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The ability of a carrier to intervene in an underlying liability action.
Mar. 2017  |  Bad Faith Update  |  Vol. 3 Iss. 5

Sherman v. Kaplan


Intervention Post Allen v. Bryers


At various points, including after the Supreme Court decision in Allen v. Bryers, the issue of an insurance carrier’s right to intervene in the underlying liability action has been the topic of this Bad Faith Update.

Recently, the Western District Court of Appeals handed down its decision in Sherman v. Kaplan which tracks the decision in Allen and offers some insight in the ability of a carrier to intervene in an underlying liability action.

Background

The Sherman case involved a medical malpractice claim against a Plastic Surgeon and his wife who served as the Surgeon’s assistant. At the time of the incident, the Surgeon was insured by a policy of insurance issued by Missouri Professionals Mutual-Physicians Professional Indemnity Association (Mutual-Physicians).

After the filing of the lawsuits and various motion practice, the Surgeon was dismissed from the suit without prejudice. Following the dismissal of the Surgeon, Plaintiff sought leave to amend the complaint to set out causes of action for negligence against the Surgeon’s wife and a claim for violation of the MMPA against the Surgeon. Following its receipt of the proposed Amended Petition, Mutual-Physicians denied coverage to the Surgeon as the Proposed Amended Petition failed to allege a breach of the standard of care in rendering professional services, the policy excluded coverage for willful, fraudulent and intentionally wrongful activity, and no coverage was provided for guarantees or warranties of the results of professional services. Coverage was also denied to the Surgeon’s Wife as she did not qualify as an insured under the policy.

Following this, Plaintiff, Surgeon and Surgeon’s wife entered into an R.S.Mo. §537.065 agreement where all claims against Surgeon’s wife were dismissed, Surgeon consented to Plaintiff filing an amended petition premised on medical malpractice along with other considerations.

On September 28, 2015, the trial court held a bench trial and entered a judgment in favor of Plaintiff in the amount of $500,000.

Intervention

After the judgment became final, Plaintiff filed an equitable garnishment action against Mutual-Physicians seeking to collect the September 28, 2015 judgment. Mutual-Physicians then filed a motion to intervene and set aside the September 28, 2015 judgment pursuant to Rule 74.06(b) in the underlying case.

The trial court permitted Mutual-Physicians to intervene and set aside the September 28, 2015 judgment.
Plaintiff appealed these rulings.

Western District Opinion

After sorting out the issue of whether it had jurisdiction to hear Plaintiff’s appeal, the Western District reversed the decision of the trial court in permitting Mutual-Physicians to intervene and in setting aside the September 28, 2015 judgment.

Timing of Intervention
The Western District first determined that the trial court had no jurisdiction to grant a motion to intervene as it had already lost jurisdiction over the underlying case. Under Rule 75.01, a trial court only retains jurisdiction over cases for 30 days after a judgment is entered. Thus, any motion to intervene must be filed and ruled upon within 30 days after judgment is entered or the ruling is considered void. Here, the motion to intervene was not filed until 67 days after the judgment was entered and was not ruled upon until over 7 months after the September 28, 2015 judgment was entered.

Right to Intervention
In addition, the Western District determined that even if Mutual-Physicians had timely sought intervention, it was not entitled to intervene as a matter of right. The Court noted that in a third-party liability insurance situation, the carrier does not have a sufficient interest to intervene as a matter of right; the carrier only has the right to participate pursuant to its contractual obligation to defend its insured. Instead, the carrier is permitted to raise any policy defenses or other defenses in a declaratory judgment or garnishment action.

Authority to Set Aside Judgment
As Mutual-Physicians had no right to intervene and did not attempt to do so timely, the Western District determined that the trial court lacked authority to set aside the September 28, 2015 judgment. In doing so, the Western District re-affirmed the decision in Allen that the provisions of Rule 74.06(b) are only available to parties. As Mutual-Physicians was never a party to the underlying case, it could not seek relief so set the judgment aside.

The decision in Sherman reinforces well established Missouri law based on sound principles. By upholding the timing requirements for intervention, the finality of judgments are respected. Further, by holding that carriers are not entitled to intervene in the underlying liability action, claimants are not required to litigate both liability and coverage simultaneously. Finally, carriers can still protect their interests by litigating any coverage questions in declaratory or subsequent garnishment actions.
 
"My legal practice involves keeping up with the latest cases involving bad faith claims. Contact me if you need advice."

- Kirk Presley
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