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What to know about 065 agreements

  

With the 2021 legislative session officially underway, 065 agreements are expected to be a topic of conversation in the year ahead. 

Litigation dealing with Section 537.065 of Missouri statute (commonly known as an 065 agreement) runs through a complicated system, one that has seen changes in recent years and may see another in 2021. Here’s a look at what an 065 agreement is and the bills the legislature is set to discuss.

What is an 065 agreement?

As defined in Missouri statute, a tortfeasor — someone who commits a civil wrong against another — whose insurer denies them coverage can enter into an agreement with the victim, who limits their pursuit of the tortfeasor’s assets to certain items or forgoes it all together. The defendant agrees to settle or compromise the claim, after which the victim can pursue a claim against the insurer, which can only debate whether or not legal coverage existed in the case.

065 agreements come with risk; insurers may be faced with additional liability if their dispute leads to a claim of bad faith, while a victim may not recover anything if the insurer wins its coverage dispute.

The statute changed in 2017 when a pair of bills from Rep. Bruce DeGroot were signed into law. The new pieces altered the standards for 065 agreements, allowing 90 days for a settlement demand, penalizing claimants who fail to comply with the statute, and requiring insurers to be notified of the case. 

DeGroot said the reforms were quickly taken advantage of after their passage and new legislation IS needed to close the loopholes.  

“065 reform is needed because the plaintiffs’ bar and their allies on the bench have chiseled a loophole into the reforms that we accomplished in 2017,” DeGroot told The Missouri Times. “Prior to those reforms, plaintiffs’ attorneys had the unfettered opportunity to collude with defendants to shut insurance companies out of the litigation process, put on a show trial without any evidence allowed to contradict the plaintiff’s self-serving testimony.”

“To no one’s surprise, these show trials resulted in sham judgments worth millions of dollars in cases that — if contested — were only worth thousands,” he continued. “Then the plaintiffs would proceed to collect those exorbitant awards from the insurers they prevented from participating in the trial in the first place. Our reforms allowed these insurers back into the trials to put on evidence.” 

What’s on deck this session?

Another bill filed by DeGroot for this session, HB 345, would ensure that arbitration awards would only be enforceable against insurers if the insurer had agreed to the proceeding in writing. DeGroot said the bill would close a loophole that allowed the plaintiff’s attorneys to skip trial and enter arbitration, shutting insurers out of the conversation entirely while making them liable for the award. DeGroot’s bill seeks to keep insurers involved in the proceedings, as does a similar bill from Rep. Mark Ellebracht. 

A nearly identical piece from Rep. Mary Elizabeth Coleman stalled in the Senate after passing through the lower chamber last session. DeGroot said he expected the legislature to back it this year in light of the hardships businesses have seen during the coronavirus pandemic.

“There is an overall thirst for tort reform in general,” he said. “Especially during COVID, we are seeing our businesses suffer, and it’s more important than ever to provide them with the simplest of protections. We’re just trying to level the playing field and fix these situations that lead to wildly unfair results, that’s what we’re trying to do this session.”

Who opposes the changes?

While members of the legislature hope to move forward with reform this session, Missouri Association of Trial Attorneys (MATA) immediate past President Brett Emison said the legislation would alter laws established over a century ago. 

“Basically it would permit an insurance company to say they wouldn’t defend you or pay any of the claim, but would come in and meddle with the underlying lawsuit,” he said. “The big problem is that it goes against more than a century of case law: Since at least 1899, Missouri law has said an insurance company cannot deny coverage under the policy and then insist on controlling the defense of the lawsuit and that the insurance company is bound by the result of underlying litigation that it has refused to defend without reservation of rights.”

Emison testified against Coleman’s bill in committee last year, noting that the legislation would be “at the expense of Missouri families and small business.”

With the legislature gearing up to consider this year’s bills, the conversation over 065 reform is expected to take up its fair share of debate in the coming months.