MODIFIED
May 27, 2014
In the
Missouri Court of Appeals
Western District
JIMMIE LEE TAYLOR, )
)
Appellant, ) WD76380
)
v. ) OPINION FILED: April 29, 2014
)
THE BAR PLAN MUTUAL )
INSURANCE COMPANY, ET AL., )
)
Respondents. )
Appeal from the Circuit Court of Jackson County, Missouri
The Honorable Sandra Midkiff, Judge
Before Special Division: Cynthia L. Martin, Presiding Judge, Gary D. Witt, Judge and
Zel M. Fischer, Special Judge
This case involves the interpretation of an insurance contract providing coverage
for legal malpractice. Appellant Jimmie Lee Taylor ("Taylor"), upon the advice of his
now-disbarred attorney, made several loans to the law firm of the attorney and to a
separate entity, which was also a client of the attorney. After both the attorney and the
other entity defaulted on the loans, Taylor prevailed in a civil action against the attorney
for malpractice. In this subsequent equitable garnishment action, the attorney's insurer,
Respondent The Bar Plan Mutual Insurance Company ("The Bar Plan"), was granted
summary judgment. Taylor appeals. We reverse.
FACTUAL AND PROCEDURAL HISTORY1
This matter arises from an attorney's representation of a client in the midst of
numerous significant ethical breaches. The facts are not in dispute. In September 2006,
Taylor, the trustee and sole beneficiary of the Jimmie Lee Taylor and Leilla V. Taylor
Revocable Trust (the "Trust"),2 retained James C. Wirken ("Wirken") of the Wirken Law
Group as his attorney to handle certain legal claims regarding the management of the
Trust. Wirken's legal representation continued into 2008 and included matters relating to
estate planning and estate administration. Throughout the extended legal representation,
Taylor came to rely on the advice of Wirken.
Wirken was the 100 percent equity owner in the Wirken Law Group. Although he
has since been disbarred, during all relevant times, Wirken was licensed to practice law in
Missouri, and Wirken Law Group was a Missouri professional corporation engaged in the
practice of law. The Bar Plan is an insurance company doing business in Missouri and
sold Wirken and the Wirken Law Group their professional liability insurance.
The underlying dispute arose from two sets of loans made by Taylor (from the
Trust) and facilitated by and on the advice of Wirken: three loans went directly to Wirken
Law Group, and three loans to Longview Village Development Company ("Longview").
1
We view the facts and all reasonable inferences in the light most favorable to the party against whom the
summary judgment was entered. Mo. Pub. Entity Risk Mgmt. Fund v. Am. Cas. Co. of Reading, 399 S.W.3d 68, 73
(Mo. App. W.D. 2013).
2
Taylor is the son of Leilla V. Taylor, who died in 2007. Wirken's representation also included Taylor's
wife, Cindy Taylor, who is not a party to this appeal.
2
On the latter three loans, Wirken received a "finder's fee" from Longview for securing the
loans.
Loans to the Wirken Law Group
Prior to April 5, 2007, while Wirken was representing Taylor and the Trust,
Wirken approached Taylor about the Trust loaning money to the Wirken Law Group.
Wirken did not inform Taylor that the Wirken Law Group was strapped for cash and
needed additional funding for its needs and for his personal expenses. Unknown and
undisclosed to Taylor, Wirken had approached multiple lending institutions for loans and
had been rejected, Wirken's personal assets were heavily leveraged, and Wirken also had
unpaid loans from multiple other clients. Wirken falsely indicated to Taylor that he had
multiple contingent fee cases that had already been settled but not yet paid, the proceeds
of which would be sufficient to repay the loans to the Trust.
The Wirken Law Group borrowed money from Taylor three times in 2007. The
agreements were executed by way of promissory notes, guaranteed by Wirken personally,
but Taylor took no security interest in any of Wirken's assets or in the Wirken Law Group
or its assets. Those three loans totaled $250,000, each with ten percent interest until
default and fifteen percent thereafter. The three notes all provided that a reasonable
attorney fee was due in the event the notes were placed for collection.
When Wirken was drafting these notes and advising as to the method of
repayment, Taylor believed that Wirken was his lawyer and was acting in his and the
Trust's best interests. Wirken conceded that he was the attorney for Taylor and the Trust
and had a fiduciary duty to them as clients. Nonetheless, Wirken never suggested that
3
Taylor seek the advice of an uninterested lawyer before entering into these transactions,
nor did he make any written disclosure regarding his ethical obligations under the Code
of Professional Responsibility when engaging in a business transaction with a client.
Taylor was never repaid for these three loans.
Loans to Longview
As for the three loans to Longview, sometime prior to May 24, 2007, Wirken
advised Taylor that Longview was seeking short-term lenders for its projects and
encouraged him to become a lender. Longview was another of Wirken's clients. Wirken
advised Taylor that any loans to Longview would be secured by the personal guaranty of
Jeffrey Montgomery, a Kansas City Royals baseball player, implying that Wirken would
review the paperwork to assure that the personal guaranty was included.3 Taylor loaned
Longview a total of $261,740 in the three 2007 loans. Wirken drafted all of the
agreements. The agreements were executed by way of promissory notes, bore interest at
the rates of thirty-two to thirty-six percent, and provided for reasonable attorney fees
upon default.
The first loan was executed May 24, 2007 and was for $150,000. Per the trial
court's judgment, that loan was "memorialized by a note from Longview." It bore thirty-
two percent interest, was due August 24, 2007, and required reasonable attorney fees in
the event of default. The first ninety days of interest were paid in advance and subtracted
from the loan amount, so that funding the note only required $138,000.
3
Jeffrey Montgomery paid Taylor $50,000 to be released from any obligation on all three notes.
4
The documents signed by Longview included an executed promissory note and a
second mortgage on certain real property that Wirken informed Taylor "will be recorded
in Johnson County, Kan." Taylor's check for $138,000 was payable to The Wirken Law
Group Trust Account and was used to fund the loan. Taylor later learned that the
mortgagor of the property serving as collateral for the $150,000 loan did not own the
property offered as security, that the mortgage was never recorded, and that Wirken did
not confirm ownership of the property or the recording of the mortgage prior to Wirken
funding the loan from the Wirken Law Group Trust Account. Taylor also later learned
that Wirken was paid a "finder's fee" for delivering Taylor as a lender and that Longview
owed Wirken money at the time that Wirken brought Longview to Taylor's attention.
The second loan Taylor made to Longview was executed June 6, 2007 for
$90,000, payable to the Wirken Law Group Trust Account. It bore thirty-six percent
interest, was due July 7, 2007, and provided for the payment of reasonable attorney fees
in the event of default. This note was secured in part by the pledge of a Smith-Barney
account. Taylor later learned that the Smith-Barney account did not exist and that
Wirken had not confirmed its existence prior to funding the loan from his trust account.
As for the third loan, on June 22, 2007, per Wirken's instruction, Taylor loaned
Longview $21,740 with an interest rate of thirty-six percent, due on July 22, 2007. The
loan was also funded with a check to Wirken's trust account and provided for a recovery
of attorney fees in the event of default.
The Trust was never repaid for these three loans.
5
Subsequent Litigation
Taylor filed an action against Wirken and the Wirken Law Group, alleging breach
of fiduciary duties to him as his lawyer in representing him and causing him to fund the
various loans.4 The Bar Plan provided Wirken and the Wirken Law Group a defense
against Taylor's suit, but it reserved the right to deny coverage if the court entered
judgment against either defendant for acts or omissions its policy did not cover. Wirken
requested that The Bar Plan either withdraw its reservation of rights or withdraw from the
defense. The Bar Plan withdrew its defense, and Wirken and the Wirken Law Group
hired their own counsel.
After a bench trial, the trial court entered judgment in favor of Taylor. As to the
first set of loans, the trial court found that an attorney-client relationship existed, that
Wirken drew the notes memorializing the loans to the Wirken Law Group, and that
Wirken breached his fiduciary duty to Taylor.5 As to the second set of loans, the trial
court also determined that the attorney-client relationship was in force during the loan
transaction with Longview and that Wirken "was performing legal services . . . by
passing documents [from Longview to Taylor] through his offices, by implying that
Wirken would review the paperwork and the transaction details to see that Taylor's
interests were served, and by serving as the vehicle for funding the loans from Taylor to
Longview." The trial court also determined that Wirken breached his fiduciary duty by
4
Taylor was the sole beneficiary of the Trust and was thus entitled to receive the unpaid loans owed to the
Trust.
5
For reasons we discuss, infra, the legal theory pursued by Taylor and the Trust is significant. To find a
breach of fiduciary duties, the trial court in Taylor's action against Wirken and The Wirken Law Group had to find
the existence of an attorney-client relationship, and defalcation in the provision of legal services in violation of that
fiduciary relationship.
6
neglecting to tell Taylor about the fee he received from Longview and that Longview was
indebted to Wirken. The trial court found that Wirken's breach of his fiduciary duties
was the proximate cause of Taylor's damages. Accordingly, the trial court assessed
damages based on the face value of the loans plus interest and attorney fees in the amount
of $415,971.69 on the loans to the Wirken Law Group and in the amount of $524,873.13
on the loans to Longview.
Taylor then filed an equitable garnishment action6 against The Bar Plan, which is
the subject of this appeal, seeking to recover the damages assessed in the judgment
against Wirken and the Wirken Law Group. The trial court in the garnishment action
determined that Wirken and the Wirken Law Group were engaged in the provision of
legal services to Taylor in connection with efforts to document the various loans and/or
collateral security for the loans, thus bringing the activity within the coverage expressed
by the insuring agreement,7 but it was subject to a policy exclusion. Specifically, the trial
6
An equitable garnishment action is a means by which an injured party can seek recovery against a
tortfeasor's insurer. § 379.200. All statutory references are to RSMo 2000 as currently supplemented unless
otherwise indicated.
7
The portion of the policy under which the trial court found coverage contracted that The Bar Plan "will
pay on behalf of an Insured all sums, subject to the Limit(s) of Liability, Exclusions and terms or conditions
contained in this Policy, which an insured shall be legally obligated to pay as Damages as a result of CLAIMS . . .
by reason of any act or omission by an Insured acting in a professional capacity providing Legal Services." The
question of coverage is not an issue on appeal. In fact, that question was necessarily determined by the trial court in
Taylor's underlying lawsuit in light of his election to pursue a claim for recovery on the defaulted notes on a theory
of breach of fiduciary duty in the provision of legal services, in lieu of, by way of example, a theory of breach of
contract on the notes themselves. See, supra, note 5. Because the trial court in the underlying lawsuit determined
that Wirken and The Wirken Law Group had provided legal services to Taylor in connection with the various loans,
The Bar Plan was estopped from challenging this determination in the equitable garnishment proceeding. See
Assurance Co. of Am. v. Secura Ins. Co., 384 S.W.3d 224, 232 (Mo. App. E.D. 2012) ("One who has undertaken to
indemnify another against loss arising out of a certain claim and has notice and opportunity to defend an action
brought upon such a claim is bound by the judgment entered in such action, and is not entitled, in an action against
him for breach of his agreement to indemnify, to secure a retrial of the material facts which have been established by
the judgment against the person indemnified.") (quoting 17 LEE R. RUSS, COUCH ON INSURANCE sec. 239:73
(3d ed. 1995)).
Because the factual issues necessarily determined in the underlying lawsuit effectively predisposed the trial
court's coverage determination in the equitable garnishment case, we are not permitted to assess whether the trial
7
court granted summary judgment to The Bar Plan, determining that the activity was
excluded by Section III(B)(4) of the policy, which states that for "ANY CLAIM BASED
UPON OR ARISING OUT OF…[a]n Insured’s capacity as…[a] legal representative of
investors in regard to and resulting in investment in an enterprise in which an Insured
owns an equity interest or for which the Insured receives a fee or commission from an
Entity other than the investor.”
Taylor appeals from the summary judgment in the equitable garnishment action.
ANALYSIS
Taylor argues that the trial court erred in entering summary judgment in favor of
The Bar Plan on the ground that the phrase "resulting in investment in an enterprise" in
the exclusion is ambiguous. Taylor additionally argues: (1) that a covered concurrent
proximate cause will result in coverage even if another cause is excluded, (2) that The
Bar Plan's asserted exclusion is not applicable because the Wirken Law Group is a
professional corporation in which non-lawyers are legally barred from "investing," and
(3) that additional ambiguity arises because the exclusion is dependent on other
"capacities" in that it combines multiple, separate exclusions by use of the word "and."
Because we agree with Taylor that the phrase "resulting in investment in an enterprise"
and the terms "investment" and "investor" are ambiguous as used within the policy and
thus that The Bar Plan did not meet its burden of establishing that the exclusion applied,
the cause is reversed and remanded.
court's entry of summary judgment in favor of The Bar Plan could be alternatively affirmed because it erroneously
found that Wirken's efforts in securing and documenting the loans, particularly the Wirken Law Group loans, were
covered legal services. This opinion therefore assumes, without analyzing or deciding, that Wirken's activities were
within the coverage of The Bar Plan policy.
8
Standard of Review
Our Supreme Court has set forth our standard of review:
Summary judgment is appropriate only when the moving party
demonstrates that "there is no genuine dispute as to the facts" and that "the
facts as admitted show a legal right to judgment for the movant." The
movant bears the burden of establishing both a legal right to judgment and
the absence of any genuine issue of material fact required to support the
claimed right to judgment. The propriety of summary judgment is purely
an issue of law, and this Court's review is essentially de novo. "As the trial
court's judgment is founded on the record submitted and the law, an
appellate court need not defer to the trial court's order granting summary
judgment."
Bob DeGeorge Assoc.'s, Inc. v. Hawthorn Bank, 377 S.W.3d 592, 596 (Mo. banc 2012)
(quoting ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371,
380 (Mo. banc 1993)) (citations omitted).
Additionally, the interpretation of an insurance policy is a question of law that we
also determine de novo. Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo. banc
2007) (citations omitted); Blumer v. Auto. Club Inter-Ins. Exch., 340 S.W.3d 214, 218
(Mo. App. W.D. 2011) (holding that where "resolution of the case involves the
interpretation of an insurance contract, we give no deference to the circuit court as
contract interpretation is a question of law").
General Principles of Interpretation
As the appeal concerns whether policy language is ambiguous, we note at the
outset that "[w]e read a contract as a whole and determine the intent of the parties, giving
effect to that intent by enforcing the contract as written." Thiemann v. Columbia Pub.
Sch. Dist., 338 S.W.3d 835, 840 (Mo. App. W.D. 2011) (citation omitted). In so doing,
9
we give the language in an insurance contract its plain and ordinary meaning. Id. "If,
giving the language used its plain and ordinary meaning, the intent of the parties is clear
and unambiguous, we cannot resort to rules of construction to interpret the contract." Id.
Mere disagreement over the interpretation of the terms of a contract does not create an
ambiguity. Id. In examining whether the language used in an insurance policy is
ambiguous, the language is normally considered in the light in which it would normally
be understood by the lay person who bought and paid for the policy. Blumer, 340 S.W.3d
at 218 (citation omitted). If no ambiguity exists, the insurance contract will be enforced
as written. Rodriguez v. Gen. Accident Ins. Co. of Am., 808 S.W.2d 379, 382 (Mo. banc
1991) (citation omitted).
An "ambiguity exists when there is duplicity, indistinctness, or uncertainty in the
meaning of the language in the policy." Seeck, 212 S.W.3d at 132 (citation omitted); see
also Mendota Ins. Co. v. Ware, 348 S.W.3d 68, 71 (Mo. App. 2011) (stating that, the
"insured is entitled to a pro-coverage interpretation of an insurance policy if the terms are
susceptible of two possible interpretations and there is room for construction") (internal
citations and quotations omitted). We resolve "ambiguities in favor of the insured."
Fanning v. Progressive Nw. Ins. Co., 412 S.W.3d 360, 364 (Mo. App. W.D. 2013)
(citations omitted). "This rule is especially applicable where insurance is first 'granted'
and is then followed by provisions limiting or avoiding liability." Rice v. Shelter Mut.
Ins. Co., 301 S.W.3d 43, 47 (Mo. banc 2009).
Put another way, Missouri strictly construes exclusionary clauses against the
drafter. Manner v. Schiermeier, 393 S.W.3d 58, 62 (Mo. banc 2013) (citation omitted).
10
"The burden of showing that an exclusion to coverage applies is on the insurer." Id. The
Manner court explicitly noted in the context of a summary judgment, which is the
procedural juncture we face here, that the "burden was on the insurers to prove" that an
exclusion applied. Id. at 60. We construe ambiguities in favor of the insured for two
reasons:
(1) insurance is designed to furnish protection to the insured, not defeat it;
ambiguous provisions of a policy designed to cut down, restrict, or limit
insurance coverage already granted, or which introduce exceptions or
exemptions, must be strictly construed against the insurer; and (2) as the
drafter of the policy, the insurance company is in the better position to
remove the ambiguity from the contract.
Golden Rule Ins. Co. v. R.S., 368 S.W.3d 327, 334 (Mo. App. W.D. 2012) (citation
omitted) (emphasis added).
Reasonable Attorney Standard
Before we can proceed with our review of the terms of this policy we must first
determine the proper lens through which we view its terms. While the review of an
insurance policy is normally based on the understanding of a reasonable lay person, when
reviewing a policy of legal malpractice, the only possible purchasers of the policy would
be attorneys. Our review hinges on what an average insured would believe the policy
language means. Shiddell v. The Bar Plan Mut. Ins. Co., 385 S.W.3d 478, 485 (Mo. App.
W.D. 2012) (stating that a dictionary definition was "consistent with what an ordinary
person purchasing the policy would understand . . . and certainly what an ordinary
attorney would understand"). A reasonable insured in the context of legal malpractice
insurance is a reasonable attorney because only attorneys purchase legal malpractice
11
insurance. Of course in the context of other types of insurance (such as automobile
insurance), an ordinary person of average understanding if purchasing insurance would
not be subject to the reasonable attorney standard, regardless of whether the person who
bought the insurance happened to be an attorney.
On this issue of first impression, we determine that the proper lens for review of a
legal malpractice insurance policy would be through the eyes of a reasonable attorney
who purchased the insurance.8 This principle is consistent with precedent of the Supreme
Court of Missouri. See Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132, 135
(Mo. banc 2009) ("[I]n construing the terms of an insurance policy, this Court applies the
meaning which would be attached by an ordinary person of average understanding if
purchasing insurance . . . .") (emphasis added); Robin v. Blue Cross Hosp. Serv., Inc.,
637 S.W.2d 695, 698 (Mo. banc 1982) (stating that terms are given "'the meaning that
would ordinarily be understood by the layman who bought and paid for the policy'")
(emphasis added; citation omitted).
Discussion
The isolated issue we address is whether The Bar Plan met its burden of
establishing that the policy it drafted excluded the loans that Taylor made to Wirken and
Longview. The contested exclusion states as follows:
THIS POLICY DOES NOT PROVIDE COVERAGE FOR ANY CLAIM
BASED UPON OR ARISING OUT OF: . . .
8
The parties in their briefing and argument spend considerable time focusing on how Taylor and Wirken
would have categorized these loans at the time they were entered into. This likewise applies the wrong standard of
review, because our review is restricted to what a reasonable attorney would have believed the policy covered or
excluded at the time the policy was purchased, not at the time the disputed transaction was entered into.
12
B. An Insured’s capacity as . . .
4. A legal representative of investors in regard to and resulting in
investment in an enterprise in which an Insured owns an equity interest or
for which the Insured receives a fee or commission from an Entity other
than the investor.
Taylor argues that The Bar Plain did not meet its burden because the terms
"investors" and "investment in an enterprise," neither of which is defined in the policy,
are ambiguous inasmuch as they must encompass within their definitions "loans" in order
to apply to the facts at issue. The trial court found that the three loans to Wirken were
excluded by the policy because Wirken acted "as a legal representative for Mr. Taylor 'in
regard to and resulting in investment in an enterprise in which an Insured owns an equity
interest'" because Wirken owned 100 percent equity interest in The Wirken Law Group.
As for the Longview loans, the trial court found that "Wirken received a commission fee
from Longview" and thus the loans to Longview were "investments 'for which the
Insured receives a fee or commission from an Entity other than the investor.'" Though
the trial court's findings appear to have accurately honed in on the uncontested fact that
Wirken had an equity interest in the Wirken Law Group, and that Wirken received a
commission on the Longview loans, the trial court offered no explanation for its
conclusion that Wirken's legal services in connection with the loans were provided to an
"investor" with regard to and "resulting in investment in an enterprise." Of course, the
intended meaning of these terms is controlling here.
The operative policy exclusion applies only if the insured attorney acted as a legal
representative of "investors . . . resulting in investment in an enterprise." We must read
13
the words of the exclusion and the contract as a whole and in proper context. Thiemann,
338 S.W.3d at 840. In so doing, we agree with Taylor that The Bar Plan did not meet its
burden of establishing that a reasonable attorney purchasing this insurance9 would have
reasonably understood that legal services provided to document loans being made by a
client would be excluded because the loans are "investments in an enterprise." For
reasons explained below, either the policy exclusion is simply not applicable to these
facts or it cannot be enforced because it is ambiguous.
The distinction between financing a business or enterprise through equity versus
debt runs throughout the law. An attorney purchasing a policy through The Bar Plan may
understand a financing that provides an equity or ownership interest to be "resulting in
investment in an enterprise" with capital investments, various stocks, securities, shares,
and other partnership or membership interests at stake as being the most common
examples. The return on these investments is typically tied to the performance of the
enterprise.10 All financing does not necessarily constitute an "investment in an
9
In many instances the purchaser of legal malpractice insurance is a law firm consisting of more than one
attorney and the firm and the individual attorneys are purchasing this insurance to protect the firm and the individual
attorneys from liability brought on by the legal malpractice of one of the attorneys employed by the firm.
10
Within, for example, the Investment Company Act of 1940, 15 U.S.C. § 80a-3, "investment company" is
defined in part as an entity engaging in the business of investing or reinvesting or trading in securities. Similarly,
under the Securities Exchange Act of 1934, in determining whether a contract, transaction, or scheme is an
"investment contract" within the definition of "securities," one element is that there will be the expectation that
profits will be derived from the entrepreneurial or managerial efforts of others. SEC v. W.J. Howey & Co., 328 U.S.
293, 298-99 (1946); Reves v. Ernst & Young, 494 U.S. 56, 64 (1990); Long v. Shultz Cattle Co., 881 F.2d 129, 132
(5th Cir. 1989) (citing 15 U.S.C. §§ 77b(1) and 78c(a)(10)). Along that line, multiple provisions of the Revised
Statutes of Missouri require "investment advisors" to register with the U.S. Securities and Exchange Commission.
See, e.g., sections 103.032 and 166.415.5.
It would be hasty and incorrect to conclude that a note is always a security. The U.S. Supreme Court
fashioned a multi-part test for determining whether a note constitutes a security pursuant to the Securities Exchange
Act. Reves, 494 U.S. at 65-69. The Reves Court noted that "[i]f the seller's purpose is to raise money for the general
use of a business enterprise or to finance substantial investments and the buyer is interested primarily in the profit
the note is expected to generate, the instrument is likely to be a 'security.' If the note is exchanged to facilitate the
purchase and sale of a minor asset or consumer good, to correct for the seller's cash-flow difficulties, or to advance
14
enterprise," however. Loans similar to those in the case at bar operate differently because
they do not confer equity or ownership interests and instead constitute a business's debt.
In short, loans are not always included among types of "investments." See, e.g., In re
Keisker's Estate, 168 S.W.2d 96 (Mo. 1943) (noting that the terms "loan" and "invest" are
often incorrectly used interchangeably; statute used the word "invest" to denote the idea
of purchase, and "loan" to denote idea of making a loan rather than purchase); In re Terry
Mfg. Co., Inc., No. 03-32063, 2007 WL 274319, at *8 (Bankr. M.D. Ala. Jan. 25, 2007)
(noting that the "term investment is ambiguous, as it can mean either debt or equity");
Engelking v. Inv. Bd., 458 P.2d 213, 219 (Idaho 1969) (distinguishing the terms "loan"
and "investment"); In re Owen's Estate, 36 N.Y.S.2d 60, 62 (N.Y. Sur. 1942) (holding
that "[t]he word ‘investment’ is a vague term and no general rule can be laid down as to
its meaning"); Reves, 494 U.S. at 62 (holding that notes are "used in a variety of settings,
not all of which involve investments").
In giving the language of the insurance contract its plain and ordinary meaning, we
note the following illustration. If a business owner is asked to list a business's "debts," the
owner will list the business's banker, the revolving operating loan, the Mastercard, Visa,
and/or American Express, and the business's other creditors. However, if a business
owner is asked to list the business's "investors," the owner will list the stockholders,
some other commercial or consumer purpose, on the other hand, the note is less sensibly described as a 'security'"
(emphasis added). Another factor in the Reves Court's determination that notes were securities in that case was that
was there was "common trading" of the notes and that they were offered and sold to a broad segment of the public.
Id. at 68.
Fortunately, our question presented does not entail application of the multi-factor test, and we note the
cases and statutes only to highlight the lack of conclusiveness and the indistinctness of the matter. For our purposes,
perhaps what best summarizes Reves was the Court's observation that "common stock is the quintessence of a
security . . ., but the same simply cannot be said of notes, which are used in a variety of settings, not all of which
involve investments." Id. at 62 (emphasis added).
15
partners, and members (either active or passive) -- those with equity or ownership
interests. It would be a complete stretch for any business owner to consider the credit
card company, banker, lender, or other creditor an "investor" in the business or enterprise.
In fact, the definition of "enterprise" in Black's Law Dictionary, Ninth Edition, is
consistent with this point. "Enterprise" is therein defined as a "venture or undertaking
especially one involving financial commitment." This definition suggests a financial
commitment more in line with ownership or management control, and not simple loans.
All six loans in this case were simple, unsecured loans that charged interest
according to the terms of the promissory notes but in no way evidenced a transaction
"resulting in investment in an enterprise." These loans did not confer to Taylor any
property or ownership interest other than the right to be repaid with interest. To be sure,
Taylor never obtained the right to share in the profits of either business. Were it the case
that the policy exclusion defined "investment" to include loans or omitted the phrase
"resulting in investment in an enterprise," our resolution of whether such a loan is
included in that exclusion may differ. But as noted above, as the drafter of the policy, the
insurance company was in the better position to remove the ambiguity from the contract,
Golden Rule, 368 S.W.3d at 334, and the ambiguous language that The Bar Plan drafted
instead creates indistinctness and uncertainty.
The Bar Plan's failure to draft unambiguous policy language and thus meet its
burden of establishing that the exclusion applied is also evident in the duplicity of
definitions for investment in Black's Law Dictionary. The first definition of investment
is an "expenditure to acquire property or other assets in order to produce revenue; a
16
capital outlay." That first definition includes three examples of the term: (1) a "fixed-
dollar investment," which is "an investment whose value is the same when sold as it was
when purchased," as in "bonds held to maturity, certain government securities, and
savings accounts"; (2) a "fixed-income investment," which is an "investment (including
preferred stock) that pays a fixed dividend throughout its life and is not redeemable
unless the corporation makes a special call"; (3) a "net investment," which is an
"investment (including preferred stock) that pays a fixed dividend throughout its life and
is not redeemable unless the corporation makes a special call." Black's second definition
of "investment" is the "the asset acquired or the sum invested" and contains no examples.
Here, the only example in the first definition that arguably could encompass these
particular interest-bearing loans falls within "fixed-dollar investments," perhaps most
akin to the ownership of a "savings account."11 But whether the rest of the first definition
includes the loans at issue here as investments is unclear when read with the policy
language in mind. Viewed in the context of the exclusion, which is that the loan must
"result[] in investment in an enterprise," no property or other assets were acquired to
produce revenue when Taylor made his loans with either Wirken or Longview by way of
promissory notes. It is true that the right to repayment set out in the note may be viewed
as an asset in certain contexts, but as set out above, it does not follow that a creditor or
other lender necessarily becomes an investor by acquiring an asset. Quite simply, Taylor
11
The dissent argues that, "The fact that at least one of the Longview loans closely resembled the purchase
of a 'zero-coupon bond' demonstrates the complexity of these transactions." However, the fact that none of these
loans was a "zero-coupon bond" helps demonstrate the simplicity of these transactions. More to the point, a bond is
a quintessential security, so far removed from a simple loan that one would not reasonably confuse the two or infer
that a loan can be an "investment in an enterprise" solely because a bond is an example of an investment.
17
acquired no interest in any enterprise when he loaned money to Wirken Law Group and
to Longview, and it would be absurd to expect either Wirken Law Group or Longview to
consider Taylor an investor as equally as it would be absurd to consider a credit card
company or any other such creditor an investor. See Mendota, 348 S.W.3d at 71 (holding
that the insured is entitled to a pro-coverage interpretation if the terms are susceptible of
two possible interpretations and there is room for construction).
In viewing the language of the exclusion as a whole, it thus appears that the trial
court simply missed a step in its analysis. While it is true that Wirken facilitated business
transactions between Taylor and Wirken Law Group and between Taylor and Longview,
it is not the case that those transactions involved Wirken acting as a legal representative
for an investor "resulting in investment in an enterprise," which is the language of the
policy exclusion and our context for the ambiguous term. Strictly construing this
exclusion against the insurer, as we must, Golden Rule, 368 S.W.3d at 334, it is at least
reasonable under the legal definition of "investment" that an ordinary purchaser of The
Bar Plan policy would not reasonably understand based on these transactions that Taylor
was an "investor investing in an enterprise." Rather, an ordinary insured under The Bar
Plan would reasonably believe he was providing routine legal services to a client to
document simple loans. Stated again and most basically, under common usage, the loans
did not result in investment in an enterprise in which the attorney owns an equity
interest or for which the attorney receives a fee or commission from the entity.
That an ordinary purchaser of The Bar Plan policy would not reasonably
understand this exclusion to apply is particularly obvious as to the loans to Wirken's
18
practice. Any purchaser of the policy would be well aware of the impossibility of Taylor
entering into a transaction "resulting in investment in an enterprise" where the enterprise
in question is a legal corporation. § 356.111.1(1) (stating that a professional corporation
may issue shares, rights, or options to purchase shares only to those authorized to render
the "professional service permitted by the articles of incorporation"). In other words,
although the Wirken Law Group was financially indebted to Taylor, Taylor (a non-
lawyer) was prohibited by statute from entering any transaction resulting in an equity or
ownership investment in the Wirken Law Group. The base question is this: Would a
reasonable attorney think that a non-lawyer can invest in his or her law firm? No. Would
a reasonable attorney think that a non-lawyer can make a loan, profitable or not, to a law
firm? Yes. Can a non-lawyer invest in a law firm? No. Thus, a reasonable attorney
purchasing this policy may not read the exclusion to include a loan to an entity the lender
cannot legally invest in.
As noted above, we strictly construe exclusionary clauses against the drafter and
place the burden of showing that an exclusion to coverage applies on the insurer because
insurance is designed to furnish protection for an insured, not defeat it, and because
the insurer created the policy language and was in the better position to cure any
deficiency. Golden Rule, 368 S.W.3d at 334. We particularly note the difficulty of
members of a multi-person practice who were not cognizant of the malfeasant actions of
one member to guess at the meaning and application of the proffered exclusion after the
fact.
19
We further note that, in arguing that the loans at issue met the policy definition of
"investment in an enterprise," The Bar Plan does not seek to elevate the transactions at
issue from anything other than mere loans. In other words, The Bar Plan does not argue
that the transactions, particularly with respect to Longview, were a specific type of
investment cloaked as a loan. To be clear, the undisputed facts are that all of the loans
contained fixed interest rates, and the record nowhere indicates that the returns were
dependent on the performance of any acquired assets. Compare Minn. Lawyers Mut. Ins.
Co. v. Ahrens, 432 Fed.App'x. 143, 148 (3rd Cir. 2011) (holding that speculative
investments were not converted to loans and so fell within policy exclusion where the
"clients expected to profit from . . . success in the gold and commodities futures market,
and . . . their expected returns depended upon that success, not on an interest rate").12
Similarly, we do not find persuasive The Bar Plan's reliance on Vaughn v.
Guarino-Sanders, 478 Fed.App'x. 310 (6th Cir. 2012),13 where the Sixth Circuit
considered the very same exclusion. Unlike the case at bar, the parties in Vaughn did not
contest that the transaction at issue, the purchase of "membership in limited-liability
companies as vehicles to buy Florida real estate," in which the insured attorney owned an
equity interest, was an investment. Id. at 310. If anything, Vaughn underscores the
difference between becoming a member in a company and simply extending credit to a
business. Further, as the ambiguity at issue in this case was not even raised in Vaughn,
that case is irrelevant to our analysis.
12
Although it is denominated an unpublished federal opinion, we know of no rule prohibiting our citation
to this case, in contrast to Missouri Supreme Court Rule 84.16(b), which prohibits the citation of unpublished
Missouri opinions.
13
Id.
20
In its characterization of our holding, the dissent charges that "Wirken created and
had control of the undisputed facts of his own legal malpractice insurance question."
However, the dissent fails to acknowledge that the fact of the malpractice (and thus of
coverage) is not an issue in this equitable garnishment action, having already been
determined in the underlying action in a manner that binds the insurer. The dissent's
analysis fails to apply -- let alone acknowledge -- black-letter law that the insurer bears
the burden of showing that an exclusion applies to defeat coverage, and that in sustaining
that burden, policy language is strictly construed against the insurer.14 We do not accept
as a "given" the premise of the dissent that a reasonable attorney would not expect
coverage under the circumstances of this case. To the contrary, we believe a reasonable
attorney would expect the provision of legal services in connection with assisting a client
in making loans to be covered under a malpractice policy, and would not expect that
coverage to be negated by an exclusion for "investments in an enterprise."
Taylor should not suffer when Wirken's misdeeds were contemplated in the policy
or at least were not shown by the insurer to be excluded therefrom. The paying policy
holder, despite his covered, undisputed malpractice, and the victim, should not suffer
because of the insurer's careless drafting and/or its failure to define "investment" if the
insurer indeed meant to exclude the transactions at issue.
14
Indeed, instead of recognizing and applying black-letter law regarding the burden of proof and the dictate
that exclusions are strictly construed against an insurer, the dissent relies on The Bar Plan Mut. Ins. Co. v.
Chesterfield Mgmt. Assocs., 407 S.W.3d 621, 629 (Mo. App. E.D. 2013), for broad language regarding policy
ambiguities that is quoted from California jurisprudence. But Chesterfield and the California case on which it
depends concern ambiguities as to coverage (an issue not before this court), not as to an exclusion (the issue that we
must address). We prefer to rely on recognized tenets from Missouri jurisprudence that squarely apply to how we
are to confront insurance policy exclusions.
21
We thus determine as a matter of law that the policy exclusion set out in The Bar
Plan's policy was indistinct and therefore ambiguous as to whether it included the loans at
issue. The Bar Plan bore the burden of showing that an exclusion to coverage applies and
did not meet that burden. To the contrary, the terms "investment" and "investor" are
ambiguous as there is "duplicity, indistinctness, or uncertainty in the meaning of the
language in the policy," Seeck, 212 S.W.3d at 132, and the terms are not applicable to the
facts at bar when read in the context of the entire exclusion, which entails that the
transaction result in "an investment in an enterprise."
CONCLUSION
The trial court's judgment is reversed and remanded for proceedings consistent
with this opinion.
__________________________________
Gary D. Witt, Judge
Martin, Presiding Judge, joins in the majority opinion
Fischer, Special Judge, concurs in part and dissents in part in separate opinion
22
In the
Missouri Court of Appeals
Western District
JIMMIE LEE TAYLOR, )
)
Appellant, ) WD76380
)
v. ) OPINION FILED: April 29, 2014
)
THE BAR PLAN MUTUAL )
INSURANCE COMPANY, ET AL., )
)
Respondents. )
CONCURRING IN PART AND DISSENTING IN PART OPINION
I agree with the circuit court that the "legal representative of investors" exclusion
unambiguously excludes coverage, and, therefore, I respectfully dissent from the result of
the principal opinion. I concur with the principal opinion that the standard for
determining whether an ambiguity exists in a legal malpractice insurance policy is
whether a reasonable attorney would conclude that coverage exists for the advice given
or the conduct of the attorney. I dissent from the principal opinion's holding that the
phrase "investment in an enterprise" is ambiguous due to the existence of multiple
definitions of the word "investment." The circuit court concluded that no reasonable
attorney who read the policy could believe that the investment advice given would be
covered by this malpractice insurance policy. My view of this case is consistent with the
circuit court in that the six loans James C. Wirken advised his client to make were
"investments in enterprises" within the meaning of the policy exclusion. Therefore, I
would affirm the circuit court's judgment that denied Jimmie Lee Taylor's claim for
equitable garnishment against The Bar Plan Mutual Insurance Company ("The Bar
Plan").
Factual Background
Taylor seeks to recover from The Bar Plan under a legal malpractice insurance
policy for the actions of Wirken, the insured and now-disbarred attorney. Wirken
advised Taylor to make several loans to his own law firm, the Wirken Law Group, P.C.,
and to another of Wirken's clients, Longview Village Development Company
("Longview"). Three loans went to the Wirken Law Group, and three went to Longview.
Wirken was the sole owner of the Wirken Law Group. Longview paid Wirken a
commission based fee for delivering Taylor as a lender. The loans never were repaid,
and Taylor sued Wirken for breach of fiduciary duty.
Prior to the six loans, Wirken represented Taylor regarding general estate planning
and administration matters. According to the Second Amended Petition in the underlying
lawsuit against Wirken for breach of fiduciary duty, at some point Taylor "sought the
advice of [Wirken] regarding the investment of" the trust assets. Also according to
Taylor's Second Amended Petition in the underlying lawsuit, when Wirken approached
Taylor about lending money to Longview, Wirken advised him "that he was aware of a
tremendous investment opportunity." The circuit court in the underlying case held a
bench trial on the claim for breach of fiduciary duty. The circuit court determined that
2
Wirken was acting within the scope of an attorney-client relationship with Taylor
regarding all six loans, and it entered judgment against Wirken and the Wirken Law
Group. The circuit court assessed damages based on the face value of the six notes plus
interest and attorney fees, totaling $940,844.82.
Taylor then sought to collect on the judgment by suing The Bar Plan directly in
this action for equitable garnishment. See § 379.200, RSMo 2000. The Bar Plan moved
for summary judgment, arguing that Taylor's claim was barred by the "legal
representative of investors" exclusion. The circuit court's grant of summary judgment
expressly stated:
The court concludes that coverage is defeated by the unambiguous
language of the policy exclusion in Section III(B)(4). Section III(B)(4) of
the policy states:
THIS POLICY DOES NOT PROVIDE COVERAGE FOR ANY
CLAIM BASED UPON OR ARISING OUT OF:
B. An insured's capacity as:
4. A legal representative of investors in regard to
and resulting in an investment in an enterprise
in which an Insured owns an equity interest or
for which the Insured receives a fee or
commission from an Entity other than the
investor.
In the loans to Wirken Law Group, it is undisputed that Mr. Wirken had a
100% equity ownership interest in Wirken Law Group. The loans to his
law firm fall squarely within the exclusion when he acted as a legal
representative for Mr. Taylor "in regard to and resulting in investment [sic]
in an enterprise in which an Insured owns an equity interest." The loss on
Counts I and II of the Taylor judgment is excluded from coverage by this
exclusion.
3
As to the Longview Loan transactions, it is undisputed that Mr.
Wirken received a commission fee from Longview for Plaintiff's
investments. Wirken describes in his deposition testimony his belief (or
assumption) that the "finder's fee" checks he received amount to 5% of the
loans made by Taylor. These loans were thus investments "for which the
Insured receives a fee or commission from an Entity other than the
investor." The loss arising from the Longview loan transactions and loss
thereon are excluded under the provisions of Section III B(4) [sic] policy
exclusion.
(Amended Judgment & Order Granting Def. The Bar Plan Mut. Ins. Co.'s Mot. for
Summ. Judgment at 11-12, L.F. 506-07, Mar. 27, 2013.) Taylor appeals.
Standard of Review
The trial court makes its decision to grant summary judgment based
on the pleadings, record submitted, and the law; therefore, this Court need
not defer to the trial court's determination and reviews the grant of
summary judgment de novo. In reviewing the decision to grant summary
judgment, this Court applies the same criteria as the trial court in
determining whether summary judgment was proper. Summary judgment
is only proper if the moving party establishes that there is no genuine issue
as to the material facts and that the movant is entitled to judgment as a
matter of law. The facts contained in affidavits or otherwise in support of a
party's motion are accepted as true unless contradicted by the non-moving
party's response to the summary judgment motion. Only genuine disputes
as to material facts preclude summary judgment. A material fact in the
context of summary judgment is one from which the right to judgment
flows.
A defending party . . . may establish a right to summary judgment by
demonstrating: (1) facts negating any one of the elements of the non-
movant's claim; (2) that the non-movant, after an adequate period for
discovery, has not been able and will not be able to produce sufficient
evidence to allow the trier of fact to find the existence of any one of the
elements of the non-movant's claim; or (3) that there is no genuine dispute
as to the existence of the facts necessary to support movant's properly
pleaded affirmative defense. Each of these three methods individually
establishes the right to judgment as a matter of law.
The record below is reviewed in the light most favorable to the party
against whom summary judgment was entered, and that party is entitled to
4
the benefit of all reasonable inferences from the record. However, facts
contained in affidavits or otherwise in support of the party's motion are
accepted as true unless contradicted by the non-moving party's response to
the summary judgment motion.
Goerlitz v. City of Maryville, 333 S.W.3d 450, 452-53 (Mo. banc 2011) (internal citations
and quotation marks omitted).
Both the interpretation of an insurance policy and the determination of whether
exclusion provisions are ambiguous are issues of law, subject to de novo review.
Mendenhall v. Prop. & Cas. Ins. Co. of Hartford, 375 S.W.3d 90, 92 (Mo. banc 2012).
Analysis
In an action for equitable garnishment brought directly against an insurer pursuant
to § 379.200, RSMo 2000, recovery depends on whether the insurance policy provides
coverage. Noll v. Shelter Ins. Cos., 774 S.W.2d 147, 150 (Mo. banc 1989). The sole
issue in this case is whether the "legal representative of investors" exclusion applies.
Section III(B)(4) of the policy provides as follows:
This policy does not provide coverage for any claim based upon or arising
out of . . . [a]n Insured's capacity as . . . [a] legal representative of investors
in regard to and resulting in an investment in an enterprise in which an
Insured owns an equity interest or for which the Insured receives a fee or
commission from an Entity other than the investor.
I concur with the principal opinion that the standard for determining whether
ambiguity exists in a legal malpractice insurance policy is whether a reasonable attorney
would conclude that coverage would be available pursuant to the terms of the policy.
Shiddell v. The Bar Plan Mut. Ins. Co., 385 S.W.3d 478, 485 (Mo. App. 2012)
(emphasizing what an ordinary attorney would understand the policy to mean). I also
5
agree that this standard is consistent with the Supreme Court of Missouri's decisions in
Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132, 135 (Mo. banc 2009), and Robin
v. Blue Cross Hosp. Serv., Inc., 637 S.W.2d 695, 698 (Mo. banc 1982).
This rule makes sense as a general matter. Contract disputes are generally
confined to determining the rights of the contracting parties and any third-party
beneficiaries, assignees, or delegatees. Accordingly, a contract's terms should be
interpreted to attribute the meaning those people would give them, not the meaning the
average person in society would give them. See Chochorowski v. Home Depot U.S.A.,
404 S.W.3d 220, 226 (Mo. banc 2013) ("[T]he primary rule of contract interpretation is
that courts seek to determine the parties' intent and give effect to it.") (emphasis added).
This principle is especially apparent when the dispute concerns whether an attorney has
acted within the scope of an exclusion in a legal malpractice insurance policy. The
attorney should not be permitted to act in a way that a reasonable attorney would
conclude falls outside the scope of coverage, then subject his or her malpractice insurer to
liability just because a reasonable layperson might believe that terms in a policy
exclusion are ambiguous.
The principal opinion concludes that the phrase "investment in an enterprise" is
ambiguous, and must be construed against The Bar Plan as the drafter of the policy,
because the term "investment" can be defined in different ways. I agree with the circuit
court that this exclusion is not ambiguous as applied to the particular transactions at issue
in this case. A reasonable attorney would not conclude that Wirken's actions would be
covered by his malpractice insurance policy because it is clear that the loans in this case
6
were investments in enterprises. No reasonable attorney in Wirken's position would
conclude they were not. The plain language of the policy exclusion bars Taylor's
equitable garnishment claim against The Bar Plan.
This court should not resort to canons of construction when the contract provision
is clear and unambiguous. State Farm Mut. Auto. Ins. Co. v. Ballmer, 899 S.W.2d 523,
525 (Mo. banc 1995). Where no ambiguity exists, the court should not distort policy
language to create one. Shahan v. Shahan, 988 S.W.2d 529, 535 (Mo. banc 1999);
Shiddell, 385 S.W.3d at 485 ("Rules of construction are . . . only to be utilized where an
ambiguity already exists."). The circuit court determined the applicable exclusion was
unambiguous, so it correctly did not resort to any rules of construction.
The principal opinion invokes the canon of construction contra proferentum and
holds that the "legal representative of investors" exclusion does not bar Taylor's claims
because the court should construe it narrowly against the drafter of the insurance policy
and in favor of coverage. It holds that the phrase "investment in an enterprise" is
ambiguous because a reasonable attorney could conceivably conclude that an investment
does not mean a loan but only a purchase of an equity interest in a business. In my view,
the insurance policy's use of such a broad phrase as "investment in an enterprise," without
limiting its definition, prohibits such a restrictive reading in this case. I agree with the
circuit court that the "legal representative of investors" exclusion is clear and
unambiguous when applied to the facts of this case because it would be apparent to any
reasonable attorney that each of the loans Wirken advised Taylor to make was an
7
"investment in an enterprise" and that Wirken's actions were excluded from insurance
coverage.
As the principal opinion notes, there are several different dictionary definitions for
the term "investments." The Bar Plan presents the first definition of "investment" listed
in Webster's Third New International Dictionary: "an expenditure of money for income
or profit or to purchase something of intrinsic value[;] a capital outlay." Webster's Third
New International Dictionary 1190 (1993). Taylor argues that an investment requires a
purchase of something, and he urges a definition of "invest" that can be found in the
American Heritage Dictionary: "to purchase with the expectation of benefit." American
Heritage Dictionary 922 (5th ed. 2011).1 Black's Law Dictionary provides a definition
that seems to encompass both: "An expenditure to acquire property or assets to produce
revenue; a capital outlay." Black's Law Dictionary 902 (9th ed. 2009).
Despite the existence of multiple definitions, they are not competing definitions,
as the principal opinion suggests. The definitions are not exclusive of one another. They
show only that the term is broad—an investment is both an outlay of funds with the
expectation that some income or profit will result and a purchase with the expectation to
receive a benefit. The policy exclusion at issue here does not provide a specific,
restrictive definition otherwise, and it does not confine its use of the word "investment"
to only purchases of assets. Rather, the policy exclusion adopts the word "investment"
itself, in all its breadth.
1
Notably, the American Heritage Dictionary also provides a substantially identical definition to the
Webster's definition, which does not mention a "purchase." It is listed as the first definition of "invest": "To commit
(money or capital) in order to gain a financial return: invested their savings in stocks and bonds." American
Heritage Dictionary, at 922.
8
As a result, a reasonable attorney would not have concluded that the policy
exclusion's use of the phrase "investment in an enterprise" meant that a purchase was the
only type of investment excluded from coverage. It would be unreasonable to conclude
that the term investment means only a purchase of something simply because the
dictionary states that an investment can be an outlay of funds with the expectation of a
return and also a purchase of assets with the expectation of a return. It is a broad term
that means both, which does not make it ambiguous. See The Bar Plan Mut. Ins. Co. v.
Chesterfield Mgmt. Assocs., 407 S.W.3d 621, 629 (Mo. App. 2013) (stating that
"'[m]ultiple or broad meanings do not necessarily create ambiguity'" because "there is
often a deliberate purpose in using a word with a broad meaning or multiple meanings in
a contract, namely to achieve a broad purpose").
Moreover, nothing about the phrase "investment in an enterprise" inherently
suggests a purchase of an equity interest, as the principal opinion holds. Although the
purchase of stock in a particular business with an expectation to make a return would
surely qualify, the principal opinion provides no satisfactory reason for concluding that a
loan for the same amount of money to a particular business with an expectation to make a
return does not qualify in equal measure. The principal opinion assumes that the average
business would list loans as debts and not also as investments but provides no support for
that proposition. Slip op. at 15-16. The same is true regarding its assumption that equity
investments are the "most common examples" of investments. Id. at 14.
Even if these assumptions are correct, and even assuming they suggest businesses
do not consider their lenders to be investors as a general matter, a particular loan to a
9
particular business may still obviously be an investment. And although it is true that the
value of an equity interest in a business is tied to the business's performance, so is the
value of the right to repayment of a loan—as evidenced by the interest rate, which
reflects the calculated risk that the borrower will default. A reasonable attorney would
not have given the investment advice that Wirken gave in this case, but a reasonable
attorney who was acting in his or her professional capacity to give investment advice
would assume "investment in an enterprise" to mean both a purchase of stock and a loan
of money to a particular business.2
In the same vein, the principal opinion's conclusion that a reasonable attorney
would know that a layperson cannot invest in a law firm begs the central question. 3
Section 356.111.1, RSMo 2000, would prevent a layperson from obtaining an ownership
interest in securities of a professional corporation, but the statute says nothing of who can
invest in a professional corporation. "A professional corporation may issue shares,
fractional shares, rights or options to purchase shares, and other securities only to the
following: ...." Id. By stating that § 356.111.1 precluded Taylor from investing in the
2
To illustrate, the definition of investment provided by Black's Law Dictionary uses "bonds held to
maturity" as an example of an investment. Black's Law Dictionary, at 902. It defines a "bond" as a "written promise
to pay money or do some act if certain circumstances occur or a certain time elapses." Id. at 200. Clearly an
investment in an enterprise can include providing debt financing to a business; it is not limited to the purchase of an
equity share in a business. The principal opinion draws an empty distinction. As previously mentioned, the fact that
"investment in an enterprise" can mean providing both debt and equity financing to a particular business does not
make the phrase ambiguous. See Chesterfield Mgmt. Assocs., 407 S.W.3d at 629.
Likewise, nothing about the word "enterprise" suggests an investment must be a purchase of an equity
share in a business. The principal opinion inexplicably comes to that conclusion from use of the phrase "financial
commitment," presumably by some dictionary. Slip op. at 16. The ninth edition of Black's Law Dictionary defines
"enterprise" as "[a]n organization or venture, esp. for business purposes;" it does not define it as one involving a
"financial commitment." Black's Law Dictionary, at 611. Regardless, a loan is a financial commitment even though
it must be paid back, and there is no tenable argument that the Wirken Law Group and Longview were not
"enterprises."
3
The principal opinion states the following as its rationale: "Would a reasonable attorney think that a non-
lawyer could invest in his or her law firm? No. Would a reasonable attorney think that a non-lawyer can make a
loan, profitable or not, to a law firm? Yes. Can a non-lawyer invest in a law firm? No." Slip op. at 19.
10
Wirken Law Group, the principal opinion assumes its conclusion—that the definition of
an investment in a professional corporation is limited to a purchase of an equity share.
As noted, the policy does not restrict the word "investment" to this narrow definition.
Although loans may not always be considered investments for all purposes, this
does not make the policy ambiguous.4 It is sufficient that no reasonable attorney would
conclude that the loans in this case were not investments. The principal opinion holds
that the exclusion is ambiguous because, at the time the insurance policy was drafted, an
attorney conceivably might conclude, in the abstract, that some loan somewhere may not
be considered an investment. Slip op. at 11 n.8 (stating that the court's standard of review
is limited to what the parties would believe the contract means at the time of contracting).
But coverage disputes are not resolved in the abstract. Wirken created and had control of
the undisputed facts of his own legal malpractice insurance coverage question. The
investment advice that Wirken gave to Taylor was to make six loans and receive a return
on his money. There is no doubt that each loan constituted an "expenditure of money for
income or profit."5 Webster's Third New International Dictionary, at 1190.
4
The Supreme Court of Missouri has found that loans may not always have been considered investments.
See Hines v. Am. Sur. Co. (In re Keisker's Estate), 168 S.W.2d 96, 98-99 (Mo. 1943) (stating that the words "loan"
and "invest" are often used interchangeably, but distinguishing an "investment in bonds of the United States" from a
loan because the particular statute's use of the word "investment" contemplated a purchase); see also Oren v. C.I.R.,
357 F.3d 854, 857-58 (8th Cir. 2004) (holding that a shareholder's loan to a corporation does not constitute an
investment for purposes of calculating the shareholder's income taxes, when the transaction was essentially a sham
and the shareholder incurred no actual economic outlay); Ahrens v. Minn. Lawyers Mut. Ins. Co., 432 F. App'x 143,
149-50 (3d Cir. 2011) (suggesting that loans may not always be considered investments for all purposes but holding
that certain transactions were investments, as that term normally is used and as used in the legal malpractice
insurance policy exclusion in that case, while emphasizing that the "insured's reasonable expectations" precluded
coverage).
5
At least one of the Longview was a complex transaction, which illustrates why a reasonable attorney
could only conclude that Wirken's advice was investment advice. Taylor paid $138,000 to Longview up front for a
$150,000 loan, in effect paying the interest up front. Slip op. at 5. The whole amount of the loan was due all at
once, three months later. Id. Although the parties did not arrange this transaction as the purchase of a bond, there is
practically no difference. In a zero-coupon bond transaction, the purchaser (the lender) pays the issuer (the
11
It is difficult to find a better word to describe the loans. One must affirmatively
avoid using the word "investment." This is apparent from the fact that Taylor himself did
not avoid using the term to describe the loans, and even Wirken described the Longview
loans as "investments" when pitching the idea to Taylor. Taylor admitted in his Second
Amended Petition in the underlying lawsuit that he had sought "investment advice" from
Wirken and that "Wirken advised [Taylor] that he was aware of a tremendous investment
opportunity" regarding the Longview loans. Although the subjective beliefs of neither
Taylor nor Wirken are dispositive of what a reasonable attorney would believe, the fact
that both parties referred to the loans colloquially as "investments" illustrates the strained
logic required to conclude that these loans were anything but investments in two
particular business enterprises.
These six loans were investments in two enterprises—the Wirken Group and
Longview. In my view, no reasonable attorney in Wirken's position could have
concluded otherwise. There is no "indistinctness and uncertainty," and no one was
required to "guess at the meaning" of the policy exclusion just because there is more than
one dictionary definition of the word "investment." Slip op. at 16, 19. After reading
what the policy excluded, any reasonable attorney would have concluded that advising
borrower) something lower than the face value of the bond at the outset, in lieu of receiving the periodic interest
payments typical of a run-of-the mill bond (known as "coupon" payments). Black's Law Dictionary, at 205. The
effect is that the issuer pays the interest up front. Id. The bondholder turns a profit at maturity, assuming there is no
default, when the issuer pays the bond's face value. Id.
This was not a "simple loan," and the transaction sounds complicated because it was. Wirken and Taylor
were required to analyze, or at least should have analyzed, the risk of default as reflected in (1) the high interest rate,
(2) the short repayment period, and (3) the fact that the borrower was willing to pay the interest up front. Each
suggests a higher risk of default. The principal opinion nonetheless holds that it is reasonable for a lawyer to
conclude that advising his or her client to engage in the practical equivalent of a zero-coupon bond debt financing
transaction to a particular business is not advising the client to make an investment in an enterprise.
12
Taylor to make these loans would not be covered by insurance. I would hold that the
exclusion is clear and unambiguous and that the court must apply the plain language of
the exclusion as it is written. Gavan v. Bituminous Cas. Corp., 242 S.W.3d 718, 720
(Mo. banc 2008).
The principal opinion insinuates that because the fact of malpractice is not at issue
in this case, neither is the issue of whether Wirken's actions were covered by the
insurance policy. Slip op. at 20-21 & n.14. The principal opinion's rationale is that the
general insuring clause provides coverage of the malpractice and that the exclusion must
be construed strictly against the drafter. But whether an exclusion applies is inherent in
the question of whether the policy provides coverage. See Todd v. Mo. United Sch. Ins.
Council, 223 S.W.3d 156, 163 (Mo. banc 2007) (holding that an insurance policy that
provided for a broad grant of coverage in one provision with limits in separate exclusions
was not ambiguous, and stating that "[i]nsurance policies are read as a whole, and the risk
insured against is made up of both the general insuring agreement as well as the
exclusions and definitions").
This court should not resort to canons of statutory construction when policy
language is unambiguous. Gavan, 242 S.W.3d at 720; Ballmer, 899 S.W.2d at 525.
When there is no ambiguity, the plain language governs. Id. It is irrelevant whether that
plain language is in the general insuring clause or in a policy exclusion. See Todd, 223
S.W.3d at 163. Insurance policies are routinely written with policy exclusions, and a
reasonable attorney reading the policy would not have ignored the "legal representative
of investors" exclusion in determining coverage. Contrary to the majority opinion's use
13
of the phrase "burden of proof," this case was resolved as a pure question of law by the
circuit court, which determined the policy provisions were unambiguous. See
Mendenhall, 375 S.W.3d at 92 (stating that whether a policy exclusion is unambiguous is
a question of law). The Bar Plan, based on undisputed facts, demonstrated that the policy
unambiguously excluded coverage.
Summary and Conclusion
The "legal representative of investors" exclusion can be broken down into three
elements. It excludes coverage for: (1) claims that are "based upon or aris[e] out of" the
insured's capacity as a "legal representative of investors;" (2) when the representation was
"in regard to and resulted in an investment in an enterprise;" and (3) when the insured
either (a) "owns an equity interest" in the enterprise in which the investment was made or
(b) "receives a fee or commission from an [e]ntity other than the investor" for the
investment.
Here, it is undisputed that Wirken was a "legal representative" of Taylor because
Wirken was acting within the scope of an attorney-client relationship regarding all six
loans. The representation was in regard to and resulted in an "investment in an
enterprise" because, as discussed, Taylor's interest-bearing loans to the Wirken Law
Group and Longview were well within the definition of "investments in enterprises," as a
reasonable attorney would understand that phrase. This made Taylor an "investor." As
to the first set of three loans, Wirken was the sole owner of the Wirken Law Group—
which was "the enterprise invested in." And as to the second set of three loans, Wirkin
14
received a commission based fee from Longview—which was "an Entity other than the
investor." All three elements of the policy exclusion are met.6
In my view, the circuit court did not "miss a step" in its analysis. Slip op. at 18. It
correctly determined that the loans were investments. I agree with the circuit court's legal
conclusion that Wirken could not have reasonably expected that his actions in soliciting
and facilitating loans from his client to his own law firm and to another client would be
covered by his malpractice insurance policy, given the language of the policy exclusion.
I would affirm the circuit court's judgment that The Bar Plan is entitled to judgment as a
matter of law.
/s/ Zel M. Fischer
___________________________
Zel M. Fischer, Special Judge
6
Taylor also presents two claims that the principal opinion does not address: (1) that even if the policy
exclusion is unambiguous, it does not apply to this claim, and summary judgment was inappropriate because some
of Wirken's actions did not fall within the exclusion; and (2) that The Bar Plan did not prove that the exclusion
applies because the policy's use of the word "and" to connect four different exclusions means The Bar Plan was
required to meet all of them. These claims are also without merit. In light of the scope of the issues discussed in the
principal opinion, I do not address these arguments here.
15