MOUNT VERNON – St. Clair County Circuit Judge Heinz Rudolf awarded $250,000 against Country Mutual for no reason except a precedent that he cited incorrectly, according to Fifth District appellate judges.
They reversed him on March 18, finding he answered the wrong question when he found Country Mutual had a duty to defend drunk driver Floyd Schmitt.
They directed the circuit court to determine whether Country Mutual owes a duty to indemnify Schmitt against a trial verdict.
Justice David Boie wrote that defense and indemnification are separate and distinct duties and the duty to indemnify is narrower.
Justices Thomas Welch and Barry Vaughan concurred.
As of March 19, the circuit clerk’s website showed Associate Judge Julie Katz would preside at proceedings on April 3.
According to background in the ruling, Country Mutual covered Floyd Schmitt’s automobile use in 2012.
He hadn’t told them the state revoked his license for driving under the influence.
He bought a 2000 Chevy Silverado, placed the title in the name of nephew Roy Schmitt, and insured the vehicle with Geico.
Floyd kept it on his farm and used it mostly on the property.
In 2013, he picked up a friend in the Silverado and they proceeded to a bar.
After they left and Floyd dropped off his friend, he crashed into another vehicle causing injuries to driver James Manley.
Manley sued Floyd, and Geico provided Floyd’s defense.
In 2014, Country Mutual sued for declaratory judgment that as an excess insurer it owed no duty to defend the Schmitts.
Country Mutual claimed its policy didn’t cover the crash because Floyd didn’t own the Silverado and it was available for his regular use.
On March 24, 2015, former judge Randall Kelley held bench trial on Manley’s suit.
On March 25, Country Mutual amended its action to add affirmative defenses.
On March 26, Kelley awarded $360,737 to Manley.
Geico paid its policy limit of $20,000, and the case closed.
In 2017, in Country Mutual’s action for denial of coverage, Rudolf rejected its bid for classification as excess insurer.
Rudolf wrote that he was “simply not persuaded by Country Mutual’s assertion that it provided excess coverage and did not have a duty to defend Floyd Schmitt.”
He found Manley raised facts potentially within Country Mutual’s coverage.
He found Country Mutual’s original action timely but ruled that the amended complaint failed all tests for timeliness.
He cited a Third District opinion, Federal Insurance v. Economy Fire and Casualty, finding a duty to defend.
He quoted from it that “the action was brought against a named additional insurer, J.R. Construction.”
He quoted from it that the complaint disclosed a potential for coverage.
In 2019, he entered judgment for the policy limit of $250,000 plus four years of interest since trial.
On appeal, Country Mutual prevailed.
“The circuit court did not provide any reasoning, or cite to any precedent, concerning its determination that the Country Mutual policy was not excess coverage,” Boie wrote.
He found the Third District didn’t make the finding Rudolf quoted and the case did not involve any party by the name of J.R. Construction.
He wrote that in Rudolf’s order he found a later citation to a Third District opinion in West American Insurance v. J. R. Construction.
“The West American court did make the above finding; however, we note that the West American court’s finding was a determination that J.R. Construction was a named insured on the primary insurance policy,” he wrote.
“As such, the circuit court’s reliance on the West American holding was misplaced.”
He wrote that in the case Rudolf incorrectly cited, the Third District addressed a duty to defend where a policy concerned other collectible insurance.
He quoted from it that, “Excess or secondary coverage is coverage whereby, under the terms of the policy, liability attaches only after a predetermined amount of primary coverage has been exhausted.”
He agreed and wrote, “Country Mutual had no duty to defend Floyd in the underlying action until the Geico policy limits were exhausted.”
He wrote that the underlying action had been resolved and judgment entered.
“We agree with Country Mutual that the question before the circuit court was one of indemnification and not simply a question of the duty to defend,” he wrote.
Keith Carlson of Chicago represented Country Mutual.
Zane Cagle of St. Louis represented Manley.