Missouri’s New Fair Settlements Bill & the Repeal & Replacement of RSMo. 537.065
The Missouri General Assembly has passed, and it is anticipated Governor Greitens will soon sign, legislation that provides insurers with a measure of protection from unfair settlement practices in Missouri. House Bill 339/714 addresses two difficult situations for Missouri insurers: (1) time-limit demands; and (2) the aggressive use of RSMo. 537.065 to produce uncontested “trials” and limit a carrier’s ability to defend its coverage positions.
Time-Limit Demands for Settlement of Claims Relating to Personal Injury, Bodily Injury, or Wrongful Death
HB 339/714 imposes requirements for time-limited settlement demands, but only where such demands are later used to support a claim for bad faith refusal to settle brought by or on behalf of the claimant. The bill appears to be narrowly tailored to address situations where claimants make aggressive time-limit demands to posture the claim for a 537.065 contract and/or collateral bad faith litigation. A demand not compliant with this section is not admissible in a subsequent bad faith claim brought by or on behalf of a claimant as a purported “reasonable opportunity to settle.” The statute should be read carefully for all of its terms, but in general, to be compliant the demand must:
– be in writing
– reference new Section 537.058
– be sent by certified mail to the liability insurer
– be open for at least 90-days
– state the monetary amount demanded
– identify the date and location of loss
– identify the claim number if known
– describe all known injuries
– identify the claims and parties to be released
– unconditionally release all insureds for all present and future liability
– identify all relevant health care providers and provide a HIPPA-compliant authorization to obtain those records
– identify all relevant employers and provide an authorization to obtain those records
The Repeal & Replacement of RSMo. 537.065
Presently, any carrier issuing a coverage declination or defending while reserving its right to later decline coverage, risks the claimant and insured entering into an agreement pursuant to Section 537.065. Under such agreements, the carrier is often deprived of any opportunity to participate in the defense of its insured, and may also be limited in its ability to litigate its coverage position in subsequent garnishment or declaratory proceedings. Such proliferation of 537.065 contracts was the impetus behind this portion of the bill.
Under many 537.065 contracts, the carrier is effectively prohibited from defending the merits of the claim against its insured. Judgments resulting from such uncontested “trials” often including detailed findings of fact and conclusions of law. Under the present state of Missouri law, a carrier may be bound by such fact findings in its defense of a garnishment proceeding, even though it had no opportunity to participate in the proceeding that led to the judgment. Further complicating the matter, even where insurers are permitted to defend their insureds in cases involving issues of coverage, defense counsel retained by the carrier may be ethically conflicted from advancing the insurer’s interests to the detriment of the insured. As a result, a carrier is often partially or wholly deprived of its ability to truly defend its coverage position.
House Bill 339/714 seeks to address these issues and provide carriers with some measure of protection from 537.065 contracts. The bill allows for 065 contracts only where an insurer has been given the opportunity to defend without reservation but has refused to do so. In other words, an insurer should have the opportunity, up front, to avoid a 537.065 contract by waiving its coverage defenses. This should effectively end the practice of claimants taking 537.065 contracts in cases where there is no coverage dispute but the carrier has refused a settlement demand it deems excessive, or where the carrier simply has not been able to obtain sufficient information to adequately assess the demand.
In other cases where a carrier has decided to stand its ground in the form of a coverage declination or reservation, 537.065 contracts will still be available to insureds. However, the carrier will be entitled to thirty days notice that such a contract has been made, and the right to intervene in the action against its insured before any judgment may be entered. The purpose is to give carriers some access to the courts, and some opportunity to protect their interests in a judgment to which they may be bound. Previously, carriers had not been allowed to intervene in tort cases against their insureds.
We anticipate that, following the enactment of these new laws, there will be significant challenges. For example, there is little guidance in the case law as to the rights of an intervening insurer. Those rights will have to be litigated in the years to come. Whatever the outcome, the result will almost certainly be better for carriers than the status quo – under which, in some situations, carriers have had little or no right to be heard.
A copy of the bill as it will be presented to Governor Greitens may be found at http://www.house.mo.gov/billtracking/bills171/hlrbillspdf/0981S.05T.pdf. Representative Bruce DeGroot of St. Louis County was largely responsible for sponsoring this legislation. The Missouri Organization of Defense Lawyers worked closely with the Missouri Insurance Coalition, the Chamber of Commerce, Associated Industries, and several insurance carriers to support this bill through the legislative process.
Please feel free to contact any of our coverage and bad faith lawyers with any questions or comments.