Missouri Insurance Lawyer Blog
Missouri Insurance Lawyer Blog

Scottsdale vs. United Fire

by Christian L Faiella, February 12, 2015

In a decision handed down in December 2014, the Missouri Supreme Court clarified the topic of bad faith claims in Missouri, bringing this state more in line with the growing majority of the country and creating law that helps those who are insured and insurance companies who act in good faith.   In that case, Scottsdale Insurance Company and Wells Trucking v. Addison Insurance Company and United Fire & Casualty Company, the Court held that the insured does not have to suffer an excess judgment to pursue an action for bad faith and; secondly, because an insurer ultimately settles a case for the policy limits, that does not insulate them from a bad faith claim.

 

When you purchase insurance coverage, part of that policy is the requirement that the insurance company perform its duties in good faith.  When the insurer breaches that duty, it’s called bad faith and is a violation of the law.  One of the duties an insurer owes its insured is the duty to settle or pay the policy limits in good faith, i.e. when the investigation makes it clear that settling would best protect the insured’s interests.  Remember, it’s the insurance company’s job to protect its insured within the scope of the policy.  That’s why you pay the premiums.

 

A claim for bad-faith from refusal to settle arises when:

1.  The insurer keeps the exclusive right to settle or defend,

2.  The insurer does not allow the insured to settle without the insurer’s consent; and,

3.  The insurance company acts in bad faith or commits fraud in refusing to settle a claim within the policy limits.

 

In this case, Wells Trucking was sued for an injury caused by an employee’s negligence.  United Fire is the primary insurer with a $1 million policy limit.  Scottsdale is the secondary insurer with a $2 million limit.  United Fire entered into negotiations with the original claimant during which they had many opportunities to settle for the policy limits.  They finally settled only after the plaintiffs filed a lawsuit and would no longer accept only $1 million.  Plaintiff increased the demand to $3 million, requiring Scottsdale, the secondary insurer, to pay the $2 million.  The Core of Well’s Trucking and Scottsdale’s claims was United Fire wrongfully refused to settle the lawsuit for the policy limits despite the fact that they had many opportunities to do so. 

 

United Fire clamed in its defense that since they ultimately settled the case for the policy limits they did not commit bad faith.  The court determined that United Fire ultimately settling the case and paying the policy limits did not reset the clock.  They had already acted in bad faith by not settling when they could.  By dragging their feet they exposed their insured; and, by virtue of the secondary insurance policy, they exposed Scottsdale to damages.

 

The Court’s clarification of the issue of bad faith in lawsuits involving secondary insurers is good for the insured and the insurance companies holding secondary polices.  A primary insurer cannot gamble with secondary insurers’ money.  Insurers will know they cannot refuse settlement in a case like this one, where they know the case is worth well in excess of the policy limits, exposing their policyholders to unnecessary damages.

 

If you believe you have been a victim of bad faith, contact our firm  and speak to an attorney about your rights.

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Advantage vs. Mid-Continent

by Christian L Faiella, February 8, 2015

An insurance company can be held liable for bad faith even when there is no coverage under the policy.  In September 2014, the Missouri Court of Appeals, Western District upheld a trial court decision stating “[The insurance company] had an unequivocal duty to defend based on its own analysis of the policy…and, having undertaken that duty, was required to do so in good faith.  Moreover, having failed to provide an effective reservation of rights, Mid-Continent was liable on the policy to its policy limits despite the policy language.” Advantage Buildings & Exteriors, Inc. v. Mid-Continent Casualty Company. 

 

Advantage was sued in July 2008 for damages resulting from its construction defects.  Advantage submitted the claim to its insurer, Mid-Continent.  Mid-Continent notified Advantage early on that it would investigate and perform coverage analysis but asserted a “reservation of right”.   They also told Advantage they would promptly notify them “of the outcome of our coverage analysis.”  In another letter Mid-Continental reiterated its promise to “promptly inform.”  That was in September of 2008. 

 

Mid-Continental hired any attorney, investigated and analyzed the case.  Their attorney advised them to settle for the limits because he believed the insured, Advantage, was exposed to damages in the millions.  Mid-Continental determined its coverage was limited to $53,000, well below the policy limits.  They did not inform Advantage of that conclusion nor did they make any settlement offers to protect their insured from damages above what would be covered by the policy.  Mid-Continental did not communicate with Advantage for more than a year.  Advantage hired its own attorney and demanded they settle for the policy limits.  Mid-Continental did not respond.  This refusal to settle continued until July, 2010 when Mid-Continental notified Advantage by letter that the policy did not cover most of the claims against them. 

 

In 2012, the trail court held that Advantage’s policy did not provide coverage for the claims against them, but a jury found the Mid-Continental committed bad faith in its failure to settle and held the insurance company liable for the damages against Advantage.  Because bad faith is an issue of fact, it had to go to a jury to decide. 

 

A “reservation of right” allows an insurance company to, at any time during the proceedings, contest that the injury is not covered by the policy while continuing to defend the insured.  In order for an insurer to maintain a proper reservation of rights:

1.  It must be clear and timely, and

2.  The insured must understand fully the insurer’s position.

 

Mid-Continental did not promptly advise Advantage of its position once it had concluded the coverage analysis.  Mid-Continental’s internal analysis concluded the only potential coverage for which they would be liable under the policy was $53,000.  Mid-Continental also knew, because their lawyer had advised them, that the risk to the insured was a large judgment if the plaintiffs prevailed.  They made this conclusion 2 years before notifying Advantage.  Mid-Continental knew its own position, but they did not communicate it to Advantage until four days before trial.  Therefore, because Mid-Continental did not properly reserve their rights, they owed a duty to Advantage to act in good faith. 

 

Citing another Western District case, the Court listed examples of bad faith: “failing to fully investigate a [claim], ignoring that a verdict could exceed policy limits, refusing to consider a settlement offer, and not keeping an insured informed of settlement offers or the risks of an excess judgment.”  The court further stated of Mid-Continental, “All of those factors are present here.”

 

In this case, the insurer was liable for its bad faith against the insurer even though there was no coverage under the policy.  If you believe you have been the victim of bad faith by your insurance carrier, please contact the firm for a consultation.

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Chris Faiella Teaching CLE on Bad Faith for West ED

by Amanda L Drew, January 21, 2015

TGFW Managing Member, Chris Faiella, will present a CLE webcast for West ED tomorrow morning on Prosecuting and Defending the Bath Faith Case A to Z.  Chris is an expert in the field of insurance bad faith and takes particular interest in these types of cases.

If you're interested in participating in the CLE, visit www.westlegaledcenter.com to register.  If you know of someone who may have a bad faith insurance claim, don't hesitate to contact our firm for an initial consultation.  We have the experience and resources to successfully pursue these claims.

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SENDING YOUR KIDS OFF TO COLLEGE THIS FALL? FOUR THINGS YOU AND YOUR KIDS SHOULD KNOW WHEN THEY TAKE THE CAR TO COLLEGE

by Tatlow, Gump, Faiella & Wheelan, LLC, August 29, 2014

  1. CAR INSURANCE: Read your automobile insurance policy and check with your insurance agent about appropriate coverage for your college student. Keep proof of insurance coverage in the vehicle. Make sure you and your new college student understand the types of coverage that you have BEFORE you need it. Is your student covered on your policies? The answer may depend on whether the car is titled to the parents or the student or other variables.   Talk to your insurance agent. I recommend that you make sure you have adequate liability coverage, uninsured motorist coverage and underinsured motorist coverage. Also, medical payments coverage can help with medical bills for anyone injured in your child’s vehicle and it is relatively inexpensive to purchase.  Remember, if she is involved in an accident, medical bills and other damages can accumulate quickly. Lastly, ask your insurance agent about discounts. Many companies offer good student discounts or other discounts for college students.
  2. KNOW WHAT TO DO IN THE EVENT OF AN ACCIDENT: If there is an automobile accident, first check to see if anyone is injured. If so, call 911 immediately to get emergency help. If possible, exchange information with the other party, including name, phone number and insurance information. Smartphones make it easy to take pictures and notes at the accident scene. This is important because details are often forgotten even a few days later. However, to protect against identity theft, do not allow anyone to take a copy of your driver’s license.   Even if no one is injured, make sure the police are called to get an accident report. This is especially important if the other driver is at fault. The officer may take witness statements as well as document important facts regarding the accident scene and damage to the automobiles. As soon as practicable following the accident, contact your insurance company and report the accident.
  3. KNOW WHAT TO DO IF A FRIEND WRECKS YOUR CAR: Car insurance generally follows the car and not the driver for most coverages. What this means is that if you lend your car to a friend and your friend wrecks it, it is YOUR insurance that will pay for any liability claims. You must have collision coverage on the car in order for it to pay for any property damage to the car. If your friend causes damages to another person or their property that exceeds the amount of liability insurance coverage on your car, you or your parents may be held liable for expenses that exceed your insurance coverage limits.   Also, there is an added risk of you or your parents being held responsible if your friend has a history of driving violations or risky behavior. Some insurance companies only provide “step-down” coverage for drivers that are not named insureds on the policy. This means that a friend operating your vehicle may not have as much insurance coverage as you would if you wrecked the same car.   Again, it is wise to check with your insurance agent BEFORE an accident occurs.
  4. CAR MAINTENANCE: Keep the car in good repair. Before your student heads out, make sure the vehicle is up to date on oil changes and other required maintenance so as to avoid breaking down on the road or in a new city.   Make sure the tires are adequate for the weather and type of driving they will be doing. Having a back up plan such as Onstar or AAA, which includes roadside assistance, also helps. As a parent, it provides some often needed peace of mind.   Although you may have been in charge of regular maintenance while both the child and car were at home, your young adult may now be in the best position to know if there is a possible problem with the car. Be sure to discuss as a family, how to handle those maintenance issues.

The attorneys at Tatlow, Gump, Faiella and Wheelan, LLC, have years of experience regarding automobile accidents, serious injury, wrongful deaths, and disputes involving insurance coverages. Please call us for a free consultation if you or someone you love needs legal advice regarding these matters.

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2010 Judging the Judges

by Amanda L Drew, June 20, 2014

Amanda Drew

This November there will be many non-partisan judges asking for Missourians to vote to keep them on the bench. How do you decide who will get your vote?

One resource you may want to consider is Judging the Judges 2010, a website provided by the Missouri Bar's Judicial Performance Evaluation Committee. They gathered data and opinions from all judges seeking retention and conducted an extensive evaluation of each. By familiarizing yourself with the judges you will be asked to vote on, you will be making a well informed decision.

Non-partisan judges make up a very important part of our legal system here in Missouri, and we are a model for other states. Having non-partisan judges helps keep politics out of our courtrooms. For more information on Missouri's non-partisan court plan, visit the Show Me Courts website.

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Topics: voting

Be Prepared for Severe Weather

by Sidney E. Wheelan, June 2, 2014

The Severe Weather resources page is just one of the many helpful resources for people available on the Missouri Department of Insurance website. There are instructions on how to make sure you have appropriate insurance coverage, how to file storm damage claims, resources for flood victims, information on crop insurance and many other things.

If your property has sustained damaged in a storm and your insurance is denying coverage, contact Tatlow, Gump, Faiella & Wheelan, LLC to see if we can help you.

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