an exception to
the public policy prohibition for municipal entities. (ECF
No. 12 at 6-7). In addition, the Court argues that Counts II,
III, and IV should be dismissed or stayed because the
Policy's "in fact" language in Section
III.A. requires the Court to await factual
findings in the Carter case before the exclusion is
triggered. The City also contends the Court should dismiss
Count IV of the Complaint because the illegal "profit,
renumeration or advantage" does not apply in that an
allegation that the City received personal gain is not an
essential element of each claim in the Carter
lawsuit. The City asserts Count V should be dismissed because
it is fatally flawed; the exclusion in Section III.C. (11)
does not apply. The City claims Count VI should be
dismissed because the exclusion in Section III.C. (15) does
not apply to the allegations in the Carter
lawsuit. Finally, the City asks this Court to
dismiss or stay the litigation pending a final determination
of the Carter lawsuit under the principles of abstention.
Missouri's Declaratory Judgment Act, any person
interested under a written contract, or whose rights are
affected by a contract may have determined any question of
construction or validity under the contract and obtain a
declaration of rights." Secure Energy, Inc.,
2012 WL 13710, at *2 (citing Mo.Rev.Stat. §527.020). An
action under the declaratory judgment act requires a
justiciable controversy wherein: "(1) the plaintiff has
a legally protectable interest at stake; (2) a substantial
controversy exists with genuinely adverse interests; and (3)
the controversy is ripe for judicial determination."
Missouri Alliance for Retired Am. v. Dep't of Labor
& Indus. Relations, 277 S.W.3d 670, 676 (Mo. 2009)
(citations omitted). Allied's Complaint asks the Court to
identify the parameters of its duty to defend and indemnify
the City. An insurer's duty to defend a suit against its
insured arises "whenever there is a potential or
possible liability to pay based on the facts at the outset of
the case and is not dependent on the probable liability to
pay based on the facts ascertained through trial."
McCormack Baron Mgmt. Servs., Inc. v. Am. Guar. &
Liab. Ins. Co., 989 S.W.2d 168, 170 (Mo. 1999). The duty
to defend is determined by comparing the language of the
insurance policy with the allegations in the complaint.
Secura Ins. v. Horizon Plumbing, Inc., 670 F.3d 857,
861 (8th Cir. 2012) (citing McCormack, 989 S.W.2d at
170); see also Williams v. Employers Mut. Cas. Co.,
No. 4:13-CV-2393 RLW, 2015 WL 892556, at *3 (E.D. Mo. Mar. 2,
2015), aff'd, 845 F.3d 891 (8th Cir. 2017).
Unlike the duty to defend, "[t]he duty to indemnify is
determined by the facts as they are established at trial or
as they are finally determined by some other means, for
example through summary judgment." McCormack,
989 S.W.2d at 173. Under Missouri law, the duty to defend is
broader than the duty to indemnify. Lampert v. State Farm
Fire and Cas. Co., 85 S.W.3d 90, 93 (Mo.Ct.App. 2002).
An insurer may have a duty to defend claims falling within
the policy even if it may not ultimately be obligated to
indemnify the insured. Millers Mut. Ins. Ass'n of
Illinois v. Shell Oil Co., 959 S.W.2d 864, 871
(Mo.Ct.App. 1997); Argonaut Great Cent. Ins. Co. v.
Lincoln Cty., Missouri, No. 4:17-CV-00762 JAR, 2018 WL
3756767, at *4 (E.D. Mo. Aug. 8, 2018). "The duty to
defend arises when the insured is first sued and thus is
understandably broader than the duty to indemnify."
Esicorp, Inc. v. Liberty Mut. Ins. Co., 193 F.3d
966, 969 (8th Cir. 1999) "Where there is no duty to
defend, there is no duty to indemnify.", 4m. States
Ins. Co. v. Herman C Kempker Constr. Co., 71 S.W.3d 232,
236 (Mo. App. W.D. 2002); Trainwreck W. Inc. v.
Burlington Ins. Co., 235 S.W.3d 33, 44 (Mo.Ct.App.
review of the Complaint and the memoranda pertaining to the
present motion to dismiss, the undersigned finds that
dismissal is not appropriate at this time. At the motion to
dismiss stage, the only issue before the Court is whether the
pleadings state a cause of action that is plausible on its
face. Secure Energy, Inc. v. Philadelphia Indem. Ins.
Co., No. 4:11CV1636 TIA, 2012 WL 13710, at *2 (E.D. Mo.
Jan. 4, 2012). The Court holds that Allied has sufficiently
alleged facts to support a declaratory judgment action.
Allied alleges a present case and controversy that is ripe
for adjudication. See Employers Ass'n, Inc. v. United
Steelworkers,32 F.3d 1297, 1299 (8th Cir.1994)
("[r]ipeness is demonstrated by a showing that a live
controversy exists such that the plaintiffs will sustain
immediate injury from the operation of the challenged
provisions."); S. Dakota Min. Ass'n, Inc. v.
Lawrence Cty.,155 F.3d 1005, 1008 (8th Cir. 1998). The
City has made a claim for settlement for its full policy
limits, and Allied is currently defending this action under a
reservation of rights. See Home v. Firemen's Ret.
Sys. of St. Louis,69 F.3d 233, 236 (8th Cir.1995)
(quoting United States v. Fisher-Otis Co., 496 F.2d
1146, 1151 (10th Cir.l974))("The essential distinction
between a declaratory judgment action and an action seeking
other relief is that in the former no actual wrong need have
been committed or loss have occurred in order to sustain the
action."); Cty. of Mile Lacs v. Benjamin, 361
F.3d 460, 464 (8th Cir. 2004). The Court will make a coverage
determination after interpreting the insurance policy and the
allegations in the underlying lawsuit. This determination is
a question of law that is appropriately determined by this
Court. Griffitts v. Old Republic Ins. Co., 550
S.W.3d 474, 478 (Mo. 2018) ...