A Cole County Circuit Court judgment in favor of Scotland County and the nearly $300,000 reimbursement order against the county’s insurer, Missouri Public Entity Risk Management Fund (MoPERM) has gone up in smoke as the Missouri Court of Appeals Western District overturned the lower court’s ruling.

The county had sought financial relief from its insurer after coverage was denied for the county in a lawsuit filed by a property owner that was denied a permit by the county to construct a hog confinement.

On February 6, 2013 Gavin Hauk was awarded $178,566 by a Mercer County judge who ruled the county had acted illegally in not issuing a permit for Hauk’s proposed hog confinement.

That dollar figured grew to 192,375.80 as the county exhausted its appeal options before finally writing the check in August of 2014 when the funds were secured via a sale of tax anticipation notes, earmarking future tax revenue to pay the cost of the lawsuit.

In the summer of 2015 the county filed a lawsuit against MoPERM claiming the insurance provider failed to perform its duties to defend and indemnify Scotland County in the lawsuit process.

Various hearings were held throughout 2016 with Kirksville attorney Scott Templeton arguing the county’s case before Cole County Circuit Court Judge Jon Beetem.

Beetem ultimately issued a summary judgment in favor of Scotland County late in 2016. The judge disagreed with the defendants, MoPERM, who cited a policy exclusion negated the company’s duty to defend the county against the initial lawsuit and to ultimately cover the settlement ordered by the courts against the county.

“The underlying lawsuit was not for inverse condemnation nor was it a challenge to the land use plan. At best it was a challenge to the constitutional propriety of the actions of the individual commissioners in implementing the land use plan,” the judgment stated.

Judge Beetem ruled in favor of Scotland County and ordered MoPERM to pay $294,545.95 plus interest on that amount from June 11, 2015 when the case was first filed.

A petition to appeal the decision was filed in March of 2017.

Unfortunately for Scotland County and the taxpayers who temporarily received relief from the original court order, the Missouri Court of Appeals Western District recently overturned the ruling.

On January 24, 2018, the trail court’s decision was officially vacated by the court of appeals.

MoPERM’s attorneys argued that the court erred in entering judgment in favor of Scotland County, citing two insurance policy exclusions which negated MoPERM’s duties to defend and indemnify the county.

The appeal went on to state the trail court erred entering its judgment “because  the underlying judgment against Scotland, and for which indemnity was sought, was unenforceable.”

The appeals court ultimately reversed and vacated the trial court’s decision based on the insurance company’s exclusion, which stated the policy did not cover “claims for loss or damage arising out of or in connection with the principles of eminent domain, proceedings to condemn property or inverse condemnation by whatever name…”

Attorneys for the insurance company argued that the exclusion negated any coverage, as the initial lawsuit against the county arose from the county’s inverse condemnation claim, when the county allegedly prevented the property owner from constructing a hog confinement, or in legal terms committed regulatory taking of the private property.

The county attorney argued that the exclsuion was ambiguous and “inverse condemnation” was not clearly defined.

Ultimately the appeals court ruled that while the insurance policy did not define inverse condemnation, the court did not find the term ambiguous, citing case law that did not leave the term reasonably open to different meaning.

The court finding cited several U.S. Supreme Court cases that stated “A regulatory taking–that is, the enforcement of an excessive land use regulation, or the arbitrary application of a land use regulation–constitutes an example of arbitrary or unreasonably interference with property rights,” and “while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking” and the law “allows a landowner to assert that a particular exercise of the State’s regulatory power is so unreasonable or onerous as to compel compensation.”

The judgment also cited Missouri Supreme Court case law that similarly ruled “regulatory taking occurs when government regulation does not result in a physical invasion of property or the denial of all economically viable use but, instead, ‘goes too far’ in restricting the exercise of property rights. The imposition of an invalid regulation can, under certain circumstances, constitute a regulatory taking.”

Ultimately the appeals court ruled that “the ordinary and natural meaning of ‘inverse condemnation’ includes claims based on regulatory takings resulting from the unreasonable or arbitrary enforcement of land use regulations. Section IV.K excludes from coverage claims arising out of or in connection with ‘inverse condemnation by whatever name.’ Given the ordinary and natural meaning of the phrase ‘inverse condemnation,’ Section IV.K unambiguously excludes coverage for claims seeking compensation or other relief arising out of the interference with property rights by virtue of the alleged unreasonable or arbitrary enforcement of land use regulations.”

The appeals court noted that both counts on the original Hauk lawsuit versus the county sought compensation and/or relief for the county’s unreasonable deprivation of his property rights and specifically claimed the county’s actions constituted an unconstitutional regulatory taking of Hauk’s property.

“By whatever name or theory, all relief sought in the Hauk Petition was inherently grounded in his claim that the Commission unreasonably deprived him of the right to reasonably use private property,” the appeals court decision stated.

The court ruled that the insurance company’s exclusion of the coverage was unambiguous and therefore must be enforced as written.

The appeals court thus ruled the insurance company had no legal obligation to defend the county against the lawsuit and had no legal responsibility to cover the resulting costs of the settlement.

Based on the decisions on Point I and II of the appeal, the higher court did not take up the final point of the appeal, which argued that the insurance company ultimately shouldn’t have to provide coverage for the county because the initial court judgment was made in err or otherwise was unenforceable.