Material fact issues precluded summary judgment on the issues of bad faith and statute of limitations. 

Liberty had the duty to promptly settle Miller's initial claim "for the value or within the range assigned to the claim as a result of its investigation." Newport v. USAA, 2000 OK 59, ¶ 16, 11 P.3d 190, 196. Newport explained that the duty of good faith and fair dealing "prevents an insurer from offering less than what its own investigation reveals to be the claim's value." Id., 11 P.3d at 197.

As to the statute of limitations, the court found that while the action was brought more than 2 years after the claim had been paid, the discovery rule applied.  The period of time a statute of limitations is tolled pursuant to the discovery rule is generally a question of fact. Samuel Roberts Noble Found., Inc. v. Vick, 1992 OK 140, ¶ 30, 840 P.2d 619, 626.

MILLER v. LIBERTY MUTUAL FIRE INSURANCE COMPANY
2008 OK CIV APP 65

This is an interesting case – not necessarily for the holding, but because under undisputed facts, two courts reached opposite conclusions and still found the policy unambiguous. 

The NAICO policy excluded from the definition of an "insured" for uninsured motorist coverage purposes, those who own their own vehicles which are covered by statutorily mandated insurance.  Thus, NAICO argued that even though Vallion was injured while riding in a district-owned vehicle, the policy language excludes UM coverage for him because he owns a personal motor vehicle and is insured under an insurance policy in compliance with the Oklahoma Financial Responsibility Act, 47 O.S. 2001 §7-101 et seq. (the Act).

Under Oklahoma law, the purpose of UM is "to protect the insured from the effects of personal injury from an accident with another motorist who either carries no insurance or has inadequate coverage." Burch v. Allstate Ins. Co., 1998 OK 129, ¶13, 977 P.2d 1057, 1063.  Similar contractual exclusions were upheld in Shepard v. Farmers Ins. Co., 1983 OK 103, 678 P.2d 250, and Graham v. Travelers Ins. Co., 2002 OK 95, 61 P.3d 225.

The appellate court affirmed the trial court's ruling that Vallion was not covered under the policy.

The Insureds sued Farmers for breach of contract, fraud and bad faith. Summary judgment was denied and a jury found for Farmers.  The Court of Civil Appeals reversed, finding that the trial court erred in submitting the issue of the parties’ contractual intent to the jury.

Whether an insurance contract provision is ambiguous is a question of law to be determined by the court. Max True Plastering Co., v. U.S.F. & G. Co., 1996 OK 28, ¶20, 912 P.2d 861, 869. The test to be applied in determining whether a word or phrase is ambiguous is whether the word or phrase is susceptible to two interpretations on its face from the standpoint of a reasonably prudent lay person. Id. This Court will not indulge in forced or constrained interpretations to create and then construe ambiguities in insurance contracts. Id.

Under Oklahoma law, when an insurer desires to limit its liability under a policy of insurance, it must employ language that clearly and distinctly reveals its stated purpose. Farmers failed to do so, and the subroof was, therefore, covered. 

Farmers claimed that the Insureds had two separate roofs, ie. the wood shingles constituted a divisible and separate roof from the composition roof. Farmers argued that because the wood roof did not sustain direct hail damage and the policy does not cover damage not caused by a covered peril, Farmers was only obligated to pay for the damage to the composition roof. To prevail on this theory, Farmers would have to show the necessary components that make up a single roof are divisible and separate. Oklahoma law ( Redcorn v. State Farm Fire & Cas. Co., 2002 OK 15) does not support this argument.

 The trial court's judgment in favor of Farmers on the contract claim was reversed. The trial court was directed to enter judgment in favor of the Insureds as to liability, and conduct a trial on damages.

Plaintiffs initially sued for breach of implied warranty and poor workmanship. Plaintiffs later amended their petition to claim that Okemah was  guilty of negligence per se for violating the BOCA (Building and Code Administrators) code regarding installation of the EIFS (Exterior Insulation and Finish Systems) system.

NAICO claimed that the policy only covered tort claims, not breach of contract claims and that various exclusions precluded coverage, including 1) Contractual Liability Exclusion; 2) Damage to Your Product Exclusion; 3) Damage to Your Work Exclusion; 4) Building Related Illness Exclusion; 5) Fungi or Bacteria Exclusion; and 6) Exterior Insulation and Finish Systems (EIFS) Exclusion. NAICO contended it did not have any duty to defend where there is no coverage under the policies.

This insurance does not apply to "bodily injury", "property damage", "personal injury" or "advertising injury" that arises out of, is caused by, or is attributable to, whether in whole or in part, the following:

a. The design, manufacture, sale, service, construction, fabrication, preparation, installation, application, maintenance or repair, including remodeling, service, correction, or replacement of an "exterior insulation and finish system" or "direct-applied exterior finish system" or any part thereof, or any substantially similar system or any part thereof, including the application or use of conditioners, primers, accessories, flashing, coatings, caulking or sealant in connection with such a system and including any method or procedure used to correct problems with installed or partially installed systems, that was performed by or on behalf of any insured; or . . .

. . . .

An EIFS system is defined as “an exterior cladding or finish system and all component parts therein used on any part of any structure, and consisting of:

(1) A rigid or semi-rigid insulation board made of expanded polystyrene or other materials; and
(2) The adhesive and/or mechanical fasteners used to attach the insulation board to the substrate; and
(3) A reinforced or unreinforced base coat; and
(4) A finish coat providing surface texture and color; and
(5) Any flashing, caulking or sealant used with the system.”

Okemah claimed that in order for the exclusion to apply, it would have had to install or apply all five elements of the EIFS system, as defined in the exclusion. The Court disagreed. The exclusion specifically applies to any property damage that arises out of or is caused by an EIFS system "or any part thereof, or any substantially similar system or any part thereof . . ." The exclusion from coverage is clear and unambiguous, and is not limited to complete systems installed by the insured. Instead, the exclusion was intended to apply to work by the insured that is related to any part of an EIFS system.

The trial court also properly found NAICO did not have a duty to defend Okemah. The liability policies provide that NAICO will have no duty to defend against any suit seeking damages "to which this insurance does not apply." The umbrella policies state NAICO will defend when a suit seeks damages "covered by this policy." There is simply no duty to defend under the policies when there is no coverage for the claims in the underlying suit.

The court also found that the ban on client contact was unenforceable, as was the ban on contacts with the employer's suppliers.  Summary judgment to the former employee was affirmed. 

Two recent Oklahoma Court of Civil Appeals decisions discusses the applicability of the Oklahoma Residential Property Condition Disclosure Act, found at 60 Okla. Stat. § 831 et seq. The Act permits buyers of residential property to sue sellers of that property for conditions known to the sellers at the time of the sale, such as flood damage to the property. The Act requires that actions be brought within two years of the date the property was transferred. 60 Okla. Stat. § 837(C), and precludes any claims for fraud resulting from sales covered by the Act.

In Mamoodjanloo v. Wolf, 2008 OK CIV APP 59, the Court of Civil Appeals found that the Act does not cover “[t]ransfers by a fiduciary who is not an owner occupant of the subject property in the course of the administration of a ... trust.” §838(A)(3). Thus the fact that the Trustees signed a disclosure form did not mean the sale was covered by the Act. But since the Act did not apply, the buyer could bring a fraud claim against the seller/trustee. The court stated:

Under the common law doctrine of caveat emptor, when a buyer inspects property prior to sale, silence on a seller's part does not constitute fraud if it relates to conditions that the buyer, through the exercise of reasonable diligence, could discern upon inspection. Therefore, the buyer may not base a fraud claim on misrepresentations concerning patent, or readily observable, defects when the purchaser has been afforded an unimpeded opportunity to inspect the property. The doctrine does not apply if a seller fraudulently conceals a latent defect. Rogers v. Meiser, 2003 OK 6, 68 P.3d 967, 976-977. A latent defect known to the seller creates a duty of disclosure in the seller. Failure to disclose amounts to fraudulent concealment of the defect. Brauchitsch v. Cravens, 1978 OK CIV APP 48, 604 P.2d 379, 380.

Since the Buyer presented some evidence that the trustee knew of prior flooding on the property and failed to disclose it, there was sufficient evidence to go to trial on a fraud claim against that trustee.

In another case, Lester v. Smith, Case No. 104,854 (released for publication by the Court of Civil Appeals, but not yet published), the court held that the two year limitation period in the Act is a statute of repose, not a statute of limitations. Therefore, the discovery rule (which tolls the statute of limitations in tort cases until the injured party knows or in the exercise of reasonable diligence should know of the injury) does not apply to claims under the Act. The Court contrasted the language of the Act’s limitations with the general statute of limitation and other Oklahoma statues of limitations and statutes of repose. The Court found that the Act was a statute of repose and that the discovery rule would not apply to claims under it. As a result, the buyer’s claims against the sellers were untimely, and judgment in the seller’s favor was affirmed. Neal Stauffer, Jody Nathan and Nathan Parrilli were on the briefs for the sellers.

Roesler was a nurse anesthetist.  He purchased liability insurance from TIG in May 2002. In August 2002, Roesler was sued for his involvement in the June 1998 cesarian section birth of a severely brain-damaged infant. Roesler notified TIG, and TIG rescinded Roesler’s policy because he failed to include information about the incident on his application.  Roesler sued for bad faith and breach of contract.  A jury awarded him  $60,072 for breach of contract,  $2.31 million in compensatory damages for TIG's bad faith, and $2.3 million in punitive damages.  The Tenth Circuit found that the introduction of certain post - litigation conduct was improper, but it also found that the trial court properly denied TIG’s motion for directed verdict.  The Tenth Circuit reversed, the judgment, however, because of improper jury instructions.  The trial judge had instructed the jury (over TIG’s objection) that if the jury found that TIG’s coverage position was wrong, they would have to find that TIG acted in bad faith.  (Jody R. Nathan made this argument to the trial court).  The appellate court agreed.  The case was remanded for a new trial. 

Haberman v. Hartford, 443 F.3d 1257 (10th Cir. Okla. 2006)

In this case, Haberman was the sole shareholder of a corporation.  She and an employee were driving  on a pleasure trip when the employee lost control of the vehicle.  The employee was killed and Haberman was injured.  After Haberman collected both the liability and UM limits on the employee’s car (the one involved in the accident), she sought UM coverage under her Hartford policy.  The Hartford policy was issued to her corporation and the employee’s car was not a scheduled vehicle.  The Hartford policy, however, had an endorsement on the auto policy which specifically named Haberman as an insured for auto liability purposes.  Hartford denied the claim.  The policy limited UM coverage to specific vehicles and the employee’s car was not a listed vehicle.

On summary judgment motions, the court ruled that the endorsement made Haberman an insured for all purposes under the policy.  Even if the policy was ambiguous, the court would have to find for coverage.  It therefore entered summary judgment on behalf of Haberman finding coverage.  At trial, Haberman was granted judgment as a matter of law on her contract claim and Hartford’s quest to remove punitive damages from the jury was denied.  The jury found for Haberman and awarded her $548,000 on the contract claim, $5,000 for actual damages on the bad faith claim and a further $100,000 for punitive damages on the bad faith claim.

The appellate court affirmed both the contract and bad faith findings.  Even if there was a legitimate dispute as to coverage, the bad faith claim was appropriately decided by the jury because the reason Hartford gave when it denied the claim (that Haberman was not in a covered vehicle) was different from the reason it gave when it was in court (that Haberman was not an insured).  Furthermore, because there was evidence that Hartford ignored its own policy language and well settled Oklahoma law, and because it delayed payment of her med pay claim, there was sufficient evidence to take the question to the jury.

The appellate court found that the judgment should have been vacated in its entirety.  There was no evidence that there was a trial.  The judge did not remember one.  Plaintiff was not at the "accident" and could not testify as to the facts of the accident.  Neither Burton nor his attorney were present.  Therefore the judgment, which should be based on what actually happens in court, rather than on what might happen, was improper.  It was also improper to try to prop it up by claiming it was a judgment based on stipulations.  There is nothing in the record that shows that Burton or his attorney agreed to any of the facts the court found. 

SAVAGE v. BURTON; 2008 OK CIV APP 20

        It should go without saying that attorneys should only present truthful documents to the court for signing, and that judgments and orders signed by the court should reflect what actually occurred, not what could have, should have, or never could have occurred. We have no hesitancy in holding that the November 14, 2005 and January 25, 2007 judgments resulted from irregularities in obtaining the judgments, and the failure to vacate those judgments constituted an abuse of discretion.

        With respect to the November 14, 2005 Judgment, the trial court could not recall a trial and had no independent evidence of a trial. It was also admitted that neither Burton nor his attorney appeared before the court that day. As a result, the judgment did not reflect what actually occurred. Deciding to transform the inaccurate judgment into stipulations of fact also has no basis in the record.

In addition, the court specifically found that the intentional act of hitting someone with your car is not covered, even if the insured did not intend to cause injury.  This is not so obvious as you might think in Oklahoma, since there are cases that distinguish between intentional acts and intentional injuries.

EQUITY INSURANCE CO. v. GARRETT; 2008 OK CIV APP 23

In this case, summary judgment in favor of Equity was affirmed.  Garrett, the insured, admitted to intentionally bumping Hull with her car.  She claimed she was trying to stop a fight between Hull and her husband and did not intend to cause Hull injury.  Equity filed a declaratory judgment seeking a declaration of no coverage and no duty to defend Garrett in Hull’s action against her.  The court found that under Oklahoma’s declaratory judgment statute, as amended, the trial court could properly declare whether there was coverage under the policy.  The Court of Civil Appeals also affirmed that there was no coverage for the intentional act of Garrett. 

Failure to clear the payment with the State of Oklahoma can result in both fines and imprisonment.  The statute is 56 O.S. § 237B

In Stehm v. The Nordam Group, Inc., 2007 OK CIV APP 94, www.oscn.net/applications/oscn/deliverdocument.asp, employee claimed that he was recruited by Nordam while employed with another company.  Employee was concerned about the financial stability of the airline industry, and was told that the company was financially secure due in part to substantial revenue under a specific contract.  Based in part on these assurances, Employee quit his job and went to work for defendant/Employer.  Plaintiff quickly learned that the specific contract had been terminated and that the person who had assured him of the company’s stability based on that contract was aware of the contract’s termination during the interview process.  The trial court granted summary judgment, and the Court of Civil Appeals reversed. 

There was no direct Oklahoma precedent for the claim, but the court relied upon a Colorado Court of Appeals case, Berger v. Security Pacific, 795 P.2d 1380 (1990) which found that a claim could be considered viable.  Berger recognized an action brought by a terminated employee against the former employer for fraudulent concealment of a substantial known risk that a project for which the employee was being hired would be discontinued in the near future. Berger held the employer had a duty to disclose to the prospective employee facts that "in equity or good conscience should be disclosed."  This is generally in line with Oklahoma law on fraud as stated in Varn v. Maloney, 1973 OK 133, 516 P.2d 1328:"It is equally well settled that the concealment of material facts which one is bound under the circumstances to disclose, may constitute fraud." . . . “A duty to speak may arise from partial disclosure, the speaker being under a duty to say nothing or to tell the whole truth. One conveying a false impression by the disclosure of some facts and the concealment of others is guilty of fraud, even though his statement is true as far as it goes, since such concealment is in effect a false representation that what is disclosed is the whole truth.”

The elements for the claim for fraudulent misrepresentation and/or concealment in hiring are (1) the employer misrepresented or concealed a material fact during the hiring process, (2) the employer had knowledge of the falsity of the fact or lacked reasonable grounds for believing it to be true, (3) the employer intended to induce the employee's reliance, (4) the employee justifiably relied upon the misrepresentation, and (5) damages resulted. Since there was some evidence on each of the required elements, and the evidence was disputed, summary judgment was improper.

This case is particularly interesting because Oklahoma is an employment at will state.  Thus, although employers may fire an employee for any reason or no reason (except for reasons against public policy), the case indicates that employers must be careful in what they say to prospective employees during the interview process.

This case involved a dispute between an insured, Yaffe, and its excess carrier, Great American.  As a result of an explosion at Yaffe’s scrapyard in Muskogee, Oklahoma. Yaffe incurred  $1,785,986.89 in liability on claims by numerous parties. Yaffe had two insurance policies – a  commercial general-liability policy issued by ACE with limits of $1,000,000 per occurrence; and a commercial umbrella policy issued by Great American with limits of $25,000,000.  The ACE policy, however, had a per claim deductible, rather than a per occurrence deductible.  Since most of the claims were under $10,000, ACE paid just under $500,000 of Yaffe’s total liability of over $1,785,000.  Yaffe wanted Great American to pay the difference between what Yaffe paid out in claims and the ACE policy limits – about $785,000.  Great American claimed it had no liability because the ACE policy had not been exhausted.  The trial court granted summary judgment to Great American, holding that the Great American policy is unambiguous and that Great American is only liable after the ACE policy is exhausted. The Tenth Circuit reversed, finding that the Great American policy was ambiguous.  The Tenth Circuit refused, however, to grant summary judgment to Yaffe, since Great American had not had an opportunity to respond to Yaffe’s motion for summary judgment in the trial court. 

Under the loss payable clause, the policy states: 

    Coverage under this policy will not apply unless and until [Yaffe] or [Yaffe’s] underlying insurer is obligated to pay the “[R]etained [L]imit.”

 The court discussed three reasonable constructions of this clause: 1.  When the loss payable clause refers to what Yaffe “is obligated to pay,” it refers to Yaffe’s legal liability, regardless of whether Yaffe is protected by insurance coverage for that liability. Since Yaffe had to pay more than $1 M, there could be coverage, but the reference to Yaffe’s “underlying insurer” becomes superfluous.  2.  Since umbrella policies are designed to fill gaps in coverage, the loss payable clause could mean that Great American only pays when either Yaffe (in the case of an event not covered by insurance) or Yaffe’s underlying insurer (in the case of a covered event) is obligated to pay the retained limit.  Since the accident was covered in part by insurance, this would mean that Great American was not required to pay until the ACE policy limits were exhausted.   3.  The reference to Yaffe in the loss payable clause is merely to protect Yaffe in the event of a default by its primary insurer, ACE. 

The Tenth Circuit also found that other clauses were open to more than one reasonable interpretation, including the “other insurance” clause and the “defense” clause.  The court found there could be a reasonable expectation of coverage under the other insurance clause.  And, while defense was not an issue in the case, Yaffe argued successfully that the defense clause showed that the drafters of the policy could unambiguously require exhaustion of coverage when they wanted to.

This case is notable because the Court rests its finding, in part, on the fact that Great American could define its obligations precisely when it wanted to; and its failure to be specific in the loss payable clause was highlighted by its greater specificity in other parts of the policy.

Although the Social Security Administration (SSA) administers both programs, the Supreme Court has outlined their distinctions: “Title II is an insurance program. Enacted in 1935, it provides old-age, survivor and disability benefits to insured individuals irrespective of financial need. Title XVI is a welfare program. Enacted in 1972, it provides [Social Security Insurance] benefits to financially needy individuals who are blind, or disabled regardless of their insured status.”

www.ca10.uscourts.gov/opinions/05/05-2247.pdf

The district court found that the “phrase [Social Security Disability Award] has a technical meaning that does not include [Social Security Income] payments” and refused to “go beyond the technical meaning of Social Security Disability Award.”  The court emphasized “that the language in each of these places means what Monumental meant it to say when it wrote [the] definition.”  The Tenth Circuit notes the definition of disability is the same under either Title II or Title XVI, and that a reasonable person could conclude that a finding of disability under either title was sufficient.  The court rejected Monumental’s claim that since the Title XVI benefits would cease when Monumental  began paying Miller, that such payments were not sufficient under the policy, finding that the argument placed Miller in a classic Catch 22.  The court found the term ambiguous.  It also found that any extrinsic evidence should have been presented in the summary judgment motions, but was not.  The Court adopted the rule of contra proferentem in cases of ambiguous language with a de novo standard of review, which means that terms are construed against the drafter. The court then held that Miller’s receipt of Title XVI benefits satisfied the plan requirements.  It remanded the case, however, to rule on an issue the trial court did not reach – whether Mr. Miller’s accident was the “sole cause” of his disability.

The decision is remarkable in several respects.  First, it reverses a trial court’s ruling on summary judgment on a plan determination.  It should be noted that the plan did not give the administrator the authority to interpret ambiguous provisions, therefore, the court had de novo review.  Second, it finds that the term social security disability is ambiguous, as it could apply to any finding of disability under the social security laws. Third, it specifically adopts the contra proferentem rule in ERISA cases in the Tenth Circuit, joining the majority of courts which have considered the issue.  Finally, the court notes that it has never construed a term against an ERISA beneficiary, which would be against the policies of ERISA. 

After an explosion at the insured's plant, the insured's total liability was $1,785,000. Because the underlying CGL policy had a $10,000 per claim deductible (rather than a per occurrence deductible), the primary carrier paid only about half of its million dollar limits.  The insured wanted its excess carrier to pay the amounts over its primary carriers' million dollar limits, but the excess carrier said it was not required to pay because the primary carrier had not paid its limits.  The trial court sided with the excess carrier on summary judgment, but the Tenth Circuit reversed, finding that excess carrier's loss payable clause was ambiguous. 

The Tenth Circuit discussed three different clauses of the Great American policy: the loss payable clause and the retained limit definition; the other insurance clause and the defense clause.  Under the loss payable clause, the Great American policy applied to damages in excess of the retained limit–  defined as the total amounts stated as the applicable limits of the underlying policies (e.g., the $1 million dollar limit of the ACE policy).  Great American claimed that it had no duty to pay until the underlying ACE policy limits were exhausted.  But the Tenth Circuit said that under the policy terms, Great American was obligated to pay once Yaffe incurred liabilities exceeding $1,000,000. 
Under the loss payable clause, the policy states: 

Coverage under this policy will not apply unless and until [Yaffe] or [Yaffe’s] underlying insurer is obligated to pay the “[R]etained [L]imit.”

 The court discussed three reasonable constructions of this clause: 1.  When the loss payable clause refers to what Yaffe “is obligated to pay,” it refers to Yaffe’s legal liability, regardless of whether Yaffe is protected by insurance coverage for that liability. Since Yaffe had to pay more than $1 M, there could be coverage, but the reference to Yaffe’s “underlying insurer” becomes superfluous.  2.  Since umbrella policies are designed to fill gaps in coverage, the loss payable clause could mean that Great American only pays when either Yaffe (in the case of an event not covered by insurance) or Yaffe’s underlying insurer (in the case of a covered event) is obligated to pay the retained limit.  Since the accident was covered in part by insurance, this would mean that Great American was not required to pay until the ACE policy limits were exhausted.   3.  The reference to Yaffe in the loss payable clause is merely to protect Yaffe in the event of a default by its primary insurer, ACE. 

The Tenth Circuit also found that other clauses were open to more than one reasonable interpretation, including the “other insurance” clause and the “defense” clause.  The court found there could be a reasonable expectation of coverage under the other insurance clause.  And, while defense was not an issue in the case, Yaffe argued successfully that the defense clause showed that the drafters of the policy could unambiguously require exhaustion of coverage when they wanted to.

This case is interesting on several levels.  First, it provides practitioners with a guide on how to successfully argue ambiguity in one clause by showing that another clause is more clear.  Second, it shows that an appellate practitioner might have success in arguing that a policy is ambiguous on appeal, since whether a contract is ambiguous is a question of law for the court, and therefore, the appellate court will review the matter de novo.  Finally, it shows the importance of consistency in language for policies; defined terms should be used in the same way for the same thing throughout the policy – the failure to do so might cause the policy to be considered ambiguous.  

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The Oklahoma State Courts Record

Milroy rear-ended Lewis at a stop sign while talking on her cell phone. It was a minor fender bender, and neither Milroy nor Lewis sought medical attention at the scene. Later that day, after talking with an attorney, however, Lewis sought medical attention. She later ran up chiropractor bills and, after a demand for settlement was denied, sued Milroy in small claims court. The case was defended on behalf of Milroy by Allstate, through Horton, an attorney who was a salaried employee of Allstate. The case was taken into district court and a jury eventually awarded Lewis $2,600.

Allstate promptly paid the judgment and the later award of attorneys fees and costs. Milroy then sued Allstate, claiming it acted in bad faith by litigating the claim against her instead of settling it. Milroy sued Allstate in part because she thought Allstate mistreated the lady who sued her by disputing her claims for damages! She admitted she was never in danger of having an excess judgment against her but complained that Allstate dragged her through court in a total waste of time.

The court also discussed Milroy’s claims that Allstate had "dragged her through the legal system" and involved her in a legal battle that was "totally unnecessary." Simply put, the court found no damages to Milroy. There were no out of pocket expenses, she never requested that Allstate pay for lost wages, and the case only took up 6 or 7 hours of her time.

"Allstate did not contract with Milroy to eliminate any emotional distress she might suffer should she be at fault in an automobile accident."

Where the third party's recovery will not exceed the policy's liability limits, the question of whether the insurer will compromise or settle the claim or the manner in which it conducts the aspects of the defense are "matter[s] of no concern to the insured."

Milroy also claimed that Allstate harassed Lewis "as part of its effort to punish the plaintiffs and their attorneys who bring lower value soft tissue injury claims." Even if true, such facts could not support a bad faith claim, because the duty of an insurance company to deal fairly and in good faith with its insured does not extend to an injured third party who has no contractual or statutory relationship with the tortfeasor's insurer.

One wonders why the court simply did not state that Milroy had no standing to assert any claims against Allstate on behalf of Lewis.

In Meraou v. The Williams Companies, Case No. 06-5051, the Court was faced with the issue of whether an ERISA plan properly terminated long term disability (LTD) benefits.  The Plan provided that benefits could be terminated if the participant either ceased to be disabled, or failed to provide current medical information.  The claims administrator sought current medical information from the participant, Meraou, on February 27, 2002.  Some but not all of the requested information was supplied.  The administrator then asked Meraou to see a physician it had paid to get the requested information.  Meraou responded by stating she was seeing a different doctor, and that doctor would supply the information. No information was received by July 30, 2002, and Meraou was warned that her benefits would be terminated for failure to supply the information. Benefits were terminated effective August 1, 2002, for failure to provide the information. After an appeal was filed, additional information was provided.  The appeal was denied because it was determined that Meraou was no longer disabled. Another appeal resulted in an affirmance of the denial because Meraou was no longer totally disabled. 

The trial court found that the Plan’s decision was based on substantial evidence and was not arbitrary and capricious. It therefore upheld the decision terminating benefits.  The Tenth Circuit found the arbitrary and capricious standard of review applied, and reviewed the trial court’s determination de novo.  The court found that it was not unreasonable to require objective evidence of the disability; that the Plan had considered the combined effects of the claimed impairments to determine whether she was disabled; that the Plan was not estopped from contesting disability simply because she was receiving social security disability benefits; and the Plan was not estopped from terminating her benefits based on its prior determination of disability.  The grant of benefits did not foreclose subsequent review of her claims, and determination of disability under social security does not equate to disability under the Plan.  The denial was affirmed.

Read the case:
http://www.kscourts.org/ca10/cases/2007/02/06-5051.htm

In Bank of Oklahoma v. Monumental Life, Case No. 06-6137, the Tenth Circuit affirmed a summary judgment in favor of the insurance company.  The claim involved a mortgage life policy from Monumental that was supposed to pay off the mortgage in case the insured/homeowner died.  The insured never paid any premiums for the policy, and died three years later.  His widow sought coverage and brought claims against the bank and the insurance company.  The widow settled with the bank and assigned any right of recovery to the bank as against the insurance company.  The court held that because there were no premiums paid for the coverage, that there was simply no coverage in effect at the time the insured died. The court states, “The Policy's provision along these lines - allowing for the cessation of contractual obligations when payment is not forthcoming despite a reasonable grace period - is treated as valid, enforceable, and, indeed, essential under Oklahoma law for obvious and equitable reasons. See Gen. Am. Life Ins. Co. v. Brown, 56 P.2d 809, 812 (Okla. 1936).

"[I]t is quite generally held that the provisions of an insurance policy requiring prompt payment of the premiums, and the provision for lapse or cessation of the policy for nonprompt payment are valid, essential, and enforceable provisions of the contract." (internal quotation omitted)).”

There was nothing in the agreement between the Bank and Monumental which required Monumental to tell the Bank or the insured that it had not received any premiums or that the policy lapsed.  Thus, there could be no coverage by promissory estoppel.  While the insured may have been a third party beneficiary of the contract between the Bank and Monumental, the issue was waived on appeal.

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