Knockerball MidMo, LLC (Knockerball) operated a sports facility. A patron, Hart, was injured and paralyzed while on the premises. Prior to the injury Knockerball had its broker, McGowen, procure a liability policy with limits of $1,000,000.00 from Atlantic Specialty Insurance Company. Sportsinsurance.com, Inc. was the managing general agent for Atlantic.
Hart filed suit against Knockerball, and Knockerball forwarded the petition to McGowen. However, through a variety of alleged missteps by McGowan, Sportsinsurance and Atlantic, no responsive pleading was timely filed on behalf of Knockerball and an order of default against Knockerball was entered in the underlying Suit.
Knockerball retained personal counsel and entered a RSMo. §537.065 agreement with Hart. The agreement had a non-execution clause as to Knockerball, and an agreement by Knockerball to cooperate in an equitable garnishment and bad faith action against Atlantic. The agreement provided for whatever the outcome, at the conclusion of litigation, Hart would file a satisfaction of judgment as to Knockerball. The parties also agreed that Hart would retain 90 percent of all sums recovered up to the amount of any judgment he secured against Knockerball and Knockerball would be paid 10 percent of the remaining amount and all sums above the judgment.
With this agreement in hand, Hart and Knockerball secured a non-contested lay down bench trial, and the judge entered judgment for $44,631,268.99 with interest at the rate of 6.16 percent. Hart then brought actions against Atlantic and Sportsinsurance, and those claims were settled for $30 million, of which Knockerball received $1.25 million.
Knockerball also filed suit against McGowen for professional negligence and breach of fiduciary duties for its alleged damages. McGowan filed a Motion for Summary Judgment arguing that Knockerball’s claims against McGowan failed as a matter of law because Knockerball could not establish that it was damaged because of McGowan’s alleged tortious misconduct. The trial court entered judgment for McGowen finding it was” … undisputed that not only was Knockerball protected from liability on Hart’s claims, it also stood to collect in excess of $1 million as a result of the resolution of actual coverage claims, therefore it was “difficult to see how Knockerball has been damaged and that such damage was proximately caused by McGowan’s conduct.”
In affirming the judgment, the Western District was careful to point out that this was not a bad faith refusal to settle claim filed against an insurance carrier, but a tort claim against the broker, and then held that under the theories pled, a plaintiff must prove damages, and Knockerball was not able to do so. Specifically, the Court held,
“In each of the three counts against McGowan, Knockerball’s only allegation as to damages is that it “suffered damages in the amount of the judgment entered against it and in favor of Plaintiff Hart ($44,631,268.99).But, as has been discussed earlier in this opinion, as a result of the 537.065 Agreement, Knockerball is not exposed to any liability to pay any portion of the judgment in the Underlying Suit.”
A reader with experience in bad faith actions will know that the insured, by virtue of the non-execution clause in a §537.065 agreement, never sustains damages. However, bad faith, like the theories alleged against McGowen, also require proof that damage has been sustained. However, judges do not apply this prohibition in bad faith cases as against insurers. Thus, we see the Court mention this is not a bad faith case, and while the Court tried to distinguish the different types of action, frankly, their explanation makes no sense, nor can it. If an action, however titled, requires damages, as all do, a non-execution agreement should be a bar to all causes of action. Knockerball MidMo, LLC v. McGowan & Co., Inc., No. WD 85458.