Often a carrier is presented with the situation where multiple claims arise from an occurrence, usually an auto accident. The phone starts ringing with multiple demands for the policy limits. Usually, the policy limits fall short of the aggregate amount of the demands, leaving the carrier in an extremely precarious position, and exposed to later bad faith refusal to settle claims. Prior to the Missouri Legislature’s amendment to the Interpleader Statute, §507.060, absent an agreement with all claimants to equitably split the limits among themselves, carriers had to extensively evaluate each separate claim, and make individualized counteroffers, hoping without any guarantee, that a jury won’t later consider the counter-offer decisions and find those decision in bad faith.
In 2018, The Legislature amended the statute and added §507.060.4. In essence, within 90 days of first receiving a demand from any claimant, the carrier can petition the Court for interpleader. If the Court grants the interpleader, then the carrier must deposit all applicable limits of coverage into the Court. If the timelines are met, the carrier is absolved from any extra-contractual claims. However, the carrier must continue providing a defense and cannot demand a release for either itself or its insured as a condition to interpleading the limits of the applicable policy. In order to obtain the protection, the statute affords, the defense of the insured must continue even if the policy provides the defense ceases once the policy limits are paid. Practically, if an insured does not have significant liquid assets, the claimants fight it out in the interpleader end any ancillary litigation. One thing claimants can’t do however, is bring an action for bad faith refusal to settle.
There have only been two cases that have construed this recent amendment to the statute. The most recent is Garrison Prop. & Cas. Ins. Co. v. McWhirt, No. WD 84612, 2022 WL 3031645, at *1 (Mo. Ct. App. Aug. 2, 2022). In Garrison the carrier appealed because the trial court would not dismiss it with a declaration of no liability in respect to the accident. The Court of Appeals held that such a declaration was premature and the statute on its face did not authorize such a broad declaration. In Great W. Cas. Co. v. Carr, 642 S.W.3d 306, 311 (Mo. Ct. App. 2022) the carrier appealed a dismissal from the interpleader without prejudice, arguing it should have been with prejudice. The Court held that the argument had been waived, but was probably not correct on the merits. Neither case impinges on the protection §507.060.4 provides if all procedural steps are followed.
So, when faced with competing claims for a limited pot of limits, be aware of §507.060.4. The additional defense costs you might incur will be minimal considering the bad faith exposure you are negating.