PS Partners/Associate: Gary E. Snodgrass, Partner
We represented: Safeco Insurance Company of Illinois
Venue: Missouri – Howell County Circuit Court
Plaintiff Karen Burkett was a passenger in a vehicle owned by plaintiff and her husband, and driven by her son, on February 22, 2007. The Burkett vehicle slowed down for traffic on Highway W in Thayer, Missouri, when Devin Smith crested a hill and was unable to stop before hitting the rear of the Burkett vehicle. Plaintiff filed suit against Mr. Smith and her underinsured motorist carrier, Safeco Insurance Company of Illinois. Mr. Smith settled with plaintiff for $25,000.00, the limits of his policy of insurance, prior to trial.
Plaintiff claims that immediately after the accident, she tried to get out of the car, but became dizzy and fell to the ground. She did not receive medical treatment at the scene. However, she went to an urgent care center later that day where she complained of neck and back pain. She was diagnosed with cervical, thoracic, and lumbar strains. Plaintiff claims she had shortness of breath immediately after the accident, although shortness of breath was not noted in her medical records until several months after the accident.
After the accident, a chest x-ray was taken of the thoracic spine which showed an elevation of the right hemi diaphragm in the lung. Plaintiff underwent surgery for her lung condition on July 10, 2007. After the surgery, plaintiff continued to complain of shortness of breath and claimed she is disabled and unable to return to work as a home health care provider due to her condition. Plaintiff’s medical expenses totaled around $55,000.
Plaintiff was involved in a prior automobile accident in 2005 wherein she complained of abdominal pain and back pain. A CT scan in the emergency room following that accident showed an elevated right hemi diaphragm of her lung. She was diagnosed with a possible contusion to the right lung at that time.
Plaintiff claimed the 2007 accident exacerbated her lung condition as she did not have any complaints or shortness of breath prior to the accident. Plaintiff’s experts Dr. David Dale, her IME doctor, and Dr. Christopher Nicholas, her treating surgeon, testified at trial that the 2007 accident exacerbated her lung condition as she claims she did not have any complaints of shortness of breath prior to the 2007 accident.
Defendant’s experts Dr. Brian Kim and Dr. Joseph Horner testified via videotaped deposition, and Dr. Andrew Martine testified at trial that the 2007 accident did not cause or exacerbate plaintiff’s lung condition as the elevation of the right hemi diaphragm had not changed in the x-rays prior to, and after the 2007 accident. Also, defendant’s experts testified that plaintiff did not exhibit the type of symptoms after the 2007 accident that would be expected if there was damage to the phrenic nerve and the lung condition was exacerbated by the accident.
The jury returned a verdict for the defendant.
Last Demand: $25,000
Last Offer: $0
Some issues frequently arise in most any matter. It is helpful to have a quick primer or FAQ (frequently asked questions) with answers to these persistent legal questions. For claims adjusters, lawyers or litigants with cases pending in Missouri, there may well be questions about legal issues that will inevitably arise in your case. The following provides a quick reference guide to several of those issues. Do not hesitate to contact us with questions as to how these, or other issues, impact a particular situation. Of course, these factors will not always apply to every case, as, there are inevitably peculiar facts in each situation which may well alter the outcome, so these are just general principles which you can use as a reference guide.
Required Motor Vehicle Coverage:
Bodily Injury: The minimum required limit is $25,000 for bodily injury to any one person and $50,000 for bodily injury to two or more persons. §303.020(10) RSMo.
Property Damage: The minimum limit is $10,000. §303.020(10) RSMo.
Uninsured / Underinsured:
• Uninsured motorist bodily injury coverage is required with limits of at least $25,000/$50,000. §379.203 RSMo. Underinsured motorist bodily injury coverage is not required.
• Anti-stacking provisions in policy concerning uninsured coverage have been invalidated as against public policy. Shepherd v. American States Insurance Co., 671 S.W.2d 777 (Mo. banc 1984).
• Stacking of underinsured motorist coverage depends upon the policy language.
Medical Payments: Coverage is not mandatory. Cameron Mutual Insurance Co. v. Madden, 533 S.W.2d 538 (Mo. 1976). Med Pay is excess over health insurance except Medicare if the contract provides. Med Pay is stackable if contract permits. An insurance carrier cannot subrogate for Med Pay.
Prejudgment Interest: If a claimant has made a demand and the judgment exceeds the demand, prejudgment interest shall be awarded, calculated from a date ninety days after the demand was received or from the date the demand was rejected without counter offer, whichever is earlier. The demand must (1) be sent by certified mail; (2) provide an affidavit of the claimant describing the claim with supporting documents; (3) for wrongful death, must list medical providers and employers, provide medical bills and submit authorizations, and (4) be left open for ninety days.. § 408.040.2 RSMo.
Missouri is a Pure Comparative Negligence Jurisdiction:
Statute of Limitations: Bodily injury or property damage claims involving adults age eighteen and older must be commenced within five (5) years. §516.120 RSMo. If a defendant is out of the state after a cause of action accrues, the limitation period begins upon the return of the defendant to the state. §516.200 RSMo. The limitation period by minors under the age of 18 when the cause of action accrues is extended to three years from the minor’s 18th birthday. §516.030 RSMo. The wrongful death statute of limitations is three years. §537.100 RSMo.
Collateral Sources: Missouri follows the general rule that evidence of a collateral source is inadmissible. Taylor v. Associated Electric Cooperative, Inc., 818 S.W.2d 669, 672 (Mo W.D. 1991).
Tort Threshold: No minimum tort threshold is necessary for a bodily injury claim to be made.
Joint and Several Liability: Joint and several liability applies to all defendants who are found at least 51% at fault. If a defendant is found less than 51% at fault, that defendant shall only be responsible for the percentage of the judgment for which that defendant is held liable. Mo. Rev. Stat. §537.067.
Minor’s Settlement: Minor settlements and are not valid unless approved by the court. §507.184 RSMo. If the settlement exceeds $10,000, additional safeguards require the guardian to post a bond or open a conservatorship for the minor. If the claim is a fairly minor injury, consider foregoing court approval. Such a settlement is not enforceable and there is nothing to preclude the minor from later bringing a cause of action. The defendant will be entitled to a setoff for any amount previously paid.
Vexatious Refusal: In the event of vexatious behavior, the insurer may be required to pay the amount owed under the policy plus interest, reasonable attorneys’ fees and a statutory penalty of an additional 20% of the first $1,500 and 10% of all other damages thereafter. §375.296 and §375.420 RSMo. The statute is strictly construed. Thornburgh Insulation, Inc. v. J.W. Terrill, Inc., 236 S.W.3d 651 (Mo. E.D. 2007).
Worker’s Compensation: Worker’s compensation benefits may be recovered by subrogation. §287.150 RSMo. Subrogating employer shall pay from employer’s share of the recovery a proportionate share of the expenses of the recovery, including a reasonable attorney fee. §287.150 RSMo. Carrier does not have a right of first recovery. Carrier’s right to recover is pro rata.
Legal Age: The age of majority is 18. §507.115 RSMo.
Inter-Family / Inter-Spousal Immunity: Common law rule of inter spousal immunity is not a bar to a personal injury claim by one spouse against another during a marriage. §451.290 RSMo. and Townsend v. Townsend, 708 S.W.2d 646 (Mo. banc 1986). Additionally, Missouri has abrogated parental immunity. Hartman by Hartman v. Hartman, 821 S.W.2d 852 (Mo. 1991).
Wrongful Death: Cause of action exists only by statute. §§ 537.080 through 537.090 RSMo. Damages may include pecuniary losses, funeral expenses and the reasonable value of the services, consortium, companionship, comfort, instruction, guidance, counsel, training and support of those on whose behalf the suit may be brought. §537.090 RSMo. Damages are determined by jury. Sanders v. Ahmed, 364 S.W.3d 195, 205 (Mo. banc 2012).
Alcohol: The Dram Shop Act holds a liquor licensee liable if the licensee is convicted of selling alcohol to a minor or selling to a person whom he knows to be intoxicated. Social hosts cannot be held liable for torts committed by their intoxicated guests. §537.053 RSMo. and Coons v. Berry, 304 S.W.3d 215, 222 (Mo. W.D. 2009).
Salvaged Motor Vehicles: Missouri does not have a specific statute regarding disposal of salvage. Resale of salvaged parts and materials is prescribed by §301.218 RSMo. Under §301.217, a certificate of title may be issued for a salvaged vehicle at least twenty-five years old.
Value of Medical Treatment: The dollar amount necessary to satisfy the financial obligation to health care providers, including those amounts which are paid by Medicare, constitute the value of medical treatment. Deck v. Teasley, 322 S.W.3d 536 (Mo. banc 2010).
Dogs: Missouri does not have a dog liability statute. Liability is reserved only for vicious propensities of which the owner or keeper knew or should have known. Savory v. Hensick, 143 S.W.3d 712 (Mo. Ct. App. 2004). However, violation of leash ordinance may establish per se negligence. See local ordinance.
Small Claims Court: Limit for small claims court is $5,000. Mo. Sup. Ct. R. 140 through 152.
A setoff provision in a policy of automobile insurance seeks to reduce coverage by amounts recovered by the insured from other insurance. In the context of uninsured motorist (UM) and underinsured motorist (UIM) coverage, a setoff provision most often seeks to reduce any amount payable under such coverages by all sums paid by or on behalf of the legally responsible tortfeasor. Setoff language is commonly found in the “Limit of Liability” section of the particular coverage.
Uninsured Motorist Coverage
Section 279.203, RSMo. requires that the limit of UM coverage be not less than the liability limit for bodily injury or death set forth in Section 303.030 – i.e. $25,000 per person and $50,000 per occurrence. Thus, any provision in a policy of insurance that purports by a setoff to reduce UM coverage below the limit required by statute is invalid. Cano v. Travelers Insurance Company, 656 S.W.2d 266 (Mo. 1983).
Nonetheless, policies may provide for setoffs against the limits of UM coverage so long as enforcement of the setoff provision does not reduce the available UM coverage to an amount less than that required by statute. For example, a setoff provision stating that “[t]he limit of liability shall be reduced by all sums paid because of the ‘bodily injury’ by or on behalf of persons or organizations who may be legally responsible” will be enforced up to the amount mandated by statute. Hunt v. Everett, 181 S.W.3d 248 (Mo. Ct. App. 2006),quoting Rodriguez v. General Accident Insurance Company of America, 808 S.W.2d 379, 381 (Mo. banc 1991); American Standard Insurance Company of Wisconsin v. Bracht, 103 S.W.3d 281 (Mo. Ct. App. 2003).
However, where a setoff provision states that it is entitled to a setoff from “any amount payable” under the terms of the UM coverage, the provision has been held ambiguous as to its intended effect. For example, inHunt, the setoff provision provided that “[a]ny amount payable under the terms of this Coverage will be reduced by any amount paid or payable for the same damages to or for an insured by or for any person…who is or may be held legally liable for bodily injury to such insured.” Hunt, 181 S.W.3d at 250. The court held that the language “any amount payable” was ambiguous in that it was unclear whether the language referred to the insured’s total damages or to the maximum amount of UM coverage (i.e. the UM policy limits). Given the ambiguity, the court concluded that the settlement amount was to be deducted from the total damages awarded to the insured.
Further, in Missouri, an insurer may not reduce UM coverage to an amount less than the statutory minimum by the amount of workers’ compensation benefits received by the insured. Douthet v. State Farm Mutual Automobile Insurance Company, 546 S.W.2d 156 (Mo. 1977); Cano v. Travelers Insurance Company, 656 S.W.2d 266 (Mo. 1983) (where the same insurer was both workers’ compensation carrier and UM carrier). In contrast, Illinois courts have held that insurers are entitled to setoffs for workers’ compensation benefits paid to the insured. Ullman v. Wolverine Insurance Company, 269 N.E.2d 295 (Ill. 1970); Taylor v. Pekin Insurance Company, 899 N.E.2d 251 (Ill. 2008).
In addition, in Missouri, a provision that would reduce the amount of UM coverage below that required by statute by benefits received by the insured pursuant to the policy’s medical payments coverage is invalid. Webb v. State Farm Mutual Automobile Insurance Company, 479 S.W.2d 148 (Mo. Ct. App. 1972). In Illinois, setoffs for medical payments coverage are enforceable so long as the total proven or undisputed damages incurred by the insured are less than the combined total of UM and medical payments coverage. Melson v. Illinois National Insurance Company, 274 N.E.2d 664 (Ill. 1971). The principle underlying the enforceability of setoff provisions in Illinois is whether application of the setoff is necessary to prevent double recovery by the insured. Hoglund v. State Farm Mutual Automobile Insurance Company, 592 N.E.2d 1031 (Ill. 1992).
Underinsured Motorist Coverage
Since UIM coverage is not mandatory coverage in Missouri, the parties to an insurance contract are free to limit the terms of coverage available under an automobile policy. However, provisions limiting coverage – specifically, setoff provisions – must be free from ambiguity. Several recent decisions illustrate the differing view among appellate courts regarding the enforceable nature of setoff provisions in the context of UIM coverage.
In Lynch v. Shelter Mutual Insurance Company, 325 S.W.3d 531 (Mo. Ct. App. 2010), the insured sought to recover a total of $200,000 in UIM benefits under four separate policies of insurance under which she, as a passenger, was insured. Under the insuring agreement for UIM coverage, Shelter promised to pay “uncompensated damages subject to the limit of liability stated in this endorsement.” Following the insuring agreement, the policy contained a “Limit of Our Liability” provision, which stated that the limits of UIM liability listed in the declarations would be reduced by all amounts paid or payable to the insured by, or on behalf of, those legally obligated to pay any portion of the damages to the insured. Since the underlying tortfeasor paid $100,000 and the UIM limit was $50,000, Shelter would owe nothing under its policy should the provisions be enforced. The Court of Appeals for the Southern District of Missouri held that the Shelter policy consistently stated that its UIM limit was subject to the language contained in the “Limit of Our Liability” provision and, thus, Shelter was entitled to enforce its setoff language. Further, the court held that the “Other Insurance” clause did not render the “anti-stacking” provision ambiguous, such that the policy was enforced according to its terms.
In Shelter Mutual Insurance Company v. Straw, 334 S.W.3d 592 (Mo. Ct. App. 2011), the Court of Appeals for the Southern District of Missouri reaffirmed Lynch, holding that the setoff language in the “Limit of Our Liability” provision of the Shelter policy was unambiguous. The policy allowed Shelter to reduce its UIM limits “by the amount paid, or payable, to the insured for damages by, or for, any person who…is legally liable for the bodily injury to that insured….” Following the rationale expressed in Lynch, the court held that the setoff language was enforceable and, thus, Shelter was entitled to reduce from its $100,000 limit of liability that amount paid by the underlying tortfeasor (i.e., $100,000).
However, the Court of Appeals for the Western District of Missouri has recently issued two decisions that hold contrary to Lynch and Straw. Both lawsuits involved the interpretation of Shelter policies containing UIM setoff language substantially similar to that at issue in the preceding cases. In Long v. Shelter Insurance Companies, 351 S.W.3d 692 (Mo. Ct. App. 2011), the plaintiff received $50,000 from the tortfeasor in settlement of her wrongful death claim. She then filed suit seeking payment of UIM benefits from Shelter under seven insurance policies issued to her and her husband. Shelter argued that plaintiff was only entitled to UIM coverage under one of the automobiles and that the policy limit was subject to a setoff for the $50,000 paid on behalf of the tortfeasor.
In spite of an “Other Insurance in the Company” clause stating that “[o]ur total liability under all our policies will not exceed the highest limit of any one policy,” the court held that this provision was ambiguous when read in conjunction with the “Other Insurance” clause. The “Other Insurance” clause stated as follows:
If an insured suffers bodily injury for which benefits are payable under this coverage, it applies as excess insurance over all other underinsured motorist insurance available to that insured.
Applying the principle that “where an insurance policy promises the insured something at one point but then takes it away at another, there is an ambiguity”, the Long court held that plaintiff was entitled to stack the UIM limits of the seven policies. The court concluded that the “Other Insurance” clause could be reasonably interpreted by an ordinary person to mean that Shelter’s UIM coverage would provide excess coverage to all other UIM policies (including other Shelter policies issued to her), which conflicts with the policy’s “anti-stacking” provision.
Further, the court found an ambiguity in the “Limit of Our Liability” provision. The court noted that the UIM endorsement’s insuring agreement stated that Shelter would “pay the uncompensated damages, subject to the limit of our liability stated in this coverage.” The court concluded that the endorsement’s reference to “this coverage” meant the coverage amounts shown in the declarations. Thus, the subsequent setoff language took away coverage that was earlier promised to the insured. In Wasson v. Shelter Mutual Insurance Company, 358 S.W.3d 113 (Mo. Ct. App. 2011), the Court of Appeals for the Western District of Missouri reaffirmed the holding in Long relative to the setoff language, concluding that “Shelter may deduct the $100,000 from State Farm from the Wassons’ total damages, but not from the policy limits for UIM coverage.”
So, at this point, there appears to be conflicting case law between the Western District and Southern District relative to the effect of setoff language similar to that employed in the Shelter policies. The Supreme Court of Missouri has not weighed in on the enforceable nature of this precise language. Nonetheless, these decisions illustrate how conflicting results can be reached by the different courts when interpreting similar policy language. While the outcome may be difficult to predict, we can state with certainty that there will be continued litigation over the enforceable nature of setoff provisions in the context of UIM coverage.
The Illinois Supreme Court recently issued an opinion concerning the doctrine of interstate forum non conveniens, which allows a court to decline jurisdiction of a case, even though it may have proper jurisdiction over the subject matter and the parties, if another forum would better serve the convenience of the parties and promote justice. The case, Fennell v. Illinois Central Railroad Co., 2012 IL 113812 (Dec. 28, 2012) involved a forum non conveniens motion brought by the defendant where the plaintiff resided in Mississippi, the injury occurred in Mississippi or Louisiana, the defendant maintained offices in Mississippi and Tennessee, and the only connections to Illinois were the location of the attorneys’ offices, some documentary evidence, and the location of one of the plaintiff’s experts. The Circuit Court of St. Clair County, Illinois denied defendant’s Motion to Dismiss onforum non conveniens grounds, which was affirmed by the Fifth Circuit.
Defendant Illinois Central Railroad Co. appealed, and the Illinois Supreme Court ruled courts should examine all public and private factors in the forum non conveniens analysis, and should not simply give deference to where a plaintiff decided to file the case. In ordering dismissal in favor of a Mississippi forum, the court noted “far less deference” should be given to the plaintiff’s choice of an Illinois forum when the plaintiff does not reside, and the cause of action did not arise, in Illinois.
After originally filing an asbestos lawsuit in the Circuit Court of Jefferson County, Mississippi, seeking recovery for injuries sustained as the result of alleged exposure to asbestos while employed by the Illinois Central Railroad, plaintiff refiled the suit in the Circuit Court of St. Clair County, Illinois. Plaintiff lived in Mississippi and worked for the railroad in Mississippi.
The railroad moved to dismiss the suit based on interstate forum non conveniens, and argued Mississippi was the most convenient forum to try the case. The Circuit Court of St. Clair County denied defendant’s motion to dismiss, and held St. Clair County was a convenient forum, as: (1) substantial documentary evidence critical to plaintiff’s case was located a short distance from the St. Clair County courthouse; (2) in-court testimony of two important witnesses for plaintiff would be available if the case were tried in Illinois, but unavailable if the case were tried in Mississippi; (3) St. Clair County was closer than Mississippi for plaintiff’s expert witness from Chicago; (4) the citizens of St. Clair County had an interest in asbestos; and (5) the Circuit Court of St. Clair County no longer had congested trial dockets.
The Supreme Court held the trial court abused its discretion when it denied defendant’s motion to dismiss the Illinois action in favor of an action in Mississippi. The Court ruled private factors weighed heavily in favor of the convenience of a Mississippi forum over an Illinois forum because plaintiff resided in Mississippi; the alleged exposure occurred in Mississippi and Louisiana; the vast majority of the identified witnesses, including the treating physicians, were located in Mississippi and were not subject to Illinois subpoenas; and a jury view of the premises would occur outside of Illinois.
In its analysis of public interest factors, the Court held Illinois had no relevant or practical connection with the litigation, as the only Illinois connections were the offices of the parties’ counsel, accessible and transportable documents in the possession of defendant’s counsel; and a compensated expert witness for plaintiff. The Court found these connections did not provide “a significant factual connection with the instant case that justified imposition of the burdens of a litigation upon the citizens and the court system of St. Clair County and Illinois.” Further, the Court held that merely conducting business in St. Clair County does not affect the forum non conveniens issue.
In sum, the Court found the weight of the private and public interest factors greatly favored Mississippi. Although the Court acknowledged this analysis is always case specific, deference to plaintiff’s choice of an Illinois forum was significantly lessened in the current case because: (1) Illinois was plaintiff’s second choice of forum; and (2) plaintiff did not reside in Illinois and the action did not arise in Illinois, such that Mississippi was the proper forum.
One of the most monumental decisions in the medical malpractice world in Missouri was handed down by the Missouri Supreme Court in Deborah Watts v. Lester E. Cox Medical Centers, et al., 376 S.W.3d 633 (Mo. 2012), on July 31, 2012. As most in the medical malpractice community are aware, the case held the cap on non-economic damages of $350,000 for medical malpractice actions found in Mo. Rev. Stat. § 538.210 unconstitutional. This cap had been in place and upheld by Missouri Courts since August 28, 2005. Given that the Watts case only addressed the constitutionality of the cap on non-economic damages in a personal injury case, the Court’s decision left the medical malpractice legal community attempting to determine whether or not the decision affected wrongful death cases. Given the language found in the Watts opinion focusing only on common law actions, and given the rationale used in upholding the cap in wrongful death cases decided prior to Watts, it is the opinion of this author that the wrongful death non-economic damages cap remains intact.
Watts provided the perfect test case for the non-economic damages cap on medical malpractice actions from the plaintiff’s perspective. Deborah Watts filed on behalf of her infant son, Naython Watts, alleging he suffered disabling brain injuries as a result of negligence committed by Cox Medical Centers and its associated physicians. Deborah Watts received prenatal care from Cox Medical Centers and was seen on October 30, 2006, due to cramping and her detection of decreased fetal movement. The jury found that the treating physician failed to perform appropriate tests, failed to notify Watts of the significance of decreased fetal movement and failed to perform any further diagnostic monitoring. Two days later, Watts was admitted to the hospital with lack of fetal movement. Although a Caesarian section delivery commenced, Naython Watts was born with catastrophic brain injuries due to fetal hypoxia and acidosis.
At the conclusion of trial, the jury awarded damages of $1.45 million in non-economic damages and $3.371 million in future medical damages. The non-economic damages were reduced to $350,000 by the trial court pursuant to Mo. Rev. Stat. § 538.210, and plaintiff appealed, claiming the reduction and application of the cap was unconstitutional since it violated the right to trial by jury found in article I, § 22(a) of the Missouri Constitution and several other portions of the Missouri Constitution. The Court found the non-economic cap of § 538.210 unconstitutional for infringing on the jury’s constitutionally protected purpose of determining the amount of damages sustained by an injured party. Id. at 636. In doing so, the Court also overruled its own prior decision of Adams By and Through Adams v. Children’s Mercy Hosp., 832 S.W.2d 898 (Mo. Ban 1992), wherein the Court had upheld the cap.
In discussing the rationale for its ruling, the Court specifically referenced the long history of the inviolate right to trial by jury for actions arising under Missouri common law. Article I, § 22(a) of the Missouri Constitution provides for a trial by jury as “heretofore enjoyed.” Noting that the Constitution was enacted in 1820, the Court undertook an analysis of the history of Missouri common law remarking that Missouri’s common law is based on the common law of England and that English common law recognized medical negligence as one of the five types of “private wrongs.” Id. at 638. Civil actions for personal injury damages had long been considered personal wrongs tried by civil juries. Using the history of Missouri common law, the Court stated “if Missouri common law entitled a plaintiff to a jury trial on the issue of non-economic damages in a medical malpractice action in 1820, Watts has a state constitutional right to a jury trial on her claim for damages for medical malpractice.” Id. at 638.
Noticeably absent in the Court’s rationale for striking down the cap as unconstitutional, was the mention of statutory causes of action, such as wrongful death actions. Nonetheless, in my opinion, the Court will continue to uphold the cap on non-economic damages for wrongful death actions. The same Court had decided Sanders v. Ahmed, 364 S.W.3d 195 (Mo. 2012), in April of 2012, only a few months prior to its Watts decision. In Sanders, the Missouri Supreme Court unequivocally upheld the cap in a wrongful death medical malpractice action. The Court noted that it did not need to decide whether or not the Adams case upholding the cap under common law was correct, since this case involved a statutorily created cause of action. Specifically, the Court indicated “Missouri does not recognize a common-law claim for wrongful death.” Id. at 201. The Court concluded by upholding the cap on non-economic damages holding that the legislature has the power to define the remedy available if it created the cause of action. Id.
Although I have set forth my opinion that the cap will continue to apply to non-economic damages in medical malpractice wrongful death actions, it should be noted there is a distinction in the rationale found in the opinions of the Court which long upheld the caps and the Watts decision with respect to the view expressed by the Watts Court that the legislature does not have the ability to effect the inviolate right to trial by jury. After Watts, there is some call for a Constitutional Amendment reinstating the caps for non-economic damages in all medical malpractice actions. The Missouri legislature and governor appear poised to address the issue in the upcoming year, and I anticipate their compromise will reinstate some limitation on all medical malpractice actions in the future. In the meantime, medical providers and malpractice insurers in Missouri continue to adapt and adjust to the reality of no limitations on damages in personal injury medical malpractice cases with a continuation of cap limitations on wrongful death medical malpractice actions.
The stacking of policies refers to the practice of combining insurance coverage limits to account for more than one vehicle insured under a multi-car policy, or under separate policies of insurance. Stacking has been the subject of many appellate decisions in recent years, particularly in the context of underinsured motorist coverage. Although the great majority of policies contain language that seeks to preclude the stacking of coverage (appropriately termed “anti-stacking” provisions), such language is not uncommonly deemed ambiguous by courts and rendered unenforceable so to permit stacking of certain coverages.
Where a single policy of liability insurance is issued covering multiple vehicles, only one of which was involved in the accident causing injury, the single limit of liability applies. O’Rourke v. Esurance Insurance Company et al., 325 S.W.3d 395 (Mo. Ct. App. 2010); National Union Fire Insurance Company of Pittsburgh, Pa. v. Maune, 277 S.W.3d 754 (Mo. Ct. App. 2009); Mazzocchio v. Pohlman, 861 S.W.2d 208 (Mo. Ct. App. 1993).
However, the Supreme Court of Missouri has recently held that where there are two policies covering a single automobile, both an ownership policy and an operator’s policy, anti-stacking clauses contained in the policies are void as against public policy (Missouri’s Motor Vehicle Financial Responsibility Law requiring at least $25,000 per person and $50,000 per occurrence in liability coverage). Karscig v. McConville, et al., 303 S.W.3d 499 (Mo. banc 2010). Thus, the insurer was required to pay the $25,000 limit under each of the two liability policies. It should be noted that the court in O’Rourke, in discussing the distinction between a single policy insuring multiple vehicles and multiple policies insuring the same vehicle, held that the financial responsibility law “only requires $25,000 for each insured vehicle involved in an accident, not $25,000 multiplied by the number of vehicles insured under one policy….” O’Rourk v. Esurance Insurance Company, et al., 325 S.W.3d at 398.
Uninsured Motorist Coverage
Issues pertaining to the stacking of uninsured motorist (UM) coverage can generally be broken down into two categories. The first category relates to stacking of coverages on behalf of the named insured or a resident member of the named insured’s household. In this context, Missouri case law is well-settled that UM coverage can be stacked given the statutory mandate for UM coverage, Mo. Rev. Stat. § 379.203, and the strong public policy derived from the statute. Cameron Mutual Insurance Co. v. Madden, 533 S.W.2d 538 (Mo. 1976). “Anti-stacking” provisions with respect to the named insured are void regardless of whether UM coverages were provided by the same or different insurers. Galloway v. Farmers Insurance Company, Inc., 523 S.W.2d 339 (Mo. Ct. App. 1975). Further, public policy mandates that when an insured has two separate policies containing UM clauses, effect shall be given to both coverages without reduction or limitation by policy provisions, and that both coverages are available to those insured under the policy. Bergtholdt v. Farmers Insurance Company, Inc., 691 S.W.2d 357 (Mo. Ct. App. 1985).
The second category relates to an “occupancy” insured – that is, an occupant of the insured vehicle other than the named insured and household residents. Under this scenario, appellate courts have historically held that stacking is not required. Hines v. Government Employees Insurance Company, 656 S.W.2d 262 (Mo. banc 1983). In fact, current case law holds that Missouri’s Motor Vehicle Financial Responsibility Law and the UM statute do not require that an insurer provide any UM coverage to an occupant of an insured vehicle where the policy excludes such occupants by its terms (although this holding is currently being challenged in appellate courts). Hines; Byers v. Shelter Mutual Insurance Company, 271 S.W.3d 39 (Mo. Ct. App. 2008).
Public policy does not require stacking of UM coverages on fleet vehicle commercial policies where the individual’s eligibility for payment of UM coverage arose solely from his occupancy of a vehicle. Linderer v. Royal Globe Insurance Company, 597 S.W.2d 656 (Mo. Ct. App. 1980). Further, public policy does not require the “doubling” of UM policy limits where multiple UM vehicles contributed to cause an accident. Tresner v. State Farm Mutual Insurance Company, 957 S.W.2d 380 (Mo. Ct. App. 1997).
In contrast to Missouri law, Illinois courts have held that “[i]nsurance policy provisions intended to limit the aggregation of coverage – generally referred to as antistacking provisions – do not undermine the legislative purpose supporting the mandate of uninsured motorist protection.” Bruder v. Country Mutual Insurance Company, 620 N.E.2d 355, 358 (Ill. 1993). Further, “anti-stacking” provisions do not conflict with the “premium rule” – the rule holding that it is unfair to permit an insurer to collect premiums and thereafter apply a provision limiting or absolving liability. Id. Thus, in Illinois, a policy’s “anti-stacking” provision may be enforced to preclude stacking of UM coverages where the policy language is unambiguous. Id.
Underinsured Motorist Coverage
Unlike UM coverage, there is no statute in Missouri mandating underinsured motorist (UIM) coverage, so the existence of UIM coverage and the ability to stack is typically determined by the contract entered into between the insured and insurer. Rodriguez v. General Accident Insurance Company, 808 S.W.2d 379 (Mo. 1991).
However, in interpreting insurance policies, Missouri courts have held UIM “anti-stacking” provisions ambiguous, thereby entitling an insured to stack UIM coverage in certain contexts. In fact, a significant number of recent opinions analyzing the enforceable nature of “anti-stacking” provisions in UIM policies have identified ambiguities within the policy so as to deem the “anti-stacking” provision unenforceable. These ambiguities are not necessarily found in the “anti-stacking” language itself, but instead, in other policy provisions that courts find incongruous with the “anti-stacking” language.
For example, where “Other Insurance” clauses found in two separate automobile policies provide that UIM coverage will be excess over “any other similar insurance,” Missouri courts have held that the phrase could be interpreted as one policy providing UIM coverage excess to such coverage provided in another policy; thus, the coverages under the policies stack despite the presence of “anti-stacking” provisions in both. American Family Mutual Insurance Company v. Ragsdale, 213 S.W.3d 51 (Mo. Ct. App. 2007); Chamness v. American Family Mutual Insurance Company, 226 S.W.3d 199 (Mo. Ct. App. 2007); Ritchie v. Allied Property & Casualty Insurance Company, 307 S.W.3d 132 (Mo. 2009). However, in Stewart v. Liberty Mutual Fire Insurance Company, 349 S.W.3d 381 (Mo. Ct. App. 2011), the Court of Appeals for the Western District of Missouri distinguished the UIM coverage’s “Other Insurance” clause from those at issue in theRagsdale, Chamness, and Ritchie policies, noting that the clause stated that UIM coverage was excess over applicable primary coverage. Thus, the court reasoned, the “Other Insurance” clause could not reasonably be understood to allow the stacking of multiple UIM coverages since UIM coverage was not primary. Since there was no conflict between the “anti-stacking” provision and the “Other Insurance” clause, the policy was not ambiguous and the “anti-stacking” provision was enforced.
In addition, Missouri courts have held that if the policy of insurance intertwines UM and UIM coverages to the point where there is an ambiguity between the two, an insured is permitted to stack the UIM coverages. Bauer v. Farmers Insurance Company, 270 S.W.3d 491 (Mo. Ct. App. 2008); Niswonger v. Farm Bureau Town & Country Insurance Company of Missouri, 992 S.W.2d 308 (Mo. Ct. App. 1999) (where UM and UIM coverages were “lumped together” as one coverage on the declarations page and a single premium was charged for both, even though the coverages were defined and treated separately in the policy itself).
As in Missouri, Illinois courts will enforce “anti-stacking” provisions so long as they are clear and unambiguous. “[M]ost cases in which the court has found that an insurance policy allows stacking have done so on the basis that the language of the policy was ambiguous because the declarations sheet listed more than one vehicle with separate coverages and separate premiums.” Hanson v. Lumley Trucking, LLC, 932 N.E.2d 1179, 1182 (Ill. App. Ct. 2010); see e.g., Johnson v. Davis, 883 N.E.2d 521 (Ill. App. Ct. 2007) (where the court found that stacking was allowed under the policy because the limits of the UIM coverage were listed four separate times, once for each vehicle covered, and four separate premiums for the UIM coverage were also listed on the declarations sheet). However, merely listing the premiums for each covered vehicle separately, without more, does not create an ambiguity so to permit stacking. Hanson, 932 N.E.2d at 1182.
On June 16, 1887, 150 years ago, Mr. Frank Primrose walked into the Philadelphia Western Union office with an encoded message for his agent dispatched to Ellis, Kansas to purchase wool. The message was sent, but no reply message was asked for, or paid for. Instead of sitting tight for further word, (because Primrose had just purchased all the wool he needed), his agent began to buy up all the wool he could, assuming those were his instructions. However, Western Union made a mistake in transcribing only one letter of the message, which made a huge difference in the content of the code they were using. All of this cost Mr. Primrose $20,000.00, a handsome sum in those times, and he sued Western Union for their mistake.
However, his case was not any more successful than his initial message attempt, because the Western Union “agreement” contained an “olde fashioned” limitation of liability provision, which dictated the damages that could be recovered for a mistake in an “unrepeated message” (one sent, but which was not repeated back to the sender to verify it was transcribed accurately), was the cost of sending the original message, to Mr. Primrose, $1.15. The Supreme Court of the land, in the case Primrose v. Western Union Tel. Co., 154 U.S. 1 (1894), held the limitation of liability clause enforceable because it was a “proper and lawful mode of securing a due proportion between the amount for which the carrier may be responsible and the freight he receives, and of protecting himself against extravagant and fanciful valuations.”
(The whole case can be found here.)
Limitation of Liability Clauses
Many industry form documents and custom construction contracts contain provisions shifting or limiting the respective parties’ risks. One of the main risk-limiting provisions seen primarily in the terms and conditions of professional service agreements is the “limitation of liability” clause (“LoL” clause). These clauses generally establish the maximum liability or exposure of the design professional if there is a claim. The purpose of these clauses is to recognize the proportional role of the professional service provider in the project and limit their liability according to the level of compensation received. If enforceable, the clause will serve to cap a party’s liability for damages to an amount certain.
Are they Enforceable? The Answer Depends Upon Your State’s Law
While these provisions are commonplace, not all U.S. jurisdictions find them enforceable. Though many states enforce them, still others hold them unenforceable unless properly worded, reviewing them under a strict scrutiny standard. Some states find them totally unenforceable for reasons ranging from violation of that state’s anti-indemnity statutes to public policy reasons.
Generally speaking, in order to contractually limit damages for a party’s future conduct, the contractual language at issue must be: 1) clear, 2) unambiguous, 3) unmistakable and 4) conspicuous, to be enforceable. While a contractual clause limiting the amount of damages that may be recovered for the acts of a party (limitation of liability clause) versus one that totally exonerates a party from its future conduct (exculpatory clause) are not exactly the same, some courts categorize both such clauses as “exculpatory clauses.”
An exculpatory clause is one that relieves a party from liability resulting from a negligent or wrongful act. Generally, exculpatory clauses in contracts are disfavored under the law of most states, and such contract provisions are strictly construed against the party claiming the benefit of the clause. Courts are reluctant to enforce contracts that relieve parties from the effects of their future acts, because, policy considerations and common sense tell you that, if exonerated, they will not use the same level of care they otherwise might. However, a limitation of liability clause simply places a fixed cap on the amount of damages that may be recovered against a contracting party in the event of a claim.
Generally, courts hold that such clauses are not per se against public policy, but several states are more protective, and many have enacted legislation, by way of their anti-indemnity statutes that hold such clauses void and unenforceable. In some situations, exculpatory clauses have been held to be invalid under particular statutory provisions and in other instances because the contract is one affected with a public interest. Statutory restrictions which preclude their use hold that statutory liability for negligence cannot be contracted away. Courts will analogize the clause to an indemnity provision for any unrecovered amounts over the liability cap, which results in one party indemnifying the other for their sole negligence. This generally runs afoul of an anti-indemnity statute, invalidating the clause.
Where the parties to a contract are sophisticated business entities dealing at arm’s length, the limitation is reasonable in relation to the design professional’s fee, and the damages are purely economic (versus a personal injury claim), most states will enforce a contract’s limitation of liability clause.
Enforceability of Limitation of Liability Clauses
There are several principles that emerge from those states that find limitation of liability clauses enforceable. As a rule, most states allowing them strictly construe them against the beneficiary of the clause. The clause must still meet the above four language requirements. However, a theme from these cases is that the courts are not in a position to re-write sophisticated parties’ business agreements, and will generally only enforce them as written. In other words, they must of themselves completely enumerate all of the instances where the liability of the design professional is to be limited.
Whether a claim arises out of “negligence” or “breach of contract,” the clause must address any circumstance for a potential claim, or the Courts will not enforce them. (If the clause only mentions negligence, then a breach of contract claim could be outside the protection of the clause, as an example). The Courts will not re-write the contract, and will strictly construe them against the party relying on them, limiting them to their exact language.
Some courts have held that, in the absence of evidence of separate negotiation or bargaining for the clause at issue, it will not be enforced. Some require evidence of separate consideration, or monetary recognition, for the limitation of liability clause. Other courts have held that, if the clause is not conspicuous, is set out along with several other numbered paragraphs, is in the same typeface and not highlighted in any way, it is not enforceable.
States that refuse to enforce the clauses do so for a number of reasons, including finding the clauses violative of the specific state’s anti-indemnity statute, or holding that they are unenforceable as against public policy. Due to the “professional” status of the designer, these states hold there exist “extra-contractual” duties that require invalidating these clauses. Some hold that claims of professional negligence operate outside of a contract, and so contract defenses simply are not available to limit liability in any way.
Risk-Management “Take Aways” for Drafting Effective Limitation of Liability Clauses
There are certain essential elements to any limitation of liability clause. Initially, it is important the clause be negotiated. This can be accomplished in several different ways. Use of pre-printed forms with blanks to fill in the appropriate liability caps (using either a standard figure, like $50,000.00, or the professional’s fee, whichever is higher, or some other limit which meaningfully takes into consideration the potential damages on the project), evidences the fact the clause was discussed. Highlighting the language in the agreement with different typeface, or bold print, or having a separate signature or initial block adjacent to the limitation of liability language will show it was conspicuous, negotiated and explicitly accepted.
All too many times, I have seen a well written LoL clause invalidated or ignored by a judge because a design professional failed to obtain a signed copy of its proposal letter or executed work authorization form which incorporated the terms and conditions containing the clause. Please remember: although you may have a “handshake agreement,” you do not have an enforceable “contract” with defenses you can use in response to a claim until the document is signed, and you should not begin work without a signed agreement.
Cases enforcing these clauses focus on the simple, clear and unambiguous nature of the language at issue. Therefore, the language must specifically state that it is a release of future “negligence,” “breach of contract” or other theory of recovery in order for the clause to be an effective waiver of these claims. General language releasing future claims will not suffice.
There must also be evidence of relatively equal bargaining power during contract negotiation, not a “take it or leave it” situation. When dealing with members of the general public, then, great care should be used with the clause to show it was understood and accepted, versus dealing with a sophisticated business entity at arm’s length.
Even following these suggestions does not guarantee a court will enforce the clause as written. These clauses will be subjected to heavy scrutiny. While these are simply suggestions, you should of course obtain the assistance of counsel in your respective jurisdiction to make sure that your limitation of liability language complies with the exact letter of the law in the subject state.
Most importantly, the design professional must be open to communicating with clients about the appropriate proportion of the potential responsibilities, liabilities and risk/reward that the project offers to all participants, so these limitations make much more sense in the context of who really benefits and who suffers, and who is best situated to deal with the risks that will undoubtedly arise as the project progresses.
If you have any questions about the enforceablility of your clause, please feel free to contact me!