OOIDA RISK RETENTION GROUP, INC., Plaintiff,

v.

CHARITY CONTRACT HAULING, LLC; Lamar Charity; Mario Van McIlwain; Daniel Loyal; and, Wendy Loyal, Defendants.

1:20cv259

Signed March 30, 2023

Attorneys and Law Firms

Jon M. Hughes, Michael Patrick Johnson, McMickle Kurey & Branch, LLP, Alpharetta, GA, for Plaintiff.

Timothy J. Pavone, The Law Offices of Attorney Timothy J. Pavone, PLLC, Charlotte, NC, for Defendant Mario Van McIlwain.

Douglas B. Abrams, Noah B. Abrams, Abrams & Abrams, P.A., Raleigh, NC, for Defendants Daniel Loyal, Wendy Loyal.

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, Chief District Judge.

*1 This is an action by Plaintiff OOIDA Risk Retention Group, Inc. (“OOIDA”) for a declaratory judgment, pursuant to 28 U.S.C. § 1391, regarding insurance coverage relating to a vehicle accident that is the subject of a pending state court lawsuit. Before the court are two dispositive motions by OOIDA. First, OOIDA moves for summary judgment against Defendants Mario van McIlwain, who was the driver of the truck in the underlying accident, and Daniel and Wendy Loyal (the “Loyals”), who were the injured parties in the accident. (Doc. 42.) The Loyals do not oppose the motion for summary judgment, but McIlwain has not responded. (Doc. 46.) Second, OOIDA moves for default judgment against Defendants Charity Contract Hauling, LLC., (“Charity Hauling”), McIlwain’s alleged employer at the time of the accident, and Lamar Charity, its vice president. (Doc. 44.) Neither Charity Hauling nor Lamar Charity has appeared in this case. For the reasons explained below, both motions will be granted.

I. BACKGROUND

The facts, briefly stated, are alleged to be as follows:

In March 2019, OOIDA issued an automobile liability policy (the “Policy”) to Charity Hauling. (Doc. 1 ¶ 10; Doc. 1-1.) OOIDA contends that the Policy only covers the following vehicles used by Charity Hauling: a 1999 Freightliner tractor, a 2015 Freightliner tractor, and a 2000 Strick/DV trailer. (Doc. 1 ¶ 14.)

On May 17, 2019, McIlwain, while working for Charity Hauling, was driving a 2020 HINO box truck (the “truck”), which collided with a 2017 Ford Explorer driven by Daniel Loyal. (Doc. 1 ¶¶ 17-18.) At the time of the collision, the truck had been leased to Charity Hauling and Lamar Charity and was delivering goods on behalf of both. (Doc. 1-2 at 6.)

The Loyals filed a lawsuit in Orange County, North Carolina, on November 4, 2019, against McIlwain, Charity Hauling, and Lamar Charity, among others, seeking damages for injuries arising out of the accident (the “state court lawsuit”). (Doc. 1 ¶ 20; Doc. 1-2.) On March 18, 2020, OOIDA filed this declaratory judgment action against Charity Hauling, Lamar Charity, McIlwain, and the Loyals, seeking a declaration that it has no duty to defend or to indemnify Charity Hauling, Lamar Charity, or McIlwain as to the state court lawsuit. (Doc. 1 ¶¶ 25-26, 30-31.) OOIDA argues this is because the Policy covers neither the truck as a “covered auto” nor Charity Hauling, Lamar Charity, or McIlwain as insureds under the Policy. (Doc. 1 ¶¶ 24-25, 29-31.) Further, while the Policy also has an MCS-90 endorsement,¹ and while OOIDA alleges in the complaint that the MCS-90 endorsement is not applicable (Doc. 1 ¶¶ 34-35), after mediation with the Loyals OOIDA now concedes that the endorsement applies but argues that it does not create a duty to defend any party in the state court lawsuit (Doc. 43 at 9). The Loyals, who are the injured plaintiffs in the state court lawsuit, agree that the Policy raises no duty to defend or to indemnify related to the accident. (Doc. 46.) Further, except for McIlwain’s answer filed in this case (as noted below), the record contains no indication that anyone has asserted that OOIDA bears either a duty to defend anyone in the state court lawsuit or a duty to indemnify any judgment that might result from it. The complaint, summary judgment motion, and motion for default judgment all lack any indication that any party has demanded that OOIDA defend or indemnify it. Importantly, neither Charity Hauling, to whom the Policy was apparently issued (see Doc. 1-1 at 4, 10), nor Lamar Charity has appeared in the present action. McIlwain only filed an answer. In it, his second defense contends that the complaint should be dismissed to permit the matters to proceed in the state court lawsuit. (Doc. 17 at 2.) And while McIlwain’s answer prays for a judgment declaring a duty to defend him, it is only in response to OOIDA’s complaint in this case. (Id. at 5.)

II. ANALYSIS

A. Standing

*2 An insurer seeking a declaratory judgment must demonstrate that it faces a concrete injury sufficient to show standing. “The ‘irreducible constitutional minimum of standing’ requires the petitioner to allege a concrete injury that is ‘actual or imminent, not conjectural or hypothetical.’ ” Trustgard Insurance Co. v. Collins, 942 F.3d 195, 199 (4th Cir. 2019) (citing Lujan v. Defs. Of Wildlife, 504 U.S. 555, 560 (1992)). Otherwise, a federal court potentially exceeds its constitutional authority outlined in Article III of the Constitution and runs the risk of rendering nothing more than an advisory opinion. Id. (citing Spokeo, Inc. v. Robins, 578 U.S. 330, 337-38 (2016); MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 126 (2007).) Thus, a plaintiff bears the burden of showing it has standing. See Overbey v. Mayor of Baltimore, 930 F.3d 215, 226-27 (4th Cir. 2019). And even if standing is demonstrated, a court must consider whether it should exercise its discretionary jurisdiction under the Declaratory Judgment Act. Trustgard, 942 F.3d at 201-02 (citing Wilton v. Seven Falls Co., 515 U.S. 277, 289-90 (1995); Nautilus Ins. Co. v. Winchester Homes, Inc., 15 F.3d 371, 376-77 (4th Cir. 1994)).

In determining whether to proceed, the court must determine if the case is ripe for adjudication. OOIDA is seeking a declaration that it has no duty either to defend or to indemnify the parties in this case. District courts must be careful to “distinguish between the duty to defend and the duty to indemnify in determining whether each issue posed in a declaratory-judgment is ripe for adjudication.” Adm. Ins. Co. v. Niagara Transformer Corp., 57 F.4th 85, 93 (2d Cir. 2023) (collecting cases). Pursuant to North Carolina law, the duty to defend is “broader than [the] obligation to pay damages incurred by events covered by a particular policy.” Wm. C. Vick Const. Co. v. Great Am. Ins. Co., 52 F. Supp. 2d 569, 575 (E.D.N.C. 1999) (citing Waste Management of Carolinas, Inc. v. Peerless Ins. Co., 340 S.E.2d 374, 377 (N.C. 1986)), aff’d sub. nom. Wm. C. Vick Const. Co. v. Great American Ins. Co., 213 F.3d 634 (4th Cir. 2000) (unpublished).

The duty to defend arises “when the claim against the insured sets forth facts representing a risk covered by the policy.” Id. (citing Fieldcrest Cannon, Inc. v. Fireman’s Fund Ins. Co., 477 S.E.2d 59, 66 (N.C. App. 1996)). This is determined by what North Carolina courts call the “comparison test,” where “the pleadings are read side–by–side with the policy to determine whether the events as alleged are covered or excluded.” Waste Mgmt. of Carolinas, 340 S.E.2d at 378. “[T]he facts alleged [in the pleadings] are to be taken as true and compared to the language of the insurance policy.” Kubit v. MAG Mut. Ins. Co., 708 S.E.2d 138, 144 (N.C. App. 2011) (quoting Harleysville Mut. Ins. Co. v. Buzz Off Insect Shield, L.L.C., 692 S.E.2d 605, 610 (N.C. 2010)). “When the pleadings state facts demonstrating that the alleged injury is covered by the policy, then the insurer has a duty to defend, whether or not the insured is ultimately liable.” Waste Mgmt. of Carolinas, 340 S.E.2d at 377. This is true even if the facts alleged in the complaint are groundless, false, or fraudulent accusations. Id. at 378. Only “if the facts are not even arguably covered by the policy” can an insurer be excused from its duty to defend. Kubit, 708 S.E.2d at 144 (citing Waste Mgmt. of Carolinas, 340 S.E.2d at 378). “If the facts, as alleged in the complaint, could support liability under the policy, then a duty to defend arises on the insurer’s part … [and] any doubt as to coverage is to be resolved in favor of the insured.” Peerless Ins. v. Strother, 765 F. Supp. 866, 869 (E.D.N.C. 1990) (citing Waste Mgmt. of Carolinas, 340 S.E.2d at 694). Even where the complaint fails to assert claims falling within the coverage provided, an insurer’s duty to defend may still be found where the insurer knows or could reasonably ascertain facts that, if proven, would be covered by the policy. Waste Mgmt. of Carolinas, 340 S.E.2d at 377. However, the inverse is not true. New NGC, Inc. v. Ace Am. Ins. Co., 105 F. Supp. 3d 552, 568 (W.D.N.C. 2015) (citing St. Paul Fire & Marine Ins. Co. v. Vigilant Ins. Co., 724 F. Supp. 1173, 1179 (M.D.N.C. 1989) (noting that an insurer may not exonerate itself of liability by concluding that no coverage exists despite the allegations of the complaint), aff’d, 919 F.2d 235 (4th Cir. 1990)). Whether there is a duty to defend is a question of law. Great West Casualty Co. v. Packaging Corp. of Am., 444 F. Supp. 3d 664, 673 (M.D.N.C. 2020).

*3 In contrast, “an insurer’s duty to indemnify will depend on resolution of facts alleged in the complaint.” Great West, 444 F. Supp. 3d at 674 (citing Penn-Am. Ins. Co. v. Coffey, 368 F.3d 409, 413 (4th Cir. 2004)). To that end, courts have held that a “duty to indemnify is generally resolved after the underlying lawsuit.” Id. (citing Trustgard, 942 F.3d at 200) (other citations omitted). However, if the court determines that there is no duty to defend after reviewing the complaint in the underlying lawsuit and accepting all the facts as true, it necessarily follows that “the court may also reach the conclusion that there is no duty to indemnify as well.” Great West, 444 F. Supp. 3d at 674.

Here, the duty to defend claims are ripe for adjudication. An underlying lawsuit has been pending in state court for nearly four years. (Doc. 1-2.) The Loyals named McIlwain, Lamar Charity, and Charity Hauling as parties (Doc. 1-2 at 1), and Charity Hauling held an insurance policy with OOIDA (Doc. 1-1). Pursuant to North Carolina law, the filing of the state court lawsuit can trigger a duty to defend, particularly now that OOIDA has actual notice of it. See Kubit, 708 S.E.2d at 154 (adopting the “majority rule” and holding that “in North Carolina, the duty to defend arises when an insurer receives actual notice of the underlying action.”) Based on these facts, the court finds it has jurisdiction to determine whether a duty to defend exists against OOIDA.

B. Court’s Discretion

A court must also determine whether it should exercise its discretion to decide the declaratory judgment action. See Trustgard, 942 F.3d at 201. Whether the court should do so is subject to the same legal analysis but can turn on whether the question is sufficiently concrete. An insurer who contends it has no duty to defend generally can either defend a claim tendered to it under a reservation of rights or seek a declaratory judgment that it has no obligation to defend. Trustguard, 942 F.3d at 200 (citing Medical Assur. Co., Inc. V. Hellman, 610 F.3d 371, 381-82 (7th Cir. 2010)). While there is no evidence that any Defendant has tendered the defense of the state court lawsuit to OOIDA, OOIDA has actual notice of it, which is sufficient under North Carolina law to trigger the duty to defend. Kubit, 708 S.E.2d at 154. The court should therefore exercise its discretion to decide the declaratory judgment action.

C. Duty to Defend and Indemnify

OOIDA seeks a declaratory judgment by default against Charity Hauling and Lamar Charity and by summary judgment against McIlwain.

Default is available pursuant to Federal Rule of Civil Procedure 55 and Local Rule 7.3(k)² upon a showing that the defendant failed to defend a claim. When a motion for default judgment is unopposed, the court must exercise “sound judicial discretion” to determine whether to enter it. United States v. Williams, No. 1:17-cv-00278, 2017 WL 3700901, at *1 (M.D.N.C. Aug. 25, 2017) (internal quotation marks omitted). Upon the entry of default, the defaulted party is deemed to have admitted all well-pleaded allegations of fact, but not conclusions of law, contained in the complaint. J & J Sports Prods., Inc. v. Romenski, 845 F. Supp. 2d 703, 705 (W.D.N.C. 2012). The party moving for default judgment must still show that the defaulted party was properly served, Md. State Firemen’s Ass’n v. Chaves, 166 F.R.D. 353, 354 (D. Md. 1996),³ and that the “unchallenged factual allegations constitute a legitimate cause of action,” Agora Fin., LLC v. Samler, 725 F. Supp. 2d 491, 494 (D. Md. 2010). See Romenski, 845 F. Supp. 2d at 705 (noting that default judgment is proper when “the well-pleaded allegations in the complaint support the relief sought”).

*4 Summary judgment is warranted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A genuine issue of material fact exists ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.’ ” Basnight v. Diamond Developers, Inc., 146 F. Supp. 2d 754, 760 (M.D.N.C. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). In determining a motion for summary judgment, the court views the “evidence in the light most favorable to the non-moving party, according that party the benefit of all reasonable inferences.” Id. Summary judgment should be denied “unless the entire record shows a right to judgment with such clarity as to leave no room for controversy and establishes affirmatively that the adverse party cannot prevail under any circumstances.” Guessford v. Pa. Nat’l Mut. Cas. Ins. Co., 983 F. Supp. 2d 652, 659 (M.D.N.C. 2013) (quoting Campbell v. Hewitt, Coleman & Assocs., Inc., 21 F.3d 52, 55 (4th Cir. 1994)).

While the movant bears the initial burden of demonstrating the absence of a genuine dispute of material fact, once that burden has been met, the non-moving party must demonstrate the existence of a genuine dispute of material fact. Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 521 (4th Cir. 2003); Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586–87 (1986). A mere scintilla of evidence is insufficient to circumvent summary judgment. Anderson, 477 U.S. at 252; Dash v. Mayweather, 731 F.3d 303, 311 (4th Cir. 2013) (“[T]he nonmoving party must rely on more than conclusory allegations, mere speculation, the building of one inference upon another, or the mere existence of a scintilla of evidence.”); see also Felty v. Graves-Humphreys Co., 818 F.2d 1126, 1128 (4th Cir. 1987) (noting that there is an affirmative duty for “the trial judge to prevent ‘factually unsupported claims and defenses’ from proceeding to trial” (citation omitted)). Trial is unnecessary if “the facts are undisputed, or if disputed, the dispute is of no consequence to the dispositive question.” Mitchell v. Data General Corp., 12 F.3d 1310, 1315–16 (4th Cir. 1993).

In the state court lawsuit, the Loyals allege several claims against McIlwain, Lamar Charity, and Charity Hauling. Against McIlwain they allege negligence and wanton conduct (Doc. 1-2 at 29-33), and against Lamar Charity and Charity Hauling they allege vicarious liability for the actions of McIlwain, as well as negligence and wanton conduct (Doc. 1-2 at 39-44). The Loyals also seek damages from all the defendants in the state court lawsuit for loss of consortium. (Doc. 1-2 at 50-51.)

OOIDA contends that the Motor Carrier Coverage Form in the Policy only grants insurance for “Covered Autos.” (Doc. 1 ¶ 12; see Doc. 1-1 at 57 (listing the three covered vehicles).) The Policy provides in pertinent part:

A. COVERAGE

We will pay all sums an “insured” legally must pay as damages because of “bodily injury” or “property damage” to which this insurance applies caused by an “accident” and resulting from the ownership, maintenance or use of a covered “auto”.

* * *

We will have the right and duty to defend any “insured” against a “suit” asking for such damages…. However, we have no duty to defend any “insured” against a “suit” seeking damages for “bodily injury” or “property damage” … to which this insurance does not apply. We may investigate and settle any claim or “suit” as we consider appropriate. Our duty to defend or settle ends when the Liability Coverage Limit of Insurance has been exhausted by payment of judgments or settlements.

(Doc. 1-1 at 30.)

The complaint in the state court lawsuit alleges that McIlwain was driving a 2020 HINO box truck, which collided with the Loyals’ automobile. (Doc. 1 ¶¶ 17-18.) The Policy’s Schedule of Covered Autos does not list that truck, and thus OOIDA contends it has no duty to defend Charity Hauling. (See Doc. 1-1 at 57.) Further, the Policy defines an “insured” as only those who are in some manner operating or owning a “covered auto” or “anyone liable for the conduct of an ‘insured.’ ” (Doc. 1-1 at 30.) Therefore, OOIDA contends, neither McIlwain nor Lamar Charity are “insureds” pursuant to the Policy, and OOIDA has no duty to defend them. (Doc. 1 ¶¶ 23-27.) Finally, OOIDA notes, and the Loyals concede, that the MCS-90 endorsement does not create a duty to defend. (Doc. 43 at 9.)

*5 The comparison test makes clear that the alleged claims could not possibly fall within the Policy and OOIDA therefore has no duty to defend McIlwain, Lamar Charity, or Charity Hauling in the state court lawsuit. The truck McIlwain was allegedly driving during the accident is not a “covered auto” under the Policy to give rise to an insuring obligation. Further, neither McIlwain nor Lamar Charity is an “insured” for this accident under the Policy. Moreover, the court agrees that the MCS-90 endorsement, which operates as a surety bond even where there is no coverage under the Policy and which OOIDA concedes applies, does not create a duty to defend. Titan Indemnity Co. v. Gaitan Enters., Inc., 237 F. Supp. 3d 343, 349 (D. Md. 2017) (noting that federal courts have consistently stated that the MCS-90 endorsement does not create a duty to defend claims which are not covered by the policy but only by the endorsement) (citing Harco Nat’l Ins. Co. v. Bobac Trucking, 107 F.3d 733, 735–36 (9th Cir. 1997); Carolina Ca. Ins. Co. v. Yeates, 584 F.3d 868, 883 (10th Cir. 2009); T.H.E. Ins. Co. v. Larsen Intermodal Servs., Inc., 242 F.3d 667, 677 (5th Cir. 2001)).

Because the court finds that OOIDA has no duty to defend the Defendants, it necessarily follows that there can be no duty to indemnify them. See Great West, 444 F. Supp. 3d at 674. The court will therefore grant OOIDA’s motions.

III. CONCLUSION

For the reasons stated,

IT IS THEREFORE ORDERED that OOIDA’s motion for summary judgment seeking a declaratory judgment that it has no duty to defend or indemnify McIlwain and the Loyals (Doc. 42) is GRANTED;

IT IS FURTHER ORDERED that OOIDA’s motion for default judgment seeking a declaratory judgment that it has no duty to defend or indemnify Charity Hauling and Lamar Charity (Doc. 44) is GRANTED; and

IT IS FURTHER ORDERED that this action be DISMISSED.

All Citations

Slip Copy, 2023 WL 2711408

Footnotes

1. The MCS-90 endorsement is for motor carrier policies of insurance for public liability under sections 29 and 30 of the Motor Carrier Act of 1980 and provides in pertinent part: In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (the company) agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere. (Doc. 1-1 at 26.)  
2. Local Rule 7.3(k) states: “If a respondent fails to file a response within the time required by this rule, the motion will be considered and decided as an uncontested motion, and ordinarily will be granted without further notice.”
3. Here, OOIDA has demonstrated by a preponderance that it has properly served Defendants Charity Hauling and Lamar Charity by publication, pursuant to North Carolina Rule of Civil Procedure 4(e) and (j1), after both refused OOIDA’s process server’s attempts at personal service on multiple occasions. (Docs. 23, 24.) The Clerk of Court properly entered default thereafter. (Docs. 26, 27.)   

© 2023 Thomson Reuters. No claim to original U.S. Government Works.  

End of Document

Leslie M. HENSON, Individually, and as Personal Representative of the Estate of Leslie S. Henson, Respondent,

v.

MEROB LOGISTICS, LLC, and Tedros S. Lakew, Respondents,

and

Zurich American Insurance Company, Appellant.

WD 85158

OPINION FILED: April 18, 2023

Appeal from the Circuit Court of Jackson County, Missouri, The Honorable John M. Torrence, Judge

Attorneys and Law Firms

Tim Dollar and Tom Hershewe, Kansas City, MO, Attorneys for Respondent Leslie Henson.

Julie J. Gibson and Michael D. Matteuzzi, Overland Park, KS, Attorneys for Respondents Merob Logistics, LLC, and Tedros Lakew.

Russell F. Watters, Timothy J. Wolf, and Lucas J. Ude, St. Louis, MO, Attorneys for Appellant.

Before Division Two: Edward R. Ardini, Jr., Presiding Judge, and Lisa White Hardwick and Karen King Mitchell, Judges

Opinion

Karen King Mitchell, Judge

*1 Zurich American Insurance Company appeals the denial of its motions to intervene and vacate the judgment in a wrongful death action filed by Leslie M. Henson against Merob Logistics, LLC, and Tedros Lakew. Zurich raises nine points on appeal. In Points I-IV, Zurich argues that the denial of its motion to intervene violated Rule 52.12(a) in that § 537.065 provides a right to insurers to intervene (Point I) and Zurich had an interest in the litigation (Point II); Rule 52.12(b) insofar as there were common questions of law and fact or § 537.065 granted a conditional right to intervene (Point III); and Zurich’s right to due process in that it was not given an opportunity to be heard on the underlying judgment for which it is now subject to garnishment (Point IV). In Points V-IX, Zurich argues that the trial court erred in denying Zurich’s motion to modify or vacate the arbitration award for a variety of reasons. Finding no error, we affirm.

Background

On December 6, 2019, Lakew was operating a tractor–trailer as part of his employment with Merob when he drove the tractor–trailer onto the right shoulder of a highway in Chase County, Kansas, and lost control of the vehicle. Henson v. Merob Logistics, LLC, 633 S.W.3d 838, 840 (Mo. App. W.D. 2021). The trailer, which had no lights, came to rest blocking the roadway. Id. Around 11:48 p.m., Leslie S. Henson (Decedent) struck the trailer while driving a passenger vehicle and died from his injuries six days later. Id.

At the time of the accident, both Lakew and Merob were insured by American Millennium Insurance Company (American) for the tractor portion of the tractor–trailer. Id. The trailer portion was owned by an affiliate of Amazon.com, Inc., and insured by Zurich through a commercial automobile insurance policy. Id.

On January 21, 2020, Decedent’s son, Leslie M. Henson, was appointed Administrator of Decedent’s estate. After the accident, American agreed to pay out its policy limits ($1,000,000) to Henson. Believing that Lakew and/or Merob may be insured under additional policies, Henson entered a non-execution agreement with Lakew and Merob, whereby Henson agreed that, in exchange for the policy limits paid by American, Henson would not levy execution against any personal assets of either Lakew or Merob other than liability insurance coverage available to either by any insurers other than American or any proceeds Lakew or Merob might recover from claims against insurers for failure to defend or settle claims against Lakew or Merob. Henson would file a wrongful death action against Lakew and Merob in Missouri, and Lakew and Merob agreed not to challenge either venue or personal jurisdiction, though they were otherwise free to answer with both admissions and denials as they saw fit. The agreement further provided for a distribution of the assets from the American policy to Decedent’s children, and all parties agreed to file a joint motion with the court to approve the agreement and distribution.

The agreement also provided, “If investigation or discovery reveals additional potential insurance, Lakew and Merob and their personal counsel agree to tender their defense to that insurance company.” And, if any additional insurer then rejected a request for an unconditional defense, “Lakew and Merob agree[d] to reject any defense under reservation and resolve Henson, Jr.’s claims through binding arbitration under the provisions of the Missouri Uniform Arbitration Act and the Federal Arbitration Act.” The agreement also noted that Henson, Lakew, and Merob had negotiated “a separate arbitration agreement that they agree[d] to execute if any additional insurance companies reject[ed] Lakew’s and/or Merob’s request for an unconditional defense of the claims.”

*2 Then, on April 13, 2020, Henson filed a wrongful death lawsuit against Lakew and Merob. On May 28, 2020, pursuant to a joint motion from the parties, the trial court approved the non-execution agreement and distribution of assets from the American policy. On June 23, 2020, counsel for Lakew and Merob sent a letter to Zurich and three other insurers, notifying them of the accident and the non-execution agreement and tendering the defense of Lakew and Merob to each insurer. The letter gave the insurers fourteen days from receipt of the letter to respond with an indication of whether they would provide a defense. Zurich received the letter on June 30, 2020, and, on July 6, 2020, Zurich sent Merob a letter acknowledging the claim had been filed but giving no indication as to whether Zurich intended to provide a defense.

On August 13, 2020, the previously negotiated arbitration agreement between Henson, Lakew, and Merob, wherein the parties agreed to submit their dispute to binding arbitration, was executed. On August 28, 2020, Lakew and Merob sent a second letter to Zurich, noting that, because Zurich did not respond to the prior communication with an agreement to defend, Lakew and Merob entered into binding arbitration. The letter further advised Zurich that the arbitration was scheduled for September 3, 2020, and that Zurich was invited to participate. Zurich chose not to attend, and, after the hearing, the arbitrator entered an award, finding Lakew negligent and 90% at fault, Merob vicariously liable for Lakew’s negligence, and Decedent contributorily negligent and 10% at fault. The arbitrator awarded total damages to Henson in the amount of $11,071,647.82.

On September 18, 2020, Henson filed an unopposed motion to confirm the arbitration award. And, on September 23, 2020, Zurich filed its first motion to intervene. The very next day, the trial court entered an order confirming the arbitration award, which was followed a day later by Zurich’s second motion to intervene and request to vacate the judgment. The trial court attempted to schedule case management conferences to address Zurich’s motions, but Zurich filed an appeal in this court, challenging the judgment confirming the arbitration award. Henson, 633 S.W.3d at 842. On October 5, 2021, we dismissed the appeal for lack of a final judgment insofar as the motions to intervene had not been addressed, and we held that Zurich was not then an aggrieved party. Id. at 843.

On November 29, 2021, Zurich filed a supplemental motion on intervention, which the trial court denied on January 27, 2022. Zurich appeals.

Analysis

Zurich raises nine points on appeal. The first four are directed at the trial court’s denial of Zurich’s motion to intervene, and the remaining five are directed at the trial court’s denial of Zurich’s motion to modify or vacate the arbitration award.

I. Zurich lacked a right to intervene.

In Points I and II, Zurich claims that it had a right to intervene under Rule 52.12(a). We disagree. “We will affirm the trial court’s decision denying intervention as a matter of right ‘unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law.’ ” Britt v. Otto, 577 S.W.3d 133, 139 (Mo. App. W.D. 2019) (quoting Allen v. Bryers, 512 S.W.3d 17, 28 (Mo. banc 2016)). “[T]he decision to grant or deny the motion is one involving application of the law.” Id. at 139-40 (quoting BMO Harris Bank v. Hawes Tr. Invs., LLC, 492 S.W.3d 607, 615 (Mo. App. W.D. 2016)).

Rule 52.12(a) provides two circumstances under which anyone who has timely applied “shall be permitted to intervene in an action”:

(1) when a statute of this state confers an unconditional right to intervene or (2) when the applicant claims an interest relating to the property or transaction that is the subject of the action and the applicant is so situated that the disposition of the action may as a practical matter impair or impede the applicant’s ability to protect that interest, unless the applicant’s interest is adequately represented by existing parties.

*3 Rule 52.12(a).¹

The relevant version of § 537.065.2, provides:

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.

Section 537.065.2 RSMo 2017.²

In Point I, Zurich argues that § 537.065.2 conferred upon it, as an insurer, an unconditional right to intervene in Henson’s action below. Though § 537.065.2 does provide an insurer the right to intervene “in any pending lawsuit involving the claim for damages” within thirty days of receiving notice of an agreement entered into under § 537.065.1, the trial court below determined that § 537.065 did not apply to the agreement at issue in this matter. Specifically, the trial court determined, “Zurich has failed to establish that Missouri statutory law applied to the parties’ nonexecution agreement. The Court finds that the requirements of section 537.065 do not apply to the agreement between an Oklahoma resident and two Texas residents regarding a vehicle crash that occurred in Kansas.” Zurich has not challenged that determination on appeal.³

*4 “Before a judgment may be reversed, an appellant must demonstrate that ‘all of the reasons’ the trial court relied on as supporting a challenged ruling in the judgment ‘were wrong.’ ” In re Wilma G. James Tr., 487 S.W.3d 37, 53 (Mo. App. S.D. 2016) (quoting City of Peculiar v. Hunt Martin Materials, LLC, 274 S.W.3d 588, 591 (Mo. App. W.D. 2009)). “Thus, the failure to challenge an alternative basis supporting the trial court’s ruling ‘is fatal to [the] appeal.’ ” Id. (quoting STRCUE, Inc. v. Potts, 386 S.W.3d 214, 219 (Mo. App. W.D. 2012)). Because Zurich did not challenge the trial court’s determination that § 537.065 was inapplicable, Zurich cannot now rely on § 537.065 to support its claim that the court erred in denying its request to intervene as a matter of right under Rule 52.12(a)(1). Point I is denied.

In Point II, Zurich claims that it also had a right to intervene under Rule 52.12(a)(2) insofar as it had an interest in the underlying litigation, disposition of the litigation impaired its ability to protect that interest, and none of the existing parties adequately represented Zurich’s interest. See Rule 52.12(a)(2) (identifying three requirements to intervene as a matter of right). As the proposed intervenor, Zurich bore the burden of proving all three assertions. See Britt, 577 S.W.3d at 142. If Zurich established all three requirements, its “right to intervene [wa]s absolute, and a trial court ha[d] no discretion to deny the motion.” Id. But if any one of the requirements was not established, the trial court did not abuse its discretion in denying the motion to intervene. Id.

“Missouri courts have long held that ‘[t]he liability of an insurer as potential indemnitor of the judgment does not constitute a direct interest in such a judgment so as to implicate intervention as of right in that action.’ ” Id. (quoting Sherman v. Kaplan, 522 S.W.3d 318, 326 (Mo. App. W.D. 2017)). “Instead, ‘the insurer has a forum by declaratory judgment action or in the action to compel indemnity for the judgment that affords the insurer full scope to protect its interests against the contention of coverage, and hence liability for the judgment.’ ” Id. (quoting Sherman, 522 S.W.3d at 326). “In other words, ‘[i]n the third[-]party liability claim context, the insurance carrier has no right to intervene in litigation between its policyholder and the third party; the carrier can participate in the litigation only pursuant to its contractual obligation to defend the policyholder.’ ” Id. (quoting Sherman, 522 S.W.3d at 326).⁴ Because Zurich’s interest is limited to its contractual obligation as a potential indemnitor, it failed to prove the requisite interest for intervention as a matter of right under Rule 52.12(a)(2).⁵ Point II is denied.

II. The trial court did not err in denying Zurich permissive intervention.

*5 In Point III, Zurich argues that the court erred in denying permissive intervention under Rule 52.12(b)(1) and (2). “We review the denial of permissive intervention under Rule 52.12(b) for abuse of discretion.” Britt, 577 S.W.3d at 145. “A trial court abuses its discretion when its decision is ‘clearly against the logic of the circumstances then before the court and is so arbitrary and unreasonable as to shock the sense of justice and indicate a lack of careful consideration.’ ” Id. (quoting Johnson v. State, 366 S.W.3d 11, 21 (Mo. banc 2012)).

Rule 52.12(b) allows for permissive intervention, upon timely application, “(1) when a statute of this state confers a conditional right to intervene; or (2) when an applicant’s claim or defense and the main action have a question of law or fact in common.” Rule 52.12(b). Zurich argues first that its objection to the arbitration award had common questions of law and fact with Henson’s wrongful death petition and, alternatively, that § 537.065.2 provided Zurich with a conditional right to intervene. For the same reasons identified in response to Point I, supra, we reject Zurich’s alternative argument that § 537.065.2 provided it with a conditional right to intervene. Because Zurich did not challenge the trial court’s determination that § 537.065 was inapplicable, Zurich cannot now rely on § 537.065 to support its claim that the court erred in denying its request for permissive intervention under Rule 52.12(b).

With respect to Zurich’s argument that its objection to the arbitration award had common questions of both law and fact with Henson’s wrongful death petition and it was, therefore, entitled to permissive intervention, we disagree.

“[I]t is well established that ‘an intervenor must accept the action pending as he finds it at the time of intervention.’ ” Knight ex rel. Knight v. Knight, 609 S.W.3d 813, 824 (Mo. App. W.D. 2020) (quoting Martin v. Busch, 360 S.W.3d 854, 858 n.5 (Mo. App. E.D. 2011)). At the time Zurich sought intervention, the parties had already participated in a binding arbitration, and an award had already been entered; the parties were merely seeking confirmation of that award by the trial court. Thus, we do not ask whether Zurich’s objection to the arbitration award had common questions of law and fact with Henson’s petition; instead, we ask whether there were common questions with the motion requesting confirmation of the arbitration award, which was the “main action” pending at the time Zurich sought to intervene. There were not.

In its motion to intervene, Zurich argued that the arbitration award was “erroneous, collusive, invalid, and unenforceable,” and further argued that it “was procured by undue means.”⁶ But the parties, themselves, jointly urged the court to confirm the award and none of the parties raised any challenge to the validity or enforceability of the award; thus, there were no common questions of law or fact between Zurich’s request to intervene and the parties’ joint motion to confirm the arbitration award. See Aguilar v. GEICO Cas. Co., 588 S.W.3d 195, 201-02 (Mo. App. W.D. 2019) (“Because the circuit court here was asked to confirm the award, and no grounds were urged by the parties to the arbitration for vacating, modifying, or correcting the award, neither the validity nor the enforceability of the award was at issue.”). Under § 435.400,⁷ the court was required to confirm the award, unless a party raised grounds urging the court to vacate, modify, or correct the award. Hart v. Metzger, 834 S.W.2d 236, 238 (Mo. App. E.D. 1992). “And because no application was filed [by a party] to vacate the award for undue fraud, questions of law and fact pertaining to the circumstances under which the parties entered the agreement were similarly not at issue.” Aguilar, 588 S.W.3d at 202.⁸

*6 In Point IV, Zurich argues that it suffered a due process violation based on its alleged inability to be heard on the judgment for which it will be garnished. For the same reasons discussed in footnote 6 in response to Point III, we reject Point IV. Zurich plainly has the opportunity—and has capitalized on this opportunity—to be heard in both its declaratory judgment action currently pending in federal court and in the garnishment action filed by Henson below. Thus, there is no due process violation. For all of these reasons, Point III and IV are denied.

III. Zurich lacked standing to request the trial court modify or vacate the arbitration award.

In Points V-IX, Zurich raises a variety of rationales to support its claim that the trial court erred in denying Zurich’s post-judgment request to modify or vacate the arbitration award. But “[o]nly a party has standing to attempt to set aside or appeal from a judgment.” F.W. Disposal S., LLC v. St. Louis Cnty. Council, 266 S.W.3d 334, 338 (Mo. App. E.D. 2008). “In order to be a party, a person ‘must either be named as a party in the original pleadings, or be later added as a party by appropriate trial court orders.’ ” Id. (quoting Wieners v. Doe, 165 S.W.3d 520, 522 (Mo. App. S.D. 2005)). “Motions filed after judgment by strangers to the record present nothing for the court to rule on.” Id.

Here, because the trial court denied Zurich’s request to intervene, Zurich remained a stranger to the action and, therefore, lacked standing to seek modification or vacation of the arbitration award. Accordingly, the trial court did not err in denying Zurich’s motion.

Points V-IX are denied.

Conclusion

The trial court did not err in denying Zurich’s request to intervene. And, because Zurich was not a party, Zurich lacked standing to seek modification or vacation of the arbitration award; thus, the trial court did not err in denying Zurich’s post-judgment motion to modify or vacate the award. The trial court’s judgment is affirmed.

Edward R. Ardini, Jr., Presiding Judge, and Lisa White Hardwick, Judge, concur.

All Citations

— S.W.3d —-, 2023 WL 2981556

Footnotes

1. All rule references are to the Missouri Supreme Court Rules (2021) unless otherwise noted.  
2. Zurich argues that we should apply the 2021 version of § 537.065, which provides greater rights for insurers under the agreements permitted therein, rather than the 2017 version. We disagree. Even if § 537.065 applies to the agreement in this case, the applicable version would be the one effective when the contract was executed because the 2021 version contains additional requirements not found in the 2017 version; thus, the parties could not enter into a contract “under this section” that included requirements that did not yet exist. See Desai v. Seneca Specialty Ins. Co., 581 S.W.3d 596, 601 (Mo. banc 2019) (holding that, where “contracts executed under the amended statute have new requirements to be effective compared with those executed under the [prior] statute[,] … the amended statute is not a continuation of the prior version pursuant to section 1.120,” and the parties “could not have ‘entered into a contract’ pursuant to [new] requirement[s] that w[ere] not yet law.”).
3. In fact, the sole reference Zurich makes is an isolated, conclusory statement in the argument portion of the brief that “Section 537.065.2 … undoubtedly applies to the non-execution agreement entered into by the parties,” followed by a citation to a nonexistent provision of the applicable version of § 537.065. Though the applicable version of § 537.065 also indicates that it “shall apply to any covenant not to execute or any contract to limit recovery to specified assets, regardless of whether it is referred to as a contract under this section,” § 537.065.3, it says nothing about whether § 537.065 applies to agreements between non-Missouri residents involving a crash occurring outside of Missouri. And, because Zurich has not raised a claim on appeal related to the applicability of § 537.065 under these circumstances, we need not decide whether the trial court’s conclusion was correct.  
4. “If either party to the insurance contract breaches in such a way that results in the insurer not providing a defense to the insured during the underlying lawsuit, that matter may be raised only in the proper forum, i.e., a declaratory judgment action or a subsequent garnishment action.” Britt v. Otto, 577 S.W.3d 133, 142 (Mo. App. W.D. 2019) (quoting Sherman v. Kaplan, 522 S.W.3d 318, 326 (Mo. App. W.D. 2017)).
5. Zurich argues for the first time on appeal that, by giving insurers a right to intervene in § 537.065, the legislature necessarily intended to completely abrogate this well-settled law about the insurer’s lack of direct interest in the action even when the entity attempting intervention does not comply with § 537.065. We need not reach this issue, as Zurich failed to preserve it by failing to raise it below. In any event, Zurich’s argument seems at odds with the decisions in Loveland v. Austin, 626 S.W.3d 716 (Mo. App. E.D. 2021), transfer denied (Aug. 31, 2021); Aguilar v. GEICO Cas. Co., 588 S.W.3d 195 (Mo. App. W.D. 2019); and Britt, 577 S.W.3d at 143; and with the general principle that, “[u]nless a statute clearly abrogates the common law either expressly or by necessary implication, the common law rule remains valid.” State ex rel. Brown v. III Invs., Inc., 80 S.W.3d 855, 860 (Mo. App. W.D. 2002) (quoting In re Estate of Parker, 25 S.W.3d 611, 614 (Mo. App. W.D. 2000)).  
6. The underlying bases for Zurich’s claim that the award is erroneous is that the award fails to comply with statutory damage caps under Kansas law, fails to credit the $1,000,000 paid out by American against the total award, improperly awards pre-crash and pre-death damages, and “improperly implicates Defendants’ alleged coverage with Zurich.” Zurich argues that the award was collusive because it was a product of the underlying non-execution agreement that Zurich contends was collusive. But “[t]he validity and/or enforceability of the [non-execution] contract is not an issue in [an] appeal” from the denial of requested intervention. Britt, 577 S.W.3d at 140 n.6. Furthermore, “[t]he authorized grounds for vacating an [arbitration] award are limited, and do not include re-litigating the facts or legal issues determined by the award.” Id. at 144. In any event, intervention “is not available to … litigate the coverage question in the [underlying] action, or to restore to [the insurer] the control of the defense it forfeited by the denial of coverage, or to impugn the fairness of the settlement agreement proceedings and judgment.” Whitehead v. Lakeside Hosp. Ass’n, 844 S.W.2d 475, 481 (Mo. App. W.D. 1992). “These are interests of liability properly litigable in an action for declaratory judgment, statutory garnishment, or even by the insured for reimbursement.” Id.  
7. Section 435.400 provides, “Upon application of a party, the court shall confirm an award, unless within the time limits hereinafter imposed grounds are urged for vacating or modifying or correcting the award, in which case the court shall proceed as provided in sections 435.405 and 435.410.” § 435.400.  
8. Furthermore, Zurich was invited to attend the arbitration, but it declined to do so. And, “in denying permissive intervention, the trial court was entitled to consider that [the would-be intervenor] declined an invitation to participate in the arbitration proceeding.” Britt, 577 S.W.3d at 145-46.  

© 2023 Thomson Reuters. No claim to original U.S. Government Works.

End of Document