Missouri Insurance Lawyer Blog
Missouri Insurance Lawyer Blog

Failure To Tell the Truth Can Void Life Insurance Policy

by Christian L Faiella, June 8, 2015

Life insurance is a critical financial tool for many families in the United States. As a recent Missouri case illustrates, the failure of an insured to give true answers on a life insurance application can result in a loss of the insurance policy when it comes time to collect the life insurance. In the case of Adams v. Stonebridge Life Insurance Company, the 8th Circuit Court of Appeals held that where a man who had purchased a life insurance policy gave false and misleading answers on an application in response to questions regarding whether he had any pre-existing mental disorders, the company could rescind the policy. The court noted that the insurance company justifiable relied on the man’s application answers, and therefore, the claim for benefits to the beneficiaries after the applicant’s death was proper.

This underscores two important points. First, that the application is very important in the process of obtaining life insurance and will be relied upon by the insurance company in determining whether or not to insure a person, and the amount of premium that will be paid if the application is accepted. Second, while subject to certain statutory limitations, an insurance company generally has the right to rescind the policy when the application answers were falsely made by the application. Most states, including Missouri, have a non-contestability clause, under which, after a certain period of time has passed, answer will no longer form the basis for recession. However, as no one ever knows when they will die, it is an important practice to only provide correct information when applying for life insurance, so that the benefit will actually be there when it is needed. 

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Do You Really Have "Full Coverage"?

by Rex V Gump, June 5, 2015

During the initial interview of our personal injury clients, after asking all the obvious questions concerning the facts surrounding the injury, we ask the clients about their own automobile coverage. The typical response is “Why do you want to know that, it was the other person’s fault?” Most of the time, the clients state “We have full coverage.” Nevertheless, we ask them to bring in all of their insurance policies. They may have full coverage for their automobile, but not for their own injuries.

Many times potential defendants will give the investigating officer some evidence of insurance and later we learn the insurance coverage has lapsed or was fraudulently given at the time of the accident. Many times the potential defendant has the statutory minimum for insurance; in Missouri the statutory minimum for automobile insurance is $25,000.00 of coverage per person and $50,000.00 of coverage total per accident. This is similar to the majority of states, but many states require less.

If you are in an accident and are taken by ambulance, go through the emergency room and spend only one night in the hospital, the $25,000.00 statutory required minimum is gone. If you have group health insurance or Medicare, eventually they will seek to be reimbursed for what they have paid on your medical bills.

All policies in Missouri require a minimum of coverage, which, as stated above is $25,000.00 per person and $50,000.00 per accident. These amounts are designed to protect you if the motorist who causes your injuries has no insurance. As stated above, however, $25,000.00 is a pitifully small amount if the injuries are serious.

Another form of available coverage, which is comparatively cheap, is underinsured motorist coverage. This coverage affords protection for you if the other driver has the minimum amount of coverage and your injuries exceed the amount.

Policies differ and the state of the law is currently in flux as to whether insurance companies may enforce what are known as “set off” provisions in underinsured motorist coverage. You should carry increased amount of uninsured and underinsured motorist coverage to protect you against injuries caused by motorists who have no insurance or the minimum required by law.

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Tips For Handling Insurance Claims: Storm Damage

by Christian L Faiella, June 4, 2015

Many Missourians experience devastating losses as a result of severe weather across our state each year. When people have insurance claims, we want to help make sure those claims are handled properly by explaining a few things to take into consideration:

1. Many insurance companies use a property damage estimating software program called Xactimate. Prices in the program are updated on a quarterly basis. When a large storm strikes it is not uncommon for labor and materials prices in the area of the storm to increase, sometimes rapidly. As a result the prices in the Xactimate program may be outdated at the time of the storm because of the sudden increase in prices. Check with your insurer who uses this or similar programs to determine if they have updated their prices to reflect the increase in the prices immediately following the storm. If not, ask that they do so; otherwise your repair estimate may not accurately reflect the exact cost of repairs.

2. Standard homeowner policies provide that you are entitled to the full replacement cost for the repairs to your home. However, the insurer is only required to pay you the actual cash value of your repairs to your home. However, the insurer is only required to pay you the actual cash value of your repairs until you replace or repair your property, and then when that is done you can collect difference between the replacement cost and the actual cash value. This difference is called the hold back. The holdback is determined by subtracting depreciation from the replacement cost estimate for your repairs. Therefore, if your repairs are estimated at $10,000 for replacement cost value, and the insurer determines that $1,000 depreciation should be subtracted from the replacement cost repair estimate, the insurer will then pay you initially only $9,000 (less you deductible). The $9,000 payment is called the actual cash value payment. Depreciation is determined by considering several factors, such as the wear and tear, age and obsolescence of the item being repaired or replaced. Insurers use a variety of schedules to determine what should be depreciated and for how much. Ask your insurance adjuster how they arrived at the depreciation rate for each item depreciated and what the depreciation rate is based upon to make sure that the appropriate depreciation rate is being applied. Make sure the adjuster is aware of the age of items to be repaired or replaced so that the proper depreciation rate can be applied. For example, the expected age of interior paint may be ten years. If you painted the inside of your house only two years ago, then the depreciation rate that should be applied to the paint job should only be 20%. If the insurer charges a higher rate you should question their depreciation reduction. Also, several items should not be subject to depreciation, such as pure labor items (i.e., remove and replace light fixture to paint room, etc.) or other items (i.e., profit, overhead, and sales tax, etc.) because these items are not subject to wear, tear and obsolescence. Read the insurer’s estimate carefully to make sure that such items are not being depreciated.

3. For large losses (anything over $10,000) always get your own estimate from a local licensed general contractor who will commit to doing the work for the amount of his estimate. It is preferable that your contractor prepare an estimate on the same kind of estimating program that the insurer uses so that the two estimates can be easily be compared. If there are differences between the insurer’s estimate and your contractor’s estimate have your contractor meet with the insurer’s representative at the house to discuss the differences and have the insurer’s representative explain why there are differences. Regardless, once the insurer determines what the repairs are, the insurer must pay you that amount, even though there may still be a disagreement between you and the insurer over nay additional amounts that can be owed.

4. If there is a disputed between you and the insurer over the amount of the repairs consider taking advantage of the appraisal provision in the policy which is there to resolve disputes over the amount of the loss. In appraisal, you select a qualified appraiser hat you pay, the insurer selects their own appraiser, which they pay, and the two appraisers select an umpire, and you and the insurance company share the cost of the umpire. The appraisal panel then determines the amount of the loss which the insurer must pay. Appraisal has some advantages, in that it can be quicker and less expensive than litigation where there is a dispute over the amount of the loss. Nonetheless, you should be careful in selecting your appraiser, and you should consider getting advice from qualified and experienced attorney on your selection as to how best proceed with the appraisal.

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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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