In a huge win for insurers in Missouri, the Western District Court of Appeals significantly restructured the procedural and substantive rights of insurers who intervene in tort litigation. The court held that once an insurer timely intervenes under the 2021 amendments to Missouri Revised Statute, § 537.065 the insurer has a substantive right to defend the insureds substantive rights in the litigation eliminating collusive judgments being entered. The Lyda decision, combined with the Missouri Supreme Court’s decision in McCrackin v. Mullen, 701 S.W.3d 868 (Mo. 2024), marks the culmination of a statutory and judicial evolution that has transformed insurers from court imposed passive bystander in their insured’s tort litigation into active parties with full defendant rights—including the right to discovery, motion practice, and jury trial—that cannot be extinguished by post-intervention settlement agreements between the injured party and the insured.
For decades, Missouri courts consistently held that a liability insurer’s status as a potential indemnitor did not give it a sufficient “direct interest” to justify intervention as a matter of right in a pending tort action between its insured and an injured plaintiff. This was the case despite the language Courts routinely found that insurers had adequate alternatives such as declaratory judgment actions, statutory garnishment proceedings, and bad faith actions—that fully protected their interests without permitting them to disrupt litigation between their insureds and injured parties. This rule was especially firm where insurers had declined to defend their insured without a reservation of rights, having earlier rejected the opportunity to actively control the litigation.
In 2021, the legislature filled the gaps within § 537.065 by requiring the tort-feasor to provide the insurer with notice (and a copy of the agreement and any filed action) under multiple scenarios: when a lawsuit is pending at the time the agreement is executed; when such a lawsuit is dismissed and refiled; and when no lawsuit is pending at the time of agreement but one is later filed. Mo. Ann. Stat. § 537.065.2 (2021). Critically, the amended § 537.065.4 upgraded the intervention right to an unconditional right to intervene and specified the full scope of that right upon intervention: “the intervenor shall have all rights afforded to defendants under the Missouri rules of civil procedure and reasonable and sufficient time to meaningfully assert its position including, but not limited to, the right and time to conduct discovery, the right and time to engage in motion practice, and the right to a trial by jury and sufficient time to prepare for trial. No stipulations, scheduling orders, or other orders affecting the rights of an intervenor and entered prior to intervention shall be binding upon the intervenor.” Mo. Ann. Stat. § 537.065.4. The 2021 legislation also amended the Missouri Uniform Arbitration Act to provide that personal-injury arbitration awards are generally not binding against an insurer unless the insurer itself agreed to arbitration.
Lyda addressed these legislative changes on an appeal. In the underlying case, Connie Lyda was injured when Mark Northcott crashed into the golf cart in which she was a passenger. Lyda sued Northcott. Northcott notified Allstate and requested a defense. Allstate refused to defend Northcott without a reservation of rights and subsequently denied coverage for the accident. On March 30, 2023, Allstate filed suit in the United States District Court for the Eastern District of Missouri, seeking a declaratory judgment that it had no obligation to defend or indemnify Northcott under either of its policies. Meanwhile, Lyda and Northcott entered a § 537.065 agreement, limiting recovery to Northcott’s insurance coverage maintained with Allstate. Northcott agreed to pursue claims against his insurers for indemnity, breach of contract, bad faith, and breach of fiduciary duty; he also agreed to pay Lyda 90% of the net amount he recovered. After being notified of the agreement, Allstate intervened in the lawsuit. Despite Allstate’s intervention and objections, Lyda and Northcott settled for $6,140,000, and the circuit court entered a consent judgment in that amount over Allstate’s opposition. Allstate appealed. The Western District Court of Appeals reversed the circuit court on the central intervention issue and remanded. In so finding, the Court made several important holdings for consideration moving forward.
First, the court concluded that the 2021 amendments expressly overturned prior precedent by guaranteeing an intervening insurer’s right to contest the insured’s liability, and the extent of the injured party’s damages. It effectively reversed the principle that an intervening insurer must generally “ ‘take the action as it found it’ at the time of its intervention.” The legislature had done precisely what prior courts identified was absent from the 2017 statute explicitly stated that an intervening insurer would in all instances have the right to defend the insured’s liability and damages on the merits, without regard to prior stipulations.
Second, the court concluded that because § 537.065.4 gives insurers the right to independently contest the insured’s tort liability, separate and apart from the insured’s own right to contest a claim, no consent judgment can be entered on that claim unless the intervening insurer joins in it. The court explained that permitting post-intervention settlement by the plaintiff and the insured would effectively nullify the 2021 amendments, violating the canon that a court “should never construe a statute in a manner that would moot the legislative changes, because the legislature is never presumed to have committed a useless act.”
Lyda fundamentally changes the litigation calculus for all parties in cases involving § 537.065 agreements. For insurers who deny coverage or withdraw a defense, the path is now clear: upon receiving notice of a § 537.065 agreement and a pending lawsuit, the insurer should promptly move to intervene within the 30-day window. Once intervention is granted, the insurer cannot be forced into a consent judgment without its participation. The case also reinforces the importance of the 2021 amendment to the Missouri Uniform Arbitration Act (§ 435.415.2), which provides that personal-injury arbitration awards are not binding against an insurer unless the insurer agreed to arbitration—closing the arbitration evasion tactic that plagued the § 537.065 2017 amendment era cases.
At its core, Lyda provides the full protection of the amended 537.065 statute and goes a long way in eliminating the huge collusive judgments that had become common place in Missouri. Lyda outlines for insurers the procedural steps necessary to protect their rights to intervene following the 2021 amendment. WWBH lawyers have been successful in most venues in Missouri over the past year or so in utilizing the statute to Intervene and at the same time file Declaratory Judgments on the coverage issues in order to get the coverage matter decided without a huge collusive judgment entered against its insured and hanging over the head of the insurer during the coverage litigation. Lyda v. Allstate Fire & Casualty Insurance Co., No. WD 87901, 2026 WL 806769 (Mo. Ct. App. Mar. 24, 2026)