Court Opinion

ID: 9495373
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:01:29.473984+00
Date Added: 2024-06-11T17:56:59.269202
License: Public Domain

BYE, Circuit Judge,
concurring in part and dissenting in part.
I agree Royal breached its duty to defend Kirksville. Royal abandoned the defense soon after the district court held it had no duty to defend, even though Kirks-ville had appealed the erroneous ruling. If an insured appeals a trial court’s adverse ruling on a duty-to-defend claim, the insurer should continue to defend under a reservation of rights pending final resolution in the appellate court. See, e.g., Detroit Edison Co. v. Mich. Mut. Ins. Co., 102 Mich.App. 136, 301 N.W.2d 832, 836 (Mich. Ct.App.1981) (“When an insurer relies on a lower court ruling that it has no duty to defend, it takes the risk that the ruling will be reversed on appeal”). Because Royal abandoned Kirksville prematurely, Kirks-ville was free to make the best settlement it could, and Missouri law precludes Royal from arguing there was no coverage for the trespass claim alleged against Kirks-ville in the underlying state court action. See Whitehead v. Lakeside Hosp. Ass’n, 844 S.W.2d 475, 480 (Mo.Ct.App.1992); Bituminous Cas. Corp. v. Walsh & Wells, Inc., 170 S.W.2d 117, 122 (Mo.Ct.App.1943).
I also agree Missouri law allows Royal, notwithstanding its abandonment of the defense, to have Kirksville’s settlement apportioned between the covered trespass claim and any noncovered claims. See Esicorp, Inc. v. Liberty Mut. Ins. Co., 193 F.3d 966, 971 (8th Cir.1999) (interpreting Missouri law). On appeal, Kirksville initially argued Royal’s duty to indemnify should encompass the entire settlement amount, but conceded in its reply brief that Royal need only indemnify it for the portion of the settlement attributable to the trespass claim.
I do not agree the collateral estoppel doctrine bars Kirksville from claiming indemnity for the portion of the settlement attributable to the trespass claim, because at the time Kirksville settled there was no final judgment on the merits in the state court proceeding. The grant of partial summary judgment on the trespass claim occurred on July 28, 1998. On July 31, Kirksville’s adversary in the state court action, Lewistown, moved the state court to reconsider the decision. On August 4, Kirksville and Lewistown settled the state court action. At that point in time the trespass claim was on its last legs, perhaps, but nevertheless still alive and in controversy. See Enchanted Hills, Inc. v. Medlin, 892 S.W.2d 722, 723 (Mo.Ct.App.1994) (“It is well settled that a partial grant of summary judgment, with additional issues remaining before the trial court, is interlocutory and has no [preclusive] effect.”). Therefore, when Kirksville and Lewistown sat down at the settlement table on August 4, the trespass claim was undoubtedly a part of the discussion.
The district court and the majority both concluded Kirksville was collaterally es-topped from claiming indemnity against Royal because of the final judgment entered in the state court pursuant to the stipulation for dismissal between Lewis-*810town and Kirksville. But the final judgment was not entered until September 28, 1998, well after Kirksville had been prejudiced by Royal’s abandonment and forced to settle the case on its own. Thus, when considering whether Royal has a duty to indemnify Kirksville for the portion of the settlement attributable to the trespass claim, our focus should be on the status of the trespass claim at the time of settlement, not some later point in time.
I would reverse and remand. Kirksville should not be collaterally estopped from asserting its right to indemnity, and is entitled to have a portion of the settlement attributed to the trespass claim.