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Knockerball MidMo, LLC (“Knockerball”) appealed the trial court’s judgment granting McGowan & Company, Inc.’s (“McGowan”) motion for summary judgment on Knockerball’s negligence and breach of fiduciary duty claims.
IN Knockerball Midmo, LLC v. McGowan & Company, Inc. d/b/a McGowan Excess & CasualtyNo. WD85458, Court of Appeals of Missouri, Western District, Fourth Division (May 9, 2023), the Court of Appeals resolved the dispute.
McGowan, acting as Knockerball’s insurance broker, and Sportsinsurance, acting as managing general agent for the Liability Insurer, helped obtain general liability insurance coverage for Knockerball in the amount of $1 million and the liability insurance covered the period of time Hart was seriously injured on Knockerball’s premises.
Hart sued Knockerball for personal injuries (the “underlying suit”). Knockerball was served and immediately notified McGowan of the underlying suit and provided a copy of the petition to McGowan. McGowan’s rep assured Knockerball’s chief member that McGowan would “handle it.”
However, through a variety of missteps by McGowan, Sportsinsurance and the Liability Insurer, no timely responsive pleading was filed on behalf of Knockerball and an interim default judgment against Knockerball was entered in the underlying lawsuit on March 31, 2017.
Knockerball then entered into an agreement with Hart containing the following provisions: Hart and Knockerball and in consideration of TEN DOLLARS ($10.00) provided by Knockerball to Hart this day, agreed to settle and assign rights against brokers and underwriters.
A bench trial for damages was subsequently held on July 11, 2017, where Knockerball did not cross-examine witnesses or object to the evidence offered by Hart’s attorney. On July 13, 2017, the court in the underlying lawsuit entered final judgment for Hart against Knockerball in the amount of $44,631,268.99 with interest at 6.16 percent.
It is undisputed that Knockerball did not incur any attorney’s fees for the defense of the underlying lawsuit. And Hart is prohibited from attempting to collect any portion of the judgment in the underlying lawsuit against Knockerball or Knockerball’s executive member.
The trial court found it undisputed that Knockerball was not only shielded from liability for Hart’s claims but that it could also collect over $1 million as a result of the settlement of actual coverage claims, therefore it was difficult to see how Knockerball has been harmed and that such injury was proximately caused by McGowan’s conduct.
This case is not a “bad faith refusal to settle” action against a liability insurer or that insurer’s general agent. Simply put, there is a difference between an insurance broker like McGowan and a general agent for the insurer (i.e., Sports insurance). While an agent represents the insurer, an insurance broker, unless otherwise authorized and prescribed, represents the insured and, unless the evidence shows otherwise, to be considered the insured’s agent. Knockerball’s claim against McGowan is for negligence.
The circuit court entered the insurance broker’s judgment and the insured appealed, arguing that the district court erroneously concluded that the insured did not suffer any damages as a result of the insurance broker’s failure to obtain adequate insurance coverage.
The judgment in the underlying trial was entered after Hart agreed that he would not enforce by garnishment or otherwise at law, or otherwise collect or attempt to collect on any property, asset or right of Knockerball for any part of the judgment obtained against it in the underlying litigation. Rather than suffering damages from a $44 million default judgment in the underlying lawsuit, Knockerball actually received $1.25 million from the liability insurer’s settlement of Hart’s claim against the liability insurer.
Knockerball actually served from its own place of business negligence due to the corresponding settlement of Hart’s coverage and bad faith claims.
The Court of Appeals concluded that Knockerball has not been harmed as a result of the judgment entered against it in the underlying trial. Knockerball has not established that it suffered financial loss as a result of McGowan’s alleged negligence and breach of fiduciary duty to Knockerball as Knockerball’s insurance broker.
Without damages, the district court’s judgment is not erroneous, and Knockerball’s appeal lacks merit.
Although the broker was negligent in not immediately forwarding notice of the lawsuit to the insurer, the steps taken by the insured and the plaintiff to allow action against the insurer and the brokers resulted in Knockerball sustaining no damages and in fact profiting from the situation. This part of the case was, in my view, a waste of judicial time because an inability to prove any injury defeats the purpose of the litigation.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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