In Pitt v. Leonberger, the Missouri Court of Appeals ruled that the criminal conduct exclusion did not apply. Leonberger, a school bus driver, struck and killed Pitts’ son.  The insurer, Missouri United School Insurance Council (MUSIC), accepted liability and even hired an attorney to represent Leonberger when a criminal charge of negligent homicide was filed against Leonberger.  The attorney told Leonberger to plead guilty, and he did.  MUSIC stated it thought it was prudent to exercise control over the criminal matter since the outcome could impact the claim. And, MUSIC thought the death was a tragic accident, not a criminal matter.  Before pleading guilty, Leonberger requested MUSIC settle all claims against him within the
policy limits if the opportunity arose. At no time before the plea did MUSIC tell Leonberger that pleading guilty to the criminal charges would affect his coverage. After the civil suit was filed against Leonberger, MUSIC’s reinsurer, UE, said there wasn’t any coverage because of the criminal act exclusion.  There was some evidence that the claim of no coverage was intended to force the plaintiffs to accept the statutory cap on damages or go to mediation.  A reservation of rights letter was prepared, but not sent, and a policy limits demand was made by the plaintiffs.  When MUSIC eventually sent the reservation of rights letter, Leonberger settled with the Pittses to the extent of coverage, per Missouri law, and Pitts went forward with the coverage claims, after a court found Leonberger liable for negligence in the death of Pitts’ child.

The finding of coverage was affirmed, and the insurer was liable for the full amount of the judgment, regardless of limits.

The general liability and automobile liability insurance policy covered any “accident,” which included acts of negligence, and negligence has no degrees in a civil action, so any finding of negligence rendered insurers liable for coverage. Policy excluded criminal acts, but listed that exclusion with other acts that are all intentional, so the criminal acts exclusion must also refer to intentional acts. So, when the same events produce guilty verdicts in both civil and criminal actions, the criminal charge “did not change the nature of the act from negligent to intentional [.]” Otherwise, criminal procedure would determine the insurance contract’s coverage. The overlap created, at best, an ambiguity construed against the insurer. Also, the insurer initially assumed the defense of its insured without reservation of rights, and even retained criminal counsel for the insured, who advised the insured to plead guilty. Those facts preclude denial of coverage. Having had the opportunity to control the litigation, the insurer is liable for any judgment against its insured without regard to policy limits, but only if the insurer made its refusal to defend in bad faith. Statute applies post-interest judgment pending appeal, while circuit court applied contractual interest separately and cumulatively, from which garnishee insurer cannot appeal.