Section 3.29 Specter of Declaratory Judgment Actions

• Library: Settling Cases 2014

As noted in §3.23 above, § 537.065, RSMo 2000, was designed to make insurers decide whether to litigate underlying causes or their policy defenses, but not both. But, insurers have tried to have their cake and eat it too, as in State ex rel. Mid‑Century Insurance Co. v. McKelvey, 666 S.W.2d 457 (Mo. App. W.D. 1984).

Mid‑Century, 666 S.W.2d 457, arose out of an action in which Hernandez was sued by Sparks. Hernandez tendered the suit papers to Mid‑Century, along with a demand for a defense without any reservation of rights. The insurer declined to defend without a reservation, although it did explain its reasons for the reservation. Hernandez refused the defense under those circumstances. Hernandez did not file an answer, and Sparks sought a default. Mid‑Century applied for leave to intervene to file an answer. The trial court denied the application, and Mid‑Century sought a writ of mandamus.

The court of appeals held that Hernandez was not required to accept the defense under reservation even though, unlike Butters v. City of Independence, 513 S.W.2d 418 (Mo. 1974), Mid‑Century gave its insured the reasons for its reservations. Nonetheless, the court held that Mid‑Century did have a potential remedy to resolve its dilemma: “It may file a declaratory judgment suit to determine the question of its policy coverage in this accident.” Mid‑Century, 666 S.W.2d at 459.

That is the very thing that one of the insurers did in United States Fidelity & Guaranty Co. v. Safeco Insurance Co. of America, 522 S.W.2d 809, 818–19 (Mo. banc 1975)...