Coverage Analysis
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MISSOURI

  ACCIDENTS OR OCCURRENCES

  Under Missouri law, an occurrence is "that which happens by chance or fortuitously, without intention or design, and which is unexpected, unusual or unforeseen."  Terrazzo v. Iowa National Mutual Ins. Co., 566 F.Supp. 546, 552 (E.D. Mo. 1983).  

  Missouri courts apply a subjective standard, requiring coverage unless insurer can shown "not only that the insured intended the acts causing the injury but the injury was expected or intended from these acts."  American Family Mutual Ins. Co. v. Pacchetti, 808 S.W.2d 369 (Mo. 1991)(insured who gave cocaine to friend for "pleasure" did not expect or intend resulting death). Mere recklessness is not enough to preclude coverage.  Pacchetti; Koch Engineering Co. v. Gibraltar Casualty Co., 78 F.3d 1291 (8th Cir. 1996).

  The test, therefore, is whether it was "substantially certain" that the insured's intentional acts would result in some type of injury.  State Farm Fire & Cas. Co. v. D.T.S., 867 S.W.2d 642 (Mo. App. 1993)(no coverage for allegations that teacher engaged in sexual relations with minor student).

  The fact that the injuries are of more serious or of a different degree does not matter.  Under Missouri law, all injuries that are the "natural and probable consequences" of the insured's intentional acts are outside the scope of coverage if the insured did not intend the specific injury that resulted. Easley v. American Family Mutual Ins. Co., 847 S.W.2d 811 (Mo. App. 1992) and Metropolitan Property & Casualty Ins. Co. v. Ham, 930 S.W.2d 5 (Mo. App. 1996)(no coverage for fire that was started by 14 year old inmate of juvenile home to divert authorities while she escaped that burned down the property).

  Nor will coverage be reinstated because the insured perversely believed that his injurious conduct might somehow benefit or please the victim.  State Farm Fire & Cas. Co. v. Caley, 936 S.W.2d 250 (W.D. Mo. App. 1997).

  The terms "expected" and "intended" are not synonymous.  Farm Bureau Town and County Ins. Co. v. Turnbo, 740 S.W.2d 232, 236 (Mo. App. 1987).  

  The burden of proving that injuries were expected and intended has been placed on the insurer.  In Steelman v. Home Mutual Ins. Co., 765 S.W.2d 372 (Mo. App. 1989), the Court of Appeal also found that "intended" required a finding that the insured "either desired to cause the injury or believed that the injury was substantially certain to follow from" his deliberate acts.  "Expected" connoted a situation in which the insured "realized, or should have realized that there was a strong probability" that injury would be a consequence of his deliberate acts.  Id.; Turnbo, 740 S.W.2d at 236.

  Intent may be inferred in cases of sexual molestation and other cases where the  when the nature and circumstances of the insured’s intentional acts are such that harm is substantially certain to result.  American Family Mutual Insurance Company v. Franz, 980 S.W.2d 56, 58 (Mo. App. 1998) and U.S.A.A. v. Sorrell, 910 S.W.2d 774, 777 (Mo. App. 1995);  State Farm v. Caley, supra;  MAB v. Nicely, 911 S.W.2d 313 (Mo. 1995);  B.B. v. Continental Ins. Co., 8 F.3d 1288 (8th Cir. 1993).

  Missouri does not recognize intoxication, whether voluntary or otherwise, as a basis for concluding that the insured did not expect or intend to cause injuries by reason of his intentional acts.  Travelers Insurance Company v. Cole, 631 S.W.2d at 664 (alcohol); Hanover Insurance Company v. Newcomber, 585 S.W.2d 285, 289 (Mo. App. 1979)(marijuana) and James v. State Farm Fire & Casualty Insurance Company, WD 55546 (Mo. App. June 20, 2000)(alcohol).

  An "expected or intended" exclusion in a homeowner's policy has been held to bar coverage for property damage resulting from the insured's act of arson.  In American Family Mut. Ins. Co. v. Mission Medical Group, 72 F.3d 645 (8th Cir. 1995), the Eighth Circuit ruled that the insured's intentional acts were not covered merely because he had acted under the mistaken belief that the building he had set fire to was an abortion clinic.  Further, the court refused to find coverage for allegations of negligent supervision against the arsonist's mother, holding that the exclusion applied if the harm was intended by "any insured."   On the other hand, the Eighth Circuit has ruled that allegations that the insured negligently supervised daycare children in her home, allowing them to be sexually abused by a third person were outside the scope of a policy exclusion for injury “arising out of any sexual act.”  St.  Paul Fire & Marine Ins. Co.  v.  Schrum, 1998 WL 410667 (8th Cir.  July 23, 1998).  

  Allegations against a bar based upon the assault and battery of an employee were held to be within the scope of an exclusion for assault and battery claims in Acceptance Ins. Co. v. Winning Concepts of Westport, Inc., 842 S.W.2d 206, 208 (Mo. App. 1992).  

  "Willful and wanton" conduct or other forms of gross negligence are still an "occurrence."   White v. Smith, 440 S.W.2d 497, 509 (Mo. Ct. App. 1969)(slaughterhouse polluted nearby well).  See also Koch Engineering Co. v. Gibraltar Cas. Co., 78 F.3d 1291 (8th Cir. 1996)(mere recklessness does not preclude possibility of an "occurrence").

  Where an exclusion applies to all claims "arising out of" an assault and battery, it will preclude coverage even where theories of liability are expressed in terms of negligence, as in the insured's failure to prevent such an assault.  Capitol Indemnity Corp. v. Callis, 1997 WL 727564 (Mo. App. November 25, 1997).

  The Missouri Court of Appeals has ruled that a CGL policy is ambiguous and must afford coverage for age discrimination claims due to a purported conflict between the "personal injury" grant of coverage for such claims and the preclusive effect of the "expected or intended" definition of "occurrence."  Missouri Property & Casualty Insurance Guaranty Association v. Petrolite Corp., 918 S.W.2d 869 (Mo. App. 1996).  

  The Court of Appeals also ruled in McDonough v. Liberty Mutual Ins. Co., 921 S.W.2d 90 (Mo. App. 1996) that the insured's refusal to allow the plaintiffs to proceed with the construction of a hockey rink on their property within a housing subdivision did not allege an accidental "occurrence."
  Claims based based upon a contractor’s failure to carry out work as specified may not be an “accident.”  In American States Ins.  Co.  v.  Emco Contracting Co., 73560 (Mo.  App.  E.D. August 18, 1998), the state Court of Appeals ruled that the insured’s failure to trench and grade the slope were not the result of an “accident,” as the insured’s failure to perform was entirely within its control, nor did it result in any unintended damage to other property.
 

  ALLOCATION AND SCOPE ISSUES

  The Missouri Court of Appeals has ruled that liability insurers that successively afford coverage for claims that allege injury over a period of years should pro-rate the costs of defense on a "time on the risk" basis. Continental Cas. Co. v. Medical Protective Co., 859 S.W.2d 789 (Mo. App. 1993).  See also Transamerica Ins. Co. v. General Gasket Corp., St. Louis County Circuit Court No. 894-00289 (Mo. June 6, 1994)(asbestos claims) and  TWA, Inc.  v.  Associated Aviation Underwriters, St.  Louis No.  942-01848A (Mo. Cir.  Ct.  October 21, 1998)(pollution).  In TWA,  Judge Riley rejected the insured’s “joint and several” arguments as well as suggestions that the allocation of loss should be subject to “other insurance” clauses, noting that the policies in question were successive and not concurrent.  Instead, Judge Riley ruled that coverage should be allocated based on each insurer’s “time on the risk.”  

  Earlier, the Appeals Court suggested in Harold S.  Schwartz & Assoc., Inc.  v.  Continental Casualty Co., 705 S.W.2d 494, 497 (Mo.  App.  1985) that apportionment might be proper if permitted by policy language but did not indicate what sort of provisions would support allocation.  
 

  APPELLATE PROCEDURES

  Missouri has both an intermediate appellate court and a state Supreme Court.  The Court of Appeals has two divisions (Eastern and Western).
 

  BAD FAITH

  Unfair or deceptive consumer practices are proscribed by Mo. Ann. Stat. § 407.010 (Vernon 1990).

  Mo. Rev. Stat. §375.420 allows for an award of damages and attorneys fees if an insurer's refusal to cover a loss was "willful and without reasonable cause, as the facts would appear to a reasonable and prudent person."  DeWitt v. American Family Mutual Ins. Co., 667 S.W.2d 700, 710 (Mo. 1984) and New Madrid County v. Continental Cas. Co., 904 F.2d 1236 (8th Cir. 1990).  In such circumstances, the plaintiff’s damages shall be enhanced by 20% of the first $1,500.00 of the loss and 10% of the amount in excess of that amount and reasonable attorneys fees.

  A liability insurer is not precluded from paying its policy limits to settle claims against some (but not all) of its policyholders so long as it attempted to achieve a global settlement and did not discriminate between its policyholders with respect to the manner in which the defense is conducted.   Millers Mutual Insurance Company v. Shell Oil Company, 959 S.W.2d 864 (Mo. App. 1997).
 
  An insured's claim for bad faith may not be assigned to a tort claimant.  Quick v. National Auto Credit, 65 F.3d 749 (8th Cir. 1995).

  A federal district court has ruled that a property insurer is entitled to recover its attorney’s fees and costs for proving a fraud claim involving the insured’s arson of the insured home.  Allstate Insurance Company v. Estes, 2000 WL 1664929 (E.D. Mo. August 17, 2000).  

  "BODILY INJURY"

  The term "bodily injury" has been held to be ambiguous to the extent that the term "bodily" may modify either "injury" or also "sickness or disease."  Lanigan v. Hanover Ins. Co., 938 S.W.2d 330 (Mo. App. W.D. 1997)(claim against mortuary for losing body, thus affecting loss of sepulchre).  More recently, the Eastern District has criticized Lanigan as being based on the minority view of the New York Court of Appeals in Lavanant.  Citizens Insurance Co. of America v. Leiendecker, 1998 WL 72272 (Mo. App. E.D. February 24, 1998).
 

  BREACH OF POLICY CONDITIONS 

  Under Missouri law, the failure to provide timely notice is treated as an affirmative defense for which the insurer has the burden of proof.  Weaver v. State Farm Mutual Automobile Ins. Co., 936 S.W.2d 818, 821 (Mo. 1997) (en banc).  In such cases, it is the insurer's obligation to prove that it was prejudiced by the delay.  Two of the Weaver justices dissented, noting the impracticality and unfairness of requiring insurers to prove a negative.  

  An insured's delay may be excused by good cause.  Even an unexcused delay will not defeat coverage, however, unless it results in prejudice.  Anderson v. Slayton, 662 S.W.2d 575 (Mo. App. 1983).

  Further, substantial compliance with notice requirements in a liability policy is sufficient.  Greer v. Zurich Ins. Co., 441 S.W.2d 15, 30 (Mo. 1969) and  Tressner v. State Farm Ins. Co., 913 S.W.2d 7, 15 (Mo. 1995).  

  Regulations adopted by the Missouri Insurance Commissioner prohibit the denial of coverage for failure to provide timely notice of a claim unless the insurer can establish prejudice from the late notice.  20 Mo. Code Regs Section 100-1.020 (4).  However, proof of prejudice is not required with respect to "claims made" policies since the requirement of notice is an essential part of the scope of insurance rather than a condition to coverage.  Lexington Ins. Co. v. St. Louis University, 1996 WL 376411 (8th Cir. July 8, 1996).

  In Hendrix v. Jones, 580 S.W.2d 740 (Mo. 1979), the Missouri Supreme Court rejected a per se rule that mere absence from trial, even if wilful and even if the insurer has done what it reasonably could do to produce the insured, suffices on its own to establish, or to create a presumption of, prejudice. 
 

  BROAD FORM COVERAGES

  Although the "occurrence" policy limitation bars coverage for intentional acts, ambiguity has been found given the conflict between this limitation on coverage and the grant of insurance for intentional torts under "personal injury" coverage provisions. Missouri Property & Casualty Ins. Co. v. Petrolite Corp., 918 S.W.2d 869 (Mo. Ct. App. 1996) (prosecution and slander).  

  In Pipefitters Welfare Educational Fund v. Westchester Fire Ins. Co., 976 F.2d 1037 (7th Cir. 1992), the Seventh Circuit suggested that pollution claims might potentially give rise to “personal injury” coverage.  More recently, however, the Eighth Circuit declared in Liberty Mutual Ins.  Co.  v.  FAG Bearings Corp., 153 F.3d 919 (8th Cir. 1998) that suits by abutting property owners claiming that they had been exposed to polluted well water because of the insured’s TCE discharges did not give rise to coverage on this basis.  While conceding that such claims could be understood as describing a covered offense, the court ruled that the claims could not give rise to coverage on this basis since they were actually for “bodily injury” and “property damage.” 

  In 1986, this language was amended to limit the scope of “personal injury” coverage to such acts that involved a “room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor.”  Such exclusions have been held to be enforceable and unambiguous. TGA Development, Inc. v. Northern Insurance Co. of New York, 62 F.3d 1089 (8th Cir. 1995).

  The Eighth Circuit has since ruled that environmental pollution claims that arise in the context of an actual trespass upon the plaintiff’s property may give rise to coverage under a policy’s “personal injury” coverage.  In Royal Insurance Company of America v.  Kirksville College of Osteopathic Medicine, 191 F.3d 159 (8th Cir.  1999), the court ruled that allegations of property damage resulting from the rupture of a tank in which MGP wastes had once been stored arose out of a discharge of pollutants “at or from any premises...which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste,” rejecting the insured’s claim that the premises must have been “primarily used” for waste storage to be excluded.  Nevertheless, the court ruled that the counts for trespass were not excluded and gave rise to a claim under Coverage B as involving an action for “wrongful entry” or “invasion” of the plaintiff’s property.The court carefully distinguished cases in which it was the discharge of pollutants that was found to be the trespass, holding that although the absolute pollution exclusion would preclude coverage under such circumstances, it should not apply to cases in which a trespass had occurred independently of the discharge of contaminants onto the plaintiff’s property.
 

  BURDEN OF PROOF

  Under Missouri law, insured has initial burden of showing that its claim is within the scope of coverage; thereafter, the burden of showing the applicability of policy exclusions shifts to the insurer.  National Union Fire Ins. Co. v. Structural Systems Technology, Inc., 756 F.Supp. 1232 (E.D. Mo. 1991); Truck Ins. Exchange v. Brown, 800 S.W.2d 2 (Mo. App. 1990)(insured must prove he was "insured") and American Family Mut. Ins. Co. v. Brown, 657 S.W.2d 273 (Mo. App. 1983); Grossman Iron & Steel Co. v. Bituminous Casualty Company, 558 N.W.2d 255, 259-60 (1977).   

  In missing policy cases, proof must be by a standard of "clear and convincing" evidence. Transamerica Ins. Co. v. General Gasket Corporation, St. Louis County Circuit Court No. 894-00289 (Mo. June 6, 1994).  This result was affirmed on appeal in 1995, although the Court of Appeals declined to expressly ruled whether the stricter standard would be required in all cases.
 

  CHOICE OF LAWS

  Missouri uses the criteria of the Restatement (Second) of Conflicts of Laws in choice of law situations dealing with contracts,  Frost v. Liberty Mut. Ins. Co, 883 S.W.2d 915 (Mo. App. 1992), as well as tort cases. Crown Center Redevelopment Corp. v. Occidental Fire & Cas. Co. of North Carolina, 716 S.W.2d 348 (Mo. App. 1986).   Under Section 188 of the Restatement approach, the contacts to be weighed and evaluated are (1) the place of the contract; (2) the place of negotiation of the contract; (3) the place of performance; (4) the location of the subject matter of the contract; and (5) the domicile, residence, nationality, place of incorporation and place of business of the parties.  If these contract rules prove insufficient, Missouri courts will look to the more general "governmental interest" approach delineated under §6.  Fruin v. Colnon Corp. v. The Missouri Highway and Transportation Commission, 736 S.W.2d 41, 43 (1987).

  The Court of Appeals declined to adopt a “law of the site” approach in a pollution case, declaring in  Superior Equipment Co., Inc.  v.  Maryland Cas.  Co., No. 73559 (Mo.  App.  December 15, 1998) that Missouri law applied to claims involving a Missouri insured even though the insured’s wastes were ultimately disposed of at a site in Illinois.

  Where pollution arose out of a specific insured facility out of state, a federal district court has ruled in Curran Composites, Inc.  v.  Liberty Mutual Ins.  Co., 874 F.Supp.  261 (W.D. Mo.  1994), that Wisconsin law should apply under a Section 193 Restatement analysis.  

  CONFLICTS OF INTEREST

  Where a conflict of interest exists, the insurer may either retain independent counsel of its own choosing or should reimburse the insured for independent counsel of the insured's choosing.   Howard v. Russell Stover Candies, Inc., 649 F.2d 620, 625 (8th Cir. 1981).
 

  "DAMAGES"

  The Missouri Supreme Court ruled on March 25, 1997 that the plain and ordinary meaning of "damages" includes both legal damages and the cost of undertaking equitable relief. Farmland Industries, Inc. v. Republic Ins. Co., 941 S.W.2d 505 (Mo. 1997).  The court ruled that neither the common and ordinary nor legal meaning of "damages" permits a distinction between legal damages and equitable relief that would preclude coverage for sums that an insured is forced to pay to clean up the environment or to reimburse others for clean up measures.

  In so holding, the court swept aside a decade's jurisprudence in which federal courts had refused to find coverage for Superfund "response costs" on this basis.  See Continental Ins. Co. v. NEPACCO, 842 F.2d 977 (8th Cir. 1988); Aetna Cas. & Surety Co. v. General Dynamics Corp., 968 F.2d 707 (8th Cir. 1992) and Becker Metals Corp. v. Transportation Ins. Co., 802 F.Supp. 235 (E.D. Mo. 1992).  

  The Supreme Court's ruling in Farmland overruled that part of the Court of Appeals' analysis in McDonough v. Liberty Mutual Ins. Co., 921 S.W.2d 90 (Mo. App. 1996), review denied (Mo. April 30, 1996) which had found that claims for declaratory relief and promissory estoppel failed to assert a demand for "damages" within the scope of a homeowners policy.  While noting that there might be other reasons why the claims were not covered, the court refused to adopt the lower court's distinction between equitable remedies and legal damages.

  Farmland did find, however, that fines and penalties are not covered, since these are in the nature of punishment and are not sums paid to compensate the damaged party.

  The Court of Appeals, relying on Farmland, has since ruled in Brown Group, Inc. v. George F. Brown & Sons, Inc., 963 S.W.2d 285 (Mo. App. 1997) that closure costs involving pollution at the insured's former leather tannery were "damages" even though the insured had merely received claim letters from the government and was not acting pursuant to any court order. 

  In Hyatt Corp. v. Occidental  Fire & Cas. Co., 801 S.W.2d 382 (Mo. App. 1990), the Missouri Court of Appeals ruled that "damages"  included all of the insured's liabilities, including an award of attorneys fees against it in the underlying action.  But see, The Bar Plan v. Campbell, 1991 WL 179443 (Mo. App. September 17, 1991), appeal dismissed (Mo. 1992)(Rule 11 sanctions against attorney held not to be "damages" under professional liability policy) and International Ins. Co. v. Metropolitan St. Louis Sewer District, 1996 WL 560110 (E.D. Mo. September 30, 1996)(court order requiring sewer district to rebate excess user charges to customers did not seek "money damages").  

  An action for conversion or replevin is outside the scope of liability insurance for tort damages. Federated Mutual Ins. Co. v. Madden Oil Co., 734 S.W.2d 258 (Mo. App. 1987).  
  Ordinarily, Missouri courts will follow a "first filed" rule in determining the priority of competing actions for declaratory relief.  Orthmann v. Apple River Campground, Inc., 765 F.2d 119, 121 (8th Cir. 1985).  However, this rule will not be applied in a rigid, mechanical or inflexible manner that would not serve the interests of justice.  Merrill Lynch, Pierce, Fenner & Smith v. Haydue, 675 F.2d 1169, 1174 (11th Cir. 1982).  Accordingly, a federal court in Missouri has ruled to give effect to the "first filed" rule where the insured claimed that its delay in filing an action was caused by the insurer's representations.  Commercial Union Ins. Co. v. Turbaty, 1997 WL 108683 (E.D. Mo. January 27, 1997).  In Turbaty, the insurer filed its action for declaratory relief only three days after announcing its coverage position.  Under the circumstances, the court ruled that the insurer should not be permitted to win the "race to the courthouse."  
 

  DECLARATORY JUDGMENT ACTIONS

  As a general rule, attorney's fees are not awarded to prevailing insureds.  Schwartz v. Continental Cas. Co., 705 S.W.2d 494, 498 (Mo. App. 1985).  However, attorney's fees can be awarded for an insurer's bad faith or "vexatious" refusal to pay under Mo. Rev. Stat. §375.420. New Madrid County v. Continental Cas. Co., 904 F.2d 1236 (8th Cir. 1990). 
 

  DIRECT ACTION CLAIMS

  Where an insurer denies coverage or only agrees to provide a defense under a reservation of rights, it cannot prevent its insured from entering into a settlement that limits the scope of any resulting judgment to the available insurance proceeds.  State of Missouri v. RIMCO, Inc., 858 S.W.2d 307 (Mo. App. 1993).

  Section 537.065 of the Insurance Code of Missouri provides that "any person having an unliquidated claim for damages against a tortfeasor, on account of bodily injuries or death, may enter into a contract with such tortfeasor or any insured in his behalf or both, whereby, in consideration of a payment of a specified amount, the person asserting the claim agrees that in the event of a judgement against the tortfeasor, neither he nor any person, firm or corporation claiming by or through him will levy execution...accept against the specific aspects listed in the contract and accept against any insurer which insurers the legal liability of the tortfeasor for such damage."  

  However, claims under Section 537.065 are not enforceable if they are the result of the insured's fraud or collusion.  Whitehead v. Lakeside Hospital Association, 844 S.W.2d 475, 480 (Mo. App. 1992).  In Gulf Ins. Co. v. Nobel Broadcast, 1997 Mo. LEXIS 17 (Mo. January 21, 1997), the Missouri Supreme Court, for the first time, addressed the issue of whether a Section 537.065 settlement must also be reasonable.  The fact that a settlement may be unreasonable will not defeat coverage, however.  In Gulf, the Supreme Court declared that the appropriate procedure in a case where the settlement was unreasonable was to remand the case to the trial court for further findings as to what a reasonable settlement would have been.  
 

  DISCOVERY ISSUES

   --Claims Manuals
 

   --Drafting History

 Ordered produced in Trans World Airlines, Inc. v. Associated Aviation Underwriters, St. Louis No. 942-01848 (Mo. Dist. Ct. November 12, 1997).

   --Other Policyholder Claims

 Ordered produced in Trans World Airlines, Inc. v. Associated Aviation Underwriters, St. Louis No. 942-01848 (Mo. Dist. Ct. November 12, 1997).

   --Reinsurance Information

 Ordered produced in Trans World Airlines, Inc. v. Associated Aviation Underwriters, St. Louis No. 942-01848 (Mo. Dist. Ct. November 12, 1997).

  Courts have denied discovery of reinsurance information on the grounds that it is irrelevant to the issues in a coverage dispute.  See, e.g., Independent Petrochemical Corp. v. Aetna Cas. & Sur. Co., 117 F.R.D. 283, 288 (D.D.C. 1986).

   --Reserves

 Ordered produced in Trans World Airlines, Inc. v. Associated Aviation Underwriters, St. Louis No. 942-01848 (Mo. Dist. Ct. November 12, 1997).
 

  DUTY TO DEFEND

  Pleadings and facts known or readily discoverable through investigation by insurer.  Such facts may also be used as a basis for denying coverage, however.  Travelers Ins. Co. v. Cole, 631 S.W.2d 661 (Mo. App. 1982).

  Where an insurer unjustifiably refuses to defend its insured, the insured is free to take such steps as are reasonably necessary to protect its own interests.  Cologna v. Farmers and Merchants Ins. Co., 785 S.W.2d 691, 701 (Mo. App. 1990).  

  The Missouri Supreme Court has suggested that a policyholder may have the right to demand that an insurer affirmatively accept coverage or reject coverage and that the insurer may not provide a defense subject to a reservation of rights if the insured so insists.  State Farm Mutual Auto Ins. Co. v. Baumer, 889 S.W.2d 523 (Mo. 1995).  

  A liability insurer has no obligation to reimburse its policyholder for costs incurred before the defense of the action was tendered to it.  Crown Center Redevelopment Corp. v. Occidental Fire & Cas. Co. of North Carolina, 716 S.W.2d 348, 357 (Mo. App. 1986).

  The duty to defend is terminated by the payment of policy limits, even if the payment only results in a partial settlement and does not extinguish the third party's claims against a particular insured.  Millers Mut. Ins. Co. v. Shell Oil Co., 955 S.W.2d 864 (Mo. App. 1997), review denied (Mo. January 15, 1998)(settlement as to named insured exhausted any remaining duty to defend additional insured).

  The duty to defend is broader than the duty to indemnify.  Shelter Mutual Ins. Co. v. Shepard, 928 S.W.2d 6, 8 (Mo. App. 1996).  

  "PRP" claims were held not to be a suit in Becker Metals Corp. v. Transportation Ins. Co., 802 F.Supp. 235 (E.D. Mo. 1992).
 

  ESTOPPEL AND WAIVER

  In the absence of either an (1) express waiver by the insurer; or (2) conduct which clearly and unequivocally shows a purpose by the insurer to relinquish a contractual right, the insured must show prejudice before it could be barred from raising new coverage defenses that were not originally asserted.  Brown v.  State Farm Mutual Auto Ins.  Co.,. 776 S.W.2d 384, 388 (en banc) (Mo.  1989).  

  Delay in raising a coverage defense will not create an estoppel absent proof of prejudice to the insured. Safeco Ins. Co. v. Marion, 676 F.Supp. 197 (E.D. Mo. 1987).  On the other hand, the Missouri Court of Appeals has ruled that an exclusion to coverage is an affirmative defense that must be pleaded or will be deemed to be waived by the insurer.  In Century Fire Sprinklers, Inc. v. Transportation Insurance Company, WD 57479 (Mo. App. June 27, 2000), the Western District declared that Transportation was precluded from relying on certain business risk exclusions in a CGL policy, even though the exclusions were relied on in its original denial letter, given its counsel’s failure to include these exclusions as affirmative defenses to the insured’s coverage suit. 

  The consequence of a wrongful failure to defend is that an insurer forfeits the right to challenge the determination of its insured’s liability and resulting damages.   Esicorp, Inc. v. Liberty Mutual Ins. Co., 193 F.3d 966 (8th Cir. 1999); James v. State Farm Fire & Casualty Insurance Company, WD 55546 (Mo. App. June 20, 2000) and Whitehead v. Lakeside Hospital Association, 844 S.W.2d 475, 480 (Mo. App. 1992).  The insurer is not estopped, however, from disputing coverage.  Nor, inasmuch as it has no right to intervene in the underlying proceedings, is it estopped by findings pertaining to the issue of coverage.

  On the other hand, if an insured is found to owe coverage, it may be obligated to pay the full amount of a consent judgment that the insured entered into to,  not just out of pocket amount for which the insured was required to pay under its agreement with the tort claimant.  Esicorp, Inc. v. Liberty Mutual Ins. Co., 193 F.3d 966 (8th Cir. 1999).
 

  EXCESS INSURERS

  The Missouri Court of Appeals ruled in Crown Center Redevelopment Corp. v. Occidental Fire & Cas. Co. of North Carolina, 716 S.W.2d 348 (Mo. App. 1986) that an excess policy that only provided for the payment of defense costs that were incurred with the consent of the carrier did not have a "duty to defend" per se.

  The Eighth Circuit ruled that policies that provided coverage "in excess of the insurance afforded" did not have to "drop down" when the underlying layer of insurance became insolvent.  Interco, Inc. v. National Surety Corp., 900 F.2d 1264 (8th Cir. 1990).  See also Weber v. Granite State Ins. Co., (Mo. App. March 23, 1992).
 

  KNOWN LOSS

  In United States of America v. Conservation Chemical Co., 653 F.Supp. 152 (W.D. Mo. 1986), the federal district court ruled that a site operator not entitled to coverage after site was closed and government filed suit to compel clean-up.
 

  NUMBER OF OCCURRENCES

  Insured's successive collision with two vehicles held to be subject to single "accident" limit in Kansas Fire & Cas. Co. v. Koelling, 729 S.W.2d 251 (Mo. App. 1987).

  Three separate operations that the insured performed on a patient to correct a problem with an arthritic hip were held to only trigger a single E&O policy limit, despite the fact that the surgical procedures occurred in separate policy years.  The court ruled in RCA Mutual Ins. Co. v. Sanborn, 918 S.W.2d 893 (Mo. App. 1996) that each operation was part of a single continuous course of treatment and therefore only involved a single "medical incident."
 

  OTHER INSURANCE

  The Missouri Court of Appeals ruled in Continental Casualty Co. v. Medical Protective Co., 859 S.W.2d 789, 791 (Mo. App. 1993) that "other insurance" clauses only apply when two policies cover the same loss during overlapping periods of insurance company and do not apply to successive injuries in different periods
 

  POLLUTION EXCLUSION

  Upheld by 8th Circuit in Aetna Cas. & Surety Co. v. General Dynamics Corp., 968 F.2d 707 (8th Cir. 1992).  Relying on General Dynamics, the U.S. Court of Appeals for the D.C. Circuit ruled in Independent Petrochemical Co. v. Aetna, 842 F.Supp. 575 (D.D.C. 1994), aff'd, 69 F.3d 1160 (D.C. Cir. 1995) that the individual waste sprayings were could not be considered separately to make them "sudden," holding that this sort of micro-analysis would render the exclusion "toothless."  and that these discharges were not "accidental," even if performed by a third party.  The court also rejected IPC's ambiguity and estoppel claims based upon the exclusion's alleged drafting history.  Similarly, in Trico Industries, Inc. v. Travelers Ind. Co., 853 F.Supp. 1190 (N.D. Cal. 1994)(Missouri law), Judge Rea ruled that the causes of pollution at the Conservation Chemical site were not "accidental" merely because the insured had entrusted his wastes to a licensed waste disposal contractor.  Further, despite conflicts in the case law, the court ruled that "sudden" must be read in context and therefore defeated coverage for pollution that had developed over ten years of dumping activity.

  The Eighth Circuit reaffirmed General Dynamics in its later ruling in Liberty Mutual Ins.  Co.  v.  FAG Bearings Corp., 153 F.3d 919 (8th Cir. 1998), holding that well water contamination caused by the periodic malfunction of the insured’s degreasing system, causing discharges of TCE vapor, was not “sudden and accidental.”  .The court declared that the insured’s failure to take steps to remedy the problem precluded any finding that the discharges were “accidental.”   the court also found, however, that Liberty Mutual had a duty to defend until the underlying facts became clear that the only possible causes of pollution were excluded.

  Consistent with this sort of approach, the state Court of Appeals ruled in  Superior Equipment Co., Inc.  v.  Maryland Cas.  Co., 986 S.W.2d 477 (Mo.  App.   1998) that insurers had a duty to defend a Superfund claim where the underlying action only generally described how pollution had occurred.  The court did not comment on the scope of the exclusion, nor did it find that the exclusion was ambiguous.

  The Missouri Court of Appeals is now reviewing a trial court’s ruling in in Trans World Airlines, Inc. v. Associated Aviation Underwriters, No. 942-01848 (Mo. Cir. Ct. August 29, 1997) that summary judgment should therefore enter for TWA's liability insurers on the basis of the pollution exclusion.  Using the analogy of a baseball pitcher, Judge Bush pointed out that one could appropriately say that "the loss of the zip on his fast ball was gradual" or that the "loss of the zip on his fast ball was "sudden" but one cannot sensibly and without contradiction say "the loss of the zip on his fast ball was gradual and sudden."

  The exclusion was also upheld by the Delaware Supreme Court in Monsanto Company v. Aetna Cas. & Sur. Co., New Castle No. 88C-JA-118 (Del. Super. December 8, 1993), aff'd, No. 39, 1994 (Del. November 7, 1994)(Missouri law) as precluding coverage for gradual releases of pollutants as not being "sudden."  
 
  The Missouri Court of Appeals ruled in Hocker Oil Co. v. Barker-Phillips-Jackson, Inc., 997 S.W.2d 510 (Mo. App. 1999) that a gas station operator had a reasonable expectation of coverage for clean  up claims involving a spill of gasoline, notwithstanding an absolute pollution exclusion in its policy.  The court declared that “it would be an oddity for an insurance company to sell a liability policy to a gas station that would specifically exclude the insured’s major liability.”  Owing to the failure of the insurer to include “gasoline” in the definition of “pollutant,” the Court of Appeals affirmed a lower court’s finding that the exclusion was ambiguous in such circumstances.

  In Casualty Indemnity Exchange v. City of Sparta, 997 S.W.2d 545 (Mo. App. 1999), the Court of Appeals ruled that the exclusion precluded coverage for claims by property owners who complained that hazardous materials contained in sludge from the insureds waste water treatment plant, which had been applied as a fertilizer or soil supplement on adjoining farm properties.  The court declared that the waste was plainly a pollutant since its high pH made it an “irritant or contaminant.”  As the sludge contained substances which, according to the evidence presented at trial, were toxic to humans and animals, the court declared that the claims were subject to the policy’s absolute pollution exclusion.  Even though the insurer’s expert had conceded that sludge was not a “hazardous substance” as that term is used by regulation under CERCLA, the Court of Appeals declared that what was important was whether a substance fell within the definition of “pollutant” not whether a discharge of the chemical would subject the insured the liability under federal law.  The court expressly disagreed with the 8th Circuit’s construction of the exclusion in Sargent Construction, in which the federal Court of Appeals had declared that Muriatic Acid was not an irritant or contaminant.”  Since, in this case, there was little doubt that the plaintiffs exposure to the sludge materials had caused injury thus precluding any dispute as to whether the substances involved were an “irritant or contaminant.”  Finally, the court rejected the insured’s argument that the exclusion should only apply to “a persistent polluter engaged in general polluting activities” as was the ruling of the Arkansas Supreme Court in Minerva Enterprises.  The court declared that there was an immense difference between the malfunction of a septic system in a mobile home park, the facts in Minerva, and a sewage system, the main purpose of which was to remove dangerous materials.  “To hold the absolute pollution exclusion does not bar coverage for damage caused by toxic substances from sludge removed from sewage by Sparta’s Waste Water Treatment Facility would leave one wondering what kind of activity would be excluded by the absolute pollution exclusion.”

  The U.S. Court of Appeals of the Eighth Circuit has ruled in a Missouri case that environmental pollution claims that arise in the context of an actual trespass upon the plaintiff’s property may give rise to coverage under a policy’s “personal injury” coverage.  In Royal Insurance Company of America v.  Kirksville College of Osteopathic Medicine, 191 F.3d 159 (8th Cir. 1999), the court ruled that allegations of property damage resulting from the rupture of a tank in which MGP wastes had once been stored arose out of a discharge of pollutants “at or from any premises...which is or was at any time used by or for any insured or others for the handling, storage, disposal, processing or treatment of waste,” rejecting the insured’s claim that the premises must have been “primarily used” for waste storage to be excluded.  Nevertheless, the court ruled that the counts for trespass were not excluded and gave rise to a claim under Coverage B as involving an action for “wrongful entry” or “invasion” of the plaintiff’s property.  Notwithstanding a recent Eighth Circuit opinion that had adopted a limited construction of this “personal injury” language, the court was persuaded by the Third Circuit’s 1999 New Castle County analysis that the language was ambiguous.  The court carefully distinguished cases in which it was the discharge of pollutants that was found to be the trespass, holding that although the absolute pollution exclusion would preclude coverage under such circumstances, it should not apply to cases in which a trespass had occurred independently of the discharge of contaminants onto the plaintiff’s property.

  Earlier, the federal Court of Appeals took a more limited view of the exclusion, holding that it should not apply where there was a question of fact as to whether the injuries resulted from contact with an “irritant” or “contaminant.”   In Sargent Construction Co., Inc. v. State Auto Ins. Co., 23 F.3d 1324 (8th Cir. 1994) a contractor was sued for property damage resulting from acid fumes released in the course of the insured's application of muriatic acid in the course of re-troweling a concrete floor T the Eighth Circuit ruled that the exclusion was ambiguous since, when applied properly, an acid would not commonly be understood as being a "liquid irritant or contaminant. 

  A federal court has ruled that TCA fumes were a chemical vapor, not "smoke" in USF&G v. First State Bank & Trust Co., No. 1:93 cv 0184 (E.D. Mo. October 7, 1996).
 

  PROPERTY DAMAGE

  Claims against a subdivision trustee for lost economic benefits due to the insured's refusal to allow the plaintiff to proceed with the construction of a hockey rink have been held not to allege a claim for "property damage." McDonough v. Liberty Mutual Ins. Co., No. 68245 (Mo. App. February 13, 1996).
 

  PUBLIC POLICY

  Under Missouri law, an insured is prohibited from insuring against the consequences of its intentional acts.  State Farm Fire & Casualty Company v. Caley, 936 S.W.2d 250, 251 (Mo. App. 1997).  
 

  PUNITIVE DAMAGES

  Punitive damages were held uninsurable in Heartland Stores, Inc. v. Royal Ins. Co., 815 S.W.2d 39 (Mo. App. 1991).  Similarly, the Court of Appeals has ruled that insurance should not be available for damages resulting from harm that is "consciously and deliberately done by the insured, knowing that they were wrong."  White v. Smith, 440 S.W.2d 497, 512 (Mo. App. 1969) and Crull v. Gleb, 382 S.W.2d 17, 21 (Mo. App. 1964).  The 8th Circuit has ruled that insurance policies do not provide coverage for punitive damages unless expressly stated otherwise.  Union L.P. Gas v. International Surplus Lines Ins. Co., 869 F.2d 1109 (8th Cir. 1989).  However, the 8th Circuit has found that the public policy of Missouri does not preclude coverage for harm for civil rights violations or other intentional acts per se.  New Madrid County v. Continental Cas. Co., 904 F.2d 1236 (8th Cir. 1990).
 

  STANDARDS FOR POLICY INTERPRETATION

  Words in an insurance policy are to be given their ordinary everyday meaning unless there is evidence that a technical meaning should apply.  Herpel v. Farmers Ins. Co., 795 S.W.2d 508, 510 (Mo. App. 1990) and Arbeitman v. Monumental Life Ins. Co., 878 S.W.2d 915, 916 (Mo. App. 1994).  Accordingly, unless the policy is ambiguous, its terms must be enforced as written.  U.S. Fire Ins. Co. v. Coleman, 754 S.W.2d 941, 944 (Mo. App. 1988).  However, ambiguous policy provisions will be construed against the insurer. Peters v. Employers Mut. Cas. Co., 853 S.W.2d 300, 302 (Mo. 1993).  A policy will be deemed ambiguous where there is "duplicity, indistinctness or uncertainty in meaning" such that a policy term is reasonably and fairly susceptible of different meanings.  Hempen v. State Farm Mut. Auto Ins. Co., 895 S.W.2d 205, 209 (Mo. App. 1995).

  Missouri will also consider the reasonable expectations of the insured in evaluating the scope of coverage.  The reasonable expectations doctrine may only be looked to where the insurance policy in question is ambiguous.  Killian v. St. Farm Fire & Casualty Co., 903 S.W.2d 215, 218 (Mo. App. 1995). 

  The Fifth Circuit, applying Missouri law, ruled in Eagle Leasing Corp. v. Hartford Fire Ins. Co., 540 F.2d 1257 (5th Cir. 1976) that ambiguous policy language should not be strictly construed in favor of coverage "when the insured is not an innocent but a corporation of immense size, carrying insurance with annual premiums in six figures, managed by sophisticated businessmen and represented by counsel on the same professional level as the counsel for insurers."  In ordinary situations, the doctrine of "reasonable expectations" will be applied, however.  Katz Drug Co. v. Commercial Standard Ins. Co., 647 S.W.2d 831 (Mo. App. 1983).

  Language in an insurance policy stating that coverage was precluded for injury caused by any insured precluded coverage notwithstanding a severability of interest clause stating that the interests of each insured were to be considered separately. American Family Mutual Insurance Company v. Moore, 912 S.W.2d 531 (Mo. Ct. App. 1995).  

  A court may reform a written contract if the party seeking reformation shows by clear and convincing evidence that a mistake was made that was both mutual and common to both parties and it must appear that both parties did what neither intended to do.  Kopff v. Economy Radiator, No 59586 (Mo. App., August 25, 1992) and Urban Expansion, Inc. v. Fireman's Fund Ins. Co., 592 S.W.2d 239, 242 (Mo. App. 1979).  However, a unilateral mistake does not justify reformation.  Sheinbein v. First Boston Corp., 670 S.W.2d 876, 876 (Mo. App. 1984).
 

  THEORIES OF ALTERNATIVE LIABILITY

  Missouri Supreme Court refused to adopt alternative theories for DES claims in Zaff v. Eli Lilly & Co., 676 S.W.2d 241, 246 (Mo. 1984), holding that plaintiffs must establish a causal relationship between the defendants and the injury-producing agent as a precondition to the maintenance of their causes of action. 
 

  TRIGGER OF COVERAGE

  Missouri follows the majority rule that coverage is triggered when the claimant sustains actual damage and not when the act or omission that caused such damage was committed. Dennis Cain Motor Co. v. Universal Underwriters Ins. Co., 614 S.W.2d 275 (Mo. App. 1981).  

  The Missouri Court of Appeals has stated that "bodily injury" and "occurrence" are "inherently ambiguous" when applied in the context of cumulative, progressive diseases.  In Continental Cas. Co. v. Medical Protective Co., 859 S.W.2d 789 (Mo. App. 1993), the court relied on INA v. 48 Insulations in using an "exposure" trigger to allocate defense costs among successive carriers in a medical malpractice case.

   The U.S. Court of Appeals for the 8th Circuit ruled in NEPACCO, 811 F.2d 1180 (8th Cir. 1987) that an "exposure" trigger should be applied for pollution claims.  An exposure trigger has also been adopted in two asbestos cases.  See Transamerica Ins. Co. v. General Gasket Corporation, St. Louis No. 894-00289 (Mo. Cir. Ct. June 6, 1994) and Standard Asbestos Mfg. & Insulating Co. v. Royal Indemnity Ins. Co., Jackson No. CV80-14909 (Mo. Cir. Ct. April 1986).  In general, although described as "exposure" cases, it appears that Missouri would follow an "injury in fact" trigger, looking to those policies in which harm actually occurs.
  Relying on this "actual injury" approach, the Eighth Circuit ruled in a construction case that an insurer had no obligation to afford coverage for a building collapse that occurred after its policy had expired, even though the collapse had been preceded by a series of problems during the policy period. In Morley-Simon, Inc. v. Michigan Mutual Ins. Co., 645 F.Supp. 596, 600 (E.D. Mo. 1986), aff'd 822 F.2d 1093 (8th Cir. 1987), the court ruled that there was no coverage for construction defects involving cracked walls, ceilings and floors, stress on water and gas lines and loosening of ducts that became apparent after the policy period, even though the construction work was performed by the insured during the policy period.

  A "first encounter" rule was adopted for sexual molestation claims in May v. Maryland Cas. Corp., 792 F.Supp. 63 (E.D. Mo. 1992).

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