            In the Missouri Court of Appeals
                    Eastern District
                                        DIVISION ONE

HELEN Y. SMITH,                                 )   No. ED106603
                                                )
       Respondent,                              )   Appeal from the Circuit Court
                                                )   of the City of St. Louis
vs.                                             )
                                                )   Honorable Steven R. Ohmer
KEYSTONE MUTUAL INSURANCE CO.,                  )
                                                )
       Appellant.                               )   FILED: June 25, 2019

       Keystone Mutual Insurance Co. (“Keystone”) appeals from the trial court’s judgment,

following a jury trial in which Keystone was the defendant insurance company in an action

brought by Helen Y. Smith, the widow of a deceased patient of Dr. Wallace Berkowitz, who had

been insured by Keystone for a time. We reverse the trial court’s judgment and remand with

instructions.

                                        I. Background

       Dr. Berkowitz, an ear, nose, and throat physician, applied for insurance with Keystone,

which focuses its business on insuring physicians in a small number of low-risk specialties, such

as ear, nose, and throat physicians. In 2009, Keystone agreed to insure him and his private

practice for 2010, and the policy was renewed in 2011. A dispute later arose between the parties,

which culminated in the parties entering into an agreement in March 2011, which, among other

things, mutually rescinded the insurance policy and waived all of Dr. Berkowitz’s and his private
practice’s claims against Keystone (the “Agreement”). The facts of this Agreement will be

discussed in greater detail during the discussion of the points below.

           Helen Smith (“Smith”), widow of Johnnie Ray Smith, the deceased patient of Dr.

Wallace Berkowitz, filed a wrongful death lawsuit against Dr. Berkowitz in 2010. A jury

entered a verdict in favor of Smith in February 2013, awarding $1 million plus interest, which

was reduced later to $680,000 with taxable costs and interest. Dr. Berkowitz filed for

bankruptcy and received discharge in August 2016, which freed him from the obligation to pay

the wrongful death judgment and hindered Smith’s ability to collect from him. While Dr.

Berkowitz was still in bankruptcy, Smith filed a petition against Keystone on May 9, 2014.

Smith asserted six claims, including equitable garnishment under Section 379.200, RSMo. 1,

fraud, bad faith, civil conspiracy, vexatious refusal to pay, and punitive damages.

           On May 31, 2016, Dr. Berkowitz purported to assign all claims he had against Keystone

to Smith. In return, Dr. Berkowitz received the right to 10 percent of Smith’s recovery from

Keystone. 2 On June 20, 2016, Smith moved for leave to file a First Amended Petition against

Keystone, and Dr. Berkowitz and his practice joined in. The motion was granted and the First

Amended Petition asserted five counts: Smith asserted equitable garnishment under Section

379.200, RSMo., and Smith and Dr. Berkowitz asserted the remaining claims of bad faith, fraud,

vexatious refusal to pay, and punitive damages. Keystone answered and asserted a counterclaim

with three counts: two counts requesting a declaratory judgment that Policy No. 09-056 was

void ab initio and that the insurance policy was properly rescinded under the Agreement between

Dr. Berkowitz and Keystone; and third, seeking a rescission to the extent that the policy was not

already rescinded.




1
    All statutory citations are to RSMo. 2000 as updated, unless otherwise indicated.
2
    This provision is not in the assignment, but both Smith’s counsel and Dr. Berkowitz acknowledge its existence.
                                                           2
          The trial court entered partial summary judgment in favor of Keystone with respect to

Counts I, III, IV, and V of the First Amended Petition. The court held on Count I that “plaintiff

Smith may not maintain an equitable garnishment action” under Section 383.035.4. On Count II,

the “bad faith refusal to pay” claim, the trial court explained:

          [I]t is patent from the record herein that Keystone had reasonable grounds to
          believe that Berkowitz had breach[ed] the insurance contract by concealing
          material information in his Application. There is nothing in the record to suggest
          that Keystone’s conduct in this matter was based on any motive other than the
          belief that Berkowitz had made material misrepresentations concerning his claims
          history. Until the rescission agreement was signed, Keystone had supplied
          counsel and was defending the Smith claim. Further, there is no evidence on this
          record that Smith ever made a [settlement] demand on Berkowitz prior to the
          rescission agreement. Under the circumstances, the tort claim of “bad faith
          refusal to settle” is not viable.

          On Count III, the trial court affirmed a prior ruling that Smith had failed to state a claim

under Section 428.024 “because Keystone is not a debtor subject to the statute.” The court also

concluded that Section 375.144 “does not provide a private right of action for Plaintiffs’ fraud

claim.”

          For the vexatious refusal to pay claim, the trial court agreed that the relevant statutes are

“inapplicable to Keystone.” The court held that “the record here shows beyond dispute that

Keystone had a reasonable cause or excuse to refuse to pay the Berkowitz judgment.” That

“excuse is that Berkowitz had apparently concealed or misrepresented his claims history in the

Application, and the uncertainty of the application of Section 379.195 to Keystone meant that

Keystone had a legitimate basis to seek rescission of its policy.” In dismissing Smith’s request

for punitive damages, the court noted that Keystone’s conduct “was far from outrageous.”

          The court, however, held that Count II of the First Amended Petition stated a claim for

breach of an insurance contract, agreeing with Keystone that the breach of contract claim was

governed by the five-year statute of limitations in Section 516.120. The court acknowledged that

Dr. Berkowitz was “on notice that Keystone would refuse to perform its agreement when
                                                    3
presented with the rescission agreement” in March 2011, while the First Amended Petition,

reflecting the assignment, was filed on June 20, 2016, more than five years later. The court

concluded, however, that the assigned claim related back to the original petition filed by only

Smith on May 9, 2014.

        After this ruling, Smith sought leave to amend again and file a new three-count petition

with new tort claims and alleging duress in connection with Dr. Berkowitz’s execution of the

settlement Agreement. The court granted this request as to Count I (breach of contract) only and

denied Smith leave to assert additional claims, stating that the only viable claim is the breach of

the duty to defend, which turns on the validity of the rescission Agreement, with no tort liability

in this action.

        Keystone moved for summary judgment based on the settlement Agreement and

challenged Dr. Berkowitz’s alleged duress. On November 29, 2017, the trial court entered

partial summary judgment in favor of Keystone, holding that “the defense of duress is not viable

on this record.” Immediately before trial, Smith filed her Third Amended Petition asserting a

single count, based on Dr. Berkowitz’s assigned claim, for breach of his insurance contract.

Other than incorrectly re-alleging that Dr. Berkowitz signed the settlement Agreement under

duress, Smith asserted no other reason as to why it was not enforceable.

        A five-day trial took place in January 2018, during which time Keystone moved for a

directed verdict at both the close of Smith’s evidence and at the close of all the evidence. Both

were denied. Keystone proposed jury instructions and a verdict form with respect to its

counterclaims, which were refused by the trial court and not submitted to the jury. The court

submitted a single count to the jury for breach of the insurance policy contract, over Keystone’s

objection that the issue was whether Dr. Berkowitz, not the plaintiff, was damaged. The jury

returned a verdict in favor of Smith in the amount of $870,625.23, with post-judgment interest of


                                                 4
9 percent. Keystone filed post-trial motions for judgment notwithstanding the verdict, for a new

trial, and to reduce the damage award, as well as a motion for judgment on Counts I, II, and III of

its counterclaim, which had not been decided. All of Keystone’s motions were denied.

       This appeal follows.

                                           II. Discussion

       Keystone raises six points on appeal. First, it alleges the trial court erred in denying

Keystone’s motion for a directed verdict because Smith, as the assignee of Dr. Berkowitz, stood

in Dr. Berkowitz’s shoes and therefore had no right to recover for breach of contract, in that Dr.

Berkowitz agreed in the settlement Agreement with Keystone that he had no coverage under the

insurance policy and knowingly waived any breach of contract claim against Keystone before he

assigned the claim to Smith.

       Second, Keystone alleges the trial court erred in denying Keystone’s motion for a

directed verdict because the breach of contract claim was barred by a five-year statute of

limitations, in that the parties entered into a settlement Agreement in March 2011 but Dr.

Berkowitz never asserted the breach of contract claim before he assigned the claim to Smith in

May 2016.

       Third, Keystone argues the trial court erred in denying Keystone’s motion for directed

verdict because the insurance policy was void ab initio, in that Dr. Berkowitz made material

false misrepresentations in the Application through his failure to truthfully list his claims history,

hospital suspensions, and reprimand that might reasonably influence Keystone’s decision to

accept or reject the risk or charge a different premium.

       Fourth, Keystone contends the trial court erred in submitting Instruction No. 6 to the jury

and denying Keystone’s request for a new trial because Instruction No. 6 misstated the law and

confused the jury, in that the instruction told the jury to determine Smith’s damages instead of


                                                  5
Dr. Berkowitz’s damages when the breach of contract claim was an assigned claim from Dr.

Berkowitz.

       Fifth, Keystone alleges the jury’s award is not supported by substantial evidence because

Dr. Berkowitz never testified that his damages were $870,625.23, in that Dr. Berkowitz only

testified to damages of $97,287.59, consisting of the $122,968.20 that he paid his attorneys after

executing the settlement Agreement offset by the refund of $25,680.61 from Keystone.

       Sixth and finally, Keystone alleges the jury’s award is against the weight of the evidence

because Smith’s damages are limited to $97,287.59, in that Dr. Berkowitz testified that this

amount represented his out-of-pocket loss ($122,968.20) as a result of the denial of his insurance

coverage, less the $25,680.61 in refund.

                        Point I: Keystone’s motion for directed verdict

A. Standard of Review

       Generally, this Court reviews the “‘denial of a motion for directed verdict as a question of

law, viewed in the evidentiary light most favorable to the non-moving party, and determine[s]

whether that party has made a submissible case.’” Damon Pursell Const. Co. v. Mo. Highway &

Transp. Comm’n., 192 S.W.3d 461, 474 (Mo. App. W.D. 2006) (internal citations omitted). In

determining whether the trial court erred in overruling a motion for directed verdict, this Court

must “consider all the evidence viewed in the light most favorable to the plaintiff,” give the

plaintiff the “benefit of all favorable inferences arising therefrom,” and “disregard the

defendant’s evidence except insofar as it aids the plaintiff’s case.” Stout v. Cent. Nat’l Life Ins.

Co., 522 S.W.2d 124, 128 (Mo. App. 1975). When the claim of error on appeal is the failure to

direct a verdict because of proof of an affirmative defense, however, the moving party is only

entitled to a directed verdict if that party proved its affirmative defense as a matter of law. Wolfe

v. State ex rel. Mo. Highway & Transp. Comm’n, 910 S.W.2d 294, 300 (Mo. App. W.D. 1995).


                                                  6
A “directed verdict should only have been granted if there were no factual issues remaining for

the jury to decide.” Id. Whereas Keystone is claiming that the trial court erred in failing to

direct a verdict in its favor based on its affirmative defense that Dr. Berkowitz contracted away

all claims he might have against Keystone, and therefore had nothing to assign to Smith, we

review whether Keystone proved this affirmative defense as a matter of law.

       Settlement agreements are governed by principles of contract law. Neiswonger v.

Margulis, 203 S.W.3d 754, 760 (Mo. App. E.D. 2006). Matters of contract interpretation –

including whether a contract is ambiguous – are questions of law to be reviewed de novo on

appeal. Monsanto Co. v. Syngenta Seeds, Inc., 226 S.W.3d 227, 230 (Mo. App. E.D. 2007).

B. Did the Settlement Agreement Rescind All Rights of Dr. Berkowitz and his Assignee, Smith?

       Smith argues that Keystone did not have the legal right to rescind Dr. Berkowitz’s

insurance contract, but we find that both Keystone and Dr. Berkowitz, together, contracted to

rescind the insurance contract.

       When interpreting any contract, a court must follow the terms of the contract as written if

those terms are plain, unequivocal, and clear. Muilenburg, Inc. v. Cherokee Rose Design &

Build, L.L.C., 250 S.W.3d 848, 853-54 (Mo. App. S.D. 2008). Unless an ambiguity is present in

the contract, a court will not look outside of the four corners of the contract to determine the

intent of the parties. Eisenberg v. Redd, 38 S.W.3d 409, 411 (Mo. banc 2001). If the essential

terms of a settlement agreement are present in a contract and are sufficiently definite to enable a

court to give them exact meaning, the contract will be found to be valid and enforceable even if

some terms are missing or left to be agreed upon at a later time. Vulgamott v. Perry, 154 S.W.3d

382, 390-91 (Mo. App. W.D. 2004). "It is the most basic principle of contract law that parties

are bound by the terms of the contracts they sign and courts will enforce contracts according to




                                                  7
their plain meaning, unless induced by fraud, duress, or undue influence." Nitro Distrib., Inc. v.

Dunn, 194 S.W.3d 339, 349 (Mo. banc 2006).

       During his completion of the application for insurance with Keystone in late 2009, even

if Dr. Berkowitz disclosed to Keystone’s Vice President of Sales, Tony Lyons, orally, or by

writing, some or all of his past hospital suspensions, lawsuits, and reprimand from the Missouri

State Board of Registration for Healing Arts, it is undisputed that Dr. Berkowitz signed the

written application without such information being reported on the application itself and that Dr.

Berkowitz did not suggest making any changes. When asked whether he had ever been directly

or indirectly involved in “any claim, potential claim or suit arising out of the rendering or failing

to render professional services,” Dr. Berkowitz did not list numerous malpractice lawsuits that

had been filed against him. Despite being sued more than 15 times, he listed a single lawsuit,

Wilman, which resulted in a $200,000 settlement. Dr. Berkowitz did not list his hospital

suspensions or a reprimand from the Missouri State Board of Registration for the Healing Arts

that occurred in 2007, despite questions on the application asking whether he had ever been

subject to reprimand, or been investigated by any hospital committee, state licensing or

regulatory agency, or other medical review committee. Based on the answers in Dr. Berkowitz’s

application for insurance, Keystone issued a professional liability policy covering Dr. Berkowitz

and his private practice for the year 2010.

       Dr. Berkowitz did not report new events as they occurred, such as the January 2010

federal indictment for Medicare fraud, even though he had answered “no” on the application

question asking if he had even been charged with, or indicted for, any crime, and Dr. Berkowitz




                                                  8
had agreed in the application to “immediately notify [Keystone] if there is any change in any of

the answers, statements or particulars.” 3

        In late 2010, Dr. Berkowitz applied for renewal of his insurance for the year 2011.

Specifically, he certified that he reviewed his initial application dated November 6, 2009, and

that “there have been no facts, matters or events that change any of [his] answers provided in the

initial application.” He further certified that the answers to the initial application questions

remain correct, and that he had “no knowledge of any incident, circumstances, or potential

adverse outcome that resulted, or may result, in injury or death, or in a claim, potential claim or

suit involving [him] (even if such claim or suit may be without merit).” Keystone agreed to

renew his policy for 2011.

        On March 3, 2011, Keystone’s chairman and CEO James Bowlin (“Bowlin”) sent, via

certified mail, a letter to schedule a meeting, “[c]onfirming our initial conversation of last Friday

and my follow-up of earlier this week.” The letter clearly stated, “[a]s [Bowlin] mentioned, [he]

believe[d] it would be helpful for [Dr. Berkowitz] to have [Dr. Berkowitz’s] personal counsel

with [him] . . . .” Although Dr. Berkowitz testified that he did not bring his counsel with him to

the March 7, 2011 meeting despite the letter’s advice, he later consulted with his personal

attorney, Mr. Bender or Mr. Carl Lang. Dr. Berkowitz also testified that during the March 7

meeting, Bowlin and Keystone’s attorney gave him the rescission Agreement and read it to him.

The Agreement covers both the 2010 and 2011 policies, and it mutually rescinded the insurance

policy and waived all of Dr. Berkowitz’s claims against Keystone.

        The agreement provides, in part:


3
 Dr. Berkowitz did report to Keystone that he had been sued for malpractice in the lawsuit Smith v. Berkowitz, the
case underlying this lawsuit here. Keystone provided a defense to Dr. Berkowitz and hired the law firm Eckenrode
Maupin to represent him until Dr. Berkowitz and Keystone agreed to rescind the insurance policy. Dr. Berkowitz
also reported to Keystone the case, Shea v. Berkowitz, for which Keystone also tendered a defense to Dr. Berkowitz
and hired the same law firm. His application also disclosed a lawsuit that had resulted in a $200,000 settlement,
Wilman v. Berkowitz.
                                                        9
       Notwithstanding this right to rescind, in the interest of all parties, and for good
       and valuable consideration, the receipt and sufficiency of which is hereby
       acknowledged, Keystone and Berkowitz mutually agree to effect a termination of
       the Keystone policies under the following terms:

       1. Berkowitz to Obtain Insurance; Rescission. Within 10 days of the date of this
       Agreement, Berkowitz shall obtain professional liability insurance from another
       professional liability insurer, and advise Keystone when such insurance has been
       obtained. In the event Berkowitz does not obtain such insurance within such
       time, the parties agree that Keystone shall and will rescind the Policies effective
       as of their dates of inception, e.g. December 31, 2009 as to the First Policy and
       December 31, 2010 as to the Second Policy.

       2. Mutual Cancellation of the Policies; Waiver of Notice. In exchange for the
       agreements of Berkowitz herein, on the earlier of either the 10th day after the date
       of this Agreement or the date upon which Berkowitz advises Keystone that such
       insurance contemplated by Section 1 has been obtained, Keystone and Berkowitz
       mutually agree that the Policies shall be cancelled effective as of the initial date of
       such policies, e.g. December 31, 2009 as to the First Policy and December 31,
       2010 as to the Second Policy . . . .

       Additionally, the parties agreed that Keystone was not going to provide any

insurance coverage, and would not cover any portion of the Smith lawsuit. Dr. Berkowitz

said he understood that in signing the Agreement, he was “on the hook for any verdict

rendered in Smith.” Dr. Berkowitz understood that there was a mutual release by which

both he and Keystone were giving up claims against each other. A confidentiality

provision was included so that neither party would disclose any aspect of the Agreement

or matter giving rise to the Agreement without prior written consent of the other party,

which Dr. Berkowitz identified as critical to his decision to execute the Agreement.

       The plain and unambiguous language of the Agreement in this case demonstrates the

intent of the parties, that Dr. Berkowitz and Keystone clearly enter into a mutual Settlement

Agreement in March 2011, at which time Dr. Berkowitz cancelled the Keystone insurance

policies “effective as of the initial date of such policies, e.g. December 31, 2009.” Berkowitz

“acknowledge[d] and agree[d] that Keystone is not, and shall not, provide any coverage for

[Smith v. Berkowitz], whether for defense thereof and/or for any damages adjudged against . . .
                                                 10
Berkowitz.” Further, Dr. Berkowitz “will have sole responsibility for the cost of defense of

[Smith v. Berkowitz] and for the payment of any damages or settlements connected therewith.”

Dr. Berkowitz agreed to, and did “waive any and all rights, claims, actions and causes of action

Berkowitz may have in relation to Keystone, including, but not limited to, the right to pursue

coverage under the Policies; [and] reimbursement of costs incurred and payments made in

relation to [Smith v. Berkowitz] (whether for defense or damages).”

       “We determine what the parties intended by what they said, and we cannot be concerned

with what they may have subjectively intended to say.” Promotional Consultants, Inc. v.

Logsdon, 25 S.W.3d 501, 506 (Mo. App. E.D. 2000). Although we need not look beyond the

clear language in the Agreement, even the parties’ actions here confirmed their intent as clearly

and unambiguously expressed in their Agreement. Dr. Berkowitz applied for new insurance on

March 11, and upon obtaining it and consulting with his attorney, the rescission Agreement was

signed on March 16, 2011. Dr. Berkowitz did not make any changes to the Agreement. Notably,

the Agreement states, “The parties acknowledge they’ve had legal counsel’s advice in relation to

entering into this agreement,” which did occur. Dr. Berkowitz testified that he received a check

in the amount of $25,686 for reimbursement of his premiums from Keystone, which he cashed.

       Accordingly, Dr. Berkowitz had no insurance coverage for the Smith v. Berkowitz

lawsuit, and had waived all claims against Keystone. By giving up his insurance and claim for

breach of contract, he received the promise of confidentiality, avoided future litigation that might

result in a judicial rescission at a high cost and on the public record, and received a refund of

premiums. Just as the trial court ruled prior to this judgment, this was not a case of fraud, duress

or undue influence.

       “The purpose of encouraging settlements would be frustrated if a party, following an

apparent settlement, could avoid the agreement by instituting and prevailing in further litigation


                                                 11
by arguing that the settlement was ineffective because his legal position was sound.” See Budget

Rent A Car of St. Louis v. Guaranty Nat’l Ins. Co., 939 S.W.2d 412, 414-15 (Mo. App. E.D.

1996). Dr. Berkowitz (and his assignee Smith) cannot now avoid this Agreement by arguing it

was ineffective because Keystone did not have the right to rescind the insurance policy at all.

          Next, we find that Smith, the assignee of Dr. Berkowitz, is bound by the settlement

Agreement entered into by Dr. Berkowitz. An assignment is the transfer of a cause of action to

another, vesting legal title in the assignee, together with the right to maintain an action in his or

her own name as the real party in interest. Kroeker v. State Farm Mut. Auto. Ins. Co., 466

S.W.2d 105, 109-110 (Mo. App. 1971). “The only rights or interests an assignee acquires are

those the assignor had at the time the assignment was made.” Renaissance Leasing, LLC v.

Vermeer Mfg. Co., 322 S.W.3d 112, 128 (Mo. banc 2010) (emphasis added). “If there can be no

recovery on the part of the insured, . . . there can be no recovery on the part of his assignee, . . .

who would stand in his shoes.”

          In Hellmann v. Sparks, 500 S.W.3d 252, 268 (Mo. App. E.D. 2015), an agreement to

relocate a community dock was orally rescinded before the rights under the agreement were

assigned to the plaintiffs, property owners in a residential subdivision. The Court of Appeals

stated:

          The trial court’s determination that there was no agreement to relocate the
          community dock was correct because the parties to the original agreement to
          move the community dock had mutually rescinded that agreement prior to the
          time the [plaintiffs] received their assignment of [the assignor’s] rights under
          those contracts.
                  ....
          At the time the [plaintiffs] purchased the property and [the assignor] made the
          assignment of his rights under the agreement to relocate the community dock, the
          agreement to relocate the community dock had already been rescinded.
          Consequently, it was as if the agreement had never existed, and there was nothing
          to transfer to the [plaintiffs].

Id.


                                                  12
       We find Hellman to be instructive in that Dr. Berkowitz’s insurance policy with Keystone

had been mutually rescinded prior to the time Smith received her assignment of Dr. Berkowitz’s

rights under the insurance policy. Whereas Dr. Berkowitz had no right to Keystone’s coverage

and waived any breach of contract claim against Keystone, he could not pass coverage or claims

on to Smith. Thus, the trial court erred in refusing to enter a directed verdict in favor of

Keystone in Smith’s lawsuit. Keystone’s first point is granted and the trial court’s judgment is

reversed and remanded with instructions that the trial court enter a directed verdict for Keystone.

       Because the trial court must enter a directed verdict in favor of Keystone, we need not

discuss Keystone’s remaining points on appeal.

                                            Conclusion

       We reverse the judgment and direct the trial court to enter judgment in favor of Keystone.




                                               __________________________________
                                               ROY L. RICHTER, Presiding Judge

Robert M. Clayton III, J., concurs.
Angela T. Quigless, J., concurs.




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