What Is “Bad Faith” in a Missouri Personal Injury Case?
About the Author
Ethan Charles (“EC”) Duckworth is the founding attorney of Duckworth Injury Law. EC earned his law degree from the University of Missouri - Columbia, where he graduated in the top 10 of his class and served as an Editor of the Missouri Law Review. EC currently serves as a member of the Missouri Association of Trial Attorneys (MATA) and is a graduate of the Ross T. Roberts Trial Academy. EC has represented hundreds of injury victims throughout his career resulting in tens of millions of dollars in compensation recovered. EC has handled several bad faith failure to settle personal injury cases throughout his career, resulting in many extracontractual recoveries for his clients.
Bad Faith Insurance Claims in Missouri Personal Injury Cases: Understanding Insurers’ Duties and Failure to Settle Within Policy Limits
“Bad faith” in a Missouri personal injury case typically refers to an at-fault party’s insurance company failing to settle a claim within applicable policy limits when it had a reasonable opportunity to do so.
As liability insurance companies are involved in the vast majority of personal injury claims, Missouri law provides that insurers owe certain duties to their insureds. The most common of these duties are the duty to defend (hire and pay for a lawyer) and the duty to indemnify (pay settlements or judgments). If an insurer breaches either of these duties, the insured may have a cause of action against the insurer.
Within the duty to defend and the duty to indemnify also lies the duty of the insurer to act in good faith and fair dealing when considering settlement offers in handling a personal injury claim made against its insured. When an insurer has the opportunity to settle a liability claim made against its insured within policy limits and fails to do so—thereby exposing the insured to a potential excess judgment—the insured may have a cause of action for bad faith failure to settle.
Legal History of Bad Faith Failure to Settle in Missouri
The legal history of bad faith failure to settle was first addressed by the Missouri Supreme Court in Zumwalt v. Utilities Insurance Co., 228 S.W.2d 750, 753 (Mo. 1950). This foundational case continues to guide Missouri courts when evaluating insurer conduct during settlement negotiations.
In Zumwalt, the plaintiff alleged his insurance company failed to settle a lawsuit against him within the liability policy limits, exposing plaintiff to an excess judgment. The Missouri Supreme Court concluded that the standard for determining whether an insurer would be held liable for the excess judgment was if the insurer was guilty of fraud or bad faith in failing to settle the claim. The Court made clear that this standard required a showing more than that the insurance company was simply negligent in failing to settle the claim.
Who Can Bring a Bad Faith Claim in Missouri?
One of the biggest misconceptions regarding Missouri bad faith claims is who the proper party is to pursue a bad faith claim. In Missouri, a bad faith claim is held by the insured negligent party (i.e., the at-fault party) against his or her own insurance company – not the plaintiff/injured party.
However, the negligent party/at-fault party may be able to assign their bad faith claim to the plaintiff/injured party in exchange for an agreement for the injured party not to collect against the at-fault party personally. Other times, it may be necessary for the at-fault party to pursue the claim against their insurer directly.
What Are the Elements of Bad Faith Failure to Settle in Missouri?
In Missouri, the elements of bad faith failure to settle are outlined in Dyer v. General American Life Insurance Co., 541 S.W.2d 702, 704 (Mo. Ct. App. 1976). These elements are as follows:
- The liability insurer assumed control over settlement of the claim brought against the insured;
- The insured demanded that the insurer settle the claim brought against the insured;
- The insurer refused to settle the claim within the liability limits of the policy; and
- In refusing, the insurer acted in bad faith.
How Do I Know If I Have a Bad Faith Claim Against My Insurance Company in Missouri?
Bad faith claims are often very complex claims, and rarely is a bad faith claim black and white. Rather, the insurer's conduct must be evaluated under the specific facts and circumstances of the claim to determine whether such conduct rises to the level of bad faith.
On a high level, a bad faith claim typically arises when an insurer places its own financial interests ahead of its insured’s financial interests.
For example, imagine you are clearly at-fault for causing a car accident (e.g., you run a red light and T-bone another vehicle). As a result of the crash, the other driver suffers a significant spinal injury and is required to be airlifted to a hospital. Following the crash, the other driver makes a claim against you through your auto insurance company and demands payment of your liability limits of $100,000 for settlement of their claim against you. After receiving this settlement demand, your insurance company drags their feet on investigating the claim and fails to accept the other driver’s demand for settlement within a reasonable period of time. Thereafter, the other driver withdraws their demand, files a lawsuit against you, and proceeds to obtain a judgment against you in the amount of $1 million. Under these facts, you likely have a claim for bad faith against your auto insurer arising from their failure to settle the other driver’s claim against you when it had the chance, thereby exposing you to an excess judgment in the amount of $900,000.
In determining whether a viable bad faith claim exists, Missouri courts will consider the following factors:
- Unreasonable delays in investigating or paying a claim;
- Failing to properly investigate a claim;
- Ignoring clear evidence of liability;
- Failing to disclose policy limits to a claimant;
- Failing to foresee and prevent an excess judgment;
- Failing to advise an insured regarding likelihood of an excess judgment;
- Lowball settlement offers without justification;
- Misrepresenting policy language or coverage;
- Failing to communicate;
- Refusing to defend or indemnify an insured;
- And other factors.
What Damages Can I Receive In a Missouri Bad Faith Claim?
Assuming you have a viable bad faith claim against your insurance company, you will typically be entitled to the following damages:
Contract Damages
First and foremost, you are entitled to the policy benefits owed under your insurance policy. In a bad faith claim, that means your insurance company must pay the applicable liability policy limits to the injured party.
Extra-Contractual Damages
The crux of a bad faith failure to settle a claim is that your insurance company has exposed you to an excess judgment (i.e., a judgment above your applicable liability policy limits). As such, a successful bad faith claim will require your insurance company to pay the excess judgment against you to the injured party.
If you have incurred other financial harm beyond the policy limits, this may be recoverable as well.
Punitive Damages
Punitive damages may also be available where your insurance company’s conduct is particularly egregious. Punitive damages are used to punish and deter and insurance company from such conduct moving forward.
Can I Bring a Bad Faith Claim Against My Insurance Company on an Uninsured or Underinsured Motorist Claim?
On first-party insurance claims (when you file a claim directly with your own insurance company), such as uninsured motorist and underinsured motorist claims, Missouri law does not allow bad faith claims. Rather, Missouri law permits you to bring a cause of action for breach of contract and/or vexatious refusal to pay. This distinction is critical, because bad faith remedies available in third-party claims do not apply to first-party UM/UIM claims in Missouri.
While similar to a bad faith claim in many ways, vexatious refusal to pay is a distinct cause of action authorized by statute. See RSMo. § 375.296 and 375.420. A vexatious refusal to pay claim arises where your own insurance company fails to pay you on a claim without reasonable cause.
If You Need to File a Bad Faith Case in Central Missouri, EC Duckworth Would Be Proud to Leverage His Legal Experience Against Your Insurance Company
Insurance companies are not on your side—and when they act unfairly, Missouri law gives you options. If you believe an insurance company has delayed, denied, or undervalued your personal injury claim, Duckworth Injury Law can help. We will review your situation, explain your rights, and determine whether bad faith may be involved.
Whether your mid-Missouri bad faith case involves a car accident, truck accident, motorcycle accident, or boating accident, Duckworth Injury Law ensures your legal rights are protected.
Contact Duckworth Injury Law
today for a free consultation to discuss your personal injury claim and learn how we can hold insurance companies accountable.
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