Insurance Bad Faith Demand Letter - Missouri

INSURANCE BAD FAITH DEMAND LETTER

State of Missouri

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION — FOR COMPROMISE PURPOSES ONLY
PROTECTED UNDER MO. R. EVID. 408 AND FED. R. EVID. 408

TIME-LIMITED DEMAND UNDER MO. REV. STAT. § 537.058

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [ADJUSTER_EMAIL]

Date: [__/__/____]

[INSURANCE_COMPANY_NAME]
[CLAIMS_DEPARTMENT_ADDRESS]
[CITY], [STATE] [ZIP]

Attention: [ADJUSTER_NAME], [ADJUSTER_TITLE]

Re: FORMAL BAD FAITH / VEXATIOUS REFUSAL DEMAND — MISSOURI LAW
Insured: [________________________________]
Claimant: [________________________________]
Policy Number: [________________________________]
Claim Number: [________________________________]
Date of Loss: [__/__/____]
Location: [____________] County, Missouri
Policy Limits: $[____________]
Response Deadline: [__/__/____] (Not less than ninety (90) days from receipt, as required by Mo. Rev. Stat. § 537.058)

Dear [ADJUSTER_NAME]:

I. INTRODUCTION AND NATURE OF DEMAND

This firm represents [CLIENT_NAME] ("our client" or "the Claimant") in connection with the above-referenced insurance claim arising under the laws of the State of Missouri. This letter serves a dual purpose:

(1) It is a formal time-limited demand within the meaning of Mo. Rev. Stat. § 537.058 for tender of the full policy limits in settlement of all claims against the Insured, [INSURED_NAME]; and

(2) It places [INSURANCE_COMPANY_NAME] ("the Company" or "[CARRIER_SHORT_NAME]") on formal notice that any failure to protect its Insured from an excess judgment will constitute bad faith refusal to settle under the doctrine recognized by the Missouri Supreme Court in Zumwalt v. Utilities Insurance Co., 228 S.W.2d 750 (Mo. 1950), and reaffirmed in Scottsdale Insurance Co. v. Addison Insurance Co., 448 S.W.3d 818 (Mo. banc 2014).

This demand is made in strict compliance with § 537.058. It is in writing, is sent by certified mail (return receipt requested), identifies all parties and claims, specifies the damages demanded, and provides a minimum of ninety (90) days for acceptance. A copy of the supporting documentation is enclosed and available for inspection as provided below.

II. MISSOURI BAD FAITH LAW — DUAL FRAMEWORK

Missouri recognizes two distinct frameworks for insurer misconduct:

A. First-Party: Vexatious Refusal to Pay (§ 375.420)

Missouri does not recognize an independent common-law tort for first-party bad faith breach of contract. Overcast v. Billings Mut. Ins. Co., 11 S.W.3d 62, 68–69 (Mo. banc 2000). Instead, the Legislature provides a statutory remedy under § 375.420:

"In any action against any insurance company to recover the amount of any loss under a policy... 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..."

The standard is "willful and without reasonable cause, as the facts appear to a reasonable and prudent person before trial." Watters v. Travel Guard Int'l, 136 S.W.3d 100 (Mo. App. E.D. 2004); Dhyne v. State Farm Fire & Cas. Co., 188 S.W.3d 454 (Mo. banc 2006). The trier of fact may infer vexatiousness from the insurer's entire course of conduct — including pre-suit investigation, evaluation, reserving, and litigation posture.

B. Third-Party: Bad Faith Refusal to Settle Within Limits (Zumwalt)

Missouri recognizes a common-law tort against liability insurers that refuse to settle within policy limits when a reasonable insurer would have accepted a settlement demand. The elements under Zumwalt and Scottsdale are:

1. The insurer reserved the exclusive right to contest or settle the claim;
2. The insurer had the right to prohibit settlement by the insured;
3. The insurer's duty of good faith arose from these rights;
4. The insurer failed to exercise such good faith; and
5. Judgment in excess of the policy limits was entered against the insured.

Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 828 (Mo. banc 2014); Shobe v. Kelly, 279 S.W.3d 203 (Mo. App. W.D. 2009); Ganaway v. Shelter Mut. Ins. Co., 795 S.W.2d 554 (Mo. App. S.D. 1990).

Critically, Missouri's bad faith refusal to settle cause of action is assignable by the insured to the claimant. Scottsdale, 448 S.W.3d at 828–29. The damages recoverable include the full amount of the excess judgment, not merely the policy limits.

C. Statutory Reform: §§ 537.058 and 537.065 (2017/2021 Amendments)

Missouri's bad faith litigation landscape was substantially reformed by 2017 legislation (effective August 28, 2017) and further refined by 2021 amendments:

§ 537.058 establishes formal requirements for time-limited demands against liability insurers:

• Must be in writing
• Must be sent by certified mail, return receipt requested
• Must reference § 537.058 and state it is a time-limited demand
• Must allow at least 90 days for acceptance
• Must identify the claimant and include medical records, bills, and income loss documentation (or make them available)
• Must include a release proposal

Only time-limited demands that comply with § 537.058 can support a subsequent bad faith refusal to settle claim.

§ 537.065 governs covenants not to execute (commonly called "537.065 agreements") where the insured and claimant agree to limit recovery to the insurer's policy proceeds:

• No judgment may be entered against the insured until the insurer receives written notice and has at least thirty (30) days to intervene as a matter of right
• Any § 537.065 agreement is admissible in evidence in any subsequent bad faith action
• The insurer has an absolute statutory right to intervene

This letter is intended to create the evidentiary predicate required for any future § 537.065 agreement and subsequent bad faith set-up under Scottsdale.

III. POLICY INFORMATION AND COVERAGE

A. Policy Details

B. Coverage Analysis

The loss arises from [DESCRIBE_CLAIM_TYPE]. Coverage is clear under the policy's insuring agreement. No exclusion applies. [CARRIER_SHORT_NAME] [☐ has acknowledged coverage / ☐ is defending under reservation of rights].

Missouri applies standard insurance contract construction principles:

• Policies are construed as a whole — Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129 (Mo. banc 2007)
• Ambiguities are construed against the drafter — Peters v. Emp'rs Mut. Cas. Co., 853 S.W.2d 300 (Mo. banc 1993)
• Exclusions are construed narrowly — Rodriguez v. Gen. Accident Ins., 808 S.W.2d 379 (Mo. banc 1991)
• Coverage is interpreted to protect the reasonable expectations of the insured

Having accepted coverage, the Company owes [INSURED_NAME] the duties recognized in Scottsdale: to conduct a fair and objective investigation, evaluate settlement opportunities reasonably, keep its Insured informed, and give the Insured's interests equal consideration to its own.

IV. FACTUAL BACKGROUND AND CLAIM HISTORY

A. The Underlying Loss

On [__/__/____], [DESCRIBE_LOSS_EVENT_IN_DETAIL], resulting in [DESCRIBE_INJURIES/DAMAGES] to our client.

[ADDITIONAL_LOSS_DETAILS]

B. Clear Liability Against the Insured

The Insured, [INSURED_NAME], is clearly liable under Missouri law because:

1. Duty: [DESCRIBE_DUTY_OWED]
2. Breach: [DESCRIBE_BREACH] — supported by [EVIDENCE]
3. Causation: [DESCRIBE_CAUSATION]
4. Damages: [SUMMARY]

Missouri applies pure comparative fault under Gustafson v. Benda, 661 S.W.2d 11 (Mo. banc 1983). Our client bears no comparative fault.

C. Chronology of [CARRIER_SHORT_NAME]'s Claim Handling

V. SPECIFIC BAD FAITH CONDUCT UNDER MISSOURI LAW

A. Failure to Conduct a Reasonable Investigation

The Company's investigation fell below the standard required under Dhyne v. State Farm, 188 S.W.3d 454 (Mo. banc 2006):

• [INVESTIGATION_FAILURE_1]
• [INVESTIGATION_FAILURE_2]
• [INVESTIGATION_FAILURE_3]

B. Failure to Give Equal Consideration to the Insured's Interests

Under Scottsdale, 448 S.W.3d at 828, a Missouri liability insurer must give the Insured's interests "at least equal consideration" to its own. [CARRIER_SHORT_NAME]'s refusal to settle within policy limits when liability and damages are clear constitutes a breach of this fiduciary-like duty.

C. Unreasonable Settlement Offers

D. Unreasonable Delay

[CARRIER_SHORT_NAME] has violated 20 C.S.R. 100-1.030 and Missouri's UCSPA (§ 375.1007) by:

☐ Failing to acknowledge communications within 10 working days
☐ Failing to begin investigation within 10 working days
☐ Failing to accept or deny within 15 working days after proof
☐ Failing to communicate the basis for denial in writing

E. Failure to Advise Insured of Settlement Opportunity / Excess Exposure

A Missouri liability insurer must inform its Insured of settlement demands, the possibility of excess judgment, and the right of independent counsel. Truck Ins. Exch. v. Prairie Framing, LLC, 162 S.W.3d 64 (Mo. App. W.D. 2005). [DESCRIBE_FAILURE]

F. Misrepresentation of Policy Provisions

[DESCRIBE_MISREPRESENTATIONS] — in violation of § 375.1007(1).

VI. STATUTORY VIOLATIONS — MISSOURI UCSPA (§§ 375.1000 to 375.1018)

[CARRIER_SHORT_NAME]'s conduct violates numerous provisions of the Missouri Unfair Claims Settlement Practices Act:

• § 375.1007(1) — Misrepresenting policy provisions
• § 375.1007(2) — Failing to acknowledge communications promptly
• § 375.1007(3) — Failing to adopt reasonable investigation standards
• § 375.1007(4) — Refusing to pay without reasonable investigation
• § 375.1007(5) — Failing to affirm or deny coverage within reasonable time
• § 375.1007(6) — Not attempting good-faith settlement where liability is reasonably clear
• § 375.1007(7) — Compelling litigation by offering substantially less than reasonable value
• § 375.1007(14) — Failing to provide reasonable explanation of denial

Although the UCSPA does not create a private cause of action, these violations are admissible as evidence of vexatious refusal under § 375.420 and provide grounds for regulatory enforcement by the Missouri Department of Commerce and Insurance.

VII. DAMAGES

A. Contract Damages

B. Excess Exposure Analysis (Scottsdale)

A jury in [____________] County, Missouri — applying MAI and pure comparative fault — would reasonably return a verdict of not less than $[____________], which vastly exceeds the available policy limits of $[____________]. The projected excess judgment exposure to the Insured is therefore approximately $[____________].

C. Statutory Penalties (First-Party Context)

If this claim is a first-party claim, our client will seek statutory damages under § 375.420:

• 20% of the first $1,500 of the loss = up to $300
• 10% of the loss in excess of $1,500 = $[________]
• Reasonable attorney's fees = $[________]

Where applicable, additional penalty under § 375.296 (death/disability policies).

D. Prejudgment Interest

Under Mo. Rev. Stat. § 408.020, our client is entitled to prejudgment interest at 9% per annum on liquidated amounts, accruing from [__/__/____].

E. Punitive Damages

Under Missouri law, punitive damages require proof by clear and convincing evidence that the defendant intentionally harmed the plaintiff or acted with a conscious disregard for the rights of others. Mo. Rev. Stat. § 510.261. Punitive damages are capped at the greater of $500,000 or five times the net compensatory damages. Mo. Rev. Stat. § 510.265. Because bad faith is an intentional tort, punitive damages are routinely awarded in Zumwalt/Scottsdale cases.

VIII. DEMAND — TENDER POLICY LIMITS

A. Monetary Demand

Pursuant to Mo. Rev. Stat. § 537.058, we hereby demand that [CARRIER_SHORT_NAME] tender the full policy limits of $[____________] in full and final settlement of all claims against [INSURED_NAME] arising from the [__/__/____] loss. This demand is supported by the documentation enclosed herewith and any additional records available upon reasonable request.

B. Release Terms (§ 537.058 Compliance)

In exchange for tender of policy limits, our client will execute:

1. A full and final release of [INSURED_NAME] as to all claims arising from the [__/__/____] loss;
2. The release will be limited to the named Insured and shall not release any non-insured tortfeasors;
3. Our client will indemnify and hold harmless [INSURED_NAME] against any known medical liens up to the amount of such liens;
4. Release will be delivered within 30 days of receipt of the policy limits check.

C. Supporting Documentation (§ 537.058(2)(c))

Enclosed or available for inspection:

• Medical records from [PROVIDERS]
• Itemized medical bills
• Wage loss documentation
• Photographs / crash report / relevant exhibits
• Expert reports (if applicable)

IX. SECTION 537.058 TIME-LIMITED DEMAND — STRICT COMPLIANCE

THIS DEMAND IS MADE PURSUANT TO MO. REV. STAT. § 537.058 AND IS A "TIME-LIMITED DEMAND" AS DEFINED BY THAT STATUTE.

Effective Date: This demand is effective upon receipt by [CARRIER_SHORT_NAME].

Deadline for Acceptance: [__/__/____] at 5:00 p.m. Central Time — a period of not less than ninety (90) days as required by § 537.058(2)(d).

Method of Acceptance: Acceptance must be unequivocal, in writing, and accompanied by tender of the full policy limits in cleared funds. Any counter-offer, conditional acceptance, or request for additional terms shall constitute rejection.

Effect of Rejection: Rejection (or failure to accept) will terminate any opportunity to protect the Insured from an excess judgment and will establish the factual predicate for a bad faith refusal-to-settle action under Scottsdale Insurance Co. v. Addison Insurance Co., 448 S.W.3d 818 (Mo. banc 2014).

X. SECTION 537.065 NOTICE — BAD FAITH SET-UP PRESERVATION

If this demand is not accepted, our client reserves all rights to enter into a Section 537.065 agreement with [INSURED_NAME] upon full compliance with the statutory notice and intervention procedures. Specifically:

1. Written notice of any such agreement will be provided to [CARRIER_SHORT_NAME];
2. [CARRIER_SHORT_NAME] will be afforded 30 days to intervene as a matter of right;
3. No judgment will be entered against [INSURED_NAME] during the 30-day intervention window;
4. Any § 537.065 agreement will be admissible in any subsequent bad faith action;
5. The assignable cause of action under Scottsdale will be preserved and pursued.

XI. CONSEQUENCES OF NON-RESPONSE

If [CARRIER_SHORT_NAME] fails to accept this demand:

1. Litigation will be filed in the Circuit Court of [____________] County, Missouri, seeking the full amount of damages described herein, together with prejudgment interest at 9% (§ 408.020), attorney fees, and costs;

2. Vexatious refusal damages will be sought under § 375.420 where applicable;

3. Punitive damages will be sought under § 510.261 (clear and convincing evidence standard), subject to the cap in § 510.265 (greater of $500,000 or 5× compensatory);

4. Section 537.065 agreement with [INSURED_NAME] will be pursued to preserve the assignable bad-faith cause of action under Scottsdale;

5. Regulatory complaint will be filed with the Missouri Department of Commerce and Insurance, Consumer Affairs Division, P.O. Box 690, Jefferson City, MO 65102-0690, Telephone: 800-726-7390;

6. Excess judgment exposure to the Insured will be fully pursued with assignment of the bad faith claim to the Claimant.

XII. DOCUMENT PRESERVATION NOTICE

This letter constitutes formal notice to preserve all documents and ESI related to this claim, including but not limited to:

• The complete claim file (all versions and drafts)
• All internal communications (emails, notes, memos)
• All communications with the Insured
• Adjuster notes, diaries, and activity logs
• Reserve information and reserve change documentation
• Supervisor notes and approvals
• Quality assurance / audit reports
• Claim handling guidelines, manuals, and procedures
• Training materials
• All expert reports, estimates, and evaluations
• Photographs, videos, and inspection reports
• All documents received from or sent to the Claimant

Spoliation will support an adverse inference under Missouri law. Schneider v. G. Guilliams, Inc., 976 S.W.2d 522 (Mo. App. E.D. 1998); Brown v. Hamid, 856 S.W.2d 51 (Mo. banc 1993).

XIII. STATUTE OF LIMITATIONS NOTICE

• Written insurance contract: 10 years (Mo. Rev. Stat. § 516.110)
• Tort (personal injury): 5 years (Mo. Rev. Stat. § 516.120)
• Third-party bad faith (Zumwalt) claim: Accrues upon entry of excess judgment — Overcast, 11 S.W.3d at 68

XIV. CONCLUSION

The Company's handling of this claim represents precisely the type of conduct that Missouri's bad-faith doctrine was designed to address. The Insured faces catastrophic personal exposure for a judgment vastly exceeding available policy limits, and [CARRIER_SHORT_NAME] has a clear statutory and common-law opportunity — under § 537.058 and Scottsdale — to protect its Insured by paying policy limits.

We strongly urge [CARRIER_SHORT_NAME] to use the 90-day period provided by § 537.058 to evaluate this demand fairly, consult qualified coverage counsel, and tender the policy limits. Failure to do so will result in vigorous prosecution of all available Missouri remedies, including an assignable bad faith claim under Scottsdale that will expose [CARRIER_SHORT_NAME] to an uncapped excess judgment.

Please direct all communications regarding this matter to the undersigned.

Respectfully submitted,

[LAW_FIRM_NAME]

By: _______________________________
[ATTORNEY_NAME]
Missouri Bar No. [____________]
[ADDRESS]
[CITY], MO [ZIP]
[PHONE]
[FAX]
[EMAIL]

Counsel for [CLIENT_NAME]

ENCLOSURES:

• Medical records
• Itemized medical bills
• Wage loss documentation
• Missouri Uniform Crash Report / incident report
• Photographs
• Expert reports (if applicable)
• Proposed release (§ 537.058(2)(e))

CC:

• [CLIENT_NAME]
• [INSURED_NAME] (with notice of excess exposure)
• Missouri Department of Commerce and Insurance (conditional)

MISSOURI BAD FAITH LAW QUICK REFERENCE

Sources and References

• Mo. Rev. Stat. § 375.420 — Vexatious Refusal to Pay
• Mo. Rev. Stat. § 375.296 — Additional Damages Death/Disability
• Mo. Rev. Stat. § 375.1000 et seq. — Missouri UCSPA
• Mo. Rev. Stat. § 537.058 — Time-Limited Demand Statute
• Mo. Rev. Stat. § 537.065 — Covenants Not to Execute
• Mo. Rev. Stat. § 510.261 — Punitive Damages Standard
• Mo. Rev. Stat. § 510.265 — Punitive Damages Cap
• Mo. Rev. Stat. § 408.020 — Prejudgment Interest
• Missouri Department of Commerce and Insurance
• Overcast v. Billings Mut. Ins. Co., 11 S.W.3d 62 (Mo. banc 2000)
• Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818 (Mo. banc 2014)
• Zumwalt v. Utilities Ins. Co., 228 S.W.2d 750 (Mo. 1950)
• Watters v. Travel Guard Int'l, 136 S.W.3d 100 (Mo. App. E.D. 2004)
• Dhyne v. State Farm Fire & Cas. Co., 188 S.W.3d 454 (Mo. banc 2006)
• Shobe v. Kelly, 279 S.W.3d 203 (Mo. App. W.D. 2009)
• Truck Ins. Exch. v. Prairie Framing, LLC, 162 S.W.3d 64 (Mo. App. W.D. 2005)