Insurance Bad Faith Demand Letter - Missouri

INSURANCE BAD FAITH DEMAND LETTER

State of Missouri

[LAW FIRM LETTERHEAD]

SETTLEMENT COMMUNICATION — FOR COMPROMISE PURPOSES ONLY
EVIDENTIARY USE SUBJECT TO MISSOURI COMMON LAW AND, WHERE APPLICABLE, FED. R. EVID. 408

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

USE THIS LABEL ONLY AFTER ROUTE REVIEW. Section 537.058 is limited to
its defined personal-injury, bodily-injury, or wrongful-death offer to a
tort-feasor with liability insurance. For a first-party policy claim or
another demand, delete the § 537.058 label and all statutory-compliance
assertions and use the separately verified route.

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]:

Missouri courts generally exclude bona fide settlement offers when offered as admissions, but Missouri has no generic "Mo. R. Evid. 408" governing an ordinary demand. Missouri Supreme Court Rule 17.06 separately protects communications in an ADR process undertaken under Rule 17. Where federal evidence law applies, Federal Rule of Evidence 408 may limit specified uses of negotiations concerning a disputed claim. These authorities do not themselves make this ordinary demand confidential or privileged.

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. Counsel selected the following route:

☐ Qualifying § 537.058 third-party time-limited demand. The claimant offers to settle a personal-injury, bodily-injury, or wrongful-death claim against the tort-feasor [INSURED_NAME] within applicable liability limits.

☐ First-party or other insurance demand. Section 537.058 is not invoked; delete its headings, deadline statements, release terms, and compliance checklist.

Selected route and counsel's basis: [________________________________]

Do not state that rejection automatically proves bad faith. Liability, breach,
causation, damages, assignment, defenses, and the effect of this demand depend
on the complete record and current controlling authority.

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 in bad faith to settle a claim within policy limits. Under Zumwalt as explained in Scottsdale, the action may lie when the insurer:

1. Reserves the exclusive right to contest or settle the claim;
2. Prohibited the insured from voluntarily assuming liability or settling without its consent; and
3. Committed fraud or bad faith by refusing to settle within the policy limits.

An excess judgment is not required; an excess settlement may cause loss too. The Missouri Supreme Court also declined to make a demand by the insured an essential element, although a settlement demand is highly relevant to bad faith. Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 827–28 (Mo. banc 2014).

Section 537.058(7) expressly contemplates a lawsuit by a claimant as the tort-feasor's assignee. Any actual assignment of a bad-faith claim must be evaluated and documented separately. The damages recoverable depend on the proven claim and loss.

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:

• The demand must fit the subsection 1 definitions.
• It must be written, reference § 537.058, and be sent by certified mail, return receipt requested, to the tort-feasor's liability insurer.
• The subsection 2 material terms must include the receipt-based acceptance period, payment or limits request, loss date and location, known claim number, all known injuries, released parties and claims, and the unconditional-release offer required by subsection 2(8).
• Subsection 3 requires provider lists and sufficient HIPAA-compliant authorizations, plus employer lists and sufficient authorizations when the claimant asserts the specified income loss.
• Subsections 4 through 6 separately govern written acceptance, any payment period, and demands issued within 90 days of a jury trial.

In the lawsuit described by subsection 7, a noncompliant demand is not considered a reasonable opportunity to settle and is inadmissible. Do not expand that consequence into an automatic liability rule for every claim.

§ 537.065 permits a qualifying personal-injury, bodily-injury, or death claimant to contract with the tort-feasor to limit recovery to specified assets or available insurance when an insurer has declined coverage or refused to withdraw a reservation of rights. The agreement must be in writing and signed. The statute separately requires notice to the insurer after execution when an action is pending or later filed, bars entry of judgment during the statutory notice period, and gives the notified insurer thirty days to intervene. An agreement is admissible in a later bad-faith action. Counsel should check every statutory condition before proposing this route.

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)
• Unambiguous policy language receives its plain meaning; an actual ambiguity is resolved in favor of the insured — Progressive Preferred Ins. Co. v. Reece, No. WD78915 (Mo. App. W.D. June 7, 2016)

If this is a third-party liability claim, assess the insurer's settlement conduct in light of its duty to protect the Insured's financial interests. Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818, 827–28 (Mo. banc 2014).

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. Settlement Decision and the Insured's Financial Interests

Under Scottsdale, 448 S.W.3d at 827–28, a Missouri liability insurer must protect the Insured's financial interests when considering settlement. Explain how [CARRIER_SHORT_NAME] evaluated the available settlement and why its conduct may amount to a bad faith refusal: [DESCRIBE_FACTS_AND_HARM].

C. Unreasonable Settlement Offers

D. Unreasonable Delay

[CARRIER_SHORT_NAME]'s claim handling should be assessed under 20 CSR 100-1.030, 20 CSR 100-1.050, and § 375.1007, as applicable:

☐ Failing to respond within 10 working days to a communication reasonably calling for a response (§ 100-1.030(1)(B))
☐ In a first-party claim, failing to advise acceptance or denial within 15 working days after submission of all necessary forms (§ 100-1.050(1)(A))
☐ In a first-party claim, failing to give the required notice and reasons when more investigation time is needed (§ 100-1.050(1)(C))
☐ In a first-party claim, failing to communicate a denial and its policy basis in writing (§ 100-1.050(1)(A))

E. Communication with Insured about Settlement Opportunity / Excess Exposure

Identify the settlement demand, when the insurer received it, what the Insured was told about the opportunity and potential excess exposure, and any resulting harm: [DESCRIBE_COMMUNICATION_AND_HARM]. Assess these facts with the insurer's duty to protect the insured's financial interests under Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818 (Mo. banc 2014).

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) — Not attempting good-faith settlement where liability has become reasonably clear
• § 375.1007(5) — Compelling an insured or beneficiary to sue by offering substantially less than the amount ultimately recovered
• § 375.1007(6) — Refusing to pay without reasonable investigation
• § 375.1007(7) — Failing to affirm or deny coverage within a reasonable time after completed proof of loss
• § 375.1007(12) — Failing to promptly explain the basis for a denial or compromise offer

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 = $[________]

Only if the insurer is unauthorized to do business in Missouri and the contract, claimant, and 30-day pre-suit demand conditions are met, § 375.296 supplies another basis for the statutory vexatious-refusal damages and fees provided in § 375.420; do not add a second penalty for the same refusal.

D. Prejudgment Interest

For a qualifying first-party claim for money due under a written policy, § 408.020 may allow interest at 9% per year when no other rate is agreed upon. For a tort judgment, § 408.040.3 governs prejudgment interest if the claimant satisfies its written-demand, supporting-material, timing, and judgment-amount conditions. The tort rate follows § 408.040 rather than a fixed 9% rate.

E. Punitive Damages

For actions filed on or after August 28, 2020, punitive damages require clear and convincing evidence that the defendant intentionally harmed the plaintiff without just cause or acted with deliberate and flagrant disregard for the safety of others. Mo. Rev. Stat. § 510.261. Section 510.265 states a ceiling at the greater of $500,000 or five times the net judgment awarded to the plaintiff against that defendant. Its statutory exceptions and constitutional applicability must be assessed for the particular claim; the Revisor's Lewellen annotation describes a constitutional ruling involving common-law fraud. Punitive damages are fact-dependent and are not automatic from a bad-faith finding.

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 (§ 537.058.2(6)-(8) Completion)

Party or parties to be released: [________________________________]

Claims to be released: [________________________________]

Offer of unconditional release for the liability insurer's insureds from all present and future liability for this occurrence under § 537.060: [ATTACH COUNSEL-APPROVED RELEASE]

Specified payment period, if any: [____] days after the insurer receives the fully executed unconditional release. Do not use fewer than ten days.

Any lien, indemnity, confidentiality, non-disparagement, or other settlement term requires separate review and is not supplied by § 537.058.

C. Required Accompaniments (§ 537.058.3)

Enclosed with the demand:

☐ List of names and addresses of health care providers who treated or evaluated the claimant or decedent for the injuries from the injury date through the demand date

☐ HIPAA-compliant written authorizations sufficient for the insurer to obtain records from every listed provider

☐ If the specified income loss is asserted, list of names and addresses of all employers from the time of first injury through the demand date

☐ If that income loss is asserted, written authorizations sufficient for the insurer to obtain records from every listed employer

Additional supporting material selected by counsel: [________________________________]

IX. SECTION 537.058 TIME-LIMITED DEMAND — COMPLETION CHECK

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].

Insurer receipt date: [__/__/____]

Deadline for Acceptance: [__/__/____] at [____:____] [TIME ZONE] — not less than ninety days from the insurer's receipt under § 537.058.2(1).

Method of Acceptance: Written acceptance of the subsection 2 material terms must be delivered or postmarked to the claimant or representative within the stated demand period. Any separate payment timing is stated above and complies with § 537.058.5.

Trial-proximity gate: [____] days remain before the jury trial of the filed claim. Section 537.058 does not apply to demands issued within ninety days of that trial.

Effect of nonacceptance: [INSERT ONLY COUNSEL-APPROVED, CASE-SPECIFIC LANGUAGE]. This form does not state that nonacceptance automatically establishes bad faith or eliminates every later settlement opportunity.

X. POSSIBLE SECTION 537.065 AGREEMENT

Nonacceptance of this demand alone does not qualify the parties for a § 537.065 agreement. If [CARRIER_SHORT_NAME] has declined coverage or refused to withdraw a reservation of rights, and the claim otherwise satisfies § 537.065, our client may discuss a written, signed agreement with [INSURED_NAME]. If one is executed:

1. [INSURED_NAME] will provide the executed agreement and the pending or later-filed action to the insurer within the applicable statutory period;
2. The insurer will have 30 days after receipt of notice to intervene as a matter of right;
3. No judgment will be entered against [INSURED_NAME] until at least 30 days after the insurer receives the required written notice;
4. Any § 537.065 agreement will be admissible in any subsequent bad faith action;
5. Any assignment of a bad-faith claim will be reviewed and documented separately.

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 any prejudgment interest available under § 408.040.3 for a qualifying tort claim or § 408.020 for qualifying money due under a policy, attorney fees where authorized, and costs;

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

3. Punitive damages will be sought under § 510.261 if the facts support them, with § 510.265's statutory ceiling (greater of $500,000 or five times the net judgment against that defendant) considered only if it applies to this claim;

4. Section 537.065 agreement will be considered only if its coverage and other statutory conditions are met;

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 exposure: The Claimant will evaluate available remedies if the Insured suffers loss from a bad faith refusal to settle. Missouri permits assignment of a bad faith refusal to settle claim, but the Claimant has no assigned claim unless the Insured actually makes that assignment; counsel must assess the claim and any agreement. Scottsdale Ins. Co. v. Addison Ins. Co., 448 S.W.3d 818 (Mo. banc 2014); Mo. Rev. Stat. §§ 537.058.7, 537.065.

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

An adverse inference may be available if evidence is intentionally destroyed in circumstances indicating fraud and a desire to suppress the truth. Brown v. Hamid, 856 S.W.2d 51, 56–57 (Mo. banc 1993). The requested preservation alone does not establish those conditions.

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: Determine accrual from the actual claim and loss; an excess judgment is not a prerequisite under Scottsdale, 448 S.W.3d at 827–28.

XIV. CONCLUSION

The claimant requests that [CARRIER_SHORT_NAME] evaluate the enclosed offer, policy, liability, damages, defenses, and supporting record within the stated period. Section 537.058 supplies a qualifying demand procedure; it does not by itself decide liability or bad faith.

We request a written response within the counsel-calculated period. The claimant preserves only rights and remedies that exist under the applicable policy, facts, and current law.

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)
• Counsel-approved unconditional-release offer (§ 537.058.2(8))

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 — Unauthorized Insurers After Due Demand
• 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
• Mo. Rev. Stat. § 408.040 — Tort Prejudgment Interest
• 20 CSR 100-1.030 and 100-1.050 — Claim Handling
• Official federal court order quoting Brown's spoliation standard
• 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) — opinion text: https://www.courtlistener.com/opinion/2758891/
• 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)
• Progressive Preferred Ins. Co. v. Reece, No. WD78915 (Mo. App. W.D. June 7, 2016) — official opinion: https://www.courts.mo.gov/file/WD/Opinion_WD78915.pdf