Missouri Insurance Lawyer Blog

Insurance policies are complicated legal contracts between you, the policy holder, and the insurance company. Very often, when a policy holder makes a claim for damages they believe should be covered by their insurance policy, the insurance company will deny the claim citing a reason unknown or often misunderstood by the policy holder.
On December 27, 2011, the Missouri Court of Appeals, Eastern Division, decided an insurance case based on the disputed definition of "owned" and "resident". The case, Manner v. Schiermeier, et. al, and American Family Mutual Insurance Company and American Standard Insurance Company, Case No. ED96143, was a claim against the insurance companies for underinsured motorists coverage on four separate automobile insurance policies because of serious injuries suffered in a motorcycle collision.

The coverage on at least one of the insurance policies depended upon whether the injured Plaintiff "owned" the motorcycle which he was driving as that word was used in the policy. For purposes of the insurance policy, the Court of Appeals determined that even though the certificate of title was not yet in the Plaintiff's name, the undisputed facts demonstrated that the plaintiff held the motorcycle as his own possession, had paid for it, either in whole or in part; drove it; and was in the process of having title transferred to him; and had separately paid for liability and underinsured motorist insurance. Therefore the Court determined that the Plaintiff did indeed "own" the motorcycle for purposes of insurance coverage.

Continue reading "WHETHER OR NOT YOU RECOVER BENEFITS FROM YOUR AUTOMOBILE INSURANCE POLICY MAY DEPEND UPON THE DEFINITION OF A SINGLE WORD IN THAT POLICY" »

In the case of Long v. Shelter Insurance Company, the Missouri Western District Court of Appeals, held that Shelter Insurance's anti-stacking language in the underinsured motorist coverage was ambiguous because of the "other insurance" clause. The court concluded that Shelter's "excess" language in the "other insurance" clause as well as it's "other insurance in the company" provision created ambiguity when read with the policy's anti-stacking language. The court further went on to strike down the policy set off provision, holding that the interplay of the policy's declaration page, limits of liability, and its promise to pay uncompensated damages created ambiguity when viewed against the policy's set-off language.

Interestingly, on the same day the court also issued the opinion of Stewart v. Liberty Mutual Insurance Company holding in that case that the insured could not stack and that the UIM anti-stacking language was not ambiguous. In its decision, the court distinguished between the "excess" "other insurance" language in the Liberty Mutual policy from the "other insurance" provisions considered by the Missouri Supreme Court in Ritchie v. Allied Property and Casualty Insurance Company, 307 S.W.3d 132 (Mo. banc 2009). In its decision, the Western District relied on a decision which had already been partially repudiated by the Missouri Supreme Court. That decision, Farm Bureau Town & Country Insurance Company of Missouri v. Barker, 150 S.W.3d 103 (Mo. App. W.D. 2004), was noted by the Supreme Court to have not been cited in any other underinsured motorist decision since it was handed down, and to the extent it was inconsistent with Seeck v. Geico General Insurance Company, 212 S.W.3d 129 (Mo. banc 2000), Barker should no longer be followed. In a detailed decision, the Stewart court, relying on Barker, distinguished the excess provision from other provisions addressed in Ritchie and Seeck. The Missouri Supreme Court did not accept transfer of the case. However, given Ritchie's criticism of Barker, and the Western District's reliance on Barker, this issue almost certainly will be revisited in other cases. The Seeck case, which the Supreme Court cited with approval, relied on a long line of cases including Zemelman v. Equity Mutual Insurance Company, 935 S.W.2d 673 (Mo. App. W.D. 1996); Goza v. Hartford Underwriters Insurance Company, 972 S.W.2d 371 (Mo. App. E.D. 1998); Niswonger v. Farm Bureau Town & Country Insurance Company of Missouri, 992 S.W.2d 308 (Mo. App. E.D. 1999); American Family Mutual Insurance Company v. Ragsdale, 213 S.W.2d 51 (Mo. App. W.D. 2006) and Chamness v. American Family Mutual Insurance Company, 226 S.W.3d 1999 (Mo. App. E.D. 2007), which included similar language to the policy contained in Stewart, but reached opposite conclusions of Barker. Undoubtedly, insurers seeking to avoid underinsured motorist liability will avoid the language held to be ambiguous in Long v. Shelter Insurance Company, and move towards the language held not to be ambiguous in Stewart v. Liberty Mutual Fire Insurance Company in the future. Nonetheless, given the inconsistencies between the Stewart court's reliance on the Barker decision and its stark contrast with Seeck and its cases, the underinsured motorist stacking issue will continue to spawn numerous cases, and seemingly conflicting decisions.

Many Missourians have experienced devastating losses as a result of the storms that have ravaged the southern portion of the state in recent weeks. Thousands of people will be filing insurance claims and we want to help make sure those claims are handled properly by explaining a few situations that could happen with your insurance claims. Here are just 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 until you replace or repair your property, and then when that is done you can collect the difference between the replacement cost and the actual cash value. This difference is called the hold back. The hold back 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 your 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 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 any additional amounts that can be owed.

4. If there is a dispute 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 that 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 well as to how best proceed with the appraisal.

All 50 states have been affected by a Tennessee based entity called the American Trade Association (ATA) plus other affiliated firms, which was selling fake health insurance. The program was supposed to work by the ATA taking out money directly from consumer's accounts. Consumer's thought they were saving hundreds of dollars each month on premiums until an issue with their health came up and they found out they were not insured.

Some consumer's have shared their stories through Smart Data Solutions where one person stated, "I tried to get prescriptions through my card and it is not covered. They say they are getting a new plan, but did not inform anyone. Their phone goes unanswered, or it is busy. Their website; http://www.myatabenefits.com doesn't work either. This is either an incredibly poor run organization, or a scam."

After investigations were held consumers found out that their money had actually been used to pay for personal items such as cars, real estate, and loan payments. Some claims were paid, but only the small ones to maintain the appearance of legitimacy.

The state of Maine actually ordered the American Trade Association to pay a $1.2 million penalty because of the unlicensed products sold to consumers, the unlicensed agents, and for not adequately paying for consumer's medical bills.

Kathleen Sebelius, secretary of the U.S. Department of Health and Human Services describes how this is just the beginning. There will be more scammers out there because they know people are seeking cheaper insurance coverage.

Consumers who want to research a company can check with their State Department of Insurance. If you are scammed by insurance company or a company that promises to provide insurance and does not, you have legal rights. In Missouri an insurance company that does not honor its promise can be sued for breach of contract and in some circumstances for bad faith. If a company poses as an insurance company but is a fake, you can sue for damages for breach of contract, misrepresentation and fraud. If you have been scammed you should also report the company responsible to law enforcement.

Continue reading "Health Insurance Scam Affects 26,000 People Across the U.S." »

It is a common scenario that insurance companies who have sold you a disability policy attempt to terminate benefits claiming the disability is no longer present, or severe enough to prevent employment. This most commonly occurs between two to four years after receiving the benefits depending on the type of language in your contract. Most disability insurance policies include a time period ranging from two to four years after which the definition of total disability changes. The definition typically narrows which is generally bad for the policy holder. This change may take the form of either increasing the number of occupations which should be considered before determining if you are disabled, or narrowing the requirements to meet ongoing disability.

Furthermore, disability policies include the right of the insurance company to obtain your medical records, and to periodically have you examined for the purposes of determining if you are still disabled.

Continue reading "Disability Insurance Denials When Your Company Says You're No Longer Disabled" »

People purchase disability insurance to provide financial assistance in the event they become disabled and unable to work for a living. These policies are sometime purchased by an individual but most often they are provided as a benefit by an employer as part of a group plan. These policies are also commonly sold to professionals such as doctors and lawyers. Unfortunately, many legitimate disability claims are unfairly denied by the disability insurance companies, leaving policyholders without the benefits of a policy they have paid for.

If you have suffered a disability because of car crash or other tragedy or illness you may be entitled to benefits under your group or individual disability policy. If you insurance company denies your claim the law firm of Tatlow, Gump, Faiella & Wheelan may be able to help. To learn more visit our web site or give us a call at 1-800-264-3455.

Insurance companies have an obligation to defend and indemnify an insured under a typical liability policy. When a company is notified of the claim or suit the company should start performance of the contractual obligation which would include speaking with the insured, investigating, gathering facts, protecting evidence, hiring counsel for the insured, and responding to the claim. Sometimes under the policy language the insurance may have an exclusion under which the company does not have an obligation to defend and indemnify the insured. This is a problem for the insured, but insurance companies don't have to keep promises they don't make. Unfortunately companies don't always take a fair view of the facts or policy language and will not defend and indemnify the insured even when they should.

Many companies simply use a reservation of rights as standard operating procedure. This practice has become common and insurers often respond by sending letters reserving the right to deny coverage for as many reasons as possible and for any reason they can think of or discover in the future. Under an ROR the insurance company is saying, we will defend for now but we can still sue you in another lawsuit to get a court to decide that we don't have to defend or indemnify you. Many insurance companies also fail to honor their obligation to fairly consider settlement when an ROR has been issued. Unfortunately for the insured this means massive uncertainty, possible loss of the opportunity to settle, financial risk and additional litigation. If the insured loses both the liability and coverage lawsuit they will be liable for the judgment from the first law suit and will also have to pay the insurance company for the legal fees and expenses of the insurance company. This can lead to ruinous financial consequences and bankruptcy for most people.

The sharp practice of issuing ROR's is happening even when an insurance company receives coverage opinions favorable to the insured. To gain leverage insurance companies try to squeeze the insured by including language that expands the ROR not only to the reasons stated in the letter, but reserves the right to expand the reason for denial for any reason. The insured is also reminded that they have a duty to cooperate and if they fail to cooperate they will lose their coverage. This means the insured doesn't know what is coming next.

Insurance companies will often also use favorable dates ins such letters so that the conditional obligation that they assume under the ROR is not the date they first became aware of the claim, but a date that positions the company best for future litigation. This is particularly true if the insurance company has failed in its duty to settle before the insured made a formal demand for defense and indemnity. In Missouri many of the bad things that can happen when an ROR is issued can be avoided by rejecting the reservations. Missouri law prevents insurance companies from using threats and leverage to bully insured's to accept a reservation of rights. Under Missouri law and insured is entitled to treat an ROR as a breach because an ROR is anticipatory repudiation of the contract. Although the insurance company still has the upper hand because of its financial strength and expertise, this gives the insured the option of walking away and controlling the litigation without the insurance company's involvement. This also gives the insured a chance to resolve the claim by negotiating with the company on more equal footing, or the insured can defend or settle the underlying lawsuit on its own and then suing the company for breach of the contract. The insured can also settle the claim so that the plaintiff has the obligation to pursue the insurance company, so that the insured can settle can get out without any further risk.

The decision to accept or reject an ROR depends on many factors, and may or may not be a good decision depending on the situation. These decisions can be particularly complex for businesses as the ROR may have implications that are not immediately apparent and must be thought through with extreme care. Anyone who has received an ROR from their insurance company should consult with a private attorney knowledgeable in this area of the law.

The law firm of Tatlow, Gump, Faiella & Wheelan, LLC may be able to help if you are having a problem with your insurance company. To learn more about our law practice visit our website.

In this post I continue on with tips on home owners insurance. Make sure that your home owner's policy is a "replacement costs" policy.
Most policies sold cover replacement costs for structural damage, but it is wise to make sure that your policy is a replacement cost policy. A replacement cost policy pays for the repairs or replacement of damaged property with materials of similar kind and quality. The insurance company will not deduct or depreciate when rebuilding your home. Depreciation is the decrease in value due to the passage of time, wear and tear and other factors. If you have an older home, you may not be able to buy a replacement cost policy. Instead, you may have a modified replacement cost policy. This means that instead of repairing or replacing future typical older homes, such as lathe and plaster walls, solid wood doors, the policy will pay for repairs using the standard building materials and construction techniques in use today. If you have an older home and you want your home to be built back as it was, you should check carefully to insure that this is the way the policy reads. Most likely, you will need to purchase an additional rider or have additional language to your policy to insure a home built with older construction techniques.
Consider buying a guaranteed replacement cost policy. Guaranteed replacement cost policies will pay for whatever it costs to rebuild your home as it was before it was destroyed, even if it exceeds the policy limits. This gives the insured the protection against sudden increases in cost due to shortage of building materials, or booming real estate markets.
Insure that your home is not in a flood zone. Standard home owners insurance does not include flood insurance. Many people who were not within the typical 100 year flood plain but above have recently suffered damage to their homes because of flood waters far beyond those normally expected. You should contact the Federal Insurance Administration at 800-638-6620 to inquire about the National Flood Insurance Program offered through the government.
Make sure that you keep lists of all your personal possessions. Making lists of your personal possessions of everything you own in your home will assist you in making a claim should your home and possessions be destroyed. It is time consuming to make a paper list of everything, and some people choose to use cameras or video recorders to record the items in their home. The manner in which you record all your possessions is up to you, however, a written list along with photographs of more expensive items would be the best practice. Also, be aware that many items such as computers and jewelry have limits on the homeowner's policy. So for instance if you have a lot of expensive computer equipment, you should insure that your policy actually covers them. You may need to buy a personal articles endorsement to cover items above and beyond the limited amount of protection offered in your homeowner's policy. Very few policies have unlimited personal possession limits when it comes to expensive items such as electronics, jewelry and clothing.
There are two basic ways to insure your personal possessions. Replacement cost or actual cost value. A replacement cost policy pays the dollar amount needed to replace a damaged item with one of similar kind and quality without deductions or depreciation. An actual cash value policy pays the amount needed to replace the item minus depreciation. Suppose for example a tree fell through the roof and destroyed your refrigerator. At the time the refrigerator was destroyed it was five years old, but was in good condition. If you had a replacement cost policy for the contents of your home, the insurance company would pay to replace the old machine with a new one of similar type and quality. If you had an actual cash value policy, the company would only pay a percentage of the cost of a new refrigerator because a refrigerator that has been used would be worth less than its original cost. This means that you would either have to pay for the difference between the amount of the actual cash value and what it would cost to buy a new refrigerator or you would have to buy a used appliance.
Consider all of these factors in assessing in your present homeowners insurance or when buying a new homeowner's policy to insure that you are adequately protected.

Roy Rogers once said an insurance policy is one page that tells you what insurance you have and 50 pages that tell you why it does not apply in your particular situation. The 50 pages that take coverage away are called exclusions.
Exclusions are the insurance companies way of narrowing the risk they have accepted under the contract. For example if you have a policy of insurance on your car, but the situation that arises falls within an exclusion you bear the risk of loss and not the insurance company. In a recent post entitled Don't Believe The Hype You Are Not Friends, I made the point that all you get from insurance is the written contract. The nice sales pitch and fuzzy promises on TV give way to the hard realities of what's written in the insurance contract when its time for a claim.
If the insurance company denies your claim, it is usually because of exclusion. By way of example consider a common exclusion in a personal auto insurance policy, the business exclusion, which takes coverage away if your vehicle is used in a business instead of personal use. Even if you have your car insured for liability and you are in a crash and hurt someone you won't have any coverage if you were using a personal auto on business. Fortunately exclusions in the policy must be phrased in clear, plain and unambiguous language. If the insurance company claims that exclusion applies it is their burden to prove that it applies. So to protect yourself read your policy carefully to see what is covered before you need to make a claim.

The insurance company will have a contractual right to control the defense, but no right to prevent the insured from retaining their own counsel. Therefore, it is the wise policy holder who receives a reservation of rights letter, that immediately hires personal counsel to handle not only the issues emanating from the reservation of rights letter, but to keep tabs on and participate in the defense being put on by the insurance company.

The reservation of rights letter also implicates the relationship between the insurer and its' policyholder with respect to the cooperation clause. Insurance companies expect that their insured will abide by the cooperation clause in the policy which mandates that policyholders provide information and comply with reasonable requests of the insurance company in order to evaluate the claim and provide a defense. Once a policyholder receives a reservation of rights letter, the policy holder may not be sure how to proceed or what is required under the cooperation clause. Fortunately, well established contract principles instruct that the policyholder's obligations under the cooperation clause are conditioned upon the insurance company's performance of its own contractual obligations. Therefore, where an insurance company interest diverge from the interest of a policyholder, the policy holder's duty to cooperate logically only runs to the defense of the claim which could terminate liability for both the insured and the insurance company. Such duty to cooperate should not run to the insurance company and the issues raised concerning insurance coverage.

The conflict can be heightened further if the insurance company completes its investigation and decides to rely on its reservation of rights and file litigation against its insured to declare that there is no insurance coverage. Fortunately, Missouri policy holders have the right to reject the insurance company's reservation of rights. This is a valuable right, because it forces the insurance company to choose whether they wish to fight the battle with their own insured, or if they will honor their contract, defend the case and fight liability and damages against the person suing their insured. This right serves policy holders by preventing insurance companies from putting off performance they have contractually obligated to perform, and subjecting the insured to a conflict of interest in which the insured is obligated to cooperate with someone who is looking to dump them and avoid their contractual responsibilities.

It is clearly important that an insurance policy holder understand the full ramifications of denying reservation of rights. If a policy holder denies a reservation of rights, the policy holder has the obligation to simply reject and proceed on their own or they could offer the insurance company the opportunity to continue its performance if the insurance company will withdraw the conditions leading to the reservation. Although individual policy holder situations vary, the choice to reject the reservation of rights is often the soundest choice for policy holders faced with a reservation. This is particularly true if the policy holder or their counsel has acted to appropriately limit claims brought by the plaintiff through the use of an alternative settlement arrangement. If, of course, settlement is not a viable alternative with the plaintiff, then the rejection of the reservation of rights would leave the policy holder with the obligation to defend itself as best it could and then sue for recovery of its costs and any indemnify from its insurer. However, because of the perceived conflict of interest that a policy holder may feel, an adequately financed policy holder may still choose this opinion as the best choice rather than by defended by an insurance company who is ultimately seeking to break its obligations.

Where settlement with the plaintiff is possible, such may be achieved by using a covenant not to sue or by complying with the provisions of Missouri Revised Statute Section 537.065 which allow the contracting parties to limit the collection of their suit to specified assets. Depending upon the nature of the allegations in the petition, the strength of the liability, and the extent and nature of damages suffered by the suing party, such restriction assets may include the policy or the policy in other specified assets. Other specified assets should be included if there is a potential for a bad faith claim for failure to settle a bad faith claim against the insurance company arising out of their handling of the claim or litigation. Nonetheless, a straight rejection or a rejection with an offer to allow continuing performance to an insurance company may provide just the remedy a policy holder needs to a reservation of rights letter.

Where the best interests of a policy holder are served by outright rejection of the reservations they should do so unequivocally and then proceed to defend the suit themselves or enter an appropriate settlement arrangement with the plaintiff to fully protect their own interests.

Where the policyholder is willing to accept the performance of the insurer if the insurer withdraws the reservation of rights, then the policyholder should make the insurer aware of this fact and give the insurance company a deadline within which to meet the demand. Failure of the insurer to meet the demand will result in a rejection of the reservation. It is also advisable that a policyholder who indicates a future willingness to accept performance should inform the company that if such performance is not undertaken by the insurance company within the time period, that a settlement or other arrangement with the claimant will be forthcoming and it's likely that the insurance company will be sued for breach of coverage, garnishment or bad faith as may be applicable to the particular fact situation involved. Such direct threats often motivate an insurance company to rethink their position, particularly if the liability is defendable, or their coverage position is weak.

Despite the distress associated with receiving a reservation of rights letter, policy holders can come out ahead when they receive reservation of rights letters. The key is taking control of the situation by hiring independent counsel, in appropriate situations rejecting the reservation of rights, taking control of the defense, preventing and where appropriate entering settlement agreements that protect the policy holders interests and shifting the conflict from a policy holder facing lawsuits from both the injured party, and its insurance company to absolving itself of both lawsuits and allowing the injured party and the insurance company to become the combatants. This process allows the policy holder who purchased the insurance coverage to obtain their ultimate desired goal when they purchased the insurance, to protect their assets and transfer risks, while at the same time allowing both the aggrieved party and the insurer to fight the battle of coverage at a later date.

Chris Faiella is a personal injury in Missouri with the law firm of Tatlow, Gump & Faiella, www.tgflaw.com

An insurance policy is a contract and therefore subject to general principals of contract law. Missouri law allows a contract to be reformed when by reason of fraud or mutual mistake the written contract does not express the actual agreement of the parties to the contract. Mills v. Camerson Mut. Ins. Co., 764 S.W. 2d 244, 249 (Mo. App. 1984). In cases of mistake the mistake must be mutual, but that does not mean the parties have to agree that the mistake was a mistake of both parties as long as the evidence shows that both parties were in fact operating under a misapprehension of fact or law, or bot. See State Farm Mut. Ins. Co. v. McGuire, 905 S.W. 2d 150 (Mo. App. W.D. 1995).
In essence what this legal doctrine allows is a showing that there was an joint objective or purpose arrived upon by agreement between the parties, but that the expression of that agreement in the written contract is flawed. The proof required for reformation is clear, cogent and convincing evidence. However, where the litigants present conflicting evidence about the actual agreement, a Missouri court is free to sort out the conflicts which only need be supported by competent and substantial evidence. CMI Food Services v. Hatridge Leasing, 890 S.W. 2d 420 (Mo. App. W.D. 1995).

There are a variety of ways that this theory can help policyholders who have been left out in the cold without coverage. The theory can help not only where the policyholder and company make a mutual mistake but also where a mistake occurs between an agent and an insurance company, because legally the policyholders mistake is being a party to the erroneous policy. If you are in a situation where you thought you had insurance coverage and your insurance policy does not reflect your understanding of the agreement at the time the agreement was made, don't give up. The insurance company is not the final word on justice.

When your premium is due insurance companies expect you to timely pay your premium.  If you don't they will stop providing coverage.  What happens then when they owe you money for a claim?  A common experience among claimants is that insurance company's drag their feet when it comes to claim payments.  If this has happened to you there are some useful things you should know about.
In Missouri, if you are making a claim on your own policy, the insurance company has to comply with regulations that require a timely response, a decision on your claim and an explanation of your claim. If the insurance company says it needs more time to gather facts they must regularly update you with the status of their investigation. To learn more go the Missouri Department of Insurance web site.

This is a two part blog covering some things Missouri policyholders involved in a personal injury claim and who receive reservation of rights letters from their liability insurance company should understand. There is some good news, a reservation of rights letter means the insurance company is offering to pay your defense costs, but the bad news is that the insurance company is reserving its rights to deny coverage and sue you the policyholder or insured to obtain back the defense costs expended. Insurance companies often send reservation of rights letters to their policyholders because their broad duty to defend is implicated by the filing of a petition against their insured. Because the duty to defend is broader than the duty to indemnify there is a possibility the insurance company may be contractually obligated to pay for the defense even if it is not eventually required to pay for any liability alleged. In addition by asserting a reservation of rights letter, a company can undertake a defense and investigation of the claim and coverage at the same time and preserve its rights to disaffirm coverage without precluding itself from asserting defenses to the coverage at a later date, and managing their exposure to bad faith claims. Generally speaking to avoid waiving defenses, the letter will identify every possible coverage defense. Depending upon the individual facts, the doctrine of estoppel and/or waiver may prevent an insurance company from later asserting a defense that it failed to include in its reservation of rights letter. Unfortunately, reservation of rights letters are favorable for insurance companies, are fraught with danger for the policyholder. The mere issuance of reservation of rights letter indicates that there is a conflict of interest between the policyholder and the insurance company. This conflict of interest alone would advise that a policyholder should hire an independent attorney to represent them and not rely on the attorney appointed by the insurance company to provide a defense. Attorneys hired by insurance companies are often financially dependent upon the insurance company and that they receive much of their work from the company. While appointed defense counsel may diligently represent your interest in the alleged lawsuit, it is difficult to believe that that counsel can ignore their own financial interest, and give independent advice on your dispute with the insurance company. Most defense insurance counsel will defend the allegations in the lawsuit, but advise that you should hire personal counsel on the coverage issues. Unfortunately, there is often interplay between the allegations of liability and the triggers for coverage which are in dispute between the policyholder and the insurance company which lead to conflict of interest issues with insurance defense counsel. Bottom line, you should hire an independant lawyer to protect yourself. In part II, we will discuss the right of control, the duty to cooperate and the right to reject the reservation of rights. Chris Faiella is a personal injury lawyer in Missouri with the law firm of Tatlow, Gump & Faiella.

American Family Mutual Insurance Company has lost its appeal to the 8th Circuit in a bad faith and breach of contract case after accusing its insured of burning down his own home.  Arson is a felony and the accusations resulted in not only economic loss but serious emotional and physical distress of the insured.  The Court of Appeals upheld the district court verdict which resulted in a compensatory damage award of $49,564.96 and $1,150,000.00 in punitive damages. 

The court upheld a jury instruction that allowed the jury to consider violations of Prohibited Practices in Insurance Business Act as evidence of bad faith.  The court also upheld the punitive damages award based upon American Family's "tortious conduct" of labeling their insured an arsonist based on insufficient grounds. The court found that that conduct "evinced an indifference to or disregard of" the insured's financial, emotional and physical well-being.  Notably the insured presented evidence that American Family, without first conducting an adequate investigation, sent documents to the State Insurance Commissioner and the Property Loss Insurance Register that the insured's claim was denied for arson and fraud.  The evidence presented was that such a report would have a devastating effect on the insured's ability to obtain other insurance and thereby hurt his family business.  

Insurance companies cannot deny claims without a valid basis, or without conducting a prompt, fair and full investigation.  In Missouri, the tort of bad faith known as vexatious refusal to pay can be brought to obtain the benefits the insured is owed and to recover punitive damages and attorneys' fees.

If you use an insurance agent to obtain your insurance policy then that insurance agent has certain responsibilities that are imposed by law. In Missouri when an insurance agent undertakes to procure insurance for a party, with a view to earning a commission, he becomes the party's agent and owes a duty to the party to act with reasonable care, skill and diligence. If an agent is unable to obtain the insurance you sought, he has a duty to timely notify you.   The failure to procure the appropriate coverage or the failure to timely notify you will render an agent liable damages.  

If your agent has broken these rules you may sue for money damages for the breach of the agreement to obtain the insurance requested or for negligent breach of the agent's duty. In addition, an independent insurance agent and his client may have a fiduciary relationship.  A fiduciary duty between principal (you) and agent (insurance agent) requires the exercise of utmost fidelity and good faith.  In Missouri the existence of a fiduciary relationship obligates the agent to make a complete and full disclosure of all material facts concerning the transaction which might affect the principal's decision regarding the subject of the relationship. In Missouri it is a breach of fiduciary duty for an agent to occupy a position antagonistic to his principal.

If your agent failed to obtain the policy or coverage you requested, or failed to notify you and you have suffered an uncovered loss or are being sued but have no insurance to cover your liability you may be able to pursue your insurance agent for his wrong doing.