Navigating Intervention-and-Stay and Bad Faith Pitfalls: Practical Lessons from Recent Missouri Decisions

Two recent Missouri decisions – McCrackin v Safeco Insurance Company of America, 701 S.W.3d 868 (Mo. banc 2024) and Escabusa v Safe Auto Insurance Company, 707 S.W.3d 657 (Mo. App. W.D. 2024) – offer a roadmap for navigating coverage disputes alongside active tort litigation. They also show, in practical terms, how diligent documentation and clarity in settlement communications can make or break a bad faith claim. For in-house leaders selecting outside counsel, these cases underscore a simple point: your team needs command of both the procedural tools that protect the insurer’s position and the day-to-day blocking and tackling of settlement practice.

Why these cases matter now

McCrackin cements an insurer’s right to intervene – solely to ask for a stay – so courts can resolve coverage in a separate declaratory judgment action first. That protects the insurer’s right to defend and helps avoid being bound by an adverse judgment when coverage is genuinely in question.

Escabusa, in turn, shows how an insurer can defeat a bad faith failure-to-settle claim when it acts promptly, keeps policy limit offers on the table and documents the lack of a clear, definite offer from the claimant. The record matters – and in Escabusa, the record was decisive and determinative.

McCrackin: Using Rule 52.12(a)(2) to protect the right to defend

The setup

After a fatal 2019 shooting, the decedent’s family sued several defendants, including the alleged shooter. Safeco had issued a homeowners policy to the shooter’s grandmother, where he allegedly lived. The plaintiff offered to settle with Safeco for the liability limit; Safeco declined, citing intentional act exclusions. Safeco then filed a federal declaratory judgment action to resolve defence and indemnity, but the federal court stayed that case. Safeco moved to intervene in the wrongful death suit solely to request a stay pending the coverage ruling; the trial court denied intervention and entered a USD16.5 million judgment against the insured. Safeco appealed.

The holding and why it’s important

The Missouri Supreme Court held Safeco had a right to intervene under Rule 52.12(a)(2) for the limited purpose of seeking a stay while coverage is litigated. The Court noted that insurers have two distinct obligations – defence and indemnity – and emphasised that the duty to defend is broader and tied to potential coverage evident from the pleadings and facts known at the outset. Crucially, whether the insurer had the opportunity to control the defence affects the extent to which it may later be bound by the tort result. Staying the tort action while coverage is decided protects that right without forcing the insurer to defend when coverage is questionable.

The Missouri Supreme Court set forth a clear path for insurers to follow: when coverage is genuinely in doubt, file a declaratory judgment action, and then move to intervene in the underlying tort case, seeking a stay until coverage is determined in the declaratory judgment action. If intervention is denied, consider an appeal – do not sleep on the right to protect your position.

However, while McCrackin made clear an insurer has an absolute right to intervene in Missouri state court, it did not decide whether a stay was appropriate and remanded the matter for further consideration by the trial court. Therefore, when good faith coverage issues arise it is best practice to move to intervene and seek a stay as soon as possible because whether a stay is granted is still within the discretion of the trial court and the age of the case, trial setting and prior extensive discovery may be among the factors a trial court will consider in deciding whether to stay the case.

Escabusa: no bad faith without a clear, definite opportunity to settle

The settlement dance – and the problem

The insured caused a 2012 crash. Safe Auto offered its USD25,000 limit early and repeated that offer over the next year. Plaintiff’s counsel changed multiple times, and plaintiff’s third set of counsel sent an email on 2 October that referenced “total insurance coverages under all applicable policies” and a Section 537.065 agreement – but never attached any proposed agreement or specified terms. Defence counsel repeatedly asked for the proposed 537.065 agreement (a covenant not to execute on the insured’s assets) and stood ready to tailor the release. Plaintiff’s counsel never sent a usable draft. Years later, after a USD1.25 million judgment, the insured cross-claimed for bad faith failure to settle.

The holding and why it is important

The Court of Appeals affirmed summary judgment for Safe Auto. Bad faith failure to settle requires, among other things, a reasonable opportunity to settle within limits. There was no such opportunity here because the settlement “offer” was not sufficiently definite – it depended on other carriers and unspecified terms, and never included the 537.065 agreement plaintiff’s counsel kept referencing. Without a clear, definite offer, there is nothing to accept and no refusal to settle in bad faith. The record also showed Safe Auto acted in good faith: it responded promptly, left limits open and repeatedly invited the 537.065 agreement that never arrived.

Five practical takeaways

Use the intervention-and-stay mechanism proactively

When coverage is genuinely disputed, file the declaratory judgment action promptly and move to intervene in the tort case solely to request a stay. If the court says no, preserve and consider seeking appellate review. This protects the right to defend without forcing premature merits decisions on coverage.

Keep a meticulous settlement record

Escabusa turned primarily on the paper trail. Track offers, responses, document requests, missed deadlines and every ask for proposed language. A clean record can be dispositive to show the insurer acted in good faith, especially in the absence of a definite demand.

Demand clarity before calling it an “offer”

Under Missouri law, an offer must be definite enough that each party’s promises and performance are clear. “We’ll settle for total coverages under all applicable policies with a 537.065” does not cut it, especially without a draft agreement attached. Insist on specifics – amount, parties, documents and terms. However, use caution in seeking clarification to try to avoid an argument the insurer is making a counter-offer – thereby rejecting an opportunity to settle.

Do not conflate the duties to defend and indemnify

The duty to defend is broader and arises from potential coverage apparent at the outset. That duty – and the related right to control the defence – drives whether the insurer may later be bound by an adverse judgment. Treat defence decisions with the gravity they deserve; if you challenge coverage, protect the right to defend via the McCrackin path.

Handle Section 537.065 agreements with precision

If opposing counsel references a 537.065 agreement, without providing the draft, ask for it and make a written record of those requests. Confirm parties, scope and protection for the insured’s personal assets. If no draft is forthcoming, document every request – silence on their side strengthens your good faith story and defeats any claim that you “refused” to settle.

What in-house counsel should look for in outside counsel

General counsel should prioritise teams that blend procedural knowledge with prompt execution. Your outside counsel should be well versed in intervention-and-stay strategy, and procedures under McCrackin, able to promptly file declaratory judgments in the right forum and pursing appellate review of intervention denials. Just as importantly, they should understand the importance of properly handling and documenting the settlement process, including clear communications, prompt responses and contemporaneous documentation showing that the carrier is acting in good faith. Equally important, your outside coverage counsel should know the notable plaintiffs’ bad faith attorneys in the venue so that proper case strategy and management can be employed.

A short checklist you can use tomorrow

Important actions include the following.

• File early and in the right court: If coverage is disputed, file the declaratory judgment promptly.
• Intervene narrowly: Move to intervene solely to seek a stay. If denied, consider appeal.
• Keep the policy limits offer live: Reconfirm it in writing at sensible intervals.
• Ask for the actual documents: If a 537.065 agreement is referenced, request the draft – repeatedly and in writing.
• Document everything thoroughly, showing you are acting in good faith: Treat your file as if it will be Exhibit A in the bad faith action.

Closing thought

McCrackin gives insurers a clean way to protect their right to defend when there is questionable coverage. Escabusa reminds both sides that clarity wins: without a definite offer, there is nothing to accept – and no bad faith. Together, they recognise insurers and defence counsel who move quickly, think procedurally and build a careful record showing the insurer acted in good faith.