Case Result: Bad Faith and Equitable Garnishment Settlement

Shepard v. Baker, Heathman and Employers Mutual Casualty Company

$2 Million Settlement

An insurance company that initially denied coverage to its insureds paid two times the $1,000,000 policy limit to settle a personal injury case.

Baker and Heathman formed a partnership to operate a convenient store in Missouri. After the store opened for business, they decided to operate a paintball facility out of the store. Paintball supplies were rented inside the store and a field where paintball was played was directly behind the store. Neither the convenience store nor the paintball operation was separately incorporated.

Baker and Heathman purchased a business owners’ liability policy from Employers Mutual Casualty Company. They bought the insurance policy to cover the business of the partnership. The insurance policy specifically listed the partnership as the insured. The policy’s declaration page listed the named insureds as Baker and Heathman d/b/a Tabacco Shack.

The Employers Mutual Casualty Company policy stated if the insured was listed as a partnership, the partners were insureds with respect to the conduct of their business. So in this case, Baker and Heathman were insureds.

The policy limit was $1,000,000.

Plaintiff injured his eye while playing paintball and filed suit naming Baker and Heathman individually.

Baker and Heathman tendered the claims to Employers Mutual Casualty Company. The insurance company denied coverage and stated they would not provide a defense. The insurance company claims it denied coverage because its policy did not insure a paintball operation.

Baker and Heathman tendered the claim a second time to the carrier, and it again refused to provide a defense.

Plaintiff obtained an excess judgment against Baker and Heathman for $2,750,000.

Plaintiff then filed an equitable garnishment action in the Circuit Court of Jackson County, Missouri. Baker, Heathman and EMC were named as Defendants. Cross claims were filed by Baker and Heathman against Employers Mutual Casualty Company for bad faith failure to defend and bad faith failure to settle. The basis for the cross claims was that Baker and Heathman claimed they were insureds under the policy for their partnership business. Their business was a convenient store and paintball operation.

The case settled at mediation for $2,000,000.