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Court of Appeals Reaffirms Arbitration Award in Sec. 537.065 Case Where Insurer Not Present; Though All is Not Lost

ABSTRACT: The Missouri Court of Appeals for the Western District affirmed an arbitration award stemming from a Sec. 537.065 agreement finding that the insurance company could not substantively act, even after timely and properly intervening. The Court held that the intervenor must accept the case as it is at the time of intervention, and, thus, it was too late to change the award.

In the recent decision M.O. v. Geico General Insurance Company and Government Employees Insurance Company, the Missouri Court of Appeals for the Western District upheld a judgment against Geico affirming an award from an arbitration that only the insured participated in with the tortfeasor.

The pertinent facts are as follows: the driver had consensual sexual relations with the plaintiff in his vehicle, which allegedly resulted in the transmission of a sexually transmitted infection. The insured driver failed to disclose to plaintiff that he had this transmissible illness, and the plaintiff brought a claim against the insured and his insurer claiming that such failure to disclose was negligent. After an investigation, the insurer determined that the claim was outside of the driver’s insurance policy and denied coverage. The insured and plaintiff entered into a §537.065 agreement, and then arbitrated the claim pursuant to that agreement, where the plaintiff was awarded $5.2 million dollars.

Plaintiff then filed a petition in the circuit court to affirm the award. At that time, the insurer attempted to intervene to reduce or set aside the arbitration award. The court entered a judgment affirming the award and then, subsequent to the entry of judgment, granted intervention. The insurer moved to set aside, amend, or alter the judgment, which the court summarily denied. On appeal, the court of appeals held that the law grants insurers the right to intervene; but that right does not guarantee anything more than intervention, with the intervener having to accept the action as he finds it at the time of intervention.

This holding is troubling, but while this case was pending, the Missouri legislature amended the relevant statutes to guarantee not only an insurer’s right to intervene, but also guarantees that insurers are able to meaningfully develop facts and arguments in the case before entry of any judgment. This amendment to the statute guarantees an insurer the ability to adequately defend its interests, provided the insurer timely intervenes (the statute still requires intervention within 30 days of notice).

In sum, while the recent amendments to the statute limit this case’s precedential effect, the key lesson remains that the law does not reward those who sit on their rights. The statute now permits an insurer a guaranteed right to be able to develop its case, but an intervening party must still accept the litigation as it finds it at the time of intervention. For this reason, early and continuous engagement in or monitoring of any matter in which an insurer might wish to intervene is essential to protecting that insurer’s interest.