Dontcha just love how the press/media reports insurance coverage stories? Almost immediately I heard via text messages and emails about this decision from (1) the SIU director of a NY auto insurer, (2) the claims manager of a NY property and casualty insurer, (3) my eldest son, who is an SIU field investigator, and (4) one of my office's legal assistants.
For their benefit and yours I offer the following context.
No, GEICO was not ordered to pay $5.2 million to a woman who claimed she contracted HPV after having sex in her ex-boyfriend’s GEICO-insured car. And no, the Missouri appellate court most certainly did not rule GEICO "must cover" that the woman's allegedly related "injuries and losses".
Last week's (June 7, 2022's) decision of the Missouri Court of Appeals did only this:
Government Employees Insurance Company and GEICO General Insurance Company (collectively “GEICO”) appeal the judgment of the Circuit Court of Jackson County confirming an arbitration award finding against GEICO’s insured—M.B. (“Insured”)—and in favor of M.O. Insured and M.O. were in a romantic relationship. After M.O. contracted anogenital human papillomavirus (“HPV”), she submitted a settlement offer to GEICO, asserting Insured negligently infected her with the disease during sexual encounters in his automobile, and that Insured’s GEICO-issued automobile insurance policy provided coverage for her injuries and losses. GEICO denied coverage and rejected her settlement offer.Insured and M.O. entered into an agreement pursuant to section 537.065, RSMo,1 and agreed to arbitrate M.O.’s claims. The arbitrator found Insured negligently infected M.O. with HPV and awarded her $5.2 million in damages. Thereafter, M.O. filed this action in the trial court. GEICO moved to intervene and M.O. moved to confirm the arbitration award. The trial court granted both motions on the same date and entered judgment in favor of M.O. consistent with the arbitration award. GEICO appeals, asserting the trial court erred in confirming the arbitration award without giving GEICO a meaningful opportunity to defend its interests. For the reasons stated below, we affirm.
So chillax, you auto claims and underwriting professionals and insurance producers. The decision merely affirmed a confirmed arbitration award against GEICO's insured, "M.B." (identified identified in GEICO's related DJ action as Martin Brauner). It did not make any finding of coverage under GEICO's personal auto policy. That policy, of course, afforded liability coverage for "damages which an insured becomes legally obligated to pay because of (1) bodily injury, sustained by a person, and; (2) damage to or destruction of property, arising out of the ownership, maintenance or use of the owned auto or a non-owned auto."
The MO Court of Appeal's decision provides the factual and procedural background to the arbitration award and GEICO's appeal to that court:
The MO Court of Appeal's decision provides the factual and procedural background to the arbitration award and GEICO's appeal to that court:
In November of 2017, M.O. and Insured began a romantic relationship. Effective at that time was an automobile insurance policy issued by GEICO to Insured.
On February 25, 2021, M.O. submitted to GEICO a copy of a petition she intended to file against Insured, and made a final settlement offer to resolve her “claims against [Insured] for the applicable limits of $1m.”2 The petition attached to the settlement offer alleged that during “November and early December of 2017,” Insured and M.O. engaged in unprotected sexual activities in Insured’s vehicle, and during those sexual encounters, Insured “negligently caused or contributed to cause [M.O.] to be infected with HPV by not taking proper precautions and neglecting to inform and/or disclose his diagnosis,” despite “having knowledge of his condition.” M.O. alleged that as a result of Insured’s negligence, she incurred, and will incur, “past and future medical expenses,” as well as “past and future mental and physical pain and suffering.” On April 7, 2021, GEICO denied coverage and refused M.O.’s settlement offer. GEICO also initiated a declaratory judgment action in federal court to establish the parties’ rights and obligations under the insurance policy.2 It is unclear from the record when M.O. first submitted her claim to GEICO. However, in January 2021, GEICO informed M.O. via letter that it had “completed [its] coverage investigation” and determined “there was no coverage” because the damages claimed did not arise out of the normal use of the vehicle.” GEICO “disclaim[ed] any and all liability or obligation to [M.O.] and to others under” Insured’s automobile policy and advised that it would “take no further action with respect to any claim . . . and hereby withdraws from the matter entirely.”Meanwhile, on March 11, 2021, M.O. and Insured entered into a Contract to Limit Recovery to Specified Assets and Arbitration Agreement Pursuant to Section 537.065 RSMo (“065 Agreement”).3 On May 17, 2021, M.O. and Insured arbitrated M.O.’s claims, and the arbitrator thereafter issued his “Findings, Conclusions, and Award.”3 The 065 agreement was not made part of the record on appeal, nor was it presented to the trial court. Any reference to the title or the contents of the 065 Agreement we take from filings that were included in the record. Section 537.065, which will be discussed extensively in our analysis, allows an injured party and tortfeasor to enter into an agreement to limit the injured party’s recovery to the tortfeasor’s applicable insurance limits if the insurer has refused to defend the tortfeasor.The award first described procedural aspects of the arbitration proceeding, including that: (1) Prior to the arbitration, Insured submitted an Arbitration Statement detailing his defense; (2) Both parties presented opening statements at the arbitration; (3) Insured was given the opportunity to cross-examine M.O.’s witnesses and elicit testimony for Insured’s defense; (4) Insured submitted as exhibits three internet articles discussing HPV; (5) M.O. requested an award of $9.9 million in damages in her closing argument; and (6) In his closing argument, Insured disputed that he was aware he could transmit HPV to M.O., M.O. received HPV from him, he had a duty to disclose such diagnosis to M.O., and the amount of damages.As to his substantive findings, the arbitrator determined that: (1) “there was sexual activity in [Insured’s] automobile in November/December of 2017 which occurred in Jackson County, Missouri”; (2) the sexual activity in Insured’s vehicle “directly caused, or directly contributed to cause, M.O. to be infected with HPV”; (3) Insured knew he had “been told that his throat cancer tumor was diagnosed as HPV positive”; (4) Insured should have disclosed his diagnosis to M.O. prior to the sexual activity that occurred, but he did not; and (5) Insured “was negligent and is liable for causing M.O. to contract HPV.” The arbitrator found that “an amount that would fairly and justly compensate Plaintiff, M.O., for all of her damages and injuries is $5,200,000,” and entered an award in that amount “in favor of Plaintiff M.O. and against the Defendant [Insured].”On May 24, 2021, M.O. provided written notice to GEICO that she and Insured had entered into an agreement pursuant to section 537.065. The following day, M.O. initiated this action by filing her Petition for Damages in the trial court.4 On June 10, 2021, GEICO discovered the existence of this lawsuit by monitoring Case.net (Missouri state courts’ automated case management system). On June 18th, GEICO filed a motion to intervene.On June 22nd, M.O. filed a response to GEICO’s motion to intervene and a motion to confirm the arbitration award. In her motion to confirm the award, M.O. asserted she and Insured had agreed “that after an arbitration award is issued, [M.O.] will immediately seek to have the award confirmed . . . and reduced to judgment . . . and that neither party will seek judicial review of the award or attempt to have the award set aside, modified, amended or changed in any way unless by express written agreement of each party.” On June 29th, GEICO filed a reply in support of its motion to intervene. On July 2nd, the trial court granted M.O.’s motion to confirm the arbitration award and entered judgment in favor of M.O. and against Insured in the amount of $5,200,000. The trial court adopted and incorporated the findings and conclusions of the arbitration award, and stated the award was attached to the judgment as Exhibit A. No exhibit was attached to the judgment. Also on July 2nd, after entering judgment, the trial court entered an order granting GEICO’s motion to intervene.On July 30th, GEICO filed a motion for leave to conduct discovery, a motion for new trial, and a motion to vacate the arbitration award. In the latter two motions, GEICO asserted that the arbitration award and judgment confirming it should be vacated because the award “was procured by collusion, fraud, [and] undue means,” it was “contrary to public policy and §§ 537.065 and 435.350,” it was the result of an invalid and unenforceable arbitration agreement, and it violated GEICO’s due process rights and right to access the courts. The parties submitted additional briefing on GEICO’s motions. On September 8, 2021, the trial court summarily denied all of the motions and entered a “Judgment Nunc Pro Tunc,” attaching the arbitration award that was inadvertently omitted from the original judgment.GEICO appeals, asserting three claims of error relating to the trial court’s confirmation of the arbitration award—specifically, to the timing of the trial court’s confirmation.5 GEICO asserts that by confirming the arbitration award without giving GEICO a meaningful opportunity to defend its interests and develop facts and arguments pre-judgment, the trial court acted in contravention of section 537.065 and Rule 52.12 (Point I), section 435.405 (Point II), and state and federal constitutional provisions guaranteeing due process and access to the courts (Point III).
What most articles and headlines obscure or gloss over is the fact that GEICO commenced an action for a declaration of non-coverage against both the claimant "M.O." and its insured in US District Court for the Western District of Missouri in April 2021. Not surprisingly, GEICO's primary argument is that contracting an STD from having sex in a car does not constitute bodily injury arising out of the ownership, maintenance of use of the insured motor vehicle. It arises out of, so to speak, something else.
GECIO's Second Amended Complaint for Declaratory Judgment states as the Nature of Action and Relief Sought of its DJ action:
1. This is an action for declaratory relief under 28 U.S.C. § 2201 for the purpose of determining the Parties’ rights and obligations, if any, under a[] [$1 million] automobile insurance policy (the “Auto Policy”) issued by GEICO General Insurance Company and [a $1 million] umbrella insurance polic[y] (the “Umbrella Policy”) issued by Government Employees Insurance Company (collectively, the “Policies”) to Brauner.
2. GEICO seeks a declaration that it has no duty under the Policies to defend or indemnify Brauner for the third party bodily injury liability claim asserted by M.O. (“the subject claim”).
3. On February 25, 2021, M.O. demanded that GEICO pay $1,000,000 to resolve her “claims against [GEICO’s] insured” (i.e., Brauner). She included in her demand letter a proposed state court petition and indicated intent to file it should GEICO not satisfy her demand.
4. GEICO denies the existence of coverage under the Policies for the subject claim.
5. There is an actual, immediate controversy among the Parties as to whether coverage for the subject claim exists under the Policies.
6. All necessary and proper parties are before the Court with respect to the matters in controversy as set forth herein.
7. GEICO has no adequate remedy at law.
Footnote #1 to GEICO's Second Amended Complaint that for reasons not disclosed, the "Court’s October 20, 2021 order dismissed (previous defendant) M.O. from the case. Dkt. 52."
GEICO's Second Amended Complaint adds some factual context for the claimant's allegations:
M.O.’s Threatened Tort Lawsuit Against M.B.
14. On February 25, 2021, M.O. sent GEICO a demand letter. The body of the letter stated, in its entirety:
Here’s the Petition that will be filed against your insured, [M.B.]. Before doing so, we have been authorized to make one final attempt to resolve [M.O.’s] claims against your insured for the applicable limits of $1m. Let me know.15. M.O.’s proposed state court petition sought from M.B. damages for negligence and negligent infliction of emotional distress.
16. In it, M.O. alleges M.B. and M.O. entered into a sexual relationship in November 2017 and early December 2017, including that the two “engaged in unprotected sexual activities, including intercourse, in Defendant [M.B.’s] home and in his 2014 Hyundai Genesis car.”
17. M.O. further alleges that M.B. negligently failed to tell M.O. that he was infected with anogenital human papillomavirus (HPV), and that he failed to use adequate protection and take proper precautions to prevent its transmission to her.
It appears from the docket of GEICO's DJ action and the Scheduling Order that was filed on May 12, 2022 that discovery in the DJ action is underway and will be bifurcated:
The first phase of discovery in this action shall conclude August 15, 2022. Phase I discovery will include discovery of all issues relating to the parties’ anticipated dispositive motions directed to the threshold coverage issue. Phase II discovery will involve discovery relating to bad faith or extra-contractual claims, as well as any other merits issues. To the extent that issues overlap, the Court directs the parties to undertake discovery within Phase I.
You can mark your calendars as follows:
July 15, 2022 -- Status reportJuly 29, 2022 -- Motion to join additional partiesJuly 29, 2022 -- Motion to amend pleadingsAugust 15, 2022 -- Close of Phase I discoveryAugust 31, 2022 -- Motions for Summary Judgment On Coverage IssueSeptember 21, 2022 -- Motions ResponsesOctober 5, 2022 -- Motions Replies
I've got a Court Listener alert set up for GEICO's DJ action, and I'll post again when the MSJs are filed. That should be some interesting reading, there. Meanwhile, I'm predicting that the Missouri District Court will ultimately find in favor of GEICO and rule that M.O.'s contraction of HPV did not arise out of the ownership, maintenance or use of Brauner's 2014 Hyundai Genesis.
What I can guarantee is that this case will be in next semester's insurance law course syllabuses in law schools across the country.
Fun facts to know and tell for coverage nerds (like me):
- the term "anogenital human papillomavirus" has appeared in only one reported case state or federal court decision in the United States ever -- this case;
- although homeowners insurance policies typically contain a communicable disease exclusion, personal auto policies don't (Extra Credit Q: Because...?);
- the claimant originally filed a hit-and-run UM claim under her ex-BF's policy with GEICO (okay, that's not true);
- the insured sought physical damage coverage under his policy's explosion, colliding with bird or animal and/or civil commotion perils (okay, also not true); and
- GEICO originally commenced its DJ action in Kansas, but for "the convenience of the parties and in the interest of justice", the action was fittingly transferred to the show-me (yours and I'll show you mine) state of Missouri, the Kansas district court judge musing in the 2022 frontrunner for masterful understatement, "This isn't the typical insurance coverage dispute." NSS, judge. NS.
Roy A. Mura