Section 9 Insurer’s Refusal Was Without Reasonable Cause or Excuse

• Library: Damages 2012

The most litigated question in vexatious refusal cases is whether the insurer had a “reasonable cause or excuse” in denying the insured payment. Missouri courts recognize that claims of vexatious refusal to pay arise in “innumerable contexts.” Dhyne v. State Farm Fire & Cas. Co., 188 S.W.3d 454, 458 (Mo. banc 2006). Direct and specific evidence to show vexatious refusal is not required, and the jury may find vexatious delay upon a general survey and a consideration
of the whole testimony and all the facts and circumstances
in connection with the case. Columbia Mut. Ins. Co. v. Long, 258 S.W.3d 469, 477 (Mo. App. W.D. 2008).

Whether a decision not to pay is with reasonable cause or excuse is determined “as the facts would have appeared to a reasonable person before trial.” Groves v. State Farm Mutual Automobile Insurance Co., 540 S.W.2d 39, 42 (Mo. banc 1976); Watters v. Travel Guard Int’l, 136 S.W.3d 100, 108 (Mo. App. E.D. 2004). See also Morris v. J.C. Penney Life Ins. Co., 895 S.W.2d 73, 76 (Mo. App. W.D. 1995) (the test on whether to impose vexatious penalty is “how the facts appeared at the time of the refusal to pay”).

In Russell v. Farmers & Merchants Insurance Co., 834 S.W.2d 209 (Mo. App. S.D. 1992), the court examined the Groves language, noting that the language is significant because the fact that the “trial judgment is adverse to the insurer’s contention is not sufficient reason to impose the statutory penalty.” Id. at 221. Therefore:

whether a refusal to pay is vexatious or not must be determined by the situation as presented to the insurer at the time it was called on to pay. However, an insurer that persists in its refusal to pay after it becomes aware that it has no meritorious defense is subject to penalty for vexatious refusal.

Id. (citation omitted); see also Boatmen’s First Nat’l Bank of Kansas City v. Hawkeye-Sec. Ins. Co., 861 S.W.2d 600, 603 (Mo. App. W.D. 1993) (claim vests “at the time the insurer was called upon to pay”); Hunt v. United States Fire Ins. Co. of N.Y., 193 S.W.2d 778, 787 (Mo. App. W.D. 1946) (insurer cannot exclude evidence of its obstructive conduct that occurred after the filing of the plaintiff’s suit on the policy; in so holding, the court concluded that the issue of vexatious refusal to pay includes conduct of the defendant in resisting payment after the filing of suit on the policy, and it is to be determined as the facts appear to a “reasonable and prudent man before trial”). To the same effect is Hay v. Utica Mut. Ins. Co., 551 S.W.2d 954, 958 (Mo. App. S.D. 1977).

Other cases indicate that the basis for determining whether vexatious penalties should be applied depends on “all the evidence adduced at the trial of the action,” Dixon v. Bus. Men’s Assurance Co. of Am., 285 S.W.2d 619, 630 (Mo. banc 1955), or depends on whether the insurer “persists in its refusal to pay—after it is aware it has no meritorious defense,”...