Opinion ID: 1463724
Heading Depth: 1
Heading Rank: 4

Heading: estoppel and collateral estoppel against state farm

Text: James claims that State Farm is equitably estopped from claiming the benefit of the criminal adjudication because it violated its duty to defend Paul when he filed his civil suit alleging negligence. James relies on McCormack Baron Mgmt. Servs., Inc. v. American Guar. & Liab. Ins. Co., 989 S.W.2d 168, 170 (Mo. banc 1999), providing that, ordinarily, the duty to defend is determined by comparing the policy provisions with the allegations of the petition. But where the insured made a judicial admission as part of a prior judicial determination in a criminal case that the insured's conduct was intentional, the general rule announced in McCormack does not give rise to estoppel. Estoppel, being an equitable doctrine, applies where the refusal to defend was unjustified under the circumstances. State Farm justifiably relied on the prior judicial admission and determination in concluding it had no coverage and, thus, no duty to defend Paul. For State Farm to have defended Paul on the ground that his conduct was intentional rather than negligent would have created an irreconcilable conflict with the insured. Cox v. Steck, 992 S.W.2d 221 (Mo. App.1999). Therefore, the doctrine of equitable estoppel does not apply to prevent State Farm from asserting the absence of coverage. James also argues that any preclusion resulting from the plea of guilty was negated by the judgment in the civil case and that State Farm is now collaterally bound by the civil judgment. As previously noted, offensive use of collateral estoppel, as proposed by James, is disfavored. In addition, there is a lack of privity between Paul and State Farm in the civil case. In the civil action, Paul's earlier plea of guilty left little question regarding the issue of his liability to James. Indeed, he agreed to make restitution to James in that case. The only real question was the extent of damages at issue. Paul's only defense was to enter into a sec. 537.065 settlement agreement designed to shift the bulk of any assessment of damages to his insurer while minimizing his personal exposure to damages. Both Paul and James had identical interests in having Paul's conduct declared unintentional so as to shift the obligation of paying damages to State Farm. State Farm's interest in relying on the criminal plea and the coverage exclusion were not aligned with either that of James or Paul in the civil action. As a result, the privity necessary to impose collateral estoppel against State Farm was absent. Finally, the inherent conflict between State Farm and Paul prevented State Farm from effectively asserting its policy defenses in the civil action until the garnishment proceeding. For all these reasons, it would be inequitable for State Farm to be collaterally estopped from asserting its coverage defenses in the garnishment proceeding.