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Desai v. Seneca Specialty Insurance Co.

Supreme Court of Missouri, En Banc

June 25, 2019

NEIL DESAI, M.D., ET AL., Respondents,
v.
SENECA SPECIALTY INSURANCE COMPANY, Appellant.

          APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY The Honorable James Francis Kanatzar, Judge

          MARY R. RUSSELL, JUDGE

         Seneca Specialty Insurance Company appeals the circuit court's overruling of its motions to intervene and to set aside judgment. Seneca sought to intervene in a lawsuit filed by Dr. Neil Desai and Heta Desai against Garcia Empire, LLC, after the Desais and Garcia Empire entered into a contract pursuant to section 537.065, RSMo 2016. In 2017, the legislature repealed that statute and enacted an amended section 537.065, RSMo Supp. 2017. The amendment was effective after the case was tried and submitted but prior to the circuit court's entry of judgment. The amended statute continued to permit the same contracts as provided in the 2016 statute but included additional requirements that an insurer be provided written notice and the opportunity to intervene. Seneca claims it was denied both additional rights and, as a result, the circuit court erred in entering judgment. Because the Desais and Garcia Empire entered into a contract prior to the effective date of the amended statute, the circuit court did not err in overruling Seneca's motions to intervene and to set aside the judgment. The judgment is affirmed.

         Background

         A Garcia Empire employee broke Dr. Desai's arm on Garcia Empire's property. As a result, the Desais sued Garcia Empire for damages. Garcia Empire had a commercial general liability policy issued by Seneca. Garcia Empire advised Seneca of the lawsuit, and Seneca offered to defend Garcia Empire subject to a reservation of rights. Garcia Empire declined.

         The Desais and Garcia Empire entered into a section 537.065 contract[1] in November 2016, in which the Desais agreed that, in the event of a judgment against Garcia Empire, they would recover solely from Garcia Empire's insurer. The case was tried and submitted on August 17, 2017. Judgment was entered in October 2017 in favor of the Desais.

         On August 28, before judgment was entered, an amended version of section 537.065 became effective after the legislature repealed and replaced the 2016 statute. The amended statute permitted the same contracts as the 2016 statute but included two notable additional requirements. First, it provided that before creation of a contract, the insurer must be given the opportunity to defend the tortfeasor without reservation and refuse to do so. Second, the amended statute provided that before a judgment may be entered against a tortfeasor after such tortfeasor "has entered into a contract under this section," the insurer must be provided with written notice of the contract and be given the opportunity to intervene as a matter of right.

         Seneca filed motions to intervene as a matter of right pursuant to Rule 52.12 and for relief from judgment pursuant to Rule 74.06(b). Seneca argued the circuit court erred in entering judgment without providing it written notice and the opportunity to intervene pursuant to the amended statute. The circuit court overruled Seneca's motions. Seneca appeals.[2]

         Standard of Review

         The overruling of a motion for leave to intervene as a matter of right pursuant to Rule 52.12(a) will be affirmed unless it is not supported by substantial evidence, is against the weight of evidence, or erroneously declares or applies the law. State ex rel. Nixon v. Am. Tobacco Co., 34 S.W.3d 122, 126 (Mo. banc 2000). Additionally, a circuit court's ruling on a Rule 74.06(b) motion to set aside a judgment is reviewed for abuse of discretion. Bate v. Greenwich Ins. Co., 464 S.W.3d 515, 517 (Mo. banc 2015). But whether a judgment is void is a question of law reviewed de novo. Id.

         Analysis

         Seneca makes two arguments regarding why the amended statute's requirements of notice and opportunity to intervene should apply here. First, Seneca argues the amended statute was intended to apply to all cases in which judgment had not yet been entered before the effective date, regardless of when the contract was made. In the alternative, Seneca contends the amended statute should operate retroactively to this case because doing so would not violate article I, section 13 of the Missouri Constitution.

         I. Whether the 2017 Amended Statute Applies to This Case

         The legislature repealed section 537.065, RSMo 2016, and replaced it with an amended statute. The amended statute became effective after the case was tried and submitted but before the circuit court entered judgment. [3] Section 537.065.2, RSMo Supp. 2017, provides in relevant part:

Before a judgment may be entered against any tort-feasor after such tort-feasor has entered into a contract under this section, the insurer or insurers shall be provided with written notice of the execution of the contract and shall have thirty days after receipt of such notice to intervene as a matter of right in any pending lawsuit involving the claim for damages.

(Emphasis added). The key issue here is to determine what "under this section" means. Seneca argues the amended statute is a continuation of the 2016 statute and, consequently, the Desais and Garcia Empire's contract was executed "under this section," as provided in the amended statute, despite the amended statute not being in effect at that time. In response, the Desais argue that the amended statute does not apply because the contract was entered into pursuant to the 2016 statute as it was the only statute in effect at the time. According to the Desais, the language in the 2017 amended statute should apply only to those contracts entered into after August 28, 2017 - the date the amended statute went into effect. [4]

         When determining whether the phrase "under this section" in the amended statute encompasses the 2016 statute, this Court must look to the relevant differences between the two statutes. State ex rel. Stone v. Vernon Cty. Court, 53 Mo. 128 (1873) (emphasizing the prior version of a statute and the new version "must accordingly be construed together in arriving at the legislative intent"). This Court then determines whether the amended statute is a continuation of the 2016 statute. Clark v. Kansas City, St. Louis, & Chi. R.R. Co., 118 S.W. 40, 44 (Mo. 1909). "The provisions of any law or statute which is reenacted, amended or revised, so far as they are the same as those of a prior law, shall be construed as a continuation of such law and not as a new enactment." Section 1.120, RSMo 2016 (emphasis added).

         The amended statute allows for the same type of contracts as the 2016 statute. Both the 2016 statute and the amended statute permit contracts whereby the plaintiff agrees that, in the event of a judgment against the tortfeasor, the plaintiff will collect money solely from the tortfeasor's insurer or other specified assets, rather than directly from the tortfeasor.[5] But the statutes substantively differ, as the amended statute includes two noteworthy additions. First, the amended statute adds a prerequisite to the execution of a valid contract that did not previously exist. Under the amended statute, a tortfeasor is able to enter into a contract only if the tortfeasor's insurer or indemnitor "had the opportunity to defend the tort-feasor without reservation but refuse[d] to do so." Section 537.065.1, RSMo Supp. 2017. Additionally, the amended statute added the requirement that insurers be given written notice and the opportunity to intervene prior to judgment. Section 537.065.2, RSMo Supp. 2017.

         In examining the significance of these additions in the amended statute, this Court's holding in Clark is instructive. In Clark, this Court held a newly enacted statute that provided it applied to "any action which shall have been commenced within the time prescribed within this section" was a continuation of the statute's prior version. 118 S.W. at 44 (emphasis added). The Court emphasized that "the time prescribed within this section" was the same time prescribed in the previous version of the statute, indicating that "the old law is continued in force in that regard." Id. In other words, the phrase "under this section" in the amended statute did not only refer to the amended statute but also included the statute's prior version.

         Unlike in Clark, the phrase "this section" in the amended statute at issue here does not refer to the statute's prior version. While the amended statute retained much of the 2016 statute's language, the amended statute's added requirements pertain to the meaning of its phrase, "has entered into a contract under this section." Under the 2016 statute, a contract could be created and cases could conclude without any insurer involvement. Indeed, under the 2016 statute it was not a requirement for the insurer to be told the case existed. Conversely, under the amended statute, before a contract can be executed, insurers must have the opportunity to defend the tortfeasor and refuse to do so. In addition, prior to judgment, insurers must be provided with written notice and the opportunity to intervene.

         Accordingly, contracts executed under the amended statute have new requirements to be effective compared with those executed under the 2016 statute. While the dissenting opinion is correct that, here, the terms of the contract executed under the 2016 statute remain the same post-amendment, the dissenting opinion disagrees as to the effect of the two substantive changes in the amended statute, which require: (1) the tortfeasor's insurer be given the opportunity to defend without reservation and to refuse to do so for the contract to be binding, and (2) the insurer receive notice and the opportunity to intervene prior to entry of judgment. See section 537.065.1-.2, RSMo Supp. 2017. As a result, the amended statute is not a continuation of the prior version pursuant to section 1.120. The Desais and Garcia Empire could not have "entered into a contract" pursuant to a prerequisite and a requirement that was not yet law.

         When interpreting a statute, this Court is guided by the legislature's intent, as indicated by the statute's plain language. State ex rel. Clay Equip. Corp. v. Jensen, 363 S.W.2d 666, 669 (Mo. banc 1963). This Court must give meaning to every word or phrase in the statute if possible. State v. Blocker, 133 S.W.3d 502, 504 (Mo. banc 2004). By using the phrase "has entered into a contract under this section," the legislature made clear the new notice and intervention requirements applied to contracts entered into under the amended statute.[6] Here, the contract was entered into prior to the amended statute's enactment, so the amended statute does not apply to this case. The Desais and Garcia Empire did not enter into a contract under "this section" - because "this section" and its provisions did not exist in November 2016 when the contract was executed under the 2016 statute.[7] Further, the amended statute was not yet effective at the time the case was tried and submitted. Seneca, however, was aware of the lawsuit but did not attempt to intervene. Because the contract was entered into under the 2016 statute, the amended statute was not applicable. As a result, the contract remains effective pursuant to the savings clause.[8]

         II. Whether the 2017 Amended Statute Applies Retroactively to This Case

         Alternatively, Seneca argues the amended statute is procedural and, accordingly, can apply retroactively to the instant case without violating article I, section 13 of the Missouri Constitution. This argument is purely academic in light of this Court's holding, above, that the legislature did not intend for the statute to apply to contracts entered into prior to its effective date.

         Consequently, this Court need not engage in an analysis to determine whether the amended statute is substantive or procedural because even if it were determined that it is procedural - as Seneca argues - the legislature made clear with its amendment that it does not apply to contracts entered into prior to August 28. Specifically, the legislature limited the application of the 2017 amendment to contracts "entered into … under this section," which means only those contracts entered into after the amendment took effect. As a result, the requirements of the amended statute do ...


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