The Assault Continues – Another Shot at RSMo. §507.060 Fails

by | October, 2022 | Legal News

RSMo §507.060 offers the carrier the opportunity to interplead policy sums when there are multiple claimants seeking a finite pot. If the carrier interpleads the funds withing 90 days of the first demand, and continues to defend its insured, any exposure for bad faith refusal to settle is negated.

The most recent case concerning this statute is Farmers Insurance Company, Inc. v. Mabie, et al, 2022 WL 3588894 (August 23, 2022). In Mabie although there was a classic case made for interpleader, the trial judge dismissed the interpleader action. The Western District Court of Appeals reversed the trial court and allowed the interpleader to go forward, thereby insulating the carrier from exposure for bad faith refusal to settle claims.

Mabie presents a common set of facts that before RSMo §507.060 was amended in 2018, left carriers exposed to bad faith refusal to settle claims, no matter how diligently and fairly they tried to settle claims. Farmer’s insured, Mason, had a $25,000/$50,000 policy. As the result of an accident where Mason was driving, Mason’s passenger was injured, the other driver was killed, and the other driver’s passenger was injured. Farmers was presented with two BI claims and one wrongful death claim that needed to be resolved, with only limited funds available.

Trying to maximize their return in excess of the policy limits the three claimants would not accept a dollar settlement without the agreement containing these non-monetary and oppressive terms:

  1. payment of the $50,000 limit;
  2. agree to allow the three claimants to seek recovery in excess of $50,000 by pursuit of bad faith claims against Farmers;
  3. agree the settlement agreement could never be used as a defense to or in mitigation of any claim;
  4. no release would be given for Mason.

It was certainly clear to Farmers that rather than settle the claims within the policy limits, claimants’ strategy was to set Farmers up for extra contractual damages. Seeing which way the wind was blowing Farmers pre-emptively filed an interpleader action. However, the claimants’ convinced a Jackson County Circuit Judge to dismiss the interpleader on the basis it failed to state a cause of action.

The Western District reversed, finding that there were only “two vital facts” necessary to plead a cause of action for interpleader, those being “First, that persons have claims against the party, and second, that those claims are of such nature that the party may be exposed to double liability.” The Court found that those two facts were clearly pled and that the trial judge acted improvidently in dismissing the interpleader.