Oklahoma Insurance Lawyer & Attorney : Stauffer & Nathan Law Firm

In Newman v. State Farm, the 10th  circuit discussed the quantum of proof necessary for an insurance company to show a set fire and avoid a bad faith claim.  The Newman's house burned down when no one was home; Mrs. Newman had moved out and the rest of the family was camping.  The cause and origin inspection showed the fire started in or near the stove, but no accelerants were found, and no cause was determined.  State Farm was getting ready to pay the claim when it received information that the Newmans had paid someone to burn the house. 

When the claim wasn't paid, the Newmans sued State Farm for breach of contract and bad faith.  State Farm got summary judgment on the bad faith claim and the jury found for State Farm on the breach of contract claim.  On appeal, the Newmans complained that the jury was not properly instructed on State Farm's intentional acts and false swearing defense. 

“First, the Newmans argue[d] that contrary to Oklahoma law the district court did not instruct the jury that State Farm must prove each of the necessary elements of its arson defense.”  But in a case where evidence of arson is circumstantial, proof that the fire had an incendiary origin along with proof of motive, intent, and opportunity by the insured is sufficient. The insurer is not required to prove motive, intent, and opportunity specifically as elements of arson.  The jury was properly instructed that the affirmative defense of fraud need only be shown by a preponderance of the evidence, not by clear and convincing evidence.  As to the false swearing defense, no detrimental reliance need be shown, since that was not a requirement under the policy.

 

 

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In Kutz v. State Farm Fire & Casualty Company, 2008 OK CIV APP 60, the issue was whether the Kutzes were properly notified about their policy cancellation. The Kutzes sued State Farm and Agent for bad faith breach of contract after State Farm failed to defend John Kutz or pay his claim for liability for an auto accident because the policy insuring the vehicle had been canceled before the claimed loss occurred. The Kutzes asserted State Farm and Agent failed to notify them the policy was being canceled, and the Kutzes asserted Agent was negligent for failing to warn them before cancellation.


The Kutzes claimed they did not receive the following from State Farm: a balance due notice on April 30, and a cancellation notice on August 26. The policy was cancelled on September 8; and Mr. Kutz was involved in an accident in November. It was admitted that the Kutzes did not pay the full premium, but they claimed it wasn’t their fault because they did not receive a reminder that the premium was due.


The court first noted that State Farm was required to follow the terms of the policy in cancelling it. Midwestern Ins. Co. v. Cathey, 1953 OK 169, 262 P.2d 434, 436. The policy only required that the cancellation notice be mailed, not that it be received, in order to be effective. The plaintiffs claimed that the record only showed the cancellation notice was prepared, not that it was mailed. But the evidence included a photo of the envelope addressed to plaintiffs going through State Farm’s automated mailing system, and an affidavit that it was State Farm’s regular practice and procedure to submit the notices to the post office immediately thereafter, and State Farm did not deviate from its procedure. A business’s regular practice and procedure is admissible as proof of mailing. Summary judgment in favor of State Farm was affirmed.


The court then discussed the Kutzes claim that the agent was negligent in failing to tell them they forgot to pay their premium. The court that the agent had no such duty. Summary judgment to the agent was also affirmed.


This case is interesting because it details the type of proof necessary to show that something was mailed. Many insurance companies no longer send out notices by certified mail – thus, it has been difficult to show such notice. Furthermore, the court was unwilling to expand the duty of an agent to include advising a client about payment and cancellation issues.

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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. 
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Roesler v. TIG; 251 Fed.Appx. 489, (10th Cir. Okla. 2007)


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. 
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Vining v. Enterprise Financial Group
48 F.3d 1206, 49 Fed. R. Evid. Serv. 1026 (10th Cir. Okla. 1998)

Claimant under a credit life insurance policy sued the insurer for breach of contract and bad faith after the insurer refused to pay benefits upon the insured's death. After a jury found for the claimant and awarded her $800,000 in compensatory and punitive damages, the trial court denied the insurer's motions for judgment as a matter of law and for a remittitur, and the insurer appealed. The award was affirmed on appeal.  The insurer’s systematic practice of cancelling policies without determining whether it had good cause to do so was bad faith; since the insurer admitted that the insured did not intentionally misrepresent his health history, it had no recission defense;  the evidence supported the damages award; a report prepared by the Oklahoma Insurance Commissioner concerning the insurer's business practices was admissible; an expert witness was properly allowed to testify; and the insurer’s training manual and the testimony of other claimants was admissible to show bad faith.
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