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

Hartford insured Vakas' medical office when it was destroyed in a fire.  The policy provided for replacement cost coverage up to $240,000; but only if the property was replaced. Otherwise, it provided for actual cash value of the destroyed property.  In this case, only 4 items were replaced, as Dr. Vakas had been dead several years by the time of the fire.  But, the claimants (Dr. Vakas' heirs) still wanted Hartford to pay the replacement cost for the destroyed office contents. 

The court notes that Kansas law applied and follows the general rules regarding construing ambiguous policies against insurance companies.  The court found that the policy is not ambiguous or internally inconsistent.  After reading the policy, “a reasonably prudent insured would understand that Hartford would not pay replacement-cost value unless and until the property actually was replaced.”

Thus, summary judgment was affirmed.

See, Vakas v. Hartford

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In Andres v. Oklahoma Farm Bureau Mutual Ins. Co., the Oklahoma Court of Civil Appeals decided that even though OFB should have paid the Andres' claim, it could not be found liable for bad faith.  It therefore affirmed in part and reversed in part a motion for summary judgment granted in favor of OFB.  

Andres made a claim on his homeowners policy when water from a city sewer line backed up into his home.  OFB said it wasn't covered, citing to policy language which excluded losses from water damage, including “water which backs up through sewers or drains . . .”  The court found this exclusion applies not only to water, but to the sewage which might be in the water.  But, the policy policy specifically covered "Accidental Discharge or Overflow of Water or Steam from within a plumbing . . . system[.]"  Thus, the policy was ambiguous, because it both included and excluded sewage back ups, and therefore, the policy was construed against the insurer. 

Although the court decided that OFB was liable to the homeowners on the policy, it upheld the summary judgment on the bad faith claim, since OFB had a legitimate dispute as to coverage.  The court states: 
 

OFB denied the claim on the grounds that the claim was not covered by the policy; it relied upon decisions from nine other jurisdictions which supported its theory; its legal theory was plausible; and there was no Oklahoma precedent. Nothing in the appellate record suggests that OFB lacked a good-faith basis for refusing to pay Plaintiffs' claim. Thus, we conclude as a matter of law that OFB had a reasonable legal basis for refusing to pay the claim, and it is not liable for breach of the duty of good faith and fair dealing. The trial court properly entered summary judgment on this claim.

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