Opinion ID: 1860591
Heading Depth: 1
Heading Rank: 2

Heading: westport is bound by its agreement to defend without a reservation of rights

Text: Appellate review of the grant of summary judgment is de novo. Southers v. City of Farmington, 263 S.W.3d 603, 608 (Mo. banc 2008). The Court reviews the record in the light most favorable to the party against whom summary judgment was entered. Id. The criteria on appeal for testing the propriety of summary judgment are no different from those which should be employed by the trial court to determine the propriety of sustaining the motion initially. ITT Commercial Finance Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993) (internal quotation omitted). Summary judgment will be upheld on appeal if: (1) there is no genuine dispute of material fact, and (2) the movant is entitled to judgment as a matter of law. Id. Generally, an insurance company can effect a proper reservation of rights when the company provides notice to an insured that its defense of an action should not be construed as a waiver of any policy defense and the insured accepts the defense of the action without protest and with full knowledge of the position of the insurance company of its right to assert non-liability. Atlanta Cas. Co. v. Stephens, 825 S.W.2d 330, 333 (Mo.App.1992). An insured has the right to reject a tendered defense with a reservation of rights. State Farm Mut. Auto. Ins. Co. v. Ballmer, 899 S.W.2d 523, 527 (Mo. banc 1995). Should the insured reject the defense, the insurer then has one of three options: (1) ... represent the insured without a reservation of rights defense; (2)... withdraw from representing the insured altogether; or (3) ... file a declaratory judgment action to determine the scope of [the] policy's coverage. Truck Ins. Exchange v. Prairie Framing, L.L.C., 162 S.W.3d 64, 88 (Mo.App. W.D.2005). Here, Westport chose the first option: It agreed to defend the underlying personal injury action without a reservation of rights. This foreclosed it from the option of filing a declaratory judgment action to determine coverage. It seeks in this suit to accomplish that same purpose by defending the garnishment as if it had not agreed to defend the underlying suit. It is well-settled, however, that defending an action with knowledge of noncoverage under a policy of liability insurance without a non-waiver or reservation of rights agreement ... precludes the insurer from subsequently setting up the fact and defense. Mistele v. Ogle, 293 S.W.2d 330, 334 (Mo.1956); see also State Farm Mut. Auto. Ins. Co. v. MFA Mut. Ins. Co., 485 S.W.2d 397, 402 (Mo.1972) (MFA insurance estopped from denying coverage when it undertook to defend its insured in damage suit and took complete charge and control of that suit). Westport acknowledges the usual rule but argues that it was its insured's burden to prove the agreement to defend without a reservation of rights once it moved for summary judgment. The movant bears the burden of establishing both a legal right to judgment and the absence of any genuine issue of material fact required to support the claimed right to judgment. Lewis v. Biegel, 204 S.W.3d 354, 356 (Mo.App.2006) (internal quotation omitted). The trial court is prohibited from granting summary judgment, even if no responsive pleading is filed in opposition to a summary judgment motion, unless the facts and the law support the grant of summary judgment. In Landstar Investments II, Inc. v. Spears, 257 S.W.3d 630, 632 (Mo.App. S.D.2008), the court noted that Appellant failed to file a response to Landstar's motion for summary judgment and `[by] reason of [her] failure to deny those statements in the manner specified in Rule 74.04(c)(2), those facts were admitted.' Nevertheless, the court stated, for Landstar to be entitled to summary judgment, the admitted facts must establish its right to judgment as a matter of law. Id. Westport claims that, in this case, the admitted facts established its right to summary judgment on the issue of coverage. But before reaching that question, this Court must determine whether Westport waived its right to raise that defense. While it is true that the Carsons did not raise the reservation of rights issue in their opposition to Westport's summary judgment motion itself, they did not need to do so because Westport already had admitted in its answer that it had agreed to defend without a reservation of rights, and nothing in Westport's summary judgment motion countered that admission. The facts admitted in Westport's answer, not countered in its summary judgment motion, establish that it is not entitled to raise the defense of noncoverage. Westport argues that it nonetheless should not be bound by its agreement because it did not know at the time of its September 22 letter that ABC Tow and the Carsons had reached a section 537.065 settlement and that a trial had been held and judgment entered. It argues that, had it been aware of these events, it would not have offered to defend without a reservation of rights; hence, its waiver of coverage defenses was not knowing or intentional and should not be binding. This Court disagrees. Westport had notice of the personal injury suit, and it was its duty to keep abreast of developments in it, including the scheduling of the trial and the court's entry of a judgment. Further, once it agreed to defend without a reservation of rights on September 22, 2006, Westport still had time to file a motion for new trial, as the docket entries show judgment was entered only a week earlier on September 14, 2006, see Rule 78.04 (30 days to file motion for new trial or to amend judgment). [6] Once the judgment became final, Westport had 10 days in which to file a timely appeal. Rule 81.04. Westport apparently made no immediate effort to learn the status of the case; it did not learn of the judgment, therefore, until shortly before it was served with the garnishment action on October 16, 2006. Even at that point, Westport did not attempt to file a late notice of appeal, see Rule 81.07, or to file a motion to set aside the judgment, see Rule 74.06. Neither did it at any time attempt to notify ABC Tow that it was withdrawing its reservation of rights. Instead, it simply sat on any rights it may have had to raise the issue of notice in the underlying suit. In effect, Westport seeks to use the garnishment action as a second chance to appeal or set aside the underlying judgment that it allowed to remain in place under an agreement to defend without a reservation of rights. While the Court understands the difficulty in which this places Westport, it is a difficulty of its own making and not one from which a garnishment action can be used to relieve it. Having agreed to defend the underlying suit without a reservation of rights, while that suit still was pending, Westport is bound by that agreement. The trial court erred in granting summary judgment on the basis of lack of coverage. Westport was precluded from bringing a coverage defense because it previously had agreed to defend without a reservation of its right to contest coverage.