Two different kinds of insurance fights

It depends on whose loss it is.

• Your own claim. Your insurer will not pay you for your own loss. Examples are a house fire, a theft, a health or life claim, or an uninsured driver claim.
• A claim against you. Someone sues you. Your insurer controls the defense. And it turns down a chance to settle within your policy limits.

The law treats these two situations very differently.

When your insurer will not pay your claim

Missouri calls this “vexatious refusal to pay.” It means refusing to pay without a reasonable cause. First, you must demand payment in writing and wait 30 days. If the insurer still refuses, and the refusal had no reasonable cause, a judge or jury can add a penalty and legal fees to what is owed under the policy.

This applies to most kinds of insurance, including property, life, health, accident and theft. It does not apply to the liability part of a car policy. It also does not punish an insurer that has an honest, reasonable question about coverage.

No separate “bad faith” lawsuit for your own claim, with one exception

In Missouri, if your own insurer wrongly refuses to pay, your lawsuit is for breach of the insurance contract, plus the penalty above. The Missouri Supreme Court has said there is no separate bad-faith lawsuit for that refusal alone.

But the penalty law does not block other claims. If the insurer does some other wrong while handling your claim, you can sue for that too. In one Missouri case, an insurer falsely accused its customer of setting a fire. The customer won a separate claim for the damage to his reputation.

When your insurer would not settle a lawsuit against you

This is where true “bad faith” claims come from in Missouri. It usually looks like this:

1. Someone sues you, and your policy lets the insurer control the defense and any settlement.
2. The other side offers to settle for an amount within your policy limits.
3. Your insurer refuses, and the refusal is in bad faith.
4. The case goes to trial, and the judgment is bigger than your coverage.

In that case, the insurer can be responsible for the amount above your limits. If the insured person signs this claim over to the injured person, the injured person may be able to pursue it.

Settlement demands with a deadline

In injury and wrongful death cases, Missouri has strict rules for settlement offers that come with a deadline. The offer must:

• be in writing and mention the Missouri law that covers it (§ 537.058);
• be sent to the insurer by certified mail;
• stay open at least 90 days after the insurer gets it;
• include the amount, the injuries, who and what will be released, and medical records releases.

An offer that breaks these rules does not count as a fair chance to settle. It also cannot be used later to claim bad faith. The rules do not apply to offers made within 90 days of a jury trial.

Fights over what the policy covers

Many insurance cases are really about what the policy covers. You or the insurer can ask a court to decide what the policy means. And in a lawsuit, you can ask the other side to show its insurance policy.

Missouri’s arbitration law does not force you into arbitration under an insurance policy. So most coverage fights are decided in court. If you were hurt by another driver, see talking to insurance adjusters and uninsured motorist claims.

Common questions

Related reading

• Civil litigation overview
• Uninsured motorist claims
• Talking to insurance adjusters
• Breach of contract