“Time-limited demands” bill finally passed by the House

SCS HCS HB’s 339 & 714, sponsored by Rep. Bruce DeGroot, was truly agreed and finally passed by the Missouri House, meaning the next step is a signature from Governor Greitens. The bill addresses time-limited demands and abusive agreements that allow a plaintiff and defendant to collude against the defendant’s insurance company.

Synopsis of SS/SCS/HCS/HB 339 & 714 – Section 537.065 allows claimants and insureds to contract to limit recovery to insurance coverage.  This statute is unique to Missouri, as no other states have established such a practice by statute. The insured, while knowing that he will not be held personally responsible, agrees either to settle or compromise the claim or not to oppose the tort victim’s prosecution of the claim at trial. The insurer generally is limited to disputing only the legal conclusion of whether coverage existed and typically is barred from re-litigating any other aspect of the suit.  These agreements are often used to compel an insurer to provide a defense where there is no coverage or to pay policy limits on questionable claims. These agreements are also frequently used as vehicles whereby insureds and claimants work in concert to create coverage and create inflated damage awards in uncontested bench trials.   SS/SCS/HCS/HB 339 & 714 will help curb the abuses associated with §537.065 agreement by allowing insurers to intervene in underlying lawsuits.  By being able to participate in the underlying lawsuit, the insurer will be able to present a more accurate picture on liability, damages, and coverage issues.  The bill further provides that an insured cannot enter into a settlement agreement with a claimant if the insurer is providing the insured a defense without reservation.  An insured should not be allowed to enter into an unauthorized settlement agreement if an insurer defends without qualification.  This is so because when an insurer defends under the policy, the insurer is fulfilling its policy obligations and can expect the insured to comply with its policy obligations, including the duty to cooperate and refusal to pay provisions.  Finally, the bill establishes standards governing time limit demands in an effort to prevent bad faith setups.  This measure will be sent to Governor Greitens for his signature.