Safeco Insurance Company of America v. Schmitt

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

SAFECO INSURANCE COMPANY OF )

AMERICA, )

)

Plaintiff(s), )

) Case No. 4:20-cv-01482-SRC

vs. )

)

JOSEPH SCHMITT, et al., )

)

Defendant(s). )

Memorandum and Order

After a night of drinking at Bomber O’Brien’s Sports Bar & Grill, off-duty police officers

Joseph Schmitt and William Olsten attempted to execute an arrest in the wee hours of the

morning. Their target, the pseudonymously-named S.D., was in a van in the Bomber O’Brien’s

parking lot, smoking marijuana. Schmitt and Olsten pulled S.D. from the van and forced him to

the ground. S.D. was armed, and he fired two bullets into Olsten, wounding him. As S.D. fled

from the scene, Schmitt shot S.D. eight times, causing permanent and severe injuries. At least

that’s what the pleadings state.

S.D. filed a civil action against Schmitt, the City of St. Louis, and others in the Circuit

Court for the City of St. Louis, Missouri, alleging battery, assault, and negligence. Doc. 19-1;

Doc. 1-3. The City refused to defend Schmitt in the civil action, so Safeco Insurance Company

of America reluctantly assumed Schmitt’s defense under Schmitt’s personal homeowner’s

insurance policy. Doc. 19 at ¶¶ 45, 62–68. Safeco filed this declaratory judgment action

seeking, among other things, a declaration that the City has a duty to defend and indemnify

Schmitt against S.D.’s civil claims. Doc. 19 at ¶¶ 57–60. The City filed a motion to dismiss all

of Safeco’s claims against it, which the Court grants. Doc. 29.

I. Facts and background

For purposes of considering the City’s motion to dismiss, the Court accepts all well-

pleaded factual allegations as true. See Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007).

Plaintiff Safeco Insurance Company of America filed a complaint against Defendants Joseph

Schmitt and S.D., seeking declaratory relief that it owes no coverage under Schmitt’s

homeowner’s policy for the claims asserted in state court. Doc. 1. Safeco claims that the policy

excludes coverage for S.D.’s injuries arising from the shooting incident on April 21, 2018. See

id. Safeco then amended its complaint to include claims against the City of St. Louis, asserting

that the City has an obligation to defend and indemnify Schmitt in the underlying action as well

as to reimburse Safeco for its defense of Schmitt. Doc. 19 at ¶¶ 54–70.

Schmitt demanded that Safeco defend him in the underlying action after the City refused

to defend him. Id. at ¶ 63. The City refused to undertake Schmitt’s defense even after Safeco

tendered the defense to the City on four separate occasions. Id. at ¶¶ 65–66. Safeco observes

that the City maintains a self-insurance fund for covering the defense and indemnity of its law

enforcement officers. Id. at ¶¶ 32–33. In Count 1, Safeco requests that the Court enter a

declaratory judgment that the City is obligated to assume the defense and indemnity of Schmitt

in the underlying action. Id. at ¶ 60. And in Count 2, Safeco seeks an equitable subrogation

award for Safeco’s fees and costs incurred in defending Schmitt. Id. at ¶ 70. These are the only

counts asserted against the City. Id. at ¶¶ 54–70.

II. Standard

Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a claim for

“failure to state a claim upon which relief can be granted.” The notice pleading standard of Rule

8(a)(2) requires a plaintiff to give “a short and plain statement showing that the pleader is

entitled to relief.” To meet this standard, “a complaint must contain sufficient factual matter,

accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009) (internal quotations and citation omitted). This requirement of facial

plausibility means the factual content of the plaintiff’s allegations must “allow[] the court to

draw the reasonable inference that the defendant is liable for the misconduct alleged.” Park

Irmat Drug Corp. v. Express Scripts Holding Co., 911 F.3d 505, 512 (8th Cir. 2018) (quoting

Iqbal, 556 U.S. at 678). The Court must grant all reasonable inferences in favor of the

nonmoving party. Lustgraaf v. Behrens, 619 F.3d 867, 872–73 (8th Cir. 2010).

When ruling on a motion to dismiss, a court “must liberally construe a complaint in favor

of the plaintiff[.]” Huggins v. FedEx Ground Package Sys., Inc., 592 F.3d 853, 862 (8th Cir.

2010). However, if a claim fails to allege one of the elements necessary to recover on a legal

theory, the Court must dismiss that claim for failure to state a claim upon which relief can be

granted. Crest Constr. II, Inc. v. Doe, 660 F.3d 346, 355 (8th Cir. 2011). Threadbare recitals of

a cause of action, supported by mere conclusory statements, do not suffice. Iqbal, 556 U.S. at

678; Twombly, 550 U.S. at 555. Although courts must accept all factual allegations as true, they

are not bound to take as true a legal conclusion couched as a factual allegation. Twombly, 550

U.S. at 555 (internal quotations and citation omitted).

III. Discussion

The City moves to dismiss both counts against it in Safeco’s amended complaint for

failure to state a claim. Doc. 29; see also Fed. R. Civ. P. 12(b)(6). As to Count 1, the City

argues that Safeco does not allege plausible, nonconclusory facts to show the City had a duty to

defend and indemnify Schmitt against S.D.’s civil claims. Doc. 29 at ¶ 1. As to Count 2, the

City contends that Safeco fails to establish the elements of an equitable subrogation claim. Id. at

¶ 2. The Court addresses these arguments in turn.

A. Count 1 – duty to defend and indemnify

The City moves to dismiss Count 1 of Safeco’s amended complaint, arguing that Safeco

failed to establish a duty owed by the City to defend and indemnify Schmitt. Doc. 30 at 3–5.

The City contends that Safeco provided no statutory or contractual basis for an obligation to

defend and indemnify Schmitt. Id. at 3. The City points to Roberts v. St. Louis, 242 S.W.2d 293,

295 (Mo. App. 1951), which held that the City of St. Louis had no duty to defend and indemnify

a police officer sued in state court. Roberts explained that section 2, article 10 of the St. Louis

City Charter did not create an obligation for the City Counselor to defend civil suits against city

police officers. Id. at 297–298 (section 2, article 10 required the City Counselor to “render the

police department all legal advice and service required by it.”). Roberts explained that the City

had discretion to defend and indemnify an officer in a civil action, but the City did not have to

defend the officer as it was not “a matter of right.” Id.

Safeco claims that the City’s maintaining a legal expense fund to defend and pay claims

on behalf of its employees obligates the City to defend and indemnify all of its police officers for

alleged police misconduct. Doc. 34 at 7–8. In Green v. City of St. Louis, 2020 WL 7056015, at

*6–8 (E.D. Mo. Dec. 6, 2020), the court recognized that the City of St. Louis uses its legal fund,

the Public Facilities Protection Corporation (“PFPC”), to pay judgments against the City and its

employees. Green allowed the plaintiffs to proceed with discovery on whether the City had

waived sovereign immunity for state-law tort claims against it by maintaining self-insurance

coverage through the PFPC. See id. at *8. Importantly, Green did not address whether the very

existence of the PFPC obligated the City to defend and indemnify its employees. See id.

Safeco compares this case to Kershaw v. City of Kan. City, 440 S.W.3d 448, 458 (Mo.

App. W.D. 2014), which held that Kansas City had a duty to pay a negligence judgment obtained

by one of its employees against another one of its employees for a vehicle collision. In Kershaw,

Kansas City assumed a legal duty to pay for tort damages caused by one of its employees “by

expressly agreeing to indemnify [the defendant employee].” 440 S.W.3d at 456 (“The question

before us is whether the City’s ordinance constitutes a clear and unequivocal agreement to allow

recovery from the City Legal Expense Fund by [the defendant employee] in this case.”). The

court interpreted section 2–1685 Kansas City’s Code of Ordinances, titled “City legal expense

fund,” which provided:

(b) There is hereby established a fund to be known as the city legal expense fund,

the purpose of which is to enable the city to pay, in whole or in part, claims for

various losses and liabilities incurred by the city, except that no payments from

the fund are to be made for claims or lawsuits in which the city has immunity under

section 537.600 RSMO, or other applicable law, either statutory or case law.

. . .

(g) Use of the city legal expense fund. Losses payable from the city legal expense

fund shall be as follows:

. . .

(2) Claims made by third parties based on liability of the city, its agents,

representatives, officials, officers, or employees, if such claims are not barred by

sovereign, governmental, official immunity, and the public duty doctrine, in

accordance with Section 537.600 RSMO, or other applicable law, either statutory

or case law based on a final judgment of a court of competent jurisdiction.

Section 2–1685(g), Code of Ordinances of the City of Kansas City, Missouri (2009) (emphasis

added).

The court explained that the plain text of section 2–1685(b) “does not clearly indicate the

purpose of section 2–1685(g), so the court analyzed caselaw on the purpose of the similar

Missouri State Legal Expense Fund. Kershaw, 440 S.W.3d at 458. The court cited Judge

Blackmar’s opinion in Cates v. Webster, 727 S.W.2d 901, 907 (Mo. banc 1987) (Blackmar, J.,

concurring in part and dissenting in part), which explained the purpose of the State Legal

Expense Fund as follows:

The State Legal Expense Fund exists to protect the covered employees from the

burden and expense of civil litigation relating to the performance of their duties.

The purposes 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.

The court found it “logical that this would be the purpose of section 2–1685(g) as well, as the

language of the State Legal Expense Fund statute and City Legal Expense Fund ordinance is

similar, and the same considerations prompting protection of state employees also apply to city

employees.” Kershaw, 440 S.W.3d at 458.

Construing section 2–1685(g) in light of this purpose, the court determined that the use of

the word “shall” in the ordinance imposed “a mandatory duty on the City to pay judgments such

as the one against [the employee] in this case.” Kershaw, 440 S.W.3d at 461 (“Generally the use

of the word ‘shall’ connotes a mandatory duty.” (internal citations omitted)). The court observed

that the State Legal Expense Fund statute contained the same “shall” language, imposing a

mandatory duty on the State: “Moneys in the state legal expense fund shall be available for the

payment of any claim or any amount required by any final judgment rendered by a court of

competent jurisdiction against: . . . Any officer or employee of the State of Missouri[.]” Id. at

461 n.14. The court concluded that section 2–1685(g) “clearly and unequivocally establishes a

duty on the City’s part . . . to pay [the defendant employee] on the Kershaws’ negligence

judgment.” Id.

Based on Kershaw, Safeco contends that the City of St. Louis’s PFPC created the same

duty for the City to defend and indemnify its employees, yet Safeco failed to provide a similar

statute or city ordinance where the City arguably assumed this kind of responsibility. Doc. 34 at

8–11. Safeco only cites section 3.10.040(H) of the Revised Code of the City of St. Louis, part of

a provision defining the duties of the City Counselor:

In addition to the duties prescribed in the Charter and in existing ordinances not

inconsistent with the Charter, it shall be the duty of the City Counselor:

A. To initiate and prosecute in the Circuit Court all proceedings relating to the

appropriation of any private property or any easement or use therein for any public

use, or arising out of any public improvement or work which will damage private

property, as prescribed and required in Article XXI of the Charter;

. . .

H. To prepare all charges and to prosecute and to defend before the City Courts,

or Justices of the Peace, or the St. Louis Court of Criminal Correction, all

actions on behalf of the City, or emanating from the Board of Police

Commissioners, or any department of the City, and defend before such courts all

actions against any officer or servant or agent of the City, or the Board of

Police Commissioners, on account of his acts, and to attend to appellate courts to

all appeals or writs of error in any case originating as aforesaid;

. . .

Section 3.10.040, Revised Code of the City of St. Louis (1994).

Section 3.10.040(H) expressly provides for the defense of City employees “before the

City Courts, or Justices of the Peace, or the St. Louis Court of Criminal Correction.” See id. The

Court examines whether section 3.10.040(H) obligates the City to defend and indemnify Schmitt

in the underlying action. This requires the Court to determine whether the language “the City

Courts, or Justices of the Peace, or the St. Louis Court of Criminal Correction” encompasses the

underlying action in the Circuit Court. Doc. 1-3.

Under section 3.08.040 of the Revised Code, “City Courts” are municipal courts with

“jurisdiction of all suits for the recovery of any fine, forfeiture or penalty imposed for the

violation or breach of any ordinance, which suits and proceedings therein shall be in the nature

of a civil action.” See also State ex rel. & to Use Bouckaert Bros. v. Mathews, 159 S.W. 2d 767

(Mo. 1942) (City Courts have jurisdiction of all civil cases arising from the violation of St. Louis

City ordinances). The underlying case is not in the “City Courts” or any other municipal court,

nor does it involve allegations regarding St. Louis City ordinances. Doc. 1-3. Thus

3.10.040(H)’s reference to the “City Courts” does not “clearly and unequivocally establish” the

City’s agreement to defend the action against Schmitt.

Justices of the Peace were “special courts” of the state, like magistrate or probate courts,

“which do not proceed according to the common law.” Rice v. Lucas, 560 S.W.2d 850, 857 (Mo.

1978). The Justices of the Peace were replaced by magistrate courts in 1945, which took on the

same “law, practice procedures, administration and jurisdiction” as the Justices of the Peace. Id.

at 856. The magistrate courts were abolished in 1979 by constitutional amendment, and their

duties were assigned to Associate Circuit Judges. Brainchild Holdings, LLC v. Cameron, 534

S.W.3d 243, 246 (Mo. 2017). The record indicates that the underlying case is pending before a

Circuit Judge, not an Associate Circuit Judge, and Safeco provides no information to the

contrary. Doc. 1-3; Doc. 34 at 1–3. The plain text of section 3.10.040(H) specifying matters

before “Justices of the Peace” might, at best, support an argument that the City has a duty to

defend a case pending before an Associate Circuit Judge. But the Court does not reach that issue

and only holds that the plain text of the ordinance does not “clearly and unequivocally establish”

the City’s agreement to defend the action against Schmitt.

The St. Louis Court of Criminal Corrections was historically “an inferior[] court, of

limited jurisdiction and statutory origin” which also did not proceed “according to the course of

the common law.” Ex parte O’Brien, 30 S.W. 158, 161 (Mo. 1895); see also City of St. Louis v.

Vetter, 293 S.W.2d 140, 143 (Mo. App. 1956) (“[T]he proceedings of said court shall be

governed by the laws regulating proceedings and practice in criminal cases[.]”). This court was

“statutorily created so as to have exclusive original jurisdiction of all misdemeanors committed

in the City of St. Louis,” but the court was abolished in 1979. Vaughn v. State, 763 S.W.2d 232,

236 (Mo. App. W.D. 1988) (citing Mo. Ann. Stat. § 479.180 (1949) (repealed)). Nothing in the

text of the ordinance or this history suggests, much less “clearly and unequivocally establishes,”

the City’s agreement to defend a civil tort action before a Circuit Judge.

Notably, section 3.10.040(A) of the Revised Code authorizes the City Counselor to

initiate certain actions “in the Circuit Court” for the State of Missouri, thus distinguishing the

courts listed in subsection H from the “Circuit Court” in subsection A. Section 3.10.040(H) does

not mention the Circuit Court in its list, reaching only the “City Courts, or Justices of the Peace,

or the St. Louis Court of Criminal Correction.” Further, Safeco presents no argument that the

tort claims against Schmitt fall under the various jurisdictions of the City Courts or of the

nonexistent Justices of the Peace or St. Louis Court of Criminal Corrections. Doc. 34 at 8–11.

Accordingly, the plain text of section 3.10.040(H) creates no duty for the City Counselor to

defend Schmitt in a tort action brought in the Circuit Court.

Safeco points to a 2018 letter written by City Counselor Julian Bush to a City

Alderwoman, which states that the PFPC is used “to pay judgments against the City and its

employees generally, including those arising from the operations of the Division of Police.” Id.

at 6 (quoting Green, 2020 WL 7056015, at *7–8). Safeco argues that the very existence of the

PFPC creates a duty for the City to defend all of its police officers. Id. But the City’s decision

to defend some of its police officers in tort actions does not create an ongoing obligation to

defend all officers. See Roberts, 242 S.W.2d at 298. As the City points out, the City regularly

provides a legal defense for some, but not all, of its police officers accused of misconduct. See,

e.g., Hall v. City of St. Louis, et al., 4:19-cv-02579-JCH, 465 F. Supp. 3d 937 (E.D. Mo. 2020),

appeal dismissed sub nom. Hall v. City of St. Louis, Missouri, No. 20-2267, 2021 WL 2628827

(8th Cir. Feb. 19, 2021) (the City Counselor’s Office represented Mayor Krewson, Joseph

Marcantano, and Lawrence O’Toole, but not Dustin Boone, Christopher Myers, or Bailey

Colletta); Wahlers v. Hendren et al., 4:19-cv-03064-SRC, 2020 WL 1934992, at *1 (E.D. Mo.

Apr. 22, 2020) (the City Counselor’s Office represents Gary Foster, but not Nathaniel Hendren

or Patrick Riordan).

Safeco presents no other authority to show that the City assumed the duty to defend and

indemnify its police officers in state tort actions. Doc. 34 at 8–11. Section 3.10.040(H) does not

obligate the City to defend its employees in state circuit court, unlike the provision in Kershaw,

which “clearly and unequivocally establishe[d]” such a duty. See Kershaw, 440 S.W.3d at 461.

The letter from City Counselor Bush does not create a statutory or contractual duty for the City

to defend and indemnify its police officers––at most it indicates that the City may choose to

defend and indemnify its employees at its own discretion. See Green, 2020 WL 7056015, at *7–

8; see also Roberts, 242 S.W.2d at 298. Safeco provides no basis for the City’s purported

obligation to defend and indemnify Schmitt, therefore, the Court grants the City’s motion to

dismiss Count 1. Doc. 29.

B. Count 2 – equitable subrogation

The City moves to dismiss Count 2 of Safeco’s complaint, contending that Safeco’s

allegations fail to establish the necessary elements for equitable subrogation. Doc. 30 at 5.

“Subrogation exists to prevent unjust enrichment.” Keisker v. Farmer, 90 S.W.3d 71, 75 (Mo.

banc 2002). Equitable subrogation “provides that ‘one who has been compelled to pay a debt

that ought to have been paid by another is entitled to exercise all remedies which the creditor

possessed against the other.’” Weitz Co., LLC v. Lexington Ins. Co., 786 F.3d 641, 645 (8th Cir.

2015) (internal citation omitted). Under Missouri law, “[a] right to equitable subrogation

belongs to ‘one, not a volunteer, who pays another’s debt.’” Scottsdale Ins. Co. v. Addison Ins.

Co., 448 S.W.3d 818, 832 (Mo. banc 2014) (“Equitable subrogation has been recognized by a

majority of jurisdictions as a proper claim for an excess insurer to recover from a primary

insurer’s wrongful refusal to settle.”).

Because the City had no obligation to defend or indemnify Schmitt, Safeco did not pay a

debt of the City, and equitable subrogation does not apply. Because Schmitt has no right to a

defense or indemnification from the City, Safeco cannot recover its costs from the City either.

See Weitz Co., LLC, 786 F.3d at 645. Accordingly, the Court grants the City’s motion to dismiss

Count 2. Doc. 29.

IV. Conclusion

The Court grants the City’s motion to dismiss Counts 1 and 2 of Safeco’s complaint and

dismisses this action against the City. Doc. 29; see also Fed. R. Civ. P. 12(b)(6).

So Ordered this 21st day of July, 2021.

su Ph. CS

STEPHEN R. CLARK

UNITED STATES DISTRICT JUDGE

11