Missouri

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:

1. Misrepresenting to claimants and insureds relevant facts or policy provisions relating to coverages at issue;
2. Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under its policies;
3. Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims arising under its policies;
4. Not attempting in good faith to effectuate prompt, fair and equitable settlement of claims submitted in which liability has become reasonably clear;
5. Compelling insureds or beneficiaries to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them;
6. Refusing to pay claims without conducting a reasonable investigation;
7. Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed and communicated to the insurer;
8. Attempting to settle a claim for less than the amount to which a reasonable person would believe the insured or beneficiary was entitled by reference to written or printed advertising material accompanying or made part of an application;
9. Attempting to settle claims on the basis of an application which was materially altered without notice to, or knowledge or consent of, the insured;
10. Making a claims payment to an insured or beneficiary without indicating the coverage under which each payment is being made;
11. Unreasonably delaying the investigation or payment of claims by requiring both a formal proof of loss form and subsequent verification that would result in duplication of information and verification appearing in the formal proof of loss form;
12. Failing in the case of claims denial or offers of a compromise settlement to promptly provide a reasonable and accurate explanation of the basis for such actions;
13. Failing to provide forms necessary to present claims within fifteen calendar days of a request with reasonable explanations regarding their use;
14. Failing to adopt and implement reasonable standards to assure that the repairs of a repairer owned by or required to be used by the insurer are performed in a workmanlike manner;
15. Failing to promptly settle claims where liability has become reasonably clear under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

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):

1. The liability insurer has assumed control over negotiations, settlement, and legal proceedings brought against the insured;
2. The insured has demanded that the insurer settle the claim brought against the insured;
3. The insurer refuses to settle the claim within the liability limits of the policy; and
4. In so refusing, the insurer acts in bad faith, rather than negligently.

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.

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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.