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.

State ex rel. Mid-Century Insurance Co. v. McKelvey, 666 S.W.2d 457 (Mo. Ct. App. 1984).


  1. Can an insured deny a defense provided by the insurer under a reservation of rights?

  2. What can an insurer do to protect itself after an insured’s refusal of a defense under a reservation of rights?

At times, it may be unclear whether certain claims fall under an insurance contract. In these circumstances, insurance companies are placed in a difficult situation: assume responsibility for the legal defense of a claim it may not need to defend or refuse to provide such a defense and be liable for breach of duty to defend. Id. at 458-59. The solution in these circumstances is a reservation of rights, where the insurer defends the claims but maintains the right to protest liability under the policy. Id. at 459. The court in this case determined that an insured can refuse to accept a defense under reservation of rights, because an insurer may defend a case differently knowing that it may not be required to pay the judgment. Id. The insurance company isn’t without a remedy, though, because it can file a declaratory action and stay any proceedings if the insured refuses a defense subject to a reservation of rights. Id.

This suit arises from an accident with a dirt bike that occurred on a front lawn in Kansas City. Id. at 458. The injured boy filed suit against the boy that operated the dirt bike and his parents. Id. The parents sent a letter to their insurance company requesting that the company defend the lawsuit. Id. The insurance company agreed to defend, but only under a reservation of rights. Id. On advice of counsel, the parents declined this representation and declines to respond to the lawsuit. Id. The injured party filed a motion for default judgment and the insurance company sought to enter the lawsuit as an intervenor. Id. The trial judge denied this request, and the insurance company requested the Court of Appeals issue a writ allowing the company to intervene. Id.

The court noted that the “basic question” posed by this case is whether an insured “must accept the tendered defense with reservation of right to deny the policy coverage.” Id. at 459. The court found that an insured does not have to accept that defense, whether or not the insurer offers a reason for the reservation of rights. Id. The court reasoned that an insurer may defend a case differently under a reservation of rights differently, which could negatively affect the insured. Id. For example, the insurer would be less inclined to resolve a matter that it doesn’t have to ultimately pay. Id. Additionally, the insurer would be very interested in “establishing facts which would result in non-coverage,” which is a clear conflict of interest with the insured. Id. Simply put, “the defense would be encumbered by the overhanging issue of policy coverage.” Id.

The insurer is not left high-and-dry, though. Id. The insured can file a declaratory judgment suit and have the court determine if the claim is covered under the policy. Id. At that point, the insurer can request a stay—or pause—of the underlying lawsuit pending the decision of coverage. Id. Practicing what it preaches, the court ordered the trial judge to stay the lawsuit so long as the insurer quickly filed a declaratory action. Id.