In Missouri, there is a specific statutory section which penalizes insurance companies that handle claims in bad faith. Section 375.420, RSMo, provides the following:
“In any action against any insurance company to recover the amount of any loss under a policy of automobile, fire, cyclone, lightning, life, health, accident, employers’ liability, burglary, theft, embezzlement, fidelity, indemnity, marine or other insurance except automobile liability insurance, if it appears from the evidence that such company has refused to pay such loss without reasonable cause or excuse, the court or jury may, in addition to the amount thereof and interest, allow the plaintiff damages not to exceed twenty percent of the first fifteen hundred dollars of the loss, and ten percent of the amount of the loss in excess of fifteen hundred dollars and a reasonable attorney’s fee; and the court shall enter judgment for the aggregate sum found in the verdict.”
What typically happens for this statute to come into play is that an insured attempts to recover from his or her insurance company for a loss, and the insurance company, without good reason or adequate evidence, fails to honor the contract in part or in whole. The insured/plaintiff bears burden to prove that an insurance company’s denial is vexatious. Specifically, it needs to be shown that the denial is“willful and without reasonable cause, as the facts would appear to a reasonable and prudent person.” And there need not be one piece of direct evidence to show that the refusal is vexatious; instead, a judge or jury can weigh the circumstances and surrounding facts in finding that the insurance company is acting in bad faith. The consequence of such a finding against the insurance company is a pretty hefty interest tacked onto the settlement.
Section 375.296, RSMo, provides additional damages for a vexatious refusal — but that’s a subject for a different time.
While on the subject of insurance companies, there is also statutory section that allows prejudgment interest when a demand is made on an insurance company that is refused, and later a court judgment is awarded in excess of what the initial offer was. Section 408.040, RSMo, states that:
“Notwithstanding the provisions of subsection 1 of this section, in tort actions, interest shall be allowed on all money due upon any judgment or order of any court from the date of judgment is entered by the trial court until full satisfaction. All such judgments and orders for money shall bear a per annum interest rate equal to the intended Federal Funds Rate, as established by the Federal Reserve Board, plus five percent, until full satisfaction is made. The judgment shall state the applicable interest rate, which shall not vary once entered. In tort actions, if a claimant has made a demand for payment of a claim or an offer of settlement of a claim, to the party, parties or their representatives, and to such party’s liability insurer if known to the claimant, and the amount of the judgment or order exceeds the demand for payment or offer of settlement, then prejudgment interest shall be awarded, calculated from a date ninety days after the demand or offer was received, as shown by the certified mail return receipt, or from the date the demand or offer was rejected without counter offer, whichever is earlier. In order to qualify as a demand or offer pursuant to this section, such demand must:
(1) Be in writing and sent by certified mail return receipt requested; and
(2) Be accompanied by an affidavit of the claimant describing the nature of the claim, the nature of any injuries claimed and a general computation of any category of damages sought by the claimant with supporting documentation, if any is reasonably available; and
(3) For wrongful death, personal injury, and bodily injury claims, be accompanied by a list of the names and addresses of medical providers who have provided treatment to the claimant or decedent for such injuries, copies of all reasonably available medical bills, a list of employers if the claimant is seeking damages for loss of wages or earning, and written authorizations sufficient to allow the party, its representatives, and liability insurer if known to the claimant to obtain records from all employers and medical care providers; and
(4) Reference this section and be left open for ninety days.”
Essentially, this provision accomplishes many of the same things that the vexatious refusal provision accomplishes: ensures that insurance companies honor their contractual relationships with their insureds, and punishes any such insurance companies for reasonable delays.
Because insurance companies will never discuss these statutory sections when you’re talking about a recovery, it is important to be cognizant of this law. A good attorney would be of good assistance to you in such a case…