Skip to content

A Tale of a Felonious Father: Under Missouri Law Insurers Must Do It Right the First Time or Prepare To Pay Twice

April 29, 2015

When a court-approved ‘wrongful death’ settlement really isn’t a settlement, beware the children of a felonious father.  In Braughton v. Esurance Insurance Co., Case No. WD77686 (Mo.App. W.D. 2015), the Missouri Court of Appeals for the Western District of Missouri recently held that an insurance company could be held liable for breach of contract and required to pay damages under its uninsured motorist policy (“UM”), after it had settled the claim for policy limits under the policy, and received a release, and obtained court approval of the settlement.

In May 2010 Julie Braughton (Mother) was killed in a car accident with an uninsured motorist.  She was survived by her husband Joseph (Father), two minor children Keyen and Konnor (Minors), and her parents, the Gibbs (Grandparents).  At the time of the accident Mother had UM coverage in the total amount of $150,000 with Esurance.  In July 2010 Father settled with Esurance for the UM policy limits.  He executed the release of Esurance individually and as class representative of all persons entitled to recover for the wrongful death of Julie under Missouri Statute section 537.080. Grandparents also submitted affidavits agreeing with the terms of the settlement.  Esurance prepared a petition for court approval of a wrongful death settlement.  Father as class representative, the Minors and Grandparents were named as plaintiffs but not represented by counsel.  In addition, the Minors were not represented by an appointed next friend, guardian or conservator.

In August 2010, the court conducted the required approval hearing.  Father testified as to the terms of the settlement, that the Minors lived with him and under his care, and that the settlement was in the class’s best interests.  The Court approved the settlement agreement, entered judgment and authorized Father to execute the Release of all claims plaintiffs had against Esurance.  The policy limits were paid and a satisfaction of judgment filed in September 2010.

Father was indicted on multiple counts of statutory sodomy and jailed in November 2010.

David and Michelle Braughton were appointed Conservators for the Minors and filed a motion to set aside the settlement judgment in July 2011.  The Motion argued the Minors had not been given notice of the settlement hearing (even though they were in attendance), that no next friends or guardians were appointed to represent the Minors in the settlement in violation of Missouri Rule 52.10 (real party in interest rule), that Father had been out on bond from a previous felony indictment for various sex crimes at the time of the settlement hearing, and the settlement proceeds had not been used for the Minors’ care as represented.  The motion alleged the settlement had been procured by mistake, fraud or misrepresentation and should be set aside.

The trial court conducted a hearing on the motion in August 2011.  Esurance argued it had paid the UM policy limit, obtained a valid release and satisfaction of judgment.  The trial court set aside the settlement apportion and found the Father had a conflict of interest with the other class members and the judgment was obtained by fraud and misrepresentation.  Father was in jail and did not respond to the motion or appear at the hearing. In October 2011 the trial court entered a second judgment apportioning the wrongful death proceeds.  The second judgment apportioned the $150,000 between the Minors, with a small allocation to Father and an amount to satisfy a medical lien.  The second judgment made no reference to Esurance, other than their appearance at the hearing and did not order Esurance to pay anyone.  No reference was made to the UM policy, the executed release or the satisfaction of judgment. Esurance did not appeal this second judgment.

In November 2011, the Minors made demand for payment under the UM policy but took no action to execute on the second judgment.  The Minors then filed suit against Esurance for breach of contract and vexatious refusal pay.  The case was assigned to the same judge that handled the previous proceedings and the parties agreed to submit the case on stipulated facts, including: the policy limits of the UM coverage was $150,000, Father had entered into the release on behalf of the wrongful death class, the trial court approved the wrongful death settlement, and a satisfaction of judgment had been filed.  The trial court found Esurance had not paid the UM proceeds as ordered in the second judgment entered and was therefore in breach of contract.

Esurance appealed.  The Court of Appeals acknowledged the procedural and factual history of the case was “a Gordian knot,” however the only question to be answered was did the first settlement release and judgment bind the Minors?  After a lengthy analysis of Missouri contract law, the Appeals Court found it did not.  The Appeals court first ruled the trial court erroneously found Esurance breached the contract because it failed to pay insurance proceeds, as Esurance did in fact pay under the policy.  The trial court’s second judgment did not set aside the original release nor declare Esurance responsible for the second division of the settlement proceeds.

However, the Appeals Court decided they were constrained to uphold the trial court’s finding under any reasonable theory pleaded and supported by the evidence.  The Minors pleaded Esurance did not pay them any proceeds under the UM policy.  It was uncontested Esurance did not pay any of the proceeds directly to the Minors.  Esurance claimed the affirmative defense of payment and release.  The Appeals Court found Esurance did not meet its burden of proof on its affirmative defense of payment because it failed to prove the original settlement agreement and judgment was legally binding on the Minors.  Esurance failed in its burden because the Minors, who were named plaintiffs in the proceedings giving rise to the first settlement and judgment, were not represented by a duly-appointed next friend or guardian as required by Missouri Statute Sections 507.110, 507.115 and 507.184.  The Appeals Court found the trial court had no authority to approve a settlement for the Minors or authorize the execution of the original release because they were not represented by a duly-appointed next friend, guardian, or conservator.

The Appeals Court rejected Esurance’s argument Father adequately represented his children’s interests and thus bound them to the original settlement agreement, release and judgment.  The Minors were named parties to the proceedings and because of the conflict of interest found by the trial court, duly appointed representatives to protect their interests were required.

The Appeals Court also found the parties and the trial court erroneously characterized the settlement as a wrongful death proceeding.  It was a simple contract claim because it was not a claim against a tortfeasor that caused a death.  The Appeals Court stated there is nothing wrong with seeking court approval of a first-party UM insurance settlement, especially when the claimants are minors.  Minors however are still represented by next friends or conservators.

The Appeals Court affirmed the judgment finding Esurance breached the UM contract. In parting the Court stated “We recognize that Esurance will now be required to pay out an amount in excess of its UM coverage.  However, Esurance failed to insure that settlement with Father legally bound the Minors and, thus, created the risk of contract liability in excess of its policy limits.  We express no opinion regarding Esurance’s available recourse against Father.”

Other than the Courts’ obvious concern for the Minors’ potentially being left holding their Father’s bag with no compensation for the death of their Mother, what are the practical ramifications of this ruling?  In any Missouri claim where a Minor or person without legal capacity is a party or beneficiary of a settlement, it is advisable to have a court-appointed next friend, guardian, or conservator for that individual.  The extra paperwork for appointment of a next friend is negligible compared to the consequences of double payment, even potentially in excess of policy limits.

Christopher L. Heigele

From → Case Notes, Insurance

Leave a Comment

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: