A significant Missouri “tort-reform” law went into effect on August 28, 2018. That statute is R.S.Mo. § 507.060 and specifically addresses multi-claimant exposures. The law addresses the scenario frequently faced by insurers wherein their insured is at fault for a collision resulting in more damages than the policy of insurance affords coverage for. In the past, these claims often involved policies affording the state minimum required bodily injury coverages of $25,000.00 per person and $50,000.00 per accident. However, with rising costs and larger jury verdicts in recent years, these scenarios now frequently involve larger policies on a regular basis. Additionally, inflated auto values have resulted in more property damage exposures exceeding the available property damage coverages in multi-vehicle collisions in this post-pandemic world.
Prior to the enactment of the aforementioned statute, insurers faced many difficult decisions in these situations in Missouri. What was the correct course of action? Is it proper for an insurer to pay claims on a first come, first serve basis? Should an insurer exclude the claims of lesser-injured parties in favor of reserving limits to address only the most serious claims? Should an insurer proactively communicate with all potentially injured parties even though those numerous parties might not have been injured and not have made a claim against the insured but for being contacted and told that insurance money was available to address injuries resulting from the loss? What if an injured party was to take a judgment against the insured before all of the other injured claimants were in a position to resolve their claims? The list of questions and issues is seemingly unending.
A Missouri insurer faced this scenario in the case of American Family Mutual Insurance Co. v. Skow, 13CY-CV10308. That case involved an accident with a Kansas City Area Transit Authority Bus and upwards of 14 injured passengers. According to case materials, the claims were addressed on a first come, first served basis and two passengers with allegedly significant claims were not resolved within the available policy limits. The insured reached an agreement with those two passengers wherein each passenger would receive payment in the amount of $500,000.00. After a trial on the bad faith claim, a jury rendered a verdict in the amount of $1,000,000.00 in actual damages and $10,000,000.00 in punitive damages. The risks to insurers was real and significant.
R.S.Mo. § 507.060 addresses the outcome of the case. Specifically, this statute provides that if an insurer faces multiple exposures that exceed the policy limits available under the policy of insurance, that if certain threshold steps are satisfied the insurer “shall not be liable to any insured or defendant for any amount in excess of the plaintiff’s contractual limits of coverage”. The steps an insurer must meet in order to claim the protections afforded by the statute are:
- File an Interpleader Action within ninety (90) days of receiving the first “offer of settlement or demand for payment by a claimant”;
- Deposits all of its applicable limits of coverage into court within thirty (30) days of the Court’s order granting interpleader; and
- Defend its insureds in good faith from any claims or lawsuits for damages allegedly caused by the incident or occurrence for which the limits of coverage were paid into court even after depositing its limits of coverage into court notwithstanding any policy provision releasing the insurer of its duty to defend any of the insureds.
Each of the aforementioned provisions are outlined in § 507.060(4).
In practice, Interpleader filings under this statutory scheme have greatly reduced excess exposures facing insurers in Missouri multi-claimant scenarios and have in large part benefitted both the insurer and the insured in that numerous multi-claim exposures have successfully been resolved in full, with releases, once the claimants and their attorneys realize that the insurer has no excess exposure and the insured’s policy is all that exists to collect on for the injuries at issue. Numerous insurers have pursued relief under the statute over the past five (5) years with significant success.
As many readers will be well educated on, the amendments enacted to R.S.Mo. §537.065 in August of 2017, another “tort-reform” measure, generated near immediate case law and a strong response from the Plaintiff’s bar with tactics aimed at undercutting the effect of the amendments. This resulted in the Missouri legislature having to re-address the statutory amendments in yet another Amendment enacted in August of 2021. However, although six years have now passed, there still exists no significant appellate case law addressing significant deficiency or enforcement issues with the Interpleader statute and reliance on the statute continues to occur with good results.
Most issues that insurers face with respect to the Interpleader statute involve strategic decisions that can be addressed through experience, well-reasoned assessment and in discussing same with the insured. These tricky situations can often arise when one claimant rushes forward while others lag behind and all parties are not prepared to resolve the claim globally within 90 days of the first “offer of settlement or demand”. Similarly, many cases have successfully been fully resolved globally, with releases for the insured, even after the filing of an Interpleader action in Missouri state court. Balancing the demands of the court with the needs of the case and the parties can be an involved and tricky act requiring experience which the attorneys at Watters, Wolf, Bub & Hansmann have acquired over the past half decade in this area of law.