Brenda Estes, As Guardian and Next Friend for Jane Doe v. The Board of Trustees of The Missouri Public Entity Risk Management Fund In Their Official Capacities ( 2021 )

In the
Missouri Court of Appeals
Western District
BRENDA ESTES, AS GUARDIAN )
AND NEXT FRIEND FOR JANE DOE, )
) WD83764
Appellant, )
) OPINION FILED: March 16, 2021
v. )
)
THE BOARD OF TRUSTEES OF THE )
MISSOURI PUBLIC ENTITY RISK )
MANAGEMENT FUND IN THEIR )
OFFICIAL CAPACITIES, ET AL., )
)
Respondents. )
Appeal from the Circuit Court of Buchanan County, Missouri
The Honorable Kate H. Schaefer, Judge
Before Division Four: Cynthia L. Martin, Chief Judge, Presiding, Lisa White Hardwick,
Judge and Mark D. Pfeiffer, Judge
This case involves several issues of first impression relating to whether the
Missouri Public Entity Risk Management Fund ("MOPERM") and its board of trustees
can be sued in tort. Brenda Estes ("Estes"), as next friend for Jane Doe ("Doe"), appeals
from the trial court's grant of summary judgment in favor of MOPERM and the
individual members of its board of trustees in their official capacities. The trial court
found that MOPERM has sovereign immunity from claims of bad faith failure to settle
within policy limits and breach of fiduciary duty asserted by Estes following an
assignment of rights from MOPERM's insured, Alberta Hughes ("Hughes"). Because
MOPERM does not have sovereign immunity, and because no other basis in the record
supports the grant of summary judgment as a matter of law, we reverse the trial court's
grant of summary judgment and remand this matter for further proceedings consistent
with this opinion.
Factual and Procedural Background1
Doe is a developmentally disabled woman who requires daily caretaking services.
At all times relevant to this case, Doe was receiving services from Progressive
Community Services ("PCS"), and specifically from PCS's employee, Hughes. PCS was
organized under sections 205.968 through 205.973.2
MOPERM is a body corporate and politic created by the General Assembly.3 It is
authorized to provide insurance coverage to "public entities" as that term is defined in
section 537.700.2(3). As a "public entity" under section 537.700.2(3), PCS elected to
obtain insurance coverage from MOPERM, and was issued a memorandum of coverage
for the period from January 1, 2012 to January 1, 2013. The memorandum of coverage
1
When reviewing the grant of a motion for summary judgment, "[w]e view the record in the light most
favorable to the party against whom the judgment was entered and accord the non-movant all reasonable inferences
from the record." Traweek v. Smith, 607 S.W.3d 779, 784 (Mo. App. W.D. 2020). Here, the factual and procedural
background is drawn from uncontroverted facts identified in the parties' summary judgment pleadings, and from the
procedural history of the case found in court records.
2
All statutory references are to RSMo 2016, as supplemented, except as otherwise noted.
3
See section 537.700 et. seq.
2
also provided coverage to PCS's officers and employees as authorized by statute.4
Section 537.705.1(2).
In November 2013, Estes, as legal guardian and next friend for Doe, brought a
negligence action against Hughes after Hughes's husband raped and impregnated Doe
while under Hughes's care ("Underlying Lawsuit"). MOPERM accepted Hughes's
defense in the Underlying Lawsuit, subject only to a reservation of rights for any
obligation to cover an award of punitive damages.
MOPERM's board of trustees possessed the exclusive right and sole authority to
negotiate the settlement of Estes's claims against Hughes in the Underlying Lawsuit.
Section 537.705.3. Efforts to settle the Underlying Lawsuit before trial were
unsuccessful. The maximum amount MOPERM is permitted to pay for the payment and
settlement of claims arising out of a single occurrence is $2,000,000, subject to indexed
adjustments. Sections 537.756.1 and .2. Estes purportedly offered to settle her claims
against Hughes in exchange for payment at or below this statutory limit. Before trial,
MOPERM's board of trustees never offered more than $150,000 to settle Estes's claims
against Hughes.
The Underlying Lawsuit proceeded to trial. A jury entered a verdict in favor of
Estes and against Hughes on June 4, 2015, in the amount of $3,000,000 in compensatory
damages (which was reduced by 30 percent for fault allocated to Doe's grandmother), and
4
The extent of coverage obtained by PCS for its officers and employees as described in PCS's
memorandum of coverage is not an issue in this appeal.
3
$6,000,000 in punitive damages. The trial court entered judgment accordingly in the
Underlying Lawsuit on June 30, 2015.
Hughes appealed. On December 20, 2016, the trial court's judgment in the
Underlying Lawsuit was affirmed by this Court. Doe by and through Doe v. Hughes,
WD 79064, 2016 WL 7364704 (Mo. App. W.D. Dec. 20, 2016). Hughes's application
for transfer to the Missouri Supreme Court was granted on April 4, 2017. Doe by and
through Doe v. Hughes, SC96211.5 When the Supreme Court granted transfer, at the
request of the parties, it also entered an order staying the proceedings and remanding the
matter back to the trial court to enable settlement negotiations.
On March 30, 2017, and thus just prior to the grant of transfer by the Supreme
Court, Hughes assigned to Estes, as next friend for Doe, all of Hughes's rights, actions,
and causes of action against MOPERM and its board of trustees arising out of the
handling of the claims asserted in the Underlying Lawsuit.
On May 15, 2017, by agreement of the parties, the trial court in the Underlying
Lawsuit entered an amended judgment vacating the jury's verdict and the trial court's
original judgment dated June 30, 2015. The amended judgment entered judgment in
favor of Estes and against Hughes in the amount of $8,000,000 in compensatory
damages, with no fault apportioned to Doe's grandmother. The amended judgment also
awarded Estes pre-judgment interest and post-judgment interest. MOPERM and the
5
When the Missouri Supreme Court accepted transfer, our opinion in Doe by and through Doe v. Hughes,
WD 79064, 2016 WL 7364704 (Mo. App. W.D. Dec. 20, 2016) was automatically vacated and has no precedential
effect. Stickler v. Ashcroft, 539 S.W.3d 702, 713 n.9 (Mo. App. W.D. 2017) (citing Bolden v. State, 423 S.W.3d
803, 808 n.6 (Mo. App. E.D. 2013) (holding that following Supreme Court's grant of transfer, Court of Appeal's
decision "'may be referred to as functus officio,' meaning 'without further authority or legal competence[.]'") (citation
omitted)).
4
board of trustees' answer to the first amended petition filed by Estes in the instant case
affirmatively states in paragraph 25 that the amended judgment in the Underlying
Lawsuit "was entered with the consent of MOPERM," and that "MOPERM consented to
the assignment" of Hughes's rights and claims against MOPERM to Estes, as next friend
for Doe. On June 5, 2017, the appeal pending in the Missouri Supreme Court, but stayed
by the Court's order, was voluntarily dismissed. Doe by and through Doe v. Hughes,
SC96211.
After entry of the amended judgment in the Underlying Lawsuit, MOPERM paid
Estes, as next friend for Doe, $2,000,000 in partial satisfaction of the judgment entered
against Hughes.
On May 9, 2018, Estes, as next friend for Doe, and based on the assignment of
rights and claims received from Hughes, filed suit in the Circuit Court of Buchanan
County, Missouri against MOPERM and the individual members of MOPERM's board of
trustees in their official capacities. Estes's first amended petition alleged a claim of bad
faith failure to settle within policy limits and a claim of breach of fiduciary duty arising
out of MOPERM's handling of the claims asserted against Hughes in the Underlying
Lawsuit.
MOPERM and the board of trustees filed a motion for summary judgment.
MOPERM and the board of trustees asserted that the uncontroverted material facts
established, as a matter of law, that Estes's claims were barred by sovereign immunity;
that Estes's bad faith failure to settle claim was precluded because MOPERM does not
owe a duty of good faith to its insureds as it is not a liability insurer and merely
5
administers a self-insurance pool; and that Estes's claims were precluded because
MOPERM's enabling legislation prohibits the use of MOPERM funds to pay such claims,
and prohibits MOPERM from paying in excess of $2,000,000 for all claims arising out of
a single occurrence.
On March 31, 2020, the trial court entered its final judgment and order
("Judgment") granting summary judgment in favor of MOPERM and its board of
trustees. The Judgment concluded that "the Court finds no genuine issue of material fact
and SUSTAINS the motion. The Court rules that MOPERM has sovereign immunity for
all claims asserted in both counts of Plaintiff's First Amended Petition."
Estes appeals.
Standard of Review
"We review the grant of summary judgment de novo." In re Annaliese Brightwell
Trust, 605 S.W.3d 143, 145 (Mo. App. W.D. 2020). "Summary judgment shall be
entered if there is no genuine issue as to any material fact and the moving party is entitled
to judgment as a matter of law." Messina v. Shelter Ins. Co., 585 S.W.3d 839, 842 (Mo.
App. W.D. 2019) (citation and quotation omitted). "The Court reviews the record in the
light most favorable to the party against whom judgment was entered, and gives the non-
movant the benefit of all reasonable inferences from the record." Truman Med. Ctr., Inc.
v. Progressive Cas. Ins. Co., 597 S.W.3d 362, 365-66 (Mo. App. W.D. 2020) (citation
and quotation omitted). Here, Estes does not contend that controverted facts precluded
the entry of summary judgment. Instead, Estes contends that based on the uncontroverted
facts, summary judgment should not have been granted as a matter of law.
6
MOPERM and the board of trustees' motion for summary judgment urged four
distinct bases for granting summary judgment in their favor. The trial court's Judgment
expressly relied on only one urged basis--that sovereign immunity barred Estes's claims
against MOPERM and its board of trustees in their official capacities. The trial court did
not address the contention that MOPERM is not a liability insurer, and therefore owes no
duty of good faith to its insureds to attempt to settle claims within policy limits. The trial
court did not address the contention that MOPERM's funds cannot be used to pay claims
of the nature asserted by Estes. And the trial court did not address the contention that
MOPERM has paid all that it is statutorily permitted to pay for claims arising out of a
single occurrence. However, we "will affirm the trial court's summary judgment on any
ground supported by the record, whether relied on by the trial court or not." Sisk v.
Union Pac. R. Co., 138 S.W.3d 799, 809 (Mo. App. W.D. 2004) (quotation omitted); see
also Nowden v. Div. of Alcohol & Tobacco Control, 552 S.W.3d 114, 116 (Mo. banc
2018) ("[T]he trial court's judgment may be affirmed on any basis supported by the
record." (quotation omitted)).
Analysis
Estes raises three points on appeal challenging the trial court's grant of summary
judgment in favor of MOPERM and its board of trustees. The first and second points
address the trial court's stated basis for granting summary judgment--sovereign
immunity.6 Specifically, in her first point, Estes asserts that the trial court committed
6
Estes does not contest that if MOPERM enjoys sovereign immunity from Estes's claims of bad faith failure
to settle and breach of fiduciary duty, that same protection extends to the individual members of the board of
trustees who have been sued in their official capacities. "Sovereign immunity, if not waived, bars suits against
7
legal error in concluding that Estes's claims were barred by sovereign immunity because
MOPERM is not a public entity entitled to sovereign immunity since it is not controlled
by and directly answerable to public officials, public entities, or the public itself, and
does not perform a service traditionally performed by the government. Estes's second
point argues that the trial court committed legal error in concluding that Estes's claims
were barred by sovereign immunity because MOPERM does not hold state funds and the
state is not liable for MOPERM's obligations. Whether MOPERM has sovereign
immunity from tort claims presents an issue of first impression in Missouri.
Estes's third point on appeal addresses the alternative bases for granting summary
judgment raised in MOPERM and the board of trustees' motion for summary judgment,
but not expressly relied on by the trial court in its Judgment. Estes asserts that the trial
court's Judgment cannot be affirmed on any other basis supported by the record because
MOPERM is a liability insurer with a duty to act in good faith with respect to the
settlement of claims against its insureds, and because Estes's claims are neither prohibited
by MOPERM's enabling legislation nor subject to the statutory limit on payment of all
claims arising out of a single occurrence. Each of the alternative bases for summary
judgment addressed in Estes's third point on appeal presents an issue of first impression
in Missouri.
We address Estes's points on appeal in order. Our analysis is benefitted by first
briefly explaining the purpose and function of MOPERM.
employees [named] in their official capacity, as such suits are essentially direct claims against the state." Suppes v.
Curators of Univ. of Mo., 613 S.W.3d 836, 855 (Mo. App. W.D. 2020) (citation omitted).
8
I.
MOPERM is a creature of statute, authorized to provide insurance coverage to public
entities, their officers and employees
"MOPERM is a public body corporate and politic,7 created by the Missouri
General Assembly in 1986 to provide liability coverage for insured risks to participating
public entities and their officers and employees when engaged in their official duties[.]"
Gilley v. Mo. Pub. Entity Risk Mgmt. Fund, 437 S.W.3d 315, 318 (Mo. App. W.D. 2014).
See section 537.700.1; section 537.705.1. As used in sections 537.700 through 537.756,
"public entity" means "any city, county, township, village, town, municipal corporation,
school district, special purpose or taxing district, or any other local public body created
by the general assembly." Section 537.700.2(3). The MOPERM enabling legislation
affords these public entities the opportunity to acquire, at their election, the right of a
defense to, and coverage for, claims that are not covered by the State Legal Expense
Fund ("SLEF"). Gilley, 437 S.W.3d at 320 n.6 (citing P.L.S. ex rel. Shelton v. Koster,
360 S.W.3d 805, 814-17 (Mo. App. W.D. 2011) (observing that the SLEF is limited to
coverage of the state, agencies of the state, and their officers and employees)); see section
105.711.2(1).
"The general administration of, and responsibility for, the proper operation of"
MOPERM is managed through a board of trustees. Section 537.730.1. MOPERM's
board of trustees "shall have the powers and duties specified in sections 537.700 to
537.755 and such other powers as may be necessary or proper to enable it, its officers,
7
We discuss, infra, the import of the General Assembly's designation of MOPERM as a body corporate and
politic.
9
employees and agents to carry out fully and effectively all the purposes of sections
537.700 to 537.755." Section 537.700.1.
"'MOPERM functions like a liability insurance carrier and issues to each insured a
'memorandum of coverage.'" Gilley, 437 S.W.3d at 320 n.6 (quoting Mo. Pub. Entity
Risk Mgmt. Fund v. Am. Cas. Co. of Reading, 399 S.W.3d 68, 71 (Mo. App. W.D.
2013)). Absent a statutory provision to the contrary, MOPERMS's coverage obligations
are controlled by the language in the memorandum of coverage. Naucke v. Mo. Pub.
Entity Risk Mgmt. Fund, 95 S.W.3d 166, 168-69 (Mo. App. W.D. 2003).
MOPERM's board of trustees has the sole and exclusive power to "negotiate the
settlement of and provide the defense of any claim for which coverage has been obtained
by any public entity in accordance with coverages offered by the board." Section
537.705.3. MOPERM's enabling legislation provides that "[n]o amount in excess of the
amount specified by section 537.756 shall be paid from the fund for the payment and
settlement of claims arising out of any single occurrence." Section 537.705.2. Sections
537.756.1 and .2 limit this amount to $2,000,000, subject to indexed adjustments.8
Because MOPERM "is a body corporate and politic, [] the state of Missouri shall
not be liable in any way with respect to claims made against the fund or against entities
or individuals covered by the fund, nor with respect to any expense of operation of the
fund." Section 537.705.4. "Money in the fund is not state money nor is it money
collected or received by the state." Id.8
Section 537.730.8 does authorize MOPERM's board of trustee to procure insurance covering participating
public entities, their officer and employees for amounts in excess of the statutory limit set forth in section 537.756.
There is nothing in the record which suggests that excess coverage of this nature was obtained by PCS from
MOPERM.
10
II.
Points One and Two: Because MOPERM is not a public entity for purposes of
sovereign immunity protection under section 537.600.1, the trial court erred in
concluding that Estes's claims against MOPERM were barred by sovereign immunity
Estes's first point on appeal argues that the trial court committed legal error in
granting summary judgment in favor of MOPERM and its board of trustees on the basis
of sovereign immunity because MOPERM does not qualify as a public entity for
purposes of sovereign immunity under section 537.600.1 as it is not controlled by and
answerable to public officials, public entities, or the public itself, and as it does not
perform a service traditionally performed by the government. Estes's second point on
appeal argues that the trial court committed legal error in granting summary judgment in
favor of MOPERM and its board of trustees on the basis of sovereign immunity because
MOPERM does not hold state funds that are subject to sovereign immunity. We address
these points collectively.
A.
Public entities are entitled to sovereign immunity protection
The Missouri Supreme Court "abolished sovereign immunity in Jones v. State
Highway Comm'n, 557 S.W.2d 225 (Mo. banc 1977)." Stacy v. Truman Med. Ctr., 836
S.W.2d 911, 917 (Mo. banc 1992) (abrogated on unrelated grounds by Southers v. City
of Farmington, 263 S.W.3d 603, 614 n.13 (Mo. banc 2008)). "The legislature, however,
restored sovereign immunity by enacting sections 537.600 through 537.650, RSMo 1986
and Supp. 1991." Id. Section 537.600.1 provides, in pertinent part:
11
Such sovereign immunity or governmental tort immunity as existed at
common law in this state prior to September 12, 1977, except to the extent
waived, abrogated or modified by statutes in effect prior to that date, shall
remain in full force and effect; except that, the immunity of the public
entity from liability and suit for compensatory damages for negligent acts
or omissions is hereby expressly waived in the following instances: . . . .9
(Emphasis added.)
"Section 537.600 introduced the phrase 'public entity' without defining it." Stacy,
836 S.W.2d at 917. In 1989, the General Assembly partially defined "public entity" by
amendment to section 537.600 to provide that "'public entity' as used in this section shall
include any multistate compact agency" formed between Missouri and another state and
approved by the Congress of the United States. Section 537.600.3 RSMo 1986.
However, no further guidance is provided in sections 537.600 through 537.650 about the
meaning of the term "public entity" beyond the directive that "governmental tort
immunity as existed at common law in this state prior to September 12, 1977 . . . shall
remain in force and effect." Section 537.600.1.
In Stacy, our Supreme Court acknowledged the absence of a statutory definition
for "public entity" in sections 537.600 through 537.650, and provided guidance about
determining the reach of the term:
Section 537.600.3 contains a partial definition related to a multi-state
compact agency not relevant to the present discussion. The fact that the
legislature partially defined the term 'public entity' in 1989, however,
signifies that this term is intended to encompass the entities that will be
protected under the statute. In turn, based upon the legislative history, this
9
The statutory exceptions to sovereign immunity described in section 537.600.1 are for "injuries resulting
from a public employees' operation of a motor vehicle in the course of their employment, or injuries caused by the
condition of a public entity's property." State ex rel. Blue Springs School Dist. v. Grate, 576 S.W.3d 262, 268 (Mo.
App. W.D. 2019) (internal citation and footnote omitted). Those exceptions are not at issue in this appeal.
12
statute protects 'public entities' that were protected under the sovereign
immunity cases prior to September 12, 1977.
Section 537.700.2(3) specifically defines 'public entity' for purposes of
sections 537.700 to 537.755 related to risk management for public entities.
Section 537.745.1 provides that the liability of public entities under
sections 537.700 to 537.755 shall be the same as the liability of public
entities under the sovereign immunity statute. Thus, the definition of
'public entity' in section 537.700.2(3) may be helpful in deciding the scope
of 'public entities' under section 537.600. Section 537.700.2(3) provides as
follows:
[T]he following words and terms . . . mean:
******
(3) 'Public entity', any city, county, township, village, town, municipal
corporation, school district, special purpose or taxing district, or any other
local public body created by the general assembly.
836 S.W.2d at 917 (citations omitted). Stacy thus held that although sections 537.600 to
section 537.650 do not identify all of the "public entities" entitled to sovereign immunity,
at a minimum, the term includes the "public entities" defined in section 537.700.2(3) who
are eligible to obtain coverage from MOPERM. Id.Stacy inherently recognized, however, that the definition of "public entity" in
section 537.700.2(3) used to determine MOPERM eligibility is not exhaustive for
purposes of determining sovereign immunity eligibility,10 and that entities which do not
fall within the MOPERM definition may nonetheless possess attributes sufficient to
10
That is obviously the case as the state and agencies of the state enjoy sovereign immunity, and are thus
"public entities" for purposes of section 537.600.1, even though the state and agencies of the state do not fall within
the definition of "public entity" set forth at section 537.700.2(3). See Metro. St. Louis Sewer Dist. v. City of
Bellefontaine Neighbors, 476 S.W.3d 913, 921 (Mo. banc 2016) (observing that '[t]he rule is that the state, by reason
of its sovereign immunity, is immune from suit and cannot be sued in its own courts without its consent. . ."
(quotation omitted)); see P.L.S. ex rel. Shelton, 360 S.W.3d at 819 (distinguishing the state and agencies of the state
for sovereign immunity and the SLEF purposes from public entities as defined in MOPERM's enabling legislation).
13
warrant extending sovereign immunity protection because it can be concluded the entity
would have enjoyed such protection prior to September 12, 1977. Id. The Supreme
Court in Stacy was asked to determine whether Truman Medical Center ("TMC"), a
private, not-for-profit hospital, was a "public entity" for purposes of section 537.600.1
sovereign immunity protection. Id. The Court framed the issue accordingly:
Because TMC is not any of the specific entities listed in section
537.700.2(3), but is a private, not-for-profit corporation pursuant to chapter
355, TMC is not a defined 'public entity' for purposes of sovereign
immunity. However, because the case law has treated some hybrid entities,
which are not expressly included in the above definition, [as subject to
sovereign immunity] the issue remains whether as a hybrid entity it is
enough like a public entity that it is entitled to sovereign immunity under
section 537.600.
Id. (emphasis added) (citations omitted).
To settle upon the criteria for determining if a hybrid entity is entitled to sovereign
immunity protection, Stacy examined three earlier cases where a hybrid entity was
deemed to be a public entity for purposes of section 537.600.1. Id. at 918 (citing State ex
rel. Reg'l Justice Info. Serv. Comm'n v. Saitz, 798 S.W.2d 705, 706 (Mo. banc 1990)
("REJIS") (involving a joint commission created by the City of St. Louis and St. Louis
County to operate a regional criminal justice database); State ex rel. Trimble v. Ryan, 745
S.W.2d 672, 674 (Mo. banc 1988) (involving the Bi-State Development Agency formed
by interstate compact between Missouri and Illinois in 1949 to address metropolitan
transportation issues and needs); State ex rel. Cass Med. Ctr. v. Mason, 796 S.W.2d 621,
621 (Mo. banc 1990) (involving a county owned hospital)). After reviewing these cases,
14
Stacy identified "three features common among the entities," and designated the three
features as "requirements for sovereign immunity." Id. at 919.
"First, each entity must perform a service traditionally performed by the
government, i.e., the provision of a criminal justice database as in REJIS, metropolitan
transportation as in Trimble, and medical care as in Cass Medical Center." Id. "The
second, and probably the most critical, requirement of entities entitled to sovereign
immunity is that they are controlled by and directly answerable to one or more public
officials, public entities, or the public itself." Id. "The third requirement concerns what
limitations, if any, apply to the creation of a public entity that will have the benefits of
sovereign immunity. Put another way, the basic issue involves how and by whom is
government or a public entity formed?" Id.
B.
Whether MOPERM is enough like a public entity to warrant sovereign immunity
protection
MOPERM concedes that it is not one of the specific entities listed in section
537.700.2(3)'s definition of "public entity." That is not unexpected since the definition of
"public entity" in section 537.700.2(3) is intended to identify the entities eligible to
obtain coverage from MOPERM. And although MOPERM is a legislatively formed
entity that operates statewide, MOPERM does not contend that it enjoys sovereign
immunity because it is the state or an agency of the state. Nor could it, as section
15
537.705.4 expressly provides that MOPERM is not "the state."11 Thus, MOPERM can
only establish that it is entitled to sovereign immunity if it is a hybrid entity that is
"enough like a public entity that it is entitled to sovereign immunity under section
537.600." Stacy, 836 S.W.2d at 917. To achieve this standard, MOPERM must satisfy
the three requirements announced in Stacy. Id. at 919.
i. MOPERM satisfies the third Stacy requirement as it was formed by the
government
Estes's first point on appeal challenges only whether MOPERM satisfies the first
and second Stacy requirements. Estes does not contest that MOPERM satisfies the third
Stacy requirement. In fact, MOPERM was formed by the General Assembly as a body
corporate and politic and thus satisfies the third Stacy requirement. See section
537.700.1. "New governmental entities or political subdivisions of existing
governmental entities are formed by government itself or by the voters acting as a group."
Stacy, 836 S.W.2d at 919.
Though MOPERM satisfies the third Stacy requirement, that is not sufficient,
standing alone, to support the conclusion that MOPERM is a "public entity" pursuant to
section 537.600.1. See Trimble, 745 S.W.2d at 674 (discussing how Bi-State's
commissioners are appointed and whether Bi-State's authority aligned with "substantial
governmental authority and power" to determine whether Bi-State was entitled to
11
The implication on sovereign immunity of enabling legislation creating an entity or fund that includes a
provision declaring that the entity or fund is not the state or possessed of state moneys is discussed in greater detail,
infra. In connection with that discussion, we observe in footnote 20, infra, that the application of the Stacy hybrid
entity requirements to entities like MOPERM that are authorized by enabling legislation, but that are plainly not
local or regional entities, is potentially suspect. However, both parties in this case believe the Stacy requirements
are controlling in determining whether MOPERM has sovereign immunity, influenced, no doubt, by the fact that
Stacy neither holds, nor hints, that only local or regional entities can be "hybrid entities" whose eligibility for
sovereign immunity depends on satisfying the Stacy requirements. 836 S.W.2d at 919.
16
sovereign immunity, though Bi-State was a body corporate and politic); Reg'l Justice
Info. Serv. Comm'n, 798 S.W.2d at 707-08 (discussing numerous factors to determine if
REJIS enjoyed sovereign immunity, though REJIS was a body corporate and politic).
Thus, Estes's concession that MOPERM satisfies the third Stacy requirement because it is
an entity formed by government is not dispositive, as all three Stacy requirements must
be established. Stacy, 836 S.W.2d at 919.
ii. MOPERM does not satisfy the first Stacy requirement because it does
not perform a service traditionally performed by government
We next address whether MOPERM "perform[s] a service traditionally performed
by the government." Stacy, 836 S.W.2d at 919. The Supreme Court clarified the focus of
this requirement as follows:
We have avoided characterizing this requirement as calling for a
governmental function; such terminology would confuse this requirement
with the distinction between the two types of functions performed by
municipalities and school districts, e.g., governmental versus proprietary.
In fact, this requirement is much broader because we are asking whether
this entity does what government has typically done in the past; because
government performs both governmental and proprietary functions,
activities fitting within either of those categories should satisfy this
requirement. In view of the broad range of activities in which the
government is involved, it is difficult to envision a hybrid entity that meets
the other requirements but would not meet this one.
Id. (emphasis added). MOPERM has not referred us to any situation where our state
government has historically performed the service of providing optional liability
insurance coverage to public entities, their officers and employees, in exchange for the
payment of annual contributions that are tantamount to premiums. We are aware of no
such service ever having been undertaken by our state government prior to September 12,
17
1977, the temporal benchmark before which sovereign immunity as existed at common
law in this state is to remain in full force and effect. Section 537.600.1.
MOPERM does point to a different "insuring" function undertaken by our state
government beginning in 1967 through the "Tort Defense Fund." Section 105.710 RSMo
1967. By 1975, section 105.710 provided that "[a]s part of the compensation to be paid"
to various officers and employees of designated state agencies, "the commissioner of
administration is authorized to pay from the 'Tort Defense Fund,' which is hereby
created," final judgments against said persons "arising out of and performed in
connection with their official duties in behalf of the state."12 Section 105.710 RSMo
Cum. Supp. 1975. In 1983, the Tort Defense Fund was replaced when the General
Assembly enacted sections 105.711 through 105.726 to create the SLEF. Betts-Lucas v.
Hartmann, 87 S.W.3d 310, 319 (Mo. App. W.D. 2002). Similar to the Tort Defense
Fund, the SLEF "consists of sums appropriated by the General Assembly and any funds
otherwise credited to the Fund by certain departments pursuant to section 105.716."
P.L.S. ex rel. Shelton, 360 S.W.3d at 809. And similar to the Tort Defense Fund, the
SLEF is available for:
[T]he payment of any claim, or any amount required by any final judgment
against (1) the State, or any agency of the State (to the extent that the claim
against the State is authorized pursuant to section 537.600, the sovereign
immunity statute); and (2) against 'any officer or employee of the State or
any agency of the State,' as provided and as limited in the statute.
12
When section 105.710 was originally enacted, it did not create a "Tort Defense Fund" funded by state
appropriations, but instead authorized the Commissioner of Administration to acquire private liability insurance to
cover those designated in the statute, with the cost of premiums chargeable to each state agencies budget. Section
105.710 RSMo. 1967. Section 105.710 was amended, however, in 1969 to move away from authorizing the
acquisition of private liability insurance to the creation of the "Tort Defense Fund." Section 105.710 RSMo 1969.
18
Id.MOPERM argues that the SLEF, and the Tort Defense Fund it replaced, require us
to conclude that MOPERM is performing a traditional governmental service. It is true
that "[t]he MOPERM Fund was created by the legislature to function (in part) in a
fashion similar to that of the [SLEF.]" Id. at 813. And it is true that MOPERM and the
SLEF are both authorized to provide legal protection to certain governmental entities, and
their officials and employees. See id. at 814 ("The first thought coming to mind is that
the MOPERM statute was designed to provide a mechanism for the defense of the
various local government employees who were excluded from the scope of the [SLEF].").
Thus, like MOPERM, the SLEF is a "mechanism to settle and pay 'claims' against . . .
individual employees" and "sounds like insurance." Dixon v. Holden, 923 S.W.2d 370,
378 (Mo. App. W.D. 1996).
However, unlike MOPERM, the SLEF is not a body corporate and politic, and is
merely an appropriation of state funds which the Attorney General is authorized to use to
defend and cover claims against the state, agencies of the state, and their officers and
employees acting in their official capacity. Section 105.711.1; section 105.711.2(1)-(2).
In other words, the SLEF is a designated appropriation of state funds used to defend and
cover claims that impact the state's interests. Section 105.711.2(1)-(2). This function
"seem[s] to flow from one policy--to promote governmental efficiency and protect state
business by protecting employees." Dixon, 923 S.W.2d at 381 (emphasis added). "The
fundamental purpose of the SLEF is to protect the covered employees from the burden
and expense of civil litigation relating to the performance of their duties. The purposes
19
are apparent. A competent employee, who is in demand elsewhere, may be unwilling to
work for the state without protection. Those who do serve may be unwilling to take
necessary risks for fear of litigation." Laughlin v. Perry, 604 S.W.3d 621, 632 (Mo. banc
2020) (quotation omitted)). MOPERM does not serve this same function. MOPERM is a
legal entity that is distinct from those it insures, and "a public entity must pay for the
right to participate in MOPERM, and such participation is optional." Gilley, 437 S.W.3d
at 320 n.6 (citing section 537.705.1). Because public entities entitled to obtain coverage
from MOPERM are not the state or state agencies, MOPERM's provision of a defense
and coverage to participating public entities does not serve the function of protecting
state business or state funds. See P.L.S. ex rel. Shelton, 360 S.W.3d at 818-19(distinguishing public entities eligible for MOPERM coverage "for which right they must
pay" from the "free coverage funded by the General Assembly's appropriations" provided
to the state, agencies of the state, and their officers and employees); cf. section 537.705.4
(providing that MOPERM funds are not state money, and that the state is not liable for
claims against MOPERM, or against any public entity, officers or employees covered by
MOPERM).
Even if we ignore this fundamental difference in purpose, it is highly persuasive
that our courts have not characterized the entirety of the service provided by the SLEF as
a "traditional governmental service." In Dixon, the State Treasurer and the
Commissioner of Administration argued that a suit against the SLEF to recover a
judgment entered against a state employee violated the state's sovereign immunity
protection. 923 S.W.2d at 378. Dixon disagreed, and concluded that the SLEF's defense
20
and coverage of state officers and employees "is merely a voluntary assumption of
defense and payment of judgments or claims against state employees sued for their
conduct arising out of and performed in connection with official duties on behalf of the
state. Id. at 379. As such "[t]he doctrine of sovereign immunity is not an issue. . . ." Id.That is because sovereign immunity does not extend to the officers or employees of
entities entitled to sovereign immunity protection. Cottey v. Schmitter, 24 S.W.3d 126,
129 (Mo. App. W.D. 2000) (holding that "[w]hile the state enjoyed the limitation on
liability under the sovereign immunity provisions, [the state's employee sued by an
injured party] did not"). Thus, a claim to recover a judgment entered against a state
officer or employee from the SLEF "[does] not violate the doctrine of sovereign
immunity." Id.; see also Betts-Lucas, 87 S.W.3d at 327-28 ("'The doctrine of sovereign
immunity is not an issue' in a claim by a plaintiff seeking recovery from the [SLEF]."
(quoting Dixon, 923 S.W.2d at 379)); State ex rel. Cravens v. Nixon, 234 S.W.3d 442,
449 (Mo. App. W.D. 2007) (holding that sovereign immunity is not available as a defense
to claims to recover from the SLEF where the underlying litigation is against state
employees and not the state itself).
We recognize that the aforesaid SLEF sovereign immunity cases were not
addressing the Stacy requirements for determining when a hybrid entity is a "public
entity" for purposes of section 537.600.1. That is readily explained, however, by the fact
that the SLEF is not an entity, and is instead a mere appropriation of funds managed by
the Commissioner of Administration and the Attorney General. Section 105.711.1;
section 105.711.5. However, the relevance of the aforesaid SLEF cases to the first Stacy
21
requirement when applied to MOPERM cannot be ignored. The cases confirm that the
state's decision to provide a defense and coverage to state officers and employees is not a
"traditional governmental service," and is instead a voluntarily assumed duty that is not
subject to sovereign immunity protection. If the provision of coverage to state and state
agency officers and employees by the SLEF is not a traditional government service
entitling the SLEF to sovereign immunity, then the comparable provision of coverage to
officers and employees of participating public entities by MOPERM is not a traditional
governmental service.
Undeterred, MOPERM argues that the first Stacy requirement is no longer relevant
because it was abandoned in Casualty Reciprocal Exchange v. Missouri Employers
Mutual Insurance Company, 956 S.W.2d 249 (Mo. banc 1997). We disagree. Casualty
Reciprocal Exchange did not address whether an entity was entitled to sovereign
immunity protection, and instead addressed whether a corporation was a "public
corporation" such that its formation did not violate Article XI, section 2 of the Missouri
Constitution, prohibiting the creation of corporations by special law. 956 S.W.2d at 254.
To address that narrow issue, the Supreme Court drew analogously upon the Stacy public
entity requirements, though it discounted the relevance of Stacy's "traditional
governmental service" requirement for purposes of the issue it was required to resolve:
In the instant case, [the three Stacy factors] are useful for identifying a
public entity/corporation with the exception of the [service traditionally
performed by government] element. As this Court noted in Stacy, the
manner in which government traditionally acted is of limited importance in
identifying a public entity/corporation in modern times because of the
'broad range of activities in which the government is involved....' []
Moreover, what is important in this context is whether a corporation is
22
'established and controlled by the state for public purposes,' not whether
the protection historically afforded the sovereign should apply to a
government's current activities. [] Consequently, there is no reason in this
case for an independent requirement that a public corporation perform
actions that government has traditionally performed in the past. The more
important requirement is that the corporation be created and controlled for a
public purpose.
Id. (emphasis added) (citations omitted). This holding explains that Casualty Reciprocal
Exchange did not abandon the first Stacy requirement, but simply deemed the
requirement irrelevant to the question the Court was being asked to resolve.
Confirmation of this conclusion is found immediately preceding the above referenced
passage, where Casualty Reciprocal Exchange unequivocally observed that "[a] public
entity/corporation that possesses all three of the [Stacy requirements] is a public
corporation for purposes of sovereign immunity." Id. (emphasis added). Casualty
Reciprocal Exchange cannot be read as MOPERM suggests to have abrogated the first
Stacy requirement when determining whether a hybrid entity is a "public entity" for
purposes of section 537.600.1 sovereign immunity protection.
Casualty Reciprocal Exchange's need to discount the value of the first Stacy
requirement is nonetheless relevant here, as it permits the reasoned implication that the
corporation in that case did not readily satisfy the requirement of performing a traditional
governmental service. 956 S.W.2d at 254. The corporation at issue in Casualty
Reciprocal Exchange was Missouri Employers Mutual ("MEM"). Id. at 252. MEM and
MOPERM are strikingly similar in their origin and purpose.
In 1993, the General Assembly enacted the legislation that created MEM as an
"independent public corporation." Section 287.902. "The stated purpose of MEM is to
23
insure Missouri employers against liability for workers' compensation, occupational
disease, and employers' liability coverage." Cas. Reciprocal Exch., 956 S.W.2d at 252
(citing section 287.902). Similar to MOPERM, MEM is a government authorized
provider of insurance, though MEM can extend workers' compensation coverage to all
employers, including private employers, where MOPERM can only extend liability to
public entities as defined, their officers and employees. See section 287.902; section
537.705.1. Similar to MOPERM, MEM is managed by a board, (section 287.905), which
has the full power and authority to determine the rates to be charged by MEM for the
insurance it provides (section 287.910). Similar to MOPERM, MEM receives no state
appropriation (section 287.919.1), though MEM is authorized to issue revenue bonds.
Section 287.919.2. Similar to MOPERM, MEM is not an agency of the state. Compare
section 537.705.4, with section 287.902 (stating that MEM "shall not be a state agency").
Since the Court in Casualty Reciprocal Exchange could not readily conclude that MEM
was performing a traditional governmental service, and instead discounted the value of
the first Stacy requirement in order to find that MEM was a "public corporation," the
similarities between MEM and MOPERM lend support to our conclusion that MOPERM
does not satisfy the first Stacy requirement. 956 S.W.2d at 254-55.
For the reasons explained, we conclude that MOPERM does not satisfy the first
Stacy requirement because it does not perform a traditional governmental service. We
are mindful, however, of Stacy's admonition that "[i]n view of the broad range of
activities in which the government is involved, it is difficult to envision a hybrid entity
that meets the other [two Stacy] requirements but would not meet this one." Stacy, 836
24
S.W.2d at 919. Because we have already concluded that MOPERM satisfies the third
Stacy requirement, it is advisable to analyze whether MOPERM satisfies the second
Stacy requirement as a cross-check against our conclusion that MOPERM does not
satisfy the first Stacy requirement.
iii. MOPERM does not satisfy the second Stacy requirement because it is
not controlled by and directly answerable to public officials, public
entities, or the public
We next address whether MOPERM is an entity "controlled by and directly
answerable to one or more public officials, public entities, or the public itself[,]"
characterized by Stacy as the "most critical" requirement for determining whether a
hybrid entity is a "public entity" for purposes of section 537.600.1. Stacy, 836 S.W.2d at
919 (emphasis added). Though Stacy did not explain why this requirement is the "most
critical," we surmise it reflects a policy that a hybrid entity should not be afforded
sovereign immunity protection unless the hybrid entity is meaningfully controlled by and
accountable to the sovereign whose immunity it seeks to appropriate.
Stacy and Casualty Reciprocal Exchange addressed factors relevant to this
requirement including: who has the authority to manage and operate the entity; how
those with the authority to manage and operate the entity are selected; the extent to which
the entity is managed and operated autonomously from the government or the public;
whether the entity has reporting obligations to the government or the public; and whether
reporting obligations foster accountability to the government or the public. Stacy, 836
S.W.2d at 919-21; Casualty Reciprocal Exch., 956 S.W.2d at 253-55. These factors are
neither exclusive, nor formalistic in their relative importance or application. Instead, a
25
hybrid entity's operation must be reviewed holistically to gauge whether its authorized
function is being performed in a manner that is meaningfully controlled by and directly
answerable to one or more public officials, public entities, or the public, as to justify an
extension of the protective cloak of sovereign immunity.
a.
Whether MOPERM is "controlled by" one or more public officials, public
entities or the public
We first examine whether MOPERM is "controlled by" one or more public
officials, public entities, or the public. Stacy, 836 S.W.2d at 919. "The general
administration of, and responsibility for, the proper operation of" MOPERM is managed
through a board of trustees. Section 537.730.1. Thus, to determine whether MOPERM is
subject to "control by" public officials, public entities, or the public, we must address the
composition of MOPERM's board of trustees.
The composition and appointment of MOPERM's board of trustees is set by
statute. Section 537.710.1. Section 537.710.1 provides that the board "shall consist of
the attorney general, the commissioner of administration and four members, appointed by
the governor with the advice and consent of the senate, who are officers or employees of
those public entities participating in the fund." Based on this statutory requirement, it
would appear that the board, and thus MOPERM, is "controlled by" public officials or
public entities.
In concluding that TMC did not satisfy the second Stacy requirement, it was in
part significant to the Supreme Court that a "majority of the board members are neither
26
appointed by nor subject to removal by public officials or the general public and have no
connection to [the city], [the county], or the University of Missouri." 836 S.W.2d 919.
The Court noted that "[t]he entire board determines policy by majority vote and the votes
of the government-related directors are not weighted to give them control." Id.Conversely, in Casualty Reciprocal Exchange, where the Stacy requirements were
examined for a purpose other than determining eligibility for sovereign immunity, the
Court concluded that the second Stacy requirement was sufficiently satisfied by MEM
even though vacancies on MEM's board could be filled by a vote of policyholders, since
MEM's enabling legislation required all of the initial members of the board to be
appointed by the governor with the advice and consent of the senate, and since all board
members at that time had been so appointed. 956 S.W.2d at 255.
Between the bookends of these decisions, and given the statutorily required
composition of MOPERM's board of trustees, we conclude that MOPERM is subject to
"control by" one or more public officials, public entities, or the public.13 Stacy, 836
S.W.2d at 919.
b.
Whether MOPERM is "directly answerable to" one or more public officials, public
entities or the public
The second Stacy requirement also requires that a hybrid entity be "directly
answerable to" one or more public officials, public entities, or the public. Id. Though a
hybrid entity's governing board may be "controlled by," (that is, populated by), public
13
But see the discussion, infra, noting that the two high-ranking state officials required by statute to serve
on MOPERM's board of trustees do not, in fact, serve on the board.
27
officials or public entities, it does not necessarily follow that the hybrid entity is "directly
answerable to" public officials, public entities, or the public. To have meaning, the
"directly answerable to" feature of the second Stacy requirement must be distinguished
from the "controlled by" feature to require a hybrid entity to demonstrate that the entity
and its governing board are meaningfully accountable to the sovereign whose immunity
the hybrid entity seeks to appropriate.
In Stacy, the Supreme Court concluded that TMC did not satisfy the requirement
of being "controlled by and directly answerable to" public officials, public entities, or the
public because:
No governmental body approves the decisions of the board. Such reporting
as exists is after the fact; control remains in the independent board. We
hold this is not the kind of accountability to public officials or to the
general public required to support an application of sovereign immunity.
836 S.W.2d at 919. The same is true with MOPERM.
MOPERM's board of trustees is afforded broad and expansive powers, namely all
of "the powers and duties specified in sections 537.700 to 537.755 and such other powers
as may be necessary or proper to enable it, its officers, employees and agents to carry out
fully and effectively all the purposes of sections 537.700 to 537.755."14 Section
537.700.1. MOPERM's purpose is to provide optional liability coverage to public entities
and their officers and employees. Section 537.705.1. In exercising and performing that
purpose, MOPERM's board of trustees has the sole and exclusive authority to "negotiate
14
MOPERM's staff is provided by the Office of Administration except as otherwise determined by the
board of trustees. Section 537.705.4. However, MOPERM is required to reimburse the Office of Administration
annually "for all costs of providing staff" pursuant to a contract negotiated between MOPERM and the Office of
Administration. Id.28
the settlement of and provide the defense of any claim for which coverage has been
obtained by any public entity," and to "make the final determination on the settlement of
any claim, or any portion of any claim, that requires payment from the fund." Section
537.705.3.
MOPERM's enabling legislation imposes no reporting obligations on MOPERM's
board, and no means by which the board's exercise of its broad powers and duties can be
measured or assessed to ensure fidelity to MOPERM's purpose or function. Specifically,
there is no obligation imposed on the board to account to public officials, public entities,
or the public for the manner in which the board manages, settles, or pays judgments
entered or claims made against MOPERM's insureds.15
Section 537.730 underscores the independent operation of the board of trustees by
providing, among other things, that:
1. The general administration of, and responsibility for, the proper
operation of the fund, including all decisions relating to payments from the
fund, are vested in the board of trustees.
2. The board shall determine and prescribe all rules, regulations,
coverages to be offered, forms and rates to carry out the purposes of
sections 537.700 to 537.755.
....
4. Subject to the provisions of the constitution and section 537.700 to
537.755, the board shall have exclusive jurisdiction and control over the
funds and property of the fund.
....
15
In contrast, the SLEF, which is not an entity at all, and is instead a dedicated appropriation of state funds,
is subject to specific reporting obligations directly relating to its "insuring" function. Section 105.713.1 requires the
Attorney General and the Commissioner of Administration to submit monthly, detailed reports to the General
Assembly "detailing all settlements and judgments paid in the previous month" from the SLEF.
29
7. The board shall have the authority to use moneys from the fund to
purchase one or more policies of insurance or reinsurance to cover the
liabilities of participating public entities which are covered by the fund.
8. If such insurance can be procured, the board shall have the authority
to procure insurance covering participating entities and their officers and
employees for amounts in excess of the amount specified by section
537.756 per occurrence for liabilities covered by the fund. The costs of
such insurance shall be considered in determining the contribution of each
entity.
Section 537.730. In addition, the board of trustees has the sole and exclusive authority to
determine the amount of the annual contributions to be made to the fund by all public
entities who exercise the option to participate in the fund. Section 537.705.1. Though
the board is directed by section 537.705.1 to determine annual contributions "in
accordance with the provisions of section 379.470 relating to rates established by
insurers[,]" MOPERM is not regulated by the Department of Insurance, leaving the
board's rate setting function unmonitored for compliance with section 379.470.
MOPERM has a single statutory reporting requirement, as it must submit an
annual "statement covering the operations of the fund for the year, including income and
disbursements, and of the financial condition of the fund" to the governor, and it must "be
made readily available to public entities." Section 537.725.2. But MOPERM is not
required to undergo an independent financial audit. And the financial statement it
submits annually is submitted after the fact, and is not subject to statutory benchmarks or
standards against which MOPERM's operations are evaluated, or subjected to regulatory
oversight or intervention.
30
As was the case in Stacy, no governmental body approves, reviews, oversees,
evaluates, or regulates the decisions of the board of trustees of MOPERM, and reporting
by MOPERM, such as it exists, is after the fact. 836 S.W.2d at 919.
As noted above, we do not believe a hybrid entity can satisfy the "directly
answerable to" feature of the second Stacy requirement merely because it "controlled by"
(populated by) public officials, public entities, or the public itself. A hybrid entity's
governing body is not "directly answerable to" anyone unless the actions of the governing
body are subject to reporting obligations or some other mechanism designed to assure
and enable meaningful accountability. But even if the mere composition of a hybrid
entity's governing body could hypothetically satisfy both the "controlled by" and "directly
answerable to" features of the second Stacy requirement, we would not conclude that
MOPERM's board does so.
Although MOPERM's board is required to include the Attorney General and the
Commissioner of the Office of Administration, Estes points out that neither of these high-
ranking public officials actually sits on the board. During the time period that MOPERM
provided a defense to Hughes for Estes's claims in the Underlying Lawsuit, an assistant
attorney general sat on the board as a representative for the Attorney General, and an
attorney sat on the board as a representative for the Commissioner of the Office of
Administration. Although statutory authority might exist permitting an appointed
designee to lawfully act in the stead of one or both of these state officials, MOPERM has
not pointed us to that authority, and has therefore failed to establish, as a matter of law,
that MOPERM's board effectively includes these statutorily required members. The
31
remaining members of the board during the same time frame included an in-house
attorney for a school district; a county clerk; and a city manager. 16 There is no indication
that these public entity representatives are accountable in any meaningful manner for
their service on MOPERM's board of trustees to the public entity with whom they are
employed or to any other participating public entity. Moreover, there is no provision for
removal of a MOPERM board member, except for section 537.730.6, which states that a
trustee is subject to removal if the trustee "accept[s] any gratuity or compensation for the
purpose of influencing his action with respect to the investment of funds of the system or
in the operation of the fund[.]"
We conclude that MOPERM and its board of trustees are not "directly answerable
to" public officials, public entities, or the public itself. MOPERM's enabling legislation
does not require "the kind of accountability to public officials or to the general public
required to support an application of sovereign immunity." Stacy, 836 S.W.2d at 919.
Instead, and for all intents and purposes, MOPERM's board of trustees operates
autonomously, with near unfettered authority.
We are by no means suggesting that MOPERM's independence is inappropriate or
unlawful, or that MOPERM's operations are untoward or inscrutable. That, however, is
not the question we have been asked to resolve. The question we have been asked to
resolve is whether MOPERM is "enough like a public entity that it is entitled to sovereign
16
There was apparently an unfilled vacancy on the board at the time, as section 537.710.1 requires a total of
six board members.
32
immunity under section 537.600." Stacy, 836 S.W.2d at 917. With respect to the second
Stacy requirement, the answer is no.
Undeterred, MOPERM argues that its board of trustees is very similar to the board
of directors for MEM, which the Supreme Court determined in Casualty Reciprocal
Exchange "satisfie[d] the public control element of the public corporation analysis in
substantial part[.]" 956 S.W.2d at 255. MOPERM's argument ignores, as we have
already explained, that although the Supreme Court in Casualty Reciprocal Exchange
drew upon the Stacy requirements, it did not do so for the purpose of determining
whether MEM enjoyed sovereign immunity, and instead did so to determine whether the
formation of MEM violated the Missouri Constitution. Id. at 253. The conclusion
reached about MEM is not relevant, as we examine the second Stacy requirement for an
entirely different purpose--to determine whether MOPERM enjoys sovereign immunity.
See, e.g., Trimble, 745 S.W.2d at 674 (holding that Bi-State was a public entity for
purposes of sovereign immunity despite a prior court decision which concluded that Bi-
State was not a political subdivision of the state for purposes of determining appropriate
appellate court jurisdiction because the earlier case "involved considerations quite
separate from the questions of [sovereign] immunity presented here" (emphasis added)
(citing St. Louis Transit Co. v. Div. of Emp't. Sec., 456 S.W.2d 334 (Mo. banc 1970))).
Even if the determination in Casualty Reciprocal Exchange is relevant, as
MOPERM argues, the Supreme Court found only that MEM "satisfie[d] the public
control element of the public corporation analysis in substantial part." 956 S.W.2d at
255. Given the materially different reporting obligations and accountability measures
33
imposed on MEM, we cannot reach the same conclusion with respect to MOPERM.
Where MOPERM's board of trustees has the authority to "determine and prescribe all . . .
coverages to be offered, forms and rates . . . ," (section 537.730.2), MEM's insurance
policies and coverage determinations are "subject to the approval of the director of the
department of commerce and insurance." Section 287.902. Where MOPERM is not
regulated or controlled by any state agency, MEM "is subject to all provisions of the
statutes which relate to private insurance carriers and to the jurisdiction of the department
of commerce and insurance in the same manner as private insurance carriers[.]" Section
287.920.5. In addition, MEM is required to "be a member of the Missouri property and
casualty guaranty association, sections 375.771 to 375.779[.]" Section 287.902. Though
the boards of both MOPERM and MEM enjoy the authority to perform all acts necessary
to carry out their business, (section 537.700.1; section 287.907.2), MEM is subject to
rigorous reporting requirements, while MOPERM is not. MEM is required to conduct
"an annual audit of the books of accounts, funds and securities of the company to be
made by a competent and independent firm of certified public accountants . . ." Section
287.920.1. MEM's board must submit "an annual independently audited report in
accordance with procedures governing annual reports adopted by the National
Association of Insurance Commissioners" to the governor and general assembly, and
"shall indicate the business done by the company during the previous year and contain a
statement of the resources and liabilities of the company." Section 287.920.2. MEM is
required to ascertain "[t]he incurred loss experience and expense of the company . . . each
year to include . . . estimates of outstanding liabilities for claims reported to the company
34
but not yet paid and liabilities for claims arising from injuries which have occurred but
have not yet been reported to the company." Section 287.290.4. The department of
commerce and insurance conducts an examination of MEM "in the manner and under the
conditions provided by the statutes of the insurance code for the examination of insurance
carriers." Section 287.920.5. MOPERM's singular obligation under section 537.725.1 to
provide an annual "statement covering the operations of the fund for the year, including
income and disbursements, and of the financial condition of the fund . . ., showing the
valuation and appraisal of its assets and liabilities . . . ." stands in sharp contrast to the
regulatory oversight imposed on MEM. Comparing MOPERM to MEM, it cannot be
said that MOPERM satisfies at all, let alone "substantially," the second Stacy requirement
that a hybrid entity be "directly answerable to" public officials, public entities, or the
public. 836 S.W.2d at 919.
Section 537.705.4 lends further support to our conclusion, as it provides that
MOPERM:
is a body corporate and politic and the state of Missouri shall not be liable
in any way with respect to claims made against the fund or against entities
or individuals covered by the fund, nor with respect to any expense of
operation of the fund. Money in the fund is not state money nor is it money
collected or received by the state.
This provision expresses the General Assembly's intent that although MOPERM is a
legislatively formed statewide entity, MOPERM cannot subject the state to liability
because MOPERM is not the state, is not funded by the state, and does not hold money
35
belonging to the state.17 It follows that MOPERM is not "directly answerable to" the
state--the sovereign that created MOPERM. Stacy, 836 S.W.2d at 919.
Estes observes that similar language as appears in section 537.705.4 has led to the
conclusion in other cases that a statewide fund does not have sovereign immunity. In
Rees Oil Co. v. Dir. of Revenue, 992 S.W.2d 354, 358 (Mo. App. W.D. 1999), we found
that a suit against the Petroleum Storage Tank Insurance Fund ("PSTIF") was not barred
by sovereign immunity because, although the PSTIF was created by state legislation, the
PSTIF is not a state fund. To reach this conclusion, we expressly relied on PSTIF's
enabling legislation, which provided that "[m]oneys in such special trust fund shall not be
deemed to be state funds[.]" Section 319.129.1. We reached the same conclusion for the
same reason in River Fleets, Inc. v. Carter, 990 S.W.2d 75, 77 (Mo. App. W.D. 1999).
We also noted in River Fleets that section 319.131.4 provides that "'the liability of the
[PSTIF] is not the liability of the state of Missouri.'" Id. at 78 (quoting section
319.131.4). We relied on that provision to conclude that "[i]f the fund's liability is not the
liability of the state of Missouri, then, ipso facto, the State's immunity from liability does
not apply." Id.18
17
The same is true for MEM which, although authorized to operate statewide, is expressly declared "not [to]
be a state agency." Section 287.902.
18
MOPERM attempts to distinguish Rees and River Fleets by arguing that both cases turned on the
difference between "state funds" and "non-state funds" as described in Article IV, section 15 of the Missouri
Constitution. We disagree. Though both cases did refer to this constitutional provision, and noted that as a result,
certain fees paid into the PSTIF were to be administered by the Department of Revenue as "non-state funds," the
sovereign immunity holding in these cases did not depend on whether the Department of Revenue had the authority
to administer the "non-state funds." Rees, 992 S.W.2d at 358; River Fleets, 990 S.W.2d 77-78. If anything,
MOPERM's enabling legislation solidifies the separation between MOPERM and the state, as section 537.735
provides that all "contributions, premiums, and income from all sources" received by MOPERM, (described by
section 537.705.4 as "not state money"), are to deposited in a MOPERM account at "one or more banks or trust
companies." Sections 537.735.1 and .2.
36
The similarities between section 537.705.4, and sections 319.129.1 and 319.131.4,
cannot be ignored. However, the PSTIF is a special fund and not a legal entity,19
meaning the PSTIF is not susceptible to Stacy's "hybrid entity" analysis for determining
eligibility for sovereign immunity. 836 S.W.2d at 919. Because of that important
distinction, we are not prepared to conclude that Rees and River Fleets are controlling in
this case, as they do not address the Stacy requirements, and do not hold that the Stacy
requirements are rendered immaterial when a legislatively created statewide legal entity
(as compared to a mere fund) is declared by its enabling legislation not to be "the state."
However, though Rees and River Fleets are not controlling, they are nonetheless
instructive. At a minimum, they support the proposition that legislatively created
statewide entities are not "directly answerable to" the sovereign whose immunity the
entity wishes to appropriate when the entity's enabling legislation unequivocally declares
that moneys held by the entity are not state funds, or that the entity's actions cannot be
relied upon to hold the state liable.20
19
See City of Harrisonville v. McCall Serv. Stations, 495 S.W.3d 738, 751-52 (Mo. banc 2016), discussed
infra.
20
We question the utility of the Stacy "hybrid entity" requirements when the entity that is seeking to
establish that it has sovereign immunity is a legislatively created entity, with statewide operations, and no plausible
means by which it could be argued to be a local or regional entity or political subdivision. 836 S.W.2d at 919. It
seems more appropriate in such cases to limit the inquiry solely to whether the legislatively created statewide entity
is the state or an agency of the state. See P.L.S. ex rel. Shelton, 360 S.W. 3d at 808-19 (differentiating between the
state and agencies of the state from other public entities that may enjoy sovereign immunity but that are not covered
by the SLEF). However, neither Stacy, nor any Missouri Supreme Court case since Stacy, has suggested that the
Stacy hybrid entity requirements only apply to local or regional (as opposed to statewide) entities. Id. And, we
cannot ignore that, although the Supreme Court was resolving an issue other than sovereign immunity in Casualty
Reciprocal Exchange, it nonetheless drew upon the Stacy requirements to determine whether MEM, a legislatively
created statewide entity, was a public corporation. 956 S.W.2d at 253-55.
37
In summary, MOPERM does not satisfy the second Stacy requirement as it is not
"controlled by and directly answerable to" public officials, public entities, or the public.
836 S.W.2d at 919.
Because MOPERM does not satisfy either the first or second Stacy requirements,
MOPERM is not "enough like a public entity that it is entitled to sovereign immunity[.]"
Id. at 917. As such, Estes's claims for bad faith failure to settle and breach of fiduciary
duty against MOPERM and its board of trustees are not barred on the basis of sovereign
immunity. The trial court erred as a matter of law in granting summary judgment to
MOPERM and its board of trustees for the stated reason that MOPERM has sovereign
immunity.
Points one and two on appeal are granted.
III.
Point Three: The Trial Court's Grant of Summary Judgment is not Supported by any
of the Alternative Bases Raised in the Motion for Summary Judgment
Estes's third point on appeal addresses the other potential bases for summary
judgment raised in MOPERM and the board of trustees' motion for summary judgment,
but not expressly relied on in the trial court's Judgment. We are to "affirm the trial court's
summary judgment on any ground supported by the record, whether relied on by the trial
court or not." Sisk, 138 S.W.3d at 809 (quotation omitted).
MOPERM and the board of trustees' motion for summary judgment alleged
MOPERM does not owe a duty of good faith to attempt to settle within policy limits to
those covered by a memorandum of coverage because MOPERM is not a liability insurer,
38
and merely administers a self-insurance pool. The motion for summary judgment also
argued that MOPERM's enabling legislation precludes the use of money in the fund to
pay the claims asserted by Estes. And the motion for summary judgment argued that
Estes's claims were precluded as a matter of law because MOPERM is prohibited from
paying more than $2,000,000 for all claims arising out of a single occurrence, and has
already paid out that amount. Estes's third point on appeal contests each of these
alternative bases for summary judgment.21
A.
MOPERM is a liability insurer and owes its insureds a duty to act in good faith to
attempt to settle within policy limits
We begin with MOPERM's contention that it is not a liability insurer, and
therefore does not owe those covered by a memorandum of coverage a duty to act in
good faith in negotiating and settling claims. Based on this contention, MOPERM
argued in the motion for summary judgment that it cannot be sued for bad faith failure to
settle as a matter of law.
21
MOPERM argues that Estes's third point relied on is multifarious in violation of Rule 84.04(d). "'A point
relied on violates Rule 84.04(d) when it groups together multiple, independent claims rather than a single claim of
error, and a multifarious point is subject to dismissal.'" Sanders v. City of Columbia, 602 S.W.3d 288, 296 n.5 (Mo.
App. W.D. 2020) (quoting Kirk v. State, 520 S.W.3d 443, 450 n.3 (Mo. banc 2017)). Estes's third point on appeal is
multifarious as it argues that the trial court's Judgment cannot be affirmed on any of three alternative bases raised in
the motion for summary judgment. "However, because this court prefers to decide a case based on the merits, and
because the substance of [Estes's] challenge is discernable from [her] argument, we review [her] claims for their
merit." Id. It is particularly appropriate to exercise our discretion to entertain the multifarious claims raised in
Estes's third point on appeal here, as to do otherwise would subject Estes to the draconian outcome of dismissal of
her appeal in its entirety. See STRCUE, Inc. v. Potts, 386 S.W.3d 214, 219 (Mo. App. W.D. 2012) (holding that an
appellant's failure to challenge on appeal every basis that could support affirming a trial court's judgment is fatal to
the appeal, and requires the appeal to be dismissed).
39
"Inherent in a policy of insurance is the insurer's obligation to act in good faith
regarding settlement of a claim." Am. Cas. Co. of Reading, 399 S.W.3d at 74 (quotation
omitted).
[A] bad faith refusal to settle action will lie when a liability insurer: (1)
reserves the exclusive right to contest or settle any claim; (2) prohibits the
insured from voluntarily assuming any liability or settling any claims
without consent; and (3) is guilty of fraud or bad faith in refusing to settle a
claim within the limits of the policy.
Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 827 (Mo. banc 2014) (emphasis
added). Thus, in order for MOPERM to be subject to a claim for bad faith refusal to
settle, we must determine whether MOPERM is a liability insurer.
MOPERM argues that it is not a liability insurer and that it merely "manages a
pool of public funds contributed by its members" to cover their liabilities. [Respondent's
Brief, p. 33] In so arguing, MOPERM seeks to recast itself from a body corporate and
politic authorized to extend insurance coverage in exchange for the payment of annual
premiums, to nothing more than the administrator of a pool of self-insurance funds. This
argument distorts section 537.705.1 which provides that a public entity's "[p]articipation
in the fund has the same effect as purchase of insurance by the public entity, as
otherwise provided by law, and shall have the same effect as a self-insurance plan
adopted by the governing body of any political subdivision of the state." (Emphasis
added.) The phrase "the same effect as" does not convert the MOPERM fund into a self-
insurance pool, or MOPERM into a mere administrator of a self-insurance pool.22
22
The cases relied on by MOPERM in point III of its brief for the purported proposition that other states
"consistently hold that local government risk management pools have sovereign immunity" are readily
40
Instead, the phrase "the same effect as" simply confirms that a public entity's
participation in MOPERM waives sovereign immunity to the extent of coverage as would
be the case if the public entity purchased insurance for tort claims as permitted by section
537.610.1, or adopted a co-op self-insurance plan as permitted by section 537.620.23 See
Moore v. Lift for Life Acad, Inc., 489 S.W.3d 843, 846 (Mo. App. E.D. 2016) (observing
that participation in MOPERM constitutes a waiver of a public entity's sovereign
immunity to the extent of coverage provided in the memorandum of coverage); see also
section 537.745 (providing that MOPERM's enabling legislation does not "broaden or
restrict the liability of the public entities participating in the fund beyond the provisions
of sections 537.600 to 537.610").
MOPERM's argument also disregards that MOPERM has routinely been treated
by our courts as a liability insurer subject to the same duties and rules of contract
construction applicable to all other liability insurers. "'MOPERM functions like a
liability insurance carrier and issues to each insured a 'memorandum of coverage.'"
Gilley, 437 S.W.3d at 320 n.6 (quoting Am. Cas. Co. of Reading, 399 S.W.3d at 71). See
County of Scotland v. Mo. Pub. Entity Risk Mgmt. Fund, 537 S.W.3d 358, 363 (Mo. App.
W.D. 2017) (observing that MOPERM's memorandum of coverage is interpreted as an
insurance policy and addressing MOPERM's duty to defend an insured employing the
distinguishable as each is controlled by, and thus limited in its precedential value to, the peculiarities of the relevant
enabling legislation involved in the case. [Respondent's Brief, p. 24]
23
Section 537.620 permits any "three or more political subdivisions of this state [to] form a business entity
for the purpose of providing liability insurance" funded by assessments. Importantly, any entity formed to provide
"self-insurance" in this manner is expressly declared by section 537.620 to not be an insurance company, to not be
deemed to be transacting insurance business, and to not have issued contracts of insurance. The absence of similar
language in MOPERM's enabling legislation stands in stark contrast, and lends strong support to the conclusion that
MOPERM is an insurance company, is engaged in the transaction of insurance business, and enters into a contract of
insurance when it issues a memorandum of coverage.
41
same standard applied to other liability insurers); City of Lee's Summit v. Mo. Pub. Entity
Risk Mgmt. Fund, 390 S.W.3d 214, 219-20 (Mo. App. W.D. 2012) ("As the insured, the
City bears the burden of proving coverage under the policy. MOPERM, the insurer,
bears the burden of proving the applicability of any coverage exclusion." (citation
omitted)); Borges v. Mo. Pub. Entity Risk Mgmt. Fund, 358 S.W.3d 177, 182 (Mo. App.
W.D. 2012) (In rejecting a third party claimant's contention that MOPERM is a public
entity, rather than an insurance company, our Court stated that MOPERM's "coverage of
public entities is similar to, if not indistinguishable from, the coverage that insurers
provide to insureds." (citing section 537.705.1)); Topps v. City of Country Club Hills, 272
S.W.3d 409, 415-18 (Mo. App. E.D. 2008) (treating MOPERM memorandum of
coverage as a contract of insurance subject to interpretation by applying traditional rules
of contract construction); Charles Maggard Agency, Inc. v. Mo. Pub. Entity Risk Mgmt.
Fund, 974 S.W.2d 671, 672 (Mo. App. W.D. 1998) ("MOPERM is a liability insurance
carrier that has an agency agreement with Maggard.").
Certainly, when it has served MOPERM's interests to do so, MOPERM has
characterized itself as a liability insurer. MOPERM initiated claims for breach of duty,
equitable subrogation, unjust enrichment, and equitable contribution against another
insurer in Reading, 399 S.W.3d 68, after MOPERM (which had issued excess coverage)
settled a wrongful death action because the primary liability insurer refused to participate
in settlement discussions. MOPERM's theories of recovery depended on MOPERM's
status as a liability insurer. See, e.g., id. at 74-75 ("'Under the doctrine of equitable
subrogation, 'an excess insurer, paying a loss under a policy, "stands in the shoes" of its
42
insured with regard to any cause of action its insured may have against a primary insurer
responsible for the loss.'" (quoting Royal Ins. Co. of Am. v. Caliber One Indem. Co., 465
F.3d 614, 619 (5th Cir. 2006))). On appeal from the grant of summary judgment in favor
of the primary liability insurer, we reversed, and observed that:
[U]nder the particular facts of the case at bar, in avoiding the additional
costs of litigation, which would have impacted both insurers, in settling the
case before the additional damaging facts were disclosed, which would
have substantially increased the value of plaintiff's claim, in maintaining
its duty to settle in good faith, and in facing [the primary insurer's] denial
of primary coverage for [insured] and refusal to participate in good faith in
the settlement, MOPERM advanced facts, which if proven, would have
provided sufficient reason to intervene by payment to the plaintiffs and so
to be subrogated to the rights of [insured] in the underlying action on that
debt.
Id. at 76 (emphasis added). It is disingenuous for MOPERM to rely on its status as a
liability insurer with a duty to settle in good faith in order to pursue claims against
another liability insurer, while denying it owes any such duty in this case.
Moreover, MOPERM's enabling legislation describes authorized activities that are
aligned with those of other liability insurers. MOPERM's board of trustees is authorized
to retain and compensate insurance brokers and agents to sell coverage to public entities.
Section 537.705.6; see Charles Maggard Agency, Inc., 974 S.W.2d at 673-74 (insurance
agent possessed a right to renewal commissions under his agency agreement with
MOPERM, the liability insurance carrier, for policies placed before the agreement
between MOPERM and the insurance agent terminated). MOPERM's board of trustees
has the authority to purchase "insurance or reinsurance to cover the liabilities of
participating public entities which are covered by the fund." Section 537.730.7. Cf. Am.
43
Nat. Life Ins. Co. of Texas v. Dir. of Revenue, 269 S.W.3d 19, 21 (Mo. banc 2008)
("[R]einsurance premiums [] are paid by the primary insurer to a reinsurer, after the
insured directly pays the initial premium to the primary insurer. The primary insurer
cedes the policy's risks to a reinsurer."). MOPERM's board is required to calculate the
annual contribution or premium to be paid by a public entity "in accordance with the
provisions of section 379.470 relating to rates established by insurers."24 Section
537.705.1. As would be the case with any liability insurer, if a public entity fails to make
its annual contribution to MOPERM, it loses coverage. Section 537.705.3. Finally, as
with any liability insurer, MOPERM is obligated to pay claims to the extent of the
coverage described in a memorandum of coverage. Section 537.705.1(1) (providing that
moneys in the fund shall be available for the "payment and settlement of all claims for
which coverage has been obtained by any public entity in accordance with coverages
offered by the board"); see Naucke, 95 S.W.3d at 169 (holding that the scope of required
coverage is controlled by MOPERM's memorandum of coverage).
In light of the foregoing, we conclude that MOPERM is a liability insurer. As
such, implied in every memorandum of coverage MOPERM issues is the duty to act in
good faith in negotiating and settling claims. The imposition of this duty aligns with
section 537.705.3 which affords MOPERM's board of trustees the sole and exclusive
power to "negotiate the settlement of and provide the defense of any claim for which
coverage has been obtained by any public entity in accordance with coverages offered by
24
Section 379.470 is a part of the "Casualty and Surety Rate Regulation Law," sections 379.420 to 379.510,
and addresses the rate, or premium, that insurers can charge for casualty insurance.
44
the board." Similar provisions in insurance policies serve as the origin of the duty
imposed on liability insurers to act in good faith in attempting to settle claims within an
insured's policy limits. See Ganaway v. Shelter Mut. Ins. Co., 795 S.W.2d 554, 556 (Mo.
App. S.D. 1990) (". . . a liability insurer, having assumed control of the right to settle
claims against the insured, may become liable in excess of its undertaking under the
policy provisions if it fails to exercise good faith in considering offers to compromise the
claim for an amount within the policy limits."). "The cause of action in tort for breach of
the obligation of fair dealing presupposes an insurer and insured in a subsistent fiduciary
relationship." Varnal v. Weathers, 619 S.W.2d 825, 827 (Mo. App. W.D. 1981).
The imposition of a duty on MOPERM to act in good faith to attempt to settle
within policy limits is also consistent with the Unfair Claims Settlement Practices Act
("the Act"), sections 375.1000 to 375.1018, which "set[s] forth standards for the
investigation and disposition of claims arising under contracts or certificates of
insurance." Sections 375.1000. Section 375.1002(2) defines "insurer" as:
[A]ny person, reciprocal exchange, interinsurer, Lloyds insurer, fraternal
benefit society, and any other legal entity engaged in the business of
insurance, including agents, brokers, adjusters, public adjuster and third
party administrators. 'Insurer' shall also mean health services corporations,
health maintenance organizations, prepaid limited health care service plans,
dental, optometric and other similar health service plans. For the purposes
of sections 375.1000 to 375.1018, these foregoing entities shall be deemed
to be engaged in the business of insurance. 'Insurer' shall also include all
companies organized, incorporated or doing business under the provisions
of chapters 325, 375, 376, 377, 378, 379, 381 and 383[.]
(Emphasis added.) As a body corporate and politic, MOPERM is both a person and a
legal entity. See section 1.020(12) (defining "person" as used in "the statutory laws of
45
this state" to "extend and be applied to bodies politic and corporate"); Boyd v. Kansas
City Area Transp. Auth., 610 S.W.2d 414, 416 (Mo. App. W.D. 1980) (holding that
"when the ATA was created as a body corporate and politic it became, in fact, a
corporation"). Section 375.1002(4) defines "policy," "certificate," or "contract" to
"include[] any contract of insurance . . . proposed for issuance, or intended for issuance
by an insurer[,]" subject to delineated exceptions not relevant here. A MOPERM
memorandum of coverage is a contract for insurance as its terms control coverage.
Section 537.705.1(1) and (2) (providing that moneys in the fund shall be available to pay
claims against participating public entities and the officers and employees of participating
entities to the extent that "coverage has been obtained . . . in accordance with coverages
offered by the board"); Topps, 272 S.W.3d at 415-18 (treating MOPERM memorandum
of coverage as a contract of insurance subject to interpretation by employing traditional
principles of contract construction). As a person or legal entity engaged in the business
of insurance, MOPERM thus falls within the definition of an "insurer" pursuant to section
375.1002(2), and is subject to the Act. While a violation of the Act does not authorize a
private cause of action, (section 375.1000.2), the Act is nonetheless "an expression of
public policy in respect to such claims." 30 Mo. Prac., Insurance Law & Practice,
section 7:40 (2d ed.) Relevant here, the Act describes improper claims practices to
include, inter alia, the failure to "attempt[] in good faith to effectuate prompt, fair and
equitable settlement of claims submitted in which liability has become reasonably
clear[.]" Section 375.1007(4).
46
Because MOPERM is a liability insurer, Estes's claims in tort against MOPERM,
which are really Hughes's claims that were assigned to Estes, are cognizable. Hughes
was an insured under PCS's memorandum of coverage from MOPERM. MOPERM's
duty to act in good faith to attempt to settle Estes's claims against Hughes in the
Underlying Lawsuit within policy limits was of particular importance to Hughes. Unlike
a public entity, which is protected from liability for the acts of its officers and employees
by sovereign immunity, the officers and employees of a public entity do not enjoy section
537.600.1 sovereign immunity,25 and are not protected by the statutory "cap" for recovery
from public entities where sovereign immunity is waived as set forth in section
537.610.2. Cravens, 234 S.W.3d at 449 (holding that sovereign immunity "bars holding
the government or its political subdivisions liable for the torts of its officers or agents
unless such immunity is expressly waived"); Cottey, 24 S.W.3d at 129 (holding that "the
limitation on liability where sovereign immunity is waived applies only to the public
entity and not to an agent of the entity" (citing Trimble, 745 S.W.2d at 675)). And,
unlike a public entity, officers and employees of a public entity are not protected against
awards for damages that include punitive or exemplary damages. Section 537.610.3. As
a result, officers and employees of a public entity who are covered under a MOPERM
memorandum of coverage are susceptible to an award for damages that could exceed the
$2,000,000 payment cap set forth by section 537.756.1 for "claims arising out of any
25
Officers and employees of a public entity may be eligible for other defenses, such as official immunity.
See section 537.745.1 (providing that MOPERM's enabling legislation "shall [not] be construed to broaden or
restrict the liability of the public entities participating in the fund beyond the provisions of sections 537.600 to
537.610, nor to abolish or waive any defense at law which might otherwise be available to any public entity or its
officers and employees").
47
single occurrence," and that could include punitive damages. See Naucke, 95 S.W.3d at
169 (holding that the issue of coverage or punitive damage award is controlled by
MOPERM's memorandum of coverage). There is no rationale grounded in law or policy
for differentiating between MOPERM and all other liability insurers when it comes to the
duty to act in good faith to attempt to negotiate settlements within policy limits. But for
that duty, MOPERM would have no incentive to protect the interests of officers and
employees of a participating public entity from excess judgments, even though coverage
is extended to those individuals, and paid for by the public entity.
MOPERM's contention that it was entitled to summary judgment on Estes's claims
because it is not a liability insurer is without merit as a matter of law and could not have
served as an alternative basis for the trial court's grant of summary judgment.
B.
MOPERM's enabling legislation does not prohibit Estes's claims
We next examine MOPERM's contention that it was entitled to summary
judgment because it is not subject to claims of the nature asserted by Estes. MOPERM
alleges that use of moneys in the fund is restricted by section 537.735.1, which provides,
in part, that "[a]ll property, money, funds, investments, and rights which shall belong to,
or be available for expenditure or use by, the fund shall be dedicated to and held in trust
for the purposes set out in sections 537.700 to 537.755 and no other." (Emphasis added.)
MOPERM argues that because its enabling legislation does not expressly authorize use of
moneys in the fund to pay claims in tort like those asserted by Estes, then MOPERM
48
cannot be sued for its tortious conduct. In effect, MOPERM seeks to secure through
judicial construct what it is not otherwise entitled to--sovereign immunity.
There are multiple flaws in MOPERM's argument. First, it is uncontested that
MOPERM is a body corporate and politic. Section 537.700.1. "The term 'body
corporate' appears in the constitution and statutes of this state some ninety times. It is
clear from a review of the way in which this term is used in the statutes that the
legislature has consistently used it to refer to corporations both public and private."
Boyd, 610 S.W.2d at 416 (holding that "when the ATA was created as a body corporate
and politic it became, in fact, a corporation"). Corporations are legal entities that can sue
and be sued. See Renaissance Leasing, LLC v. Vermeer Mfg. Co., 322 S.W.3d 112, 120
(Mo. banc 2010) (noting that corporate entities are "distinct legal entit[ies] with the right
to . . . sue and be sued"). "If a defendant wishes to deny a corporation's capacity to sue or
be sued, that denial must be raised in the defendant's responsive pleading in accordance
with Rule 55.13." AllStar Capital, Inc. v. Wade, 352 S.W.3d 633, 636 (Mo. App. E.D.
2011). Rule 55.13 provides that "[w]hen a person desires to raise an issue as to the . . .
capacity of any party to sue or be sued . . . the person shall do so by specific negative
averment, which shall include such supporting particulars as are peculiarly within the
pleader's knowledge." "Should a defendant's responsive pleading fail to assert this
required specific negative averment, it will be considered an admission of . . . corporate
status." AllStar Capital, Inc., 352 S.W.3d at 636.
MOPERM's answer to Estes's first amended petition did not include a specific
negative averment challenging MOPERM's capacity to be sued for Estes's claims because
49
its enabling legislation precluded Estes's claims.26 Instead, and in sharp contrast,
MOPERM's answer admits that it is a body corporate and public, and affirmatively
alleged that by suing the members of MOPERM's board of trustees in their official
capacities, Estes's suit "is filed against MOPERM, the entity." As a matter of law,
MOPERM has admitted its legal capacity to be sued for the claims alleged in Estes's first
amended petition. Summary judgment can not be granted based on an unasserted or
improperly pleaded affirmative defense, as a matter of law. Ditto, Inc. v. Davids, 457
S.W.3d 1, 14-15 (Mo. App. W.D. 2014).
Second, MOPERM's enabling legislation in fact expressly contemplates that
MOPERM can be sued. Section 537.705.4 provides, in part, that MOPERM "is a body
corporate and politic, and the state of Missouri shall not be liable in any way with
respect to claims made against the fund or against entities or individuals covered by the
fund . . . ." (Emphasis added.) Section 537.710.2 similarly provides that "[n]o trustee
shall be liable personally in any way with respect to claims made against the fund or
against entities or individuals covered by the fund." (Emphasis added.) The phrase
"claims made against the fund" is plainly written, and necessarily refers to direct claims
against MOPERM, particularly when the phrase is juxtaposed against reference to the
separate category of "claims made against . . . entities or individuals covered by the
fund." Section 537.705.4; section 537.710.2. Put simply, nothing in MOPERM's
enabling legislation expressly provides that MOPERM is immunized from suit or liability
26
In contrast to legal capacity to be sued, "[s]overeign immunity is not an affirmative defense; instead,
when suing a public entity, the burden is on the plaintiff to plead facts with specificity that give rise to an exception
to sovereign immunity." State ex rel. City of Kansas City v. Harrell, 575 S.W.3d 489, 492 (Mo. App. W.D. 2019)
50
for its acts or omissions. See Pippins v. City of St. Louis, 823 S.W.2d 131, 133 (Mo.
App. E.D. 1992) (holding that City Land Reutilization Authority was a public
corporation, and could sue and be sued as its enabling legislation included no indication
of "legislature's intent to put LRA in singularly unique position of being able to sue but
not be sued").
Finally, MOPERM's argument that it cannot be sued because moneys in the fund
can only be used for purposes expressly described in the enabling legislation is not
supported by MOPERM's enabling legislation.
Section 537.735.1 provides, in pertinent part, as follows:
The board shall set up and maintain a Missouri public entity risk
management fund account in which shall be placed all contributions,
premiums, and income from all sources. All property, money, funds,
investments, and rights which shall belong to, or be available for
expenditure or use by, the fund shall be dedicated to and held in trust for
the purposes set out in sections 537.700 to 537.755 and no other. The
board shall have power, in the name of and on behalf of the find, to
purchase, acquire, hold, invest, . . . all property, rights, and securities, and
enter into written contracts, all as may be necessary or proper to carry out
the purposes of section 537.700 or 537.755.
(Emphasis added.) MOPERM argues that the highlighted text requires any use of
moneys in the fund to be expressly authorized, and then reads this provision with section
537.705.1 to argue that "MOPERM funds are available only for three purposes: (1) to pay
and settle all claims for any participating entity in accordance with that entity's coverage;
(2) to pay and settle all claims for any officer or employee of any participating entity; and
(3) to pay attorneys' fees and expenses incurred in the settlement and defense of such
participating entities, their officers, and employees." [Respondent's Brief, p. 29] We do
51
not agree with MOPERM's construction of the phrase "and no other" in section
537.735.1, as the argument misconstrues the phrase "shall be available for" in section
537.705.1; ignores numerous references in MOPERM's enabling legislation permitting
broad use of moneys in the fund; and ignores section 537.755 where the General
Assembly identified the only uses of moneys in the fund that are expressly prohibited.
It is true that section 537.705.1(1)-(3) authorizes the use of MOPERM funds for
the three purposes MOPERM describes. But section 537.705.1 is not written
prohibitively, as MOPERM suggests. It is written prescriptively, as it provides that the
"[m]oneys in the fund shall be available for" the three purposes thereinafter set forth. Id.The plain meaning of the phrase "shall be available for" is not to the exclusion of other
uses, but instead requires money in the fund to be used for at least those purposes
described in section 537.705.1(1)-(3).
This conclusion is reinforced by the fact that MOPERM's enabling legislation
authorizes the use of moneys in the fund for numerous other purposes, including, without
limitation:
• To reimburse the Office of Administration for all costs of providing
staff (section 537.705.4)
• To contract with independent insurance agents, authorizing the agents to
sell insurance to public entities in exchange for compensation (section
537.705.6)
• To purchase one or more policies of insurance or reinsurance to cover
the liabilities of public entities covered by the fund (section 537.730.7)
• To procure insurance covering participating public entities and their
officers and employees for amounts in excess of the amount set forth in
52
section 537.756 as the limit that can be paid out per occurrence for
liabilities covered by the fund (section 537.730.8)
• To assist participating entities is assessing and reducing the risk of
liabilities which may be covered by the fund (section 537.730.9)
• To purchase, acquire, hold, invest, lend, lease, sell, assign, transfer, and
dispose of all property, rights, and securities (section 537.735.1)
• To enter into written contracts as may be necessary or proper to carry
out the purpose of MOPERM (section 537.735.1)
• To invest the funds of the fund as to earn a reasonable return (section
537.735.3)
• To select, employ, or contract with experienced insurance underwriters,
accountants, claims servicers, or rate makers (section 537.740.2)
• To refund at the board's discretion, and on a pro rata basis to
participating public entities, any fund balance in excess of projected
needs (section 537.750.2)
• To pay claims on behalf of public entities to whom or to which a
participating public entity is obligated by virtue of a written contract to
provide coverage (section 537.755.3)
MOPERM's narrow construction of its enabling legislation to limit use of moneys in the
fund to only those purposes described in section 537.705.1(1)-(3) cannot be reconciled
with the aforesaid provisions which effectively authorize the use of moneys in the fund
for virtually anything associated with the ordinary course of operation of the business of a
liability insurer.
Moreover, the General Assembly was careful to specifically articulate in section
537.755 the only uses of moneys in the fund that are prohibited:
53
1. Except as provided in subsection 3 of this section, moneys in the
Missouri public entity risk management fund shall not be available to
pay the following:
(1) Claims made under chapter 287;
(2) Fines or penalties threatened or imposed for violation of any civil or
criminal statute, administrative regulation or county or municipal
ordinance;
(3) Attorney's fees and expenses incurred in the defense of charges that
criminal statutes or county or municipal ordinances were violated;
(4) Claims against any participating public entity or officer or employee
of a participating entity which were brought by or rendered in favor
of any participating entity or officer or employee of a participating
public entity acting in an official capacity;
(5) Claims against those who are independent contractors with a
participating public entity, its officers or employees;
(6) Claims against participating public entities, its officers or
employees who fail to cooperate with the persons conducting any
investigation and preparing any defense as required by section
537.745.
2. No payment shall be made from the fund or any policy of insurance
procured by the fund unless and until the benefits provided to pay the
claim by any other policy of liability insurance have been exhausted.
Section 537.755. It is controlling that the payment of claims asserted against MOPERM
is not on this list. "Where a statute incorporates no exception, a court should not insert
one by judicial legislation." Betts-Lucas, 87 S.W.3d at 321.
Undeterred, MOPERM argued in its motion for its summary judgment that Estes's
claims cannot be paid from the fund because the board is only authorized to require
additional "contributions" from participating entities if "contributions to the fund do not
produce sufficient funds to pay any claims which may be due." Section 537.740
54
(emphasis added). According to MOPERM, since additional contributions can only be
demanded from participating public entities if all "claims" cannot be paid, it follows that
moneys in the fund can only be used to pay "claims." Presupposing, for the sake of
argument, that the word "claims" in section 537.740 refers only to third-party liability
claims against participating public entities, or their officers and employees, (which we do
not hold and need not address), the numerous statutory provisions referenced above
authorizing broad use of moneys in the fund for virtually all purposes associated with the
operation of a liability insurer dispel the flawed premise of MOPERM's argument. In
addition, MOPERM's argument ignores that annual "contributions" (i.e. premiums) paid
by participating public entities are "in the amount determined by the board in accordance
with the provisions of section 379.470 relating to rates established by insurers." Section
537.705.1. Section 379.470(4) permits any number of factors to be considered by an
insurer in setting "rates" or premiums, including "past and prospective loss experience,"
"physical hazard," "catastrophe hazards," "a reasonable margin for underwriting profit
and contingencies," "past and prospective expenses," and "any other factors . . . which
the insurer . . . deems relevant to the making of rates." (Emphasis added.) If exposure
to claims for breach of the duty to act in good faith in negotiating and settling claims
against its insureds presents an organizational risk, then MOPERM is not prohibited from
considering that risk in determining annual contributions to be paid by participating
public entities. In that respect, MOPERM faces no greater risk to the moneys in the fund
than any other liability insurer, and commensurately, a public entity faces no greater
burden in paying premiums to MOPERM than if it where to purchase insurance
55
elsewhere. Cf. section 537.705.1 (noting that "[p]articipation in the fund has the same
effect as purchase of insurance by the public entity. . ."). Finally, MOPERM's "depletion
of the fund" argument ignores that section 537.750.1 contemplates exhaustion of the fund
as it provides that:
If the fund will be exhausted by the payment of all judgments and claims
allowed during a particular fiscal year, amounts paid to each claimant or
person obtaining a judgment shall be prorated, with each person receiving
an amount equal to the percentage his own payment bears to the total of
claims and judgments outstanding and payable from the fund. Any
amounts due and unpaid as a result of such proration shall be paid in the
following fiscal year.
(Emphasis added.) It is noteworthy that section 537.750.1 refers to "judgments" and
"persons obtaining a judgment" without in any manner limiting those references to
judgments entered against participating public entities or their officials or employees.
On appeal, MOPERM persists in its contention that moneys in the fund cannot be
used to pay Estes's claims, and that as a consequence, MOPERM cannot be sued for those
claims. MOPERM argues that we are bound by the Supreme Court's decision in City of
Harrisonville v. McCall Service Stations, 495 S.W.3d 738, 751 (Mo. banc 2016), which
limited claims that could be asserted against the PSTIF to only those "claims" expressly
authorized by the PSTIF's enabling legislation.
City of Harrisonville is distinguishable. In that case, the City asserted tort claims
against the PSTIF for negligence and fraudulent misrepresentation because the PSTIF's
third-party administrator purportedly promised the City it would be reimbursed from the
PSTIF for cleanup costs incurred to remediate contamination from a gas station's
underground storage tank. Id. at 743-44. The General Assembly created the PSTIF as a
56
"special trust fund . . . within the state treasury" to provide insurance coverage to owners
and operators of underground storage tanks "for the cleanup costs associated with spills
and leaks. . ." Id. at 743; Section 319.129.1. Our Supreme Court found that section
319.131 describes only two instances where the PSTIF provides coverage:
(1) the [PSTIF] will pay all of its participants' cleanup 'costs ... which are
greater than ten thousand dollars but less than one million dollars per
occurrence or two million dollars aggregate per year' and (2) the [PSTIF]
'shall provide coverage for third-party claims involving property damage or
bodily injury caused by leaking petroleum storage tanks whose owner or
operator is participating in the fund at the time the release occurs or is
discovered.'
Id. at 751 (quoting sections 319.131.4-5). Our Supreme Court held that because the
City's tort claims did not fall within either category, the claims were not cognizable, as
there was "no authority for payment from the [PSTIF] for claims beyond those expressly
articulated in section 319.131." Id.
MOPERM's enabling legislation is not akin to the enabling legislation authorizing
the PSTIF. The PSTIF is merely an account administered by the state. Id. at 752 ("[T]he
[PSTIF] is merely an account within the state's treasury.") Because the PSTIF is not a
legal entity, it cannot be sued as such, and "cannot be liable for its own conduct." Id.
"Instead, some person or entity must be authorized to [provide coverage, pay claims, or
take other action] using the [PSTIF]." Id. As such, those authorized to "use" the PSTIF
are strictly limited in their authority to the payment of claims against the fund authorized
by section 319.131.
MOPERM concedes that "[u]nlike the PSTIF, MOPERM is not the name of an
'account' administered by [the state]. MOPERM is a separate 'body corporate and
57
politic.'" [Respondent's Brief, p. 23] (emphasis added). We have already explained that
as a body corporate, MOPERM can sue and be sued, and is thus liable for its own
conduct. We have already explained that MOPERM's enabling legislation does not limit
the use of moneys in the fund to the three uses described in section 537.705.1 for which
moneys in the fund "shall be available." We have already explained that nothing in
MOPERM's enabling legislation can be read to immunize MOPERM from liability for its
own conduct, and instead, that MOPERM's enabling legislation expressly contemplates
that claims may be made directly against MOPERM. And we have already explained
that except as expressly delineated in sections 537.755.1 and .2, MOPERM's enabling
legislation does not impose a limit on how moneys in the fund can be used. Finally, it is
noteworthy that sections 537.705.1(1) and (2) provide that "[m]oneys in the fund shall be
available for . . . (1) [t]he payment and settlement of all claims for which coverage has
been obtained by any public entity in accordance with coverages offered by the board;
(2) [t]he payment and settlement of tort claims against any officer or employee of a
participating public entity for which coverage has been obtained by any public entity in
accordance with coverages offered by the board . . . ." (Emphasis added.) As explained,
supra, the duty to act in good faith to attempt to settle claims within policy limits is
implied in every policy of insurance, and thus in every MOPERM memorandum of
coverage. "Coverage obtained" by every participating public entity and the entity's
officers and employees therefore includes MOPERM's duty to act in good faith to attempt
58
to settle claims within policy limits. MOPERM's reliance on City of Harrisonville is
unavailing.27
MOPERM's contention that it was entitled to summary judgment because its
enabling legislation prohibits claims of the nature asserted by Estes is without merit as a
matter of law and could not have served as an alternative basis for the trial court's grant
of summary judgment.
C.
MOPERM's enabling legislation does not preclude Estes's claims on the basis that
they exceed the amount MOPERM is authorized to pay for all claims arising out of
a single occurrence
Finally, we turn to MOPERM's contention that it is entitled to summary judgment
because MOPERM's enabling legislation does not authorize MOPERM to use moneys in
the fund to pay anything more than $2,000,000 for all claims arising out of a single
occurrence. MOPERM appears to be arguing that because it could never have been
required to pay more than $2,000,000 to settle Estes's claims against Hughes in the
Underlying Lawsuit, it cannot be sued for bad faith failure to settle within those policy
limits or for breach of fiduciary duty because it has now paid Estes $2,000,000 toward
her claims against Hughes in the Underlying Lawsuit.
Section 537.756.1 provides, "The maximum amount which may be paid from the
fund . . . for the payment and settlement of claims arising out of any single occurrence, is
27
City of Harrisonville also found that the PSTIF's board of trustees and/or its individual members could be
sued for claims arising out of the administration and operation of the PSTIF. 495 S.W.3d at 752. In the instant case,
Estes has sued not only MOPERM, but also the individual members of MOPERM's board of trustees in their official
capacities.
59
two million dollars."28 In connection with the Underlying Lawsuit, the phrase "claims
arising out of any single occurrence" refers to the "claims" asserted by Estes against
Hughes that arose out of the "single occurrence" of Doe being raped and impregnated by
Hughes's husband while under Hughes's care.
In the instant case, however, the claims asserted by Estes against MOPERM and
its board of trustees belonged to Hughes, MOPERM's insured, and have been assigned to
Estes. As a result, the claims asserted by Estes in this case arose out of a different
occurrence--MOPERM's purported failure to exercise good faith in settling Estes's claims
against Hughes in the Underlying Lawsuit within the policy limits, resulting in a
judgment against Hughes in excess of the policy limits. It defies logic to suggest that
MOPERM cannot be sued for breach of the duties it owed Hughes, its insured, because
MOPERM belatedly paid Estes the policy/statutory coverage limits for her claims against
Hughes in the Underlying Lawsuit. MOPERM's argument ignores that but for
MOPERM's purported breach of the duties it owed Hughes, the Underlying Lawsuit
could have been settled within policy limits, and no judgment against Hughes in excess
of the policy limits would have been entered. MOPERM's liability in tort for breach of
the duties it owes an insured is not obviated by MOPERM's after-the fact remittance of
policy limits toward partial satisfaction of an excess judgment entered against its insured.
We recognize that a judgment entered against a participating public entity in
excess of $2,000,000 would yield little fodder for a bad faith failure to settle claim in
28
As previously noted, the cap set forth in section 537.756.1 is subject to annual indexed adjustment as
provided in section 537.756.2. In addition, section 537.730.8 provides that the board has the authority to "procure
insurance covering participating public entities and their officers and employees for amounts in excess of the
amount specified by section 537.756 per occurrence for liabilities covered by the fund."
60
light of section 537.610.2, which limits the liability of public entities on claims where
sovereign immunity has been waived to the same $2,000,000 payment cap imposed on
MOPERM by section 537.756.1. However, that is not the case where an excess judgment
is entered against an officer or employee of a participating public entity. As we have
already explained, officers and employees of public entities do not enjoy the protection of
section 537.600.1 sovereign immunity; of section 537.610.2's "cap" on recovery for
claims as to which sovereign immunity has been waived; or of section 537.610.3's
prohibition on punitive damages. "[T]he limitation on liability where sovereign
immunity is waived applies only to the public entity and not to an agent of the entity."
Cottey, 24 S.W.3d at 129 (citing Trimble, 745 S.W.2d at 675).
MOPERM's contention that it was entitled to summary judgment because it has
already paid the maximum amount it was authorized to pay for all claims arising out of a
single occurrence is without merit as a matter of law and could not have served as an
alternative basis for the trial court's grant of summary judgment. MOPERM's liability for
bad faith breach of the duty to settle within policy limits, and the damages flowing from
that breach, remain to be determined. See Truck Ins. Exch. v. Prairie Framing, LLC, 162
S.W.3d 64, 94 (Mo. App. W.D. 2005) ("Missouri law provides that where an insurer has
'acted in bad faith in refusing to settle within the policy limits it [is] liable in tort, [] not
negligence or breach of contract[,] to the insured for the entire resulting judgment against
the insured, including that part in excess of the policy limits.'" (emphasis added)
(quoting Landie v. Century Indem. Co., 390 S.W.2d 558, 563 (Mo. App. 1965)).
For the reasons herein explained, Estes's third point on appeal is granted.
61
Conclusion
The trial court's Judgment granting summary judgment in favor of MOPERM and
its board of trustees on Estes's claims for bad faith failure to settle and breach of fiduciary
duty is reversed. We remand this matter to the trial court for further proceedings
consistent with this Opinion.
__________________________________
Cynthia L. Martin, Judge
All concur
62