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Sometimes the black letter law passed by the legislature is unclear. The legislature can’t anticipate every possible fact scenario when they pass a law, so it lay to the courts to interpret the law and give guidance to what it means. This interpretation is called case law. When the court decides a certain meeting to the law it essentially answers a legal question. Lawyers and other courts then can rely on that ruling when they have a similar issue in their case. The following case answers the question above.

Victor v. Manhattan Life Insurance Co., 772 S.W.2d 826 (Mo. Ct. App. 1989).

This case addresses the following issue:

Can an insurer be sued for bad-faith because of a delay in payment, even after the payment has been received?

This case dealt with the extremely slow payment by an insurance company on an undisputedly covered claim. Id. at 831. It is well-settled when an insurance company refuses to pay altogether, a lawsuit can be filed to force payment—known as a vexatious refusal to pay claim. Id. Here, the court was asked if such a suit can be brought after a claim is paid, based upon an unreasonable delay in making the payment. Id. The court held that an insured can still file suit for bad-faith vexatious refusal to pay, even after payment is ultimately made. Id. The harm is the deprivation of the payment for an unreasonable time, and that can be redressed via a lawsuit. Id.

In this case, a father passed away. Id. at 828. The father had a life insurance policy, and all parties agree that father’s death qualified his surviving wife and children—the Plaintiffs in this action—were entitled to payment based upon the insurance policy. Id. Despite this, the Defendant insurance company did not pay the claim for over eighteen months. Id. at 830. After receiving the payment, Plaintiffs filed suit against Defendant based upon the unreasonable delay in paying out the policy. Id. at 827.

The court began with the easiest question: was the action of delaying payment vexatious and recalcitrant? Id. at 830. Such action was found to be clearly “willful and without reasonable cause.” Id. The insurance company failed to even offer a justification for the delay, and even agreed it knew such payment was due only a few months after the father’s death. Id. Thus, both the requisite attitude and refusal to pay were present. Id.

The court then had to determine if a claim for vexatious refusal to pay survived after the insurance company made the full payment, albeit severally and unjustifiably late. Id. at 830-31. Finding that such a delay constituted a “loss under a policy,” the court agreed with Plaintiffs that they had a valid claim for vexatious refusal, regardless of the payment being made pre-suit. Id. at 831.

The big difference between such types of vexatious refusal claims is the type of damages available. Id. at 833. When no payment is made, the plaintiff is entitled to the amount of the claim, interest, and attorneys’ fees based upon Section 375.420. Id. When the payment has been made, the plaintiff is entitled interest from the time payment should have been made to the date payment is finally made, plus attorneys’ fees. Id. As this case fell into the latter category, the damages awarded by the trial court were modified to fit these requirements. Id.

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