Charting a Course Thro and Pitfalls of 537.065 BY STEPHEN R. BOUGH, M. BLAKE HEATH AND SCOTT PUMMELL1

Stephen R. Bough

M. Blake Heath

Scott Pummell

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Navigating through § 537.065, RSMo 2000, litigation is complex for both attorneys representing injured victims and the attorneys for insurance companies. When an insurer refuses to defend and indemnify its insured, a § 573.065 agreement may be the only means for the insured to obtain protection of his personal assets. While the § 537.065 agreement may provide protection for the insured, it often puts the injured victim in an “all or nothing” position since it limits recovery to any applicable insurance proceeds where an insurer is disputing coverage. At the same time, the insurance company often surrenders its ability to control the underlying litigation and exposes itself to potential bad faith claims. Due to these extreme risks, it is imperative that counsel for both sides understand how to navigate the perils and pitfalls of § 537.065 agreements. Introduction   Smart people do not gamble all of their assets on a single decision. Insurance, in a sense, exemplifies this lesson. Everyone faces risks and losses, but insurance provides the ability to guard against catastrophic financial losses by shifting those risks to an insurance company that specializes in dealing with such losses. But sometimes even smart people who properly guard against risks and losses by purchasing insurance still find themselves facing enormous losses when the insurer claims that coverage does not exist

under a particular set of circumstances. Insurance companies also face difficult decisions when an insured is faced with a claim that may not be covered under the policy.   In this light, the Missouri General Assembly established a tool to protect the insured party and provide another route to recovery for the tort victim. Section 537.065, RSMo 2000, or “065 agreements,” allows the tortfeasor whose insurer denies coverage to enter into an agreement with the tort victim.2 The law is unique to Missouri, as no other states have established such a practice by statute.3 The tort victim agrees not to execute against the tortfeasor’s assets — or limits execution to certain assets. The tortfeasor, while knowing that he will not be held personally responsible, agrees either to settle or compromise the claim or not to oppose the tort victim’s prosecution of the claim at trial. After resolution of the personal injury claim, the victim can then pursue an equitable garnishment claim against the insurance company. At this point, the insurance company generally is limited to disputing only the legal conclusion of whether coverage existed and typically is barred from re-litigating any other aspect of the suit.   By their nature, these 065 agreements are perilous for all parties.4 The tort victim could lose out on all possibility of recovery if the insurer wins the ultimate coverage dispute — because the victim already agreed not to execute against the tortfeasor. On the other hand, the insurance company loses its power to control the defense to the

ough the Perils Litigation substantive action against its insured once it refuses to defend and the other parties enter into the 065 agreement. In fact, insurers may face even greater liability in these circumstances based on an action for bad faith refusal to settle a claim.   As a result, those representing insurers, plaintiffs, or tortfeasors must be able to navigate the questions arising under and around § 537.065 agreements. This article will explain the basics of how the agreements work and the history of the enabling statute in Missouri. The article will then offer analysis of other important considerations in the use of these agreements, such as the application of an insurer’s duty to defend, the consequences of the insurer’s offer of a defense under a reservation of rights, the reasonableness requirements, and the implications of an insurer’s bad faith in settlement negotiations. Finally, this article also will explain the options available to an insurer to defend or limit such agreements and provide practical tips for those representing the parties to such agreements and the insurance companies. How the Agreements Work   When insurance coverage is in dispute, an insurer has several options. Obviously, the insurer may elect to fully defend and indemnify the insured. The insurer also may refuse to provide a defense. The third option is that the insurer may “choose to undertake the defense of its insured and reserve its right to later disclaim coverage, provided it gives the insured notice of

a reservation of rights.”5 “If the insurer makes this choice, the insured, in turn, may elect to allow the insurer to defend or it may elect to refuse to allow a defense under a reservation of rights.”6 If the insurer defends under a reservation of rights, it may forfeit its right to participate in the litigation and to control the lawsuit.7 An insurer cannot reserve its right to disclaim coverage and simultaneously “insist upon controlling the defense.”8   Consequently, an insurance company’s decision to refuse a defense or to do so only under a reservation of rights creates a situation with great risks for the insured and the tort victim.9 Because the insurer denied coverage, the insured faces the possibility of a judgment without the security of indemnification or defense through the insurance policy.10 The plaintiff, on the other hand, runs the risk that even if damages are ultimately awarded against the insured tortfeasor, there will be no way of collecting, as the tortfeasor may not have the assets to pay the judgment without the insurance indemnification.11   Section 537.065, now RSMo 2000, established a system to balance these risks.12 At its essence, the statute allows the alleged tortfeasor “to buy his peace.”13 The section “authorizes a settlement between a plaintiff and defendant in a tort action by which the plaintiff will seek payment of a judgment only from specified assets which may include recovery solely from an insurance company insuring the legal liability of the tort-feasor.”14 For the plaintiff, this means that if a

court determines subsequent to the 065 agreement that no coverage exists, then the plaintiff will not be able to recover.15 On the other hand, if coverage is found, then the insurer is at risk because “it will have no opportunity to defend on the issue of liability of the tort-feasor.”16   With so many moving pieces, § 537.065 agreements often lead to complicated litigation. To work with the statute, attorneys need to understand the implications of a number of elements as interpreted by Missouri courts. These issues range from whether settlements and verdicts under these agreements may be attacked based on their objective reasonableness to the ramifications of an insurer’s reservation of rights defense. The history of the statute helps present a backdrop before addressing these issues directly. History of the 537.065 Statute   The Missouri General Assembly essentially drafted § 537.065 in response to an accident that typified a growing problem.17 In 1957, Terry Gene Drane, a minor, fell from a truck that was transporting a load of hay on a rural road in Boone County, Missouri.18 Drane fell out of the truck as it passed under a telephone line.19 The accident occurred while Drane was working for Charles L. Durk.20 Another one of Durk’s employees, Larry Jensen, was driving the truck at the time of the accident.21   The Dranes filed suit against Terry's employer (Durk), the driver of the truck (Jensen), and the owners of the telephone line (the Beiks).22 Durk was insured under a public and employee liability policy by Farmers Mutual Automobile Insurance Co. and through a separate automobile policy issued by the MFA Mutual Insurance Co.23 MFA was willing to negotiate with the Dranes to settle its share of the claim, but Farmers Mutual claimed “that there were coverage defenses available to it under the terms of the policy which it had issued to Durk.”24 March-April 2014 / 81

  Thus, Drane’s injury presented a situation where multiple defendants faced substantial liability, but the primary insurance carrier argued that its coverages did not apply. The Dranes’ circumstances set up the prototypical situation where the § 537.065 agreement comes into play: the insured tortfeasors are left exposed to substantial personal liability after the insurer or insurers refuse to defend and deny coverage. An 065 agreement provides the tortfeasor and the injured parties the power to navigate the insurance coverage issues together while limiting the tortfeasor’s liability and offering the injured party a better chance at real recovery for his or her damages. Consequently, some have argued that “Section 537.065 has the legal effect of authorizing collusion between claimants and insureds.”25   Amidst this clash in Drane, the plaintiffs’ attorney also happened to be a state senator at the time.26 He and two other senators introduced Senate Bill No. 259 even as the Dranes’ litigation was ongoing.27 In fact, Senator George Spencer – the Dranes’ attorney – stated in oral arguments before the Supreme Court of Missouri “that the bill had been introduced because of the situation which had been presented by the injury to Terry Gene Drane.”28 The bill passed the legislature and became law on August 29, 1959.29   Twelve days after Senate Bill No. 259 became law, the Dranes made use of the law and entered into an agreement with Durk, Jensen, and MFA.30 MFA agreed to pay the Dranes $11,000, and the Dranes agreed “they would not levy execution by garnishment or otherwise against Durk, Jensen or MFA, ‘provided, however, that execution by garnishment or as otherwise provided by law may be levied against said Farmers Mutual Automobile Insurance Company . . . .’”31 Further, the Beiks (the telephone line owners) 82 / Journal of the MISSOURI BAR

paid $5,600 to the Dranes, and the Dranes executed a covenant not to sue the Bieks.32   Consequently, the Dranes – along with Durk, Jensen, and MFA – established the first § 537.065 agreement.33 The Dranes’ agreement also gave the Supreme Court of Missouri its first chance to examine some basic arguments against such agreements as raised by the insurer on appeal.34 The Court rejected the insurer’s arguments that such agreements were unenforceable for three reasons: a) because of the principle that a settlement with one joint tortfeasor constituted a settlement for all tortfeasors; b) that the plaintiffs’ agreement not to levy on the property of the insured tortfeasors relieves the tortfeasors – and, consequently, their insurer – from any obligation to pay; and c) that the Dranes’ agreement did not properly list the assets of the tortfeasors that would be subject to execution upon judgment.35 The Court rejected these contentions, stating generally that such arguments are “inconsistent with what appears to us to be the obvious purpose of the statute.”36   However, the Drane Court left open a final argument by the insurer: that the insureds breached the cooperation clause of the insurance contract by entering into the § 537.065 agreement.37 The Court did not rule out that these agreements might run afoul of the insured’s duty to cooperate, depending on the language of the insurance contract.38 However, under the facts in Drane, the Court said that “[i]n view of the obligation [of the insureds] to cooperate with both [insurers], we cannot say that the mere fact of entering into the agreement constituted a breach of the cooperation clause of [the] policy.”39 Duty to Cooperate vs. Refusal to Defend Reservation of Rights  After Drane, however, a line of

cases looked closely at the question of an insured’s duty to cooperate. These decisions also addressed the implications of an insurer’s refusal to defend or offer of a defense under a reservation of rights. To understand the different parties’ duties at this point, the courts often begin their analysis at the parties’ basic roles. First, “[a]n insurance company has a duty to defend an insured when the insured is exposed to potential liability to pay based on the facts known at the outset of the case, no matter how unlikely it is that the insured will be found liable and whether or not the insured is ultimately found liable. To extricate itself from a duty to defend the insured, the insurance company must prove that there is no possibility of coverage.”40 Further, “[t]his duty to defend potentially insured claims arises ‘even though claims beyond coverage may also be present.’”41 Much of this analysis of an insurer’s duties to the insured is premised on the insurance company owing a fiduciary duty to the insured.42   If the insurer decides against offering a full defense of its insured, it has at least two other options. The insurance company may refuse to defend or defend under a reservation of rights. Both have significant consequences to the insurer and the insured. When an insurer refuses to offer any defense at all, the insured is relieved of its obligations under the contract of insurance.43 “The legal consequences to the insurer from the breach of contract for unjustified refusal to defend on the ground of non-coverage include the loss of its contractual right to demand that the insured comply with certain prohibitory as well as affirmative provisions.”44 However, “[w]here the claim is actually outside the policy coverage, the refusal of the insurer to defend is a justified refusal, the insurer is not guilty of a breach of contract and incurs no legal liability by its action.”45

  Under an offer of a defense with a reservation of rights, the insurer “does not contend that the petition . . . [does] not state some grounds of liability covered by its policy of insurance.”46 Therefore, the duty to defend still exists.47 However, through this reservation, the insurer maintains the “right to later disclaim coverage.”48   Once the insurer offers its insured a defense under a reservation of rights, the nature of the relationship changes somewhat. At this point, “the insured is released from the policy prohibition against incurring expenses and negotiating and settling claims.”49 In fact, once the insurer states its intention to defend only under such a reservation, “[t]he law treats that decision as a refusal to defend.”50 However, the insured still has the option of accepting the insurer’s defense under reservation or refusing.51 “If the fully-notified insured accepts, the insurer’s defense under a reservation of rights will not be considered a denial of coverage.”52 Nonetheless, the “[i]nsurers cannot force insureds to accept a reservation of rights defense.”53 Consequently, “[a]n insurer who refuses to defend its insured on the basis that there is no coverage does so at its own risk, and therein loses the ability to control the defense on behalf of the insured, and the ability to assert defenses that the insured might have asserted on its own behalf.”54   The decision in Butters v. City of Independence illustrates the mechanics of an insurer’s offer of defense under a reservation of rights. Kenneth Butters worked for the Consolidated Transfer Warehouse Company, which had a contract with the City of Independence to move and install heavy equipment for the city.55 While working, Butters “received a severe electrical shock which resulted in [a] very serious injury.”56 Butters filed suit against the city.57 The city’s insurer, Royal Indemnity Company,

responded by offering a defense under a reservation of rights.58 The city said it was unwilling to accept the reservation of rights agreement and instead entered into a § 537.065 agreement with Butters.59 As part of the 065 agreement, the city paid Butters $25,000, and Butters “agreed to limit execution on any judgment recovered by Butters against the city to claim against insurer.”60 At trial, Butters testified and presented medical testimony. However, the city did not cross-examine medical witnesses, and counsel for the city questioned the plaintiffs only “to ascertain that they understood the settlement arrangement with the city.”61 Further, during the trial, the city did not point out any testimony “which would relieve the city of liability.”62 Royal fought its liability in the subsequent equitable garnishment action based on the city’s rejection of the insurer’s offer of a defense under a reservation of rights, but the trial court granted judgment in favor of Butters and declared coverage under Royal’s policy, thus holding Royal liable.   On appeal, the Court framed the “basic question” as what effect the insured’s refusal of the insurer’s offer of a defense under reservation has upon the rights and obligations the parties have under the insurance contract.63 “The trial court treated the insurer’s position as if it had refused the defense of the claim, leaving the city free to manage the claim as it saw fit – so long as it acted in good faith and without collusion – with the only ultimate question in such event being whether the liability was covered by the policy.”64 The Court noted that the duty to defend existed and Royal did not assert that the petition failed to assert “some grounds of liability covered by its policy of insurance.”65 When the insurer then offered a defense only under a reservation of rights, the “city was not obligated to accept the defense on such terms.”66 “In view of its attempt to reserve the

coverage question, the insurer had no right to insist upon controlling the defense.”67 Essentially, the insurer’s offer of a defense under reservation is the “equivalent to a refusal of a defense.”68 “The consequence of such conclusion, likewise, is that ‘. . . the insured is released from the policy prohibition against incurring expenses and negotiating and settling claims.’”69   In essence, this line of legal precedents demonstrates that once the insurer refuses to defend or offers to do so only under a reservation of rights, the 065 agreement is an important tool for the insureds. Some attorneys who typically represent insurers note that the “statute supplants the insured’s duty to cooperate with insurers[,]” and it “nullifies the policy prohibition against voluntary payments and the assumption of obligations by insureds without their insurers’ consent.”70 March-April 2014 / 83

Attacking the Reasonableness of the Settlement   Before 1997, no Missouri appellate court had applied a reasonableness requirement to the 065 agreements. However, the Southern District Court of Appeals in 1990 brought up reasonableness when it explained in Cologna v. Farmers and Merchants Insurance Co. that the insured is free to make a “reasonable settlement.”71 Both the Southern and Western districts of the Missouri Court of Appeals then endorsed such agreements so long as the agreements were “free of collusion or fraud.”72   Building on these two decisions, the Supreme Court of Missouri in 1997 declared that the enforceability of settlements through 065 agreements must be considered under “a reasonableness standard.”73 “Requiring a settlement to be reasonable strikes an appropriate balance between the interests of the insured and the interests of the insurer.”74 While the insurer in such situations has refused to defend and left the insured to fend for himself, the Court noted that the insured “may act in a selfinterested way in an attempt to protect himself from personal liability.”75 These agreements, even absent any collusion or fraud, occur under unusual circumstances, as the Court noted in Gulf Ins. Co v. Noble Broad. The insured may agree to a large settlement in exchange for his release from liability because he has “nothing to lose” and “he will never be obligated to pay.”76 In these circumstances, the settlement “may have very little relationship to the strength of the plaintiff’s claim.”77  In Gulf, the Court continued on to define this reasonableness standard. “The test of whether the settlement amount is reasonable is what a reasonably prudent person in the position of the defendant would have settled for on the merits of the plaintiff’s claim.”78 This analysis 84 / Journal of the MISSOURI BAR

includes “a consideration of the facts bearing on the liability and damage aspects of plaintiff’s claim, as well as the risks of going to trial.”79 The insurer bears the burden of proving the reasonableness – or the unreasonableness, depending on the perspective – of the 065 agreement.80   Finally, the Court in Gulf determined that a “reasonableness” ruling against the insured’s agreement does not release the insurer from all liability. Instead, upon a finding that a 065 agreement is unreasonable, the trial court is tasked with determining a “reasonable settlement amount for which the insurer should be held liable.”81 Consequently, the Supreme Court of Missouri in Gulf established a reasonableness standard for the enforceability of 065 agreements and outlined the procedure for the analysis of these agreements. Bench Trial Judgment Cannot Be Attacked as Unreasonable  The Gulf ruling set a reasonableness standard for settlements reached under § 537.065, now RSMo 2000, but the Supreme Court of Missouri declined to extend this analysis of reasonableness to bench trial judgments in which the plaintiff and accused tortfeasor (the insured) cooperate.82 In Schmitz v. Great American Assurance Co., there was no settlement. Rather, when two insurance companies refused to defend their insured, the insured entered into an 065 agreement with the plaintiffs in which the plaintiffs agreed that if a judgment was entered against the insured, the plaintiffs “would limit any recovery to the insurance policies.”83 The plaintiffs took the insured to a bench trial, where “the [plaintiffs] introduced evidence regarding their damages and [the insured’s] liability. [The insured] neither objected to the entry of evidence nor offered any defense.”84 At the conclusion of the bench trial, the court declared the insured liable

and awarded $4,580,076 in damages to the plaintiffs. None of the parties appealed.85   The plaintiffs then filed an equitable garnishment action under § 379.200, RSMo 2000, against the two insurance companies to recover the damage award under the insured’s policies.86 The plaintiffs argued that the policy exclusions claimed by the insurance companies did not apply.87 While one of the two insurance companies settled, the remaining insurer, Great American Assurance Co., fought the equitable garnishment.88 The trial court held an evidentiary hearing on the equitable garnishment action, and it ruled that the underlying judgment was unreasonable and that reasonable damages were $2,200,000.89   The Supreme Court of Missouri overruled the trial court and said that the Gulf reasonableness test only applies to settlements reached under 065.90 Great American argued that the trial “lacked any semblance of an adversarial proceeding because [the insured] did not present a defense.”91 However, the Supreme Court pointed out that the insurer had an opportunity to defend but refused.92 The insured turned to the 065 agreement to limit its exposure to liability, but that “agreement did not admit liability or damages; instead, it simply limited the collection of any judgment against [the insured] to insurance policies.”93 Further, the Supreme Court said that the plaintiffs, regardless of the 065 agreement, still had to prove liability and damages at the bench trial. “Although the trial court found [the insured] liable . . . , it could have found that [the insured] was not liable or that no damages were suffered.”94   The Supreme Court explained that allowing insurers to attack bench judgments after the fact would “encourage insurers to refuse to defend on behalf of insureds.”95 The

Court explained that this policy was “inconsistent with the doctrine of collateral estoppel” because: The insured, unwilling to expose itself to liability beyond the insurance policy, will enter into a section 537.065 agreement limiting any collection of damages. Once the trial court renders its judgment and the plaintiff files an equitable garnishment lawsuit against the insurer, the insurer will challenge the trial court’s finding of liability and damages. Then, the plaintiff will be forced to re-litigate the entire case for the equitable garnishment court so that it can determine whether the judgment was reasonable.96 Thus, adopting a policy of questioning the reasonableness of a bench trial verdict would give insurers “‘two bites of the apple’ – once when the trial court determines liability and damages and once when the equitable garnishment court determines reasonableness.”97 Consequently, the Supreme Court refused to extend the reasonableness test it had applied in § 537.065 settlements to bench trial

judgments when the plaintiff and insured cooperated under similar agreements.98 Bound by the Result of Litigation   The concept of collateral estoppel also works to bind insurance companies to the results of 065 litigation. This issue arises when insurers argue that, in order to be bound by a 065 agreement and the litigation, the insurer must have unjustifiably refused to defend or provide coverage before the insured resorted to the 065 agreement.99 If the refusal to defend or provide coverage is not unjustified, then the insurer is not bound by the 065 agreement.   The courts, however, have articulated a clear standard defining when insurers are bound by the 065 judgments. First, the courts note that once an insurance company unjustifiably refuses to defend or provide coverage, the insured is free to enter into a settlement that releases it from liability.100 The standard then becomes “whether the insurer had the opportunity to control and manage the litigation, not whether the insurer had the duty to control and manage the litigation.”101 Therefore, “‘[w]here one is bound to protect another from liability, he is bound

by the result of the litigation to which such other is a party, provided he had * * * [an] opportunity to control and manage it.’”102 Based on this, when one party has secured a judgment against another and attempts to satisfy it through an action for equitable garnishment, “‘the underlying judgment may not be collaterally attacked as long as the court issuing the judgment had personal and subject[-]matter jurisdiction and the judgment is not void on its face.’”103   This result is true – the insurer remains bound – even if the insurer’s refusal to defend or provide coverage is an “honest mistake,” as it “nevertheless constitutes an unjustified refusal and renders the insurer liable to the insured for all resultant damages from that breach of contract.”104 Essentially, as the court in Rinehart v. Anderson stated, “[the insurer] cannot have its cake and eat it too by both refusing coverage and at the same time continuing to control the terms of settlement in defense of an action it had refused to defend.”105   This doctrine also means that the insurer is “precluded from relitigating any facts that actually were determined in the underlying case and were necessary to the judgment.”106

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Further, the facts decided in the underlying action will most often “determine whether there is a duty to indemnify.”107 Simply put, the facts as determined in the 065 litigation generally are used to determine the coverage issues in subsequent equitable garnishment actions. Bad Faith Refusal to Settle   When insurers unjustifiably refuse to defend, they potentially face significant consequences. As noted above, the insurer may be liable for the full amount of coverage under an 065 agreement settlement or related trial. Further, the insurer may face liability after surrendering any ability to control or influence a defense to the substantive action.   But an insurer who refuses to defend may face even greater exposure: a judgment for bad faith refusal to settle. The Truck Insurance Exchange v. Prairie Framing, LLC decision by the Western District Court of Appeals demonstrates this risk.108 In fact, the Truck Insurance Exchange decision “illustrates the risks to which an insurer may be exposed if the insurer elects to defend its insured under a reservation of rights.”109 Along with the risk of having to satisfy a judgment “that bears little relationship to the plaintiff’s actual damages, the liability issues, or the insurer’s policy limits,” the insurer may have to pay interest on that judgment “as well as possible liability for bad faith in the event the insurer is unsuccessful in litigating its coverage defenses.”110   Because of this risk, it is important to understand the Western District Court of Appeals’ holding in Truck Insurance Exchange. Eugene Rolfe was killed when his vehicle was struck by a truck driven by Robert Winger.111 Rolfe’s family filed suit against Winger and his employer, Prairie Framing, which was insured by Truck Insurance Exchange (TIE).112 TIE refused to defend. Prairie Framing executed an 86 / Journal of the MISSOURI BAR

065 agreement with the Rolfes and stipulated to its liability for negligent supervision.113 The Rolfes tried the issue of damages, and the trial court entered a judgment of $4 million against Prairie Framing.114   The trial court also found that TIE violated its duty to settle in good faith.115 Based on this, it ordered TIE to pay the full $4 million judgment against Prairie Framing, even though the policy limit was $1 million.116 Further, the trial court ordered TIE to pay nine percent interest per annum plus legal fees and expenses in defense of the underlying suit.117   On appeal, TIE argued against the bad faith refusal to settle ruling. TIE claimed it was liable only for the amount Prairie Framing was “forced to pay, and Prairie Framing was only forced to pay a nominal amount.”118 In its decision, the Western District explained an insurer’s duty in settlement negotiations. “Inherent in a policy of insurance is the insurer’s obligation to act in good faith regarding settlement of a claim. This obligation is part of what the insured pays for.”119 The court further explained its reasoning for holding insurance companies to the standard of good faith in negotiations: We find no attraction to a rule that rewards bad faith by relieving the insurer of excess liability if it forces harsh choices onto an insured facing a huge judgment. When the insurer refuses to settle, the insured loses the benefit of an important obligation owed by the insurer. An insurer’s “mere payment” of a judgment up to the policy limits does not make the insured whole or put the insured into the same position as if the company had performed its obligations under the policy.120

Requiring the insured to pay before the insurer is held to its obligations because of the insurer’s bad faith refusal to settle would impose “the very burden on the insured that the requirement of good faith seeks to avoid.”121 On the broader issue of an insurer’s bad faith, the court said that if an insurer has assumed control of its right to settle claims against the insured, it must exercise good faith in “‘considering offers to compromise the claim for an amount within the policy limits.’”122 If the insurer fails in this, it “‘may become liable in excess of its undertaking under the policy provisions.’”123 The obligation of good faith in settlement negotiations continues even after an insurer denies coverage and refuses to defend.124 If the insurer refuses to consider settlement offers in good faith, the insured is free to reach a reasonable settlement that can be enforced against the insurer.125   The courts look to the facts of the case to determine whether the insurer acted in bad faith. “Bad faith is, of course, a state of mind, indicated by acts and circumstances, and is provable by circumstantial as well as direct evidence. Each case must stand and be determined upon its particular state of facts.”126 The Western District Court of Appeals has found bad faith based on an insurer’s “‘intentional disregard of the financial interest of [its] insured in hope of escaping the responsibility imposed upon it by its policy.’”127 “The law requires the insurer to ‘act honestly to effectually indemnify and save the insured harmless as it has contracted to do – to the extent, if necessary, that it must make whatever payment and settlement an honest judgment and discretion dictate, within the limits of the policy.’”128   The court in Truck Insurance Exchange remanded the case to the trial court because no trial on the merits had been held on the issue

of bad faith and the record did not provide enough facts for it to make a clear determination on the issue on appeal. Nonetheless, the Truck Insurance Exchange court laid out a clear standard where insurance companies may be held liable for attorney’s fees and court costs, as well as damage amounts over the policy limits, when the insurers do not act in good faith regarding settlements. Fraud, Collusion, and Insurers' Defenses   When facing litigation about 065 agreements, courts must also consider the issues of fraud and collusion between the plaintiffs and insureds. “Collusion is a secret concert of action between two or more people for the promotion of a fraudulent purpose.”129 “[A] key element of collusion is promoting a fraudulent purpose.”130 “Missouri courts recognize two types of fraud: extrinsic and intrinsic.”131 “Fraud is extrinsic when it induces a party to default or to consent to a judgment.”132 “It is intrinsic when a party knowingly uses perjured testimony or otherwise fabricates evidence.”133 When contesting 065 agreements, insurers are “talking about a fraud upon the court or extrinsic fraud. Extrinsic fraud has been defined as a fraud that induced a party to default or consent to judgment against him.”134 “‘[F]raud is a positive act resulting from a willful intent to deceive.’”135 However, “[a]n insured, ‘although not engaging in collusive conduct for fraudulent or deceitful purpose, may act in a self-interested way in an attempt to protect himself from personal liability.’”136  In Cologna v. Farmers & Merchants Insurance Co., the Southern District Court of Appeals addressed the issues of fraud and collusion in 065 agreements, which ultimately resulted in a benchmark ruling on the question of fraud in these agreements.137 The case arose when Eugene Cologna died after a shotgun, held by his ex-wife

Rita Cologna, discharged while he was at her residence.138 Paulette, Gene’s wife at the time of the incident, sued Rita.139 Rita’s insurer, with whom she had a homeowner’s policy, offered a defense under a reservation of rights.140 Rita refused her insurer’s qualified defense and entered into an 065 agreement with Paulette.141   Farmers responded with a declaratory action that alleged, among other things, fraud and collusion by Rita and Paulette. Farmers’ collusion argument was that “Rita had ‘failed to cooperate’ with Farmers in the defense of the civil action as required by the policy, [and] had ‘colluded’ with Paulette” in a manner that would “expose Farmers to a substantial loss.”142 Farmers said Rita had “colluded and conspired” with Paulette by writing a letter to Farmers’ counsel demanding that he either withdraw or defend without a reservation of rights, by stipulating “to the effect that Rita carelessly and negligently caused the death of Gene Cologna and that his death was not Rita’s intentional act,” and other unnamed collusive acts.143 The Southern District noted that Farmers, in offering the defense under a reservation of rights, never admitted liability on its policy, but “[a]t the same time it was never willing to let the insured manage her defense as she saw fit.”144 The court emphasized that once Farmers offered to defend only under a reservation of rights, Rita was not obligated to accept the defense. Further, the court discounted the insurer’s arguments of collusion and fraud based on the insured’s failure to cooperate “by waiving a jury trial, failing to contest liability, failing to contest damages and by failing to offer evidence at the trial of the wrongful death action.”145   On these accusations of collusion, the Cologna court examined both the 065 agreement and the trial proceedings, concluding that no fraud

existed. The court stated: It could not fairly be said that the judgment in the wrongful death action was collusive or fraudulent; the trial court made extensive findings of fact in connection with Paulette’s claim for damages because of Gene’s death . . . . Farmers’ characterization of the proceeding as a species of confession of judgment is unwarranted.146   Consequently, the court declared that the argument that the insured breached the duty to cooperate or acted collusively was without merit.147  In Cologna, Farmers essentially asked the court to reconsider what constitutes collusion in such agreements, arguing that the insured – even those who execute 065 agreements – must meet certain March-April 2014 / 87

standards of the insurer in defending the suit (even though the insurer refused to defend). This argument basically asked for a reconsideration of precedent on 065 agreements, the Cologna court noted.148 Rather, Missouri courts have held consistently that once the insurer refuses to defend, the insured is released from its obligations to the insurer. In an early answer to insurers’ claims of collusion in such agreements, the Supreme Court of Missouri said that insureds may agree to dispense “with the necessity of defendant making a defense to plaintiffs’ claims.”149 This is not fraud or collusion – “[s]ince the parties were authorized by law to enter into the contract, we hold that their conduct in doing so was not wrongful.”150 Even if the insured does not contest plaintiff’s claims, this does not “indicate that the judgments were obtained by fraud or collusion.”151   The standard for fraud and collusion in the setting of § 537.065, RSMo 2000, agreements has not been well defined,152 but it is a high bar for insurers to reach. The analysis for such a fraud defense turns on the pleading requirements explained in Rule 55.15. The Rule states, “In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity.”153 The party alleging fraud “must plead every essential element of fraud, and failure to plead any element renders the claim defective and subject to dismissal,” and those allegations of fraud must rest on statements of fact and not mere conclusions.154 “The elements of fraud are: 1) a representation; 2) its falsity; 3) its materiality; 4) the speaker’s knowledge of its falsity; 5) the speaker’s intent [that] the representation be acted upon by the other party; 6) the other party’s ignorance of its falsity and right to rely on its truth; and 7) proximately caused injury.”155 If the insurer fails to plead even one of these seven elements, then the fraud defense to an 88 / Journal of the MISSOURI BAR

065 agreement fails. This creates such a high burden on the insurer that each and every court that has addressed the fraud defense has entirely rejected it in the context of 065 agreements.156   One of the first cases on the issue of fraud and collusion as a defense to 065 agreements, United States Fidelity & Guaranty Co. v. Safeco Insurance Co. of America, illustrated the difficulty for insurers to successfully plead the fraud argument.157 In United States Fidelity, the insured, Roy Chapman, entered into an 065 agreement with the plaintiffs, the Alonzos. As part of the agreement, Chapman made an admission of liability.158 Safeco, the insurer, on appeal argued “that under the agreement the proceedings were not adversary in nature and since [the insured’s attorney] sat silent while the attorney for the Alonzos made improper statements in argument, the verdicts and judgments obtained were ‘tainted with collusion and fraud’ and should not be permitted to stand . . . .”159 The plaintiffs’ lawyer even told the jury not to consider where the money was going to come from because “there were ‘substantial sources from which the money will come,’” and the insured’s attorney raised no objection to the allusion to insurance coverage made in front of the jury.160 As to “sitting in silence” during the plaintiffs’ attorney’s statement about “substantial sources” of money to cover the verdict, the Supreme Court of Missouri noted there was “no claim or evidence that [he] agreed in advance as to the [improper closing] argument or that he knew it was coming.”161 Moreover, the Court ruled there was no collusion or fraud, as the agreement was executed as the statute intended.162 The Court explained, “There is no question but that an insurer which has elected for what it considers valid reasons not to defend a pending damage suit can be placed in a difficult position by those acting under the statute, but infirmities of

this sort in the statute, if so, can be corrected by the general assembly.”163   Consequently, the insurer’s options to challenge 065 agreements are limited. In fact, “[a]bsent fraud or collusion between the claimant and the insured, a Section 537.065 agreement does not provide the insurer with a defense to liability on the policy.”164 And, as the above cases show, the courts routinely have rejected insurers’ defenses based on fraud or collusion. A Few Limits on 065 Agreements   While § 537.065, RSMo 2000, largely is structured to benefit the insured parties, the courts have carved out limitations to protect insurers, too. For one, 065 agreement settlements may not create greater liability for the insurer than what is covered under the policy. “[A]n insurer’s liability when the insured has settled the underlying action may not exceed the policy coverages.”165 Consequently, where a tortfeasor and insured settle under an 065 agreement and the settlement encompasses both covered and non-covered claims, the settlement “must be fairly apportioned between the two.”166 The insurer is then only liable for the portion of the settlement apportioned to covered claims.   Further, 065 agreements apply to contracts of insurance but not to contracts of indemnification. For instance, in Holiday Inns, Inc. v. Thirteen-Fifty Investment Co. a hotel franchisee – Thirteen-Fifty Investment Co. – attempted to execute an 065 agreement with a hotel occupant injured on the property.167 The occupant was injured when diving into the hotel pool, and he sued Thirteen-Fifty.168 ThirteenFifty and the plaintiff structured the 065 agreement so that the plaintiff could execute against an indemnity clause in Thirteen-Fifty’s contract with Holiday Inns. However, the

Western District Court of Appeals ruled that “[c]ontracts of indemnity are not synonymous with contracts of insurance.”169 The court continued: “A claimant under the statute looks only to the insurer of the tort-feasor. Had the legislature meant to include a contract of indemnification it would have so stated. The legislature is not so careless in its choice of words.”170   Thus, a claimant under a § 537.065 agreement “looks only to the insurer of the tortfeasor.”171   An insurer also has rights it can assert after a judgment is ordered in conjunction with an 065 agreement. While the insurer is collaterally estopped from challenging the reasonableness of a judgment following a trial, the insurer may attack facts not actually litigated in the first action.172 As such, the insurer also retains the right to be heard on the question of coverage and can raise the defense that no coverage existed even after an 065 agreement and verdict or settlement in the plaintiffs’ favor.173 “The insurer should have the right to dispute the questions which make it liable on its [insurance] contract.”174 In a subsequent action to determine liability, the insurer may raise any available defense or assert a breach of an essential condition of the contract for insurance.175 In sum, the trial between the insured and the injured party fixes the liability and damages of the insured and those issues become final with the judgment, “but the liability of the insurer on its contract presents an entirely different issue, and one which must be decided by the provisions of the contract of insurance.”176 Practical Implications   Both attorneys representing the parties to 065 agreements and those representing insurance companies need to be aware of the practical implications of these issues. When entering into such agreements, the

attorneys for plaintiffs and insureds must be careful to avoid fraud or collusion. While the attorneys for the insured are not required to raise defenses or objections during trials conducted pursuant to 065 agreements, the parties should carefully consider in advance if they should agree to an amount of damages. And even though the reasonableness of a bench verdict is not subject to attack post-judgment, the plaintiff must present enough evidence to establish his or her case and provide support for the award of damages. Most importantly, the attorney for the injured party must also understand the consequences of such an agreement and be prepared to fight the insurer on the coverage issues. If the injured party agrees not to execute against any of the tortfeasor’s assets and the insurer wins on the coverage issue, the victim is left entirely without recourse. The plaintiff’s attorney must also understand that the final judgment will be heavily dissected on appeal.   For insurance companies, these agreements make the decisions on whether to defend or attempt to deny coverage fraught with risk. To avoid these risks, “[c]laims adjusters first need to be aware that these agreements exist and the extent to which they can result in damages far greater than expected.”177 Insurance companies also should be certain of their decisions, the legal basis behind them, and the supporting facts before rejecting a claim, even for “a seemingly obvious reason.”178 And to minimize risk even further, insurance companies “should ensure that [their] claims personnel are trained not only to investigate the facts relevant to defending a claim on the merits, but also the facts upon which a coverage determination can be made.”179 Conclusion   If executed properly, § 537.065, RSMo 2000, agreements create an

avenue for a tort victim to recoup his or her losses, even when the tortfeasor’s insurance companies deny that coverage exists. By agreeing not to execute against the tortfeasor’s assets, the tort victim runs the risk of losing out entirely if the insurer wins the argument on the coverage dispute. On the other side, insurers who refuse to defend or do so only under a reservation of rights need to be aware of the dangers presented by these decisions, such as losing the ability to contribute or control a defense against legitimate claims until after a settlement or verdict. Therefore, all parties to these insurance disputes in Missouri need to be aware of and understand the issues created by § 537.065. Endnotes

  1 Stephen R. Bough is a graduate of UMKC Law School, where he served as the editorin-chief of the UMKC Law Review. M. Blake Heath is also a graduate of UMKC Law School and served on the UMKC Law Review. Their practice is limited to representing plaintiffs in complex personal injury cases and insurance coverage disputes. Scott Pummell is a recent graduate of UMKC Law School and is a law clerk for the Hon. Paul C. Wilson of the Supreme Court of Missouri. The views expressed in this article are solely those of the authors and should not be construed as reflecting the position of any court or judge thereof.   2 Section 537.065, RSMo 2000.   3 Scott Lauck, Hay Hauling Case Inspired “Unique Statute,” Mo. Law. Wkly., October 15, 2012, at 13.   4 Scott Lauck, Unique Statute Vexes Insurance Companies, Mo. Law. Wkly., October 15, 2012, at 1.  5 Safeco Ins. Co. of Am. v. Rogers, 968 S.W.2d 256, 258 (Mo. App. W.D. 1998) (citing Central Bank v. St. Paul Fire & Marine Ins., 929 F.2d 431, 433 (8th Cir. 1991)).  6 Safeco, 968 S.W.2d at 258.  7 See Ballmer v. Ballmer, 923 S.W.2d 365, 369 (Mo. App. W.D. 1996).  8 Whitehead v. Lakeside Hosp. Ass’n, 844 S.W.2d 475, 480 (Mo. App. W.D. 1992) (citing Butters v. City of Independence, 513 S.W.2d 418, 425 (Mo. 1974)).  9 State ex rel. Rimco, Inc. v. Dowd, 858 S.W.2d 307, 308 (Mo. App. E.D. 1993).  10 Id.  11 Id.  12 Id.  13 Id. March-April 2014 / 89

 14 Id.  15 Rimco, 858 S.W.2d at 308.  16 Id. at 308–09.  17 Farmers Mut. Auto. Ins. Co. v. Drane, 383 S.W.2d 714, 718 (Mo. 1964).  18 Id. at 716.  19 Id.  20 Id.  21 Id.  22 Id.  23 Id. at 717.  24 Id. at 715.  25 Claims Handling and Section 537.065, R.S.Mo., Brown & James Law Firm (June 24, 2005), available at www.brownjames.com/ ArticleDetails.aspx?id=258 (last visited May 15, 2012).  26 Drane, 383 S.W.2d at 718.  27 Id.  28 Id.  29 Id.  30 Id.  31 Id. at 716.  32 Id. at 718.  33 Id.  34 See generally id. at 714.  35 Id. at 719-20.  36 Id. at 718.  37 Id. at 720.  38 Id.  39 Id. 720-21.  40 Truck Ins. Exch. v. Prairie Framing, LLC, 162 S.W.3d 64, 79 (Mo. App. W.D. 2005) (citation omitted).  41 Id. (quoting Superior Equip. Co. v. Md. Cas. Co., 986 S.W.2d 477, 482 (Mo. App. E.D. 1998)).  42 Duncan v. Andrew Cnty. Mut. Ins. Co., 665 S.W.2d 13, 18 (Mo. App. W.D. 1983) (explaining that “an insurer’s right to control settlement and litigation under a policy of liability insurance creates a fiduciary relationship between insurer and insured.”)  43 Whitehead v. Lakeside Hosp. Ass’n, 844 S.W.2d 475, 481 (Mo. App. W.D. 1992).  44 Id.  45 Id.  46 Butters v. City of Independence, 513 S.W.2d 418, 424 (Mo. 1974) (citation omitted).  47 Id.  48 Truck Ins. Exch., 162 S.W.3d at 88 (citing Safeco Ins. Co. of Am. v. Rogers, 968 S.W.2d 256, 258 (Mo. App. W.D. 1998)).  49 Landie v. Century Indem. Co., 390 S.W.2d 558, 562 (Mo. App. W.D. 1965).  50 Ballmer v. Ballmer, 923 S.W.2d 365, 370 (Mo. App. W.D. 1996).  51 See Safeco Ins. Co. of Am., 968 S.W.2d at 258 (citing State ex rel. Rimco, Inc. v. Dowd, 858 S.W.2d 307, 308 (Mo. App. E.D. 1993)).  52 Truck Ins. Exch., 162 S.W.3d at 88 (citing Brooner & Assocs. Constr., Inc. v. W. Cas. & Sur. Co., 760 S.W.2d 445, 447–48 (Mo. App. W.D. 1988)). 90 / Journal of the MISSOURI BAR

 53 Ballmer, 923 S.W.2d at 369 (citing State ex rel. Mid-Century Ins. Co. v. McKelvey, 666 S.W.2d 457, 459 (Mo. App. W.D. 1984)).  54 Fostill Lake Builders, LLC, v. Tudor Ins. Co., 338 S.W.3d 336, 344 (Mo. App. W.D. 2011) (citing Rimco, 858 S.W.2d at 309).  55 Butters, 513 S.W.2d at 420.  56 Id. at 421.  57 Id.  58 Id.  59 Id. at 422.  60 Id.  61 Id.  62 Id.  63 Id. at 424.  64 Id.  65 Id.  66 Id. at 424–25.  67 Id. at 425.  68 Id.  69 Id. (quoting Landie, 390 S.W.2d at 562).  70 Claims Handling and Section 537.065, R.S.Mo., Brown & James Law Firm (June 24, 2005), available at www.brownjames.com/ ArticleDetails.aspx?id=258 (last visited May 15, 2012).   71 785 S.W.2d 691, 701 (Mo. App. S.D. 1990).  72 See Whitehead v. Lakeside Hosp. Ass’n, 844 S.W.2d 475, 480 (Mo. App. W.D. 1992); see also Cologna, 785 S.W.2d at 701.  73 Gulf Ins. Co. v. Noble Broad., 936 S.W.2d 810, 815 (Mo. banc 1997).  74 Id. at 815–16.  75 Id. at 816.  76 Id. (quoting Steil v. Fla. Physicians’ Ins. Reciprocal, 448 So.2d 589, 592 (Fla. Dist. Ct. App. 1984)).  77 Gulf Ins., 936 S.W.2d at 816.  78 Id. (citing Miller v. Shugart, 316 N.W.2d 729, 735 (Minn. 1982)).  79 Gulf Ins., 936 S.W.2d at 816.  80 Id.  81 Id.  82 See Schmitz v. Great Am. Assurance Co., 337 S.W.3d 700, 708 (Mo. banc 2011).  83 Id. at 704.  84 Id.  85 Id.  86 Id. at 704–05.  87 Id.  88 Id. at 705.  89 Id.  90 Id. at 708.  91 Id. at 709.  92 Id.  93 Id.  94 Id.  95 Id.  96 Id.  97 Id.  98 Id.  99 Id. at 710.  100 See Rinehart v. Anderson, 985 S.W.2d 363, 371 (Mo. App. W.D. 1998).

 101 Schmitz, 337 S.W.3d at 710.  102 Drennen v. Wren, 416 S.W.2d 229, 234–35 (Mo. App. S.D. 1967).  103 Assurance Co. of Am. v. Secura Ins. Co., 384 S.W.3d 224, 232 (Mo. App. E.D. 2012) (quoting Fostill Lake Builders, LLC v. Tudor Ins. Co., 338 S.W.3d 336, 342 (Mo. App. W.D. 2011)).  104 Whitehead v. Lakeside Hosp. Ass’n, 844 S.W.2d 475, 481 (Mo. App. W.D. 1992).  105 Rinehart, 985 S.W.2d at 371.  106 Secura Ins., 384 S.W.3d at 233.  107 Id.   108 162 S.W.3d 64 (Mo. App. W.D. 2005).  109 Claims Handling and Section 537.065, R.S.Mo. 2000, Brown & James Law Firm (June 24, 2005), available at http://www. brownjames.com/ArticleDetails.aspx?id=258 (last visited May 15, 2012).  110 Id.  111 Truck Ins. Exch., 162 S.W.3d at 69.  112 Id.  113 Id.  114 Id. at 79.  115 Id.  116 Id. at 70.  117 Id. at 69.  118 Id. at 92.  119 Id. at 93.  120 Id. (quoting Landie v. Century Indem. Co., 390 S.W.2d 558, 564 (Mo. App. W.D. 1965)).  121 Truck Ins. Exch., 162 S.W.3d at 93.  122 Id. at 94 (quoting Ganaway v. Shelter Mut. Ins. Co., 795 S.W.2d 554, 556 (Mo. App. S.D. 1990)).  123 Truck Ins. Exch., 162 S.W.3d at 94 (quoting Ganaway, 795 S.W.2d at 556).  124 Truck Ins. Exch., 162 S.W.3d at 94 (citing Landie, 390 S.W.2d at 564–65).  125 Truck Ins. Exch., 162 S.W.3d at 93.  126 Zumwalt v. Utils. Ins. Co., 228 S.W.2d 750, 754 (Mo. 1950) (citations omitted).  127 Truck Ins. Exch., 162 S.W.3d at 95 (citing Zumwalt, 228 S.W.2d at 754).  128 Truck Ins. Exch., 162 S.W.3d at 95 (quoting Boling v. New Amsterdam Cas. Co., 46 P.2d 916, 918–19 (Okla. 1935)).  129 Taggart v. Md. Cas. Co., 242 S.W.3d 755, 758 (Mo. App. W.D. 2008) (citing Vaughan v. United Fire & Cas. Co., 90 S.W.3d 220, 224 (Mo. App. S.D. 2002)). Per the Journal of The Missouri Bar’s disclosure policy, Stephen R. Bough served as counsel for the Taggarts in both the circuit court and on appeal.  130 Vaughan, 90 S.W.3d at 225.  131 Taggart, 242 S.W.3d at 758 (citing Cody v. Old Republic Title Co., 156 S.W.3d 782, 784 (Mo. App. E.D. 2004)).  132 Taggart, 242 S.W.3d at 758 (citing Cody, 156 S.W.3d at 784).

(Continued on page 115)

the Missouri Secretary of State. Dissolution was effective on February 20, 2014.   Said Corporation requests that all persons and organizations with claims against it present them immediately by letter to the Corporation at: Ruth S. Jacob Foundation, Inc., c/o Gregory E. Robinson, P.C., 1422 Elbridge Payne, Suite 170, Chesterfield, Missouri 63017.   The summary of your claim must include the following information: (i) the name, address, and telephone number of the claimant; (ii) the amount claimed; (iii) the basis for the claim; (iv) the date(s) on which the event(s) on which the claim is based occurred; (v) whether the claim is secured, and if so, the collateral used as security; and (vi) documentation in support of the claim.

  NOTICE: Because of the dissolution of Ruth S. Jacob Foundation, Inc., any and all claims against it will be barred unless a proceeding to enforce the claim is commenced within two years after the publication date of the two notices authorized by statute, whichever is published last.

Notice of Dissolution to All Creditors of and Claimants Against DeNeen Law Office, P.C. A Missouri Corporation

  On February 28, 2014, DeNeen Law Office, P.C., a Missouri corporation, filed its Articles of Dissolution with the Missouri Secretary of State. Dissolution was effective on February 28, 2014.

  DeNeen Law Office, P.C. requests that all persons and organizations who have claims against DeNeen Law Office, P.C. present them immediately by mail to James F. DeNeen, liquidating trustee, 1338 Sheridan Drive, Joplin, Missouri 64801.   All claims must include the following: the name and address of the claimant; amount claimed; basis of the claim; the date(s) the claim arose; and documentation of the claim.   Pursuant to Section 351.482 of the Revised Statutes of Missouri, as amended, any claim against DeNeen Law Office, P.C. will be barred unless a proceeding to enforce the claim is commenced within two years after the date of the publication of this notice required by statute.

Charting a Course (Continued from page 90)

 133 Taggart, 242 S.W.3d at 758 (citing Cody, 156 S.W.3d at 784).  134 Taggart, 242 S.W.3d at 758.  135 Memco, Inc. v. Chronister, 27 S.W.3d 871, 875 (Mo. App. S.D. 2000) (quoting Harris v. Penninger, 613 S.W.2d 211, 214 (Mo. App. S.D. 1981)).  136 Rinehart v. Anderson, 985 S.W.2d 363, 371 (Mo. App. W.D. 1998) (quoting Gulf Ins. Co. v. Noble Broad., 936 S.W.2d 810, 816 (Mo. banc 1997)).   137 785 S.W.2d 691, 693 (Mo. App. S.D. 1990).  138 Id.  139 Id.  140 Id.  141 Id. at 695.  142 Id. at 696.  143 Id.  144 Id. at 699.  145 Id. at 700.  146 Id. at 701.  147 Id. at 702.  148 Id. at 699.  149 Eakins v. Burton, 423 S.W.2d 787, 790 (Mo. 1968).  150 Id.

 151 Id.  152 Claims Handling and Section 537.065, R.S.Mo. 2000, Brown & James Law Firm (June 24, 2005), available at http://www. brownjames.com/ArticleDetails.aspx?id=258 (last visited May 15, 2012).   153 Rule 55.15.  154 Hanrahan v. Nashua Corp., 752 S.W.2d 878, 883 (Mo. App. E.D. 1988).  155 Miller v. Ford Motor Co., 732 S.W.2d 564, 565 (Mo. App. E.D. 1987).  156 Claims Handling and Section 537.065, R.S.Mo. 2000, Brown & James Law Firm (June 24, 2005), available at http://www. brownjames.com/ArticleDetails.aspx?id=258 (last visited May 15, 2012).   157 522 S.W.2d 809 (Mo. banc 1975).  158 Id. at 819.  159 Id.  160 Id.  161 Id. at 820.  162 Id.  163 Id. at 820-21.  164 Claims Handling and Section 537.065, R.S.Mo. 2000, Brown & James Law Firm (June 24, 2005), available at http://www. brownjames.com/ArticleDetails.aspx?id=258 (last visited May 15, 2012).

 165 Esicorp, Inc. v. Liberty Mut. Ins. Co., 193 F.3d 966, 971 (8th Cir. 1999).  166 Id.   167 714 S.W.2d 597, 600 (Mo. App. W.D. 1986).  168 Id. at 598.  169 Id. at 602 (citing Brotherton Constr. Co. v. PattersonEmersonComstock, Inc., 178 A.2d 696, 697 (Pa. 1962)).  170 Holiday Inns, 714 S.W.2d at 602 (citation omitted).  171 Id. (citing Carter v. Aetna Cas. & Sur. Co., 473 F.2d 1071, 1074 n.5 (8th Cir. 1973)).  172 See Drennen v. Wren, 416 S.W.2d 229, 236 (Mo. App. S.D. 1967).  173 Butters v. City of Independence, 513 S.W.2d 418, 425 (Mo. 1974).  174 Drennen, 416 S.W.2d at 235.  175 Id.  176 See Perkins v. Becker, 157 S.W.2d 550, 553 (Mo. App. W.D. 1942).   177 Michael J. Smith, Section 537.065 Agreements and Other Things That Go Bump in the Night, Lashly & Baer, P.C. (Aug. 29, 2011), available at http://blog.lashlybaer.com/section537-065-agreements-and-other-things-that-gobump-in-the-night (last visited May 15, 2013).  178 Id.  179 Id. March-April 2014 / 115