Insurance Coverage in Missouri for Transmission of STDs?!?

Ok, by now you have probably seen the news stories that a Missouri appellate court upheld a decision requiring GEICO to pay the $5.2 million that an arbitrator awarded to a woman who claimed that her partner gave her a sexually transmitted disease in his vehicle. The news stories, however, are not entirely accurate. And as sensational as the facts are in this case, the real story is how Missouri courts continue to interpret the 2017 version of § RSMo 537.065. Let me explain.

In M.O. v. GEICO General Ins. Co., the plaintiff M.O. alleged that M.B. negligently infected her with anogenital human papillomavirus (“HPV”) during sexual encounters in his automobile. The plaintiff later made a settlement demand for $1 million in policy limits against GEICO, which had issued an automobile policy to M.B. The demand enclosed a copy of a proposed petition that alleged that the insured engaged in unprotected sexual activities in his vehicle, and during those sexual encounters, “negligently caused or contributed to cause [M.O.] to be infected with HPV by not taking proper precautions and neglecting to inform and/or disclose his diagnosis,” despite “having knowledge of his condition.” GEICO denied coverage and rejected the plaintiff’s policy limits settlement demand. The insurer also filed a declaratory judgement action in federal court.

Because this is Missouri, the plaintiff and the insured entered into an agreement under section 537.065 to limit recovery (presumably to the insured’s insurance assets) and to arbitrate the claim. The arbitrator found that the insured negligently caused plaintiff to be infected with HPV and awarded plaintiff $5.2 million in her claim against the insured.

After entry of the arbitration award, the plaintiff notified GEICO of the 537.065 agreement. The next day, the plaintiff filed suit against the insured in Jackson County, Missouri, to confirm the arbitration award in a judgment. GEICO learned of the lawsuit through case.net and moved to intervene in the suit with 30 days of receiving notice of the 537.065 agreement. The trial court entered judgment confirming the arbitration award in favor of plaintiff and against the insured in the amount of $5.2 million. On the same day, the trial court granted GECIO’s motion to intervene. The trial court, however, later denied GEICO’s motions to set aside the judgment or to contest liability and damages.

The Missouri Court of Appeals, Western District, affirmed the trial court’s judgment. The insurer tried to argue that once a carrier receives notice of a 537.065 agreement, the statute allows the insurer 30 days to intervene in any pending lawsuit and to meaningfully participate in the case, including to challenge liability and damages. The Western District, however, noted that a similar argument had been rejected by the appellate court in Knight ex rel. Knight v. Knight, 609 S.W.3d 813 (Mo. App. W.D. 2020). Under the Knight holding, it is “well established that an intervenor must accept the action pending as he finds it at the time of intervention.” Id. at 824. The statute, according to Knight, “simply give[s] an insurer the right to written notice and an opportunity to intervene” and provides no “other rights beyond what any intervenor would have.” Accordingly, the appellate court in M.O. concluded: “At the time of GEICO’s intervention, liability and damages had been determined by an arbitrator and confirmed by the trial court. GEICO had no right to relitigate those issues.”

Here are my takeaways from this M.O. decision:

1. This claim arose under the 2017 version of section 537.065. The 2021 version of 537.065, which did not apply to this claim, may not have allowed this result for several reasons, as noted below.
2. The news stories all say that the Western District held in M.O. that GEICO must pay the $5.2 million award. The appellate court’s decision contains no such holding. In fact, GEICO may still have the right to challenge whether the judgment is covered by its auto policy with M.D. in a separate proceeding.
3. The arbitration award held that the insured’s conduct here was negligent, presumably to meet the policy’s “occurrence” or “accident” requirement. GEICO may try to argue that this finding of fact is not binding on the insurer in any separate coverage litigation.
4. GEICO can still try to argue that the negligence finding is the product of fraud or collusion.
5. For a claim to be covered by an automobile liability insurance policy, the parties typically must show in Missouri that the vehicle was an “instrumentality” in the cause of the loss. The fact that injury occurred in or around a vehicle is not enough. The Western District’s decision in M.O. does not mention any findings from the arbitration award along these lines. If no such finding was included in the award, the auto insurer here still may have an opportunity to effectively challenge coverage for this claim. This is why the news stories’ conclusion that GEICO must pay this award may be premature.
6. The arbitration in this case occurred in May 2021 and thus under Knight was permissible under the 2017 version of section 537.065. However, under the 2021 reforms to 537.065, arbitrations conducted on or after August 28, 2021 are not binding on insurers unless the carrier consented to the arbitration.
7. The parties here gave the insurer notice of the 537.065 agreement but not of the arbitration or the lawsuit. Under the 2021 version of 537.065, the parties must give the insurer notice of the agreement and the lawsuit (and arbitrations are no longer binding). Upon said notice, the insurer now has 30 days to intervene in the lawsuit.
8. The insurer in M.O. was not allowed to litigate liability or damages because those issues already had been determined in the arbitration award by the time the carrier had intervened. Had those issues not already been determined by the arbitration award, the trial court likely would have been required to allow the insurer to litigate liability and damages – even under the 2017 version of section 537.065. That’s exactly what the Missouri Court of Appeals, Eastern District, held a few weeks ago in the Reddick v. Spring Lake Estates Homeowner’s Association decision. The Reddick decision has not gotten the same attention as M.O. (plaintiffs who fall off of retaining walls apparently just don’t get the same type of press), but it is just as important.
9. Finally, the 2021 version of section 537.065 goes even further and provides that any intervening insurer “shall have all rights afforded to defendants under the Missouri rules of civil procedure and reasonable and sufficient time to meaningfully assert its position including, but not limited to, the right and time to conduct discovery, the right and time to engage in motion practice, and the right to a trial by jury and sufficient time to prepare for trial. No stipulations, scheduling orders, or other orders affecting the rights of an intervenor and entered prior to intervention shall be binding upon the intervenor.” The appellate court in Reddick commented that this new statutory language likely supports allowing the intervening insurer to challenge liability and damages.

The Eastern District in Reddick said that the Knight opinion “dealt with a closing window in time.” As we see the Western District apply the Knight holding to the salacious facts in M.O., we shall see if that prediction holds true.

Michael L. Young?is a partner in the St. Louis law firm of Reichardt Noce & Young LLC with a primary emphasis in the practice of insurance law and bad faith. He represents insurers in complex insurance coverage matters at all stages of the claims process. Mr. Young also has advised insurers in drafting policy language and developing claims best practices. He represents clients in Missouri and Illinois.