Insurance coverage issues don’t often deserve such a headline, but this case is, well - different.
Case Background
If you lived in Missouri between 2011 and 2013, you’ll likely remember the horrible murder of Betsy Faria. She was killed inside her home in Troy, Missouri, two days after Christmas 2011. She’d been brutally stabbed 55 times. Betsy's husband, Russ Faria, was convicted of the crime in 2013, but the conviction was overturned. He was acquitted in a retrial two years later. Russ spent more than three years in prison. There’d long been suspicion that Betsy's friend Pam Hupp was involved in the death. Hupp was the last person to see Betsy alive and became the sole beneficiary of Betsy's $150,000 life insurance policy just days before Betsy died. Hupp reportedly told investigators she also was Betsy's lover.
In 2016, Russ Faria filed suit against Lincoln County, various police officers, and the prosecuting attorney. His suit claimed the officers arrested him without cause and wrongly focused on him rather than Betsy's close friend Pam Hupp. And this is the point where the insurance coverage issue comes into play.
Argonaut Great Central Insurance Company had issued a policy to Lincoln County, its officers, and its employees effective January 1 2012, to December 31, 2013. Argonaut filed a declaratory judgment action claiming they did not have a duty to defend the county in Faria’s suit. The District Court ruled in favor of Lincoln County, finding Argonaut did have a duty to defend. Argonaut appealed. On
March 17, 2020, the U.S. Court of Appeals for the Eighth Circuit handed down its opinion in the case. Argonaut Great Central Insurance Company v. Lincoln County, et. al, Case No. 18-2930.
Appellate Court Review
Synopsis of Timeline
(In this synopsis, the highlighted dates are those that played an important role in the appellate court’s decision.)
On December 27, 2011, Faria’s wife, Betsy, was murdered in their home in Troy, Missouri, suffering over 55 stab wounds, including a knife stuck in the side of her neck. Faria alleged he arrived home around 9:30 that evening, found his wife, and called 911. Records of the call indicate that Faria was hysterical and told dispatchers that he thought his wife (who was terminally ill with cancer) had committed suicide. The officer who arrived at the scene also found Faria to be crying and hysterical. After the officers secured the scene, Faria voluntarily went to the police station; he also waived his Miranda rights before speaking to officers. The questioning at the Lincoln County jail and the administration of a polygraph test (which took place at another location) took more than 40 hours. Faria was released from custody around 4:30 p.m. on December 29, 2011.
On January 4, 2012, the county filed criminal homicide and related charges against Faria. Officers arrested Faria on that date, and because he couldn’t procure bail, he remained in custody at the county jail until his trial in November 2013.
In November 2013, Faria was convicted of murder and sentenced to life in prison. However, while an appeal was pending, the Missouri Court of Appeals granted Faria’s motion to remand for a new trial to account for newly discovered evidence. Faria was re-tried in a bench trial and acquitted of the murder charge in November 2015.
In July 2016, Faria brought the underlying lawsuit.
Synopsis of Other Facts
In his lawsuit, Faria alleged that:
- police officer McCarrick violated Faria’s Fourth Amendment rights in December 2011 by arresting him, seizing him, and holding him without probable cause
- McCarrick violated the Fourth Amendment in January 2012 with Faria’s second seizure and ultimate incarceration
- the prosecuting attorney violated the Fourth Amendment with Faria’s second seizure and incarceration
- the county conspired to violate Faria’s Fourth and Fourteenth Amendment rights by seizing him and denying him substantive due process
- he was maliciously prosecuted (a charge that was ultimately dismissed without prejudice)
- he was entitled to a Monell claim against the county based upon the prosecutor’s actions in her official capacity
- within these counts were factual allegations that the various county actors fabricated evidence, ignored exonerating evidence, and failed to investigate another more obvious suspect—notably Pam Hupp, a woman whom Betsy named as the new beneficiary of her life insurance policy in the days before her murder
Argonaut had issued an insurance policy to Lincoln County, including its officers and employees, which was effective from January 1, 2012, to December 31, 2013. In the policy, Argonaut agreed to indemnify the county when it was legally obligated to pay damages resulting from a covered wrongful act committed during the course and scope of law enforcement activities or which arose out of the use of law enforcement premises while conducting law enforcement activities. The policy excluded coverage for claims arising from “dishonest, malicious, fraudulent or criminal act[s], . . . or a knowing violation of [the] law.” The policy also noted that if another policy applied, the Argonaut policy would be “excess” coverage, and Argonaut would have no corresponding duty to defend. (A public insurer called Missouri Public Entity Risk Management Fund (MOPERM) had provided liability insurance coverage to the county from January 1, 2011, through January 1, 2012.) Finally, the Argonaut policy stated it did not provide coverage for any act for which an insured would otherwise have an exemption because of sovereign immunity.
Analysis of Appellate Court Decision
The court noted that under Missouri law, an insurer’s duty to defend a suit arises if there is potential or even possible liability to pay based upon the facts at the outset of the case. It further noted that analyzing a duty to defend involves comparing the language of the policy with the allegations of the complaint. If facts are alleged that give rise to a potential claim within coverage, the insurer has a duty to defend. Here, Argonaut’s duty to defend would arise when there exists the possibility of a covered wrongful act that occurred during the effective policy period. The policy defined “wrongful act” as “any act, error or omission flowing from or originating out of a law enforcement activity.” Argonaut claimed the policy exclusion for malicious acts resulted in there being no “covered act.”
While the court acknowledged that Faria’s petition did allege the county acted maliciously, the petition also alleged the defendants acted recklessly and incompetently during the investigation of Faria for murder. Thus, the court determined the “knowing” or “malicious” exclusion clauses could not be the basis to exclude coverage. Argonaut also argued that public policy precludes any insurance policy from covering reckless, willful, or intentional acts. The court disagreed as this policy was procured to shield the county from possible constitutional claims against its officers and agents during the performance of their law enforcement duties. These claims “necessarily sound in recklessness, and counties would be uninsurable if Missouri insurance policies could only cover negligent conduct.” Most importantly, the court also found that the standard for the duty to defend is whether there is any possibility of coverage. This cannot be overcome based on the allegation that there was not a covered wrongful act. Here, there was a possibility the county acted recklessly or with reckless disregard for Faria’s rights during the course and scope of their law enforcement activities.
Finally, the court addressed the issue of whether there was an occurrence during the policy period. The Argonaut policy began January 1, 2012. Argonaut argued that because the murder occurred in 2011, which was also when the investigation began, its coverage was not triggered. However, the court pointed out that under Missouri law, an insurable event occurs when the victim is first damaged. Argonaut argued the triggering event for coverage was on December 28, 2011, as Faria had alleged his constitutional rights had been violated based upon his seizure without probable cause on that date. However, the court noted that all the remaining counts involved actions that occurred in 2012. Thus, “injury, for purposes of Argonaut’s duty to defend, first occurred when the charges were filed against Faria.” This occurred during the policy period. Therefore, the court found Argonaut had a duty to defend the case.
Post-Decision Activities
Shortly after the court’s decision was handed down, Faria and Argonaut agreed to a settlement of more than $2 million.
To date, Pam Hupp has never been charged in Faria's murder. She is serving a life sentence without parole for the 2016 killing of Louis Gumpenberger. Hupp shot and killed Gumpenberger during a staged home invasion and attempted robbery inside her O'Fallon, Missouri, home, claiming she was acting in self-defense. Prosecutors believe the murder of Gumpenburger was all part of Hupp’s plan to distract from the investigation into Betsy Faria’s 2011 murder.
In October 2019, the Major Case Squad of Greater St. Louis announced it would launch a new investigation into the Betsy Faria murder case.
The case was thrust into the national spotlight when Faria's murder and Hupp's connections to it were widely covered by NBC’s Dateline, on both its television show and in a six-episode podcast entitled “The Thing About Pam.” Debuting at the top of Apple’s podcast chart, Dateline offered this synopsis of the podcast:
Two days after Christmas, 2011, Russ Faria came home from game night to find his wife, Betsy, dead. He was soon charged and convicted of her murder. But Russ Faria insisted he did not kill his wife. Betsy’s brutal murder set off a chain of events that would leave one man dead, another man implicated, and expose a diabolical scheme. It would also see Dateline NBC—the true-crime original—become a part of the never-ending saga that proves the old adage: Truth is stranger than fiction. This original series from Keith Morrison and Dateline defies all expectations.
Who would have thought insurance coverage could be so captivating?