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Court rules MOPERM may be sued for bad faith

Jessica Shumaker//March 22, 2021

Court rules MOPERM may be sued for bad faith

Jessica Shumaker//March 22, 2021

A Missouri appeals court has held for the first time that the Missouri Public Entity Risk Management Fund, also known as MOPERM, is not shielded by sovereign immunity, allowing a bad-faith failure to settle claim against the fund to proceed.  

On March 16, a three-judge panel of the Missouri Court of Appeals Western District reversed a lower-court ruling granting summary judgment for MOPERM, the self-insurance fund that serves hundreds of public entities in Missouri, and its board of trustees. 

The ruling came in a suit brought against MOPERM by Brenda Estes, the guardian and next friend of a woman identified in court records as Jane Doe. 

Doe is a developmentally disabled woman who was raped and impregnated by her caregiver’s husband while she received services from a county-funded entity, Progressive Community Services, according to the opinion written by Judge Cynthia L. Martin. Tony Hughes pleaded guilty to felony sexual assault in early 2014 and was sentenced to seven years in prison.

Estes first sued Doe’s caregiver, Alberta Hughes, in 2013, and MOPERM accepted Hughes’ defense. The parties’ efforts to settle before trial failed despite Estes’ purported offer to settle within the $2 million limit MOPERM is permitted to pay to settle claims arising from a single occurrence, Martin said. 

At trial, a Buchanan County jury awarded Estes $9 million in damages against Hughes, which the Western District affirmed in 2016. 

In March 2017, Hughes assigned to Estes all of her rights, actions and causes of action against MOPERM and its board of trustees arising out of MOPERM’s handling of the claims asserted in Estes’ lawsuit. Two months later, Buchanan County Circuit Judge Kate H. Schaefer entered an amended $8 million judgment that awarded Estes pre- and post-judgment interest. 

MOPERM ultimately paid Estes $2 million of the judgment.

In 2018, Estes sued MOPERM and its board of trustees, alleging bad-faith failure to settle within policy limits and breach of fiduciary duty regarding MOPERM’s handling of claims asserted against Hughes in the underlying lawsuit. 

In a motion for summary judgment, MOPERM asserted Estes’ claims were barred by sovereign immunity and that MOPERM does not owe a duty of good faith to its insureds because it is not a liability insurer. Schaefer agreed, granting MOPERM and its board summary judgment. 

Estes appealed, arguing that MOPERM does not qualify as a public entity for purposes of sovereign immunity because it is not controlled by or answerable to public officials, public entities or the public itself. Nor does it perform a service traditionally performed by the government, she argued. 

MOPERM conceded that it was not a public entity as laid out in state law. It argued, however, that it is entitled to sovereign immunity as a hybrid entity. 

The panel of judges disagreed, holding that MOPERM failed to satisfy the requirements for hybrid entities that the Missouri Supreme Court laid out in the 1992 case Stacy v. Truman Medical Center. 

One such requirement is that hybrid entities must be controlled by and directly answerable to one or more public officials, public entities or the public itself. The panel concluded that MOPERM failed to meet that requirement. 

MOPERM’s enabling legislation also does not require the kind of accountability to public officials or to the general public that is required to support an application of sovereign immunity, Martin said.

“Instead, for all intents and purposes, MOPERM’s board of trustees operates autonomously, with near unfettered authority,” she said. Judges Lisa White Hardwick and Mark D. Pfeiffer concurred. 

The panel also held that MOPERM is a liability insurer that owes its insureds a duty to act in good faith to try to settle claims within policy limits. 

Kirk Presley of Presley & Presley in Kansas City represented Estes. He said the ruling determined that MOPERM “cannot hide behind sovereign immunity and escape potential liability” for the remaining $6 million owed to Estes. 

“They would be liable just as any other insurance company would face potential liability if a jury finds they acted in bad faith in their failure to settle within the policy limit,” he said.  

Michael G. Berry of Newman, Comley & Ruth in Jefferson City represented MOPERM. He did not respond to a message seeking comment. 

The case is Estes v. MOPERM, WD83764.


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