Oklahoma Insurance Lawyer & Attorney : Stauffer & Nathan Law Firm

Miller was injured in a head on collision while driving his employer's car.  The accident occurred in 1991, and in 2001, Liberty has paid Miller approximately $20,000 on his claim.  Liberty had denied payment of medical claims which were incurred more than a year after the accident.  Miller sued Liberty for bad faith, claiming that Liberty failed to properly investigate and evaluate his claim, in part because Liberty initially offered Miller less than its lowest evaluation of the claim.  Liberty said it wasn't bad faith, and even if it were, the statute of limitations had run on any claim.  The trial court agreed, granting summary judgment to Liberty.  But the Court of Civil Appeals reversed.

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.

Therefore, summary judgment was improper and the case was reversed and remanded.

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

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In Ferguson v. Corgis Insurance Co., the issue was the limits of a CGL policy.  The policy declarations showed a $2 million limit, but there was a endorsement which tied the limits to the limits in the Idaho Governmental Tort Claim Act.  Unfortunately for Corgis, however, the Idaho GTCA stated required minimum limits for insurance policies, not maximum limits.  Thus, the Ninth Circuit found the policy was not ambiguous and the $2 million limit applied.  It therefore reversed summary judgment in favor of Corgis. 

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. 

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In National American Insurance Co. v. Vallion, 2008 OK CIV APP 41 , NAICO issued an insurance policy to a school district which covered vehicles owned by the school district.  Vallion was employed by the school and was a passenger in a covered vehicle which was hit by an underinsured driver. Vallion had a car which was covered by insurance. 

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.

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In Gutkowski v. Oklahoma Farmers Union Mutual Insurance Co., 2008 OK CIV APP 8, 176 P.3d 1232, Plaintiffs had asphalt or composition shingles on top of wooden shingles.  The wooden shingles were used instead of decking.  Plaintiff's roof was damaged by hail.  Farmers agreed to replace the damaged asphalt shingles, but not the wooden shingles, even though the removal of the asphalt shingles would make the wooden shingles no longer usable as a nailable surface on which to attach the new asphalt shingles.

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.

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While it might be stating the obvious, in National American Insurance Company v. Okemah Management Company, 2008 OK CIV APP 58 , the court held that there was no duty to defend a claim that was excluded under the policy.  NAICO's insured, Okemah, was sued for various construction defects in a building.  NAICO filed a declaratory judgment action seeking a declaration there was no duty to defend or indemnify its insured because the claims were not covered. 

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. Continue Reading...

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In Kutz v. State Farm Fire & Casualty Company, 2008 OK CIV APP 60, the Kutzes claimed that State Farm was in bad faith for failing to defend them on an auto accident claim that arose after their policy had been cancelled for non-payment of premium. 

Plaintiffs did not deny they failed to pay the full premium due. But they claimed that State Farm did not prove that notice of cancellation was sent to them.  The parties agreed that the policy requires State Farm only to mail the cancellation notice, and not to insure that it is received.

State Farm presented the affidavit of Taylor to prove mailing of the notice (which Plaintiffs said they did not get).  The court found the affidavit was sufficient evidence that the notice was mailed: the undisputed evidence showed that the cancellation notice was prepared on August 26, 2004, the envelope was photographed going through State Farm's automated mail system, it was State Farm's regular practice and pocedure to submit the notices to the post office immediately thereafter, and State Farm did not deviate from that procedure. Taylor could testify as to the procedure, even though the mailing of the notice happened in Arizona, while Taylor was located in Oklahoma. 

A business's regular practice and procedure is admissible as proof of mailing. State Farm's  policy plainly states that mailing of the notice is sufficient proof of notice of cancellation.

Because the Court found that State Farm strictly complied with the cancellation provision in the policy, summary judgment was proper. 
Continue Reading...

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In Vanguard Environmental Inc. v. Curler, 2008 OK CIV APP 57, the Oklahoma Court of Civil Appeals held that a contract which restricted a former employee from competing against her employer was unenforceable.  The agreement precluded the former employee (Curler) from marketing because such marketing could influence customers of the employer.  This clause was unenforceable.  Previously, it had been held that restraints on a former employee's dealings with clients of the former employer are unenforceable (except for active solicitation). 

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. 

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Oklahoma’s Residential Property Condition Disclosure Act

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.

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