Reinsurance Law Blog : Oklahoma Insurance Lawyer & Attorney : Stauffer & Nathan Law Firm

In Cornwell v. Union Pacific, Mrs. Cornwell was killed at a railroad crossing when she was struck by a train.  The trial court excluded various experts based on Daubert, and the jury found for the railroad.  An appeal followed. 

The trial court's rulings were affirmed.  For one thing, the accident reconstructionist apparently trespassed on Union Pacific property when the reconstruction was filmed.  But, more importantly, the vehicle used in the accident reconstruction was not the same type of vehicle in the accident.  Another expert was properly excluded because he was not qualified and kept changing his opinions. 

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Mount Vernon Fire Ins. Co. v. Okmulgee Inn Venture

Mount Vernon issued a liquor liability policy insuring Okmulgee Inn for liability for injuries imposed on the insured by reason of the selling, serving or furnishing of any alcoholic beverage. Okmulgee was sued by three patrons who were injured in a bar fight on the premises. Mount Vernon said it had no duty to defend the subsequent lawsuit because the allegations did not indicate the patrons’ injuries were caused by the selling, serving, or furnishing of alcoholic beverages. The trial court agreed, but the Tenth Circuit reversed.

Okmulgee argued there was a duty to defend because the victims were served alcohol, witnesses referred to beer bottles being used in the bar fight just before the shooting, and a police report from a prior incident revealed that the shooter previously had been arrested at the same bar for public intoxication. Mount Vernon said there was no evidence that the shooter had been served or furnished any alcohol, or that alcohol precipitated the shootings. The Tenth Circuit said that the facts showed there was a credible possibility that alcohol contributed to the injuries. The district court arrived at a different conclusion because the victims’ complaints did not specifically allege that alcohol caused the injuries, and the district court declined to make that assumption based on the circumstances. The Tenth Circuit found the district court’s analysis was too restrictive. “The duty to defend cannot be limited by the precise language of the pleadings. The insurer has a duty to look behind the third party's allegations to analyze whether coverage is possible.” Based on the nature of the facts gleaned from the underlying complaints and other materials, the Tenth Circuit concluded “there is a possibility of coverage. Consequently, Mt. Vernon is obligated to defend its insured, and Okmulgee is entitled to summary judgment on the duty-of-defense issue.” But the court declined to decide whether Mount Vernon had any duty to indemnify Okmulgee, prior to a determination of any liability of Okmulgee to the patrons. “[I]f Okmulgee is found to be liable for any claims, Mt. Vernon's duty of indemnification will extend only to those claims falling within the scope of the policy.”

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In Trinity Mortgage Companies v. Dryer, Dryer was sued for malpractice after a default was entered against Trinity in favor of Junker.  Later, Trinity and Junker reached an agreement which gave Junker an ownership interest in Trinity but only to the extent that Junker could control any lawsuit and any proceeds of that lawsuit against Dryer, on behalf of Trinity. Trinity then sued Dryer and both sides sought summary judgment.  Summary judgment was granted to Dryer and Trinity appealed.  The Tenth Circuit affirmed.

The trial court found that the claim against Dryer was effectively assigned to Junker.  Without the agreement, Junker would not likely recover anything against Trinity, and thus, the assignment was prohibited by 12 Okla. Stat. § 2017.  In addition to the statutory prohibition, the court decided that the assignment of a legal malpractice claim to a former adversary was contrary to public policy. 

The Tenth Circuit agreed that Trinity in fact did improperly assign tort claims. The settlement agreement between Junker and Trinity assigned tort claims by giving Junker decision-making authority concerning the litigation, precluding Junker from making decisions for Trinity apart from the lawsuit, sheltering Junker from any of Trinity’s liabilities, limiting Junker to money received from the lawsuit, prohibiting Junker from sharing in any other income of Trinity, and allowing Junker to collect on his judgment against Trinity only through the lawsuit. Thus, the settlement agreement was an assignment of a tort claim prohibited by Oklahoma law. The Tenth Circuit did not reach the public policy argument, but also affirmed summary judgment on the contract claim, because the breach of contract claim sounded in tort.
 

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In American Farmers & Ranchers v. Shelter, American's insured was driving a car owned by Shelter's insured when he had an accident.  American claimed that the "other insurance" clause in Shelter's policy violated Oklahoma's Compulsory Insurance law and should be disregarded such that Shelter should be required to pay its limits before American was required to pay anything.  The trial court disagreed.  The trial court found that since both policies had mutually exclusive other insurance clauses, the clauses would be disregarded and each policy would pay a prorated amount.  The Oklahoma Court of Civil Appeals agreed with the trial court and affirmed. 

The Court cites Equity Mut. Ins. Co. v. Spring Valley Wholesale Nursery, Inc., 1987 OK 121, 747 P.2d 947 as follows: 

When concurrent policies have such "other insurance" clauses which cancel each other, we hold that they are mutually repugnant and are to be disregarded, with the loss shared by the insurers on a pro rata basis. Where the insurers have designated in their policies the same method of apportionment, the contracts will control. Absent concurring provisions for apportionment, coverage of the loss is to be shared on a pro rata basis according to the ratio each respective policy limit bears to the cumulative limit of all concurrent policies. ...
...
Oklahoma's compulsory liability insurance laws do not dictate the determination of primary coverage.... Statutory policy is implicated only when insurers deny liability, not when they are in dispute as to which will provide primary coverage.

Even if the last part of the opinion was dicta, the Court found it persuasive and found that both insurers should pay their pro rata amounts to the injured party.  The court concludes that Oklahoma's Compulsory Insurance Law "does not constrain an insurer from declaring its coverage as excess when there is other insurance which covers its insured's liability with respect to a claim also covered by its policy. The statutory policy of the [compulsory insurance law] is implicated only if the insurer denies liability. It does not control a dispute between insurers as to which provides primary coverage. Such a dispute is a matter of contract. "

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An oral contract of insurance is possible. “The five elements necessary for an oral contract of insurance are: ‘First, the subject-matter; second, the risk insured against; third, the amount; fourth, the duration of the risk; and fifth, the premium.” Plaintiffs showed all elements so circuit court did not err in finding coverage.

MARK LAGERMANN and SHELLY LAGERMANN, Respondents vs. FARM BUREAU TOWN AND COUNTRY INSURANCE COMPANY OF MISSOURI, Appellant
Missouri Court of Appeals, Southern District - SD30721

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In American National Property and Casualty Company v. Ensz & Jester, P.C. et al., American National, an insurance company, hired the law firm of Ensz & Jester to represent its insured, Justin Kurtz, in an automobile accident. After Kurtz received a judgment that was in excess of his policy he sued Ensz & Jester for malpractice and American National for bad faith. They both independently settled Kurtz’s claims against them. American National then sued Ensz & Jester for professional negligence, breach of contract and breach of fiduciary duty. American National alleged as damages the amounts it paid in the bad-faith matter including its attorneys’ fees and the amounts it paid to Esnz & Jester in the automobile accident case.

Ensz & Jester argued that since it had entered into a good-faith settlement with Kurtz, section 537.060 barred American National’s claims. Section 537.060 bars any claim by another tort feasor for the indemnification for the same injury. The circuit court entered summary judgment in favor of Ensz & Jester holding that section 537.060 barred American National’s claim. On appeal, American National argued that the: (1) the parties had a “legal relationship”; or (2) its claims are not for “indemnity”. The Court found that regardless of how American National denominates its claims, part of its claims seeks reimbursement for the amounts it expended in discharging its liability to Kurtz; thus, seeking indemnification. On the other hand, American National’s claim to a refund of attorneys’ fees in the underlying accident case is not a claim for indemnity, so Section 573.060 does not bar them from asserting it.

American National then argued that even if some or all of its claims are for indemnity, section 573.060 does not apply because it had a “legal relationship” with Ensz & Jester via the attorney-client relationship and/or a contractual relationship that creates a duty to indemnify them. The Court of Appeals found that American National had an equitable indemnity relationship with Ensz & Jester. Equitable indemnity imposes “...indemnity due to the relationship of the parties...regardless of intention.” But, Section 573.060 discharges liability for equitable indemnity when the alleged indemnitor settled in good faith with the injured party. Since Ensz & Jester settled with Kurtz, their liability for indemnity has been discharged. Section 573.060 applies to tort feasors liable for the same injury unless (1) one of the parties contracts to indemnify the other or (2) one was held vicariously liable for the other’s conduct. There was no contract to indemnify and American National was not vicariously liable to Kurtz.

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In Greystone Construction v. National Fire & Marine Insurance Company, Richard and Lisa Hull bought a house built by Greystone, a general contractor. Greystone hired subcontractors to perform all work on the house. The house was built on soils containing expansive clays. Over time the soil expansion caused extensive damage to the home. The Hulls sued Greystone in 2005 asserting defective construction by the subcontractors. Greystone was insured under a commercial general liability (CGL) policy by National. National denied it owed Greystone a defense.

There is another home at issue. Douglas and Sandra Giorgetta bought a home in 1999, from Branan, a general contractor, who also hired subcontractors to build the house. Their home’s foundation also shifted due to being constructed on expansive soils. In 2006, the Giorgettas sued Branan asserting claims that mirrored the claims that Hull brought against Greystone. Branan also had a CGL policy with National, and National denied it was obligated to defend. The district court awarded summary judgment to National holding that Hull and Giorgetta complaints do not allege accidents that would trigger covered occurrences under their policies.

The main issue was whether property damage resulting from faulty construction by a sub-contractor was an “occurrence” under the terms of the policies. National argued that construction defects are not “occurrences” but rather the foreseeable result of poor workmanship, which is not covered by a CGL policy. The Court held that injuries flowing from improper or faulty workmanship constitute an “occurrence” so long as the resulting damage is to non-defective property and is caused without expectation or foresight. The Court considered the facts to determine if faulty workmanship was anticipated or accidental. The Court found that the damages suffered by the homeowners may have resulted from an unforeseen “occurrence” and the damage suffered was an unanticipated or unusual result flowing from a common place cause thus qualifying as a covered “occurrence” under the policy.

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Mid Continent v. Union Ins. Co. (Tenth Cir, not published)

When S&W’s contractor Griffin, was hurt working on Noble’s site, he sued Noble.  Noble asked S&W to indemnify it per their contract.  The issue was which one of S&W’s insurers (primary or umbrella) was liable to pay for Griffin’s injuries.  If the accident was Griffin’s fault, the primary carrier, Mid Continent was on the hook.  Otherwise, the umbrella carrier, Union, had to pay.

The Mid Continent Policy contains “exclusions,” which limit Mid-Continent’s coverage. The exclusions in turn contain “exceptions,” which limit the scope of an exclusion and broaden Mid-Continent’s coverage. If an event is listed in an exception to an exclusion, Mid-Continent must cover that event.

The issue in this case involves an exception to an exclusion in the Policy. The “Contractual Liability Exclusion” limits coverage for, among other events, bodily injury arising from a contractual assumption of liability. The “Insured Contract Exception” narrows the Contractual Liability Exclusion so that Mid-Continent covers S&W’s contractual assumption of liability if S&W assumes that liability as part of an “insured contract.” The Contractual Liability Exclusion in the Policy provides: “This insurance does not apply to: . . . ‘Bodily injury’ . . . for which the insured is obligated to pay damages by reason of the assumption of liability in a contract . . .”. The Insured Contract Exception to the Contractual Liability Exclusion provides: “This exclusion does not apply to liability for damages: . . . Assumed in a contract that is an ‘insured contract’ . . . .”

Thus, because of the Contractual Liability Exclusion, Mid-Continent generally does not provide coverage for bodily injuries for which S&W (the insured) has assumed liability in a contract. But, Mid-Continent provides coverage if S&W assumed that liability as part of an insured contract by virtue of the Contract Exception to the Contractual Liability Exclusion.  An insured contract is a contract where the insured assumes liability for bodily injury to a third party where the insured or those acting for the insured would be liable in tort.

It was agreed that Mid Continent would be liable if Griffin caused his injuries.  So the question became, what does “cause” mean?  Mid Continent relied on depositions to show that Griffin did not cause his injuries.  Union put on experts to opine that Griffin caused the explosion when he took apart the machine he was working on, and that Griffin’s failure to wear flame resistant clothes contributed to his injuries.   The trial court defined “cause” in its plain and ordinary usage to mean “be the cause of, effect, bring about; occasion, produce; induce.” The court found that Griffin caused, at least in part, his injuries because the explosion was caused by Griffin’s taking the machine apart.  Thus, Mid Continent was liable.

There is also a nice discussion of determining causation under Oklahoma law and with regard to insurance policies.

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 In GEICO v. Quine, Watkins was a fault free passenger injured in a 3 car collision. Her medical bills were $9,000 and she was paid $13,000 from the tortfeasor. GEICO waived its subrogation rights and Watkins sought policy limits of $100,000 for her injuries. GEICO declined to pay policy limits and offered between $6,000 and $11,000 to settle Watkins’ claim. Watkins rejected the offers but demanded that GEICO was required to tender the “undisputed” portion of the UM policy. GEICO declined to make any payment without a release and filed a declaratory judgment action. 

Based on the facts and following the doctrine of stare decisis, the court answered the certified legal question in the negative.

In reaching its decision, the Supreme Court relied heavily on Garnett v. GEICO, 2008 OK 43, 186 P.3d 935. Watkins received compensation from the tortfeasor's insurer in excess of her economic/special damages. GEICO, through its evaluation, determined that Watkins was entitled to some amount of UIM benefits under the GEICO policy for the noneconomic/general damage element of her claim. The distinction between these two damage elements is especially germane under the facts of this case. The parties could not agree on an appropriate value for Watkins' general damage claim; thus, a legitimate dispute arose. GEICO's refusal to issue an advance payment on Watkins' UIM claim presents a scenario far different than one involving a request for partial payment needed to satisfy unpaid medical expenses, lost wages, or other economic/special damages--cases where the impact of the loss is direct, immediate, and measurable with reasonable certainty.See, e.g., Weinstein v. Prudential Prop. & Cas. Ins. Co., 233 P.3d 1221, 1229-1231, 1241 (Idaho 2010) (finding sufficient evidence to support bad faith verdict where insurer unreasonably delayed payment of UM proceeds for unpaid medical bills). The only portion of her claim remaining after payment from the tortfeasor were those indeterminate sums attributable to general damages, and accordingly, the facts of this case are governed by our prior decision.

The court concludes:

that an insurer's refusal to unconditionally tender a partial payment of UIM benefits does not amount to a breach of the obligation to act in good faith and deal fairly when: (1) the insured's economic/special damages have been fully recovered through payment from the tortfeasor's liability insurance; (2) after receiving notice that the tortfeasor's liability coverage has been exhausted due to multiple claims, the UIM insurer promptly investigates and places a value on the claim; (3) there is a legitimate dispute regarding the amount of noneconomic/general damages suffered by the insured; and (4) the benefits due and payable have not been firmly established by either an agreement of the parties or entry of a judgment substantiating the insured's damages.

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