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Missouri’s Motor Vehicle Financial Responsibility Law and the Duty to Defend

The State of Missouri requires all drivers to carry certain minimum coverage under the Motor Vehicle Financial Responsibility Law (MVFRL) as prescribed in RSMo. § 303.190. That section provides that all motor vehicle liability policies must carry at least twenty-five thousand dollars of liability coverage for bodily injury or death of a person in any one accident, fifty thousand dollars of liability coverage for bodily injury or death in each accident and ten thousand dollars of coverage for property damage from each accident. Certain entities are allowed to self-insure, as opposed to purchasing insurance through a third party, if they meet the requirements of RSMo. § 303.220. In order to obtain a certificate of self-insurance, the self-insurer must agree to, “pay the same judgments and in the same amounts that an insurer would have been obligated to pay under an owner’s motor vehicle liability policy if it had issued such policy to said self insurer.” RSMo. § 303.160.

Typically, when a person purchases insurance through an insurance company, the insurer agrees to defend the insured in the event the insured is sued or a claim is made against the insured that is covered under the insurance policy. A failure to defend the insured or to settle a claim against the insured can result in a claim by the insured against the insurer for the insurer’s failure to perform its duties under the insurance contract. Insurers typically agree in their policies to defend the insured so that they are not forced to pay large judgments without the ability to participate in the defense.

While the MVFRL makes clear that each driver must carry certain minimum coverage, either through insurance or self-insurance, a recent case from the Eastern District Court of Appeals, clarifies that the minimum coverage does not require a self-insurer to provide a defense to the insured. Instead, the only requirement is that the self-insurer pay the amounts required under the MVFRL.

In Clayborne v. Enterprise Leasing Co of St. Louis, LLC the Eastern District Court of Appeals was faced with an interesting fact pattern. Carlus Parker rented a car from Enterprise, but refused Enterprise’s insurance coverage. In his rental agreement, Enterprise stated that it was not an insurer, but met the minimum requirements of the MVFRL as a self-insurer. After renting his vehicle, Mr. Parker was involved in an accident with Mr. Clayborne. Mr. Clayborne sued Mr. Parker for his injuries.

Mr. Clayborne’s attorney contacted Enterprise, and sought to settle with Enterprise as Mr. Parker’s insurer for $25,000, the coverage amount required by the MVFRL. Enterprise refused stating that it was not Mr. Parker’s insurer. Enterprise further refused to provide Mr. Parker with a defense at the trial of Mr. Clayborne’s claim against Mr. Parker. Mr. Clayborne obtained a judgment of $575,000.00 against Mr. Parker. Shortly thereafter, Enterprise paid Mr. Clayborne the $25,000 under the MVFRL, but refused to pay any additional amounts.

Mr. Parker then sued Enterprise claiming that they had acted in bad faith toward him as his insurer, in failing to defend him and refusing to settle with Mr. Clayborne for Enterprise’s $25,000 in coverage. Mr. Parker claimed that Enterprise’s refusal to settle for its $25,000 in coverage allowed Mr. Clayborne to take a large judgment against him, when Enterprise had the opportunity to settle Mr. Clayborne’s claim for an amount that would not have exposed Mr. Parker to a judgment. The Circuit Court of the City of St. Louis found that Enterprise owed no duty to Mr. Parker other than to pay its $25,000 and entered judgment in favor of Enterprise. Mr. Parker appealed.

The Eastern District Court of Appeals upheld the Circuit Court of the City of St. Louis’ judgment in favor of Enterprise. The Court found that nothing in the MVFRL required Enterprise to provide Mr. Parker with a defense or gave Mr. Parker a right to sue Enterprise for failing to settle. The Court stated:

In the instant case, Appellant [Parker] can point to no provision in the rental agreement establishing an obligation on Enterprise…to defend him in a lawsuit or to settle any claims brought against him by a third party damaged by Appellant while driving the rental car. Enterprise…ha[s] satisfied the only duty of coverage they have in this case, namely a statutory duty under the MVFRL to provide the minimum amount of $25,000 to third party Clayborne.

While the case may be reversed by the full panel of the Eastern District Court of Appeals or transferred to the Missouri Supreme Court, if the opinion stands the clear message is that the MVFRL requires nothing more than $25,000 in coverage for bodily injury or death per person, $50,000 in coverage for bodily injury or death per accident and $10,000 in coverage for property damage per accident.

This case clearly raises the question, can an insurer avoid its duty to defend similar to the self-insurer in Clayborne. While this case does not address that issue, it is likely that an insured under a state minimum policy would still have a claim against their insurer for bad faith failure to settle or defend due to the contractual agreement between the insurer and insured. The Court’s opinion in Clayborne however makes clear that a self-insurer does not have that duty unless it contractually agrees to it.

A copy of the Eastern District Court of Appeals’ Opinion in Clayborne v. Enterprise Leasing Co. of St. Louis, LLC can be found at: http://www.courts.mo.gov/file.jsp?id=111615.

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