In the Missouri Court of Appeals   Eastern District 

DIVISION THREE  DRURY COMPANY, ) No. ED100320   )  Respondent/Cross-Appellant, )   )  vs. )   ) MISSOURI UNITED SCHOOL ) INSURANCE COUNSEL, )   )  Appellant, )   ) Appeal from the Circuit Court of and  ) Cape Girardeau County   ) JACKSON R-2 SCHOOL DISTRICT, ) Honorable Benjamin F. Lewis   )  Cross-Respondent, )   ) and  )   ) WARNER-NEASE-BOST ) ARCHITECTS, INC., )   )  Defendant. ) Filed: March 25, 2014  

I. INTRODUCTION 

Missouri United School Insurance Counsel (“MUSIC”) appeals the judgment of the 

Circuit Court of Cape Girardeau County in favor of Drury Company (“Drury”) on its claims for 

breach of contract and vexatious refusal to pay pursuant to sections 375.296 and 375.420.1  

Drury’s claims arose out of its work as a subcontractor on a construction project for Jackson R-2 

 1 All statutory references are to RSMo 2000 as supplemented unless otherwise indicated. 

School District (the “School District”) and MUSIC’s denial of Drury’s claim under an insurance 

policy MUSIC issued to the School District. 

MUSIC argues the trial court erred in: (1) granting Drury’s motion for summary 

judgment because Drury’s loss is excluded from coverage under the policy; (2) granting 

summary judgment for Drury based on the “ensuing loss” clause in the policy’s faulty 

workmanship exclusion; (3) awarding damages, including attorneys’ fees, to Drury under the 

vexatious refusal to pay statutes; (4) denying MUSIC’s motion to dismiss Drury’s claims for lack 

of standing; and (5) denying MUSIC’s motion for continuance of the hearing on Drury’s motion 

for summary judgment until after substantive depositions were taken in the case.  Drury cross-

appeals, asserting the trial court erred in dismissing its claim against the School District for 

breach of contract.  We affirm. 

II. FACTUAL AND PROCEDURAL BACKGROUND 

The record reveals the following undisputed facts: In 2006, the School District entered 

into a contract (the “prime contract”) with general contractor Penzel Construction Company, Inc. 

(“Penzel”) for an addition to the School District’s high school campus.  The prime contract 

obligated the School District to purchase and maintain “property insurance written on a builder’s 

risk ‘all-risk’ or equivalent policy form” that “shall include interests of the Owner, the 

Contractor, Subcontractors and Sub-subcontractors in the Project.”   

Penzel and Drury entered into a subcontract, under which Drury was the subcontractor 

responsible for installing a cementitious roof deck known as Tectum as part of the School 

District’s construction project.  The prime contract between the School District and Penzel was 

incorporated by reference into the subcontract.   

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The School District obtained an insurance policy from MUSIC that provides “basic 

property coverages” as well as “special property coverages” including “automatic builder’s risk.”  

The policy states: “Where required by contract, this insurance shall include the interests of the 

Member [School District], the Contractor, all Subcontractors and Sub-subcontractors.”  The 

policy covers “all risks of direct physical loss . . . to the property covered from any external 

cause except as hereinafter excluded.”  The policy provides: “PERILS EXCLUDED: MUSIC 

does not cover loss due to . . . faulty workmanship or materials, unless loss by a peril not 

otherwise excluded in this Document ensues and then MUSIC shall be liable only for such 

ensuing loss.”   

In October 2007, Drury began installing the Tectum on the project’s roof.  Rain and other 

precipitation, including ice storms, occurred over the next several months, and the Tectum 

suffered moisture damage.  Drury submitted a claim to MUSIC under the School District’s 

policy for the damage to the Tectum.  MUSIC denied the claim on the basis that the damage was 

excluded from coverage under the faulty workmanship provision, among others. 

Drury filed a petition against multiple defendants.  In one count, Drury alleged that 

MUSIC breached the insurance contract by denying Drury’s claim.  In a second count against 

MUSIC, Drury asserted a vexatious refusal to pay claim under section 375.296 and sought 

statutory penalties, interest, and attorneys’ fees.  Drury also asserted a breach of contract claim 

against the School District, alleging the School District breached its obligation under the prime 

contract to obtain insurance protecting Drury’s interest in the project as a subcontractor.2 

                                                 2 In addition, Drury brought a negligence count against Warner-Nease-Bost Architects, Inc.  Drury dismissed this count without prejudice, and Warner-Nease-Bost Architects, Inc. is not a party to this appeal. 

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MUSIC moved to dismiss Drury’s two claims against it.  The School District filed a 

separate motion to dismiss Drury’s claim against the School District.  The trial court denied 

MUSIC’s motion to dismiss but granted the School District’s motion to dismiss. 

Drury moved for summary judgment on its claims against MUSIC.  MUSIC opposed the 

motion on the grounds that Drury was not an insured under the policy and even if it were, the 

claim was excluded under various provisions, including the faulty workmanship exclusion.  With 

regard to its faulty workmanship argument, MUSIC acknowledged that Drury attempted to 

protect the Tectum from the weather by covering it but claimed that Drury’s actions were 

inadequate.  MUSIC also asserted that both the project architect and the engineer MUSIC hired 

to investigate the claim determined that Drury’s faulty workmanship caused the loss.   

After MUSIC filed its response to the motion for summary judgment, Drury moved to 

strike MUSIC’s exhibits, which supported MUSIC’s faulty workmanship argument.  MUSIC 

responded by filing a motion requesting a continuance to conduct depositions if the court decided 

to strike MUSIC’s exhibits.  The trial court did not rule on either Drury’s motion to strike or 

MUSIC’s motion for a continuance. 

The trial court held a hearing on Drury’s motion for summary judgment and granted the 

motion.  The trial court found that the policy covered Drury’s interest in the project as a 

subcontractor based on the plain language of the policy.  The trial court also determined that the 

policy covered Drury’s loss, regardless of whether MUSIC’s assertion of faulty workmanship 

was true, because the covered peril of rain ensued.  The trial court awarded Drury actual 

damages, statutory damages for vexatious refusal to pay, interest, and attorneys’ fees.  MUSIC 

appeals, and Drury cross-appeals. 

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III. DISCUSSION 

A. MUSIC’s Appeal 

MUSIC asserts five points on appeal.  We address these points out of order for ease of 

analysis. 

1. Drury’s Standing to Bring Claims against MUSIC 

In its fourth point on appeal, MUSIC claims the trial court erred in denying its motion to 

dismiss Drury’s claims for breach of contract and vexatious refusal to pay.  In particular, MUSIC 

maintains that Drury did not have standing to bring these claims because Drury was not a co-

insured or third-party beneficiary under the policy.  We disagree. 

Whether Drury had standing to raise its breach of contract claim and accompanying 

vexatious refusal claim is a question of law that we review de novo.  Verni v. Cleveland 

Chiropractic Coll., 212 S.W.3d 150, 153 (Mo. banc 2007).  “Where a question of standing has 

been raised, this Court has a duty to resolve that question before reaching substantive issues.”  

Id.   

“Only parties to a contract and any third-party beneficiaries of a contract have standing to 

enforce that contract.”  Id.  “A third party beneficiary is one who is not privy to a contract or its 

consideration but who may nonetheless maintain a cause of action for breach of the contract.”  

L.A.C. ex rel. D.C. v. Ward Parkway Shopping Ctr. Co., L.P., 75 S.W.3d 247, 260 (Mo. banc 

2002) (quotation omitted).  “Only those third parties for whose primary benefit the parties 

contract may maintain an action.”  Id. (quotation omitted).  “It is not necessary for the parties to 

the contract to have as their ‘primary object’ the goal of benefiting the third parties, but only that 

the third parties be primary beneficiaries.”  Id. (quotation omitted).   

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“The intention of the parties is to be gleaned from the four corners of the contract, and if 

uncertain or ambiguous, from the circumstances surrounding its execution.”  Id. (quotation 

omitted).  “Third party beneficiary rights depend on, and are measured by, the terms of the 

contract between the promisor and the promisee.”  Id. (quotation omitted).  “Although it is not 

necessary that the third party beneficiary be named in the contract, the terms of the contract must 

express directly and clearly an intent to benefit an identifiable person or class.”  Id. (quotation 

omitted).   

Here, the policy the School District obtained from MUSIC provides: 

BASIC PROPERTY COVERAGES BUILDINGS & CONTENTS . . .  3. INTEREST AND PROPERTY COVERED: 

. . . g. Additions, renovations or new buildings in the course of construction are covered for the interests of the Member [School District] and, where required by contract, the interests of the Contractor, Subcontractors and Sub-subcontractors. 

. . . SPECIAL PROPERTY COVERAGES 1. AUTOMATIC BUILDER’S RISK: 

a. PROPERTY COVERED – MUSIC covers all materials, equipment and fixtures installed or to be installed, temporary structures that are used in connection with construction, and supplies or materials on site, in transit or in storage to be used in the construction or installation at a Member’s building project.  Where required by contract, this insurance shall include the interests of the Member, the Contractor, all Subcontractors and Sub-subcontractors.  This Document, however, does NOT cover any equipment, tools or machinery owned, leased, borrowed or rented by any contractor, subcontractor or any of its employees. 

 (emphasis added). 

The plain and unambiguous language of the policy clearly expresses an intent that the 

policy benefit an identifiable class of persons—subcontractors on construction projects—

provided the coverage is “required by contract.”  As a result, the policy covers such 

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subcontractors as third-party beneficiaries of the policy, even though the policy does not 

specifically name any individual subcontractors.  See id. (“it is not necessary that the third party 

beneficiary be named in the contract”) (quotation omitted).  The parties do not dispute that Drury 

was a subcontractor performing a portion of the work on the School District’s construction 

project.  Therefore, the policy covers Drury’s interests if “required by contract.” 

The prime contract between the School District and Penzel, which was incorporated by 

reference into the subcontract between Penzel and Drury, required the School District to obtain 

insurance that included the interests of subcontractors.  Specifically, the prime contract obligated 

the School District to purchase and maintain “property insurance written on a builder’s risk ‘all-

risk’ or equivalent policy form” that “shall include interests of the Owner, the Contractor, 

Subcontractors and Sub-subcontractors in the Project.”  (emphasis added).  The prime contract’s 

requirement that the School District’s policy cover subcontractors triggered the insurance 

policy’s coverage of all subcontractors, including Drury.  Thus, Drury is a third-party beneficiary 

of the policy and has standing to raise a breach of contract claim and corresponding vexatious 

refusal to pay claim against MUSIC. 

MUSIC argues that even if Drury is a third-party beneficiary of the policy, it is still 

uncertain whether Drury has standing under the vexatious refusal to pay statutes.  To support this 

argument, MUSIC relies solely on Desmond v. American Insurance Company, 786 S.W.2d 144 

(Mo. App. W.D. 1989).  Desmond is inapposite.  There, the court stated: “[T]he law in Missouri 

until this time was unclear both as to direct payment under a premises medical payment coverage 

provision of [a liability] insurance policy, or whether a third party beneficiary even had standing 

to assert a vexatious refusal claim pursuant to section 375.420 . . . under these circumstances.”  

786 S.W.2d at 148 (emphasis added).  “These circumstances” were an insurer’s payment to an 

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injured third party under a premises medical payment coverage provision of a liability insurance 

policy.  Id. at 145, 147.  Such circumstances are not present in this case, which concerns an 

insurer’s refusal to pay a subcontractor covered under a builder’s risk policy.  Moreover, the 

Desmond court did not address the standing issue because the insurer did not withhold payment 

to the injured party.  Id. at 148.   

The trial court did not err in denying MUSIC’s motion to dismiss Drury’s claims.  

MUSIC’s fourth point is denied. 

2. The Policy’s Coverage of Drury’s Loss 

We address MUSIC’s first and second points together because both concern the trial 

court’s determination that the policy covered Drury’s loss.  In its first point on appeal, MUSIC 

argues the trial court erred in granting Drury’s motion for summary judgment because Drury’s 

loss is excluded from coverage under the policy.  In its second point, MUSIC asserts the trial 

court erred in granting summary judgment for Drury because it erroneously interpreted and 

applied the “ensuing loss” clause in the faulty workmanship exclusion.  We disagree with both 

contentions. 

“Whether to grant summary judgment is an issue of law that this Court determines de 

novo.”  Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo. banc 2007).  “The interpretation 

of an insurance policy is a question of law that this Court also determines de novo.”  Id.  

“In interpreting an insurance contract, we must keep in mind that insurance policies are 

contracts; thus, the rules of contract construction apply.”  Doe Run Res. Corp. v. Certain 

Underwriters at Lloyd’s London, 400 S.W.3d 463, 474 (Mo. App. E.D. 2013).  “The words of a 

policy must be given their plain and ordinary meaning consistent with the reasonable expectation 

and objectives of the parties, unless it is obvious that a technical meaning was intended.”  Id.  

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“We read insurance policies as a whole to determine the parties’ intent, and give effect to this 

intent by enforcing the contract as written.”  Id.  “We must endeavor to give each provision a 

reasonable meaning and to avoid an interpretation that renders some provisions useless or 

redundant.”  Id.  

Here, the basic property coverage section of the policy states: “PERILS COVERED: 

MUSIC provides coverage against all risks of direct physical loss . . . to the property covered 

from any external cause except as hereinafter excluded.”  The builder’s risk section of the policy 

provides more specifically: “MUSIC covers all materials, equipment and fixtures installed or to 

be installed, temporary structures that are used in connection with construction, and supplies or 

materials on site, in transit or in storage to be used in the construction or installation at a 

Member’s building project.”  In addition, the builder’s risk section states: “The perils covered are 

extended beyond those previously defined by including loss by rain, snow, sleet, sand or dust to 

covered property in the open.”   

The Tectum was “covered property” because it was a material “installed or to be 

installed” at the School District’s building project.  The Tectum was also “in the open” on the 

project’s roof.  Drury asserted in its statement of material facts that there were “several 

significant precipitation events” that winter, including “rain, snow, sleet and ice,” and that the 

Tectum sustained damage as a result of the weather.  MUSIC admitted that “weather conditions 

were wet that winter” and that “ice storms and winds” occurred.  Under the plain language of the 

policy, the damage to the Tectum resulting from “rain, snow, [or] sleet” is covered. 

MUSIC argues that all-risk policies do not cover losses that are not fortuitous and that 

Drury’s loss was not fortuitous.  MUSIC correctly notes that “[u]nder an all-risk insurance 

policy, recovery will be allowed for all fortuitous losses, unless the policy contains a specific 

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provision expressly excluding the loss from coverage.”  Black & Veatch Corp. v. Wellington 

Syndicate, 302 S.W.3d 114, 123 (Mo. App. W.D. 2009) (emphasis added) (quoting Missouri 

Commercial Inv. Co. v. Employers Mut. Cas. Co., 680 S.W.2d 397, 400 (Mo. App. E.D. 1984)).  

However, we find distinguishable the federal case MUSIC primarily relies on to support its 

argument that Drury’s loss was not fortuitous: University of Cincinnati v. Arkwright Mutual 

Insurance Company, 51 F.3d 1277 (6th Cir. 1995).  There, the Sixth Circuit, applying Ohio law, 

held that the insured’s loss was not fortuitous because the insured undertook “deliberate damage-

inducing actions with known consequences” when it made a business decision to remove 

asbestos from a building.  51 F.3d at 1282, 1284.  Here, by contrast, MUSIC acknowledges that 

Drury attempted to protect the Tectum from the weather but claims that Drury’s actions were 

inadequate.  Unlike in University of Cincinnati, MUSIC does not allege that Drury undertook 

deliberate damage-inducing actions. 

MUSIC also contends that the policy’s faulty workmanship provision expressly excludes 

Drury’s loss from coverage.3  That provision states: “PERILS EXCLUDED: MUSIC does not 

cover loss due to . . . faulty workmanship or materials, unless loss by a peril not otherwise 

excluded in this Document ensues and then MUSIC shall be liable only for such ensuing loss.”  

(emphasis added).  As discussed above, the covered peril of “loss by rain, snow, [or] sleet” 

ensued.  Because Drury sustained an ensuing loss from the precipitation, MUSIC is liable for 

that ensuing loss under the plain language of the policy regardless of whether Drury’s 

workmanship was faulty. 

                                                 3 Additionally, MUSIC maintains that Drury’s loss fell under the policy’s exclusions for “deterioration,” “processing or work upon the property,” and “wet or dry rot.”  However, we decline to consider these arguments because MUSIC fails to develop them beyond conclusory statements.  “[A] contention that is not supported with argument beyond conclusions is considered abandoned.”  Goudeaux v. Bd. of Police Comm’rs of Kansas City, 409 S.W.3d 508, 522 n.18 (Mo. App. W.D. 2013) (quotation omitted). 

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MUSIC maintains that the “ensuing loss” language is subordinate to and dependent on 

the faulty workmanship exclusion and should not be interpreted to abrogate the exclusion.  To 

support this contention, MUSIC cites cases from other jurisdictions including TMW Enterprises, 

Inc. v. Federal Insurance Company, 619 F.3d 574 (6th Cir. 2010), a federal diversity case 

governed by Michigan law.  However, we do not find TMW persuasive because MUSIC is 

essentially urging us to rewrite the policy, which Missouri law does not permit us to do.  See 

Jones v. Mid-Century Ins. Co., 287 S.W.3d 687, 691 (Mo. banc 2009).  With regard to the other 

cases MUSIC cites, we find them distinguishable because they concern different legal issues and 

policy language or involve other states’ legal principles that do not bind us.  See, e.g., BSI 

Constructors, Inc. v. Hartford Fire Ins. Co., 705 F.3d 330, 334 (8th Cir. 2013) (applying 

Missouri law, court considered whether an ensuing loss provision was ambiguous); Friedberg v. 

Chubb & Son, Inc., 691 F.3d 948, 953 (8th Cir. 2012) (stating that under Minnesota law, ensuing 

loss provisions apply “only to distinct, separable, ensuing losses”) (quotation omitted). 

Moreover, we note that another exclusion in MUSIC’s policy clearly accomplishes the 

result MUSIC seeks for the faulty workmanship exclusion.  The policy states that the terrorism 

exclusion “applies regardless of any other cause or event that in any way contributes 

concurrently or in sequence to the loss . . . .”  (emphasis added).  Had MUSIC intended the faulty 

workmanship exclusion to apply regardless of any other cause of damage such as rain, it could 

have drafted the exclusion in that way. 

“When insurance contracts are unambiguous, they will be enforced as written absent a 

public policy to the contrary.”  Steele v. Shelter Mut. Ins. Co., 400 S.W.3d 295, 298 (Mo. banc 

2013).  MUSIC does not argue that the insurance contract is ambiguous or that public policy 

compels us to ignore its plain language.  Accordingly, we enforce the policy as written and hold 

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that the trial court did not err in granting summary judgment for Drury on the basis that the 

policy covered Drury’s loss.  MUSIC’s first and second points are denied. 

3. Vexatious Refusal to Pay 

In its third point on appeal, MUSIC asserts the trial court erred in awarding damages, 

including attorneys’ fees, to Drury under the vexatious refusal to pay statutes.  MUSIC alleges 

that Drury lacked standing to bring its vexatious refusal claim, which is an argument we disposed 

of in our discussion of point four above and need not address further.  MUSIC also contends that 

it had a reasonable basis to believe and did believe there was no coverage under the policy and it 

had a meritorious defense to Drury’s claim.  We disagree. 

“Sections 375.296 and 375.420 allow penalties to be assessed against an insurer when it 

refuses to make payment, upon demand and in accordance with the policy, vexatiously, willfully 

and without reasonable cause.”  Legg v. Certain Underwriters at Lloyd’s of London, 18 S.W.3d 

379, 387 (Mo. App. W.D. 1999).  The provisions in section 375.420 for attorneys’ fees and a ten 

to twenty percent penalty “obviously aim to make the contracting party whole in a practical 

sense and to provide an incentive for insurance companies to pay legitimate claims without 

litigation.”  Overcast v. Billings Mut. Ins. Co., 11 S.W.3d 62, 67 (Mo. banc 2000). 

“[A]n insurer is permitted to question or contest its liability if it has reasonable cause to 

believe, and does believe, that it has no liability under the policy and that it has a meritorious 

defense.”  Legg, 18 S.W.3d at 387 (quotation omitted).  Thus, “where there is an open question 

of law or fact relating to a claim under an insurance policy, the insurer may insist upon a judicial 

determination of those questions without being penalized for vexatious refusal to pay.”  Id.  “The 

test for a vexatious refusal claim is not the final resolution of the coverage issues but how willful 

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and unreasonable the insurer’s refusal was as the facts appeared to a reasonable and prudent 

person at the time the insurer was asked for coverage.”  Id. (quotation omitted). 

“Generally, a question of reasonableness is a question of fact for the jury rather than a 

question of law for the court.”  Watters v. Travel Guard Int’l, 136 S.W.3d 100, 109 (Mo. App. 

E.D. 2004).  “But, the question of reasonableness can be determined as a matter of law based 

upon undisputed facts.”  Id.  “This is so because a question of fact exists only when fair-minded 

people, exercising reasonable judgment, could reach different conclusions on the issue in 

controversy.”  Id. (quotation omitted).  “When reasonable minds could not differ, summary 

judgment is properly granted.”  Id.  “Summary judgment has been found proper in other cases 

involving a vexatious-refusal-to-pay claim.”  Id.   

MUSIC argues it had a reasonable basis to believe the policy did not cover Drury’s loss 

because both the project architect and the engineer MUSIC hired to investigate the claim 

determined that Drury’s faulty workmanship caused the loss.  However, there is no evidence in 

the record that MUSIC’s review of the claim involved consideration of the full text of the faulty 

workmanship exclusion, which provides coverage irrespective of workmanship when a covered 

peril ensues.  Instead, from the record it appears that MUSIC focused its review of the claim on 

gathering evidence that Drury’s workmanship was faulty.  In its letter denying Drury’s claim, 

MUSIC quoted the faulty workmanship exclusion in full but provided no explanation for why the 

exclusion would apply despite the ensuing loss language.4  Given MUSIC’s failure to consider 

the plain language of its policy, it did not have a reasonable basis to believe it had no liability.  

See McCarty v. United Ins. Co., 259 S.W.2d 91, 93-94 (Mo. App. 1953) (affirming vexatious 

                                                 4 MUSIC’s denial letter does not mention its argument on appeal that Drury was not a co-insured or third-party beneficiary under the policy. 

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refusal award where the insurer maintained that the claim fell within an exclusion despite the 

policy’s clear language affording coverage). 

MUSIC also maintains that the coverage issue involved an open question of law that it 

was entitled to litigate without being penalized for vexatious refusal to pay.  MUSIC bases this 

contention solely on Drury’s statement in support of its motion for summary judgment that “one 

must look outside Missouri” for cases discussing “the detailed workings of ‘all-risk’ insurance.”  

But here, the plain language of the policy, which MUSIC does not claim is ambiguous, requires 

coverage.  MUSIC does not explain why this court would need to examine cases discussing “the 

detailed workings of ‘all-risk’ insurance” to dispose of the coverage issue presented here. 

The trial court did not err in awarding damages to Drury for vexatious refusal to pay.  

MUSIC’s third point is denied. 

4. MUSIC’s Motion for Continuance 

In its fifth point on appeal, MUSIC argues the trial court erred in denying its motion for 

continuance of the hearing and ruling on Drury’s motion for summary judgment until after 

substantive depositions were taken in the case.  After MUSIC filed its response to Drury’s 

motion for summary judgment, Drury moved to strike MUSIC’s exhibits, which supported 

MUSIC’s allegation that the workmanship was faulty.  MUSIC responded by filing a motion 

requesting a continuance to conduct depositions if the court decided to strike its exhibits.  It 

appears from the record that the trial court did not rule on either Drury’s motion to strike or 

MUSIC’s motion for a continuance.  In any event, because we have affirmed the trial court’s 

determination that MUSIC is liable for Drury’s loss regardless of whether the workmanship was 

faulty, MUSIC’s fifth point is denied as moot. 

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B. Drury’s Cross-Appeal 

In its sole point on cross-appeal, Drury asserts the trial court erred in dismissing its 

breach of contract claim against the School District.  In that claim, Drury alleged that the School 

District breached its obligation under the prime contract with Penzel to obtain builder’s risk 

insurance protecting Drury’s interest in the project as a subcontractor.  Drury acknowledges that 

this point is moot if we affirm the judgment against MUSIC.  Given our disposition of MUSIC’s 

appeal, we deny Drury’s sole point on cross-appeal as moot. 

IV. CONCLUSION 

The judgment of the trial court is affirmed. 

______________________________ Angela Quigless, Judge 

 Mary K. Hoff, P.J., and  Kurt S. Odenwald, J., Concurs.   

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