A step-by-step framework for structuring demands that create and preserve excess judgment exposure
Missouri Injury & Insurance Law | missouriinjuryandinsurancelaw.com
Introduction
The time-limited settlement demand is one of the most consequential documents a Missouri personal injury lawyer will draft. A well-crafted demand can set the stage for a bad faith claim, create leverage far beyond the policy limits, and ultimately result in significantly enhanced recovery for the client. A poorly drafted demand, by contrast, may fail to create any exposure for the carrier and may even prejudice the underlying case. This post addresses the elements of an effective time-limited demand under Missouri law and the strategic considerations that should inform its drafting.
The Legal Framework for Bad Faith Failure to Settle
Missouri recognizes a common law cause of action against a liability insurer for bad faith failure to settle within policy limits. The claim arises when an insurer, acting in bad faith, refuses a reasonable settlement demand within the policy limits, resulting in an excess judgment against the insured. The insurer’s duty to settle arises from its exclusive control over settlement negotiations and its obligation to give equal consideration to the interests of its insured.
The elements of a Missouri bad faith failure to settle claim include: (1) a settlement demand within policy limits; (2) a reasonable probability that the plaintiff would obtain a judgment exceeding policy limits absent settlement; (3) the insurer’s refusal to settle; and (4) an excess judgment resulting from the refusal. Practitioners should structure their demands with each of these elements in mind.
Essential Elements of the Time-Limited Demand
A legally effective time-limited demand in Missouri should contain the following elements. First, the demand must be within the applicable policy limits. A demand above limits cannot create bad faith exposure regardless of how it is framed. If policy limits are unknown at the time of the demand, practitioners should request limits disclosure pursuant to Missouri’s disclosure obligations and condition the demand accordingly.
Second, the demand must provide the insurer with sufficient information to evaluate its exposure. This means attaching or offering to provide medical records, bills, wage loss documentation, liability evidence, and any other materials necessary for a competent claims evaluation. An insurer cannot be held in bad faith for failing to accept a demand it lacked the information to evaluate.
Third, the demand must set a reasonable deadline for acceptance. Missouri courts have not established a bright-line rule for what constitutes a reasonable deadline, but thirty days is generally considered the minimum adequate period for most straightforward cases. Cases involving complex coverage issues, multiple claimants, or significant damages may warrant longer deadlines. The demand should state explicitly that the offer will expire at a specified date and time and that no extensions will be granted without written agreement.
Fourth, the demand should specify clearly what is being offered in exchange—typically a full and final release of all claims against the insured—and should make clear that the offer is conditioned on the insurer tendering its full policy limits within the deadline.
Limits Disclosure Under Missouri Law
Missouri law imposes obligations on liability insurers to disclose policy limits in certain circumstances. Mo. Rev. Stat. § 375.1007 (2023) and related regulations promulgated by the Missouri Department of Insurance establish disclosure requirements. Practitioners should send a formal limits disclosure request at the outset of every third-party claim and document the insurer’s response or failure to respond. An insurer that conceals or misrepresents its limits may face additional exposure under Missouri’s unfair claims settlement practices provisions. Mo. Rev. Stat. § 375.1000 (2023).
Preserving the Record
Every communication with the insurer in connection with the demand should be sent in a manner that creates a verifiable record—certified mail, email with read receipt, or overnight delivery with tracking. The practitioner should maintain a complete file documenting: the date and manner of the demand; the insurer’s acknowledgment; all communications during the demand period; the insurer’s ultimate response; and the basis for any rejection.
This documentation becomes the foundation of the bad faith claim if the insurer refuses to settle and an excess judgment results. Missouri courts will examine the entire course of dealing between the parties, and gaps in the record will benefit the insurer. Treat every interaction with the claims department as potential trial exhibit preparation.
Conclusion
The time-limited demand is not a routine form letter—it is a strategic instrument that, when properly drafted and documented, can fundamentally reshape the economics of a personal injury case. Practitioners who invest the time to craft these demands carefully and to preserve the record meticulously will find that their clients’ outcomes improve accordingly.
