Filed 2/1/16 The Doe Run Resources Corp. v. The Fidelity & Casualty Co. CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication

or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

THE DOE RUN RESOURCES 

CORPORATION,

 Plaintiff and Appellant,

v.

THE FIDELITY & CASUALTY 

COMPANY OF NEW YORK,

 Defendant and Respondent.

 G050689

 (Super. Ct. No. 30-2008-00180034)

 O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, Robert J. 

Moss, Judge. Affirmed.

Abelson Herron Halpern, Marc D. Halpern and Heather L. Mayer for 

Plaintiff and Appellant.

Troutman Sanders, Thomas H. Prouty; Troutman Sanders, John R. Gerstein 

and Patrick F. Hofer for Defendant and Respondent.
2

I. INTRODUCTION

In the early 1980’s, California’s Irvine-based Fluor Corporation (Fluor) 

acquired Missouri-based St. Joe Minerals Company (St. Joe). As a result of that 

acquisition, insurance coverage disputes arising out of St. Joe’s mining operations in 

Missouri have, like comets, visited this court once a decade since the 1990’s.1 This third 

arrival, concerns a dispute over whether St. Joe – now known as the Doe Run Resources 

Corporation2 – was obligated to obtain the consent of one of its 1970’s excess insurers, 

Fidelity & Casualty of New York,3 before settling a Missouri environmental pollution 

class action suit for $55 million. As with the last time St. Joe was in this court, we find 

ourselves in the position of having to make our best guess as to how the Missouri 

Supreme Court would decide the matter before us. (See St. Joe II, supra, at fn. 3.) This 

time, however, we have the advantage of direct guidance on the question from the 

Missouri Supreme Court itself, by way of Johnston v. Sweany (Mo. 2002) 68 S.W.3d 

398. 

As we explain below, Johnston v. Sweany is dispositive of this case. In 

fine, the Missouri Supreme Court said the holder of a liability policy cannot present to a 

liability insurer a fait accompli in the form of a done-deal settlement of a case in 

 

1 The first one was at the end of the decade, St. Joe Minerals Corp. v. Zurich Ins. Co. (Sept. 29, 

1999, G018280) [nonpub. opn.] (St. Joe I). St. Joe I didn’t address the coverage issue directly, because it held that a 

summary adjudication that a primary liability insurer had a duty to defend various administrative proceedings 

initiated by the federal Environmental Protection Agency, without a corresponding order requiring some sort of 

payment of money, was not appealable under California’s one final judgment rule or the collateral matter exception 

to it. (See Ca Ct. App. Declines to Hear A “Fraction” of an Insurer’s Appeal Duty to Defend (1999) 9 Andrews Ins. 

Coverage Litig. Rep. 857.)

Then came St. Joe Minerals Corp. v. Zurich Ins. Co. (Feb. 22, 2002, G025002) [nonpub. opn.] (St. 

Joe II). By the time St. Joe II was decided, the trial court had made an order requiring actual payments pursuant to 

the primary insurer’s duty to defend, so St. Joe II directly addressed the issue not addressed in St. Joe I, namely 

whether administrative actions qualified as “suits” against an insured for purposes of the duty to defend. Our high 

court, in Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857 (Foster-Gardner) had said no, 

and most of St. Joe II was taken up with explaining why we thought the Missouri Supreme Court would be 

persuaded by the reasoning in Foster-Gardner.

2 We will generally refer to the plaintiff as “Doe Run” except where the context requires reference 

to its former name. 

3 Fidelity & Casualty of New York has since been acquired by Continental Insurance Company. 

The parties refer to the defendant entity as “F&C,” and we will follow suit. 
3

contravention of an insurance policy’s consent clause. Doing so forecloses the liability 

insurer from the “opportunity” of disputing the amount of damages. That is, under 

Missouri law, sufficient prejudice by itself. (Id. at p. 402.) Accordingly, we affirm the 

trial court’s judgment dismissing Doe Run’s action for declaratory relief against F&C.

II. FACTS

In 2001, residents of Herculaneum, Missouri filed a suit against Fluor and 

Doe Run alleging environmental damages from St. Joe’s lead and cadmium smelting in 

the late 1970’s. This suit is known in the record as the “Doyle action.” The Doyle action 

appears to have been quiescent for a good portion of the 2000’s, but by 2010 had been 

certified as a class action with trial scheduled to begin on October 11, 2011. Zurich 

Insurance Company had been St. Joe’s primary liability insurer from the early 1950’s 

through the mid-1980’s. By the fall of 2011, it was providing a defense of the action, 

albeit under a reservation of rights. Thus it was unclear, from Doe Run’s vantage point,

whether or how much coverage Zurich might provide to fund any settlement of the 

action, and thus whether any excess insurance would be triggered. For its part, Doe Run 

had notified F&C of the Doyle action back in 2001, but as excess insurer, F&C was not 

participating in its defense.

On September 1, 2011, coverage counsel for Doe Run wrote coverage 

counsel for F&C to update F&C on the status of the Doyle action. Preparatory to trial, a 

mediation had been scheduled for Tuesday, September 6 – five days from the date of 

letter.4 The letter was decidedly equivocal about whether the mediation might result in a 

settlement, or, if it did, whether any settlement of the Doyle action would involve 

invading F&C’s excess coverage. The letter did say that if a settlement involved excess 

coverage, Doe Run would “look to” F&C’s policies for it. But that was it as far as any 

warning to F&C was concerned. So the communication could be regarded as equivocal. 

 

4 The letter was sent both regular mail and via email, on Thursday, September 1, 2011, at 5:17 p.m. 

Pacific time.
4

We reproduce all seven paragraphs of it in the margin.5 We may also note that the letter 

set out no figures, probabilities, or theories that might have allowed F&C to gauge 

anything about (1) Doe Run’s probable exposure to the Doyle plaintiffs or (2) F&C’s 

exposure to a claim for coverage in excess of what Zurich might provide. Rather the 

 

5 We italicize portions of the letter emphasizing the uncertainty of whether F&C’s excess coverage 

might be needed:

“As you know, we are coverage counsel for The Doe Run Resources corporation (formerly St. Joe 

Minerals Corporation, formerly St. Joseph Lead Company) (“Doe Run”). Your client CNA issued liability coverage 

for Doe Run including, but not limited to, The Fidelity & Casualty Company of New York excess policy no. 

LX1218608. Since our clients are both involved in a litigation in other matters (though not in adverse position at the 

moment), out of caution we are providing this communication to CNA thru you as their counsel. In the event a 

direct communication is appropriate, please let us know who we should address going forward, and in the meantime 

please forward this email to the appropriate recipient(s).

“We write to provide an update regarding the case captioned James Doyle et al. v. The Doe Run 

Resources Corporation et al., Case No. 012-8641, City of St. Louis Circuit Court, Missouri. Materials and 

information regarding the case previously have been provided. In synopsis, Doyle is a damage and injury class 

action against Doe Run and other defendants, filed on or about July 9, 2001, concerning a class of former and 

current property owners in the vicinity of Doe Run’s long-operating lead smelter in Herculaneum, Missouri. The 

Doyle case is prosecuted by a counsel group led by the Gray, Ritter & Graham firm. The Doyle class has been 

certified and noticed, and plaintiffs contend there are over 400 class members. Trial currently is scheduled for 5 

weeks starting October 11, 2011, before Judge Van Amburg. A pre-trial conference is scheduled for October 3, 

2011.

“Doe Run’s defense in the case has been conducted continuously by the law firm Lewis, Rice & 

Fingersh, with Andrew Rothschild as the lead defense counsel. Full coverage for the defense has been provided by 

Doe Run’s primary CGL insurer Zurich Insurance Company (now Zurich-American Insurance Company), who 

issued Doe Run’s primary coverage from at least 1952 to 1985. It is Doe Run’s understanding that another primary 

insurer, Hartford Accident & Indemnity Company, who issued policies providing coverage for Doe Run from 

approximately 1985 to 1987, also has been contributing to the defense coverage thru payments to Zurich.

“An initial pre-trial mediation was conducted between plaintiffs and Doe Run on August 2nd and 

3rd, 2011, but with limited progress toward any resolution. The parties have agreed to conduct a further mediation 

on September 6th. At this time it is impossible to determine whether the parties will be able to achieve settlement. It 

is also unknown whether Doe Run’s part of any such settlement would penetrate the excess layers of coverage, 

requiring funding from CNA under the above-mentioned policy. Doe Run has requested Zurich’s position regarding 

the amount of coverage available to fund settlement under the primary policies, but has not yet received a 

determination. In the meantime, Doe Run has advised Zurich that if Zurich comes to believe that excess insurance 

may need to be involved, as the defendant primary insurer it should apprise those excess insurers of the 

circumstances and its position.

“Since the further mediation is scheduled for this Tuesday, September 6th, and Doe Run still 

awaits coverage guidance from Zurich, in an abundance of caution and as a courtesy we are providing this status 

report. Zurich has considerable information about the lawsuit, including copies of all the pleadings and discovery. 

Should you require any further information about the Doyle lawsuit at this time, please feel free to obtain that 

information from Zurich with our permission. The lead claims handler is Brad Rausa, brad.rausa@zurichna.com.

“In the event that a settlement is achieved and Zurich contends that Doe Run’s portion of the 

settlement exhausts applicable coverage under the primary policies, Doe Run will look to CNA’s applicable policies 

for coverage (possibly including, but not limited to, the Fidelity policy number referenced above, but of course not 

including other policies unavailable pursuant to the parties’ prior settlement). This will also be the case in the 

event of any adverse judgment against Doe Run, should the Doyle litigation not settle.

“Thank you for your attention to this matter, and please do not hesitate to contact me with any 

questions.” (Italics added.)
5

letter attempted to require the primary insurer Zurich to tell F&C if excess coverage 

would be needed.

The mediation of September 6 was a long one, and was still going the next 

day. Twenty minutes after midnight on September 7, Doe Run agreed to settle with the 

Doyle plaintiffs for an aggregate total of $55 million. The settlement was handwritten on 

a piece of paper, which contained a three-day rescission option for both plaintiffs and 

defendant: The settlement was “subject to” the approval of both Doe Run’s CEO and the 

class action representatives. Those two sets of parties – but no others – would have until 

Friday, September 7, to approve the settlement. The settlement contained no provision 

for input of any kind from either the primary insurer Zurich or excess insurer F&C.

The record indicates that Doe Run did not tell F&C about the settlement 

until October 5, 2011, and only then in response to a status inquiry from F&C. On 

September 28, 2011, a Midwestern administrator for CNA pollution claims wrote Doe 

Run’s coverage counsel about the Doyle case on F&C’s behalf. It is clear from that letter 

the administrator had no idea the case had already settled. The point of the letter was: 

(our paraphrase) “please tell us what’s going on,” or, as the letter put it, “As noted 

previously, Continental has received very little information from Doe Run about Doyle.” 

The administrator was apparently under the impression that Doe Run would not be 

seeking any indemnity from F&C. The administrator also included, at the end, a long list 

of (boilerplate) reasons why F&C might deny all coverage arising out of the Doyle

litigation.6 

F&C’s letter drew an email response from Doe Run’s coverage counsel 

sent at 7:08 p.m. on October 5 to the administrator. The short missive promised a further 

 

6 In ACL Technologies, Inc. v. Northbrook Property & Casualty Ins. Co. (1993) 17 Cal.App.4th 

1773, 1777 (ACL), this court observed that liability insurance coverage issues concerning pollution claims had 

“sparked a legal war that has raged in both federal and state courts from Maine to California.” It is not surprising, 

then, that a liability insurer like F&C might assert reasons to deny indemnification for liability for environmental 

pollution beyond a policy’s cooperation clause. 
6

response, and, almost as an afterthought, mentioned the little detail that the case had 

settled.7

Despite promising a further response and saying F&C would be hearing 

from Doe Run’s coverage counsel soon, Doe Run did not contact F&C at all for more 

than four months. Indeed, the next contact wasn’t really a contact at all – it was this 

lawsuit. Doe Run had filed an action against its primary insurer, Zurich, regarding the 

Doyle action; contacting F&C was a matter of adding F&C to the existing complaint. 

A summary judgment motion was brought by F&C and heard in June 2014 

based on the undisputed fact Doe Run had never asked for F&C’s consent concerning the 

September 7, 2011 settlement of the Doyle action. Doe Run admitted it never asked F&C 

for consent. The trial judge granted the motion, resulting in the judgment that is the 

subject of this appeal. 

III. DISCUSSION

A. The Consent Clause

Back in the late 1970’s, F&C wrote a policy of excess liability insurance 

(policy LX 1 21 86 08) to cover the period from February 1976 to February 1979. The 

insuring clause says “Policy Coverage [¶] to indemnify the insured for ultimate net loss 

which the insured shall become legally obligated to pay as damages, in excess of the 

applicable underlying or retained limit, because of: [¶] (a) Personal Injury [¶] (b) 

Property Damage [¶] (c) Advertising [¶] arising out of an occurrence.” The phrase 

ultimate net loss as used in the insuring clause is, on the same page, defined as “the sum 

actually paid or payable in cash in the settlement or satisfaction of losses for which the 

Insured is liable either by adjudication or compromise with the written consent of the 

 

7 Here is the entirety of the substantive portion of the October 5, 2011 email: “Thanks for the letter. 

We are putting together a response, but have been underwater for the past few days. I expect you will be hearing 

from us soon (including some of the requested information). In the meantime all rights reserved regarding the 

substantive points in your letter, but wanted to make sure you knew that the case has settled, so the trial next week is 

off-calendar.”
7

company, after making proper deduction for all recoveries and salvages collectible, but 

excludes all loss expenses and legal expenses including attorney’s fees, court costs and 

interest on any judgment or award and all salaries of employees and office expenses of 

the insured, the company or any underlying insurer so incurred. This policy shall not 

apply to defense, investigation, settlement or legal expenses covered by underlying 

insurance.”

Structurally, the requirement of the insurer’s consent is part of the 

definition of terms within the policy’s insuring clause, as distinct from constituting an 

exclusion from coverage otherwise afforded. That point makes a difference in litigation. 

It is the insured who has the initial burden of showing whether a claim is within the 

insuring clause. Then it is the insurer who must bear the burden of showing that an 

exclusion applies to remove the coverage that would otherwise exist. That is the rule not 

only in California (Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1185-1186 

[insured bears burden of showing claim is within insuring clause, insurer bears burden of 

showing pollution exception to that coverage otherwise applies]) but also in Missouri 

(Clarinet, LLC v. Essex Ins. Co. (E.D. Mo. 2012) 2012 U.S.Dist. LEXIS 7300

(Clarinet)).

B. Missouri Law and Consent Clauses

The determinative case here, Johnston v. Sweany, supra, 68 S.W.3d 398 

involved a case where the policyholder of a liability policy settled without asking for his 

insurer’s consent, and, as a result, there was no coverage. The facts were these: The 

policyholder, a contractor, did some repair work on a home. Three days later, a fire 

occurred at the home. The homeowners sued the policyholder. The policyholder did not 

tell his liability insurer about the litigation, and “eventually” signed a confession of 

judgment without telling the insurance company. A final judgment based on the 

confession was then entered in favor of the homeowners. (Id. at p. 400.) The 

homeowners then sued the insurance company seeking to enforce the judgment against 
8

the tortfeasor’s insurer, and the company successfully sought summary judgment based 

on the policyholder’s failure to comply with various cooperation clause conditions in his 

liability policy, including this consent clause: “No insureds will, except at their own cost, 

voluntarily make a payment, assume any obligation, or incur any expense, other than for 

first aid, without our consent.” (Id. at pp. 400-401.)

The Johnston v. Sweany court first noted that policy conditions requiring 

notice to the insurer and forwarding of suit papers as soon as practicable are “valid and 

enforceable” in Missouri. (Johnston v. Sweany, supra, 68 S.W.3d at p. 401.) The court 

added that while “ordinarily” the burden of showing compliance with the provisions of 

the policy is on the insured, if the question is whether the insurer “seeks to escape 

coverage solely” because of the insured’s breach of a cooperation provision, the burden is 

then “upon the insurer to prove facts that would make that provision relieve the insurer 

from liability.” (Ibid.)

With that in mind, the Johnston v. Sweany court recounted the evidence 

showing the policyholder never made a claim on his policy and provided no notice of the 

underlying action to his insurer. The only notice of the homeowners’ loss was provided 

by the policyholder’s own agent filing a general liability loss notice. Moreover, it turned 

out the policyholder told the insurer that even the agent’s notice was a mistake: he didn’t 

want to make a claim on the policy because the actual work on the home was done by 

another company of the policyholder. (Johnston v. Sweany, supra, 68 S.W.3d at p. 402.) 

A key fact noted by the high court: The insurer demonstrated on the 

motion for summary judgment that the policyholder “concurred in the confession of 

judgment assuming liability for the [homeowners’] loss without notifying [the insurer] or 

obtaining its consent.” (Johnston v. Sweany, supra, 68 S.W.3d at p. 401.) 

The court summarized the evidence on the summary judgment motion with 

the observation that the policyholder “did not comply with the provisions” of the policy 

(Johnston v. Sweany, supra, 68 S.W.3d at p. 402). The court then turned its attention to 
9

the question of whether the insurer had shown “it ha[d] been prejudiced by the insured’s 

non-compliance with such policy provisions” (ibid.). It said, “In this case, when 

Assurance first learned of the Johnstons’ lawsuit, it was presented with a ‘fait accompli.’ 

Sweany, its insured, had already signed a confession of judgment accepting liability on 

behalf of all defendants in the Johnstons’ lawsuit for the fire at the Johnstons’ home. 

Sweany’s failure to notify Assurance of the suit and forward all legal papers to 

Assurance, in addition to his failure to obtain Assurance’s consent before voluntarily 

assuming liability on behalf of all defendants, denied Assurance the opportunity to 

protect its interests. Specifically, Sweany’s failure to comply with these policy 

provisions denied Assurance the opportunity to investigate the facts applicable to the 

subject of the lawsuit, to settle the dispute before trial, to defend against liability at trial, 

and to dispute the amount of damages.” (Ibid., italics added.) The court held there was 

no insurance coverage available to satisfy the homeowners’ negligence claim against the 

policyholder-contractor.

To be sure, as Doe Run now stresses, the policyholder in Johnston v. 

Sweany did not comply with the policy’s cooperation provisions in several more ways 

than just not seeking the insurance company’s consent for the amount of settlement. But

those additional malfeasances do not vitiate the fact that court considered one of them –

the violation of the consent clause – to be sufficient to terminate coverage. 

It is revealing what the Johnston v. Sweany court did not do in regard to the 

insurer’s need to show prejudice. The opinion does not, for example, say that the insurer 

had to present evidence that the amount for which the policyholder settled was too high, 

or to show that, hypothetically, the insurer could have kept the amount lower if it had 

been involved in the negotiation. It was the exclusion itself that constituted sufficient 

prejudice. The court was plain that the very fact of depriving the insurer of the “the 

opportunity to protect its interests” by disputing the amount of coverage carried the 
10

insurer’s burden of establishing prejudice so as to allow the insurer to “escape coverage.” 

(Johnston v. Sweany, supra, 68 S.W.3d at pp. 401, 402, italics added.)

The rule from Johnston v. Sweany about the need to respect cooperation 

and consent clauses was followed by the Eighth Circuit applying Missouri law in 

Interstate Cleaning Corp. v. Commercial Underwriters Ins. Co. (8th Cir. 2003) 325 F.3d 

1024 (Interstate Cleaning), and by a federal district court applying Missouri law in 

Clarinet, supra, 2012 U.S.Dist. LEXIS 7300. Both cases are instructive. Interstate 

Cleaning involved the functional equivalent of excess insurance, since the liability 

coverage was structured so it would not be triggered until the policyholder had spent 

$50,000 for a single occurrence (or $300,000 in a year for multiple occurrences). 

(Interstate Cleaning, supra, 325 F.3d at p. 1026.) Clarinet shows a court willing to 

enforce the consent clause despite a pressing need on the part of the insured to spend

money on shoring and repair costs to protect third parties.

In Interstate Cleaning, a Missouri-based commercial cleaning service firm 

was sued in Hawaii for sexual harassment, but didn’t consider the suit important enough 

to be worth notifying its insurer. That made sense given that the policy had a self-insured 

retention of at least $50,000 and, as things would turn out, the plaintiffs would end up 

offering to settle before trial for $25,000, i.e., for an amount within the self-insured 

retention of at least $50,000.

8 But the cleaning firm rejected the $25,000, and went to 

trial. It ended up with a judgment against it so high (though the court did not quantify it) 

the trial court ordered a new trial unless the plaintiffs agreed to reduction by way of 

remittitur. (Interstate Cleaning, supra, 325 F.3d at p. 1027.) At that point the cleaning 

firm notified the insurer of the suit. In the harassment action an appeal was filed (it is not 

clear from the opinion by whom) and apparently during the pendency of that appeal the 

cleaning firm and the sexual harassment plaintiffs settled. A year after the notification, 

 

8 Readers may remember that the present case involves a requirement of liability in excess of a 

retained limit as well. 
11

the cleaning service firm sued the insurer for having failed to defend and indemnify it. 

The case reached the Eighth Circuit after the district court entered a summary judgment 

in favor of the insurer. (Ibid.) 

After determining to apply Missouri law, the Interstate Cleaning court held 

that the cleaning company’s failure to notify the insurer did, indeed, prejudice it: “ICC 

failed to notify Underwriters of the Awais’ lawsuit until after ICC defended the Awais’

action, and rejected settlement before trial (Awais demanded $25,000), and until after the 

jury had rendered a verdict. As in Johnston [v. Sweany], this tardiness deprived 

Underwriters of the opportunity to investigate facts, to defend on liability, to settle the 

lawsuit, and to choose a trial strategy. By the time ICC notified Underwriters of the 

Awais’ claims, Underwriters had already been prejudiced. The jury had already found 

ICC liable and established a value for the Awais’ claims. The district court was correct, 

ICC failed to provide timely notice as required by the Policy, and Underwriters suffered 

prejudice from the delay.” (Interstate Cleaning, supra, 325 F.3d at p. 1029, italics 

added.)

We glean two things from Interstate Cleaning. First is the fact the insurer 

there functioned like the excess insurer here (F&C): because of the self-insured retention 

there was no necessary requirement that the insurer immediately defend any (otherwise 

covered) claims against the insured. As in the present case a certain threshold had to be 

reached to trigger the coverage. And second, the court, as in Johnston v. Sweany, 

emphasized the loss of the opportunity to control costs as the essence of the prejudice. 

There was no need for the insurer to prove that, despite the loss of that opportunity, it 

might have done better if it had been notified. 

In Clarinet, supra, 2012 U.S.Dist LEXIS 7300, a property developer 

purchased a historic building in St. Louis hoping to turn it into a mix of condominiums, 

retail stores and commercial space. (Id. at p. 2.) Then came a windstorm. A portion of 

the old building collapsed. The building had to be stabilized, and the policyholder 
12

engaged in stabilization and shoring efforts that continued for several months. (Id. at pp. 

3-4.) Despite them, the building eventually had to be demolished. The policyholder 

sought reimbursement for its stabilization and demolition costs, but the insurer denied 

them. (Id. at pp. 4-5.) Interpreting Missouri law, the court began its analysis by noting it 

is the insured who bears the initial burden of proving coverage, while the insurer bears 

the burden of showing an exclusion applies. (Id. at p. 13, citing State Farm Mut. Auto. 

Ins. Co. v. Stockley (Mo. Ct. App. 2005) 168 S.W.3d 598, 600.) After first ruling the 

policy’s own property exclusion would exclude coverage for the costs even if done to 

mitigate damage to third parties (bricks and debris were causing damage to a nearby 

bridge),9 the court turned its attention to the policy’s consent clause (preventing the 

insured from “incur[ing] any expense other than for first aid, without our consent,” id. at 

p. 9), noting the policyholder did not attempt to obtain the insurer’s consent before 

incurring the disputed stabilization and demolition costs. (Ibid.) Citing both Interstate 

Cleaning and Johnston v. Sweany, the court held that the policyholder’s “failure to notify 

or at least attempt to obtain consent from Essex prejudiced Essex in that Essex was 

foreclosed from investigating the extent of the damage to the Switzer Building, the need 

for stabilization and/or demolition prior to demolition, or seeking more favorable 

demolition or stabilization contract terms.” (Id. at p. 26, italics added.) Again, as in 

Johnston v. Sweany, depriving the insurer of the opportunity to seek a better deal was 

itself enough prejudice under Missouri law – the insurer didn’t actually have to prove it 

might have been able to make a better deal.

In light of these cases, it is apparent that Doe Run’s midnight (literally

midnight) settlement with the Doyle plaintiffs, made without any consultation with F&C, 

was sufficient prejudice by itself under Missouri law. Doe Run’s letter of September 1, 

 

9 On appeal to the Eighth Circuit, the district court’s judgment was affirmed, but solely on the 

owned property exclusion. (See Clarinet, LLC v. Essex Ins. Co. (8th Cir. 2013) 712 F.3d 1246 1249-1250.) Even 

so, the appellate court reaffirmed the federal district’s observation that in Missouri it is the insured who bears the 

burden of showing a claim is within the insuring clause. (Id. at p. 1249.) 
13

2011, was insufficient to have given F&C any meaningful warning its presence would be 

needed to approve any settlement, and there is no question Doe Run did not attempt to 

obtain F&C’s consent.10 

 

10 There is a big difference between having the opportunity to reject a settlement and not having any 

such opportunity. Doe Run spends a good portion of its briefing discussing a complicated California case, FullerAustin Insulation Co. v. Highlands Ins. Co. (2006) 135 Cal.App.4th 958 (Fuller-Austin), but that case only 

illustrates the perils of not consenting to a settlement on an insured’s behalf when the insurer has the opportunity, as 

distinct from never having the opportunity in the first place. And the facts in Fuller-Austin are unique, to say the 

least. The case involved the interaction of (1) a bankruptcy statute specifically addressed to asbestos cases (id. at p. 

968, referring to 11 U.S.C. section 524(g)) with (2) the “obligations” of a group of excess insurers (id. at p. 966). To 

simplify as much as we can, though, Fuller-Austin is an example of a case where excess insurers were given the 

opportunity to consent to a settlement and (at their peril) refused to do so. (See id. at p. 983 [“Applying the 

foregoing legal principles to the undisputed evidence, the trial court found that Fuller–Austin complied with its 

policy obligations by giving appellants notice of the settlement, that appellants had a duty to Fuller–Austin to accept 

a reasonable settlement, and that they acted at their own peril by refusing to accept the settlement. In other words, 

by reserving their rights instead of acknowledging coverage and assuming the defense of the matter, appellants 

surrendered their right to rely on any policy provision requiring their consent to a settlement.”].) Even assuming 

that the Missouri Supreme Court would import Austin-Fuller into Missouri law – and that’s not by any means clear 

(see Jeffrey E. Thomas, A Case Study of Bad Faith Refusal to Settle: A Doctrinal, Normative and Practical Analysis 

of Missouri Law (1996) 64 UMKC L. Rev. 695 [discussing unanswered questions in Missouri bad faith doctrine]), 

in Austin-Fuller the excess insurers had a meaningful opportunity to evaluate a proposed settlement and chose to 

reject it. Here, F&C clearly didn’t have that opportunity.

Another California case Doe Run relies on is Diamond Heights Homeowners Assn. v. National 

American Ins. Co. (1991) 227 Cal.App.3d 563, but, as in Fuller-Austin, that case involved a meaningful opportunity 

to evaluate a proffered settlement, not a fait accompli as we have before us now. Contrast the warning given the 

excess insurer in Diamond Heights with Doe Run’s letter of September 1: “In November 1987, defense counsel 

advised Central’s counsel that at a mandatory settlement conference, two primary carriers had committed their 

policy limits in the total amount of $1.5 million in settlement of the action, which offer, combined with $100,000 

from other defendants, had been made to plaintiffs’ counsel. He further advised that plaintiffs’ counsel informed 

them that his estimate of repair costs, exclusive of asbestos abatement costs, exceeded $2 million and that asbestos 

abatement work would be costly. By letter dated November 5, 1987, defense counsel advised Central of plaintiffs’ 

settlement demand of $2,671,064, and stated: ‘Since this figure clearly exceeds the policy limits of St. Paul and 

Consolidated American, which limits have been “put on the table” (approximately $1,600,000), your immediate 

statement of position is required. . . . [¶] The trial remains set for Monday, November 9, 1987.’” (Id. at p. 575, 

italics added.) Moreover, in Diamond Heights, counsel for the insurer had sufficient time to evaluate the proffered 

settlement and object to it in open court. (Ibid.) That’s a bit different from being told of a final settlement roughly a 

month after it was final. 
14

C. Doe Run’s Arguments

1. The Argument from Sequence

Doe Run posits three arguments that would have the effect of excusing 

compliance with the consent clause: The first is what we will call the argument from 

sequence. This argument theorizes that since it is fundamental that an excess insurer 

normally has no obligation to pay until the primary policy is exhausted,11 and since 

Zurich disputed coverage and did not exhaust until well after the September 7 settlement, 

there was no occasion for Doe Run to obtain F&C’s consent.

The argument from sequence fails because it assumes that the prerequisite 

of exhaustion of primary coverage has the effect of nullifying other prerequisites for, or 

conditions precedent to, coverage in the policy. Of course, courts resist interpretations of 

contracts, even insurance policies, that nullify terms in those contracts. (E.g., ACL 

Technologies, Inc. v. Northbrook Property & Casualty Ins. Co., supra, 17 Cal.App.4th at 

p. 1785 [“In California, however, contracts – even insurance contracts – are construed to 

avoid rendering terms surplusage.”].) Doe Run’s interpretation would, in effect, read out 

of all excess policies any conditions for coverage, including cooperation clauses, that 

exist in addition to the need for primary limits to be exhausted. But as we have seen, 

Johnston v. Sweany is clear that a consent provision in an insurance policy is enforceable

in its own right. (Accord, Mendota Ins. Co. v. Mills (E.D. Mo. 2012) 2012 U.S.Dist. 

LEXIS 137965 at p. 5 [ “Cooperation clauses are valid and enforceable under Missouri 

law. . . . Similarly, provisions requiring that notice of an occurrence be given to the 

 

11 The qualification being, at least in California (see fn. 11 above), if the excess insurer objects to a 

proposed settlement. 
15

insurer ‘promptly’ are valid and enforceable. . . . Failure to give the required notice will 

relieve the insurer of liability to the insured.”].)12

Doe Run’s second argument can be called the argument from retroactive 

non-prejudice. Doe Run’s theory here is that summary judgment is not appropriate based 

solely on the admitted non-compliance with the consent clause, because F&C will still

have the opportunity to establish prejudice from the $55 million settlement at trial in Doe 

Run’s declaratory relief action. This theory ignores the realities of settlement, 

particularly this settlement, which was not achieved until after what was obviously an allnight bargaining session that continued past midnight. As every litigator knows, a 

settlement avoids the time, expense and opportunity costs of going to trial. (See J.J. 

Prescott et. al., Trial and Settlement: A Study of High-Low Agreements (2014) 57 J.L. & 

Econ. 699, 704.) Moreover, the probability of settlement of civil litigation will involve 

significant variables of subjectivity: the degree to which the competing litigants and 

lawyers are risk adverse, the degree to they have varying subjective beliefs about 

probable trial outcomes, and the degree to which they may – or may not – have equal 

information. (See id. at pp. 701-703.) 

It follows then that opportunities to settle on favorable (or at least 

acceptable) terms may knock but once. Yet trying to reconstruct the conditions that 

existed in a Missouri courthouse or office building at midnight, September 7, 2011, –

particularly the willingness of the Doyle parties to settle for an amount below $55 million

 

12 A variation on the argument from sequence is an estoppel argument predicated on the idea that 

F&C basically told Doe Run, “don’t bother us until the primary is exhausted.” That argument fails because Doe 

Run cannot point to any place in the record where F&C clearly waived the consent provision in its policy. Missouri 

law requires a clear showing that an insurer “unequivocally and clearly” waived a policy defense (Interstate 

Cleaning, supra, 325 F.3d at p. 1030), and of course Doe Run presented no such evidence at the trial level.
16

– will be impossible. As we have seen from cases construing Missouri law, the excess 

insurer F&C is inherently prejudiced by not having had an opportunity to consent first.

13

Doe Run’s third argument is what one might call an argument from 

proactivity. Doe Run says, in essence: “Look, nothing actually prevented F&C from 

attending the September 6 mediation, and the company had access to all the public 

pleadings, so if F&C didn’t consent to the settlement, it was, in effect, its own fault; it 

should have sent a representative who could have objected if the settlement was too 

high.” In other words, F&C should have proactively inserted itself into the September 6 

mediation. Having failed to do so, it cannot complain now. 

This argument fails primarily because of the way the September 1 letter 

was written (one of the reasons we have reproduced all of it). First, the letter conveyed 

no substantive information about the relative probabilities and ranges of favorable and 

unfavorable prospects for the Doyle action. For all the letter told F&C, the Doyle 

litigation could have resulted in anything between a clean defense verdict or a class 

action judgment in the nine-digit millions. The letter gave no information about Doe 

Run’s defenses, or the strengths of the Doyle plaintiffs’ case. Second, the letter gave no 

estimate of the probabilities of settlement – whether the parties might be close, far apart, 

or whether the mediation was simply a rote exercise that had to be fulfilled prior to trial. 

The only warning it gave F&C was: If there’s a settlement and if the primary isn’t good 

for all of that settlement, then of course Doe Run would “look to” F&C for the rest. And, 

perhaps most tellingly but not obviously, the letter doesn’t even tell the reader where the 

mediation would take place, or precisely when it would commence. 

 

13 Doe Run asks we take judicial notice of a (well-reasoned) trial level order and judgment in another 

Doe Run environmental coverage dispute (Doe Run Resources Corporation v. American Guarantee & Liability 

Insurance Company et al., cause number 10SL-CC01716 (American Guarantee)) from a St. Louis circuit (triallevel) court. We perceive the point of Doe Run’s request being the insurer in American Guarantee suffered no 

prejudice, even if, contrary to the evidence, it was given late notice of the underlying suit because the insurer would 

have used the policy’s pollution exclusion to deny all coverage anyway. We grant the request, but it doesn’t do Doe 

Run any good. While F&C might have reserved its rights to contest coverage for a host or reasons, there is no 

evidence that F&C had already made up its mind to deny coverage regardless of its consent.
17

Under these circumstances, F&C could hardly have been expected to send a 

representative – literally uninvited – to a mediation at an undisclosed location. Also 

significant: Doe Run made no effort to afford F&C the opportunity though it might have 

done so in the context of the midnight settlement – for example, by extending the threeday rescission period which the agreement gave to its CEO and the Doyle class 

representatives expressly to its insurers.

IV. DISPOSITION

The judgment is affirmed. F&C shall recover its costs on appeal.

BEDSWORTH, ACTING P. J.

WE CONCUR:

FYBEL, J.

IKOLA, J.