Reinsurance Law Blog

Washington Insurance Law Letter

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Tue, 19 Aug 2008 23:12:06 -0600

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.

Standards of proof in Set Fire Bad Faith cases

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Thu, 07 Aug 2008 22:29:40 -0600

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.

There were also claims that State Farm's experts should not have testified, and that the trial court erred in excluding an additional expert of the Plaintiffs who was not timely listed. These rulings were affirmed based on the standard of review.

Those of you who work on appeals should take note of this case, as the record was not properly presented to the appellate court -- by either party. The court was extremely critical of the parties' failures to follow its rules.

Insurer not in bad faith for failing to pay on cancelled policy

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Thu, 07 Aug 2008 08:14:04 -0600

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

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

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

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

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

CGL policy does not cover poor workmanship claims

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 06 Aug 2008 20:34:44 -0600

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.

UM , Lowballing and Bad faith

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Mon, 21 Jul 2008 15:23:42 -0600

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

Conflict between limits on Declarations and endorsement

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Mon, 21 Jul 2008 15:11:02 -0600

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.

Insurers limit UM coverage by their definitions of "insured"

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 16 Jul 2008 18:00:03 -0600

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.

Homeowners policy required replacement of roof decking

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 16 Jul 2008 17:39:28 -0600

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.

No Duty to Defend where there is no coverage

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 16 Jul 2008 16:44:07 -0600

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.The court found that coverage was clearly excluded by the EIFS exclusion which stated:

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

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

. . . .

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

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

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

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

Policy cancellation precludes coverage

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 16 Jul 2008 16:21:26 -0600

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

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

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

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

Because the Court found that State Farm strictly complied with the cancellation provision in the policy, summary judgment was proper.
In addition, the court found that the agent was properly dismissed. The Plaintiffs claimed that the agent should have told them about the impending cancellation. But the court noted that an agent's duty relates to the procurement of insurance, not to the maintenance of insurance. Summary judgment to the agent was also affirmed.

This case was interesting because it discussed the type of evidence which could be used to prove mailing. State Farm has an automated mailing system. It provided evidence that the notice was created, and also had a photo of an envelope addressed to the Plaintiffs going through the automated mail system. The affidavit was not from someone at the mailing center, but from someone in it's local office.

Non-Compete Agreements in Employment contracts still unenforceable in Oklahoma

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 16 Jul 2008 16:00:23 -0600

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.

Oklahoma's Residential Property Condition Disclosure Act

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 16 Jul 2008 15:48:11 -0600

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.

Proposed Legislation would prohibit uninsured motorists from recovering for injuries

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 12 Mar 2008 22:41:35 -0600

The Oklahoma Legislature has proposed a new bill which would limit the amount and types of damages uninsured motorists could recover for accidents which are not their fault. In an apparent attempt to discourage Oklahoma citizens from driving without insurance, the Legislature wants to limit the recoverable damages to medical costs, property damage and lost income. In other words, if you are in an accident that it not your fault, and you don't have insurance, the bill would prevent you from getting money for pain and suffering:

HB3380 limits damages to uninsured motorists:

"Except as provided in subsection B of this section, in any civil action to recover damages arising out of an accident involving the operation of a motor vehicle or for any claim against the motor vehicle liability insurance coverage of another party, the maximum amount that a plaintiff or claimant may receive, if the plaintiff or claimant is not in compliance with the Compulsory Insurance Law, shall be limited to the amount of medical costs, property damage, and lost income and shall not include any award for pain and suffering."

The bill makes exceptions for those who are passengers (if they are not owners of the uninsured vehicle); those injured by drunk drivers or drivers who are committing felonies; and wrongful death claims.

Since Oklahoma is not a "no fault" state, it is unclear how such a law will encourage its poor citizens to buy insurance. Furthermore, Oklahoma law does not permit a someone who commits a wrong against another to benefit from his victim's insurance. If the bill passes, it is likely to meet a constitutional challenge.

Cancellation of policy after loss

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Mon, 10 Mar 2008 17:14:07 -0600

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.

This is another cancellation bad faith case that shows that Oklahoma juries do not like it when insurance companies cancel policies after a loss. The jury instructions were clearly wrong. If they had set forth the proper standard, it is doubtful the case would have been reversed and remanded. The case settled before re-trial.

Wrongful Cancellation results in $800,000 Award

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Mon, 10 Mar 2008 17:05:45 -0600

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

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

Hartford found in Bad faith for not knowing its own policy

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Mon, 10 Mar 2008 12:33:47 -0600

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.

Garnished insurer not bound by sham judgment

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 05 Mar 2008 12:29:38 -0600

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
In this road rage case, Burton was alleged to have improperly operated his vehicle and then shot and killed Moore. The court records revealed that after a supposed settlement, there was a trial and plaintiff (Moore’s spouse) was awarded $1.2 million in damages. State Farm, Burton’s automobile liability insurer was garnished, and sought to have the judgment vacated. The trial court refused to vacate the judgment, and instead modified it to reflect that instead of a trial, the parties stipulated to the facts upon which judgment was entered. The Court of Civil Appeals reversed, stating:

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

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

OK to use Declaratory Judgment to decide coverage

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 05 Mar 2008 12:22:40 -0600

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.

New Law Requires Insurers to Help State Collect Child Support

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Wed, 10 Oct 2007 16:39:05 -0600

Beginning November 1, 2007, insurance companies must check with the Oklahoma Department of Human Services before paying any claim of $500.00 or more. If the claimant owes child support, any amounts owed must be subtracted from any amounts paid to the claimant. The child support lien is inferior to any lien or claim for 1. Services and expenses documented and related to the claim, such as attorney fees or health care expenses; 2. Damage to or a loss of real property; or 3. Damage to or a loss of a motor vehicle to the extent that it would be exempt from claims of general creditors pursuant to Section 1 of Title 31 of the Oklahoma Statutes.

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

Oklahoma Court adopts claim for fraud in hiring

jodynathan@STAUFFERLAW.COM (Jody Nathan) — Tue, 02 Oct 2007 14:18:42 -0600

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.

The court then went one step further and found that the employer’s waiver defense (employee had continued working for 8 months after learning of the claimed fraud) was improper. There was no evidence that the employee ratified his continued employment under new terms or subject to additional benefits, therefore, the waiver defense was not sufficient as a matter of law.

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