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Suit over $44M judgment can’t proceed against broker

Scott Lauck//May 11, 2023

Suit over $44M judgment can’t proceed against broker

Scott Lauck//May 11, 2023

A business hit with a $44.6 million judgment after a man was injured on its property can’t sue its insurance broker because it never suffered any damages from the broker’s alleged mistakes, the Court of Appeals Western District ruled on May 9.

The case stems from one of the largest plaintiffs’ wins of 2017, as tracked by Missouri Lawyers Media. Derek Hart was paralyzed during an activity at Knockerball MidMo’s location in Jefferson City in 2016. When Hart sued the company, it notified its insurance broker, McGowan & Company, which was to inform the insurance company of the claim.

However, Knockerball’s insurer failed to answer the suit, prompting a default judgment against the company. Hart and Knockerball entered into an agreement under section 537.065 of the Revised Statutes of Missouri, which allows a plaintiff to obtain a judgment against a defendant whose insurer has declined to provide coverage.

Under the agreement, Hart agreed to pursue any recovery from the defendant’s insurance policy rather than the defendant itself. A Cole County judge then entered the $44.6 million judgment against Knockerball.

Hart sought to recover the judgment from the company’s insurer, Atlantic Specialty Insurance Company. Knockerball pursued its own claims against the insurer and other parties that had failed to properly handle the suit, including McGowan.

According to the opinion, in January 2019 most of the defendants paid $30 million to settle those claims. Per the ‘065 agreement, Knockerball retained 10 percent of the proceeds, or $1.25 million, with the rest going to Hart.

The company’s separate claims against McGowan remained, but in 2021 a trial judge ruled in favor of Knockerball. The Western District affirmed that decision. Judge Mark D. Pfeiffer, writing for the panel, said damages were an essential part of the claims of negligence and breach of fiduciary duties that Knockerball made against McGowan. But under the ‘065 agreement, Knockerball was never in danger of having to pay the judgment rendered against it.

“Instead of Knockerball suffering damages from a $44 million default judgment in the Underlying Suit, it actually received $1.25 million from Liability Insurer’s settlement of Hart’s claims against Liability Insurer,” Pfeiffer wrote. “Thus, Knockerball actually profited from its own business premises negligence due to the corresponding settlement of Hart’s coverage and bad faith claims.”

Chief Judge Gary D. Witt and Howard County Associate Circuit Judge Mason R. Gebhardt, who sat specially on the case, concurred.

Steve Schwartz of Brown & James, who argued for McGowan, was pleased with the decision and said it made no sense to try to hold his client, which was a middleman for the insurance company, responsible for the full judgment. Matthew A. Clement of Clement, Van Ronzelen & Schulte, an attorney for Knockerball, said they are weighing whether to seek a rehearing or transfer to the Missouri Supreme Court.

The case is Knockerball Midmo LLC v. McGowan & Company Inc., WD85458.

RELATED: Man wins nearly $45M judgment against Knockerball

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