A “demand package” is prepared by a personal injury attorney at the conclusion of a client’s treatment. The personal injury attorney collects all medical records and bills and attaches those to a letter to the insurance company. The letter contains a detailed overview of liability (or who caused the accident) and outlines the client’s injuries and how they were caused by the accident. The demand for compensation serves as a case overview to explain to the insurance company why they should pay the requested amount. Demand packages are sent prior to the filing of a lawsuit. They are sent usually in the good faith hope that the case settles without the time and expense of litigation.
Prior to 2017, there was no specific law addressing how long insurance companies had to reply to personal injury demands. In the absence of law, many plaintiff’s attorneys gave insurance companies 30 days to review the file and make a counteroffer. The only leverage plaintiff’s attorneys had to enforce the 30 day reply deadline was to threaten the insurance company with a bad faith lawsuit if they did not make a timely reply. If the insurance company then fails to investigate the facts of the claim and fails to take reasonable steps to resolve the claim, they could be sued by their insured under the bad faith statute.
Bad faith claims are desirable for plaintiff’s lawyers. They are a way for plaintiff’s lawyers to obtain money in excess of the policy limits directly from the insurance company. Bad faith claims provide the ability to recover for punitive damages against an insurance company; they are meant to serve as a penalty for not taking reasonable steps to settle a claim.
In a normal personal injury claim, a plaintiff’s lawyer expects to only recover the policy limits from the insurance company. If a judgment is obtained in excess of the limits, the individual Defendant would have to pay it. This is a risky proposition if the Defendant does not have deep pockets (and most don’t!) Plaintiff’s lawyers have a much better chance of collecting on the judgment when an insurance company is responsible for paying.
The threat of a bad faith lawsuit serves as a necessary stick to prod insurance companies into reviewing the case in a timely manner. Without it, plaintiff’s attorneys would have had great difficulty explaining to their clients why so much time had passed since the demand was sent with no reply from the insurance company.
Some plaintiff’s attorneys abused the gap in the law by sending out short time limit demands in order to set up a bad faith lawsuit against the insurance company. I have heard some attorneys sending out demands with as little as ten (10) days given for the insurance company to review the file. While I want to get a resolution for my client as quickly as the next lawyer, ten days is far too short for any business to review lengthy and complicated documents with any accuracy.
In 2017 Missouri passed tort reform laws aimed at preventing plaintiff’s lawyers from using short time limit demands to set up a potential bad faith claim. These reforms have made it more difficult for a plaintiff’s attorney to quickly set up a bad faith claim by giving insurance companies a statutorily given amount of time to answer the demand. Insurance companies now have 90 days to review the file. The law, known as RSMO 537.038 requires the following:
A time limited demand to settle any personal injury, bodily injury, or wrongful death shall:
1.) Be in writing;
2.) Reference this section (RSMO 537.038);
3.) Be sent certified mail return receipt requested to the tort-feasor’s liability insurer;
4.) Contain the following material terms:
1.) The time period within which the offer shall remain open for acceptance by
the insurance carrier, which shall not be less than ninety days from the date the demand is received by the liability insurer;
2.) The amount of monetary payment requested or request for policy limits;
3.) The date and location of the loss;
4.) The claim number (if known);
5.) A description of all known injuries sustained by the claimant;
6.) The party to be released if such time-limited demand is accepted;
7.) A description of the claims to be released if time-limited demand is accepted;
8.) An offer of unconditional release from the liability insurer’s insured from all
present and future liability.
The time-limited demand shall be accompanied by:
1.) A list of all names and addresses of health care providers who provided
treatment to or evaluation of claimant for injuries suffered from date of injury
to date of time-limited demand, AND HIPAA compliant authorizations
sufficient to allow the liability insurer to obtain such records from the health
care providers listed;
2.) A list of the names and addresses of all claimant’s employers at the time the
claimant was first injured until the date of the time-limited demand AND
written authorizations sufficient to allows liability insurer to obtain such
A claimant may still make a demand for payment within a specified period; however, this period shall not be less than ten (10) days after the insurer’s receipt of the release of claims from claimant.
The final section of RSMO 537.058 may be most impactful. Section 7 states that a time-limited demand that does not comply with the terms of the statute shall not be considered as a reasonable opportunity to settle for the insurer and shall not be admissible in any lawsuit alleging extracontractual damages against the tort-feasor’s liability insurer.
Essentially RSMO 537.058(7) states that unless the demand meets the requirements of RSMO 537.058 in every way, the demand will not admissible as evidence against the insurance company where punitive damages are alleged.
What are the effects of this law? Some in the plaintiff’s bar believe that the consequences are minor. A claim for bad faith can still be made against the insurance company, but only by using evidence other than the demand.
I disagree. While you can still bring a claim, I don’t think it will be successful without the demand. I think that the best way to show that the insurance company acted in bad faith is usually by showing that they failed to reply to the demand. Jurors want to see “smoking gun” type evidence without getting bogged down in myriad legal technicalities.
I have seen insurance companies still replying to demands within a 30-day window on most accident cases since 2017. It will be interesting to see if courts uphold RSMO 537.058(7) by deeming demands that don’t comport exactly with these requirements inadmissible. It will be also interesting to see if this statute causes insurance companies to delay making their evaluations on more cases.