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Adams v. Certain Underwriters at Lloyd's of London

Court of Appeals of Missouri, Eastern District, Third Division

July 16, 2019

LATRONYA ADAMS, Appellant/Cross-Respondent,

          Appeal from the Circuit Court of the City of St. Louis Honorable Joan L. Moriarty Judge.

          SHERRI B. SULLIVAN, P.J.


         This appeal is a garnishment action brought by appellant Latronya Adams (Adams) against Certain Underwriters at Lloyd's of London (Underwriters), who issued a general commercial insurance policy (Policy) to Plaza Banquet Centers, Inc. d/b/a Lights on Broadway Plaza Grill (Lights on Broadway), an administratively dissolved Missouri corporation. Adams brought a negligence suit against Lights on Broadway and Eric Galloway (Galloway) for allegedly causing the death of Orlando Willis (Willis), Adams's son, who was shot outside of a nightclub while assisting Galloway with throwing a party. After Adams and Galloway entered into an agreement under Section 537.065[1], judgment was entered against Galloway and Lights on Broadway in the amount of $5, 000, 000. Subsequently, Adams brought a garnishment claim against Underwriters, Lights on Broadway's insurer, seeking to collect on the judgment from the underlying tort case. After lengthy litigation and a bench trial, the garnishment court entered its judgment on the various claims and cross-claims of the parties. All parties now appeal from the rulings of the garnishment court.


         On December 25, 2010, 16-year-old Willis and his friend Marquise Davenport (Davenport) were helping Galloway set up a party at Pulse Night Club. Pulse Night Club was located in a small strip mall with two other businesses, a flea market and a banquet hall. All three of the businesses were owned or operated by Galloway.

         The party had been advertised on Facebook and by word of mouth as a place where young people were welcome. However, soon after their arrival, Willis and Davenport were told the venue would not allow people under 18 years old. They and a large group of other children and young adults were told to wait outside. As they waited, the large crowd began to grow restless, and arguments broke out. Davenport testified later the arguments escalated, and one or more individuals in the crowd began firing guns. Davenport observed at least one individual hanging out of the window of a moving car, firing shots into the crowd. He recalled hearing more than one gun being fired. As shots rang out, the crowd began to panic. Some party-goers attempted to enter Pulse Night Club to escape the shooting. But as they tried to open the doors, the panicked party-goers discovered the doors had been locked. Locked out of the venue without cover, Davenport was shot in his wrist; Willis was shot in the face. Davenport witnessed Willis slump to the ground, grievously injured. Willis died of his injuries several days later.

         Adams, Willis's mother, filed suit against Galloway, his related businesses, and the property owners, seeking damages for the wrongful death of her son. The petition commencing the action went through several iterations; the fourth and final petition on which she proceeded alleged negligence on the part of Galloway and Lights on Broadway, which caused the shooting death of her son.[2] Specifically, the Fourth Amended Petition (Petition) alleged Galloway, Lights on Broadway and the related business entities responsible for throwing the December 25, 2010 party were negligent in that they had a duty to provide security for the party and failed to do so in a reasonable manner. The Petition noted Galloway and related parties were aware of the need for security and had agreed to it in advance. However, security personnel were not scheduled to arrive until 11:00 p.m. that evening, while the doors were to open to admit guests at 10:00 p.m. Willis and other individuals who helped set up for the party were allowed onto the premises even earlier. The Petition alleged there had recently been numerous violent crimes in the area, which would have put a reasonable person on notice of a need to provide security for the party before 11:00 p.m. As a result of the negligent failure to provide security, an argument outside of the nightclub escalated into gunfire. Although Willis was not involved in the argument, or an intended victim of the shooting, he was inadvertently struck by a stray bullet fired recklessly by an unknown individual. The Petition also alleged Galloway and Lights on Broadway were responsible for negligently locking Pulse Night Club's doors after the gunfire began, which left individuals outside, including Willis, unable to escape the gunfire.

         At the time of the shooting, Lights on Broadway was insured under the Policy issued by Underwriters. After the filing of Adams's suit, Galloway informed Underwriters of the claim and demanded they defend him. Based on the allegations in Adams's Third Amended Petition, Underwriters refused, stating they believed the claim was not covered under the Policy. Specifically, Underwriters believed the claim was excluded by the "assault and battery exclusion" (Assault and Battery Exclusion) in Lights on Broadway's policy. This exclusion reads:

Exclusion a. of Coverage A (Section I) is deleted and replaced with the following: "Bodily injury" or "property damage":
(1) expected or intended from the standpoint of any insured
(2) arising out of assault or battery, or out of any act or omission in connection with assault or battery, or with the prevention or suppression of an assault or battery; or
(3) arising out of charges or allegations of negligent hiring, training, placement, or supervision with respect to (1) or (2) above.

         Underwriters was later provided with the fourth and final Petition, which clarified the negligence suit arose from Willis being an unintended victim of the shooting, and not involved in the argument that led up to it. Adams contacted Underwriters, demanding they settle the negligence claim for the policy limit of $1, 000, 000. Underwriters refused, still basing their denial of coverage on the Assault and Battery Exclusion. In a denial letter received by Galloway and Adams, Underwriters stated it also reserved "any and all claims, rights, and defenses they may discover in connection with any additional information provided in this matter."

         Believing Underwriters' conclusion that the Assault and Battery Exclusion applied to the claim was incorrect, Galloway and Adams entered into an agreement pursuant to Section 537.065, whereby Adams agreed to limit any attempt to collect from a potential judgment against Galloway and Lights on Broadway to payments due under the Policy. In return, Galloway and Lights on Broadway agreed to cooperate with Adams in her pursuit of a claim against Underwriters, and to forfeit any right to appeal a judgment against them in the negligence case.

         In the meantime, Underwriters filed an action for declaratory relief in federal court to determine their obligations under the Policy with respect to Adams's claim. This action was stayed before its resolution.

         The state court negligence trial consisted of expert testimony offered by Adams, as well as affidavits from Galloway and Davenport. Adams's expert witness was Colonel Hugh Mills, Jr., the undersheriff of Jackson County, Missouri (Col. Mills). Col. Mills testified about his extensive experience organizing security for various venues, including hip hop parties/shows like the one at which Willis was shot. He testified about the standard operating procedure he would have followed, including taking stock of the crime statistics of the surrounding area. He noted his own investigation had revealed the area around Pulse Night Club had had numerous dangerous criminal attacks, including assaults and other crimes against persons. Given this knowledge, Col. Mills testified to what level of security and other precautions should have been provided in order to ensure the party's participants' safety.

         In short, in Col. Mills's expert opinion, the safety and security measures provided by Galloway and Lights on Broadway fell well below the standard of care that would have been reasonable. Col. Mills also opined the act of locking the doors of the club once the shooting began exposed the party-goers to further risk of injury, and may have constituted a violation of the fire code.

         The testimony of Galloway was presented to the court via affidavit. Galloway stated Lights on Broadway was co-promoting and co-sponsoring the party at Pulse Night Club that evening; that the guests were parking in the lot shared by the businesses at that location; that he was on the premises in the course of his management duties for Lights on Broadway; and that he had entered the address which housed Lights on Broadway to retrieve supplies and equipment and to organize manpower for the event at Pulse Night Club. Galloway also stated that although the party was to begin at 10:00 p.m., he had not arranged for any security to be on the premises until 11:00 p.m. He stated he failed to have adequate security available despite having been warned to do so by the St. Louis Metropolitan Police Department. He stated that when he had arrived at the venue he had noticed the large group of individuals gathered outside, who had been there since 8:00 or 9:00 p.m., many of whom were too young to attend the party, but he had not called the police or attempted to disperse them.

         After hearing evidence and argument, the trial court entered judgment against both Galloway and Lights on Broadway, finding them jointly and severally liable for negligently causing the death of Willis. The trial court awarded Adams $5, 000, 000 as and for actual damages. The trial court did not make written findings of fact or conclusions of law.

         After receiving the judgment, Adams filed a garnishment action against Underwriters to collect under the Policy pursuant to the Section 537.065 agreement with Galloway and Lights on Broadway. Her petition contained her own claim for equitable garnishment and the claims of Galloway and Lights on Broadway for bad faith refusal to defend, bad faith refusal to settle, and breach of fiduciary duty, which had been assigned to her under the Section 537.065 agreement.

         In its answer, Underwriters denied the Policy gave rise to any duty to defend Galloway and Lights on Broadway from Adams's negligence claim. Underwriters claimed the Assault and Battery Exclusion barred any coverage for Adams's claim. Underwriters also asserted the "Classification Limitation" provision of the Policy (Classification Limitation) also excluded Adams's claim. The Classification Limitation excludes coverage for injuries that do not arise "out of those operations or premises which are not classified or shown on the Commercial General Liability Coverage Part Declarations, its endorsements or supplements." The Commercial General Liability Coverage Part Declarations page lists the insured "premises" as 8344-8350 North Broadway, St. Louis, MO. Nothing on this page is labeled "operations"; however, under the "Premiums" table the Policy lists the premiums charged as being for the classifications of "Halls" and "Restaurants."

         Underwriters also raised a number of other defenses. It asserted Galloway was not acting on Lights on Broadway's behalf on the evening of the shooting, but on behalf of some other entity. It also accused Galloway, Lights on Broadway, and Adams of engaging in fraud to obtain the underlying judgment, thus voiding the Section 537.065 agreement and any right Adams may have to collect under the Policy. In response, Galloway and Lights on Broadway filed a cross-claim against Underwriters, claiming defamation for Underwriters' accusation of fraud.

         Numerous pretrial motions ensued. Ultimately, the score was as follows: The garnishment court dismissed the defamation cross-claim against Underwriters by Galloway and Lights on Broadway. The garnishment court denied summary judgment to Underwriters on their claim the Assault and Battery Exclusion barred Adams's claim. Concordantly, the garnishment court granted summary judgment on Galloway's and Lights on Broadway's claim of failure to defend, finding the allegations in the negligence petition were sufficient to give rise to a duty to defend from Adams's suit, and were not facially excluded under the assault and battery exclusion. As this claim had been assigned to Adams in the Section 537.065 agreement, Adams was awarded Galloway's and Lights on Broadway's attorney's fees from the underlying negligence action. Judgment was entered against Adams, Galloway, and Lights on Broadway in favor of Underwriters for the claims of bad faith failure to settle and breach of fiduciary duty.

         A trial was conducted on the garnishment claim between May 1 and May 3, 2017. The testimony largely related to two topics: what steps the insurance company took after learning of the claim, and details around Galloway's business dealings. Underwriters sought to introduce evidence at trial relating to the shootings. Specifically, they sought to introduce testimony from a police detective who investigated the shooting and from Davenport. This testimony was meant to show Adams's characterization of Willis's shooting as "inadvertent" was inaccurate, and the gunfire was not random. The garnishment court refused to hear testimony from these witnesses.

         Facts relating to Galloway's businesses at and around the location of the shooting were developed at trial, and the garnishment court made several related findings. The garnishment court found Galloway operated businesses out of the shared building at the location: Lights on Broadway, a banquet hall and restaurant; a warehouse operated under another company; Odd Lots, a flea market located between Lights on Broadway and the nightclub; and Pulse Night Club, which the trial court found was operated by Broadway Entertainment. Broadway Entertainment was a separate business entity from Lights on Broadway, and Galloway was Broadway Entertainment's agent or owner. The garnishment court found Galloway operated under a trade name, EGE Entertainment, when promoting an event at one of his businesses, and deposited the proceeds from such events with the business at which it was held, for tax purposes. The garnishment court also found Galloway had obtained a separate insurance policy for Broadway Entertainment, the company under which he managed the Pulse Night Club, but that policy had lapsed due to nonpayment, and was not in effect at the time of Willis's shooting.

         Given these facts, the trial court concluded that, although Underwriters had a duty to defend Lights on Broadway from Adams's suit, and had breached that duty by failing to do so, ultimately there was no coverage for the claim under the Policy. The garnishment court held:

The Classification Limitation in the [] Policy bars coverage for the judgment entered in the Underlying Action against Lights on Broadway because the judgment is based on a shooting that occurred at the Pulse Night Club [] located at 8370 North Broadway. The underlying judgment was not entered against Lights on Broadway for liability based on its operations as a banquet hall or restaurant located at 8344-8350 N. Broadway.

         The garnishment court also held:

The proper entity to be sued in this case was Broadway Entertainment which, on its insurance application, gave an address of 8370 North Broadway. Pulse Night Club was located at 8370 North Broadway…It is clear that Galloway, at one time, had purchased a separate policy of liability insurance to provide coverage for that entity…[This] policy had lapsed at the time of the shooting for non-payment of premiums…

         The garnishment court also found it significant there was "no evidence" that Galloway was performing the duties of an "executive officer" of Lights on Broadway. Thus, he did not qualify as an "insured" under the Policy and was not entitled to coverage for the judgment entered against him in the underlying action. Given the lack of coverage under the Policy for both Galloway and Lights on Broadway, Adams's garnishment claim was denied. This resolved the final claim and issue of the underlying garnishment case.

         All parties now appeal.

         Points Relied On

         Adams appeals from the garnishment court's judgment against her on her claim for payments owed under the Policy. Adams raises six points why the garnishment court erred in applying the Classification Limitation to bar her claim. We discuss only Point VI of Adams's appeal: The garnishment court erred in concluding the claim was excluded by the Classification Limitation because the findings upon which that ruling is predicated are precluded by findings made by the trial court in the underlying negligence act, which are binding on the garnishment court. Because we reverse the judgment of the garnishment court on this point, we do not analyze Adams's remaining points of error.

         Underwriters makes three claims of error. Point VIII claims the garnishment court erred in finding Underwriters had any duty to defend Galloway or Lights on Broadway because the Assault and Battery Exclusion bars coverage for Willis's and Adams's injury. Point IX claims the garnishment court erred in granting Adams's motion for summary judgment on her bad faith failure to defend the claim. Point X claims the garnishment ...

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