The Missouri Supreme Court recently affirmed a trial court’s order denying an insurance company’s motion to intervene and set aside a judgment that was entered following the plaintiffs’ contract with a defendant to limit recovery of the judgment against the insurance company pursuant to Missouri Statute Section 537.065. Desai, M.D., et al. v. Seneca Specialty Insurance Company, SC97361.
Plaintiffs Dr. Neil Desai and Heta Desai filed a lawsuit for personal injuries against defendant Garcia Empire, LLC. Garcia Empire had a commercial general liability policy issued by Seneca Specialty Insurance Company. Seneca sought to intervene in the lawsuit after the plaintiffs and defendant entered into a contract pursuant to Section 537.065, RSMo 2016.
The contract between plaintiffs and defendant, entered into in November 2016, provided that plaintiffs would seek recovery of any judgment against defendant solely from defendant’s insurer, Seneca. The statute in effect when plaintiffs and defendant entered into the contract provided:
Any person having an unliquidated claim for damages against a tort-feasor, on account of bodily injuries or death, may enter into a contract with such tort-feasor or any insurer in his behalf or both, 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 he nor any person, firm or corporation claiming by or through him 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. Execution or garnishment proceedings in aid thereof shall lie only as to assets of the tort-feasor specifically mentioned in the contract or the insurer or insurers not excluded in such contract. Such contract, when properly acknowledged by the parties thereto, may be recorded in the office of the recorder of deeds in any county where a judgment may be rendered, or in the county of the residence of the tort-feasor, or in both such counties, and if the same is so recorded then such tort-feasor’s property, except as to the assets specifically listed in the contract, shall not be subject to any judgment lien as the result of any judgment rendered against the tort-feasor, arising out of the transaction for which the contract is entered into.
Section 537.065, RSMo 2016.
The case was tried on August 17, 2017. Thereafter, on August 28, 2017, before any judgment was entered in the lawsuit, the Missouri State Legislature’s repeal and amendment of Section 537.065 became effective, RSMo Supp. 2017. The amended statute continued to permit the same contracts as provided in the 2016 statute, but additional requirements were put into place providing that an insurer be provided written notice of the contract and the opportunity to intervene.
The amended section, which replaced the 2016 statute, provides in relevant part:
Before a judgment may be entered against any tort-feasor after such tort-feasor has entered into a contract under this section, the insurer or insurers shall be provided with written notice of the execution of the contract and shall have thirty days after receipt of such notice to intervene as a matter of right in any pending lawsuit involving the claim for damages.
Section 537.065.2, RSMo Supp. 2017. (Emphasis included in the Opinion).
Judgment was entered on October 2, 2017, after which Seneca sought to intervene pursuant to the 2017 statute. The Circuit Court denied Seneca’s motion to intervene. Seneca then appealed, arguing that the amended statute was intended to apply to all cases in which judgment had not yet been entered before the effective date of August 28, 2017, regardless of when the contract was made. Alternatively, Seneca argued that the amended statute should act retroactively to this lawsuit.
In response, plaintiffs argued that the amended statute did not apply because the contract was entered into during the time period when the 2016 statute was in effect; therefore, the amended statute did not apply to their contract with defendant and Seneca was not entitled to intervene.
On June 25, 2019, the Supreme Court of Missouri handed down a decision that affirmed the Circuit Court’s decision that Seneca did not have a right to intervene. In so doing, the Supreme Court found that the 2017 statute differed in substance from the 2016 statute. Under the 2016 statute, which was in effect when plaintiffs and defendant entered into their contract, it was not a requirement for an insurer to be given written notice of the contract nor was there language providing that the insurer could intervene. Contrarily, the 2017 amended statute added these new requirements. Therefore, the Supreme Court found that the 2017 amended statute was not a continuation of the 2016 version such that the plaintiffs and defendant could have been deemed to have entered “into a contract under” the 2017 statute. At the time plaintiffs and defendant entered into their contract in November 2016, the additional requirements set forth in the 2017 statute were nonexistent. Hence, the plaintiffs and defendant could only have entered into their contract under the 2016 version of the statute.
In sum, the Supreme Court held that the 2017 amended statute did not apply such that Seneca could have exercised a right to intervene in this case. Consequently, for any Section 537.065 contract entered into before the effective date of the 2017 amended statute (August 28, 2017) – regardless of whether the lawsuit has actually been tried or judgment has been entered before August 28, 2017 – the 2016 statute will apply such that an insurer will not have the right to intervene under the 2017 statute. The requirements in the 2017 statute providing for notice to the insurer and intervention as a right are prospective only in application.
For review of the Opinion, including its dissent, see the link below to Neil Desai, M.D., et al. v. Seneca Specialty Insurance Company, No. SC97361 (Opinion issued June 25, 2019).