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

In Cooks v. Mid-Continent, Cooks was insured by Mid-Continent when it installed some equipment made by Greystone and sold to LaFarge.  The equipment collapsed, causing damages including lost income while the equipment was being repaired.  LaFarge and Greystone settled, and then Greystone sought indemnity from Cooks, which was granted.  In the meantime, Mid-Continent said there was no coverage because the damage arose out of Cooks work, and was therefore subject to the damage to your work exclusion, even though the policy had products completed operations (PCOH) coverage.  The trial court granted summary judgment to Mid-Continent, saying the "own work" exclusion precluded coverage.  The appellate court reversed.

The own work exclusion states

This insurance does not apply to:
I. Damage To Your Work
“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.”

Mid-Continent focused on the phrase “arising out of,” arguing that because all damages at issue arose out of Cooks’ work, they are not covered. Cooks responded that the exclusion applies only to “damage to your work” (emphasis added), and that to read the policy as Mid-Continent urges would be to render PCOH coverage illusory.  The court agreed with Cooks and states:

A plain reading of these two policy provisions reveals that while the PCOH definition in the instant case encompasses certain “‘property damage’ … arising out of … ‘your work,’” the exclusion addresses only the portion of that same property damage which was actually caused to “your work.”  Both contain the same language concerning property damage arising from the insured’s work, and both clearly address property damage falling within the definition of PCOH. However, the exclusion contains the qualifying phrase “to your work,” thereby removing from coverage property damage that falls within the PCOH definition, but that actually occurred to the insured’s work. Any remaining property damage meeting the definition of PCOH but occurring to property that was not the insured’s work, it follows, would be covered. We find no ambiguity in these provisions.

CGL policies, such as this one, insure the risk of the insured causing damage to other persons and their property, but not insuring the risk of the insured causing damage to the insured’s own work.  The court states:

In fact, an ambiguity is present only when reading the policy as Mid-Continent does. If the exclusion in fact addresses all property damage arising from “your work” and “included in the PCOH definition,” then the exclusion would remove coverage for all property damage included in the PCOH definition, rendering the latter provision illusory. Such a conclusion would not be warranted even if the wording was as Mid-Continent suggests.

The exclusion, then, only applied to the equipment that Cooks actually installed. Since there was other damages, summary judgment was not proper.  Furthermore, since the claim was covered, Mid-Continent had a duty to defend Cooks in the underlying lawsuits.

The appellate court concluded that the trial court erred in granting summary judgment in favor of Mid-Continent because the CGL policy’s exclusion for “Damage To Your Work” did not apply to alleged damage to property that was not Cooks’ “work.” In this light, based on our finding that the state and federal petitions alleged potentially covered claims, the trial court erred in determining Mid-Continent had no duty to defend Cook’s in either suit. It reversed the trial court’s grant of summary judgment to Mid-Continent and remanded for a determination of the amount of damages to property that was not Cooks’ work and was thus covered by the policy.

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In Haltom v. Great Northwest Ins., the issue was whether Plaintiffs' knee injury arose out of the car accident she was in a few weeks before.  When Haltom was checked out after the accident, she complained of many things, but not her knee.  A few weeks later, while doing yoga, her knee began to hurt.  She sought treatment and an MRI 4 months after the accident showed no tear.  But a few months after that, she had a tear in her knee and got it fixed.  She told the doctor her knee was hurt in the car accident.  In the meantime, the other driver agreed to pay policy limits and Haltom asked Great Northwest for a subrogation waiver.  Eventually, Great Northwest agreed to the waiver and paid her $10,000 in med pay.  Later, it declined any payment under her underinsured motorist coverage, claiming that the knee problem was not related to the accident.  

Summary judgment to the insurance company was affirmed.  It was not unreasonable to question whether the knee was injured in the accident, especially since there was no evidence of injury to the knee after the accident in the emergency room, and the first MRI did not show any tear. 

 

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Toppins v. Minnesota Life

Mr. Toppins died in an airplane crash within 2 years of taking out a million dollar life insurance policy – i.e., within the 2 year contestable period.  Minnesota Life began a routine investigation because the death occurred within 2 years of the policy.  The investigation included a telephone interview with Mrs. Toppins, the beneficiary, and a request that she sign the investigator’s report and some medical information release forms.    Rather than sign the documents, counsel for Mrs. Toppins demanded immediate payment and disputed Minnesota Life’s right to conduct an investigation.  Suit was filed against Minnesota Life about 35 days after the claim was sent.  Five days later, Minnesota Life was told there were no changes to the report, and Minnesota decided to pay the claim without Mrs. Toppins signature on the report or authorization.  Minnesota Life contacted its reinsurer to confirm the decision, and sent off the check for the face amount of the policy plus interest.  The claim was paid 47 days after it was received.

Summary judgment was later granted to Minnesota Life on Mrs. Toppins claims of breach of contract and bad faith.  The Tenth Circuit affirmed.  

Ms. Toppins argued that Minnesota Life breached its duty of good faith and fair dealing as follows: (1) it delayed payment while waiting for the reinsurer’s confirmation of its decision to pay, (2) it delayed payment while it waited for Ms. Toppins to sign her statement and complete the medical records authorizations, (3) it engaged in a standard practice of conducting underwriting review after an insured’s death, and (4) it did not pay on the policy within 30 days of receipt of the claim.

As to the 4 days delay in payment caused by consulting with the reinsurer, the court said that it was reasonable for an insurer to consult with its reinsurer, and the 4 day delay was not unreasonable. The insurer was entitled to investigate the claim because the insured died within 2 years of the policy inception. As to Mrs. Toppins claim that Minnesota Life was in bad faith for conducting post claims underwriting, the court rejected the claim, saying that “The tort of bad faith breach of an insurance contract must be based upon an insurer’s wrongful denial of a claim; it cannot be based upon the conduct of the insurer in selling and issuing the policy.”  

Oklahoma law says that life insurance claims shall be paid within 30 days after proof of death, otherwise, interest must be added to the amount paid. The failure to pay within 30 days, coupled with the fact that Minnesota Life did not know of the statute was not bad faith.  The payment of the full amount of the life insurance policy, plus interest, 47 days after receipt of proof of death did not constitute bad faith.

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In Hale v. Allied Insurance, Plaintiff was hurt in an accident involving a non-owned ATV on a wilderness trail.  The ATV was not registered, and not covered by insurance.  Plaintiff claimed he was entitled to UM coverage under his own policies for his injuries.   The insurer denied the claim, relying on an exclusion for accidents involving “any vehicle or equipment . . . [d]esigned mainly for use off public roads while not upon public roads.” Reasoning the ATV was designed for off-road use and the trail was not a public road, the insurer denied the claim.  The trial court agreed, granting summary judgment to the insurer. 

The Tenth Circuit affirmed.  It noted that although "road" wasn't defined in the policy, the policy  distinguishes between public roads and terrain suitable only for specially designed vehicles.  The policy’s language excludes coverage for accidents involving vehicles “designed mainly for use off public roads while not upon public roads.”  The trail where the accident happened was not a road, but an obstacle course, which inexperienced drivers were told to avoid. 

In addition, Plaintiff argued that UM coverage was mandated by Wyoming law, which required motor vehicles be covered; since ATV 's are defined as motor vehicles, they are required to be covered.  But, since this argument wasn't made to the trial court, the Tenth Circuit declined to consider it. 

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BOHOT V. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, 2012 Ark. 22, No. 11-881 (1-26-12)

The Arkansas Supreme Court, affirming summary judgment for an insurer, upheld an exclusion to medical payments coverage contained in its policy which stated, “THERE IS NO
COVERAGE FOR AN INSURED . . . IF ANY WORKERS’ COMPENSATION LAW OR ANY SIMILAR LAW APPLIES TO THAT INSURED’S BODILY INJURY.” The exclusionary language applied to preclude coverage for medical bills incurred in a motor vehicle accident while working, despite the fact that workers’ compensation benefits did not cover all bills, as physical therapy bills were denied since they were not ordered by the claimant’s authorized treating physician.

Justice Danielson rejected arguments that medical payments coverage applied to cover the unpaid bills, noting that an insurer may exclude certain risks, and while there is statutory language authorizing such things as intentional acts, commission of a felony or evasion of arrest, in Ark. Code Ann. § 23-89-205, the Court has held that is not an exclusive list.

The Court pointed out by a previous decision, Aetna Insurance Co. v. Smith, 263 Ark. 849, 568 S.W.2d 11 (1978), it has upheld a similar occupational exclusion. In that case, the exclusion read, “This coverage does not apply to bodily injury (a) sustained by any person to the extent that benefits therefor are in whole or in part paid or payable under any workmen’s compensation law, employer’s disability law or any similar law.”

The Court explained its earlier ruling:

“Therefore, the exclusion clearly applied in all scenarios where workers’ compensation benefits either had been paid in whole or in part or could be paid in whole or in part. In other words, the exclusion this court upheld in Aetna would have applied even had workers’ compensation not covered the medical bills in full, and there is no distinction between it and the exclusion at issue in the instant case.”

The Supreme Court rejected arguments that it should overrule the Aetna case, citing case law supporting stare decisis “unless great injury or injustice would result.” The Court declined to
rewrite precedent with this case.

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Ohio Casualty, Ins. Co. v. Cloud Nine (10^th Circuit, applying Utah law)

Edizone sued the insureds after the insureds continued to use Edizone’s patent to create and sell products after the insureds’ licensing agreement with Edizone ended. During the relevant time frame (about 4 ½ years) the insureds had policies from Ohio Casualty and Unigard. There was a six month gap in insurance coverage between the two insurers’ policies. 

The insureds asked Ohio Casualty and Unigard to defend them in the Edizone action. Ohio Casualty declined and filed a declaratory judgment action. Unigard agreed to defend under a reservation of rights and then intervened in the dec action. Unigard got partial summary judgment, which required Ohio Casualty to share the defense costs equally with Unigard. Ohio Casualty appealed, and the Tenth Circuit certified the following question to the Utah state courts:

Should the defense costs in the Edizone case be allocated between Ohio Casualty and Unigard under the “equal shares” method set forth in the “other insurance clause” of Ohio Casualty’s policy, or, in the alternative, because the policies were issued for successive periods, should those defense costs be allocated using the time-on-risk method described in Sharon Steel Corp. v. Aetna Casualty & Surety Co., 931 P.2d 127, 140 (Utah 1997)?

Ohio Cas. Ins. Co. v. Unigard Ins. Co., 564 F.3d 1192, 1194 (10th Cir. 2009).

In Sharon Steel, the court added up all the limits for all the years and apportioned defense costs accordingly. If there were uninsured periods, the insured would be allocated part of the defense costs. In this case, however, the Utah court said apportion defense costs as in Sharon Steel, but don’t make the insured pay since the insurers get to control the defense. The “other insurance clause” simply does not apply to successive risk insurers, but only to concurrent risk insurers. 

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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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In Jones v. UPS, the Tenth Circuit ruled that an award of $2 million in punitive damages was too big.  The jury had awarded $630,000 in compensatory damages on a retaliatory discharge claim, in addition to the $2 million in punitive damages.  The determination of the constitutionality of an award of punitive damages is reviewed de novo.  Citing State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419 (2003), and finding it a “close question,” the court found the award of punitive damages was excessive.  The jury awarded Plaintiff a substantial amount of actual compensatory damages, in light of the injuries suffered.  As a result, while the ratio of punitive to actual damages was not per se unconstitutional, the jury’s punitive damage award was grossly excessive and therefore in violation of UPS’ due process rights.  The court states:

    having considered the degree of reprehensibility, the size of the punitive damage award compared to the compensatory damage award, and comparable cases, we conclude that the jury’s award of $2 million was constitutionally excessive.

So, the case was sent back down for the plaintiff to choose between a new trial on punitive damages or remittur as ordered by the trial court.



 

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In DISH Network Corporation, et. al. v. Arch Specialty Insurance et. al., Dish filed a lawsuit against Arch (insurers) for failure to defend and indemnify against a patent infringement claim.  DISH reasoned that the patent infringement suit was equivalent to an “advertising injury” which the insurers had a duty to defend and indemnify. The district court granted summary judgment to the insurers because the underlying complaint did not allege an “advertising injury” under the policies issued to DISH.

 The insurers disputed whether a claim for patent infringement can ever constitute “advertising injury” within the relevant policy language.  The Court of Appeals concluded that it can.  The Court also considered whether the specific allegations in this case brought the underlying suit within the policy language.  The Court relied on several courts decisions that held where an advertising technique itself is patented, its infringement may constitute advertising injury.  See, Hyundai Motor Am. v Nat. Union Fire Ins. Co. of Pittsburgh, Pa., 600 F.3d 1092, 1102 (9th Cir. 2010); Amazon.com Int’l, Inc. v. Am. Dynasty Surplus Lines Ins. Co., 85 P.3d 974, 977 (Wash. Ct. App. 2044).

The Court used a causation analysis to identify the alleged injury and its origin. The Court determined that the infringement occurred in the advertising itself and reversed and remanded the grant of summary judgment.

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In Blumenthal v. New York Life Insurance, Blumenthal cancelled his universal life insurance policy with New York Life after  discovering the policy’s cash value and death benefit would be zero between 13 and 17 years.  The district court granted New York Life’s motion for summary judgment on the ground that the claims were barred by Oklahoma’s statutes of limitation.  Written materials relating to the policy were enough to put Blumenthal on notice of the basis of any claim he may have against New York Life.  Blumenthal appealed.  The Court of Appeals affirmed the district court’s ruling. It was an undisputed fact that Blumenthal received information that would put a reasonable person on notice that the anticipated premiums might be insufficient to maintain the policy until its maturity date. Blumenthal admitted that he never would have bought the policy if he had read the information when it was provided to him.

 

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In Lucas v. Liberty Life Assurance Company,  Lucas was injured at his job and received 24 months of disability under the company’s long-term disability plan. The company’s policy required that the employees eligible to receive benefits for the first 24 months not be able to perform substantial and material duties of his own occupation. After the expiration of 24 months, Lucas applied for additional disability benefits.  Liberty Life, the company’s plan administrator and insurer, denied  Lucas’ application.  To be considered disabled and eligible to receive benefits after the first 24 months, one must  “... not be capable of performing substantial and material duties of any occupation comparable to his former position.” After losing an administrative appeal, Lucas filed suit against Liberty Life for violating the Employee Retirement Income Security Act of 1974 (ERISA).  The district court entered judgment in favor of Liberty Life and Lucas appealed. The appellate court considered whether the determination to deny benefits was arbitrary and capricious. The court explained that a decision is arbitrary and capricious only if it lacks a reasoned basis. The Court found that Liberty Life had a reasoned basis for denying the claim based on the following: three separate reviews of the claim; extensive citation to medical records and investigative  surveillance; and Lucas’ securing a full-time university teaching position.

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Giant African snails are invading Miami.  The snails can grow up to 8 inches in length; and eat not only vegetation, but stucco and concrete; which could damage homes.  But these types of damages are usually not covered under homeowners policies which view pest problems as maintenance issues.

MSNBC has the article and a video. 

 

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Certain Underwriters v. B3, Inc., was a declaratory judgment action in state court, on whether the Total Pollution exclusion in an insurance policy issued by Lloyds applied to bar coverage for liability and damages.  The trial court found that there was no coverage, and the Court of Civil Appeals affirmed.  Since there was no coverage for the claim, there was no need to determine whether another party was a third party beneficiary of the policy and entitled to indemnification. 

The claim involved a damage claim by nearby landowners who said that their sewage from the defendants' wastewater treatment plant ended up on their property.  The court found that sewage was a pollutant (no kidding!) and was within the pollution exclusion of the policy.

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In Brown v. Oklahoma Farm Bureau, Brown was sued for negligently conducting a house inspection.  Although his policy was issued by AG Security, he sued both AG and Oklahoma Farm Bureau.  The court found that Oklahoma Farm Bureau was not liable on the claim because it did not issue the policy, even though it handled the claims for AG.  

The court found that Brown's alleged negligent inspection did not cause property damage, a requirement for coverage under the policy.  Further, even if it had, the professional services exclusion (the exclusion excluded coverage for property damage resulting from "rendering of or failure to render professional services in the performance of any claim, investigation, adjustment, engineering, inspection, appraisal, survey or audit services.") precluded coverage for the claim. 

There were coverage issues so that the bad faith claim was properly dismissed; further, the exclusion applied, so the contract claim was properly dismissed.

 

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In NAICo v. Gerlicher, the issue was whether an exclusion in a CGL for liability coverage for "damages that arise out of any work that you do, work that is done on your behalf or any other activity related to an "exterior insulation and finish system" (commonly called EIFS) was an appropriate basis for summary judgment.  The Court of Civil Appeals held that it was.  

First, the exclusion was clear and unambiguous and applied to the claims in the lawsuit.  Second, the efficient proximate cause doctrine did not turn the issue into a jury question because the policy contracted around the efficient proximate cause doctrine.  The efficient proximate cause doctrine applies when at least two identifiable causes combine to form a single property loss, and one is covered under the policy while the other one is excluded under the policy."If the cause which is determined to have set the chain of events in motion, the efficient proximate cause, is covered under the terms of the policy, the loss will likewise be covered."  While the issue of proximate cause in insurance coverage cases has generally been a fact question not suitable for summary judgment, the exclusion in this case contracts around the efficient proximate cause doctrine.  The policy exclusion applies regardless of whether whether the loss was caused by another possibly covered cause of loss.

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In Johnson v. Liberty Mutual Fire Insur. Co. the Johnsons sued Liberty for spoliation.  Judge Gorsuch summarizes the case as follows:

This case is about a pair of missing tail lights and the limits of reasonable foreseeability. Russell and Jennifer Johnson blame Liberty Mutual for failing to hold onto a pair of tail lights that, they say, would have helped them win a personal injury lawsuit they wanted to bring. Problem is, the Johnsons never asked Liberty Mutual to keep the tail lights, never mentioned their intent to sue, and allowed years to pass without a word. Now they fault the company for failing to divine their hidden (and perhaps not yet formed) intentions. Because the Johnsons, quite unsurprisingly, cannot identify a statutory or contractual basis for their claim, they ask us to create one for them in the common law of tort. But, we hold, the common law doesn’t require such uncommon foresight.

* * * * 

Judge Gorsuch explains: 

The Johnsons seek to use the common law in many uncommon ways. They ask us to recognize and enforce an independent spoliation tort, but the Colorado courts have yet to go so far. They say Liberty Mutual neglected its duties as the bailee of their property, but it’s unclear from the record whether the Johnsons even owned the tail lights by the time they asked for them. They argue that Liberty Mutual tortiously (in bad faith) disregarded an insurance obligation, but it’s hardly obvious what obligations Liberty Mutual had as an insurer to help the Johnsons anticipate and prepare for an affirmative lawsuit; no one, after all, suggests that Liberty Mutual had a contractual or statutory duty as insurer to pursue a lawsuit against Zimmerman and Mr. Dellock for the Johnsons. But all these questions pale beside another. To prevail on any of their (putative) tort claims, the Johnsons must show that their claimed damages were reasonably foreseeable — that Liberty Mutual knew or should have known that the destroyed tail lights would be relevant (valuable) evidence in their future affirmative litigation.. . . And this the Johnsons can’t do as a matter of law — either on the evidence at summary judgment (in their spoliation and bailment claims) or on their pleadings at the motion to dismiss stage (in their bad faith claim).

 

So, there you have it.  I cannot improve upon Judge Gorsuch's prose. 

 

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In Leprino Foods Company v. Factory Mutual Insurance Company,  (10th Circuit 2011)  Leprino stored millions of pounds of cheese in a warehouse (Gress). The cheese became tainted by damaged fruit containers stored near the cheese. Leprino sued Gress and Gress settled with Leprino for $2.4 million. Leprino also made a claim to their insurance company, Factory Mutual. Factory Mutual denied the claim relying on the policy’s Exclusion Clause and Leprino sued Factory Mutual for breach of contract. The District Court found that Leprino had adequately proved that the damages were covered and not excluded under the policy’s Exclusion Clause. The Court awarded judgment for the full amount of the loss, $14 million, plus prejudgment interest, totaling $23 million. Factory Mutual appealed stating that the insurance claim amount should be offset by the settlement amount obtained from Gress. The Tenth Circuit Court found that the judgment should be offset by the settlement amount from Gress, but ordered that the attorney’s fees and costs in obtaining that settlement must be shouldered by Factory Mutual reasoning that, “...if an insurer wrongfully denies coverage, even in good faith, it must pay its proper share of expenses incurred by the insured in recovering from a third party when the benefits of the recovery also inure to the insurer.” Louisville & Jefferson Cnty. Metro. Sewer Dist. v. Travelers Ins. Co. 753 F.2d 533 (6th Cir. 1985). The court also held that any evidence introduced in a trial must have some probative value, if it does not, it must be excluded under Rule 402 of the Federal Rules of Evidence.
 

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In Wilson v. State Farm Mutual Automobile Insurance Company, No. 3:10-CV-256-H, 2011 WL 2378190 [2011 U.S. Dist. LEXIS 63430] (W.D. Ky., June 15, 2011), the United States District Court for the Western District of Kentucky ruled that an insurance carrier did not act in "bad faith" by delaying payment of a settlement pending its determination of Medicare's reimbursable conditional payment amount.

 

In Wilson, the plaintiff filed an uninsured motorist claim which the insurer agreed to settle for the policy limits. However, the insurer delayed tendering payment until after it obtained Medicare's reimbursable conditional payment amount. The plaintiff sued the insurer claiming that the insurer's delay in paying the settlement violated Kentucky's bad faith law. For the reasons more fully discussed below, the court found that the insurer's actions did not constitute bad faith under Kentucky law.

Read about it here

 

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Brendan Johnson was killed when a vehicle driven by Mark Royal collided with his Chevrolet Cavalier, which he was driving. At the time of the accident, neither Johnson's nor Royal's vehicle was covered by an automobile insurance policy. Johnson was residing with Addrea Stewart, his mother, when the accident occurred. Stewart owned a Ford Explorer, which was insured by American Family Mutual Insurance Company and provided uninsured motorist coverage with policy limits of $100,000 per person/$300,000 per occurrence. Stewart sought Uninsured Motorist ("UM") coverage benefits for the death of her son, Johnson, under the UM provisions of the policy covering her Explorer. American Family filed a motion for summary judgment contending that Johnson was not an insured person under Stewart's policy, relying primarily on a "named driver exclusion" ("NDE") endorsement. The NDE was added to Stewart's policy after its original issuance due to the termination of coverage for Johnson and for his vehicle. The exclusion was in effect on the date of the accident and read as follows:

    This policy does not apply under any of the coverages to any vehicle in the care, custody or control of, or while operated by Brendan Johnson. . . . . All other terms, agreement, conditions and provisions remain unchanged.

Stewart opposed the granting of summary judgment, claiming that she was the injured "insured person" making a claim under her own policy. She claimed that she, as a named insured, was covered under the UM coverage of the policy for wrongful death damages with respect to the death of any person as to whom she is entitled to bring a wrongful death claim; in this case Johnson. The trial court relied on the NDE endorsement, finding the Stewart policy did not apply to any of the coverages if Johnson was driving, and granted summary judgment in favor of American Family. Stewart appealed.

Division One holds: While courts will enforce an NDE when it clearly excludes coverage when any named excluded person is driving, the language of the NDE section here is not effective, by itself, to bar a claim as to UM coverage. Nevertheless, the trial court obtained the right result in the case because the record shows that Johnson owned his own vehicle and thus could not qualify under the policy as an insured person, and because the "bodily injury" was sustained by Johnson, who was not an "insured person." Because Stewart did not suffer the bodily injury herself, as required under the policy, and Johnson was not an "insured person," Stewart could not recover under UM coverage for Johnson's death. The judgment is affirmed.

Stewart v. American Family

 

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Arthur L. Been, who was sentenced in 2007 to serve concurrent terms for assault with a dangerous weapon, malicious injury/destruction of property, obstructing a police officer, and public intoxication following an altercation at a bar. He sued the bar, claiming if he hadn't been drunk, he wouldn't be in jail.  Summary judgment to the bar affirmed.

BEEN v. MK ENTERPRISE, INC.; 2011 OK CIV APP 70

 

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In Guideone v. Shore, Guideone (Insurer) wanted Shore (Agent) to pay for all or part of a bad faith settlement it made with its insured.  Apparently Agent had told the insured that her UM coverage did not kick in until after the liability carrier paid its limits.  This is wrong under Oklahoma law.  But, when the insured repeated this information to the Insurer, the Insurer did not correct the error.  In addition, the Insurer did not timely investigate the claim.  As a result, the Insurer was sued for UM and for Bad Faith.  The Insurer settled with the Insured, and then went after the Agent for the money it paid in extracontractual damages.  Summary judgment to the Agent was affirmed.

There was no express indemnity in the Agency contract, so summary judgment was appropriate on that theory.  There was no right to implied indemnity because the Insurer was at fault for the Insured's claims.  There was no right to contribution under the contribution among joint torfeasors statute (12 O.S. § 832) because as an agent, Agency could not be liable to the insured for bad faith. 

 

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In Breen v. Gardner, the Oklahoma Court of Civil Appeals affirmed the denial of a motion for mistrial after the investigating officer testified that he checked drivers licenses and insurance at the scene of a car wreck.  The court reasoned that since Oklahoma law requires compulsory insurance, the jury would not be surprised that the officer checked insurance at the scene.  Further, there was no evidence as to whether any party had insurance.  Thus, the mere mention of insurance by the officer did not warrant a mistrial.  

In addition, the defendant claimed that the jury was unduly influenced by the word insurance because it awarded $170,000 based on $3,300 in medical bills.  But, because the record was insufficient to support this argument, this claim did not warrant a new trial, either. 

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In Hartford Underwriters Insurance Company v. Donna Ledbetter, the Missouri Court of Appeals considered whether an insurance policy’s language was ambiguous thus warranting coverage in favor of the insured.  Ledbetter received injuries in a car wreck  when another car driven by Danny Harris struck her car.   Ledbetter sued Harris for her personal injuries and later settled the suit in exchange for his liability insurance policy limit of $50,000.   Ledbetter then attempted to recover $200,000.00  against her insurer, Hartford, under the Underinsured Motorist provision of the Policy. Hartford denied that Harris’ vehicle was underinsured.  Both parties filed a Motion for Summary Judgment and the trial court entered judgment in favor of Hartford finding that Harris’ vehicle failed to meet the Policy’s definition of an underinsured vehicle.  Ledbetter appealed. 

 The appellate court’s review focused on the Policy’s “Other Insurance” clause pertaining to underinsured motorist coverage. The applicable provision stated, “Any insurance we provide with respect to a vehicle you do not own shall be excess over any collectible insurance providing such coverage on a primary basis.”  Ledbetter argued the provision was ambiguous and required a construction that the underinsured motorist coverage was excess to the tortfeasor liability coverage regardless of whether she occupied the non-owned vehicle because a requirement that she actually occupy the non-owned vehicle was not contained in the policy.

 “Language in an insurance policy is ambiguous if it is reasonably open to different constructions, and the language used will be viewed in the light of the meaning that would ordinarily be understood by a layman who bought and paid for the policy.”  Hobbs v. Farm Bureau Town & Casualty Ins. Co., 965 S.W.2d 194, 197-98 (Mo. App. 1998).

 The Court considered Goza v. Hartford Underwriters Ins. Co., 972 S.W.2d 371, 372 (Mo. App. 1998) where Hartford’s  “Other Insurance” clause, which mirrors the “Other Insurance” clause in question, was found ambiguous and resolved in favor of the insured despite the fact that Goza was driving her own insured vehicle at the time of the accident.  The Goza  Court found the policy ambiguous because one could reasonably interpret the ‘excess coverage’ language as providing coverage for a vehicle that the insured did not own, while the ‘excess coverage’ language could also be interpreted as providing underinsured coverage in excess to amounts recovered from tortfeasor. 

This Court held that an objective examination of the ‘excess’ language of the “Other Insurance” clause suggests that the language might reasonably be interpreted by an average lay person to mean underinsured coverage was excess to amounts recovered from the tortfeasor.  It also could be interpreted to mean that the ‘excess’ language prevailed over the conflicting language contained in the Policy’s definition of an underinsured and Limits of Liability sections. 

 The trial court’s grant of summary judgment was reversed and remanded.

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In Mendota v. Ware, Appellant (Ware) obtained a wrongful death judgment of $175,000 in damages against the driver of the car involved in a car accident of which her father was a passenger. Ware sought satisfaction of the entire judgment from respondent’s insurance carrier, Mendota. Ware argued that the Policy contained a typo that described property damage as “Coverage A” when it should have been designated as “Coverage B” thereby rendering the Policy ambiguous with no effective limits of liability. Mendota refused to pay more than the specified $25,000 policy limit for bodily injury claims and filed a declaratory judgment asking the circuit court to determine that the Policy was unambiguous and that the policy limit for bodily injury was $25,000. Both parties filed motions for summary judgment and the circuit court granted Mendota’s motion. Ware appealed. Relying on a single-character typo on the Policy’s Declaration page, Ware contends that the policy should be interpreted in her favor and impose no monetary limit on liability of coverage. The Court of Appeals relied on a recent Missouri Supreme Court definition of ambiguity as a “duplicity, indistinctness, or uncertainty in the meaning of the language of the policy. Language is ambiguous if it is reasonably open to different constructions.” Burns v. Smith, 303 S.W.3d 505, 509 (Mo. banc 2010). The court noted that despite the “blatant” typographical error on the Policy’s Declaration page, the Policy can neither be construed to impose no monetary limit, nor can it be construed to impose a limit other than the policy’s specified $25,000 limit. The Court also found the Policy to contain straight forward terms on how the limits of liability would operate. The Court took its decision a step further and noted that even if the Policy were deemed ambiguous, Ware would only be entitled to a resolve the ambiguity consistent with a reasonable expectation as to what coverage would be provided. Ware’s argument of unlimited liability is contrary to the reasonable expectation as to what coverage would be provided and goes beyond what any fair interpretation will allow.

 

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The Supreme Court of Oklahoma, in essence said “not so fast” to the lower court in determining the timeliness of a medical malpractice claim. In Hawk Wing v. Lorton, plaintiff filed a medical malpractice claim against her orthopedic surgeon and clinic for failure to diagnose and treat fractures in her left foot which resulted in a lifetime disability.

After a car crash on February 10, 2006, plaintiff complained of pain to her left leg and left foot. Dr. Lorton (Defendant) performed surgery on her left leg on February 11 and February 13, 2006. During plaintiff’s follow up appointment with defendant on March 2, 2006, she continued to complain of swelling and pain in her left foot; however, defendant advised her that x-rays were unnecessary and that her condition would improve. Although plaintiff continued to complain of pain, defendant did not order x-rays, until April 3, 2006. Those x-rays showed several fractures in Plaintiff's foot. Defendant refused to refer Plaintiff to an orthopedic foot specialist and advised Plaintiff that the permanent condition of her foot could not be determined for another six to twelve months. Defendant also assured plaintiff that her foot was healing properly and he advised her to continue to walk on her left foot.

On October 19, 2006, Plaintiff sought a second medical opinion in which she was advised of the severity of her injuries and that she would never walk again. Plaintiff brought a medical malpractice action on August 8, 2008 and defendants moved for summary judgment on the basis that the claims were barred by the “discovery rule” of the two-year statute of limitations which required plaintiff to file a cause of action within two years from the date that she knew or should have known of her injury through the exercise of reasonable diligence.

The trial court granted summary judgment as a matter of law and the court of appeals affirmed. The Supreme Court, however, identified 2 key factors in applying the “discovery rule” to this malpractice case: (1) the injury complained of; and (2) when did Plaintiff acquire sufficient information by which she knew or should have known of the misdiagnosis and negligent treatment of her broken foot was the cause of the injury for which she seeks damages. The Court reasoned that the question of when a plaintiff possesses sufficient knowledge to trigger the running of a statute of limitations is one of fact and one of which reasonable minds could differ. Thus, this cause was remanded to trial court for submission to the trier of fact.
 

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In Novell, Inc. v. Vigilant Insurance Company, the 10th Circuit affirmed defendant-appellee’s motion for summary judgment. Plaintiff-Appellant (Novell) was sued by another company (SCO) in Utah state court for slander of title. Novell requested Defendant-Appellee’s (Vigilant) defense in the slander action pursuant to a general liability insurance contract which required Vigilant to pay for any personal injury that Novell was obligated to pay. The Policy defined personal injury to include electronic, oral, written or other publication of material that libels or slanders a person or organization. Vigilant refused to defend because SCO’s asserted allegations would not constitute personal injury. Novell sought declaratory relief in state court. After both parties filed Motions for Summary Judgment, the Court granted summary judgment in favor of Vigilant.  Novell appealed.   The Court’s standard was whether the allegations, if proved, could result in liability under the policy. Novell asserted that SCO’s alleged facts in the slander of title cause of action implicitly asserted a claim for defamation  and was thus subject to coverage under the insurance contract.  Specifically, Novell argued the alleged statements concerning proper copyright ownership could give rise to a potential cause of action for defamation because it called into question  SCO’s honesty and significantly harmed SCO’s business reputation. The 10th Circuit wasn’t persuaded and held that since SCO did not allege that Novell’s statements impeached SCO’s honesty, integrity , virtue, etc., then Novell’s contention that the allegations implicitly calls SCO dishonest is just” too great a stretch.” Although SCO’s complaint focused on a copyright ownership dispute and the complaint alleges injury to SCO’s business reputation, the absence of allegations of defamatory comments persuaded the court to affirm the  trial court’s decision. 
 

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Lee v. Max does not involve insurance, but it does involve issues that arise in many insurance (and other) cases -- discovery disputes.  Here, the plaintiff failed to turn over documents in discovery, then failed to turn them over after an order compelling the turnover was granted; and then failed to timely turn them over after they were ordered to do so by the court again.  The last time, they turned some more stuff over and certified under penalty of perjury that all the documents were turned over -- and then turned over some more.  While the Tenth Circuit prefers that the district court say why it is dismissing a case for discovery sanctions, if the Tenth Circuit can figure it out, it can decide it.  Here, it was easy to tell what happened, and the fact that the plaintiff failed to comply with two court orders on discovery was sufficient to support dismissal.

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After a large judgment was entered on behalf of their client, the law firm split up, resulting in a fee dispute between the lawyers.  When one of the lawyers sought a defense from his professional liability insurer, it filed a declaratory judgment action, claiming that there was no coverage for fee disputes.  The trial court agreed, and the Court of Civil Appeals affirmed.

The Court of Civil Appeals cites from the trial court's ruling as follows:

The language of the OAMIC policy is clear and unambiguous in excluding from coverage the following:

This policy does not apply:

a. To any claim arising out of any dishonest, fraudulent, criminal, malicious or knowingly wrongful act or omission or deliberate misrepresentation committed by, at the direction of, or with the knowledge of any insured.

b. To any claim arising out of the division of fees or fee [apportionment] between an insured and any other lawyer or lawyers.

. . . .

All of the allegations . . . arise from the fee dispute . . . . and as such, are excluded from coverage under the policy.

Oklahoma Attorneys Mutual Insurance Co. v. Capron, 2011 OK CIV APP 46

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In Mid-Continent v. Blutone, the question was whether a Dodge pick up truck was insured under a fleet policy issued by Mid-Continent to Blutone when it was involved in an accident.  The jury found it was not covered and the 10th Circuit affirmed.

Blutone claimed it requested coverage on the truck in a 47 second telephone conversation with Mid-Continent's agent.  The 10th Circuit appeared skeptical that the necessary information could have been provided in 47 seconds.  The evidence was that Blutone was able to add or delete covered vehicles by notifying Mid-Continent’s agent, and that this had been routinely done without incident until this case.

Motion in Limine

Blutone wanted to submit an insurance verification card on the truck to show that there was coverage (or at least, that Blutone thought there was coverage).  The court said no, but that if Blutone thought it was relevant, to let him know and he would revisit the ruling.  Since Blutone never made an offer of proof, the issue was not preserved for appeal.

Jury Instructions

Blutone also wanted the jury instructed that the agent could bind Mid-Continent.  But, because there was a stipulation on that issue, there was no error in not instructing the jury. 

 

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Plaintiffs got a judgment against Bowman and sought to garnish his alleged insurer, Acceptance. Acceptance insured the car dealer who sold Bowman’s dad the car. The car dealer never gave Bowman a title or signed the sales agreement. Acceptance said that it did not insure the car because Bowman (not Bowman’s dad) owned the car. Both parties filed for summary judgment, which was granted to plaintiffs. The Court of Appeals reversed. Acceptance said that Bowman’s dad owned the car, but the trial court said that Acceptance could not deny liability on a ground not identified in its denial letter. (This is commonly referred to as the "denial letter rule." ) An insurer, having denied liability on a specified ground, may not thereafter deny liability on a different ground. But, since the material issue was that the car dealer didn’t own the car, not whether Bowman or his dad owned it, there was no waiver, since this issue was raised in the denial letter.

The next issue was whether the uncontroverted facts established the ownership of the vehicle. Texas courts look to the transfer of possession and control of the vehicle, pursuant to the parties' intent to effect the sale to determine ownership for insurance purposes. Here, it was uncontroverted that Bowman’s dad paid the full sale price for the car. Furthermore, it was uncontroverted that the car was delivered to Bowman’s dad who took possession of it. But, since the car dealer didn’t sign the sales contract, there was a factual issue as to whether the car was sold to Bowman.

Sauvain v. Acceptance, Missouri Court of Appeals, Western District.

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In SHOLER v. ERC MANAGEMENT GROUP, LLC, 2011 OK 24,  the Oklahoma Supreme Court reversed summary judgment on a diving accident claim.  Sholer was rendered quadriplegic after diving into a swimming pool and hitting her head.  Although she admitted that she knew the danger of diving into water of unknown depth, a question of fact exists regarding whether the danger of diving head first into the pool was an open and obvious danger or whether the diver was presented with a deceptively innocent appearance of safety which cloaked the reality of danger making summary adjudication inappropriate.

The court states: 

We have rejected the "open and obvious defense" in a number of cases where the condition or defect was visible but unseen by the plaintiff. A danger need not be totally or partially obscured from vision or withdrawn from sight to be considered hidden. Rather, it may encompass a condition presenting a deceptively innocent appearance of safety, cloaking a reality of danger. It may also arise from circumstances diverting the plaintiff's attention from the danger. Therefore, not every "observable" condition is "open and obvious" as a matter of law. Whether harm from an open and obvious defect may be actionable depends on an objective due care standard, i.e., whether under similar circumstances a prudent person would be able to see the defect and avoid being injured. Nevertheless, it is well established in our jurisprudence that, where conflicting evidence is presented on the issue of the open and obvious nature of a defect, the question must be resolved by the trier of fact. What would normally be considered an open and obvious danger may become a latent defect because of the conditions existing at the time of injury.

Despite Sholer's admissions indicating that she understood the dangers of diving into waters with an unknown depth, she also indicated that the pool's lighting made her believe that it would be safe to do a shallow-water dive. Based on what she observed, Sholer thought the water was as deep as five or six feet. Sholer specifically stated that her perception was linked to the pool's lighting which created shadows. Her rescuer bolstered Sholer's contentions by indicating that he could not determine the depth of the water until he entered the pool. We hold that the openness and obviousness of the dangerous condition and whether Scholer appreciated the risk are questions for the trier of fact making the entrance of summary judgment inappropriate.

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In Mulford v. Neal, the Oklahoma Supreme Court in a per curiam decision decided that a named driver exclusion violated Oklahoma's public policy.  As a result, the court found that there was coverage for an accident where a driver who was specifically excluded under the policy was driving.  Previously, the court had upheld a named driver exclusion where the excluded driver had a bad driving record.  Here, the excluded driver was a child of the insured.  The court believed that the insurance company routinely excluded minors from coverage, but it is not clear whether the record supports that conclusion.  The court also found coverage under the mother's policy which had a similar exclusion.  It is unclear why this would be necessary since the court has previously held that freedom of contract principles apply to any coverage over the minimum amount required by law.  In any event, the use of any exclusions in an automobile liability policy in Oklahoma is now suspect, and it seems likely that insurers will be on the hook for any accidents involving family members.

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Cohen-Esrey, the insured, was a property manager for an apartment complex.  Its employee, Phillips was found to have been pocketing rental money in September, 2006.  Cohen-Esrey notified its insurers of a potential claim on or before October 30, 2006.  But on November 1, 2006, Cohen-Esrey switched its errors and omissions coverage to Twin Cities.  No notice of the potential claim was given to Twin Cities until after June, 2007, when the apartment complex owners demanded that Cohen-Esrey make good on the money its employee, Phillips, stole. When Twin Cities denied the claim, Cohen-Esrey sued.  On summary judgment, the trial court found for Twin Cities because of the failure to satisfy the policy’s condition precedent that at the policy’s inception Cohen-Esrey “was [not] aware of [a] Wrongful Act, fact, circumstance or situation that [it] knew or could reasonably have foreseen might result in a Claim under this Policy.”  The Tenth Circuit affirmed.

Cohen-Esrey’s errors-and-omissions policy with Twin City was a claims made liability policy that covered both loss and defense costs. “Under a claims-made policy, coverage is only triggered when, during the policy period, an insured discovers and notifies the insurer of either claims against the insured or occurrences that might give rise to such claims.”  In contrast, under an occurrence policy, “coverage becomes effective if the negligent or omitted acts occur during the term of the policy.” The Twin City policy covered losses that Cohen-Esrey “shall become legally obligated to pay . . . resulting from Claims first made against the Insured during the Policy Period . . . for a Wrongful Act by the Insured, or an Entity for whom an Insured Entity is legally responsible.  The policy provision central to the dispute states that “as [a] condition[] precedent to coverage hereunder[,] . . . as of the inception date no partner, principal, officer, director, or member of the Insured was aware of any Wrongful Act, fact, circumstance or situation that he or she knew or could  reasonably have foreseen might result in a Claim under this Policy.”  Such prior-knowledge conditions are common in claims-made policies because they “ensure that only risks of unknown loss are potentially incurred,”

Kansas applies what it terms a two-prong, subjective-objective test to determine whether a prior-knowledge condition has been satisfied. The subjective prong is “whether the insured knew of certain facts.”  The objective prong is whether Cohen-Esrey could reasonably have foreseen that the facts known to it might result in a Claim under the Policy. Because the facts show that the insured knew facts which might result in a claim under the policy and failed to tell Twin City about  those facts, summary judgment was proper.
 

Tenth Circuit applying Kansas law

Cohen Esrey v. Twin City

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The Gibsons were told by their insurance company that their homeowner's policy would not be renewed when it expired on March 28; the Gibsons contacted their agent and thought they had insurance because they had taken down an above ground pool.  But the Gibsons did not pay any premium and heard nothing from the insurance company.  When they had a loss about a month after the policy expired, the insurance company denied it, saying there was no insurance in effect at the time of the loss.  The trial court granted summary judgment to the insurance company and the Court of Civil Appeals affirmed. 

The Gibsons were given proper notice of non renewal; and they did not pay any premiums.  The agent's statements could not bind the insurance company to cover a risk it had declined. There was no policy in effect at the time of the loss and summary judgment was proper. 

Gibson v. The Automobile Insurance Company, 2011 OK CIV APP 16

 

 

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Here, the plaintiffs hired the defendant lawyer to file a wrongful death case for them against their deceased's co-employees.  Suit was not filed within the limitations period.  At trial, the judge permitted the jury to determine if the employers insurance would have covered the claims against the co-employees.  The jury found that it would and found for the plaintiffs.  The trial court then granted the defendant's motion for judgment notwithstanding the verdict, finding it was error to let the question of insurance coverage go to the jury.  The appellate court affirmed, finding that insurance policies are to be interpreted as a matter of law. 

Policies for commercial general liability and excess liability umbrella unambiguously did not cover bodily injuries caused by employees.  Employees had no assets of their own, so no recovery would have been possible in a wrongful death action against them.  Therefore, failure to timely file wrongful death action against employees did not damage plaintiffs and defendant is not liable for attorney malpractice.  Policies’ terms are a matter of law, not a jury question, so it was error to submit the case to the jury, and defendants were entitled to judgment notwithstanding the verdict.
Semsa Selimanovic, Alen Selimanovic, Dervis Selimanovic and Jarvis Selimanovic, Appellants, v. Daniel P. Finney, Jr., d/b/a Daniel P. Finney, Jr., Attorney At Law, Respondent.

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Statute allows named driver exclusions.  Named driver exclusion denied coverage for damages caused by drivers in insured’s household but named for exclusion in policy.   Such exclusion “enabl[es] drivers with family members having poor driving records to procure affordable insurance, rather than obtaining coverage from an assigned risk pool at a greater cost or not securing insurance at all.”
Gregory F. Yates vs. Progressive Preferred Insurance Company

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In Panico v. State Farm Fire & Casualty Co., the Panicos (insureds) sued State Farm for failing to defend them in an action brought when the property they sold to a third party was not as the third party expected.  The Panicos sought a defense under their homeowners’ policy.  State Farm refused since the claims did not come within coverage of the policy.  Summary judgment to State  Farm was affirmed.

Colorado uses the four corner rule to determine whether there is a duty to defend.  If any of the allegations of the complaint come within coverage, there is a duty to defend.  State Farm had no duty to defend because the third party did not bring bodily injury claims, and the property damage claims are subject to the owned property exclusion.

There was no bodily injury claim because the underlying complaint, while mentioning some bodily injuries, did not not seek damages, or any other relief, for bodily injuries.  The underlying complaint does not seek relief for bodily injury.  Rather, the complaint clearly seeks recovery for the economic damages incurred in the purchase of the Property: the cost to bring the Property up to its warranted condition, or the difference between what was paid for the Property and what was received.  Because the underlying complaint cannot reasonably be read as an attempt to hold the Panicos liable for bodily injury, State Farm’s duty to defend is not triggered.

All of the property damage claimed, whether based on the Panicos’ alleged misrepresentations concerning the Property, their alleged negligent construction of the Property, or their alleged negligent maintenance of the Property would have taken place while the Panicos owned the property and is thus subject to the owned property exclusion.

The court notes that other courts have held that an owned property exclusion bars coverage of a home purchaser’s negligence claims against the insured (discussing cases).  The court also notes that the policy only covers property damage caused by an occurrence; and that the misrepresentation did not cause the property damage.

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In McMullan v. Enterprise Financial Group, Inc., the question certified to the Oklahoma Supreme Court was whether a bad faith claim could be brought against a vehicle service provider. 

In McMullan, the plaintiff purchased a used car from a dealership, and also purchased a vehicle service contract from the Defendant, Enterprise. The service contract indemnified the buyer for certain repair costs if mechanical breakdowns occurred before 48 months or 50,000 miles, whichever happened first. When a claim was made within 6 months, Defendant refused to pay. McMullan sued Enterprise for breach of contract and bad faith. 

The trial court granted summary judgment on the bad faith claim, since the vehicle service agreement was not an insurance contract. The Oklahoma Supreme Court reversed. The court states:

Although vehicle service providers may not be subject to the exact same requirements and regulations as insurance providers, vehicle service contracts meet the definition of and are designed to function and perform as "insurance." The consumer pays for indemnity and pays to shift the risk of paying for high repair costs to the vehicle service provider in exchange for a pre-paid premium. Because these contracts function like insurance, their providers should be subject to the same covenants of good faith that insurers must meet.

 

 

 

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In United Fire & Casualty v. Boulder Plaza, the 10th Circuit wades into some weighty yet somewhat obscure coverage issues dealing with builders, contractors, subcontractors and the indemnity agreements between them. 

The subcontractor was insured with United Fire (UFC); and the general contractor was an additional insured for imputed liability arising out of the ongoing operations of the subcontractor.  The floors the subcontractor put in were bad, apparently because of excessive moisture in the concrete below them.  Owners sued the builder who general contractor who sued the subcontractor.  And of course there were various cross claims, counterclaims, etc.  Subcontractor was eventually exonerated in these cases. The general contractor wanted UFC to defend it in the claims.  When UFC declined, a declaratory judgment action was filed, and UFC was granted summary judgment which the 10th Circuit affirmed (but on different grounds).

First, Colorado law applies the 4 corner rule to duty to defend claims, looking at the 4 corners of the complaint.  Second, under occurrence policies, coverage is only triggered when a third party suffers actual damage within the policy period. The occurrence is when the damage happens, not when the negligent act occurs.  The underlying complaint alleged the subcontractor's work was complete before the damage occurred, and therefore, the damage did not arise out of "ongoing operations" and there was no coverage. The CGL policy was not a performance bond and did not cover completed operations.

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There have been some recent unpublished cases of interest which discuss landowner liability, including landlord liability to third parties for conditions on the property.  Here is a summary of some of the main points of these unreported decisions.  

 

An absentee landlord in Oklahoma generally cannot be held liable as the keeper or harborer of its tenant’s pets. Hampton v. Hammons, 1987 OK 77, 743 P.2d 1053; Eastin v. Aggarwal, 2009 OK CIV APP 67, 218 P.3d 523; Bishop v. Carroll, 1994 OK CIV APP 37, 872 P.2d 407.

 

A property owner owes a licensee a duty to exercise reasonable care to disclose to him the existence of dangerous defects known to the owner, but unlikely to be discovered by the licensee. To an invitee, an owner owes the additional duty of exercising reasonable care to keep the premises in a reasonably safe condition for the reception of the visitor, but the owner need not remove known but obvious hazards. Pickens v. Tulsa Metropolitan Ministry, 1997 OK 152, 951 P.2d 1079, 1084. In other words, a landowner owes to an invitee, as well as to a licensee, a duty to protect him from conditions which are in the nature of hidden dangers, traps, snares and the like.” “A landowner has no duty to protect a business invitee from open and obvious dangers.” McKinney, 1993 OK 88 at 9, 855 P.2d 602 at 604.

 

A “hidden danger” within the terms of the rule governing the liability of an owner or occupant of the premises “need not be totally or partially obscured from vision or withdrawn from sight; the phrase is used to describe a condition presenting a deceptively innocent appearance of safety `which cloaks a reality of danger.’ Pickens, 1997 OK 152 at 10, 951 P.2d at 1084 (quoting Rogers v. Hennessee, 1979 OK 138, 3, 602 P.2d 1033, 1034). See also Jack Healey Linen Serv. Co. v. Travis, 1967 OK 213, 8, 434 P.2d 924, 927. In Julian v. Secured Investment Advisors, 2003 OK CIV APP 81, 23, 77 P.3d 604, 608, this Court noted:

 

The Oklahoma Supreme Court has stated that “the characteristic of an item as being observable . . . cannot, by itself, require that item to be declared as a matter of law an open and obvious danger.” Zagal v. Truckstops Corp. of America, 1997 OK 75, 9, 948 P.2d 273, 275. Instead, “[a]ll of the circumstances must be examined to determine whether a particular condition is open and obvious to the plaintiff or not.” Id. (citing Brown v. Nicholson, 1997 OK 32, 8, 935 P.2d 319, 322).

 

The general rule is that the right of possession and control over leased premises is a fundamental requirement for ascribing liability to a landlord for injury suffered on those leased premises, but the general rule does not apply where the leased premises are open to the public. See Schlender v. Andy Jansen Co., 1962 OK 156, 0, 380 P.2d 523 (Syllabus 3); Price v. MacThwaite Oil & Gas Co., 1936 OK 562, 0, 61 P.2d 177 (Syllabus 2).

 

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Regional Air v. Canal Insurance involved a property damage claim between an insurer (Canal) and an insured (Regional).  It went to appraisal and the Regional was awarded about $44,000.  But, Regional felt it was owed more and went to federal court.  Ultimately, the federal court found the appraisal ok, but a jury awarded Regional an additional $12,000 in storage costs.  The question became who was the prevailing party since the prevailing party gets attorneys fees. 

The trial court erred in entering judgment for only $12,000; the judgment should have been for the full amount awarded -- the $44,000 plus the $12,000.  This clearly makes the insured the prevailing party because it was more than the written settlement amount offered by Canal. 

The trial court erred in finding that Regional was not entitled to attorneys fees.  The notice of the loss was sufficient to satisfy the proof of loss requirement.  In addition, the statute, 36 Okla. Stat. § 3629, mandates attorneys fees to the prevailing party.  Thus, the case was remanded to the trial court to determine attorneys fees. 

Regional was not entitled to interest on the judgment, however.  Regional was only entitled to interest on the verdict -- the amount awarded by the jury, not the amount awarded under the appraisal process because that was what the statute provides. 

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An insured had a commercial vehicle policy with $1M limits.  The insured selected UM limits of $100,000.  Because there was no separate rejection of UM limits equal to the liability limits as required under New Mexico law, the court found the "rejection" ineffective.  This resulted in the UM limits being equal to the liability limits as a matter of law.

Progressive v. Weed Warrior

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In Union Insurance v. Mendoza, Mendoza was injured by breathing in ammonia fumes.  Ammonia fertilizer was being sprayed onto farm land next to where Mendoza was working on the highway, injuring her.  Summary judgment to the insurer was affirmed.  The claim was excluded under the pollution exclusion clause, which was not ambiguous.  Recent Kansas case law confirmed that the pollution exclusion was not ambiguous and therefore enforceable.  As a result, there was no coverage for Mendoza's claims and summary judgment was proper.  

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Doug Hambelton hit a deer with his tractor-trailer truck and his transmission failed about two weeks later. Canal, his insurer, refused to pay for the transmission repair, contending it was a mechanical failure. Hambelton sued Canal for breach of contract and bad faith. A jury found and awarded in favor of Hambelton on both claims, awarding actual damages of $5,366.98, plus $117,555.00 for bad faith, punitive damages of $75,000.00, and $72,982.50 in attorneys’ fees. The Tenth Circuit affirmed. 

First it was determined that the trial court correctly applied Oklahoma law.  Although the significant contacts were fairly evenly split, the trial court was correct in not applying Missouri law because while Missouri’s prohibition against bad faith and extracontractual damages protects Missouri insurers, Canal was not a Missouri insurance company.  Because the contractual relationship, which gave rise to the duty of good faith Oklahoma law seeks to protect, came into existence in Oklahoma, the district court correctly held that applying Oklahoma law protects Oklahoma’s policy interest without violating the policy of Missouri or South Carolina.

Canal’s claim that there was insufficient evidence to support the verdict was waived because Canal failed to file a Rule 50(b) motion after the verdict.  This failure forecloses a challenge to the sufficiency of the evidence. See, Unitherm Food Sys., Inc. v. Swift-Eckrich, Inc., 546 U.S. 394, 404 (2006).  Canal’s claims that the bad-faith and punitive damage awards were excessive and  unconstitutional were also waived. Canal neither moved for a new trial after the jury verdict nor filed a post-trial motion to set aside the verdict. It cannot do so for the first time on appeal. See Hardeman v. City of Albuquerque, 377 F.3d 1106, 1122 (10th Cir. 2004).  In a separate order, the award of attorneys fees was also affirmed.

Hambelton v. Canal Insurance

Attorneys fees opinion

Hambelton v. Canal Insurance 2

 

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Decedent was killed on the job in a traffic accident.  His estate received workers comp death benefits.  His estate also sued the parties involved in the accident for wrongful death.  The workers comp insurer sought to intervene in the tort action, claiming a right to be reimbursed for the payments it made under the workers comp law.  

 

HELD:  

The Oklahoma State Legislature has not included the insurance company the rights to subrogation for monies paid to an employee's beneficiaries and thus, the workers comp  insurance company has no standing to intervene in the case.  The statutory language is neither ambiguous nor uncertain. The workers comp insurer  may not stand in the shoes of the Employer and since the Employer did not pay any benefits to the employee's beneficiaries, the Employer has no right to seek reimbursement for benefits paid by the workers comp insurer.

McBride v. Grand Island Express, 2010 OK 93

 

 

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In Dodson v. National Union Fire, Dodson, which salvaged aircraft, had an insurance policy with National Union which only provided for Products Completed Operations Coverage (PCO). The PCO did not have its own coverage section. Rather, PCO coverage was provided in the definition section of the policy, Section V.  This was troublesome to the court since the care, custody and control exclusion relied upon by National Union to decline coverage was in Section I, Coverage A.  Since there was nothing which clearly stated that the exclusions set forth in Coverage A would apply to the PCO coverage, however, the policy was ambiguous and must be construed in favor of coverage.

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The city of Kinloch, Missouri, had an insurance policy with Scottsdale.  The policy had 4 parts:  four separate “coverage forms” that apply to various types of claims, including “Employment Practices Liability Coverage Form Claims Made Coverage,” “General Liability Coverage Form Occurrence Coverage,” “Law Enforcement Liability Coverage Form Occurrence Coverage,” and “Public Officials Liability Coverage Form Claims Made Coverage.” Each “Coverage Form” has its own definitions, exclusions and declarations page. There was also a general exclusion page which applied to all the coverages.

In the General Liability Coverage form, there was a jail exclusion, but that exclusion did not appear in the general exclusions applicable to all coverages.  Thus, the appellate court found there was a fact issue which precluded summary judgment.  Summary judgment would only be appropriate if there was no insurance (and therefore, no sovereign immunity).

Lashober v. City of Kinloch

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The Missouri Western Court of Appeals for the Western District was looking at an auto policy to determine if the liability coverage "stacked."  In finding that the policy was ambiguous, the Court indicates that exclusions make a policy ambiguous.

In Durbin v. Detrick, Durbin was injured by Deitrick, [the insured or covered individual], while Deitrick was operating a vehicle he did not own. Because Deitrick’s four personal automotive liability policies are ambiguous as to whether they may be stacked in this specific circumstance, we must construe the policy language against American Family and in favor of permitting stacking of Deitrick’s four liability policies. On cross motions for summary judgment, the trial court found for the insured, and this was affirmed by the Court of Appeals.

The Court notes: “Where an insurance policy promises the insured something at one point but then takes it away at another, there is an ambiguity.” Thus, “if policy language is ambiguous as to whether stacking is permitted, we construe the language of the policy against the insurer and in favor of stacking.”

The Court concluded “that while the Limits of Liability provision and Section 3 of the General Provisions in the American Family policies appear to generally prohibit the stacking of multiple liability policies, the language of the second sentence of the Other Insurance provision, analogous to that of Ritchie and Niswonger, could reasonably be understood by a lay person to indicate an exception to this general prohibition in the specific case where liability coverage is afforded for injuries incurred through use of a vehicle not owned by a covered individual.”

 

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Choice of Law / Service of Suit Endorsement

 

Cook was used a policy by Admiral. Cook told Admiral of a claim in Oklahoma. Admiral said the policy did not count the claim and that Texas laws applied because the policy was delivered to Cook in Texas.

 

The court disagreed finding that the service of suit endorsement allowed Oklahoma law to apply. In the Service of suit endorsement, Admiral agreed it could be sued in  any court of competent jurisdiction and that all matters would he determined in accordance of the law and practices of such court.

 

Since the suit was filed in Oklahoma, the court found that Oklahoma law applied.  Further, fact questions precluded summary judgment on whether the pollution exclusion applied and also whether the insured acted in bad faith.

 

Fossil Creek v. Cook’s, 2010 Ok Civ App 123

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Oldenkamp vs. United American Insurance involved cross motions for summary judgment. The trial court granted summary judgment to the plaintiffs on their claim for coverage and to the defendant on plaintiffs’ bad faith claim.

The insurance company refused to pay for surgery for the removal of a congenital cyst from plaintiffs’ son’s eyelid, claiming it was a pre-existing condition. An Oklahoma insurance regulation precludes pre-existing condition exclusions for congenital anomalies of a covered dependent child. United claimed the regulation did not apply to it because the policy was not a “health insurance policy”, but was a “limited benefit policy”. The Tenth Circuit reviewed the statutes and agreed with United. A statute specific to limited benefit policies allowed for a waiting period for coverage of pre-existing conditions. Plaintiffs also believed the policy was not a limited benefits policy. The trial court gets to decide if that issue may be raised on remand.

As to the bad faith claim, the summary judgment dismissing it was affirmed. United raised a legal argument on which there was no controlling decision by the Oklahoma courts which would have shown that the argument was unreasonable. “[B]ecause we have held that United did not breach the insurance contract by denying coverage under these circumstances, it follows that we necessarily agree that United’s denial of coverage was reasonably based.” The fact that United was unaware of the regulation relied on by Plaintiffs was not bad faith, and United didn’t have to get a legal opinion before denying the claim. The court noted that one Oklahoma case allowed a bad faith claim to go forward when the contract was not breached, but declined to apply it in this case. Even if United falsely stated that a doctor reviewed the claim, that did not cause any damages, and therefore could not form the basis of a bad faith claim. The fact that United gave Plaintiffs the “runaround” on their claim and did not produce everything that Plaintiffs thought it should was also not grounds for their bad faith claim.

The spoliation claim was not supported and was properly denied.

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In Flores v. Monumental Life, the Tenth Circuit reversed a summary judgment entered in favor of the insurer on the breach of contract claim, but affirmed the dismissal of the bad faith and negligence per se claim.

Mrs. Flores had an accidental death policy with Monumental, which would pay off if death was caused by an accidental bodily injury, independent of all other causes. The policy said that “[t]he Injury must not be caused by or contributed to by Sickness.” Mrs. Flores was on blood pressure medicine when she fell and broke her arm. She was in the hospital for 10 days and was transferred to a rehab center when she died from toxic levels of her blood pressure medicine. The medical examiner could not determine if the high levels of the medicine was caused by Mrs. Flores liver problems or by an overdose of the medicine.

Monumental denied the claim for benefits because there was no evidence Mrs. Flores’s death had resulted from an accidental bodily injury independent of all other causes and because her death fell within the specific exclusion for sickness or its medical or surgical treatment. The district court found that Mrs. Flores high blood pressure was a contributing cause to the death and found there was no coverage. While the fall was not an injury which caused death, the Tenth Circuit found that there was a fact question as to whether an overdose of blood pressure medicine caused her death. If so, that would constitute an injury under the policy.

Just because the policy requires the injury causing death to be independent of all other causes, that doesn’t mean it must have occurred in a vacuum. Rather, the accidental injury itself must be the sole proximate cause of the death. Courts have long rejected attempts to preclude recovery on the basis that the accident would not have happened but for the insured’s illness. The court distinguished cases where either the disease was aggravated by the accident or the accident aggravated the disease. Where a pre-existing disease only contributed to death insofar as it placed the insured in a position where an unanticipated and unintended occurrence might happen, the Oklahoma Supreme Court has found coverage under the terms of similar accidental insurance policies.

Since the medical examiner said he could not tell if the high levels of the medicine were caused by Mrs. Flores bad liver or by an overdose, it was up to the jury to decide. The sickness exclusion did not preclude coverage. The definition of “sickness” is “Sickness means an illness or disease which results in a covered Loss.” Because of the use of covered in the definition of sickness, the court found a reasonable person could believe that sickness could result in a covered loss, despite the sickness exclusion. In other words, the policy was ambiguous.

The court affirmed summary judgment on the bad faith claims, finding no basis for bad faith from the defendant’s general claims handling, failure to have written guidelines, or failure to train its claims handlers in Oklahoma law. There was a legitimate dispute as to coverage.

Plaintiff argues that he stated a valid negligence per se claim based on Defendant’s violation of two Oklahoma statutes: an administrative code which requires that warning language be put at the beginning of accident-only policies; and a statute which requires an insurer to adopt and implement reasonable standards for claims investigations. There was no evidence that violation of the first caused damages and no evidence of violation of the second.

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Peter Sindhuphak in the Insurance Litigation and Regulatory Law Blog discusses a recent California Supreme Court case. The insured settled his earthquake claim against his insurer, State Farm, and released all his claims against the insurer. Then, the insured apparently became dissatisfied with the settlement and sued State Farm for fraud, claiming, inter alia, that State Farm misrepresented the limits available under the policy. But in order to sue for fraud, the insured had to rescind the settlement and return the money to State Farm. 

 

Oklahoma law also requires by statute return of consideration in the rescission context. 

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Diane Polscer discusses a recent Oregon case on exhaustion requirements on the duty to defend in umbrella policies.  The court concluded the insurer’s duty to defend under an umbrella policy was triggered even where all other underlying coverage for all possible periods had not been exhausted.

 

Generally, umbrella policies are only required to kick in once the primary policy (or policies) have been used up.  Here, the court held that only primary policies covering the same year as the umbrella policy needed to be exhausted before the umbrella policy was on the hook.

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Chip Merlin at the Property Insurance Coverage Law Blog states: Many will read Buckley Towers Condo., Inc. v. QBE Insurance Corp., No. 09-13247, 2010 WL 3551609 (11th Cir. Sept. 14, 2010), to stand for the proposition that an insurer does not have to pay anything towards replacement costs under a replacement cost policy, when replacement is elected but repairs have not been made.

 

See what the fuss is about:  click here

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Brownings v. American Family involved a claim for the breach of the duty to defend and indemnify. The Tenth Circuit describes the underlying facts:

Michael Browning’s response to a property dispute was, even most charitably regarded, extreme. He threatened his neighbors, David and Brenda Reichles, with violence and punctuated his threats with gunfire. Reichles sued both Michael and his wife. Brownings asked American Family Mutual Insurance Company (American Family) to pay for their defense of Reichles’ claims. When it refused, Brownings sued in Colorado state court claiming a breach of their homeowner’s insurance contract. American Family removed the case to federal court. Brownings unsuccessfully objected to the removal. Ultimately the district court entered summary judgment in favor of American Family. Brownings appeal from both the merits and the procedural decisions. We affirm.

The case involved a fence dispute – when new owners had the property surveyed, they (the Reichles) tried to move the fence, and Brownings tried to keep them from moving it. After one incident where Brownings swore at the Reichles and fired his assault rifle 15-30 times, the Reichles sued Brownings for negligent and intentional emotional distress (among other things). Brownings requested a defense of the Reichles claims from American Family, which declined. Eventually, there was a judgment against Brownings on the emotional distress claims. When American Family did not pay, Brownings sued and the case was removed to federal court.

While the policy had the expected coverages, it also had the expected exclusions, including an intentional acts exclusion and a criminal acts exclusion. Because Brownings pleaded guilty to threatening the Reichles with a gun, the court found both exclusions applied to preclude coverage, stating: “The Policy does not require American Family to defend intentional acts or those resulting in a criminal conviction. Such limiting policy provisions seek “to prevent extending to the insured a license to commit harmful, wanton or malicious acts.”” Trespass claims were intentional acts under Colorado law were not covered – even if it did result in property damage.

As to the claims for emotional distress, the factual allegations were the same for both the negligent and the intentional infliction of emotional distress claims, including but not limited to:Brownings’ verbal and physical threats (including the dramatic placement of a bullet riddled human silhouette on the fence), rapid-fire discharge of the assault rifle in the immediate vicinity of the Reichles, and threats to shoot them. The inseparability of the factual allegations, coupled with the admitted intentional acts, necessarily invokes the intentional acts exclusion of the Policy. And besides, the since Brownings pleaded guilty to charges of threatening the Reichles with a gun, the criminal acts exclusion applied as well.

One other issue raised was whether the removal was proper since American Family did not file the notice of removal in state court for 18 days. While the rule requires the notice be filed promptly in state court, there was no action taken by the state court during the 18 day period and no one was harmed by the oversight. As a result, the motion to remand was properly denied.

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In Tarrant v. Guthrie First Capital Bank, plaintiff's judgment against the bank was reversed because the court instructed the jury on prima facie tort, which has not been recognized in Oklahoma.  In fact, the Oklahoma Supreme Court has indicated in Patel v. OMH Medical Center, Inc., 1999 OK 33, 987 P.2d 1185,:

The expression "prima facie tort" does not appear ever to have been recognized in Oklahoma. For the view that the concept of prima facie tort has been applied in Oklahoma jurisprudence under limited circumstances, see Merrick v. Northern Natural Gas Co., 911 F.2d 426 (10th Cir. 1990).

Until the Oklahoma Supreme Court recognizes such a claim, any verdict based on a prima facie tort instruction is reversible error.

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The Tenth Circuit clarified the appropriate standard for discovery related to a dual role conflict of interest in ERISA cases in Murphy v. Deloitte & Touche Group based on the recent Supreme Court decision of  Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105, 128 S.Ct. 2343 (2008). While the holding did not change Tenth Circuit law, the court felt it was appropriate to clarify its prior holdings.  

In an ERISA case where the plan “‘gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan,’” the  administrator’s decision is reviewed for an abuse of discretion – and in this context, abuse of discretion and arbitrary and capricious are the same standard.  

In reviewing a plan administrator’s decision under the arbitrary and capricious standard, the federal courts are limited to the administrative record.  As a result, discovery is generally inappropriate in these cases.  The court found that while case law prohibits courts from considering materials outside the administrative record where the extra-record materials sought to be introduced relate to a claimant’s eligibility for benefits, this general restriction does not conclusively prohibit a district court from considering extra-record materials related to an administrator’s dual role conflict of interest. Therefore, discovery related to the scope and impact of a dual role conflict of interest may, at times, be appropriate.  The appropriateness of such discovery is governed by Fed.R.Civ.P.  Rule 26(b).  A district court has substantial discretion in handling discovery requests under Rule 26(b).

 

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Insurer not entitled to recoup costs of defense where there was no duty to defend

In Employers Mutual Casualty v. Bartile Roofs, the Tenth Circuit ruled that there was no right to recoup defense costs from the insured where the insurer defended under a reservation of rights. The court first determined that jurisdiction and venue was proper, and that Wyoming law would apply unless it conflicted with Utah law. The case involved a dispute between a general contractor and a subcontractor regarding a hotel roof. The district court concluded that EMC did not have a duty to defend its insured, Bartile, against the allegations. As a result, EMC contended that it was entitled to recoup those defense costs.

Wyoming law, however, disfavors an insurer’s attempts to defend insureds while retaining the right to deny coverage and recoup defense costs at a later date. This is seen as a unilateral attempt to modify and change the policy coverage. Rather, an insurer who does not believe that coverage exists should deny a defense at the beginning, instead of defending and then seeking to recoup defense costs from its insured. The CGL policies contain no provisions allowing such recoupment, and the reservation of rights letter cannot unilaterally change the policy requirements.
 

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In State Farm v. Fisher, Fisher was shot and killed by Brown.  Fisher had stopped his car and was in the highway signaling for help after a passenger was shot by Brown as Brown rammed the Fisher car and then fired a shotgun at the vehicle after pulling even with it.  Brown stopped his truck, got out and shot Fisher, who was signaling for help in the road.  Fisher's family sought UM benefits from its insurer, State Farm, for his death.  Summary judgment to State Farm was affirmed. 

 

Citing State Farm Mut. Auto. Ins. Co. v. Kastner, 77 P.3d 1256 (Colo. 2003), the court noted that to be entitled to UM benefits under Colorado law, a claimant must demonstrate 1) that an uninsured motor vehicle was being “used” at the time he or she sustained an injury; and 2) that the use is causally related to the injury. The “use” must be contemporaneous with the injury. Because both Brown and Fisher were out of their vehicles when Brown shot Fisher, the motor vehicle was not being used at the time of the injury. Apparently, a different result would obtain as to the passenger who was shot in the Fisher vehicle while Brown was in his truck. Because it was debatable whether there was any UM coverage, State Farm was entitled to summary judgment on Fisher’s bad faith claim as well.

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In Anchondo, the Tenth Circuit discusses the ins and outs of attorneys fees applications and objections.  The plaintiff was successful in getting a class action settlement for violations of the Fair Debt Collection Practices Act and then was awarded fees on top of that.  The defendant thought the fee award was too high -- Plaintiffs counsel was apparently awarded all their hours at a set hourly rate.  But the trial court is in the best position to determine whether the tasks billed for were necessary, and the trial court need not address all factors in making a fee award.  Further, while certain travel hours could have been discounted, the defendant did not ask that the hours be discounted -- so the court wouldn't do it now on appeal.  And, the court remanded the case to the trial court to award appellate attorneys fees.

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In Newmont USA vs. Insurance Co. of North America, the Tenth Circuit affirmed an order requiring arbitration of a reinsurance disagreement. “The arbitration provision in the Reinsurance Agreements encompasses the parties’ dispute concerning the BHP Litigation and neither the Reinsurance Agreements’ expiration nor the Settlement Agreements extinguish arbitrability. Accordingly, the district court did not err in compelling arbitration.” The trial court erred, however, in not applying the postjudgment interest rate in the reinsurance agreement, rather than the federal postjudgment interest rate.

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In Valley Forge v. Health Care Management, the insureds were sued for medicare fraud and asked their insurers for a defense. The insurers agreed, but told the insureds that it was under a reservation of rights and that if there was no duty to defend, the insurers would ask the court to make the insureds pay the insurers for the defense costs. The court previously held there was no duty to defend (see Zurich Am. Ins. Co. v. O’Hara Reg’l Ctr. for Rehab., 529 F.3d 916 (10^th Cir. 2008)) and sent it down to determine the amount of fees owed. The trial court gave the insurers all their fees but no interest and both parties appealed. The Tenth Circuit affirmed in a wonderfully written opinion by Judge Gorsuch.

The insureds claimed that the insurers cannot recover the defense costs they expended for the simple reason that no provision in the parties’ insurance contracts contemplates that possibility. The insurers argued, however, that Colorado law requires an insurer to pay defense costs, but at the same time provides the insurer with this assurance: if it pays defense costs pursuant to a reservation of rights letter, the insurer may later seek and obtain recoupment of its defense costs if the facts at trial prove the claim against the insured wasn’t covered by the policy. The court notes it must follow Colorado law on the issue and sides with the insurers – and cites Sherlock Holmes! (See below) The court also finds that the insurers need not wait until the underlying action is completed before seeking a declaration of no coverage. 

Having decided that the insurers were entitled to recover the defense costs, the next question is are they entitled to all of their defense costs or might the amount be limited in some way? The court says it does not matter since the case was decided on summary judgment and no factual issues are presented. The insured’s expert affidavit was not quite sufficient under Rule 56(f) to get them more discovery. As to prejudgment interest, the statute talks about money wrongfully withheld, not wrongfully paid, and there are no cases awarding insurers interest on recoupment.

 

 

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In two decisions today the Oklahoma Supreme Court decided cases which involve police pursuits. In one, the court said the police could be liable for damages caused when the pursued vehicle causes an accident with an innocent citizen, and in the other the court held that the tort claims act did not provide immunity under the “recognized standards” exception to liability. The dissent in the first case indicates that such a change in the law should be done by the legislature, not the courts. See, State ex rel. Oklahoma Dept. of Public Safety v. Gurich, 2010 OK 56 (law enforcement could be liable for damages caused by fleeing vehicle; reckless disregard standard used) ; and Ray v. Broken Arrow Police Dept., 2010 OK 57 (the exemption from liability for "[a]cts or omissions done in conformance with then current recognized standards" did not apply, reversing summary judgment to the police department.

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Vanderwerf v. SmithKline Beecham Corp. involved a claim by surviving family members that the drug Paxil caused or contributed to a suicide.  Over the course of the proceedings, several partial judgments were granted, with the end result being that all claims were eventually dismissed.  A Rule 59(e) motion to reconsider was timely filed by plaintiffs, but no decision was made on the motion for over 7 months.  So Plaintiffs withdrew their motion to reconsider and appealed the summary judgment.  But the court said the appeal was untimely, because when the motion to reconsider was withdrawn, the date of the order appealed from was more than 30 days before the notice of appeal was filed. 

There is a strong dissent which notes the unfairness of this "catch 22".  The dissent notes that the tolling starts with the filing of the motion, and only ends when the court enters an order on the motion. 

While not an insurance case, this case notes a trap for the unwary.   The court notes the plaintiffs had other options: 

The Vanderwerfs had other options, which may have allowed this court to take jurisdiction. First, the Vanderwerfs could have filed a motion requesting a ruling. Second, they could have continued to wait for a ruling, or sought a writ of mandamus in this court, which, if granted would compel the district court to rule on the Rule 59 motion. Third, they might have filed a motion for an extension of time under Federal Rule of Appellate Procedure 4(a)(5)(A)(ii), provided that they might show good cause or excusable neglect underlying the untimely notice. Fourth, they might have filed a premature notice of appeal that would ripen into a timely notice of appeal when the district court finally ruled. See Fields v. Okla. State Penitentiary, 511 F.3d 1109, 1111 (10th Cir.2007). Finally, it seems the best option may have been for the Vanderwerfs to have moved to withdraw the motion, in hopes that the district court would rule on that motion thereby triggering a 30-day period for the filing of a timely appeal.

The court dismissed the appeal for failure to timely file it.

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In Miller vs. Monumental Life Ins. Co. the trial court ordered (after remand from a prior appeal) that the ERISA based case be sent back to the plan administrator so the record could be completed.  The plaintiff, Miller, appealed from this order, claiming it was improper on various grounds.  The Tenth Circuit ruled that it was an interlocutory order over which it had no jurisdiction to determine. 

Aside from a few well-settled exceptions, federal appellate courts have jurisdiction solely over appeals from final decisions of the district courts of the United States.  A final decision is one that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.  The order remanding the case to the plan administrator was not a final decision.

The court considers whether ERISA remand orders are reviewable on a case by case basis, and considers “practical finality.”  Neither the cost or delay associated with additional review of the “sole cause” defense, nor Miller’s unfounded fear about loss of his argument that Monumental was not entitled to raise this defense, justifies treatment of the remand order as a final order for purposes of review. Miller’s contentions are not “effectively unreviewable.” The appeal was dismissed for lack of jurisdiction.

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In Salazar Roofing & Construction, Inc. v. City of Oklahoma City, 2010 OK 34, a city dump truck driver backed up into Salazar’s dump truck, causing damages. The City admitted that the city driver was in the course and scope of his employment and admitted liability, but claimed it was only liable for Salazar’s insurance deductible. The City claimed that an exclusion from liability for “Any claim or action based on the theory of indemnification or subrogation;” applied and precluded any liability in excess of the insurance deductible, since the loss had been paid by Salazar’s insurer. The Supreme Court disagreed, noting that “the Claim filed under the Governmental Torts Claim Act by Salazar was filed in Salazar's name, directly against the tortfeasor, for the benefit of the owner of the damaged vehicle. The action was not filed by the insurance carrier to recoup the amount paid to insured. Therefore it appears that this matter is a first-party claim, not a claim for subrogation. No subrogation is at issue in the instant matter. There is no party secondarily liable for the damage caused by the City's negligence present in the case at bar.”

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In Morris v. America First Insurance Company, 2010 OK 35, the Oklahoma Supreme Court in answering a question certified from the United States District Court for the Western District of Oklahoma, found that a UM exclusion violated Oklahoma public policy.  Specifically, the court found that an exclusion which precludes UM coverage for bodily injury sustained by a resident family member, who is otherwise insured by such policy, violates public policy and is void insofar as it requires separate UM coverage on a specific vehicle even though the owner is otherwise covered by the UM provisions of a liability policy he purchased on another vehicle. Morris was injured by an underinsured motorist while in his semi-truck.  Morris did not have UM on the truck, but did have UM on his personal auto.  In addition, Morris qualified as an insured on his mother’s policy because he was residing with his mother when the accident happened.  The court said that the mother’s insurer could not exclude Morris from coverage simply because the policy covering the truck involved in the accident did not have UM coverage where Morris had other UM coverage available to him. 

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Alea London Ltd. v. Canal Club, Inc., 2010 OK CIV APP 33 is an odd case. It starts out as a liquor liability exclusion case and ends up being an assumption of liability case. Canal Club was the insured, and Alea the insurer. Canal Club was sued when an intoxicated patron (Valle) left its premises and was involved in a car accident which hurt two people. It was claimed that Canal served Valle when he was obviously intoxicated, a dram shop claim. Alea refused to defend the case because of its liquor liability exclusion. Another insurer (with lower limits) defended Canal, and Alea filed a declaratory judgment action, seeking a declaration that it had no coverage under its policy. The underlying case was then amended to add a second claim that Valle became intoxicated before entering Canal Club’s premises, its employees escorted him from those premises while he was still in an intoxicated state, and those employees negligently breached a duty of reasonable care when they “failed to make sure” Valle did not leave the area outside its premises, get into his car, and drive while he was intoxicated. Alea was not notified of the change in the allegations.  

In the underlying action, the first claim was dismissed, and Canal admitted liability on the second claim. A non-jury trial settled the amount of the damages. Then, the action switched back over to the declaratory judgment case. On cross motions for summary judgment, the trial court found that Alea was liable for the claims. The Court of Civil Appeals (COCA) reversed, finding no coverage for the claims. 

First, it found that Canal Club had an obligation to notify Alea of “critical post-denial developments” and the failure to do so “may modify, excuse or provide a defense to the performance of an insurer’s contractual duties.” Second, the COCA found that there was no duty under Oklahoma law which required Canal Club to prevent a drunk patron from leaving its premises and driving his own vehicle. As a result, the admission of liability in the underlying case triggered an assumption of liability exclusion. That exclusion precluded coverage” for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement;” but the exclusion does not apply if the insured would be liable even in the absence of any agreement.  

The court finds there would be no duty on the part of Canal Club to restrain Valle if he were not drunk, and no duty to restrain him simply because he was drunk – where Canal Club had not served Valle any drinks.  As a result, “Coverage under the CGL policy was not triggered by the basis for judgment in the underlying lawsuit.” In other words, the only reason Canal Club had any liability is because it agreed or confessed it. This brought the claim within the assumption of liability exclusion and the policy did not provide coverage. The court reversed and remanded, ordering that judgment be entered for the insurer.

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In Traders Insurance v. Johnson, the question was whether the daughter, not a named insured, had authority to reject UM (uninsured motorist) coverage on a policy issued to her parents. The answer is “maybe.” Oklahoma’s UM statute limits the right to reject UM to named insureds and applicants. (36 O.S. § 3636 (G)) The daughter was neither, so the court found summary judgment to the insurer was properly denied. Fact issues as to whether the daughter acted as an apparent agent of her parents in signing the UM rejection precluded summary judgment in favor of the insureds. So, the whole case was remanded.

This result surprised me as I would have guessed that the statutory enumeration of who may reject UM coverage would have been considered exclusive, such that agents of the insureds would not be able to reject UM for the insureds.

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A homeowner’s policy did not cover a claim for the wrongful death of a high school girl who was mauled by a tiger. In Safeco v. Hilderbrand, the insureds ran an animal sanctuary for exotic animals no longer wanted by zoos and circuses. While it was a non profit organization, the insureds also created a for profit company, Animal Entertainment Productions (AEP), to generate income to maintain the sanctuary. The insureds kept their jobs as social workers, but got a small business loan for AEP, and AEP earned some money, but was always operated at a loss. The insureds did not have a business policy, but had a homeowners policy with Safeco. When demand was made on the claim, Safeco filed a declaratory judgment action, claiming it had no duty to defend or indemnify its insureds for the claim because of a business pursuits exclusion in the policy. The policy excluded “bodily injury or property damage: . . . arising out of business pursuits of any insured . . . , ” but the exclusion did not apply to: “Activities which are ordinarily incident to nonbusiness pursuits.” After a bench trial on the merits, the trial court found the policy did not cover the claim and the Tenth Circuit affirmed, finding the business pursuits exclusion applied and the exception to the exclusion did not apply.

Under Kansas law, “To constitute a business pursuit, there must be two elements: first, continuity, and secondly, the profit motive.” Both elements were found. The activities of the insureds in operating AEP showed the engagement in a business over time. To show a profit motive, the business must be capable of being run for profit; the evidence showed the insureds operated AEP with a profit motive, even though no profit materialized. It is the profit motive and not any actual profit which the court considers. The court states:

In sum, we conclude the [insureds] operated AEP with both continuity and a profit motive when the incident occurred. At the time of the accident, Doug’s “trade, profession or occupation” was animal trainer for AEP. Therefore, AEP qualifies as a business pursuit and any incidents arising from its operation, including the tiger attack, are not covered by the [insureds’] homeowners policy.

The Tenth Circuit then found the non business pursuits exception did not apply. The accident arose out of the insured’s exotic animal shelter and entertainment business. The victim was a volunteer at the animal shelter and the insured used his business property and his expertise as an animal trainer for the photo shoot. The fact that there was no payment for the photo shoot was not determinative.

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In McBride v. NES Rentals, an employee was killed on the job in a multi vehicle accident.  The employee's family received workers comp death benefits, then sued the various tortfeasors.  The employer and the workers comp carrier sought to intervene.  The trial court denied the intervention, but the COCA (Court of Civil Appeals) found that the employer should have been allowed to intervene and press its claim regarding death benefits and both the employer and the carrier should have been allowed to intervene and recoup expenses of the last illness and the funeral.  

The case is rather difficult because of recent changes in the workers comp laws in Oklahoma.  It used to be that an employer had no right to subrogate against comp death benefits.  But the statute was changed, and allowed the employer to recover from a third party the amount of death benefit payments made to a claimant's survivors under the Workers Comp Act.

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In Allstate v. Moser, Moser was injured in a one car accident. Moser was a passenger, and her brother was driving. Allstate’s policy was issued in Colorado to Moser’s parents . It had $100,000 limits and contained a family exclusion. There was an accident in Kansas. Kansas had a compulsory insurance law which required that all policies provide at least $25,000 per person, up to $50,000 per accident. Allstate’s policy also provided that when the vehicle was operated in other states, the policy would comply with the liability insurance requirements in those states. Moser also had an umbrella policy which provided coverage in excess of $100,000 when the primary policy limits were exhausted. When Moser sued, Allstate filed a declaratory judgment action. In that action, it was determined that Allstate’s liability under the policy was limited to the minimum requirements under Kansas law – $25,000.

On appeal, the issue was whether Allstate’s liability was limited to $25,000 or whether the entire policy limit was available to Moser. The Tenth Circuit affirmed the trial court’s ruling that limited Allstate’s liability to $25,000. Because $25,000 was less than the policy limits, the underlying policy was not exhausted, and therefore the umbrella policy did not apply.

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The Tenth Circuit has determined that ERISA’s exception for governmental plans applies to plans sponsored by Indian tribes, so long as those plans meet the requirements of the definition. This means that ERISA preemption does not apply to insurance plans involving Indian tribes. Dobbs v. Anthem Blue Cross Blue Shield was the second time the case came before the Tenth Circuit. The first time, the Tenth Circuit remanded the case, asking the district court to make factual findings, and stating that “i]f the Dobbses’ benefit plan meets the new definition of governmental plan under § 1002(32), ERISA will not preempt their state-law causes of action against Anthem.” On remand, the district court found that the plan would be preempted under the new statutory language regarding governmental plans, but that the amendment was not retroactive.

The Tenth Circuit explained “law of the case” principles and stated that it had already determined by implication that the amendment would retroactively apply to the Dobbses’ claims. It questioned whether it could affirm a district court decision that rejects a prior panel decision as clearly erroneous, citing In re Smith, 10 F.3d at 724 (noting that the Tenth Circuit is bound by the precedent of prior panels absent en banc reconsideration or a superseding contrary decision by the Supreme Court). T he court discussed the general principles regarding when statutory amendments are applied prospectively or retrospectively.

The court reversed and remanded the case, once more asking the district court to make the factual determination it had previously asked it to make. 

Rather than looking to Mr. Dobbs’ duties, the court must determine whether all plan participants are employees ‘substantially all of whose services . . . are in the performance of essential governmental functions but not in the performance of commercial activities (whether or not an essential government function).’

Finally, the court held that the Dobbses could not claim fraud as to benefits. Those claims relate to the contracted for benefits, thus, if the plan was subject to ERISA, those claims would be preempted.

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Federal Judge Vacates Reinsurance Award for Evident Partiality

A federal judge has vacated a reinsurance arbitration award on grounds of evident partiality, ruling that the failure of two arbitrators to disclose their involvement in a second arbitration involving affiliates of the parties in the first arbitration and a common witness constituted a material conflict of interest.

 

The rest of the story is here

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In FFE Transportation Services, Inc. v. Pilot Travel Centers, L.L.C., the plaintiff, Medlin, had slipped and fallen while fueling at the defendant's station.  Plaintiff received workers compensation benefits from FFE, and then sued the defendant.  FFE also sued defendant for the benefits it paid to Medlin.  The verdict form had a place for the jury to fill in for the amount to award to plaintiff and to FFE.  The jury found against the defendant and filled in separate amounts for each of the plaintiffs.  This was reversible error.

The verdict form did not permit damages to be awarded to Medlin without awarding damages to FFE, nor did it permit a jury to award damages of less than a stipulated amount to FFE. The court said, "Moreover, it is not clear from this form whether FFE's stipulated damages are to be deducted from Medlin's award, or whether Medlin's award was over and above that given to FFE. FFE's derivative subrogation claim would normally be deducted from any damages awarded to Medlin; however, the verdict is not clear whether this was the intent of the jury."  

The court held: Because FFE has paid Medlin's medical expenses and lost wages (which are the subject of FFE's subrogation claim), if FFE is an active, named party participating at trial, Medlin cannot request and seek to recover damages for those medical expenses and lost wages; only FFE can do so. However, if FFE is not an active, named party participating at trial, the trial court must ask the jury, if it finds in Medlin's favor, to set out the amounts, if any, attributable to medical expenses and lost wages so that the court and the parties can ascertain what compensation FFE is entitled to for its subrogated interest.

 

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In Roberts v. Printup, Ms. Roberts was injured in a one car accident. She was a passenger, her son Printup was driving. The accident was promptly reported to Shelter, the insurance company, and she received the limits of the medical payments. Eleven days before the statute of limitations ran on the claim, Roberts sent a letter to Shelter offering to settle for policy limits ($25,000) and estimating her medical bills to be in excess of $125,000. The letter said she needed a response within 10 days because of the statute of limitations. Ms. Roberts had an agreement with her attorney that if Shelter paid the claim upon demand, she would not owe any attorneys fees on the amount paid. Shelter did not respond for three weeks and then attempted to accept the offer. Ms. Roberts refused. After liability was admitted, a judge determined Ms. Roberts damages to be in excess of $1 million. Shelter paid its limits and Ms. Roberts then was assigned Printup’s claims against Shelter for the excess judgment. 

The trial court granted summary judgment to Shelter on the claims of bad faith and negligence. The Tenth Circuit reversed, affirming the dismissal of the bad faith claim, but sending back the negligence claim. See, Roberts v. Printup, 422 F.3d 1211, 1212 (10th Cir. 2005). In the first appeal, the court found that Shelter’s failure to respond to Roberts letter within 10 days was a violation of the Unfair Claims Practices Act as adopted by Kansas. In the second go around, the district court found that Shelter did not have a written policy, procedure, or mechanism in place to ensure that a claim would be acknowledged within ten working days, that Shelter was negligent in handling the letter and that Roberts was not trying to manufacture a bad faith claim. Nevertheless, the district court found that the failure to timely respond did not cause the excess judgment, thus ruling that Shelter was not liable for the excess judgment.

The Tenth Circuit reversed again. The court states:

It is readily apparent that it was foreseeable to Shelter that its negligence in failing to implement a system to handle reasonable time-sensitive settlement offers from an injured party could result in a lawsuit being filed against its insured. Accordingly, its attempt to accept the expired offer in this case did not absolve it of liability for damages to its insured caused by its earlier negligent failure to settle.

* * * *

Shelter did not give Mr. Printup’s interest the same consideration as its own or it would have set up an appropriate system to handle time-sensitive settlement offers.

The Tenth Circuit found that based on the district court’s findings, “it is apparent that it was Shelter’s failure to implement a system to handle reasonable time-sensitive offers in negligent disregard of its insured’s interest that exposed Mr. Printup to damages in excess of policy limits.” Thus, the court reversed and remanded the case with directions to enter judgment in favor of Roberts.

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In Porter v. State Farm Mutual Automobile Insurance Co., 2010 OK CIV APP 8, the plaintiff, Porter, was a passenger who was injured in a car wreck.  State Farm insured the driver and also insured Porter on her own car.  The driver had limits of $100,000.  State Farm offered to settle her claim against the driver for $85,000 and Porter accepted, even after being told that she would not be entitled to UM if she did so.  She took the settlement and then continued her claim for UM.  Plaintiff believed she was entitled to UM because State Farm was the automobile insurance carrier for both Plaintiff and the tortfeasor, despite having settled with the tortfeasor for an amount less than the liability limits of tortfeasor’s policy.

Before an insured can proceed in an action to recover UM/UIM benefits under the contract, he must prove the existence of two simultaneous conditions precedent: 1) that he has a legal right to recover against the tortfeasor, and 2) that his claim exceeds the available liability coverage of the tortfeasor. These conditions precedent must both be present at the same time in order to obtain UM/UIM coverage.  Porter could not meet the first requirement because she released the driver from liability.  She could not meet the second requirement because by accepting less than the liability-policy limits and releasing the driver from further liability, she established that the claim did not exceed the available liability coverage. In other words, Plaintiff cannot prove the driver was underinsured.

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In Houck v. Farmers Insurance Company, Inc., 2010 OK CIV APP 12, plaintiffs complained that Farmers used a claims management company to reduce the amount of medical payments made on claims.  The trial court granted class certification and Farmers appealed.

The trial court certified the following class:
All persons who made a covered claim pursuant to the Medical Payments Coverage of a private passenger automobile insurance policy written by [Farmers] where:
A. Zurich Services Corporation (“ZSC”) was utilized to review medical expenses;
B. Farmers applied ZSC’s RC 40 reduction to the medical expenses; and
C. The insurance policy was written in one of the following states:
1. Alabama;
2. California;
3. Idaho;
4. Illinois;
5. Indiana;
6. Iowa;
7. Montana;
8. Nebraska;
9. Nevada;
10. New Mexico;
11. Ohio;
12. Oklahoma;
13. South Dakota; and/or
14. Wyoming.

The listed states were states in which the same policy language was used.  The appellate court found all requirements for a class action were met, and affirmed the trial court’s ruling. 

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The 10th Circuit has affirmed the dismissal of a lawsuit against John Grisham and others for the book, The Innocent Man.  The book details the wrongful conviction of Williamson and Fritz for the rape and murder of Debra Sue Carter. Both men were later exonerated after spending over a decade in jail.

(Ok, this isn't an insurance case, but I found it interesting)

The plaintiffs were Oklahoma District Attorney William Peterson; former Shawnee police officer Gary Rogers; and former Oklahoma state criminologist Melvin Hett each of whom played a role in the investigation or prosecution and conviction of Williamson and Fritz. The book did not portray these folks in a positive light, so they sued Grisham and others, claiming defamation, intentional infliction of emotional distress and false light invasion of privacy. The district court dismissed the suit for failure to state a claim and the Tenth Circuit affirmed, finding that since the plaintiffs were public officials, any statements critical of them were privileged, so long as there was no accusation of criminal activity.  

Because no special damages were claimed, the plaintiffs had to allege libel per se; but 12 OS § 1443.1 applied because the plaintiffs were public officers and states that “[a]ny and all criticisms upon the official acts of any and all public officers” are privileged and cannot be considered libelous, unless a defendant makes a false allegation that the official engaged in criminal behavior. To fall into this category, “the words alleged to have been spoken of the plaintiff, when taken in their plainest and most natural sense, and as they would be ordinarily understood, [must] obviously import the commission of crime punishable by indictment.”

 

The court states: 

Plaintiffs point to no statement in which defendants directly accuse any plaintiff of a crime.

Plaintiffs expect us to scale a mountain of inferences in order to reach the conclusion that defendants’ statements impute criminal acts to plaintiffs and render the statutory privilege of § 1443.1 inapplicable. We decline to engage in such inferential analysis, or to take a myriad of other analytical leaps plaintiffs ask us to make. Any connection between defendants’ statements and an accusation of criminal activity is far too tenuous for us to declare them as unprivileged for purposes of § 1443.1.

Since the statements were privileged for defamation purposes, the court found them privileged for claims of intentional infliction of emotional distress and for false light invasion of privacy.

See, Peterson v. Grisham

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The eight corner rule says that you compare the allegations of the complaint to the policy to determine the duty to defend.  This works for most cases, but where the insurer is aware of other facts, those facts must also be considered in determining coverage. 

In Apartment Investment and Management Company (AIMCO) v. Nutmeg Insurance Co., AIMCO had been sued in several actions based on the acts of one of AIMCO’s independent contractors.  The trial court looked at each complaint separately and said there was no duty to defend, since the allegations either did not state facts which amounted to wrongful acts, or were otherwise excluded under the policy.  The Tenth Circuit reversed, finding that the insurance company should have looked at all the allegations in all the complaints to determine if there was coverage.   After examining the complaints taken together, the Tenth Circuit was satisfied they contained sufficient information to provide Nutmeg with reasonable notice that these suits “might fall within coverage of the policy,” Hecla, 811 P.2d at 1089.  The Tenth Circuit also ruled that the exclusions did not apply to preclude coverage. 

 

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In Professional Solutions Insurance Company v. Mohrlang, the issue was whether one limit or two applied to claims against the same attorney.  If the claims were “related” one limit applied, if not, two limits applied.  Professional Solutions Insurance Company (PSIC) provided single coverage liability of $500,000, up to an annual aggregate limit of $1 million, to one of its insureds. When appellee Bruce Mohrlang submitted a negligence claim against the insured, and appellee Harry Mohrlang submitted another alleging breach of fiduciary duties, PSIC conceded liability of at least $500,000 on each but argued that under the policy definitions, the claims were related and thus subject to the $500,000 single coverage limit. The parties eventually settled, with PSIC agreeing to pay the single coverage limit of $500,000 and pursue a declaratory judgment action to determine any further liability. The sole question was whether the two claims were related to one another so as to cap PSIC’s liability at $500,000, or whether the two claims were unrelated and thus separately covered under PSIC’s annual aggregate limit of $1 million. On a stipulated record, the district court granted summary judgment in favor of the Mohrlangs, and the Tenth Circuit affirmed.

The critical inquiry was whether the claims were “temporally, logically or causally connected by any common fact, circumstance, situation, transaction, event, advice or decision.”  Bruce Mohrlang’s claim was based on the insured’s negligence in structuring a corporate stock sale, while Harry Mohrlang alleged breach of fiduciary duties based on the insured’s misrepresentations that caused him to release a deed of trust he held against the corporate entity.

First, the court found that Harry Mohrlang’s claim was not temporally connected to the sale because the insured caused Harry Mohrlang to release his deed of trust some three weeks after the sale closed. Next, the court found no logical connection between the claim and the sale because neither the deed of trust nor the promissory note it secured was incorporated into the final sale agreement and both should have remained unaffected by the sale. Finally, the court determined that no causal connection existed between Harry Mohrlang’s claim and the sale because the promissory note remained a valid, independent obligation even after the sale, and the deed of trust was not released until the insured’s unforeseeable acts severed any causal link that could have existed. Hence, the court ruled that the two claims were unrelated and PSIC was liable under the policy’s $1 million annual aggregate limit. 
The Tenth Circuit affirmed for the reasons stated by the trial court.

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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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In Clark v. State Farm, the issue was whether the court should have certified a class action against State Farm after Clark’s claims against it had been determined and a judgment issued.  The case involved a PIP claim under Colorado law.  There was a determination that the State Farm policy at issue had to be retroactively reformed to comply with Colorado law; it was, and a judgment was entered against State Farm for the policy limits, which was paid.  The court then refused to certify a class of others for whom such retroactive reformation could apply, finding the controversy moot, as judgment had been entered for Clark.  Other people were not allowed to intervene as plaintiffs because they sought intervention too late.  The court said there was no case or controversy, and class action was properly denied.
 

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In Mansur v. PFL Life Insurance Co., the issue was whether PFL was properly granted summary judgment on Mansur’s claims of breach of contract and bad faith.  PFL issued Mansur a long term care policy which was to pay $80 a day while Mansur was in a nursing home.  If the parties agreed on an Alternate Plan of Care (APC) then it could provide benefits while the insured was at home.  This appeal concerns the meaning of the Policy’s APC provision. Mansur claims that because PFL agreed that the home care provided was appropriate, the requirements for APC coverage were satisfied and PFL should have paid $80 per day for Mansur’s home care after she left the nursing home. Mansur also claims that PFL acted in bad faith (1) by offering to pay under that provision only $32 per day for one period and $48 per day for a later period, (2) by refusing to pay even those amounts when Mansur demanded the full $80, and (3) by refusing to waive payment of Policy premiums while Mansur was receiving home care. The trial court’s grant of summary judgment to PFL was affirmed. 

 

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In Graham v. Hartford Life & Accident, the Tenth Circuit held that a health and disability plan provided to US postal employees was not a governmental plan – therefore it was subject to ERISA.  The plan was apparently offered through the National Rural Letter Carriers Association, the exclusive bargaining agent for rural letter carriers.  Since the plan was governed by ERISA, there was no right to a jury trial.  The court affirmed the ruling of the trial court that the denial of benefits was not arbitrary and capricious
 

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In reviewing the year end blogs and blawgs, I came across this list of the top 10 coverage cases in 2009.  Page 3 starts the list of dumb insurance cases of the year; the top 10 significant cases are listed at p. 4; and then discussed beginning on p. 5; the cases include a discussion of whether single or multiple occurrences resulted when two boys fell into a pit on the insured's property (court found there were two occurrences); whether insurers are entitled to get attorneys fees from each other in coverage disputes between them (no; there is no exception to the American rule for insurance companies); and whether a contractor's endorsement which effectively reduced coverage to an insured was enforceable (it was). 

 

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While the insurer had waived certain privileges relating to the settlement of the underlying claim, based on the insurer’s concession that it would not advance an advice of counsel defense, the waiver would not be expanded to include all privileged communications and work product of the insurer’s attorneys.  The decision clarifies a prior decision which found a waiver of attorney client privileges related to the settlement of underlying asbestos claims. 

Previously, the court found that USF&G waived the attorney-client privilege as to communications between its officer, James Kleinberg, and Robert Omrod, the in-house lawyer whose advice Kleinberg disclosed at his examination before trial regarding preparation of the reinsurance billing.

“During the testimony of Kleinberg, many questions were asked regarding USF&G's decision to allocate all claims to a single treaty year as opposed to spreading them over the several coverage years. This witness repeatedly revealed the advice he received regarding preparation of the bill. Consequently, he placed this matter at issue,” the panel concluded. “Therefore, the Reinsurers may seek testimony and production of documents regarding presentation of the reinsurance claim . . .  only to the extent that the discovery relates to disclosures made during James Kleinberg's examination before trial testimony.”

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(reported by harrismartin.com reinsurance news)

A federal judge has denied Swiss Reinsurance Corp.’s motion to dismiss bad faith claims brought by an insured seeking coverage for a furnace malfunction, ruling that the policy at issue is unclear as to whether Swiss Re acted as insurer or reinsurer. Felman Production Inc. v. Industrial Risk Insurers, et al., No. 3:09-0481 (S.D. W. Va.). 

After examining the policy language, Judge Robert C. Chambers of the U.S. District Court for the Southern District of Virginia ruled that it was reasonable for the policyholder to expect Swiss Re to act as a direct insurer.

In its motion to dismiss, Swiss Re asserted that it is the reinsurer of IRI’s insurance contract with Felman, not the original insurer, therefore there is no privity of contract between Swiss Re and Felman and Felman fails to state a claim upon which relief can be granted.

Judge Chambers noted that, generally, an insured party cannot maintain a direct action against a reinsurer because the insured is neither a party to the reinsurance policy nor in privity therewith. However, a reinsurer may become directly liable to the insured if the reinsurance contract is drafted to provide for direct liability on the part of the reinsurer where the original insured is a third-party beneficiary to the contract and/or the reinsurer expressly assumes liability, the judge noted. A reinsurer may also become directly liable to the insured by directly handling an insured’s claim, the judge added.

Judge Chambers concluded that the terms of the original insurance contract are unclear as to Swiss Re’s role under the policy, therefore it was reasonable for Felman to expect Swiss Re to act as a direct insurer and to join it as a defendant in the instant suit.

“In West Virginia, an insurance policy should be interpreted according to the plain, ordinary meaning of the language used,” the judge explained. “Further, ‘whenever the language of an insurance policy provision is reasonably susceptible of two different meanings or is of such doubtful meaning that reasonable minds might be uncertain
or disagree as to its meaning, it is ambiguous.’ An ambiguous provision in an insurance policy is then ‘construed strictly against the insurer and liberally in favor of the insured.’”

As evidence of its role as a reinsurer, Swiss Reinsurance pointed to the “Syndicate Policy” pages in the policy, which identified Swiss Re as the reinsurer. Felman countered that the insurer is referred to as “the companies” throughout the policies and “the companies” is defined as “the members of Industrial Risk Insurers as hereby applicable to this policy.” Felman further argued that the “insurer” is identified as “Industrial Risk Insurers” in the body of the policy.


 

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In Berry & Murphy v. Carolina Cas. Co., the issue was whether notice to a former law partner of a claim was notice to the other law partner.  The court held it was.  Thus, because the former partner had notice of the claim before the policy was issued, the claim was not covered as to the other law partner.

Facts

The Burkhardts hired Murphy to handle a lawsuit.  Murphy was a partner at Berry & Murphy.  A year after he filed suit for the Burkhardts, he left the firm taking the case with him.  The case was dismissed for failure to prosecute and was later reinstated with new counsel.  A year after the partner left with the case, Burkhardts new counsel put Murphy on notice of a potential malpractice claim for the way he handled the lawsuit.  Murphy put his carrier on notice of the potential claim – which happened to also be Carolina Casualty.  No notice was given to Berry.  When Berry was sued along with Murphy, he tendered the claim to Carolina Casualty, which denied coverage, claiming that the alleged malpractice claim was first made against an insured (i.e., Murphy) prior to the inception of the insurance policy, thereby falling outside the claims-made coverage of the policy.

Discussion

The policy was a claims made policy, rather than an occurrence policy.  This means it covered claims only if first made during the policy period.  “A Claim shall be deemed to have been first made at the time notice of the Claim is first received by any Insured.”  The court found that Insured was defined to include an individual after he left the law firm if the claim involved that individual’s acts or omissions that occurred while at the law firm.   Thus, Murphy was an insured, and notice to him of the claim before the policy period meant that Berry was not covered under the policy.  

There is a spirited dissent, which states that since Murphy was not Berry’s agent when he had notice of the claim, notice to Murphy was NOT notice to Berry.  

The odd thing about this case is that Carolina Casualty did have notice of the claim, and had it before Berry did; and issued the policy anyway.  But, the policy as a claims made policy, was not in effect when Murphy gave Carolina Casualty notice.  Therefore, it was not a claim made within the policy period and was not covered.  An occurrence policy also requires that the event happen during the policy period.  If Carolina Casualty had insured Berry the entire time, I am not sure it could have escaped liability, as the notice from Murphy could have been notice under the Murphy policy, too. 
 

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Payless was sued in California for making hourly employees work "off the clock."  It asked its insurer, Travelers, to defend and indemnify, but Travelers declined, saying that the claim was not covered.  Payless settled the claims and then went after Travelers for reimbursement of the settlement and defense expenses.  Travelers got summary judgment and the Tenth Circuit affirmed.

See, Payless v. The Travelers. 

The Tenth Circuit found that this was a case of a misplaced modifier.  The clause at issue excluded certain statutory claims against employers and stated: 

The Insurer shall not be liable for Loss on account of any Claim made
against any Insured . . . for an actual or alleged violation of the Fair
Labor Standards Act (except the Equal Pay Act), the National Labor
Relations Act, the Worker Adjustment and Retraining Notification Act,
the Consolidated Omnibus Budget Reconciliation Act of 1985, the
Occupational Safety and Health Act, the Employee Retirement Security
Act of 1974, any workers’ compensation, unemployment insurance,
social security, or disability benefits law, other similar provisions of
any federal, state, or local statutory or common law or any
amendments, rules or regulations promulgated under any of the
foregoing; provided, however, this exclusion shall not apply to any
Claim for any actual or alleged retaliatory treatment on account of the
exercise of rights pursuant to any such law, rule or regulation.

emphasis added. 

The question was whether "other similar provisions" modified all the listed exclusions, or just the underlined exclusions.  The court found that even though bad grammar was used, the clause excluded all claims arising out of the Fair Labor Standards Act or other similar state law. 

The court held that bad grammar did not make the clause ambiguous and even quoted Groucho Marx: 

The opinion states:

All this underscores that, while the rules of English grammar often afford a valuable starting point to understanding a speaker’s meaning, they are violated so often by so many of us that they can hardly be safely relied upon as the end point of any analysis of the parties’ plain meaning. So it is that Groucho Marx could joke in Animal Crackers, “One morning I shot an elephant in my pajamas. How he got into my pajamas I’ll never know,” leaving his audience at once amused by the image of a pachyderm stealing into his night clothes and yet certain that Marx meant something very different. In the more mundane task of contract interpretation, we must be no less entitled to acknowledge the parties’ plain meaning without being straight-jacketed by a grammatical rule into reaching a patently unintended result.

Grammar and Groucho in an insurance policy interpretation case. Doesn’t get much better than that!

 

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In Rasenack vs. AIG Life Insurance Company, the Tenth Circuit ruled that AIG’s delays in deciding Rasenack’s claim for benefits under an accidental death and dismemberment policy (ADD policy) were substantial enough to result in a de novo review of the claim by the trial court.  Generally, under ERISA, claims decisions by administrators such as AIG are reviewed by the courts under an arbitrary and capricious standard.  Under the arbitrary and capricious standard, so long as the decision is supported by evidence, it will be upheld, while under a de novo standard, no weight is given to the claims administrator’s decision.  Summary judgment for AIG was reversed, and the case was remanded.

Mr. Rasenack was severely injured as a pedestrian by a hit and run vehicle.  He was in a coma for three weeks and remained hospitalized for months.  He claimed he was entitled to paralysis benefits under the AIG policy because he lost the use of both legs and his left arm.  The plan says that claims will be determined in 90 days, or under special circumstances, within 180 days; AIG took 16 months to deny the claim.  Rasenack appealed.  Appeals were to be decided in 60 days.  Seven months later, with no decision by AIG on the appeal, Rasenack sued.  AIG then denied the appeal.

First the court held that the claims administrator’s decision was entitled to no deference where the decision was made by operation of law, rather than the use of discretion.  Then the court found that the policy was ambiguous.  The policy’s definition of hemiplegia as “complete and irreversible paralysis” is wholly dependent on the meaning of “paralysis,” which the policy does not define. AIG claimed that the definition of hemiplegia carries a plain meaning, i.e., that the entire arm and leg of one side of the body must be “completely paralyzed,” and that “anything less than ‘no movement at all’ would not be ‘complete’ paralysis.”  While complete absence of movement may be a reasonable interpretation of ‘paralysis’, it was not the only interpretation, as found in various medical texts.  And the summary plan description defined hemiplegia as the loss of “use of both upper and lower limb on same side of body.”  The language was strictly construed against AIG, the drafter of the policy.

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When Willbros was sued for wrongful death, it notified its brokers of the claims.  The claims were settled for an amount in excess of the primary policy limits.  But, by the time the claims settled, the excess carriers denied any responsibility for the additional amounts paid, claiming the notice was untimely.  Willbros then sued its insurance brokers, Gallagher and JLT for failing to properly notify the excess insurers.  Gallagher is an Oklahoma broker, while JLT is based in London.  JLT was dismissed by the trial court for lack of personal jurisdiction.  The Court of Civil Appeals reversed.  

The court said it was JLT's contacts with the forum and not JLT's contacts with the plaintiff which were determinative.  Because JLT chose to do business with an Oklahoma broker, and made calls on the plaintiff's Oklahoma offices, there was sufficient purposeful availment of Oklahoma to support jurisdiction based on minimum contacts.  (Oklahoma courts may exercise jurisdiction to the full extent permitted by the Constitution)

 

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In Salisbury v. Hartford, Ms. Salisbury sued Hartford for denying her long term disability claim more than 3 years after the denial.  The plan said all suits must be filed within 3 years.  Her claim was dismissed as untimely and the 10th Circuit affirmed. 

First, the court found that the state law limitation period didn't matter since the contract stated a limitation period.  Then the court found the limitation period reasonable.  Salisbury claimed the contractual limitation was confusing and circular, but since she failed to file suit for nearly 5 years after her claim was denied, the court dismissed her arguments.

 

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In Moses v. Halstead, the court was faced with a choice of law issue:  should the court apply the law of the place of the insurance policy or the law of the place of  performance?  The court found that Kansas law applied under both the place of the contract and the place of performance analysis.

Moses was the passenger in her car when Halstead ran off the road, injuring her.  The insurance policy was issued by Allstate in Kansas.  The accident occurred in Missouri.  When Allstate failed to settle Moses' claim for policy limits, Moses sued Halstead in Missouri and got a judgment in excess of limits.  The judgment was registered in Kansas state court, and Moses started garnishment proceedings.  Allstate removed the case to federal court.

The trial court ruled that Missouri law applied and that Allstate was entitled to judgment since Missouri required an assignment from the insured before a judgment creditor can file an action agaisnt the insurance company for bad faith refusal to settle.  Kansas does not require such an assignment.

The Tenth Circuit reversed, finding that Kansas law applied to the claim.  It noted that in Kansas, while an insurer's duties are contractually based, breach of the duty is judged by a tort standard of care.  The court reviewed various Kansas decisions and determined that a claim for negligent or bad faith refusal to settle goes to the substance of an insurer's contract duties, rather than the manner of performance of those duties. Therefore, the claim would be govered by the law of the place of the contract, Kansas.  Furthermore, the court determined that a failure to settle claim went to the manner and method of performance, and that the place of performance would apply to this issue.  Since the demand for performance and the rejection of that demand was made in Kansas, the court found that Kansas law applied to this issue, as well. 

The court then remanded the case for the trial court to apply Kansas law in the first place. 

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In Conner v. American Commerce Insurance, the Oklahoma Court of Appeals held that a family member who rejected uninsured motorist (UM) coverage on his motorcycle was not covered under another policy owned by a family member in his household.  Plaintiff, Barry Connor, insured his motorcycle, with AIG, and rejected UM coverage. Plaintiff was also listed a driver on his parents’ insurance policy with American Commerce.  He resided with his parents at all relevant times.  After an accident with an underinsured motorist, Plaintiff requested UM benefits from American Commerce.  American Commerce denied the claim, based on an exclusion for resident relatives who are injured while occupying an owned motor vehicle without UM coverage.  The Court of Civil Appeals upheld the denial, based on Shepard v. Farmers Ins. Co., Inc., 1983 OK 103, 678 P.2d 250 and National American Ins. Co. v. Vallion, 2008 OK CIV APP 41, 183 P.3d 175.  The Court of Civil Appeals reasons that the Plaintiff had the opportunity to purchase UM coverage but failed to do so and therefore, found the exclusion valid.

While there is case law which supports this conclusion, the law is not as clear as the Court of Appeals seems to claim.  Oklahoma has held that UM follows the person and not the vehicle.  See, e.g., State Farm v. Wendt, 708 P.2d 581 (Okl. 1985). In Wendt, the court states:

In conformity with the clearly expressed legislative intent, above, every automobile liability policy issued in this state must provide uninsured motorist coverage for "persons insured thereunder." Accordingly, this Court has examined with critical scrutiny policy provisions which purport to dilute the legislatively mandated uninsured motorist coverage. In Keel v. MFA Insurance Co., 553 P.2d 153 (Okl. 1976), this Court voided "other insurance" clauses to the extent that those clauses precluded the insured from stacking coverages under separate policies. In Biggs v. State Farm Mutual Automobile Insurance Co., 569 P.2d 430 (Okl. 1977) this Court invalidated the "physical contact" requirement for hit-and-run coverage. In Porter v. MFA Mutual Insurance Co., 643 P.2d 302 (Okl. 1982), this Court invalidated the "consent to settle" clause. In Lake v. Wright, 657 P.2d 643 (Okl. 1982), this Court held the "limits of liability" clause was void and unenforceable as against public policy. In Chambers v. Walker, 653 P.2d 931 (Okl. 1982), this Court held invalid a clause in an uninsured motorist policy which permitted the uninsured motorist carrier to offset any amounts paid or payable under Workers' Compensation against the amounts payable under the uninsured motorist coverage. In Uptegraft v. Home Insurance Co., 662 P.2d 681 (Okl. 1983), this Court held invalid a clause in an uninsured motorist policy requiring the insured to sue the tort-feasor within two years or lose his uninsured motorist coverage. In Heavner v. Farmers Insurance Company, 663 P.2d 730 (Okl. 1983), this Court refused to apply the insurer's "insured motor vehicle exclusion" to deny uninsured motorist coverage to a passenger/plaintiff under the driver/tort-feasor's policy. We today reiterate and re-emphasize the viability of our prior decisions, which hold to the principle that once a person is insured under an uninsured motorist policy, subsequent exclusions inserted by the insurer in the policy which dilute and impermissively limit uninsured motorist coverage are void as violative of the public policy espoused by [Oklahoma’s UM statute].

Since Plaintiff in this case was insured under a UM policy, it is not clear why the owned car exclusion should be permitted while the insured motor vehicle exclusion or the vehicle furnished for the regular use of an insured exclusion is not permitted. 

 

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In Fierro v. Lincoln General Insurance Company, Fierro was injured in an accident with a motor carrier registered in California, and insured by Lincoln General. Fierro sued both the motor carrier and its insurer, Lincoln General. Lincoln General argued, its insured was an interstate motor carrier, and therefore, did not operate under an Oklahoma Motor Carrier License - thus, neither of the two Oklahoma direct action statutes applied to it. The court agreed. It found that the direct action statutes only apply to intra-state carriers, not interstate carriers. Furthermore,

Oklahoma takes part in the single state system, 47 O.S. §162.1 that is, where interstate motor carriers register and insure in their home states. Section 230.30 plainly states that “... after judgment against the carrier for any damage, the injured party may maintain an action upon the policy or bond to recover the same, and shall be a proper party to maintain such action." 47 O.S.2001 §230.30(A).” The reasons given for the prohibition [defendant's insurer cannot be directly sued by a plaintiff], besides statutory directive, include policy, prohibition by judicial decision, lack of privity between the injured plaintiff and the insurer, misjoinder of the tort action and the action on the contract, and the enforcement of the “no-action” clause in the policy.” Daigle v. Hamilton, 1989 OK 137, ¶ 5, 782 P.2d 1379, 1380.

Thus, for interstate carriers properly registered in their home state, a direct action is not available against the insurance carrier until after there is a judgment.

 

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Griffin, while attempting to enter an Indian casino, stepped into a flower bed and fell.  She sued the casino for negligence in state court.  The casino claimed it was immune from suit in state court, as a sovereign, and that Griffin would have to sue in tribal court.  The court disagreed.  It found that under the  State-Tribal Gaming Act and The Model Tribal Gaming Compact, the tribe has granted limited consent to be sued by patrons in courts of competent jurisidiction.  State district courts are courts of competent jurisdiction. 

The gaming compact mandates liability insurance coverage for the benefit of the public, prohibits the liability insurer from asserting tribal immunity, prescribes the procedure for casino patrons to claim damages, and expresses the tribe’s consent to suit.  Claims against tribes are limited to amounts set forth in the Oklahoma Governmental Tort Claims Act, and the presuit procedures found there must be followed for claims by patrons against tribes.  The Compact further requires tribes to carry insurance, and prohibits the insurer from asserting tribal immunity.

We believe that suits against tribes will increase as more and more casinos are built, especially since more and more casinos are making alcoholic beverages more readily available to their patrons. 

See, Griffith v. Choctaw Casino of Pocola;

Cossey v. Cherokee Nation Enterprises, (state district courts are courts of competent jurisdiction);

Dye v. Choctaw Casino of Pocola; (state district court may determine tort claims arising in Indian casinos against tribes or tribal enterprises)                           
 

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The Tenth Circuit has affirmed a summary judgment in favor of State Farm, which held that the earth movement exclusion is not ambiguous.  In Davis-Travis v. State Farm Fire & Casualty Co, a pipe in the bathroom had burst and flooded the house.  An inspection revealed damage to the flooring and baseboards as well settlement damage to the residence.  The settlement damage was determined to have been caused by movement of the clay under the foundation.  State Farm covered the portion of the claim related to interior water damage but denied the portion related to the foundation movements caused by settlement. The denial was based on the policy’s earth movement exclusion, which the court called the lead-in clause. The homeowners sued for breach of contract and bad faith, claiming the policy covered the settlement damages.  The trial court found that neither the lead-in clause nor the term earth movement was ambiguous, and granted summary judgment to State Farm, which was affirmed by the Tenth Circuit.

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In Ball v. Wilshire Insurance Company, the court ruled that a loaned vehicle exclusion which excluded coverage for those using the car with the owner’s permission was unenforceable, since Oklahoma public policy requires that the general public be protected up to the minimum amount of legislatively mandated coverage.  The court also ruled, however, that there was no duty to defend under the policy, since such a duty was not required to fulfill the public policy behind mandatory minimum liability coverage.  The court also determined that Wilshire did not act in bad faith in delaying UM payment to Ball, since the law was unsettled. 
 

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After the Olahs sued him for malpractice, Dr. Baird filed bankruptcy. The Olahs asked the trustee of  Dr. Baird’s bankruptcy estate to “sell” them Dr. Baird’s right to consent to settlement under his medical liability insurance policy. The trustee balked,  writing that by the terms of the insurance contract he did “not believe that there  was any asset which the trustee could assume and assign to” the Olahs. The Olahs then sought a declaration that the “right to settle”  was indeed part of the estate. When the trial court refused to so hold, they appealed.  The Tenth Circuit ruled that the liability policy is properly part of the estate, and that the trustee has discretion to exercise Dr. Baird’s rights under  the policy (including the consent to settle) or to assign those rights to the Olahs. 

There were some interesting arguments made in this opinion.  The insurance company argued that making the consent to settle clause assignable would “drastically impact the risk and burden on [it].”  The Tenth Circuit didn’t buy it, noting that the insurance company had the right and duty to defend the claim, and that no one could force the insurance company to settle.  If the insurance company and the plaintiffs negotiated a mutually agreeable settlement, then it would be in the insurance company’s interest to have the plaintiffs and not Dr. Baird exercise consent.  Further, since Dr. Baird’s liability was discharged in bankruptcy, he had nothing to lose and everything to gain from frustrating a settlement.

In re Baird, Case No. 07-4282




 

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The Oklahoma Supreme Court has ruled that private citizens may sue for unsolicited faxes.  In MLC Mortgage Corporation,  the plaintiff had received various unsolicited faxes from the defendants.  In an issue of first impression in Oklahoma, the court held that  private parties may pursue violations of the Telecommunications Consumer Protection Act (TCPA), 47 U.S.C. §227 (2005), in Oklahoma courts.

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When an Oklahoma resident is injured in Oklahoma by an uninsured motorist, you might expect Oklahoma law to apply.  But not if the UM policy was issued or delivered in another state on a vehicle registered or principally garaged in another state.  In Bernal v. Charter County Mutual Insurance Co., the Oklahoma Supreme Court said that Oklahoma's UM statute only applies to vehicles registered in or principally garaged in Oklahoma.  Thus, even though the accident occurred in Oklahoma, and the insured was from Oklahoma, Texas law would apply because that was where the vehicle was registered. Since Oklahoma law does not apply, there was no need to do a choice of law analysis -- and really, who wants to do that?  

The court says that Oklahoma's statute applies solely to cars registered or garaged in Oklahoma.  It then concludes that this a legislative mandate to use the law of the state of the policy or where the car is garaged and/or registered. 

There is no discussion as to whether there is any choice of law provision in the policy, and whether that would make any difference.  Certainly, under Oklahoma (and most other states laws), the parties may choose to be governed by a specific state's laws.  Whether and to what extent this may affect other types of insurance is not yet known.

 

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The Oklahoma legislature has not embraced arbitration.  In fact, it seems somewhat hostile towards it.  Thus, there has been some tinkering with Oklahoma’s arbitration act by the legislature.  First, it said that the only types of insurance agreements that could be arbitrated were those between insurers, which would, of course, include reinsurance agreements.  But then the statute changed to delete the exception which permitted arbitration between insurance companies.  Then, it changed again to permit it.  It was during these changes that Mid-Continent sued GenRe for failure to pay under the reinsurance contracts. 

The trial court said that the arbitration clause was unenforceable, and that therefore, the suit could proceed.  GenRe appealed, claiming that the arbitration clause was enforceable.  It was after the trial court’s ruling and before the Tenth Circuit’s ruling that the law changed again to permit arbitration between insurance companies.  The Tenth Circuit found the arbitration clause was enforceable, and that the change applied retroactively, since it was a procedural and not a substantive change. 

Read the opinion:
Mid-Continent Casualty Co. v. General Reinsurance Corporation, Case No. 07-5050

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Our friends at Reed McClure in Seattle have published their latest insurance law newsletter.   The cases discussed include issues such as parental immunity, what type of business is covered under a business coverage clause, and a case which held that certified mail is not mail.  For these and other reasons, you should check out the latest Washington Insurance Law Letter.

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A New Jersey judge who allowed a lawyer to plug an evidentiary gap with a Wikipedia page has been reversed on the ground that the online encyclopedia that "anyone can edit" is not a reliable source of information.

http://www.law.com/jsp/legaltechnology/pubArticleLT.jsp?id=1202430073269

This may be a good opinion where there is a hotly contested fact. But then, I don't think that judicial notice is appropriate for any hotly contested fact.  A study compared Wikipedia with the Encyclopedia Britannica for accuracy, and considered  them to be equal.

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Every so often, a case comes down that requires comment, even if it is not specifically an insurance case.  Such a case is Creative Consumer Concepts Inc v. Kreisler.   We believe Ms. Kreisler deserves a chutzpah award for this case. 

Ms. Kreisler worked for CCC.  She was terminated.  She was given an unsigned severance agreement. She requested and was given some additional items (such as a letter of recommendation), but these items were not put into writing.  Then, she added a mutual release clause to the severance agreement, signed it and presented it to CCC’s human resource director (without advising her of the changes) who signed it on behalf of CCC. Later, it was discovered that Ms. Kreisler had embezzled over $860,000 from CCC, and had changed the severance agreement.  Payments under the severance agreement were stopped, and CCC sued Kreisler for recission of the severance agreement and for various claims relating to the embezzlement.  Kreisler counterclaimed for enforcement of the severance agreement, including the mutual release.

The first day of trial, CCC asked the court to let it raise the issue of the lack of authority of the human resources director to sign the modified agreement. The court reviewed this issue under a plain error standard because 1) there was no claim that the evidence fell outside the pleadings until after trial; 2) there was no contemporaneous objections to the evidence at trial; and 3) her contemporaneous objection was only as to the submission of a late brief and request for additional time which could not be construed as an objection to the evidence.  The court said that while CCC should have raised this issue earlier, it was not error to permit it to address the issue at trial.  The court found that “Ms. Kreisler had notice of the defense of lack of authority and, therefore, suffered no prejudice from CCC’s failure to comply with Rule 8(c). . .”

Her claim that she was entitled to a jury trial on the issue of authority to sign the agreement was without merit, since she had agreed to a bench trial.  The agreement was not ratified by performance, since once it was discovered that the agreement had been changed, performance was discontinued. 

Ms Kreisler also claimed error in admitting parts of her deposition at trial because she was available to testify.  But Fed.R.Civ.P. 32 allows the use of a deposition of a party “for any other purpose allowed by the Federal Rules of Evidence.”  The evidence rules permit the admission of a party’s deposition as a statement of a party. 

Finally, Ms. Kreisler claimed the civil action should have been stayed pending the outcome of the criminal charges against her.  But, because the only issue before the court in the civil action was the validity of the release provisions and the severance agreement, there was no abuse of discretion in proceeding with the civil case.

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Ms. Ellis had some work done on her house in 2002 when it was discovered a pipe had broken and there was a water leak.  It was fixed, but later, the concrete slab started to crack.  Ellis submitted a claim to State Farm, which denied it.  She then sued State Farm claiming that the slab was covered and that State Farm's denial was in bad faith.

Both parties moved for summary judgment and the trial court granted summary judgment to State Farm.  The 10th Circuit affirmed in Ellis v. State Farm, finding that the “continuous or repeated seepage or leakage” clause excludes coverage for the damage to the concrete slab.

Ms. Ellis contends that the district court erred in applying the “continuous or repeated seepage or leakage” clause for three reasons: (1) the evidence on summary judgment was disputed as to whether the sand fill under the foundation was washed away by water or whether “the sand sifted into the drain pipe and was washed out by effluent that stayed within the pipe,”; (2) the policy language refers to “water or steam,” not to sewage, so the clause is either ambiguous or simply does not apply to this situation where the sand fill was carried away by sewage; and (3) under the doctrine of “reasonable expectations,” Ms. Ellis is entitled to coverage because an insured would reasonably expect the clause to apply to “a water supply line or a steam line, both of which are under pressure, rather than a drain line,”

The court ruled:  1) reasonable expectations was raised for the first time on appeal and not considered; 2) didn't matter if it was a water or a sewage pipe, it contained liquid and a leak in the pipe caused the damage; and it also did not matter if the liquid contained sewage, it was still excluded; and 3) the evidence presented showed that the pipe leak washed supporting sand away from the foundation causing the cracking.  Summary judgment was affirmed.  

 

 

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FREE LEGAL ADVICE APRIL 30

The Oklahoma Bar Association is celebrating Law Day by giving free legal advice. Oklahomans across the state are encouraged to take advantage of this community service by calling (800) 456-8525 on Thursday, April 30 from 9 a.m. to 9 p.m. So, pass the word to family and friends!

Also that evening on Oklahoma’s PBS station OETA the Ask A Lawyer TV show at 7 p.m. will feature segments on frauds to watch out for and equal rights in the workplace. More details about the legal advice and the TV show are at

http://www.okbar.org/news/events/LawDay09/hotline.htm
http://www.okbar.org/news/events/LawDay09/TVshow.htm

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Oklahoma law does not permit a tort action to state a claim for damages for a specific amount in excess of $10,000.  Rather, such claims can only request damages in excess of $10,000.  A default cannot be taken for more than the amount requested in the petition. 

In Vannoy v. Earth Biofuels, Inc., the defendant was served through the Secretary of State, but failed to answer.  Apparently, there had been some settlement negotiations.  Plaintiffs got a default judgment against defendant for $1 million.  The trial court refused to vacate the default judgment, and the defendant appealed. 

The Court of Civil Appeals vacated the default, stating that the defendant was required to have notice of the amount claimed before default was entered against it.  The trial court could not rely upon a district court rule says that no notice of default is required if no entry of appearance has been made, since the rule conflicted with the statute requiring notice of the amount claimed.

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Plaintiff was injured when he collided with a truck which became stuck on the highway when it tried to turn around.  The jury found the plaintiff was 25% at fault and awarded him $3.2M (reduced to $2.4M).  The Tenth Circuit reversed the jury verdict, however, because of improper closing argument by plaintiff's counsel.  Whittenburg v. Werner, Case No. 07-6063, 4/3/09

Plaintiff's counsel asked the jury to imagine that the defendant wrote plaintiff's family a letter telling the family that it was going to do various bad things which would result in plaintiff being badly injured; and that defendant would then improperly defend itself and spend lots of money on its defense so it would not have to pay any money to plaintiff; and in defending itself, it would cast all sorts of aspersions on plaintiff. 

The permissible limits of closing argument were exceeded in this case in two principal ways. First, counsel referred extensively to evidence not in the trial record. Second, without apparent provocation or basis in the record for doing so, counsel flooded his argument with abusive references to his opposing party and counsel.

                             * * * * 

Before us, the parties fight considerably over the propriety of ever using an imaginary letter as a way to structure a closing argument. But we need not resolve today an abstract debate over the proper form of closing arguments because in this case there is a more pressing problem. Even assuming the possible propriety of the technique generally, the content of this particular imagined letter included a great many facts about Mr. Whittenburg’s children and Werner’s conduct that lacked any basis in the evidence adduced at trial. Counsel’s argument accordingly violated the cardinal rule of closing argument: that counsel must confine comments to evidence in the record and to reasonable inferences from that evidence.

 

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Oklahoma has a statute of repose for "improvements to real property".  If you are hurt by an improvement to real property more than 10 years after it is substantially completed, you may not sue.  See, 12 Okla.Stat. § 109.  In Goad v. Buschman, the 10th Circuit affirmed the trial court's grant of summary judgment to the owner of a building which had a conveyer belt system.  The building was used for grocery warehouse operations.  The court found that the factors favored finding that the conveyor system was part of the property and therefore fell within the ambit of the statute of repose.

The evidence presented to the district court shows that in 1985, Buschman contracted for the design, construction, and installation of the conveyor system. Buschman designed and installed the system. It was constructed from several conveyor “standards” that were installed to fit within the building’s existing footprint. The system is hardwired into the building, is three stories high, and originally contained about 6,155 feet of conveyor. It is attached to the floor by anchors set in concrete and bolts, and further attached to the building by a variety of bolts, angle bracing, stabilizing legs, floor-support columns, and ceiling hangers. The conveyor system is not welded to the building or embedded in the floor. The purchase price of the system was approximately $776,852.

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We previously reported about former General Re Corp. chief executive officer Ronald E. Ferguson being sentenced to two years for his role in a fraudulent scheme to inflate AIG's loss reserves which caused investors to lose over $500 million dollars.  Now another General Re Corp executive, Christopher Garand, has been sentenced to one year in prison and fined $200,000 for the same scheme. Garand is a former Gen Re senior vice president.  

In addition, former American International Group vice president Christian M. Milton, has been sentenced to four years in prison and fined $200,000 for his participation in the  fraudulent scheme which involved General Re Corp. and American International Group Inc. (AIG).  Other convicted former Gen Re executives are Robert D. Graham and Elizabeth A. Monrad.

 

 

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A Connecticut federal judge today sentenced former General Re Corp. chief executive officer Ronald E. Ferguson to two years in prison and fined him $200,000 for his participation in a fraudulent scheme involving General Re Corp. and American International Group Inc. United States of America v. Ronald E. Ferguson, et al., No. 06-137 (D. Conn.).

The court ruled that the loss portfolio transfer (LPT) transaction between AIG and Gen Re caused more than 250 AIG investors to sustain between $544 million and $597 million in losses.

 

Ferguson, along with Christopher P. Garand, Robert D. Graham, Elizabeth A. Monrad and Christian M. Milton, were accused of engineering a LPT  transaction that helped AIG inflate its loss reserves by $500 million in 2000 and 2001. Prosecutors alleged that the deal transferred no risk of loss to AIG and included a secret side agreement that AIG would refund Gen Re’s $10 million premium and pay it a $5 million fee.

 

All five defendants were charged with securities fraud, conspiring to commit securities fraud, making false and misleading statements in reports filed with the SEC, falsifying the books and records of a public company, and mail fraud.

 

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In an unpublished case, the Oklahoma Court of Civil appeals reversed summary judgment in favor of an insurance agent who allegedly failed to properly estimate replacement cost coverage.  The insureds had purchased replacement cost coverage, but the coverage was limited to a certain dollar amount.  That limit turned out to be about half the actual replacement cost required after a tornado destroyed farm buildings.  The insureds claimed that the agent was negligent in failing to follow replacement cost estimating standards.  The Court of Civil Appeals said that generally, the insurance agency and the insurer do not have a duty to advise an insured with respect to insurance needs, but on the other hand, an insurance agency has a duty to exercise reasonable care and skill in performing its tasks. The breach of this duty with accompanying injury establishes a claim for negligence.

Since there was a fact question as to whether the acts were negligent and caused damage, summary judgment was not proper, and summary judgment for the agent and insurer was reversed. 

Rehearing has been sought on this ruling.

Runyon v. Goetz Insurors, Case No. 106013

 

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The Tenth Circuit has recently decided two cases involving benefits under an ERISA plan.  The first case dealt with death benefits.  In Kellogg v. Metropolitan Life, the plaintiff’s husband was killed in a one car accident.  General life insurance benefits were paid, but the accidental death claim was denied.  It was claimed that the deceased had suffered a seizure just before he lost control of the car, and that the seizure caused the death, not the accident.  The ADD policy excluded coverage when the loss was cause by a physical illness or infirmity.  Summary judgment for the insurance company was reversed, and the trial court was directed to enter judgment for the plaintiff.  Procedurally, the case was interesting because the Plan did not make a ruling on the appeal from the denial of benefits, so a de novo standard of review was used. The court held that the deceased died from injuries received from the accident, not from the seizure (if any).   Further, the court ruled that the insurance company could not raise a new ground for denial on appeal.  In reaching its decision, the court cites numerous cases where a physical ailment caused an accident which resulted in death.  In such cases, the death was caused by the accident, not the physical ailment, and therefore covered.  In this case, the death was caused by a skull fracture resulting from the car accident, not by physical or mental illness; while the seizure may have been the cause of the crash, it was not the cause of death.

The second case, Brown v. Hartford, involved a disability policy.  Like most disability policies, this one said that for the first year, you were entitled to benefits if you can’t do your old job; but after that, you are only entitled to benefits if you can’t do any job.  Hartford told Brown to apply for Social Security benefits (which reduced the amount Hartford had to pay under the policy) and then said that it was not bound by Social Security’s determination that Brown was unable to work.  Since Hartford believed that Brown could work at some job, it cut off benefits.  Hartford got summary judgment and the Tenth Circuit reversed. 

First, the trial court erred in finding that Hartford did not have discretion under the Plan.  Although this means that Hartford’s decision can only be overturned if its arbitrary and capricious, there is an additional factor – Hartford’s conflict of interest which was not considered by the trial court. The Tenth Circuit said the trial court should consider whether Hartford’s financial conflict could have had a role in influencing its decision to ignore the SSA and workers compensation court’s determinations that Brown was totally disabled.  The Tenth Circuit apparently felt it was unfair for Hartford to require Brown to apply for Social Security, reduce the amounts it paid because of the award, and then ignore the SSA’s finding of disability in order to cut Brown off from all further payments.

 

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Wife takes 5th during deposition, cannot recover on life insurance policy

Angelina and Bryan were married; several years later, Bryan took out a $1M life insurance policy naming Angelina as primary beneficiary, and his kids as secondary beneficiaries.  Three months later, Bryan was killed; and Torre was convicted of the murder.  There was evidence that Torre and Angelina were lovers and had been heard talking about killing Bryan for the insurance.

The insurance company filed a declaratory judgment action so the court could determine who should get the proceeds.  Angelina refused to testify at Torre’s trial and refused to answer questions in her deposition on Fifth Amendment (self incrimination) grounds.  The trial court ruled that Angelina was involved in her husband’s murder and could not benefit from the insurance, and awarded the proceeds to the children.  The Ninth Circuit affirmed.

The Ninth Circuit said that it was ok to preclude Angelina from testifying at trial, since she had taken the Fifth at deposition.  It would be unfair to allow Angelina to invoke the privilege during discovery and then disclose the information during trial.  Further, the trial court acted within its discretion to draw an adverse inference from Angelina’s assertion of the Fifth, because there was independent evidence about the facts to which she refused to testify, and there was a substantial need for the testimony.  Finally, it was proper to admit deposition testimony of a witness who said he was approached by Angelina and Torre to kill Bryan.  The witness was out of state and therefore, unavailable.  Testimony about what Torre told the witness were also admissible as a statement of a co-conspirator. 

Nationwide Life Ins. Co. v. Richards, 541 F.3d 903 (9th Cir., 2008)

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Commercial seller requirement in products liability claims

Oklahoma’s products liability law is based on Restatement of Torts (Second) §402A.  One of the requirements is that the seller be engaged in the business of selling such a product.  Liability is not imposed upon occasional sellers who where the sale is not part of a business.  Thus, in order to impose §402A liability, the defendant must be a "seller . . . engaged in the business of selling" the allegedly dangerous product.  In Spence v. Brown-Minneapolis Tank, Co., 2008 OK CIV APP 90, the court stated that if defendant is not a commercial "seller engaged in the business of selling" the allegedly dangerous product, summary judgment is proper.  In this case, intra-company transfer of goods was not a sale, and the defendant was not in the business of selling the doohickies that caused the injury.  Thus, summary judgment was proper. 
 

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Vacant not a question of fact

Bob owned a restaurant.  Bob closed the restaurant.  But Bob kept his office in the restaurant open.  The sprinklers malfunctioned and the restaurant was water damaged.  Bob’s insurance claim was denied.  The policy did not cover losses on vacant premises or from freezing pipes. Then it was determined that the sprinklers had been deliberately tampered with and the tampering caused the damages.  The claim was denied again.  The trial court said the building was vacant and tha tthe vandalism and water damage exclusions precluded coverage. Summary judgment to the insurance company was affirmed on appeal.

There was no dispute that the building was vacant on the date of the loss because it was not being used for customary operations on the date of the loss.  Using a small part of the building did not make the building occupied.  Further, it did not matter that there was no evidence that Bob tampered with the sprinklers.  The vandalism exclusion applied.  There was no bad faith in the investigation of the claim.

Saiz v. Charter Oak Fire Insurance Company;
http://ca10.washburnlaw.edu/cases/2008/11/07-1449.pdf

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If it looks like an insurance policy and quacks like an insurance policy, its an insurance policy -- according to the Oklahoma Court of Civil Appeals.  And if it meets the requirements of an insurance policy, statements in the contract that says its not insurance are going to be ignored.  Further, breach of the contract can give rise to a bad faith action.  Thus, calling a contract a debt release waiver will not insulate the parties from a bad faith claim.

EMBRY v. INNOVATIVE AFTERMARKET SYSTEMS , 2008 OK CIV APP 92 , ___ P.3d ___ (OSCN 2008)

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A Texas federal judge refused to remand a $45 million coverage dispute to state court, finding that the third-party reinsurer defendants did not waive their right of removal because they were not parties to the underlying insurance contract or its forum selection clause. Huntsman Corp. v. International Risk Insurance Co. v. ACE American Insurance Co., No. 4:08-cv-01542 (S.D. Texas).  (log in may be required)

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Layman was injured on the job. She was awarded money. The employer appealed. While it was pending, Layman died. The award was affirmed and then the lawyer sought to have the award certified. The comp court told the employer to pay the money to the estate. This was appealed and reversed. Neither the estate, nor the p.r., was a party to the proceedings. the court had no authority to require payment to a non party.
WAREHOUSE MARKET, INC. v. LAYMAN
2008 OK CIV APP 78

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Equity lets their insureds pay their premiums by the month. In its monthly invoices, it helpfully lets its insureds know that if the premium is not received by a certain date, the policy will be cancelled.  St Clair paid for a few months and then quit.  Equity believed the policy was cancelled, per the invoice.  So, when St. Clair wrecked his car 4 months after he stopped paying premiums, Equity thought there was no coverage.  The Oklahoma Supreme Court disagreed.  You see, you cannot give notice of cancellation for nonpayment until there actually has been non-payment.  Thus, the notice in the monthly invoice was ineffective to cancel the policy.

 

EQUITY INSURANCE COMPANY v. ST. CLAIR
2008 OK 79

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Today's email brought another issue of Washington Insurance Law Letter, edited by William Hickman at Seattle's Reed McClure.  I love reading Hickman's newsletter.  The cases are entertaining and the style has just the right mix of facts and sass.  And even those who do not practice in the Northwest now have reason to read it, as although the California Supreme Court is considered the most influential state court, the Washington Supreme Court is considered the second most influential state court, having been followed 942 times in the last 65 years.  At least, that's according to this UC Davis law review article. 

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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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NATIONAL AMERICAN INSURANCE COMPANY v. OKEMAH MANAGEMENT COMPANY,
2008 OK CIV APP 58

The insured (OKEMAH) was a sub contractor on a building.  The owner sued, claiming that the building leaked because of poor workmanship.  Naico filed a declaratory judgment action, claiming it was not required to defend Okemah because the CGL policy covered negligence claims, not breach of contract type claims; or that various exclusions precluded coverage.   The exclusions included 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.

The court found the EIFS exclusion applied; it did not require the insured to install or apply all 5 elements of the EIFS; and the court did not reach the other issues.  Since the claim was excluded, there was no duty to defend.

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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 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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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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A judgment in excess of $650,000 was affirmed by the Tenth Circuit against Hartford Insurance Company because it did not know the provisions of its own policy, and it changed the reason it denied the claim once suit was filed.

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.

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Burton (who was convicted of first degree manslaughter) shot and killed Savage in an apparent road rage incident.  Plaintiff sued Burton for the wrongful death of her husband, claiming that Burton violently and negligently shot Savage.  The court entered a judgment against Burton for $1.2 million dollars.  The judgment stated there had been a trial with witnesses and evidence presented.  Savage then garnished State Farm, Burton's insurer.  State Farm tried to get the judgment vacated.  Instead, the trial court modified it -- instead of a trial, the modified judgment stated it was based on "stipulations." 

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 Continue Reading...

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This case is the first one to interpret Oklahoma's amended declaratory judgment statute.  Previously, Oklahoma did not permit insurers to use the declaratory judgment statute to determine rights and liabilities under an insurance policy.  Since 2004, however, the statute specifically permits such determinations.  The court agreed that the plain language of the statute permitted such a determination. 

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. 

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Oklahoma Court adopts claim for fraud in hiring

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.

Continue Reading...

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Yaffe v. Great American, Case No. 06-7057 (10th Cir. 8/27/07);
http://www.ca10.uscourts.gov/opinions/06/06-7057.pdf

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.  Continue Reading...

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