Amy Leigh Sauvain v. Acceptance Indemnity Insurance Company

Citations: 500 S.W.3d 893; 2016 Mo. App. LEXIS 989; 2016 WL 5746381Docket: WD79198

Court: Missouri Court of Appeals; October 4, 2016; Missouri; State Appellate Court

Original Court Document: View Document

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Amy Leigh Sauvain and others (Plaintiffs) appealed the Circuit Court of Clay County's decision to grant Acceptance Indemnity Insurance Company's (Acceptance) Motion to Quash a garnishment request. The case stems from a prior lawsuit where Plaintiffs alleged that David Bowman, Jr. was negligent in a head-on collision that resulted in the death of John Sauvain, III and serious injuries to passenger Bonnie S. Hughes. The circuit court awarded the Plaintiffs $2,000,000 for wrongful death and $4,000,000 for Hughes' injuries, while Bowman's auto insurer, USAA, paid $50,000. Following a settlement under Section 537.065 with Bowman, the Plaintiffs sought equitable garnishment from Acceptance, asserting that Bowman was covered under Acceptance's policy at the time of the accident. 

Prior appeals, Sauvain I and Sauvain II, involved challenges to Acceptance's coverage and resulted in a bench trial that confirmed the Plaintiffs were entitled to $100,000 from Acceptance. After receiving this amount, Plaintiffs filed a new garnishment action for the remaining $5,900,000 of the judgment, arguing that Acceptance had a duty to defend Bowman and breached that duty, which could render it liable for the full judgment amount beyond policy limits, as established in Missouri case law.

Acceptance filed a Motion to Quash Garnishment on May 29, 2015, arguing that the court lacked authority under Chapter 525 and Rule 90 to award the full Judgment in a garnishment action, which is an ancillary in rem proceeding. Acceptance maintained that the court should only issue a garnishment order up to the limits of the Policy, as issues regarding its duty to defend and related liabilities were not part of the court's consideration. The trial court agreed, granting the Motion to Quash on December 2, 2015, prompting an appeal.

On appeal, plaintiffs contended that the trial court erred in quashing their garnishment, asserting they were entitled to recover beyond the judgment against the insurer in a garnishment proceeding under Chapter 525. Missouri recognizes two types of garnishment actions against insurers: traditional garnishment in aid of execution, which assists in recovering an existing judgment, and equitable garnishment, which allows plaintiffs to assert independent claims against an insurer. Traditional garnishment is a statutory mechanism that facilitates the collection of a judgment by reaching the debtor's property held by a third party. It requires a valid judgment as a prerequisite for the garnishment process, and the procedure is governed by Rule 90.07.

Interrogatories are served to the garnishee along with the summons and writ of garnishment, requiring the garnishee to file verified answers. The garnishor can then file exceptions to these answers, stating objections and grounds for recovery against the garnishee. The garnishee may respond to these exceptions. In garnishment actions, the interaction between the garnishee’s answer—typically indicating no funds or property of the defendant—and the garnishor's exceptions establishes the issues for the case rather than the interrogatories themselves. 

Equitable garnishment actions, particularly under section 379.200, differ from traditional garnishments as they act as direct causes of action against insurance companies. Such actions require the plaintiff to demonstrate that a judgment was obtained against the insured during the policy period and that the injury is covered by the policy. Insurers can assert defenses against the judgment creditor that could have been raised in a direct action by their insured, including policy exclusions.

The distinction between equitable garnishment actions and garnishments in aid of execution is highlighted. The former allows claims against the insurer directly, while the latter is meant to collect on pre-existing judgments. The court must consider whether a garnishment in aid of execution can address separate claims related to the judgment, specifically if it can determine whether the insurer breached its duty to defend, potentially enabling recovery of damages beyond policy limits. This inquiry includes whether such damages constitute "property subject to garnishment" as defined by Rule 90.01.

"Chose in action" is characterized as a proprietary right in personam, which includes debts, shares, and tort claims, allowing the owner to bring action to recover owed debts or property. A claim for damages in tort is considered property that can be attached in garnishment proceedings, but contingent liabilities, which are not yet due, cannot be garnished. Specifically, although debts that a garnishee can sue on, like an insurer's breach of duty to defend, might seem eligible for garnishment, such actions necessitate a prior court determination of the debt's due status. Generally, in garnishment proceedings, the garnishee cannot contest the merits of the plaintiff's claim or challenge the underlying judgment. Garnishment serves as a remedy for plaintiffs to collect judgments by reaching the defendant's property held by third parties and focuses solely on whether the garnishee possesses the defendant's assets or owes them a debt.

The ruling indicates that any claims against an insurer/garnishee for breach of duty to defend are not appropriate in a garnishment setting, which is meant to enforce existing rights from a prior judgment rather than to address independent tort claims. The garnishor's attempt to assert a separate claim for breach of fiduciary duty against the insurer is deemed improper within the confines of garnishment proceedings, which require a more comprehensive legal approach than what is allowed in this context.

Chapter 525 and Rule 90 do not allow a garnishor to seek punitive damages against a garnishee. The court cannot allow a garnishor to substitute garnishment for a breach of fiduciary duty claim. Previous cases cited by Plaintiffs, including Columbia Casualty Company v. HIAR Holding, LLC and Schmitz v. Great American Assurance Company, involved direct actions against insurers rather than garnishment actions. These cases did not address whether extra contractual damages can be determined in garnishment proceedings. The current case lacks a conclusive determination of whether the Acceptance Policy covered the accident and the total unpaid damages amount to $5,900,000. The remaining issues are whether Acceptance had a duty to defend and whether it was given notice and opportunity to do so. The court found that it could not consider Acceptance's potential liability for breaching the duty to defend in the garnishment proceeding. Consequently, the circuit court acted correctly in quashing the Plaintiffs' Garnishment for the full judgment amount.