July 1, 2021
New Missouri Legislation Significantly Revises Statutes Affecting Insurers
On June 29, 2021, Missouri’s Governor signed into law House Bill 345. House Bill 345 repeals and replaces RSMo Sections 435.415 and 537.065, and becomes effective August 28, 2021.
RSMo 435.415 permits arbitration awards to be entered as a judgment and enforced as any other judgment or decree. Under the amended version, unless a liability insurer agrees in writing to the arbitration proceeding, any arbitration award or judgment is not: (1) binding on the insurer, (2) admissible in evidence in any lawsuit against the insurer for any party to the arbitration award, or (3) a basis for any garnishment or other judgment or decree against the insurer. The amended statute further provides that an insurer’s election not to participate in an arbitration proceeding shall not constitute, nor be construed to be, bad faith.
RSMo 537.065 permits a claimant to enter a contract not to execute against a tort-feasor or his/her insurer, except against specific assets listed in the contract and subject to certain other statutory requirements. Under the amended version, the contract not to execute or to limit recovery to specified assets can only be entered if the tort-feasor’s insurer has refused to withdraw a reservation of rights or declined coverage. Previously, the law was not clear whether an insured must give its insurer an opportunity to withdraw a reservation of rights.
The amended version of 537.065 also requires a tort-feasor to provide a copy of the executed contract not to execute or to limit recovery, and a copy of the action seeking judgment on a claim against the tort-feasor, to his/her insurer within 30 days of three different triggering events:
RSMo 435.415 permits arbitration awards to be entered as a judgment and enforced as any other judgment or decree. Under the amended version, unless a liability insurer agrees in writing to the arbitration proceeding, any arbitration award or judgment is not: (1) binding on the insurer, (2) admissible in evidence in any lawsuit against the insurer for any party to the arbitration award, or (3) a basis for any garnishment or other judgment or decree against the insurer. The amended statute further provides that an insurer’s election not to participate in an arbitration proceeding shall not constitute, nor be construed to be, bad faith.
RSMo 537.065 permits a claimant to enter a contract not to execute against a tort-feasor or his/her insurer, except against specific assets listed in the contract and subject to certain other statutory requirements. Under the amended version, the contract not to execute or to limit recovery to specified assets can only be entered if the tort-feasor’s insurer has refused to withdraw a reservation of rights or declined coverage. Previously, the law was not clear whether an insured must give its insurer an opportunity to withdraw a reservation of rights.
The amended version of 537.065 also requires a tort-feasor to provide a copy of the executed contract not to execute or to limit recovery, and a copy of the action seeking judgment on a claim against the tort-feasor, to his/her insurer within 30 days of three different triggering events:
- If an action is pending when the contract is signed, within 30 days of execution;
- If an action is pending when the contract is signed but thereafter dismissed, within 30 days after the action is refiled or a subsequent action is filed; or
- If no action is pending when the contract is signed, within 30 days after the tort-feasor receives notice of any subsequent action, by service of process or otherwise.
Amended 537.065 further provides that no judgment shall be entered against any tort-feasor for at least 30 days after the insurer receives the written notice with a copy of the executed contract and copy of the action. Any insurer who receives that notice has an unconditional right to intervene within 30 days in any pending civil action involving the claim for damages. Upon intervention, the intervenor has all rights afforded to Missouri defendants, including the rights to conduct discovery, engage in motion practice, have a jury trial, and to assert or raise any defenses that would have been available to tort-feasor in absence of a contract.
In addition, 537.065 now provides that a contract not to execute or to limit recovery to specified assets shall be admissible in evidence in any action for bad faith. Moreover, the exercise of any rights under the section shall not constitute, nor be construed to be, bad faith.
This amended section further requires all contracts not to execute or to limit recovery to specified assets, regardless of whether referred to as a contract under 537.065, be in writing and signed by the parties. No unwritten term of any covenant not to execute or to limit recovery is enforceable.
If you would like to discuss these amendments to Missouri law or any aspect of Missouri insurance law, please contact Cody S. Moon at 312.585.1430 or cmoon@nicolaidesllp.com.
In addition, 537.065 now provides that a contract not to execute or to limit recovery to specified assets shall be admissible in evidence in any action for bad faith. Moreover, the exercise of any rights under the section shall not constitute, nor be construed to be, bad faith.
This amended section further requires all contracts not to execute or to limit recovery to specified assets, regardless of whether referred to as a contract under 537.065, be in writing and signed by the parties. No unwritten term of any covenant not to execute or to limit recovery is enforceable.
If you would like to discuss these amendments to Missouri law or any aspect of Missouri insurance law, please contact Cody S. Moon at 312.585.1430 or cmoon@nicolaidesllp.com.