Missouri does not recognize a common law right to bring an action for the breach of the conversant of good faith and fair dealing for a first party property insurance claim. Instead, Missouri statutory law allows policyholders the right to hold insurance companies accountable for their “vexatious” refusal to pay.

I wrote about Missouri’s vexatious refusal to pay laws eight years ago in Vexatious Refusal to Pay Insurance Claims in Kansas City, Missouri. I noted that the specific jury instruction and law that allows a policyholder to obtain a penalty as well as reasonable attorney fees against the insurer.

In a decision rendered on Tuesday,1 a Missouri federal district court discussed the Missouri vexatious refusal to pay laws and updated the law which I previously cited:

Under Missouri law, an insured party may recover damages and attorney’s fees when an insurance company refuses to pay for a ‘loss under a policy’ if the company ‘has refused to pay such loss without reasonable cause or excuse.’ MO. REV. STAT. § 375.420. When an insured party alleges its insurer vexatiously refused to pay an insurance claim, the insured must prove: (1) the existence of an insurance policy with the insurer; (2) that the insurer refused to pay the insured’s losses; and (3) the insurer’s refusal was without reasonable cause or excuse. Qureshi v. Am. Family Mut. Ins. Co., 604 S.W.3d 721, 727 (Mo. App. E.D. 2020).

‘[W]hether an insurer’s refusal to pay is vexatious or not must be determined by the situation as presented to the insurer at the time it was called on to pay.’ Russell v. Farmers & Merchs. Ins. Co., 834 S.W.2d 209, 221 (Mo. App. S.D. 1992)….’Generally, whether an insurer acted reasonably is a question of fact for the jury, and thus is improper for a court to determine in granting a summary judgment.’ Welsh v. Nationwide Affinity Ins. Co. of Am., No. 17-CV-00090, 2017 WL 7037744, (W.D. Mo. Dec. 6, 2017)….The statutes governing vexatious refusal are ‘penal in nature and narrowly construed; their purpose is to deter the insurer from vexatiously refusing to pay after becoming aware it has no meritorious defense to the insured’s claim.’

. . . .

Vexatious refusal claims have been upheld by Missouri courts where an insured’s ‘refusal is based upon a suspicion, rather than a reasonable inference of established facts.’

. . . .

Furthermore, under Missouri law ‘direct and specific evidence to show vexatious refusal is not required,’ and a jury ‘may find vexatious delay upon a general survey and a consideration of the whole testimony and all the facts and circumstances in connection with the case.’

The last part of the court’s discussion is important and often overlooked. Good faith adjustment requires insurance adjusters to make decisions based on facts, not speculation, following a full investigation. Often when an insurer makes wrong decisions, the insurer’s investigation does not establish facts because the investigation is not thorough and creates mere speculation, which is then used to deny claims.

Insurers that look to deny claims often only look at evidence in one way, do not consider competing views, and do not want the full facts that would demonstrate coverage or greater amounts owed. Full investigation for those insurers requires more money to do the adjustment job properly and may provide reasons to pay more. No wonder full investigation is a good faith duty that insurers looking to do their job in good faith teach their claims staff and require from their independents.

Policyholders in Missouri have rights when an insurance company treats them wrongly. The statutory law provides a penalty, and juries are allowed to enforce those against wrongfully delaying and denying insurance companies.

Thought For The Day

In Missouri, where I come from, we don’t talk about what we do – we just do it. If we talk about it, it’s seen as bragging.
—Brad Pitt
1 Competitive Services International v. Midwest Family Mutual Ins. Co., No. 19-395 (W.D. Mo. June 1, 2021).