How Missouri courts see through the insurance industry's arguments.
Dec. 2016  |  Bad Faith Update  |  Vol. 3 Iss. 2

Wunderlich v. Wunderlich

Reworking the Carriers Procedural
Process for Intervention

R.S.Mo. §537.065 agreements and a carrier’s right to intervene in underlying liability actions to control the defense of an insured after the entry of such agreement are often highly litigated. Carriers often attempt to intervene in the underlying liability action claiming a ‘right’ to protect its interest in that litigation.

Fortunately, Missouri courts (including the Western District Court of Appeals) have seen through the insurance industry's arguments.

Wunderlich v. Wunderlich & National General Insurance Online, Inc.
The Wunderlich case stems from an auto accident in which Sharon Wunderlich (Wife) was operating a BMW when she struck and injured Jeffrey Wunderlich (Husband). At the time of the collision, Wife was insured by National General Insurance Online, Inc. with policy limits of $250,000.
Following the accident, Husband sent a policy limits demand to National General and enclosed medical bills totaling over $200,000. National General did not respond to this demand. Wife’s attorney then sent a demand to National General asking that National General settle the case for policy limits. When National General again failed to respond, Wife requested her claims file and filed a complaint with the Department of Insurance when National General failed to produce the claims file.
Husband eventually filed suit and National General attempted to enter an appearance on behalf of Wife. Wife rejected National General’s attempt to defend and informed National General that Wife was looking into resolving the matter pursuant to a .065 agreement.
In response, National General agreed to waive any policy limits and defend without reservation in exchange for Wife cooperating in the defense of Husband’s lawsuit. National General further informed Wife that it would not consent or be a party to a .065 agreement and if Wife entered into a .065 agreement, National General would view this as a violation of the cooperation clause.
Wife ultimately rejected National General’s offer of a defense and entered into a .065 agreement with Husband. Husband’s lawsuit was then set to proceed to a bench trial.
National General filed a Motion to Intervene as a matter of right. The trial court denied this Motion and National General appealed.
Initial Western District Decision
The Western District initially affirmed the denial of National General’s Motion to Intervene.
In doing so, the Court noted that to have a right to intervene, a carrier must show that there has been an actual claim for indemnity meaning that all coverage questions must be resolved and “the injured party [must have] obtained a judgment against the tortfeasor and…demanded the carrier pay the judgment.”  In the present case, Husband had not yet obtained a judgment against Wife and there had been no demand that the carrier pay the non-existent judgment. The Court determined that even though National General had agreed to defend without reservation and had waived its policy limits, it still had no direct interest to justify intervention.
In its original decision, the Court followed well established Missouri law that a carrier has no interest sufficient to warrant intervention prior to a judgment being entered against its insured. While these cases have generally dealt with a carrier attempting to intervene when defending under a reservation of rights, the Court properly held that this distinction did not alter the application of the case law to the present case.
Opinion Withdrawn
However, the Western District withdrew its initial opinion on November 9, 2016 in light of State ex rel. Koster v. Conoco Phillips Co., 493 S.W.3d 397 (Mo. banc 2016). The Conoco Phillips decision overruled previous case law that had stated that the denial of a motion to intervene was immediately appealable. Instead, Conoco Phillips held that a proposed intervenor can only appeal from a final judgment (i.e. after the tort claim is reduced to judgment).
In all likelihood, National General’s appeal will be dismissed as premature. The tort action has not been reduced to judgment and the denial of the Motion to Intervene appears to be an interlocutory order.
Following the finality of any judgment in the tort action, Conoco Phillips seems to permit National General to reassert its appeal of the denial of its motion to intervene. It would seem unlikely that the Western District’s opinion would change significantly and the issue appears to be only one of timing.
Other Pertinent Issues
While not fully addressed by the Western District in its initial opinion, National General and Wife appear to acknowledge that a coverage issue regarding the cooperation clause may be implicated. This of course stems from Wife entering into an .065 agreement with Husband after National General agreed to defend without a reservation (and without limits to indemnity).
National General is free to assert this argument in future litigation but Wife’s right to enter into the .065 agreement was likely triggered by National General’s claims handling misconduct including failing to settle within the policy limits, failing to even respond to Husband’s settlement demands, failing to respond to Wife’s demand for the claim file and failing to inform or forward Husband’s settlement demands to Wife.
These inactions by National General are evidence of a breach of contract and bad faith and are sufficient to permit an insured to enter into an .065 agreement without violating the cooperation clause. See Johnson v. Allstate; Truck Ins. Exch. v. Prairie Framing, LLC; Hyatt Corp. v. Occidental Fire & Cas. Co.
National General had every opportunity to protect its rights and more importantly Wife’s rights and interests. The failure to do so permitted Wife to take action to protect her interests and hold National General accountable for its repeated failures.
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