Missouri Court Upholds Massive Vexatious Refusal Verdict
The Missouri Court of Appeals recently affirmed a jury’s finding that an insurer’s denial of coverage was vexatious, willful, and without reasonable excuse. Doe Run Resources Corporation v. Certain Underwriters at Lloyd’s London, et al., No. ED 98086, April 16, 2013. The case arose over coverage of a massive environmental cleanup undertaken by the insured mining company. The value of the vexatious ruling alone is well in excess of $6,000,000, plus substantial attorney’s fees.
While the factual history of the case is complex and the amounts in controversy extraordinary, the application of the vexatious refusal statutes to the conduct of insurers must be considered by any company doing business in Missouri.
The suit was filed by Doe Run Resources Corporation, a mining company, against its insurer, Certain Underwriters at Lloyd’s London (LMI). The dispute arose when the Environmental Protection Agency ordered Doe Run to remediate several sites where it had deposited harmful mining by-products at various times throughout the 20th century. Doe Run tendered coverage to LMI for the costs of the cleanup. LMI did not respond to the tender, and Doe Run filed suit for coverage.
After trial in St. Louis County, a generally conservative venue, the jury found in favor of Doe Run in the amount of $62,481,238.30. The jury also found that LMI’s refusal to provide coverage was without reasonable cause or excuse, and therefor applied the penalties under R.S.Mo. sections 375.296 and 375.420 (10% of the loss after the first $1,500, plus attorney’s fees).
The Court of Appeals applied longstanding Missouri law in upholding the vexatious refusal verdict. It stated that the insured must show that the insurance company’s refusal to pay the loss was willful and without reasonable cause or excuse. Whether the insurer acts reasonably in refusing to pay is a fact question for the jury, but whether a submissible case was made is a question of law for the court.
The court found that “Doe Run presented substantial evidence from which the jury was free to find vexatious and recalcitrant behavior”, especially the following:
- Doe Run made a formal request for coverage on December 11, 2006, but LMI did not even acknowledge the request until March 8, 2007, after suit had been filed;
- LMI’s corporate designee testified that LMI never paid a single environmental claim unless ordered by a court; and
- LMI’s claims handler testified that, after four years, the entire claim file could fit into one half of a bankers box. LMI had received six million pages of documents that it had requested from Doe Run, but claimed to lack information sufficient to admit or deny coverage.
The court noted that even if LMI did have a reasonable basis to deny coverage, the insurer could still be liable for vexatious refusal to pay where, as here, “there was evidence that the insurer’s attitude was vexatious and recalcitrant”.