What every Missouri injury lawyer needs to know before sending that demand letter.
Missouri Injury & Insurance Law | missouriinjuryandinsurancelaw.com
Introduction
Missouri’s vexatious refusal statute, codified at Mo. Rev. Stat. § 375.420 (2023), provides one of the most powerful tools available to plaintiffs’ counsel in insurance coverage disputes. Yet the statute is frequently underutilized, misapplied, or invoked too late in litigation to maximize its effect. This post examines the statute’s elements, its interaction with the Missouri Approved Jury Instructions, the damages available, and the strategic considerations practitioners should weigh when pursuing a vexatious refusal claim.
The Statutory Framework
Section 375.420 provides that where an insurer refuses to pay a loss without reasonable cause or excuse, the insured—or in the case of liability policies, the judgment creditor—may recover, in addition to the loss, damages not to exceed twenty percent of the first fifteen hundred dollars of the loss, and ten percent of the amount of the loss in excess of fifteen hundred dollars, together with all reasonable attorney fees incurred in the suit. Mo. Rev. Stat. § 375.420 (2023).
The critical phrase is ‘without reasonable cause or excuse.’ Missouri courts have interpreted this to mean that the refusal must be willful and without reasonable cause as distinguished from an honest dispute about coverage. The question is not whether the insurer was ultimately correct, but whether the insurer’s position was reasonable at the time of the refusal. This is a fact-intensive inquiry that plays out differently in every case.
It is important to note that § 375.420 applies broadly to all insurance companies doing business in Missouri, not merely to admitted carriers. Practitioners should confirm the applicable statutory provision when dealing with surplus lines or non-admitted carriers, as separate provisions may govern.
Elements of a Vexatious Refusal Claim
To prevail under § 375.420, a plaintiff must establish three core elements: (1) the existence of a valid insurance policy; (2) a loss covered under that policy; and (3) the insurer’s refusal to pay without reasonable cause or excuse. Each element carries its own evidentiary burdens and strategic implications.
The first element—existence of a valid policy—is rarely contested but should never be assumed. Counsel should obtain certified copies of the policy, all endorsements, declarations pages, and any letters of limitation, reservation of rights or denial of coverage letters as early as possible.
The second element requires demonstrating that the claimed loss falls within the policy’s insuring agreement and is not excluded. A dispute over coverage does not prevent a claim of vexatious refusal but wining coverage is not enough to recover under the statute as unreasonable refusal must still be shown. The analysis of coverage must be thorough and documented as well as possible before suit is filed. A vexatious refusal claim built on a weak coverage argument invites loss.
The third element—unreasonable refusal—is the heart of the claim. Factors that Missouri courts have found relevant include: whether the insurer conducted a prompt and thorough investigation; whether the insurer sought legal advice before denying the claim; whether the denial letter cited specific policy language; and whether the insurer reversed its position after suit was filed.
An insurer’s course of conduct during the claim is also relevant to the claim and can help you prove your claim. Vexatious Refusal to Pay a UM Claim in Missouri: Evidence of Settlement Offers & What Qureshi v. American Family Teaches About Building the Vexatious Case from Investigation Through Verdict
Damages Available Under § 375.420
The statute provides for three categories of additional recovery: (1) a penalty of up to twenty percent of the first $1,500 of the loss; (2) ten percent of the loss amount exceeding $1,500; and (3) all reasonable attorney fees. Mo. Rev. Stat. § 375.420 (2023). In significant injury cases where policy limits are in dispute, the attorney fee component may dwarf the statutory penalties and represents the primary driver of settlement leverage.
Missouri courts have held that the attorney fee award under § 375.420 is not limited to fees incurred solely on the vexatious refusal count but encompasses all fees reasonably related to securing payment of the covered loss. Practitioners should maintain detailed contemporaneous billing records from the outset of representation, as fee petitions must be supported by competent evidence.
Strategic Considerations
Vexatious refusal claims can be asserted in a first-party context—where the insured sues its own insurer—or in a third-party context often where after the injured party obtains a judgment against the insured. The timing of the demand as well as compliance with the policy terms is of paramount importance. In the first party A time-limited demand that creates a Ganaway-type exposure scenario operates synergistically with a subsequent vexatious refusal claim.
Practitioners should also consider whether to pursue vexatious refusal in conjunction with a common law bad faith claim. Unlike the statutory remedy, a common law bad faith claim allows for punitive damages but carries a higher burden of proof. The two theories are not mutually exclusive and are routinely pleaded in the alternative.
Finally, timing matters. Under Missouri law, a vexatious refusal claim does not accrue until there has been a refusal to pay. Filing prematurely—before the insurer has had a reasonable opportunity to investigate—can undermine the claim. The prudent approach is to document the insurer’s conduct thoroughly before filing, including all claim correspondence, investigation timelines, and reservation of rights communications.
Conclusion
Section 375.420 is a well-established but nuanced tool. Practitioners who understand its requirements, coordinate it effectively with contract theories in first party cases and in third party cases with bad faith theories. It is important to document insurer conduct from the first notice of claim to be best positioned to maximize recovery for clients and leverage the statute’s fee-shifting provisions for strategic advantage.
