The statute’s history, its mechanics, the 2017 and 2021 amendments, a step-by-step guide to using § 537.065 in practice
Missouri Injury & Insurance Law | missouriinjuryandinsurancelaw.com
Key Takeaways
- § 537.065 R.S.Mo. is crucial for resolving personal injury claims in Missouri when insurers deny coverage or refuse to defend.
- The statute underwent amendments in 2017 and 2021, enhancing insurer notice requirements and their intervention rights.
- The current framework allows for a structured process, giving intervening insurers the opportunity to contest liabilities and damages at trial.
- Understanding § 537.065 involves knowing its history, procedural requirements, and the strategic implications for all parties involved.
- The statute enables injured parties to secure judgments while preserving rights to insurance collections, shaping the dynamics of insurance and injury litigation.
Introduction
Section 537.065 R.S.Mo. is perhaps the most important and most litigated statute in Missouri injury & insurance practice. It creates a statutory mechanism that allows an injured party and an insured tortfeasor — whose insurer has denied coverage or refused to defend — to resolve the underlying tort claim by agreement, with collection limited to available insurance, while preserving the right to hold the insurer accountable for that coverage. In its current form, following the 2021 amendments and subsequent appellate decisions § 537.065 offers a sophisticated framework with precise procedural requirements, insurer intervention rights, and far-reaching consequences for every party involved.
The application of this framework arises in already complex and dynamic factual and legal disputes. These disputes commonly involve a serious tort with injures, a failure of the insurer to resolve the matter by settlement, and possibly a coverage dispute that may evoke a reservation of rights, or coverage denial. It is common in these cases for there to be multiple lawsuits involved, in different forums, sometimes simultaneous or sequentially or both. An understanding of § 537.065 is critical to practitioners who would swim in these complex waters.
This post provides a complete foundational treatment of § 537.065: its history from the 1959 original through the 2017 and 2021 amendments, its current mechanics, the procedural requirements for notice and intervention, what the insurer can and cannot do upon intervention, and the strategic implications for plaintiffs, defendants, and insurers. It is the reference post for the § 537.065 series on this blog.
The History of § 537.065: Three Versions of One Statute
To understand § 537.065 as it operates today, it is essential to understand where it came from and why the legislature amended it twice in four years. The honest answer to that question requires understanding both sides of a conflict that has been playing out in Missouri courts, insurance company boardrooms, and legislative chambers for decades: on one side, insurers that issue policies, collect premiums, and then find creative ways to avoid paying claims when they become expensive; on the other, injured people and abandoned insureds who need a legal mechanism to resolve claims and preserve their rights when the insurer walks away. Each version of § 537.065 represents the legislatures current judgment about where to draw that line and the 2017 and 2021 amendments reflect the insurance industry’s considerable political influence in moving that line in its direction.
| 1959Enacted | Missouri enacts § 537.065, allowing injured parties and tortfeasors to contract to limit execution against specified assets and insurance. No notice to insurers required. No insurer intervention right. Insurers could be bound by judgments entered in proceedings they never knew existed. |
| 2017H.B. 339 & 714 | Legislature adds insurer notice requirements and a 30-day intervention right in pending lawsuits. Restricts § 537.065 to cases where the insurer had the opportunity to defend without reservation and refused. The intervention right proved easily circumvented by strategic timing. |
| 2021H.B. 345 | Comprehensive overhaul: broadened eligibility to include reservation of rights refusal; overhauled notice mechanics to close the strategic timing loophole; gave intervening insurers “all rights afforded to defendants” including an unconditional right to a jury trial and freedom from all pre-intervention stipulations and orders. |
| 2026Lyda v. Allstate | Western District holds that a post-2021 intervening insurer has an unconditional right to contest liability and damages at a full jury trial. A consent judgment entered over the insurer’s objection is void as to the insurer. |
The 1959 Original: No Insurer Participation
The original § 537.065 was a simple statute authorizing injured parties and tortfeasors to contract that collection would be limited to specific assets and insurance, with no notice to the insurer required. The statute reflected a straightforward practical reality: when an insurer wrongfully denies coverage or refuses to defend, the insured is left alone to face a tort claim that the insurer was paid to handle. The insured has no money and no defense. The injured party has a valid claim and no practical path to compensation. Section 537.065 provided a mechanism for those two abandoned parties to resolve the dispute between themselves while preserving the right to pursue available insurance. The very insurance the insurer had already refused to provide. As Knight v. Knight, 609 S.W.3d 813 (Mo. App. W.D. 2020) described the scenario that played out innumerable times was that plaintiff and defendant entered the agreement, litigated the claim without insurer participation, obtained a judgment, and then sought to bind the insurer to a result it had no opportunity to contest. Insurers complained that this was procedurally unfair. That argument deserves scrutiny: the insurer had already decided, on its own initiative, not to defend the claim. The insurer also had a right to file an action to resolve the coverage issue by way of declaratory judgment. Despite the irony insurers who chose to not honor the insurance contract or issued a conditional performance that was rejected argued that a judgment rendered in § 537.065 cases where unfair or should not bind them. These arguments invariably were raised in cases where the insurance companies’ coverage decision was wrong thus causing them to have to keep the original promise they made for indemnity. In cases where an excess judgment was rendered and the insurer was guilty of fraud or bad faith they were forced to pay in excess of the contract limit. Insurers hated that result, despite the fact the road to that result was a product of their own choices, and conduct. So, insurers, in turned to the legislature.
The 2017 Amendment: Notice and a Limited Right
The 2017 amendments were promoted heavily by the insurance industry and its lobbyists, who argued that the original statute allowed collusive judgments that unfairly bound insurers to inflated amounts in proceedings they knew nothing about. While exaugurated there is some truth to that concern. There is also a great deal the industry did not say: that the insurers subject to § 537.065 agreements were, by definition, insurers who had already refused to defend claims they were contractually obligated to handle. An insurer with a sound coverage defense that litigates and wins does not face a § 537.065 judgment. The statute applied almost exclusively to situations where the insurer had made an aggressive or bad-faith coverage decision and then complained when the abandoned insured and injured party found a way to resolve the claim without them.
The context matters. The same period during which § 537.065 practice was developing in Missouri was the period during which it became publicly documented that major insurers had systematically implemented claim-handling strategies designed to minimize payouts regardless of claim merit. Allstate, in particular the insurer in Lyda v. Allstate was documented through court proceedings across multiple states to have engaged consulting firm McKinsey & Company in the 1990s to redesign its claims process around what the McKinsey documents described as good hands for claimants who accepted low offers, and boxing gloves for those who did not. Missouri courts were part of that story: a Missouri judge held Allstate in contempt of court and imposed fines of $25,000 per day eventually totaling over $2.4 million for refusing to produce the McKinsey documents in a Missouri lawsuit. When Allstate finally relented, it posted 150,000 pages of those documents publicly. They showed a systematic, profit-driven approach to claims that treated policyholders and injury victims as financial variables to be minimized rather than people with legitimate claims to honor.
Against that backdrop, the 2017 amendments added two requirements: written notice to the insurer before judgment and a thirty-day intervention right in any pending lawsuit. The statute also restricted eligibility: only insurers who had the opportunity to defend without reservation and refused could be subject to the framework. On its face, requiring notice before judgment is reasonable. In practice, the 2017 intervention right proved easily circumvented. Plaintiffs and defendants could notify the insurer when no lawsuit was pending, allow the thirty-day window to expire, and then file suit. And even where the insurer timely intervened, the statute said nothing about what rights the intervenor had, leading to inconsistent results a problem Knight v. Knight addressed by holding the intervenor had only the rights of any ordinary intervenor and had to take the case as it found it. The insurer hated these results as well, even though it was well grounded in developed law in Missouri. As before, insurers could have been avoided a bad outcome had the insurer simply not broken their promises or engaged in bad faith towards their insureds. Unhappy with being held accountable the insurer’s turned to the legislature again.
The 2021 Amendment: The Current Framework
The 2021 amendments went further than the 2017 version, and again the insurance industry’s fingerprints are visible on the legislation. The amendments were characterized by their proponents as closing loopholes. Critics would describe them differently: as giving insurers who wrongfully refused to defend a second opportunity to contest the very claims they abandoned this time with all the procedural rights of a defendant, after having contributed nothing to the litigation up to that point. The logic of the insurer position is worth examining directly: if a coverage defense is sound and well-grounded in the policy language, the insurer that litigates and wins has no problem. If the insurer loses a coverage defense on the merits, it is because the defense was wrong. The frequency with which insurers issue reservations of rights and deny coverage, only to have those positions rejected in litigation, reflects something about the aggressiveness of those coverage positions not the unfairness of § 537.065.
With that context noted, the 2021 amendments made three major changes that practitioners must understand. First, the eligibility trigger was broadened to include the insurer refusal to withdraw a reservation of rights, an outright coverage denial is no longer the only qualifying act. Second, the notice mechanics were overhauled to tie the notice obligation to the filing of litigation rather than the execution of the agreement, closing the strategic timing loophole. Third, the intervenor rights were specified: all procedural rights of a defendant, a meaningful opportunity to contest the merits, an unconditional right to a jury trial, and freedom from all pre-intervention stipulations and orders.
The Current Statute: Step by Step
Step One: Eligibility — § 537.065.1
Two threshold requirements must be satisfied. First, the claim must be an unliquidated claim for damages on account of personal injuries, bodily injuries, or death. Property damage claims do not qualify. State ex rel. Meller v. Beetem, 678 S.W.3d 478 (Mo. App. 2023). Second, the insurer must have either refused to withdraw a reservation of rights or declined coverage for the claim.
| § 537.065.1 R.S.Mo. — Authorization Any person having an unliquidated claim for damages against a tort-feasor, on account of personal injuries, bodily injuries, or death may enter into a contract with such tort-feasor or any insurer on his or her behalf or both if the insurer has refused to withdraw a reservation of rights or declined coverage for such unliquidated claim, whereby, in consideration of the payment of a specified amount, the person asserting the claim agrees that in the event of a judgment against the tort-feasor, neither such person nor any other person, firm, or corporation claiming by or through him or her will levy execution, by garnishment or as otherwise provided by law, except against the specific assets listed in the contract and except against any insurer which insures the legal liability of the tort-feasor for such damage and which insurer is not excepted from execution, garnishment or other legal procedure by such contract. |
The operative mechanism of the statute — the feature that makes an agreement a § 537.065 agreement rather than any other private contract — is the covenant not to levy execution except against specified assets and insurance. An agreement that does not limit collection in this way is not a § 537.065 agreement and does not trigger the statute’s notice requirements or intervention rights.
Step Two: Written Terms Required — § 537.065.6
All terms of any § 537.065 agreement must be in writing and signed by the parties. No unwritten term is enforceable against any party, the insurer, or any other person. Oral modifications, side agreements, and implied terms are all unenforceable. The agreement must be fully documented before execution.
Step Three: Notice to the Insurer — § 537.065.2
After execution, the tortfeasor must provide the insurer with a copy of the executed agreement and any pending lawsuit. Timing:
Lawsuit pending at execution: Notice within thirty days of execution.
Lawsuit dismissed after execution and refiled: Notice within thirty days of refiling.
No lawsuit pending at execution: Notice within thirty days of service of process in any subsequent action.
The 2021 notice mechanics were specifically designed to close the loophole in the 2017 version that allowed strategic timing — notifying the insurer when no lawsuit was pending, letting the window expire, then filing suit. The notice obligation now runs from the filing and service of litigation, not from the execution of the agreement.
Step Four: Thirty-Day Waiting Period — § 537.065.3
| § 537.065.3 R.S.Mo. — Waiting Period No judgment shall be entered against any tort-feasor after such tort-feasor has entered into a contract under this section for at least thirty days after the insurer or insurers have received written notice as provided in subsection 2 of this section. |
No judgment may be entered for at least thirty days after the insurer receives notice. This mandatory period gives the insurer a meaningful opportunity to evaluate whether to intervene before any judgment is entered.
Step Five: The Insurer’s Intervention Right — § 537.065.4
| § 537.065.4 R.S.Mo. — Intervention Rights Any insurer or insurers who receive notice pursuant to this section shall have the unconditional right to intervene in any pending civil action involving the claim for damages within thirty days after receipt of such notice. Upon intervention pursuant to this section, the intervenor shall have all rights afforded to defendants under the Missouri rules of civil procedure and reasonable and sufficient time to meaningfully assert its position including, but not limited to, the right and time to conduct discovery, the right and time to engage in motion practice, and the right to a trial by jury and sufficient time to prepare for trial. No stipulations, scheduling orders, or other orders affecting the rights of an intervenor and entered prior to intervention shall be binding upon the intervenor. However, nothing in this section shall alter or reduce the intervening insurer’s obligations to any insureds other than the tort-feasor, including any coinsureds of the defendant tort-feasor. |
Section 537.065.4 gives the intervenor three categories of rights: all procedural rights of a defendant under the Missouri rules of civil procedure; reasonable and sufficient time to meaningfully assert its position at every stage of litigation; and freedom from all pre-intervention stipulations, scheduling orders, and other orders. The co-insured protection at the end of the subsection ensures that the insurer’s intervention against one insured does not impair coverage for other persons insured under the same policy.
Step Six: What Lyda Confirmed About the Intervenor’s Rights
Lyda v. Allstate Fire and Casualty Insurance Company, 2026 Mo. App. LEXIS 211 (Mo. App. W.D. 2026), is the controlling authority on the scope of the intervenor’s rights. In Lyda, Allstate intervened after a § 537.065 agreement was executed and contested Northcott’s admissions about his intoxication, negligence, and the extent of Lyda’s injuries. Lyda and Northcott then settled for $6,140,000 and sought entry of a consent judgment. Allstate objected. The circuit court entered judgment over Allstate’s objection. The Western District reversed.
| Lyda in plain terms: once the insurer intervenes, the plaintiff and defendant cannot enter a consent judgment that binds the insurer without the insurer’s consent. The intervenor has the unconditional right to a full jury trial on liability and damages. It may contest everything — including its own insured’s admissions. A consent judgment entered over the intervenor’s objection is void as to the insurer. |
Step Seven: Judgment and Collection
If the case proceeds to trial after intervention, the resulting judgment binds all parties including the intervenor. The plaintiff may then pursue collection through equitable garnishment under § 379.200 R.S.Mo., naming the insurer as garnishee. Where the insurer wrongfully refused to defend, it is bound by issues actually litigated and necessarily determined in the underlying tort case and cannot relitigate those issues in the garnishment proceeding. Allen v. Bryers, 512 S.W.3d 17, 33 (Mo. 2016).
The Bad Faith Preservation Provision — § 537.065.7
| § 537.065.7 R.S.Mo. — Bad Faith Preservation Nothing in this section shall be construed to prohibit an insured from bringing a separate action asserting that the insurer acted in bad faith. In any such action for bad faith, any agreement between the tort-feasor and the claimant, including any contract under this section, shall be admissible in evidence. The exercise of any rights under this section shall not constitute, nor be construed to be, bad faith. |
Three important points from § 537.065.7. First, the insured’s bad faith claims against the insurer are expressly preserved and may be brought in a separate action regardless of how the underlying tort case resolves. Second, any § 537.065 agreement is admissible evidence in the bad faith action — including the recitals documenting the insurer’s conduct. Third, an insured who exercises rights under § 537.065 after being abandoned by its insurer has not acted in bad faith by doing so.
Strategic Implications After Lyda
§ 537.065 Outcomes
The insurer does not intervene. If the insurer receives proper notice under § 537.065.2 and does not exercise its intervention right within thirty days, the right is waived. A judgment subsequently entered binds the insurer in garnishment. This remains the cleanest § 537.065 outcome — the insurer that received notice and chose not to participate cannot complain about the result.
Strong liability facts warrant a contested trial. Even with insurer intervention, the plaintiff gets a jury trial. Where liability and damages evidence is overwhelming, a contested verdict after full intervention may be more durable than a consent judgment the insurer could attack. The 2021 framework at least ensures the insurer is present and bound by the result of the tort claim judgment.
The compulsory counterclaim framework adds strategic value. Once the insurer intervenes and becomes adverse to the defendant, the defendant’s claims against the insurer likely become compulsory counterclaims under Rule 55.32(a) and Hemme v. Bharti, 183 S.W.3d 593 (Mo. banc 2006). The § 537.065 framework thus creates a vehicle for consolidating all insurer-related claims in one proceeding — which may be advantageous where the coverage dispute and the bad faith claims are strong. The § 537.065.7. language is permissive in nature and not a bar to bringing the claim in the same case.
The Compulsory Counterclaim Imperative
When the insurer intervenes under § 537.065.4 and contests the defendant’s own admissions, the parties are functionally adverse. At that point, the defendant’s claims against the insurer — breach of duty to defend, breach of duty to indemnify, breach of fiduciary duty, and bad faith — are likely compulsory counterclaims under Rule 55.32(a). Failure to assert them risks permanent preclusion in any subsequent coverage or bad faith lawsuit. Lyda itself provides the model: Northcott asserted crossclaims for indemnity, breach of contract, and breach of fiduciary duty in his answer, and all three were treated as properly before the court.
| Critical: When the insurer intervenes under § 537.065.4, the defendant must assert all compulsory counterclaims against the insurer in the tort action. The compulsory counterclaim deadline cannot be missed — failure to assert these claims risks permanent preclusion. |
Conclusion
Section 537.065 R.S.Mo. is simultaneously one of the most powerful and most procedurally demanding tools in Missouri insurance & injury litigation. In its current form after the Lyda decision, it gives injured parties a vehicle to resolve tort claims with defendants while preserving insurance collection rights — but it also gives intervening insurers an unconditional right to contest the tort merits at a full jury trial. The insurer that wrongfully abandoned its insured acquires, through intervention, a second opportunity to control the very litigation it refused to participate in.
Understanding § 537.065 means understanding not just its current text but its history, the strategic problems each amendment was designed to solve, the precise procedural requirements for notice and intervention, and the scope of how it has been interpreted. It also means understanding when the statute is and is not the right vehicle — and what the alternatives are when the statutory framework no longer serves the parties’ interests.
This post is the foundation for the § 537.065 series on this blog. Related posts address equitable garnishment under § 379.200, the Lyda decision in depth, the compulsory counterclaim framework after insurer intervention, and the post-Lyda alternative settlement structure. This area of law is one that is always truly evolving.
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