Supplemental Payments provisions are present in almost every liability policy. These provisions generally detail the insurer’s responsibility for interest and costs awarded in suits that it has undertaken to defend. Litigation surrounding these provisions usually involves the amount of post-judgement interest owed or whether the insurer owes any interest. Disputes are not uncommon and generally turn on the exact language in the relevant policy.
Recently, the Southern District of Missouri was tasked with a somewhat unique appeal involving whether an insurer owes any Supplemental Payments coverage to a set of Plaintiffs after the insurer exhausted the per occurrence indemnity limits by payment to a different set of claimants..
Ash v. General Casualty Company of Wisconsin, 2024 WL 94828 (Mo. App. 2024)
Background
In March 2009, All Iowa Contracting was a contractor working on a road construction project in Howell County, MO. All Iowa was responsible for striping and generally setting up the construction zone.
Unfortunately, a car driven by the Ash Family collided with a car containing the Calegar family. Each occupant of the Calegar family was killed in the collision and the occupants of the Ash Family sustained serious injuries.
At the time of the collision, All Iowa was insured by General Casualty Company of Wisconsin under a primary CGL Policy. The CGL Policy provided a stated Per Occurrence indemnity limit of $1,000,000 for bodily injury claims and a Products Completed Operations Hazard (PCOH) Aggregate Limit of $2,000,000. The CGL Policy also contained a Supplemental Payments endorsement applicable to bodily injury coverage that provided:
- We will pay, with respect to any claim we investigate or settle, or any suit against an insured we defend:
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e. All costs taxed against the insured in any “suit”.
f. Prejudgment interest awarded against the Insured on that part of the judgment we pay. If we make an offer to pay the applicable limit of insurance, we will not pay any prejudgment interest based on that period of time after the offer.
g. All interest on the full amount of any judgment that accrues after entry of the judgment and before we have paid, offered to pay, or deposited in court the part of the judgment that is within the applicable limit of insurance.
These payment will not reduce the limits of insurance.
Following the collision, claims were made against All Iowa for the wrongful death of the Calegar family. A settlement was reached and General Casualty paid $1,000,000 under the CGL Policy to the Calegar wrongful death beneficiaries. The judgment approving the wrongful death settlement indicated that General Casualty had paid its entire applicable coverage through the settlement.
Ash Family Claims
The Ash Family also brought claims for the injuries they received and eventually filed a lawsuit against All Iowa. The lawsuit was tendered to General Casualty for a defense and indemnity. General Casualty declined to provide a defense or indemnity on the basis that it had already exhausted its indemnity obligation.
After General Casualty refused to provide a defense to All Iowa, a judgment was entered in favor of the Ash Family totaling over $10,000,000 plus post-judgment interest and costs.
Garnishment Action
The Ash Family sought to satisfy their judgment via an equitable garnishment and declaratory judgment action against General Casualty. The Ash Family acknowledged that General Casualty had paid $1,000,000 to settle the Calegar Family’s wrongful death claim under the CGL Policy but claimed the CGL Policy provided another $1,000,000 in PCOH coverage given an ambiguity in the CGL Policy. Additionally, the Ash Family argued that the terms of the CGL Policy required General Casualty to pay costs awarded to the Ash Family and all post-judgment interest that had accrued since the date the circuit court entered judgment in the suit against All Iowa.
General Casualty naturally took the opposite view. General Casualty argued that it had extinguished all its obligations under the CGL Policy by paying the $1,000,000 per occurrence limit to the Calegar Family, including any obligations under the Supplemental Payments provisions. In part, this position was premised upon General Casualty’s belief that the Supplemental Payments provision only applied to cases General Casualty defended or had the duty to defend. Because it was undisputed that General Casualty did not defend and did not have a duty to defend, it claimed it owed no obligation to provide any Supplemental Payments coverage.
The Garnishment Court agreed with General Casualty and found it owed no further obligations to All Iowa or the Ash Family after the $1,000,000 payment was made to the Calegar Family. Judgment was entered in favor of General Casualty and the Ash Family appealed to the Southern District of Missouri.
Appellate Decision
After briefing, the Court agreed that General Casualty did not owe any further money under the PCOH coverage in the CGL Policy. While the PCOH coverage indicated a $2,000,000 aggregate limit, this was subject to the CGL Policy’s per occurrence limit of $1,000,000. General Casualty satisfied its indemnity obligation to pay $1,000,000 when it settled the Calegar claims.
However, General Casualty did not fair nearly as well as it related to the Supplemental Payments coverage. The Southern District rejected General Casualty’s argument that the Supplemental Payments coverage only applied to suits it defended or had an obligation to defend. Instead, the Southern District looked at the actual language of the Supplemental Payments coverage and noted that the coverage applied to “any claim we investigate…”. Since, General Casualty investigated the Ash Family claims, the Supplemental Payments coverage was triggered..
Moreover, the Court noted that if General Casualty had intended to limit the Supplemental Payments coverage to only suits it defended or had an obligation to defend, it knew exactly how to do so. This is because General Casualty had specifically limited the Supplemental Payments coverage in the Employee Benefit Liability Coverage Form to apply only to “any claim or suit we defend.” The differences between the bodily injury and employee Benefit Liability Supplemental Payments provisions confirmed the Ash Family’s position.
Ultimately, the Southern District reversed the garnishment court and determined that General Casualty was responsible for all post judgment interest that had accrued on the $10,000,000 judgment and for the costs awarded to the Ash Family. An amount that greatly exceeds even the aggregate total of the CGL Policy.
While Ash turned on policy interpretation principles, it is really the result of good lawyering and attention to detail. The Supplemental Payments provision could have been and is often overlooked. Fortunately for the Ash Family the provision generated a significant supplemental payday..
