Missouri Supreme Court Decides Bad Faith Case
In a recent Missouri Supreme Court decision, the Court held that insureds may assign bad faith claims against a primary insurer to an excess insurer. Presley & Presley was asked to assist in preparing an Amicus Brief on behalf of MATA and we wanted to share this important case with you in this month’s issue of Bad Faith Update.
Scottsdale Insurance Company and Wells Trucking, Inc., v. Addison Insurance Company
The case arose from an automobile accident in which a Wells Trucking vehicle struck another vehicle, killing the other driver.
Wells Trucking’s primary insurer was Addison, with umbrella coverage provided by Scottsdale. The decedent’s survivors offered to settle their claim for $1,000,000, the limit of the Addison policy. However, Addison refused to settle despite a demand to do so from both Wells Trucking and Scottsdale.
The parties eventually settled for $2,000,000, requiring Scottsdale to pay the second million.
Scottsdale sued Addison to recover the $1,000,000 it paid to settle the lawsuit under a theory of bad faith failure to settle within the underlying policy limits.
The circuit court granted summary judgment to Addison, holding that there is no duty of good faith between primary and excess insurers and that Missouri law does not permit the assignment of a bad faith failure to settle claim.
Scottsdale appealed the verdict to Missouri’s Western District Court of Appeals, which in an exhaustively researched twenty page opinion, reversed the trial court and tried to adopt the rule that an excess insurer could recover under a theory equitable subrogation.
The Appellate Court reasoned that Scottsdale “stood in the shoes” of Wells Trucking when making its settlement payment and, thereby, accrued any cause of action that Wells would have had against Addison.
The appellate court also addressed some confusion in Missouri bad faith precedent, including whether such claims were assignable and if a demand to settle by the insured is a necessary element.
Missouri Supreme Court
The Missouri Supreme Court accepted transfer of the case and oral arguments were held on May 7, 2014. The Court concluded, as the Western District had, that Scottsdale could bring a claim for its $1,000,000 payment under theories of either conventional or equitable subrogation, although it declined to recognize a direct duty of good faith between the carriers.
The Court’s decision will have a broad impact on bad faith litigation, extending beyond the duties of primary insurers to excess carriers. The decision largely followed Presley and Presley’s amicus brief and adopted the rule that bad faith claims are contractual and therefore assignable, unlike personal torts which may not be assigned.
Missouri has now joined the majority of jurisdictions that have addressed this question, holding that the judgment creditor can be assigned the bad faith claim.
Click here to view Presley and Presley’s amicus brief and here (court login required) to read the Court’s decision. Many thanks to Tom Hershewe of Dollar, Burns, & Becker who assisted in the Amicus Brief.
Need Assistance with a Bad Faith Situation?
If you have any questions regarding bad faith insurance claims or litigation, please contact Kirk Presley for more information on how Presley & Presley can help you.