Kelly et al v. Auto Owners Insurance Company

Filing 18

MEMORANDUM AND ORDER... IT IS HEREBY ORDERED that Plaintiffs' motion for leave to file an amended complaint is GRANTED. (Doc. No. 17 .) The Clerks Office shall detach Doc. No. 17-1 and file it as Plaintiffs' amended complaint. Signed by District Judge Audrey G. Fleissig on 11/30/2016. (NEB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
JOHN KELLY and LINDA KELLY,
Plaintiffs,
vs.
AUTO OWNERS INSURANCE
COMPANY,
Defendant.

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Case No. 4:16CV01106 AGF

MEMORANDUM AND ORDER
This insurance coverage case is before the Court on Plaintiffs’ motion for leave to
file an amended complaint. For the reasons set forth below, Plaintiffs’ motion will be
granted.
John Kelly and Linda Kelly, husband and wife, filed this action on April 25, 2016,
in Missouri state court. Defendant removed the action to this Court based on diversity
jurisdiction. In Count I of the complaint, Plaintiff Linda Kelly sought damages under an
underinsured motorist provision in an automobile insurance policy she purchased from
Defendant Auto Owners Insurance Company, for injuries sustained in an accident on
May 16, 2011. In Count II, John Kelly sought damages for loss of consortium.
In the present motion filed on September 21, 2016, Plaintiffs state that they wished
to add a claim pursuant to Mo. Rev. Stat § 375.420, for vexatious conduct on the part of
Defendant. Plaintiffs stated that at the Court’s Rule 16 conference held on August 18,
2016, the Court suggested that the parties discuss settlement of this matter, but no offer

had yet been made by Defendant even though it had Linda Kelly’s medical bills since at
least April 2016. But Plaintiffs did not submit a proposed amended complaint.
Defendant opposed the motion to amend, arguing that Plaintiffs were seeking to add a
“bad faith” cause of action, and that Missouri law does not permit such causes of action
in a “first party action” against an insured, that is, in a case such as this one, in which an
insured seeks to recover from his insurance company for a loss sustained.
By Order dated November 14, 2016, the Court directed Plaintiffs to submit their
proposed amended complaint, and on November 15, 2016, Plaintiffs filed a new motion
for leave to amend, this time attaching their proposed amended complaint. The proposed
amended complaint adds a third count, entitled, “Vexatious Refusal to Settle,” that cites
Mo. Rev. Stat. § 375.420, and asserts that Defendant’s “wrongfully” refused to pay
Plaintiffs under the insurance policy and such refusal was vexatious and without
reasonable cause. Defendants did not file a response in opposition to the new motion to
amend.
Missouri Courts recognize a tort action against an insurer for bad faith refusal to
settle a claim that another party brought against its insured. See Scottsdale Ins. Co. v.
Addison Ins. Co., 448 S.W.3d 818, 829 (Mo. 2014).1 But here, the claim asserted in
Count III of the proposed amended complaint, is not such a claim. Rather it is a statutory
claim under Mo. Rev. Stat. § 375.420 for Defendant’s alleged vexatious refusal to pay for
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“A bad faith refusal to settle action will lie when a liability insurer: (1) reserves
the exclusive right to contest or settle any claim; (2) prohibits the insured from
voluntarily assuming any liability or settling any claims without consent; and (3) is guilty
of fraud or bad faith in refusing to settle a claim within the limits of the policy.”
Scottsdale Ins. Co., 448 S.W.3d at 827.
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a loss allegedly covered by the insurance policy it issued to Plaintiffs. To establish a
claim for vexatious refusal to pay under § 375.420, a plaintiff must plead (1) he had an
insurance policy with the defendant, (2) the defendant refused to pay a claim made by the
plaintiff, and (3) the refusal was without reasonable cause or excuse. Dhyne v. State
Farm Fire & Cas. Co., 188 S.W.3d 454, 457 (Mo. 2006). Therefore, Defendant’s
argument directed to Missouri tort law for bad faith refusal to settle is inapposite and fails
to address Plaintiffs’ claim for relief under Missouri’s vexatious refusal to pay statute.
Under Federal Rule of Civil Procedure 15(a), a court “should freely give leave [to
amend pleadings] when justice so requires.” Notwithstanding this liberal standard, a
court may deny leave to amend where the proposed amendment would be futile. Reuter
v. Jax Ltd., 711 F.3d 918, 922 (8th Cir. 2013). Here the Court cannot say that a vexatious
refusal to pay claim would be futile.
Accordingly,
IT IS HEREBY ORDERED that Plaintiffs’ motion for leave to file an amended
complaint is GRANTED. (Doc. No. 17.) The Clerks’ Office shall detach Doc. No. 17-1
and file it as Plaintiffs’ amended complaint.

AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 30th day of November, 2016.

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