United States Court of Appeals

For the Eighth Circuit

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No. 12-4012

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Chicago Insurance Company

lllllllllllllllllllll Plaintiff - Appellee

v.

Archdiocese of St. Louis; Robert J. Carlson, Archbishop

lllllllllllllllllllll Defendants - Appellants

Father Michael S. McGrath

lllllllllllllllllllll Defendant

------------------------------

Archdiocese of St. Louis; Robert J. Carlson

lllllllllllllllllllllCounter Claimants - Appellants

v.

Lloyd's London and London Companies

lllllllllllllllllllllCounter Defendant

____________

 Appeal from United States District Court 

for the Eastern District of Missouri - St. Louis

____________
 Submitted: September 24, 2013

 Filed: January 29, 2014

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Before WOLLMAN, BEAM, and SMITH, Circuit Judges.

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BEAM, Circuit Judge.

In this insurance coverage dispute, the Archdiocese of St. Louis and Archbishop

Robert J. Carlson (collectively, the "Archdiocese") appeal from the district court's1

grant of summary judgment in favor of their insurer, Chicago Insurance Company

("CIC"). Because the Archdiocese has failed to establish coverage, we affirm.

I. BACKGROUND

 On June 10, 2003, Allen Klump, the father of Christopher Klump, commenced

several claims against the Archdiocese in Missouri state court, premised on the theory

that a priest employed by the Archdiocese sexually molested Christopher, eventually

leading to Christopher's suicide. The Archdiocese moved to dismiss for failure to

state a claim, and the state trial court dismissed all but three claims against the

Archdiocese. Of the three claims that remained viable against the Archdiocese,

Count I ("the wrongful death claim") alleged that the Archdiocese "inappropriately,

recklessly and or intentionally placed young Christopher Klump in a knowingly

dangerous environment . . . which acts caused young Christopher Klump emotional

and psychological" harm and directly caused or contributed to Christopher's death. 

The remaining two claims alleged that the Archdiocese engaged in intentional

conduct. Subsequently, the parties entered into a settlement that released the

Archdiocese from any future liability associated with the alleged misconduct. After

1

The Honorable Carol E. Jackson, United States District Judge for the Eastern

District of Missouri. 

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paying Allen Klump the settlement amount, the Archdiocese turned to its insurers for

indemnification.

At times relevant to this dispute, the Archdiocese held excess liability insurance

policies with Certain Underwriters at Lloyd's London and The London Companies

("Lloyd's")2

 as a primary excess carrier and with CIC as a secondary excess carrier. 

The Lloyd's policy agreed "to indemnify the Assured for all sums which the Assured

shall be obligated to pay by reason of the liability imposed upon the Assured by law

or assumed by the Named Assured under contract or agreement . . . on account of

personal injuries . . . arising out of any occurrence." The CIC policy explicitly

incorporated the terms of the Lloyd's policy but contained additional language. 

Specifically, the CIC policy promised to indemnify the Archdiocese for an

enumerated amount of loss and defined the term "loss" as "the sums paid as damages

in settlement of a claim or in satisfaction of a judgment for which the insured is

legally liable." "Loss" also included "investigation, adjustment, defense or appeal

costs, and expenses, costs and expenses incident to any of the same."

CIC denied the Archdiocese's demand for coverage, and on June 23, 2009, CIC

commenced action against the Archdiocese in federal court, seeking a declaration that

its policy did not provide coverage for the underlying litigation. CIC then moved for

summary judgment. In resolving the coverage issue, the district court determined that

because the wrongful death claim in the underlying complaint alleged a form of

negligence against a religious organization, the Archdiocese could not be held legally

liable under current Missouri Supreme Court precedent. If the insured could not be

held legally liable, the court reasoned, the Archdiocese failed to establish that a

defined "loss" occurred. Further, because the remaining underlying claims against the

Archdiocese alleged intentional conduct, they did not fit within the policy's definition

2

The Archdiocese has voluntarily dismissed Lloyd's from this appeal.

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of "occurrences."3

 Accordingly, the district court concluded that CIC's policy did not

provide coverage for the underlying claims and granted the insurer's motion for

summary judgment. The Archdiocese now appeals.

II. DISCUSSION

In Gibson v. Brewer, the Supreme Court of Missouri concluded that

negligence-based actions against a religious organization that require a court to

evaluate the reasonableness of religious doctrine, policy and administration offend the

First Amendment and cannot be maintained. 952 S.W.2d 239, 249-50 (Mo. 1997). 

Our task on this appeal is to determine how Gibson impacts the present coverage

dispute in light of the specific policy language. We review de novo the district court's

interpretation of the policies at issue, as well as its ultimate grant of summary

judgment. Doe Run Res. Corp. v. Lexington Ins. Co., 719 F.3d 868, 870 (8th Cir.

2013). The parties agree that Missouri law applies to this diversity case.

We begin with the actual language of the policy, which agrees to indemnify the

Archdiocese for "sums paid as damages in settlement of a claim or in satisfaction of

a judgment for which the insured is legally liable." Although the policy does not

define the term "legally liable," it is generally understood that "[t]he term 'legal

liability,' as used in a policy of insurance, means a liability such as a court of

competent jurisdiction will recognize and enforce between parties litigant." Steven

Plitt et al., 7A Couch on Insurance § 103:14 (2013 rev. ed.). In a practical sense, the

term "legal liability" serves to limit the insuring clause as "the fact that a loss is

occasioned through the fault of the insured does not alone trigger the insurer's

liability." Id. Thus, "[a] common requirement is that the insured be legally liable for

the third party's claim before there is such a loss as the insurer is obligated to pay." 

3

The Archdiocese has not appealed the district court's judgment on the claims

involving intentional conduct.

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Id. Recognizing these general principles, long ago in Brinkman v. Western

Automobile Indemnity Assoc., the Missouri Court of Appeals held that to recover

under a pure indemnity policy, the insured must show "that he was legally liable to

[the injured claimant], and that the amount of the settlement he made and the other

items demanded are reasonable, and the burden is on him to so show." 218 S.W. 944,

946 (Mo. Ct. App. 1920). With this backdrop, we turn to the Archdiocese's

arguments.

 

Nearly all of the Archdiocese's arguments stem from one common claim of

error. That is, the district court erred, the Archdiocese asserts, by requiring it to

establish actual liability to trigger coverage. According to the Archdiocese, Missouri

law only requires that it show potential liability to trigger indemnification of its

settlement. Even if we assume that Missouri follows a potential liability standard–a

question we need not decide–under the unique circumstances of this case, the

Archdiocese is unable to show that it faced potential liability in the underlying action. 

The Missouri Court of Appeals has recognized that Missouri law "does not

require the insured, as a condition of reimbursement, to prove that it is ultimately

liable for the settled claims." Hyatt Corp. v. Occidental Fire & Cas. Co. of N.C., 801

S.W.2d 382, 388 (Mo. Ct. App. 1990). To the extent this statement indicates the

court's endorsement of the potential liability standard, the case provides little guidance

in the present dispute for two reasons. First, at the time the insured settled in Hyatt,

the claims pending against the insured "were not automatically precluded under

Missouri law." Id. at 389 (quotation omitted). Second, Hyatt involved a situation

where the insurer breached its duty to consider offers of settlement in good faith,

allowing the insured to bind the insurer to a reasonable settlement with the claimants. 

Id. at 388-89. Therefore, because Missouri courts have not specifically dealt with the

coverage issue under the circumstances we now confront, we turn to other

jurisdictions for guidance concerning the potential liability standard. Balke v. Cent.

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Mo. Elec. Coop., 966 S.W.2d 15, 22 (Mo. Ct. App. 1997) ("[W]e look to other

jurisdictions which have addressed this issue for guidance.").

In Luria Bros. & Co. v. Alliance Assurity Co., the Second Circuit explained the

potential liability standard: 

In order to recover the amount of the settlement from the insurer, the

insured need not establish actual liability to the party with whom it has

settled so long as . . . a potential liability on the facts known to the

[insured is] shown to exist, culminating in a settlement in an amount

reasonable in view of the size of possible recovery and degree of

probability of claimant's success against the [insured].

780 F.2d 1082, 1091 (2d Cir. 1986) (alterations in original) (internal quotation

omitted). Under this standard, "[i]f an insured settles an underlying claim prior to

verdict, it must show that it settled an otherwise covered loss in reasonable

anticipation of liability." Fed. Ins. Co. v. Binney & Smith, Inc., 913 N.E.2d 43, 48

(Ill. Ct. App. 2009) (internal quotation omitted). And, consistent with Luria Bros. and

Binney, the Missouri Court of Appeals has indicated that an insured contemplating

settlement should "take into consideration the likelihood of success or failure" on the

merits, among other factors. Hyatt, 801 S.W.2d at 389 (emphasis and internal

quotation omitted).

Here, even if we apply the standard the Archdiocese advocates, the Archdiocese

is unable to show that it settled "in reasonable anticipation of liability," Binney, 913

N.E.2d at 48, or "in an amount reasonable in view of the . . . degree of probability of

claimant's success against the [insured]," Luria Bros., 780 F.2d at 1091 (second

alteration in original). To be sure, the Supreme Court of Missouri in Gibson rejected

several negligence-based claims against a Catholic Diocese stemming from the alleged

sexual misconduct of a priest. 952 S.W.2d at 249-50. In rejecting the negligence

claims, the court opined that "[w]hether negligence exists in a particular situation

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depends on whether or not a reasonably prudent person would have anticipated danger

and provided against it. In order to determine how a 'reasonably prudent Diocese'

would act, a court would have to excessively entangle itself in religious doctrine,

policy, and administration." Id. (internal citation omitted). And, here, the Gibson rule

logically extends to the allegations of recklessness in the wrongful death claim. See

Nichols v. Bresnahan, 212 S.W.2d 570, 573 (Mo. 1948) (defining reckless conduct

to include "knowing or having reason to know of facts which would lead a reasonable

man to realize that the actor's conduct not only creates an unreasonable risk of bodily

harm to the other but also involves a high degree of probability that substantial harm

will result to him." (quotation omitted)); Hatch v. V.P. Fair Found., Inc., 990 S.W.2d

126, 139 (Mo. Ct. App. 1999) (highlighting that "[r]ecklessness is an aggravated form

of negligence," and "[i]t is applied to conduct which is negligent, rather than

intentional"). Based on Gibson's application of the First Amendment, the Archdiocese

has failed to show settlement was in reasonable anticipation of liability. Thus, the

Archdiocese did not "affirmatively establish that [it] was legally liable"–potentially

or otherwise–for the conduct alleged in the wrongful death claim, and we conclude the

Archdiocese is not entitled to indemnity coverage under CIC's policy. Brinkman, 218

S.W. at 946.4

 

Notwithstanding the Archdiocese's assertions to the contrary, we are aware of

no authority, and the Archdiocese cites none, that allows a settling insured to recover

under an indemnity policy where governing law does not permit the claimant's

4

The Archdiocese seems to suggest that, even in light of the Gibson decision,

it still faced potential liability because Gibson is a minority view that is subject to

possible reversal and changes in the law. Although Gibson has been challenged, we 

think the point is irrelevant as virtually every law is subject to possible change or

reconsideration at some unknown time. Ultimately, Gibson remained the law of

Missouri when the Archdiocese settled, see, e.g., Weaver v. African Methodist

Episcopal Church, Inc., 54 S.W.3d 575, 586 (Mo. Ct. App. 2001), and continues to

enjoy validity today, see, e.g., D.T. v. Catholic Diocese of Kansas City-St. Joseph,

No. WD 76025, 2013 WL 5979189, at *4-5 (Mo. Ct. App. Nov. 12, 2013). 

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underlying cause of action against the insured. Moreover, our conclusion harmonizes

with cases applying the potential liability standard and fits within the broader context

of Missouri's insurance coverage jurisprudence. Indeed, in Luria Bros., the court

made clear that even under a potential liability standard, governing law affecting the

settling insured's underlying liability remains significant for coverage purposes. 780

F.2d at 1091 (noting that while the insured generally owed no duty to claimants,

potential liability existed because an exception to the general rule may have applied

under the unique circumstances). Binney, too, examined whether governing law

provided the insured an absolute defense to the claims asserted in the underlying

action, ultimately concluding an absolute defense was not available to the insured. 

913 N.E.2d at 50, 52. While we agree with the Archdiocese that an insured must

evaluate several risks in contemplation of settlement, these cases applying the

potential liability standard also reveal that the insured must remain cognizant of the

underlying liability rules, which the Archdiocese failed to appreciate in this case.

And, when we move past the specific context of settlement, Missouri cases

confirm that if governing rules preclude the underlying action against the insured, the

insured is not entitled to coverage. See, e.g., Auto Owners (Mut.) Ins. Co. v. Sugar

Creek Mem'l Post No. 3976, 123 S.W.3d 183, 192 (Mo. Ct. App. 2003) (determining

that insured tavern not entitled to liability coverage because negligence claims alleged

against the insured not recognized under governing dram shop liability law); cf., e.g.,

Oates v. Safeco Ins. Co. of Am., 583 S.W.2d 713, 716 (Mo. 1979) (opining that to

recover uninsured motorist benefits, the insured must show the uninsured motorist is

legally liable, and a substantive limitation in the underlying tort action against such

motorist precludes recovery from insurer). We see no reason why Missouri would

apply a different rule in the settlement context. 

Next, the Archdiocese complains that the district court's ruling second-guesses

the state court's prior order concerning the Archdiocese's motion to dismiss. 

Essentially, the Archdiocese seems to believe that once the state court denied its

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motion to dismiss as to the wrongful death claim, the coverage issue was decided, and

the district court could not later determine that an underlying legal liability did not

exist for coverage purposes. In the words of the Archdiocese, "the [state] trial court

wore the robe that matters." The Archdiocese cites no authority for this proposition,

and the argument lacks merit. For one thing, when the state court evaluated the

motion to dismiss with regard to the wrongful death claim, it solely focused on

whether the complaint sufficiently alleged facts showing that the Archdiocese caused

Christopher to commit suicide. Indeed, the state court's order does not even mention

Gibson. For another thing, the wrongful death claim alleged both reckless and

intentional conduct–the intentional aspect of the claim remained viable even after

Gibson. See 952 S.W.2d at 248 ("Religious conduct intended or certain to cause harm

need not be tolerated under the First Amendment."). In the end, the district court did

not reevaluate the state court's judgment but merely considered an issue pertaining to

insurance coverage that had not been previously examined.5

Finally, for the first time in this litigation, the Archdiocese attempts to offer a

new construction for the policy's definition of "loss." The Archdiocese concedes it did

not raise this argument before the district court. Having failed to present this policy

construction argument to the district court, we decline to address it for the first time

5

Before the district court and on appeal, the Archdiocese primarily challenged

the district court's ruling concerning the wrongful death claim–a claim left viable by

the state trial court's dismissal order. In passing, however, the Archdiocese also

indicates that the several other claims the state trial court did dismiss may have

triggered coverage under a potential liability standard because the dismissals were

interlocutory and remained subject to reconsideration or appeal. The Archdiocese

does not offer any meaningful analysis on this point, nor does it parse each dismissed

claim and explain how it triggered specific coverage under the policy and potential

liability standard. We decline to undertake such a venture on their behalf. See Ulrich

v. Pope Cnty., 715 F.3d 1054, 1059 n.4 (8th Cir. 2013) (refusing to consider issue

where party did not provide "meaningful argument" separate from other issue). 

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on appeal. Stone Motor Co. v. Gen. Motors Corp., 400 F.3d 603, 608 n.2 (8th Cir.

2005).

III. CONCLUSION

We affirm the judgment of the district court.

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