Opinion ID: 2292704
Heading Depth: 1
Heading Rank: 5

Heading: Unjustifiable Refusal to Defend

Text: Great American claims that the equitable garnishment court erred in ruling that it was bound by the $4,580,076 judgment. It asserts that, in order for an insurer to be bound by a section 537.065 agreement that the insured entered, the insurer must have unjustifiably refused to defend or provide coverage. Great American argues that it was not bound by CPB's section 537.065 agreement with the parents because its refusal was justified. `Where one is bound to protect another from liability, he is bound by the result of the litigation to which such other is a party, provided he had opportunity to control and manage it.' Drennen v. Wren, 416 S.W.2d 229, 234-35 (Mo.App. 1967) (quoting Listerman v. Day & Night Plumbing & Heating Serv., 384 S.W.2d 111, 118-19 (Mo.App.1964)). [7] The standard is whether the insurer had the opportunity to control and manage the litigation, not whether the insurer had the duty to control and manage the litigation. As CPB's insurer, Great American was bound to protect CPB from liability. Although Great American claimed that it was not bound to cover Christine's accident because its policy did not include accidents arising out of the use of an amusement device, these assertions of non-coverage were incorrect. As noted above, the trial court correctly found that a rock climbing wall was not an amusement device so that the exclusion did not apply. This finding rendered Great American's refusal to defend or to provide coverage unjustified. Despite being bound to protect CPB, Great American, on more than one occasion, refused to defend and to provide coverage. Once an insurer unjustifiably refuses to defend or provide coverage, the insured may, without the insurer's consent, enter an agreement with the plaintiff to limit its liability to its insurance policies. Cf. Rinehart v. Anderson, 985 S.W.2d 363, 371 (Mo.App.1998) (recognizing that once an insurer unjustifiably refuses to defend or provide coverage, the insured is free to enter a settlement that releases it from liability). [The insurer] cannot have its cake and eat it too by both refusing coverage and at the same time continuing to control the terms of settlement in defense of an action it had refused to defend. Id. CPB entered into a section 537.065 agreement with the parents that limited the collection of any judgment entered against it to the insurance policies. Great American was bound to the section 537.065 agreement because it unjustifiably refused to defend or provide coverage. Its claim that its refusals were an honest mistake is of no consequence. That the refusal of the insurer to defend on the ground that the claim is outside the policy is an honest mistake, nevertheless constitutes an unjustified refusal and renders the insurer liable to the insured for all resultant damages from that breach of contract. Whitehead v. Lakeside Hosp. Ass'n, 844 S.W.2d 475, 481 (Mo.App.1992). Great American's refusal to defend and to provide coverage, while it may have been an honest mistake, was unjustified. Accordingly, CPB was free to enter a section 537.065 agreement that limited collection of a future judgment to its insurance policies. Great American was bound to the section 537.065 agreement because it unjustifiably refused to defend, and it was bound to the trial court's judgment awarding the parents $4,580,076 because it had an opportunity to control and manage the trial but failed to seize it. [8]