The Missouri Unfair Claims Settlement Practices Act, MO. Rev. Stat. §§ 375.1000 to375.1018 (1991/1993) sets forth the standards for the investigation and disposition of claims arising under contracts or certificates of insurance. It is not intended to cover claims involving workers’ compensation, fidelity, suretyship or boiler and machinery insurance. Moreover, the UCSPA does not create a private cause of action for violations of its provisions. Pursuant to§ 375.1007 of the UCSPA, any of the following acts by an insurer constitutes an improper claims practice:
While the UCSPA does not create a private cause of action for violations of its enumerated provisions, claimants have recourse by way of a common law bad faith claim. Missouri courts recognize and impose upon the insurer the duty of acting in "good faith" when handling claims against the insured. This duty is based on the “fiduciary relationship” between an insurer and its insured, in a third-party claim. Shobe v. Kelly, 279 S.W.3d 203, 209 (Mo. Ct. App. 2009) (citing Zumwalt v. Utilities Insurance Co., 360 Mo. 362, 228 S.W.2d 750 (Mo. 1950).
Generally, the elements of a bad faith refusal to settle claim are set forth in Dyer v. General American Life Insurance Co.,541 S.W.2d 702, 704 (Mo. Ct. App. 1976):
However, one or more of these “elements” may not be required for an insured to make a submissible case for “bad faith,” under certain circumstances. For instance, where the insurer has unjustly declined coverage, or issued a reservation of rights that is rejected by the insured, the insured may not have to show the first element enumerated above. Landie v. Century Indem. Co., 390 S.W.2d 588,564-565 (Mo. Ct. App. 1965). Similarly, where an insurer fails to inform its insured about opportunities to settle a third-party claim, the insured does not have to demand that the insurer settle the claim as required by the second element. Ganaway v. Shelter Mut. Ins. Co., 795 S.W.2d 554 (Mo. Ct. App. 1990).
The issue of whether the insurer has acted in “bad faith” is a question for the trier of fact. A totality of the circumstances approach is applied. Ganaway v. Shelter Mut. Ins. Co., 795 S.W.2d at 562. A finding of negligence in and of itself cannot rise to the level of “bad faith.” Zumwalt v.Utilities Ins. Co., 228 S.W.2d at 753.
Statute of Limitations:
Missouri courts treat bad faith failure to settle as an action in tort, not in contract. Thus, bad faith actions are governed by the five-year statute of limitations applicable to torts.
Recoverable damages for the bad faith cause of action, i.e. bad faith refusal to settle:
The insurer is liable for the entire judgment against the insured, including the portion of the award that is in excess of the policy limits, and may be liable for additional, intangible “tort” damages, e.g. damages for emotional distress, damage to reputation or damage to credit, and punitive damages.
Chartwell Law represents the interests of insurers and employers, as such, we continue to continue to monitor the legal landscape. If you have any questions about issues associated with right of action for bad faith claims, our attorneys are available to help. Please contact your Chartwell Law attorney.