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Statutory Changes Promise Procedural Relief from Bad Faith Set-ups in Missouri

Effective Aug. 28, 2017, Missouri House Bills 339 and 714, which are expected to be signed by Gov. Eric Greitens soon, will provide insurers with a measure of procedural relief from some of the most concerning practices used to set up insurers for bad faith claims.

A synergy of statutes, judicial rulings and other factors has propelled Missouri to the top of the list of dangerous jurisdictions for bad faith. It has become an all too common practice in Missouri for plaintiffs to make a time-limited policy limit demand on an insurer very early in the process. Lack of information, or the inability to react fast enough to the demand, leads to a failure to settle within the policy limits. Next, a “sweetheart deal” is made with the insured under Section 537.065. The insured agrees to cooperate with the plaintiff in exchange for an agreement to execute only against his insurance. An uncontested trial results in a huge judgment, and the insurer is faced with potential liability many times its policy limits.

House Bills 339 and 714 repeal Section 537.065 and enact a new Section 537.058 as well as a revised Section 537.065. Section 537.058 provides relief in the following ways:

The time-limited demand must be in writing, sent by certified mail to the insurer, and allow at least 90 days for acceptance. It also must offer an unconditional release of the insurer’s insureds and contain the information set forth in Section 537.058.2.
The time-limited demand must be accompanied by health care provider information, medical releases and employer information.
The failure to comply with this section means that in a suit by or for the benefit of the tortfeasor, the demand is not considered a “reasonable opportunity to settle” and is inadmissible in any lawsuit alleging extra-contractual damages against the tortfeasor’s liability insurer. This does not apply to a claim of bad faith by the insured on his own behalf.

Section 537.058 does not apply to offers, demands or time-limited demands within 90 days of a trial by jury.

Section 537.065, as amended, adds the following procedural protections:

An insured may only enter into a Section 537.065 agreement limiting recovery to the insured’s insurance if the carrier has had the opportunity to defend without reservation, but refused to do so.
Before a judgment can be entered against an insured who has entered into a Section 537.065 agreement with the plaintiff, the insurer must have 30 days notice of the agreement.
The insurer may intervene as a matter of right in the suit during the 30-day period.

These changes are a step in the right direction. They provide the insurer with more time and more information to make a reasoned decision. However, insurers are urged to proceed with caution. We do not yet know how plaintiffs’ counsel will try to circumvent these changes, or how Missouri’s judiciary will apply these new rules. Further, the extra time is only helpful if used wisely.

 

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About this Author

Clark Cole, Insurance, Trial Litigator, Armstrong Teasdale Law Firm
Partner

Clark Cole is a trial lawyer whose practice is devoted exclusively to litigation. He has tried cases to verdict in 13 different state and federal jurisdictions.

Clark concentrates in the areas of insurance and commercial litigation, as well as personal injury, products liability and medical malpractice defense. His practice is equally divided between Missouri (admitted 1980) and Illinois (admitted 1981). He serves as leader of the firm's Insurance Coverage & Litigation practice group.

 

314.342.8037
Patrick J. Kenny, Armstrong Teasdale Law firm, Litigation Attorney
Partner

Patrick Kenny is a trial lawyer with emphasis on complex litigation and appellate work including bad faith and insurance coverage disputes, ERISA litigation (pension and benefits), subrogation, cases involving business "divorces," non-compete and trade secrets, fraud and business torts. He has tried cases to verdict in Missouri and Illinois.  Mr. Kenny has been listed as a Top Rated Lawyer in Commercial Litigation by Martindale-Hubbell and American Lawyer Media (ALM) since 2012, been listed as a Missouri/Kansas Super Lawyers / Super Lawyers Business Edition since 2010, and has been listed in the Best Lawyers in America for Insurance Law since 2007.  Mr. Kenny also has been active with an international law group, Lex Mundi, for many years, currently serving as the Chair of the Insurance/Reinsurance Practice Group.  He also published and presented extensively on matters related to insurance, fraud, and expert witnesses.

314-552-6613
Wil tomlinson, Armstrong Teasdale, Litigation Attorney, Insurance
Attorney

A member of Armstrong Teasdale’s Litigation practice group, Wil Tomlinson handles insurance-related and commercial litigation.

Working with insurance companies and their clients, Wil resolves and litigates, if necessary, complex property, casualty and liability coverage issues. In this area, he defends claims involving misrepresentation, fraud, nonpayment, wrongful denial, termination of benefits, agent errors and omissions, interpretation of benefits and beneficiary designations. Additionally, Wil has been successful in cases involving equitable garnishment and lawsuits alleging...

314.342.8018