Western District reverses judicially reduced verdict over questions

St. Louis Daily Record & St. Louis Countian, Oct 26, 2005 by Denise G. Callahan

Flimsy evidence of workers' compensation benefit payments caused a judicially reduced jury verdict to be reversed by the Western District Court of Appeals.

In Raymond Powell and Renee Powell vs. State Farm Mutual Automobile Insurance Co., the insurance company asked for and was granted a reduced jury verdict because Powell's medical bills and lost wages were supposedly covered by his employer, the Kansas City Police Department. The Western District sent the case back to Jackson County Circuit Court Judge Jay A. Daugherty for hearings on the evidence.

In the early hours of March 18, 2001, a drunk driver struck Powell while he was on motorcycle patrol. Powell sustained injuries to his foot that required surgery.

Powell settled with the drunk driver for the driver's insurance policy limit of $50,000 before the court conducted a jury trial. Powell previously purchased underinsured motorist coverage from State Farm.

The jury awarded Powell $75,000 in damages; therefore, State Farm was responsible for $25,000. Following trial, State Farm asked Daugherty to reduce its liability by $9,011 because Powell's employer allegedly paid $5,739 worth of his medical bills. The insurance company also wanted the court to reduce the amount it owed by an additional $3,271, which was two-thirds of the amount of injury time paid or payable to the officer.

Daugherty agreed, and Powell appealed, claiming State Farm failed to offer substantial evidence that the reduction amount was paid or payable to him under the Missouri Workers' Compensation Law. His second point claimed that the amount should have been reduced from the policy limits, not the verdict.

The Western District said since it could resolve the case on the first point, it needn't discuss the second.

When State Farm asked Daugherty for relief, it pointed to a clause in Powell's insurance policy that states: Any amount payable under this coverage shall be reduced by any amount paid or payable to or for the insured under any worker's compensation, disability benefits, or similar law.

The court first decided which party in this case had the burden of proof.

State Farm argues that the offset provision of the policy is not an exclusion and that Officer Powell had the burden of proving that his claim was within the coverage of the policy. State Farm's argument is incorrect, Judge Robert G. Ulrich wrote for the unanimous court. By definition, an exclusion provision in an insurance policy excludes risk. Schwartz, 705 S.W.2d at 498. It does not endow coverage but rather limits the obligation of indemnity. Id. Although not specifically labeled an exclusion, the offset provision in the policy is an exclusion because it does not endow coverage but limits the responsibility of State Farm for Officer Powell's damages. Given State Farm's reliance on the offset provision, it had the burden of proving facts that make the provision applicable.

The court proceeded to pick apart the documents, such as the insurance policy, the police department's personnel policies and summaries of the medical bills and his lost wages State Farm offered Daugherty, to bolster its claim for an offset.

The Western District objected to the trial court taking judicial notice of the personnel policies proffered.

Under section 536.031.5, RSMo Cum. Supp. 2004, Missouri courts take judicial notice, without proof, of the Code of State Regulations. Unless a rule or regulation has been published in the Code of State Regulations, however, a court may not take judicial notice of an administrative rule or regulation. State vs. Mullenix, 73 S.W.3d 32, 37 (Mo. App. W.D. 2002), the judge wrote. The personnel policies of the Kansas City Police Department are not published in the Code of State Regulations, and, therefore, the trial court could not take judicial notice of such exhibits attached to State Farm's motion. And even if the trial court could take judicial notice of the policies, no evidence was offered that the policies were in effect at the time of Officer Powell's injury. The court noted the summary of medical bills matched evidence at trial but said the lost wages summary State Farm offered didn't agree with the evidence offered at trial.

Finally, as to testimony Powell himself gave during the offer of proof, when he said he believed his employer paid his medical bills, the court said this testimony hardly constitutes concrete evidence.

Generally, one's belief, feeling, understanding, or thought about a matter does not constitute substantial evidence justifying or permitting a finding to that effect. Dickey Co. vs. Kanan, 537 S.W.2d 430, 433-34 (Mo. App. 1976), Ulrich wrote.

The attorneys on this case could not be reached for comment, but the court made it abundantly clear more work needs to be done.

The trial court apparently considered the exhibits attached to State Farm's motion to reduce the verdict in ruling that State Farm was entitled to offset the verdict by $9,011.44. The exhibits were accepted as true without any opportunity for Officer Powell to contest or introduce evidence on the amounts or application of the provision, the court held. Because an evidentiary hearing on State Farm's motion was not conducted, the trial court lacked a factual basis for deciding the issue. See Prewitt, 979 S.W.2d at 525 (where trial court did not hold evidentiary hearing on whether juror intentionally failed to disclose material information, court had no evidence before it to determine issue).