Exercising “537.065 Agreements“ has become a boutique industry in Missouri where plaintiffs make deals with defendants to first cut out an insurer and then sue on behalf of a defendant for punitive damages, according to a civil justice reform lobbyist.
“This raises insurance rates artificially and increases the cost of litigation,” said Rich AuBuchon, executive director of the Missouri Civil Justice Reform Coalition.
The term “537.065 Agreements” refers to a section of statute, which mitigates punitive damage agreements and intervention in lawsuits for insurance companies.
As previously reported in the St. Louis Record, State Sen. Caleb Rowden (R-Columbia) sponsored SB 49 in 2019, a bill that would have prohibited arbitration awards against insurers unless the insurer had agreed to the process in advance. However, SB 49 expired in the Senate.
“What has happened is these sweetheart deals are made, they go to arbitration where they get an arbitrator's award and then establish it as a judgment under the Federal Arbitration Act,” Aubuchon told the St. Louis Record. “They're able to get a judgment as if they would have gone to court but they don't give notice that they're in arbitration. So, the insurance company doesn't have the opportunity to defend them and they should. That's the crux of the problem.”
If approved, proposed legislation would provide insurers the opportunity to intervene in the process after being notified of an insured's dispute.
“It ensures transparency for the insurance company,” AuBuchon said. “ It doesn't foreclose the agreements to be made but if those situations do develop where a plaintiff makes a deal with the defendant not to hold the defendant liable, the insurance company ought to know about it.”
The House session was canceled for the week of Jan. 18 due to a COVID-19 cluster but could potentially meet again on Monday, Jan. 25, according to the Missouri House of Representatives website. The Missouri COVID-19 dashboard reports 449,379 coronavirus cases statewide, resulting in 6,468 fatalities as of Jan. 19. The House voted against mandating masks, according to media reports.
“Everything was just filed so we've had no hearings and we haven't gotten committees established yet,” AuBuchon said last week. “Committees will be announced in the House and Senate after the inauguration and Dr. Martin Luther King Jr Day. So, we’re likely to have hearings the following week.”