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Appeals court ruling blocks $1.2 million judgment for nursing students.

Byline: Nicholas Phillips

The Missouri Court of Appeals Eastern District ruled Sept. 25 that an insurance company was not obliged to cover a $1.2 million judgment against a nursing school.

Judge Philip M. Hess wrote in his opinion that while the nursing school's behavior had been "abhorrent," its behavior was not covered under the school's insurance policy.

The case originated in 2013, when Mary Spencer and 13 of her classmates sued the St. Louis College of Health Careers under the Missouri Merchandising Practices Act. They alleged that the school's Applied Sciences of Practical Nursing Program had engaged in unfair and deceptive practices by holding out the promise of a degree that the school had no approval to confer.

After the suit was filed, the college demanded coverage from its insurer, Hartford Casualty Company. Hartford denied coverage and a defense, asserting that the students' petition did not make a claim of property damage or any other tort covered under its policy.

Before the bench trial, the parties agreed that if a judgment came down in the students' favor, the students would seek to levy execution only against Hartford. At the trial's conclusion in 2015, St. Louis Circuit Judge Timothy Wilson found that the college had practiced deception and fraud in the inducement. The judge entered a judgment for each plaintiff for a combined $2,227,954 with interest.

The students then brought an equitable-garnishment action against Hartford. Both parties moved for summary judgment. The students argued that the insurance company breached its duty to defend because in the original petition they had alleged "property damage." Specifically, the students argued that the award of a diploma instead of a degree constituted a loss of property.

Hartford denied that the petition included that allegation or any other that would've triggered its duty to defend. St. Louis Circuit Judge Joan Moriarty granted summary judgment for Hartford, ruling that in Missouri, as in the majority of states, an educational degree was not "property," so it wasn't covered under the insurance policy. The students appealed, but appeals judges Philip M. Hess, Robert G. Dowd, Jr., and Mary K. Hoff, affirmed.

Writing for the majority, Hess found that the students never alleged physical injury to tangible property or the loss of the use of tangible property.

"Appellants' loss was monetary and it is well-settled that money is not tangible property," Hess wrote.

Attorneys for the parties did not respond to requests for comment.

The case is Mary Spencer, et al v. Hartford Casualty et al, ED106337.

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Publication:Missouri Lawyers Media
Geographic Code:1U1CT
Date:Sep 27, 2018
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