Most, but not all, extra-contractual cases involve an insurer failing to accept an offer that would have protected an insured from an excess judgment. Frequently, the insurer will raise some challenge to the offer made by the claimant. These challenges take many forms but often include an alleged failure to comply with statutory requirements or that the offer was only capable of acceptance for an insufficient period of time.
Recently, the Western District of Missouri was tasked with addressing a somewhat unique challenge raised by a carrier to demands made by a claimant. The question addressed by the Western District focused on whether a demand was sufficiently definitive enough to give the carrier a reasonable opportunity to settle.
Escabusa v. Safe Auto Insurance Company,
2024 WL 4940663 (Mo. Ct. App. 2024)
Background
The facts of Escabusa are quite involved and are outlined extensively by the Western District in its opinion. Below is a basic overview of the facts outlined by the appellate court:
Escabusa arose from a May 2012 collision involving Escabusa and Mueller. Escabusa was apparently at fault for the collision as he pulled out into the path of Mueller. As a result ofthe collision, Mueller sustained a broken femur that required a surgical repair.
At the time of the wreck, Escabusa was a named insured under a Safe Auto Policy providing $25,000 in bodily injury liability coverage. Roughly a week after the collision, Safe Auto received a lien letter from the first attorney to represent Mueller. After receiving this letter, Safe Auto informed Escabusa that Mueller’s claims might exceed the policy limits and roughly a month later informed Mueller’s counsel that the $25,000 policy limits were being offered to settle the claims against Escabusa.
Mueller’s first counsel indicated that he was accepting Safe Auto’s offer but wanted to reserve the right to sue Escabusa for additional funds as Mueller’s medical bills were extensive. Mueller’s first counsel gave Safe Auto authority to negotiate with Mueller’s medical providers in order to reduce the amount Mueller owed to those providers. Mueller’s counsel expressed skepticism that the medical bills could be reduced sufficiently and informed Safe Auto that he would likely need to file a lawsuit.
Within a couple of months, Safe Auto received correspondence from new attorneys for Mueller. New counsel indicated that they had taken over Mueller’s case and requested information on whether Mueller might be covered under insurance policies issued to his family members. New counsel further told Safe Auto they would settle “with Escabusa for the total insurance coverage under all applicable policies with an agreed to Mo. Rev. Stat. §537.065 contract to limit recovery.” Safe Auto was initially informed this offer would be open for 10 days. However, Mueller’s new counsel did not send Safe Auto any documents outlining the terms of the proposed §537.065.
In response, Safe Auto reiterated its $25,000 policy limits offer and sent a proposed release to Mueller’s counsel. Mueller new counsel again stated that they were investigating whether additional coverage might exist for Escabusa and again insisted on only settling with a §537.065 contract to limit recovery, but as they had previously, did not provide any specific terms.
A few days later, counsel retained by Safe Auto to defend Escabusa wrote to Mueller’s counsel and informed him that he did not have a problem with a §537.065 agreement that would completely protect Escabusa. Escabusa’s retained counsel requested that counsel for Mueller provide a copy of any proposed §537.065 agreement so that the terms could be reviewed by Safe Auto and discussed with Escabusa.
Over the next 6-7 months, Escabusa’s retained counsel reiterated the request that Mueller provide a proposed §537.065 agreement on a monthly basis. According to the facts cited by the Western District, Mueller did not provide a proposed §537.065 agreement that was specifically tailored to Mueller’s claims despite retained counsel’s requests. During this period, Mueller filed a lawsuit against Escabusa and prepared for trial.
Escabusa and Mueller eventually agreed they would waive a jury trial and would submit the issues of liability and damages to the trial court. After a bench trial, the court entered judgment in favor of Mueller for $1,250,000 plus post-judgment and pre-judgment interest.
Bad Faith Action
After entering the Judgment, Mueller filed an equitable garnishment action against Safe Auto and Escabusa and Escabusa filed a cross-claim against Safe Auto for bad faith. Escabusa’s claims alleged that Safe Auto engaged in bad faith by failing to pay its $25,000 policy limits in exchange for the §537.065 agreement that would have insulated his assets.
After several years, Safe Auto filed a Motion for Summary Judgment on Escabusa’s bad faith claim on the grounds that Safe Auto never had a reasonable opportunity to settle Mueller’s claims against Escabusa. Safe Auto’s argued in part that it could not be liable for bad faith as none of Mueller’s offers contained clear and definitive settlement terms.
After full briefing, the Court granted Safe Auto’s motion. The trial court determined that Safe Auto did not have a reasonable opportunity to settle the claims against Escabusa for the policy limits. Escabusa timely appealed and raised multiple points on appeal.
Western District Decision
On appeal, the Western District of Missouri affirmed the trial court’s summary judgment grant. In doing so, the Court discussed that in its view, Safe Auto did not have a reasonable opportunity to settle Mueller’s claims against Escabusa as it never received a demand with definitive terms. The Court acknowledged that Mueller’s counsel did offer to settle the case with Safe Auto in exchange for a §537.065 agreement. However, Mueller never provided Safe Auto with the specific terms of his proposed §537.065 agreement despite several requests from Safe Auto’s retained counsel that he do so. Since the specific terms of the §537.065 agreement were never provided to Safe Auto, the court deemed that no clear and definitive settlement offer was made and as a result, Safe Auto did not have a reasonable opportunity to settle the case against Escabusa.
Like any extra-contractual case, Escabusa is limited to its unique facts. Notably, the Western District passed on several broader issues in Escabusa and instead allowed its decision to turn on the Court’s belief that no clear and definitive settlement offer had been made by Mueller. Escabusa is not likely to have a broad impact on extra-contractual litigation. Even so, counsel should make sure settlement offers to carriers contain sufficiently specific terms to avoid any pitfalls of Escabusa’s narrow holding.
Need Assistance with a Bad Faith Situation?
Kirk Presley enjoys helping individuals and other lawyers with bad faith cases.
If you would like to speak with him about a bad faith case email him at [email protected] or call him at (816) 931-4611.