The Missouri Supreme Court affirmed the judgment against a liability insurer for extra-contractual damages in a declaratory judgment action originally filed by the insurer to determine coverage and defense obligations. The insurer was not allowed to challenge the reasonableness of its insured’s court-approved settlement and the judgment entered against the insurer for extra-contractual damages was upheld despite there being no bad faith claim asserted in the declaratory judgment action filed by the insurer.
Doe Run is a mining and smelting company incorporated in Missouri in the late 1800’s and since then has mined and processed lead from nearly 1,000 acres of land located in St. Francois County, Missouri. In time the waste products from Doe Run’s lead mining and processing procedures created environmental waste which contaminated the surrounding area. Consequently, the U.S. EPA required remediation of those waste sites. Lloyd’s had sold seven excess insurance policies between 1952-1961, under which Doe Run sought coverage. After a jury trial resulted in a verdict of more than $62,000,000, the trial judge reduced the verdict to $5.145 million. On appeal the Eastern District of Missouri reversed, reinstated the jury verdict, and found that there was substantial evidence for the jury to find that Lloyd’s had acted “recalcitrantly and vexatiously” in its handling of Doe Run’s claim.