USA – MISSOURI Trends and Developments Contributed by: Aaron French, Katrina Smeltzer and Philip Graham, Sandberg, Phoenix & von Gontard, P.C.
The Missouri Supreme Court set forth a clear path for insurers to follow: when coverage is genuinely in doubt, file a declaratory judgment action, and then move to intervene in the underlying tort case, seeking a stay until coverage is determined in the declaratory judgment action. If intervention is denied, consider an appeal – do not sleep on the right to protect your position. However, while McCrackin made clear an insurer has an absolute right to intervene in Missouri state court, it did not decide whether a stay was appropriate and remanded the matter for further consideration by the trial court. Therefore, when good faith coverage issues arise it is best practice to move to intervene and seek a stay as soon as possible because whether a stay is granted is still within the discretion of the trial court and the age of the case, trial setting and prior exten- sive discovery may be among the factors a trial court will consider in deciding whether to stay the case. Escabusa: no bad faith without a clear, definite opportunity to settle The settlement dance – and the problem The insured caused a 2012 crash. Safe Auto offered its USD25,000 limit early and repeated that offer over the next year. Plaintiff’s counsel changed multiple times, and plaintiff’s third set of counsel sent an email on 2 October that referenced “total insurance coverages under all applicable policies” and a Section 537.065 agreement – but never attached any proposed agree- ment or specified terms. Defence counsel repeatedly asked for the proposed 537.065 agreement (a cov- enant not to execute on the insured’s assets) and stood ready to tailor the release. Plaintiff’s counsel never sent a usable draft. Years later, after a USD1.25 million judgment, the insured cross-claimed for bad faith failure to settle. The holding and why it is important The Court of Appeals affirmed summary judgment for Safe Auto. Bad faith failure to settle requires, among other things, a reasonable opportunity to settle within limits. There was no such opportunity here because the settlement “offer” was not sufficiently definite – it depended on other carriers and unspecified terms, and never included the 537.065 agreement plaintiff’s counsel kept referencing. Without a clear, definite
offer, there is nothing to accept and no refusal to set- tle in bad faith. The record also showed Safe Auto acted in good faith: it responded promptly, left limits open and repeatedly invited the 537.065 agreement that never arrived. Five practical takeaways Use the intervention-and-stay mechanism proactively When coverage is genuinely disputed, file the declara- tory judgment action promptly and move to intervene in the tort case solely to request a stay. If the court says no, preserve and consider seeking appellate review. This protects the right to defend without forc- ing premature merits decisions on coverage. Keep a meticulous settlement record Escabusa turned primarily on the paper trail. Track offers, responses, document requests, missed dead- lines and every ask for proposed language. A clean record can be dispositive to show the insurer acted in good faith, especially in the absence of a definite demand. Demand clarity before calling it an “offer” Under Missouri law, an offer must be definite enough that each party’s promises and performance are clear. “We’ll settle for total coverages under all applicable policies with a 537.065” does not cut it, especially without a draft agreement attached. Insist on specifics – amount, parties, documents and terms. However, use caution in seeking clarification to try to avoid an argument the insurer is making a counter-offer – there- by rejecting an opportunity to settle. Do not conflate the duties to defend and indemnify The duty to defend is broader and arises from poten- tial coverage apparent at the outset. That duty – and the related right to control the defence – drives wheth- er the insurer may later be bound by an adverse judg- ment. Treat defence decisions with the gravity they deserve; if you challenge coverage, protect the right to defend via the McCrackin path. Handle Section 537.065 agreements with precision If opposing counsel references a 537.065 agreement, without providing the draft, ask for it and make a writ- ten record of those requests. Confirm parties, scope
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