Missouri Insurance Lawyer Blog

On April 26, 2011, the Missouri Supreme Court, in the case Schmitz v. Great American Assurance Company, -- (S.W.3d - 2011) (2011 W.L. 1565447), held that a trial court was not permitted to determine a reasonableness of an underlying judgment against an insured in an equitable garnishment proceeding when the underlying case was tried to the court.

In Schmitz the insurer argued that the equitable garnishment trial court had to apply the reasonableness test from the Gulf Insurance case, 936 S.W.2d at 815. The Gulf Insurance test, as held by the supreme court applies only to settlements under Section 537.065, and does not apply where a underlying bench trial, determines both liability and damages. The insurer argued that the trial lacked any semblance of an adversarial proceeding because the insured did not present a defense. The Schmitz court made clear what the insurer was ignoring that the insurer had had an opportunity to present a defense, but because it had declined to do so by denying coverage, it was not entitled a second bite at the apple. The court made clear that there is a difference between a settlement, and a bench trial where no defense was presented, because the trial court did not have to find liability or damages in favor of the plaintiff. Thus, the plaintiff risked the possibility that the court would find against him. To hold otherwise would force the plaintiff in a garnishment action to relitigate the entire case before the equitable garnishment court so the court in that proceeding could determine whether or not the judgment was reasonable. The Supreme Court noted that the insurers proposed application of the Gulf Insurance test would effectively allow all insurers "two bites of the apple" - once when the trial court determines liability and damages and once when the equitable garnishment court determines reasonableness. The Supreme Court held that this application of the Gulf Insurance test in the underlying proceeding was in error.

The Schmitz decision by the Supreme Court makes clear that insurance companies who refuse to honor an insurance contract to their insured, do not get to relitigate the reasonableness of the underlying judgment and therefore have their cake and eat it too. Instead, if the trial court in the proceeding in which the insurer refused to defend enters a judgment against them on liability and damages, the insurer will be bound by the judgment. It should be noted that the insurers' position in the coverage case was unreasonable. The court noted that the insurer in coming up with its reasons for denial had actually ignored the insurance company's own policy language. Sadly this is too often the case in Missouri. Insurance companies often abandoned their insureds and deny coverage by misapplying the policy language or stretching or twisting its meaning. While this decision is favorable for insureds and strikes an appropriate balance between the insurer/insureds interest, it will likely have no detouring effect on insurers poor treatment by some insurers.

In the 2011 March and April edition of the Journal of the Missouri Bar, there appeared an interesting article entitled "Towards a Unified Theory of Insurance Law". The article was written by David C. Knieriem, of the Law Offices of David C. Knieriem.
The article can be found at the Missouri Bar website.

The Missouri legislature is again considering amending the current Missouri Workers' Compensation statutes. Just six years ago Missouri legislatures changed the statutes in an attempt to make it tougher to qualify for Workers' Compensation. The proposed changes, as set out in House Bill 162, make it easier for injured workers to qualify for compensation by adding occupational diseases and the acts of co-employees to the coverage designated by the statues. This alteration to the current statutes would prevent an injured employee from filing a claim against a co-employee in a Missouri Circuit Court.

On November 9, 2010, in Robinson v. Hooker, 323 S.W.3d 418, the Missouri Court of Appeals, Western District, ruled, based on the current Workers' Compensation statutes, that an injured employee who had a claim against an employer that did fall under the Workers' Compensation statutes could still recover damages against a co-employee in a subsequent tort claim. The ruling by the court in Robinson allowed an injured employee to sue a co-employee whose negligent actions resulted in injury. If House Bill 162 becomes law, injured employees will be limited to ONLY what they can recover through the Missouri Workers' Compensation statutes, no matter whether a co-employee's negligent actions were the cause of the injury.

In the Robinson case, Mr. Robinson's right eye was injured when Ms. Hooker used a high pressure hose negligently. As a result of the injury, Mr. Robinson is now blind in his right eye. Mr. Robinson's employer's Workers' Compensation insurance carrier settled Mr. Robinson's claim, and Mr. Robinson brought suit against Ms. Hooker for damages resulting from her negligence. If House Bill 162 becomes law, Mr. Robinson would have been barred from bringing suit against Ms. Hooker even though she may have acted negligently and caused him to lose sight in his right eye.

In a case handed down August 6, 2010 by the Missouri Court of Appeals, Southern District, the court found that the proposed lien of a health insurer was an invalid attempt to require assignment of the Participant's personal injury claim and, as such, it was contrary to longstanding Missouri public policy. Scroggins v. Red Lobster, No. SD 30214.

In 2007, Pamela Scroggins was seriously injured in a trip and fall accident at a restaurant. Ms. Scroggins' medical expenses were covered by an employee contributory self-funded health plan that provided benefit coverage to her under her employer provided health care plan. As a result of her injuries, Ms. Scroggins sued the restaurant and the lawsuit resulted in a settlement.

One of the health insurance plan provisions purported to grant the health insurer a lien upon the proceeds of the Participant's tort recovery, and a right to payment from any recovery, to the extent of the sum that the Insurer paid for injuries Ms. Scroggins suffered. This is not unusual. Insurers paying benefits to insureds as a result of injuries caused by third persons often claim an interest in recovering those costs if the insured obtains a settlement or collects upon a judgment against the third party. To that end, insurers have repeatedly attempted to draft policy provisions or establish other requirements for the purposes of seeking reimbursement from the insured in such situations.

Continue reading "HEALTH INSURER CANNOT ASSERT LIEN UPON THE PROCEEDS OF THE PARTICIPANT'S TORT RECOVERY" »

In a 7-0 decision written by Judge Richard B. Teitelman, the Supreme Court of Missouri confirms that an insurance company must promptly investigate a claim and its failure to do so is unreasonable and vexatious. D.R. Sherry Construction, Ltd. V. American Family Mutual Insurance Company, Case No. SC90442.

Sherry, a general contractor engaged in the business of building homes, filed suit against his commercial general liability insurer, American Family Mutual Insurance Company after the insurance company refused to investigate and pay a claim. Sherry made a claim on his insurance policy after a house that he built and sold, incurred structural damages caused by continuous and repeated exposure of the foundation to poor soil conditions.

Subsequent to the sale of the home, the new homeowners contacted Sherry and notified him that the foundation and drywall were cracking. Mr. Sherry inspected the house and confirmed the existence of the cracks. The homeowners threatened a lawsuit against the contractor. Mr. Sherry submitted a claim to his insurer, but American Family advised Sherry that it would not undertake further investigation of the claim until the homeowners actually filed a lawsuit. At that time, Sherry entered into an agreement with the homeowners to repurchase the home.

Sherry then filed this lawsuit against American Family asserting claims of breach of contract and vexatious refusal to pay. American Family claimed that that policy had expired at the time of making the claim, and that they did not owe anything under the policy.

The court found (1) that the damage to the house began during the policy period and was progressive from that point forward, and therefore was covered by the policy at issue; (2) the interpretation of an insurance contract is a question of law to be determined by the judge and only becomes a jury question when the court determines that the contract is ambiguous and there exists a genuine factual issue to be decided by the jury; and (3) American Family's delay and then refusal to investigate the contractor's claim was sufficient basis for concluding that the insurance company unreasonably and vexatiously refused to pay a valid claim for property damage.

Continue reading "MISSOURI SUPREME COURT CONFIRMS THAT AN INSURANCE COMPANY'S REFUSAL TO PROMPTLY INVESTIGATE A CLAIM IS VEXATIOUS" »

Unfortunately, not all accidents are just minor fender benders. Should you find yourself in a serious accident, medical payments coverage pays for medical bills (and sometimes funeral bills) incurred by the driver and passengers injured in a motor vehicle accident regardless of who caused the accident. It also pays for you or your family members injured while riding in another's car or if struck by a car as a pedestrian.

Medical payment coverage is offered by most automobile insurance coverage and is usually sold in increments of $1000, $5000 or $10,000 per person.

Even if you have health insurance, there are often deductibles and co-payments that must be paid. If your health plan requires you to pay a deductible, medical payments coverage may help pay it. This coverage can also help pay for items not covered by your health plan, such as dental treatment, professional nursing services, prostheses, and funeral services.

In Missouri, medical payments coverage is not required. However, I recommend this coverage for most of my clients. If you decide this protection is appropriate for you, make sure you specifically request it from your insurance agent or representative. It is not always provided by simply requesting "full coverage" from your agent.

Continue reading "Do I Need Automobile Medical Payments Coverage?" »

Sooner or later, it may become necessary for someone else to drive your vehicle and you want to make sure that there is insurance if they are involved in an automobile accident.

Generally, insurance follows the vehicle, not the driver. If it is your car, then the insurance coverage you have purchased for your vehicle would provide primary coverage. Any insurance policy your friend has purchased would become secondary. Primary simply means that your insurance company should pay the claim first. Then if your liability limits are exhausted, your friend's insurance should pay additional amounts up to his limits.

Please understand that if your friend is involved in an accident with your car, your rates could go up. Also, in some circumstances, if you are aware that your friend is not a safe driver and you allow him or her to drive your car, you could be held personally liable if they cause an accident that seriously injures another person.

Continue reading "Does My Friend Have Insurance Coverage If She Drives My Car?" »

Directors and officers insurance liability coverage provides insurance to the directors and officers of companies for a wide variety of claims. Typically these claims include negligent acts, omissions or misleading statements made by directors and officers of the corporation that results in claims or lawsuit against the business. Directors and officers coverage is offered by different insurers with too many different options to discuss fully in this blog post. However, it can generally be purchased to provide the corporation with coverage to cover claims made against the company, or to specifically cover directors and officers if the company does not offer indemnity to the directors or officers or is not required by law to do so with the type of entity for which they work. In addition, it can be purchased so that it reimburses the company for their expenses and indemnifying the directors and officers.

Notably, these types of policies may not include a duty of the insurer to defend the insured, but does have an obligation to pay for the associated costs, subject to and applicable deduction and exhaustion of a policy limits. Many of these policies have terms which require notice and consent prior to incurring defense costs. Thus, the prudent policy holder will inform the insurer not only of the claims, but notify any of the attorneys who are defending the claim and seek consent both on the choice of lawyers and confirm the incurring of the defense costs.

It is important that the policyholder complies with the coverage terms. However, if a dispute about coverage arises some provisions of the policy may not bind the insured. It is important to consult with an attorney if you have a claim made against you under your directors and offices insurance policy.

Errors and omissions insurance coverage is designed to protect the policy holder that is in the business of making recommendations, giving advice, or providing other professional services to third parties. The policy is designed to provide protection against claims or lawsuits when they made an error in their occupation or when they made an omission by neglecting to do something which they should have done in the course of their business or profession. It is sometimes referred to more specifically as malpractice insurance, such in the case of insurance for doctors as medical malpractice or insurance for errors and omissions by lawyers commonly known as legal malpractice insurance.

One of the common clauses in such policies is a consent to settlement clause. Unlike a typical liability insurance policy where the insurer has a unilateral right to control the litigation and to settle a claim or lawsuit at their discretion, E & O policies typically have a consent to settle clause. Thus the insurer may not unilaterally settle the case without the insureds consent.

This is a great article, by attorney Rex Gump, on stacking liability coverage in Missouri.

Can Liability Coverage Be Stacked in Missouri Up to the Minimum Requirements of the MYFRL? - Missouri Injury Lawyers Blog.

The 8th Circuit Court of Appeals has decided that a dentist who invoked his fifth amendment rights not to testify concerning two patient deaths violated the cooperation clause of his malpractice insurance policy. As a result Medical Protective was not liable under the insurance contract. The Medical Protective Company v. Bubenik, U.S. Court of Appeals 8th Cir., appealed from U.S. District Court, E.D. Missouri. Insured must be careful when asserting rights that may be breaches of the insurance contract. Sometimes invoking the 5th may be helpful to the defense and would not violate the cooperation clause. Insureds need to balance the benefit of invoking the right and whether or not it will cause a breach of the contract.

In an action by an insurer seeking a declaration that it was not liable under a professional liability insurance policy for the acts of a psychologist who treated a victim of sexual abuse but failed to report the abuse, summary judgment for insurer is reversed where the "knowingly wrongful" exclusion in the policy on which the order was based was ambiguous. The court noted that in order for an act to be intentional for purposes of Missouri tort law as well as of exclusionary clauses in liability insurance policies . . . the actor must desire
to cause the consequences of the act, or the consequences must be substantially certain
to result." the court conclude the knowingly wrongful act exclusion was reasonably subject to different interpretations. The court noted that to entertain a contrary view would work an exclusion from coverage of many, if not most, claims for damages arising out of the negligence of insureds and thus defeat the primary purpose for which liability insurance coverage is purchased.

A federal judge in Connecticut on Jan. 5 held that the follow-the-fortunes doctrine does not apply to losses not covered by an underlying policy (Arrowood Surplus Lines Insurance Company formerly known as Royal Surplus Lines Insurance Company as successor in interest to Connecticut Specialty Insurance Company v. Westport Insurance Corporation formerly known as Employers Reinsurance Corporation, No. 08-cv-01393, D. Conn.; 2010 U.S. LEXIS 426).

Missouri, Illinois Collateral Source Rules Affect Bodily Injury Claims Differently.

This is an interesting story reported by the Insurance Journal. Missouri changed its collateral source rule under tort reform in 2005. Since then the vague law has been applied differently by many circuit courts. Recently, a St. Louis judge declared the law unconstitutional.

In my earlier post, Policyholders, Don't Believ the Hype, You Are Not Friends I suggested that policyholders hold onto the promotional material used to sell the policy they purchase.  Insurance policyholder attorneys know from experience that the ads, and promises of the sale don't meet the reality of the insurance policy contract.  Recently I read a really excellent post, March Madness Makes It "Official": State Farm Embraces the Reasonable Expectations Doctrine and Rejects Linguistic Literalism by Jeffery Stemple. This blog addresses a recent series of ads by State Farm called the "Something's Missing" series.  These ads will, as Stemple suggests, help policyholders obtain the benefits they thought they had purchased.