In a game changing decision, the Missouri Supreme Court has held that an insurer has an absolute right to intervene into an ongoing lawsuit when coverage is at issue and seek a stay of that action pending the results of a filed Declaratory Judgment action to determine if coverage exists. The Supreme Court reversed a trial court decision preventing an insurer from intervening and seeking a stay of the proceedings and in the process overruled and criticized a line of Appellate Court decision over the past several decades holding to the contrary.
Missouri Courts have historically refused to allow third-party liability insurers to intervene into litigation pending against their insureds, repeatedly stating “[t]he liability of an insurer as potential indemnitor of the judgment does not constitute a direct interest in such a judgment so as to implicate intervention as of right in that action”. Loveland v. Austin, 626 S.W.3d 716, 722 (Mo. App. E.D. 2021). In refusing to allow insurer intervention, Missouri Courts have consistently explained that an insurer does not either “gain or lose from the direct operation of that judgment” as is required for entitlement to intervention as a matter of right. Id.
In 2017 and 2021, the Missouri legislature addressed this issue, in part, by passing statutory amendments to R.S. Mo. §537.065. Now, so long as the statutory amendments are satisfied, e.g., timely intervention after notice of entry into a non-execution agreement under the statute, etc., then an insurer can intervene as a matter of right. However, there continue to exist other scenarios to which Section 537.065 do not apply and some Missouri attorneys are now seeking to craft non-execution agreements so that Section 537.065 will not be found to apply even in the traditional setting. For those cases to which Section 537.065 does not apply and which intervention cannot be attained – insurers face significant issues as these cases can often lead to large, unopposed judgments which eventually form the foundation of garnishment and bad faith actions filed against the insurer.
This is the scenario Safeco Insurance Company of America faced in the matter involving its insured, Tynan Mullen. Mullen was alleged to have participated in the shooting of Riley McCrackin on the parking lot of a pool hall in Raytown, Missouri.[1] A wrongful death lawsuit was filed against Mullen in Jackson County Circuit Court[2] and Safeco filed a declaratory judgment action in the United States District Court for the Western District of Missouri.[3] As the cases progressed, Safeco moved to intervene into the Jackson County litigation, citing a string of Missouri Appellate opinions endorsing the practice of a liability insurer to moving to intervene into liability litigation for purposes of seeking a stay of that case pending resolution of a simultaneously progressing declaratory judgment action. Safeco’s motion to intervene was denied and the Court of Appeal for the Western District of Missouri initially affirmed in a signed opinion dated April 2, 2024.[4] In fact, the Court of Appeals Opinion went so far as to state that the line of cases on which intervention was sought should, “no longer be followed”, effectively closing the door on insurer intervention for purposes of seeking a stay of litigation.
However, in a surprise turn of events, the Missouri Supreme Court accepted transfer and on December 23, issued its Opinion in which the Supreme Court (1) vacated the trial court’s denial of Safeco’s Motion to Intervene and (2) for the first time expressly endorsed insurer intervention for purposes of seeking a stay of the liability litigation.[5] In doing so, the Supreme Court focused on Safeco’s potential defense obligation and noted that an insurer “stands to “gain or lose from the direct operation of the [underlying] judgment”” on the basis that an insurer “may be bound by the outcome of the tort action based on the insurer’s duty to defend.” McCrackin v. Mullen, et al, No. SC100578, at 10 (Mo. 2024). The Supreme Court further noted that Rule 52.12(a) should be construed liberally to permit broad intervention. The Court expressly advised “Insurers with good faith coverage questions should file a declaratory judgment action simultaneous with the underlying tort action and seek a stay of the tort action until the declaratory judgment action is resolved.” Id. at 11.
Considering this brand-new Supreme Court Opinion endorsing the intervene and stay procedure, insurers that find themselves in the same scenario as Safeco should now be able to intervene in liability litigation to seek a stay pending resolution of a declaratory judgment action addressing coverage issues. However, while implying throughout the decision that a stay order would be an appropriate remedy, the Missouri Supreme Court declined to opine on how the trial court should address Safeco’s Motion to Stay, it remains to be seen just how valuable the right of intervention will ultimately be as that issue is played out in the trial court and intermediary court of appeals. The intervention and stay procedure as set out by the Court will have a significant impact and creates a tool to be utilized by insurers in coverage cases that can easily be disposed of by way of dispositive motion practice in Declaratory Judgment actions filed to determine coverage. A new day may be dawning in Missouri insurance coverage law.
[1] 1916-CV01383-01
[2] 2216-CV02028
[3] 4:22-cv-00832-SRB
[4] WD86442
[5] SC100578