The elements of a bad faith claim or lawsuit against a Missouri insurance company 

In 2014,  Missouri Supreme Court identified the elements of a Missouri bad faith claim (what lawyers are required to prove to a jury)  as:

• (1) The liability insurer reserves the exclusive right to contest or settle the claim to themselves;
• (2) The liability insurer prohibits the insured from voluntarily assuming any liability or settling any claims without consent; and
• (3) The liability insurer is guilty of fraud or bad faith in refusing to settle a claim within the limits of the policy. 

Scottdale Ins. Co v. Addison Ins. Co., 448 S.W.3d 818, 827 (Mo. Banc 2014).

Determining if the Missouri bad faith elements are met, and if a valid claim against an insurance carrier can proceed, is not simple.  The Missouri Supreme Court has stated that the analysis is unique “in each case upon its particular state of facts.”   Zumwalt.  

The first and second elements, that the Missouri insurer company (either directly or through a third party claims administrator) has “assumed control” over the negotiations and that the insured is prohibited from assuming liability or settling, are rarely an issue.  Almost every insurance (whether automobile, home, commercial, business, or professional) policy written in Missouri gives the insurance carrier the right to negotiate and/or settle a claim they accept coverage of.  Of course, if the insurance carrier fails to defend the claim, or defends under a reservation of rights, then this element may not be met.  

The third element is the one that is typically at issue because insurance companies will rarely, if ever, admit that they violated Missouri law and acted in bad faith or are guilty of fraud.  The issues of bad faith and/or fraud are matters for jury resolution.  See e.g. Rinehart v. Shelter General Ins. Co., 261 S.W.3d 583 (Mo. App. W.D. 2008); Zumwalt v. Utilities Ins. Co., 228 S.W.2d 750, 754 (Mo. 1950).

Examples of evidence of insurance bad faith in Missouri:

• 1. The insurance company “gambles” that it a jury verdict will be less than the policy limits, and the verdict ends up being higher.  This is considered one of the “classic” bad faith examples.  Zumwalt v. Utilities Ins. Co., 228 S.W.2d 750 (Mo. 1950).
• 2. The insurance carrier wrongfully denies coverage and refuses to accept settlement offers within the policy limits.  This is also considered a “classic” example of bad faith in Missouri.  Landie v. Century Indemnity Co, 390 S.W.2d 558 (Mo. App. 1965).
• 3. The insurance company fails to investigate a claim.  Maryland Casualty Co. v. Elmira Coal Co., 69 F.2d 616 (8^th Cir. 1934).
• 4. An insurance company failing to respond to a settlement offer made by a plaintiff/claimant.  Johnson v. Allstate, 262, SW.3d 655 (Mo. App. W.D. 2008).
• 5. Circumstantial evidence of the bad faith state of mind of a Missouri insurance company.  Rinehart v. Shelter General Ins. Co., 261 S.W.3d 583, 591 (Mo. App. W.D. 2008).
• 6. Failure to comply with national standards for insurance carriers regarding “good faith” claims handling practices.  Johnson v. Allstate, 262, SW.3d 655, 663 (Mo. App. W.D. 2008).
• 7. Failure to comply with an insurance company’s own claims handling manual.  Johnson v. Allstate, 262, SW.3d 655, 663 (Mo. App. W.D. 2008).
• 8. Failing to keep an insured advised of the possible consequences of a claim.  Johnson v. Allstate, 262, SW.3d 655, 663 (Mo. App. W.D. 2008).
• 9. Failing to consider the interests of the insured when making a coverage decision. Shobe v. Allstate, 279 S.W.3d, 211 (Mo. App. 2009).
• 10. Adjustor starting with a presumption of no coverage, before the evaluation was complete.  Shobe v. Allstate, 279 S.W.3d, 211 (Mo. App. 2009).
• 11. Placing its own interests above its customer/insured’s interests.  Landie v. Century Indemnity Co, 390 S.W.2d 558, 566 (Mo. App. 1965).
• 12. Failing to advise the customer/insured of settlement offers made by the claimant/plaintiff. Rinehart v. Shelter General Ins. Co., 261 S.W.3d 583, 596 (Mo. App. W.D. 2008).
• 13. Failing to advise the insured of the potential for a judgment in excess of the policy limits.  Johnson v. Allstate, 262, SW.3d 655, 662 (Mo. App. W.D. 2008).
• 14. The insurance carrier focuses on coverage and fails to consider the damages of the plaintiff/claimant and/or the liability of their insured. Landie v. Century Indemnity Co, 390 S.W.2d 558, 566 (Mo. App. 1965).
• 15. Making inconsistent representations to multiple claimants involved in the same accident.  Rinehart v. Shelter General Ins. Co., 261 S.W.3d 583, 596 (Mo. App. W.D. 2008).
• 16. Prior claims handling practices that were in bad faith.  Rinehart v. Shelter General Ins. Co., 261 S.W.3d 583, 590 (Mo. App. W.D. 2008)..