Statutory Changes in Missouri Lead to Blue Skies Ahead for Insurance Companies Facing Bad Faith Set-Ups and Collateral Source Rule Issues

Recent legislation signed by Missouri Governor Eric Greitens is expected to promise procedural relief from bad faith set-ups in Missouri as well as provide clarity regarding the collateral source rule.

New Legislation Affecting Bad Faith Set-Ups

Section 537.065 of the Missouri Revised Statutes allows claimants and insureds to contract to limit recovery to insurance coverage. This statute is unique to Missouri, as no other states have established such a practice by statute. Typically, the insured, while knowing that he will not be held personally responsible, agrees to either settle the claim or to not legally oppose the tort victim’s prosecution of the claim at trial. Post-trial the insurer is limited to disputing only the legal conclusion of whether coverage existed and usually barred from re-litigating any other aspect of the suit. These agreements are often used to pressure the insurance company into providing a defense where there may not be coverage or to pay policy limits on questionable claims.  They are also used as schemes whereby insureds and claimants work in concert to obtain coverage and create inflated damage awards at uncontested bench trials.

Effective August 28, 2017, Missouri House Bills 339 and 714 repeal section 537.065 and enact a new section 537.058, as well as a revised section 537.065 (as signed by Gov. Greitens). The new law will help curb the abuses associated with section 537.065 agreements by allowing insurers to intervene in underlying lawsuits. By participating in the underlying lawsuit, the insurer will be able to present a more accurate picture on liability, damages, and coverage issues. The bills further provide that an insured cannot enter into such a settlement agreement with a claimant if the insurer is providing the insured a defense without reservation, under the reasoning that an insured should not be allowed to enter into an unauthorized settlement agreement if an insurer defends without qualification. When an insurer defends under the policy, the insurer is fulfilling its policy obligations and should expect the insured to comply with its corresponding policy obligations, including the duty to cooperate and refusal to pay provisions.  As such, section 537.065, as amended, adds the following procedural protections: Continue reading »

What to Do When You Are Served with a Lawsuit

For many individuals and businesses, being served with a lawsuit is an uncommon, or possibly even a once-in-a-lifetime, situation. Litigation can be stressful and being served with a lawsuit is often surprising as well.  However, in all situations when you or your business is served with a lawsuit, there are three simple, basic steps to best preserve your rights and protect yourself from the outset.

1. Make Some Quick Notes

Often, as a result of the frustration or surprise associated with being served with a lawsuit, most people don’t pay attention to the details of how they were served. These details can be very important. There are specific rules and procedures about proper service of lawsuits, depending on the type of lawsuit and the court.

Take a few minutes to jot down notes related to the service. Specifically, identify the date and time of service, the manner of service including whether a sheriff or process server handed you papers or if the lawsuit was received by first-class or certified mail, and the recipient of those papers. These may be important facts for your attorney to know in determining whether or not service was proper and if you should contest service as a result.

Also, don’t assume that service is improper without getting legal advice. In some instances, service by mail or serving papers on your 16 year old son or daughter when you are not home can be proper service. Continue reading »

False Economy: Why Saving a Few Dollars on Legal Fees Now Can Cost You Big Later

• You’re about to sign a lease for your company’s new premises. Should you have a lawyer review it, or save the money?
• You’re about to sign an employment agreement with your new employer. Should you have a lawyer review it, or save the money?
• You and your best friend are going to start a new business. Should you have a lawyer advise you, or get the forms off the internet and save the money?

Both in jest and with some seriousness, business people, especially entrepreneurs, tend to view lawyers skeptically. Their perception is that lawyers run up fees, make simple transactions complicated, and sometimes cause deals to fall apart completely with all of their questions.

This is a short-sighted view of how attorneys can help you and your business. Experienced business minds understand that lawyers, when properly used at the beginning of a transaction rather than later after problems have developed, can be problem avoiders. And a problem avoided can be big money saved.

In the lease situation above, for example, your lawyer would be sure that you signed the lease in such a way that only your company, not you personally, would be liable. She might negotiate a provision that you don’t pay any rent while the space is being readied for your occupancy or for reduced rent if the landlord doesn’t provide promised services. An experienced attorney has seen a lot of leases, and knows the traps they often contain.

Lawyers aren’t deal breakers. Their job is to point out the potential risks in a transaction so you, the client, can decide whether those risks are worth the potential benefits of proceeding. If the risk/reward ratio isn’t to your liking, then YOU break the deal. If the risk is acceptable, then you proceed. In either event, you have made the decision in an informed and practical manner. You are in control; your lawyer, like all of your professional service providers, works for you. Your attorney’s role is to provide advice, share wisdom and insight, and help you make the business decisions. Continue reading »