Clayborne v. Enterprise Leasing Co. of St. Louis

Citations: 524 S.W.3d 101; 2017 Mo. App. LEXIS 281; 2017 WL 1323921Docket: ED 104661

Court: Missouri Court of Appeals; April 11, 2017; Missouri; State Appellate Court

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Carlus Parker (Appellant) appeals a summary judgment favoring Enterprise Leasing Company of St. Louis, LLC and Elco Administrative Services Company (Respondents). The case arises from a March 6, 2013, rental of a 2013 Ford Escape, where Appellant declined insurance and supplemental liability protection, acknowledging the terms of the rental agreement. The agreement specified that the owner, Enterprise, would not provide additional insurance coverage beyond state minimums unless required by law. On March 11, 2013, Appellant was involved in an accident with Darion Clayborne after running a stop sign, while covered by his own insurance through Benchmark Insurance Company. On April 25, 2014, Appellant's attorney proposed a $25,000 settlement to ELCO. Subsequently, a Section 537.065 agreement was reached on June 19, 2014, where Appellant paid Clayborne $15,000, agreeing not to pursue defenses from Enterprise or ELCO in any related lawsuit. Clayborne filed a petition on July 2, 2014, alleging injuries due to Appellant's negligence in operating the Escape.

On July 8, 2014, Hershewe informed Gehbauer about a lawsuit filed by Clayborne against Appellant. Gehbauer replied the next day, stating that Benchmark, not Enterprise, was responsible for defending and indemnifying Appellant. Following a bench trial on October 6, 2014, a judgment of $575,000 plus post-judgment interest was entered against Appellant in favor of Clayborne. Subsequently, on November 7, 2014, Clayborne initiated a garnishment action against Enterprise, ELCO, and Appellant for the $25,000 limit under the Missouri Vehicle Financial Responsibility Law (MVFRL). Appellant then filed a cross-claim against Enterprise and ELCO for bad faith failure to settle and breach of duty to defend.

Enterprise and ELCO settled Clayborne's garnishment claim for $25,000, leading to his dismissal of them from the action on October 30, 2015. On November 12, 2015, Enterprise and ELCO moved for summary judgment against Appellant’s claims, arguing they had no contractual or statutory duty to defend him. On July 14, 2016, the trial court granted summary judgment in favor of Enterprise and ELCO, concluding that neither the rental agreement nor the MVFRL imposed a duty to defend or settle claims against Appellant, noting that Enterprise was not an insurer and Appellant had not paid for insurance coverage.

In his appeal, Appellant argues that the trial court erred in granting summary judgment on the bad faith claim, claiming the rental agreement constituted an insurance contract under Missouri law, obligating Enterprise to cover claims. He also contends that the court erred in ruling that Enterprise had no duty to defend him, asserting that even if Enterprise lacked such a duty, it breached the rental agreement by failing to pay the financial responsibility limits. The standard of review for summary judgment is de novo, affirming only when there are no genuine issues of material fact. A defendant can prove summary judgment is appropriate by negating any element of the plaintiff's claim or demonstrating insufficient evidence to support the claim.

The court evaluates the record favorably for the party opposing the judgment. For a motion for summary judgment, the moving party must establish a prima facie case for judgment as a matter of law, prompting the non-moving party to counter with specific facts from discovery, exhibits, or affidavits to show genuine issues for trial, as per Rule 74.04(c)(2). The court will consider reasonable inferences in favor of the non-moving party and may affirm summary judgment based on any supported theory.

In the appeal concerning breach of contract for failure to defend and bad faith refusal to settle, the Appellant asserts that Enterprise and ELCO had a duty to defend him in a lawsuit by Clayborne and failed to settle a claim prior to legal action, resulting in a $575,000 judgment against him. ELCO paid Clayborne $25,000, and Benchmark settled for $15,000. Despite Enterprise and ELCO's payments leading to their dismissal from the garnishment suit, they remain due to Appellant's cross-claims.

To establish breach of contract, the Appellant must show the existence of a valid contract, the obligations of the parties, a breach, and resulting damages. The Appellant has not identified any contractual provision obligating Enterprise or ELCO to defend him or settle claims against him. They fulfilled their statutory obligation under the Missouri Vehicle Financial Responsibility Law (MVFRL) by providing the required $25,000 to Clayborne, which is stipulated in the rental agreement indicating that coverage does not extend to the Renter or third parties except as mandated by law.

Valid automobile liability insurance or self-insurance available to the Renter, Additional Authorized Drivers (AADs), or any other driver negates the Owner's responsibility for motor vehicle financial responsibility as long as it meets state laws. If Renter and AADs comply with the agreement, the Owner's obligation is limited to state minimum financial responsibility amounts. The Owner is not liable for passenger claims while using the vehicle or for any liability under workers' compensation laws. 

The Appellant's claim against Enterprise and ELCO under the Missouri Vehicle Financial Responsibility Law (MVFRL) is unfounded as they met their obligations, and the Appellant had previously dismissed them after receiving $25,000 to satisfy his demand under the MVFRL. The Appellant also declined insurance options provided in the rental agreement. Enterprise, being a self-insured rental company, has no independent duty to defend the Appellant or settle claims unless explicitly agreed in the rental terms, which the Appellant rejected. 

Consequently, the Appellant's breach of contract and bad faith claims against Enterprise and ELCO are legally untenable. Neither company has a contractual or statutory obligation under the MVFRL to defend the Appellant, nor do the agreements restrict the Appellant from settling claims independently. The principles established in Missouri case law regarding bad faith refusal to settle indicate that such claims require evidence of exclusive rights and bad faith, which are not present in this case.

Appellant misapplied the legal standards for a bad faith refusal to settle claim by substituting "liability insurer" with "entity" and failing to recognize that a key prerequisite is the existence of an insurer and a liability policy. Instead, the case involves a car rental company and a rental agreement, not an insurer or liability policy. Appellant had the option to designate Enterprise as his insurer but explicitly opted out twice, rejecting the offers to provide liability coverage. Appellant argues that if Enterprise had settled with Clayborne for $25,000 in April 2014, he would not have faced a subsequent lawsuit and judgment of $575,000. However, this assertion does not establish a legal obligation for Enterprise to Appellant, as Benchmark, not Enterprise, served as Appellant's liability insurer and settled with Clayborne under a Section 537.065 agreement. Enterprise fulfilled its responsibilities by paying $25,000 to Clayborne, leading to Clayborne’s dismissal from the garnishment case. The court finds that the facts are undisputed and Appellant's claims lack legal support, affirming that Enterprise and ELCO are entitled to judgment as a matter of law and fact for breach of duty to settle and breach of contractual duty to defend. The judgment of the trial court is upheld.

Execution or garnishment proceedings can only target the assets of a tort-feasor explicitly identified in a contract, or any insurers not excluded in that contract. If the contract is duly acknowledged by both parties, it may be recorded in the office of the recorder of deeds in any county where a judgment can be rendered, or in the tort-feasor's county of residence, or both. Once recorded, the tort-feasor's property—except for the assets specifically mentioned in the contract—will not be subject to any judgment lien resulting from a judgment against the tort-feasor related to the contract's underlying transaction. Additionally, it is asserted that Parker can pursue a bad faith claim against Enterprise. According to the Missouri Supreme Court, such a claim is maintainable if the entity (1) retains exclusive rights to contest or settle claims, (2) prevents the insured from settling claims without consent, and (3) acts with fraud or bad faith in refusing to settle a claim within policy limits, as established in Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 827 (Mo. banc 2014).