In Glacier v. Travelers, Glacier contacted to build a new waste water pumping facility. Its pumps and wells were damaged and Travelers denied the claim. Glacier filed suit claiming the Travelers’ Builders Risk policy covered the claim. The trial court found coverage and a jury awarded Glacier $9,000. Travelers’ summary judgment was granted as to Glacier’s bad faith claim. Everybody appealed and the Tenth Circuit affirmed.
First, the Tenth Circuit found that the original wells/pumps “were temporary structures constituting covered property”. Second the Tenth Circuit found the heavy rains could constitute an “occurrence” under the policy. Travelers also claimed the pumps failed for lack of maintenance- a non covered loss. Since the evidence showed the pumps required repairs, the Court rejected this claim.
Finally, Travelers claim that the soils report caused the damage was not supported by evidence. The relevant policy clause covered costs necessary to redo the work already done. The ordinary and accepted sense of the policy terms limited coverage to connection to work previously done. The policy did not cover the expense of a new design and the costs to implement that design. As to the bad faith claim, Glacier argued the claim was not timely processed, noting that it, not Travelers initiated some of the claim processing communications. Glacier cited no authority that the insurance company must request information before the insured provides it or risk a finding of bad faith, and the Tenth Circuit refused to adopt such a rule.
In Glacier v. Travelers, Glacier contacted to build a new waste water pumping facility. Its pumps and wells were damaged and Travelers denied the claim. Glacier filed suit claiming the Travelers’ Builders Risk policy covered the claim. The trial court found coverage and a jury awarded Glacier $9,000. Travelers’ summary judgment was granted as to Glacier’s bad faith claim. Everybody appealed and the Tenth Circuit affirmed.
In Wagner v. American Family Mutual Insurance Company, Wagner found a leaking pipe under her home, which eroded the soil and caused her slab foundation to settle and crack, which damaged the walls and floors. Her insurer, American Family, agreed there was damage, but refused to pay, claiming there was no covered loss because the "policy excludes damage caused by continuous or repeated leakage." Wagner sued, claiming bad faith, but the trial court granted American Family's motion for summary judgment. The Tenth Circuit affirmed.
The Tenth Circuit found the policy was not ambiguous.
Ms. Wagner's primary argument is that an “inherent conflict” exists between the earth movement exclusion, which excludes coverage of her claim, and the “settling exclusion” found under LOSSES NOT COVERED, 6(e), which covers losses caused by water when settling causes “water or steam to escape from a plumbing ... system.” In support, she contends that (1) the exception to the settling exclusion provides a clear grant of coverage without referencing any other policy exclusions or limitations, and that her interpretation of coverage under this provision was confirmed by an American Family sales agent; and (2) American Family presented no evidence to rebut that the damage to her house comes under the exception to the settling exclusion due to either wear-and-tear, deterioration, defect, or a mechanical breakdown of the leaking pipe.
There was no ambiguity in the earth movement exclusion, and the damage claimed came within the exclusion. Furthermore, there was no unreasonable delay and denial of the claim which would subject American Family to bad faith. In Colorado “the tort of bad faith depends on the conduct of the insurer regardless of the ultimate resolution of the underlying compensation claim” but the insurance company's actions were reasonable as a matter of law, precluding a bad faith claim. Summary judgment was affirmed.
In Porter v. Oklahoma Farm Bureau Mutual Insur. Co., 2014 OK 50, the trial court dismissed a case for bad faith and breach of contract along with a class certification claim. Porter claimed that Oklahoma Farm Bureau (OFB) was in bad faith for denying the claim in light of a previous court of appeals decision, Andres v. Oklahoma Farm Bureau Mutual Insurance Co., 2009 OK CIV APP 97, which found the policy ambiguous and required coverage based on the reasonable expectations of the insureds. The Oklahoma Supreme Court affirmed in part and reversed in part. The Oklahoma Supreme Court affirmed the dismissal of the bad faith and fraud claims, and reversed the dismissal of the breach of contract claim -- and the certification issue. The class certification was dismissed as a consequence of the dismissal of the individual breach of contract claim.
Bad Faith. There was no bad faith in failing to follow a Court of Civil Appeals decision that did not constitute the law at the time of an insurer's resistance to payment. Skinner, 2000 OK 18, ¶ 19, 998 P.2d at 1223-24. A split in authority does not render the policy provisions ambiguous.
Breach of Contract. The court said that if the damage was caused by a sewer back up, it was excluded, but if it was caused from the plumbing system, there was coverage. The trial court erred in dismissing the breach of contract claim because the allegations stated a claim for breach of contract.
Class Certification. Because the district court's dismissal of the individual breach of contract claim was reversed, and because the trial court dismissed the class action claim because of the dismissal of the individual breach of contract claim, the district court must revisit the class-action breach of contract claim on remand.
In Browning v. American National (Okla. App., not published), the insureds made a claim against American for water damage to their home. Apparently, the builder failed to put a vapor guard between the bricks and the inside of the house and water got through, causing damages and mold. The Brownings got a judgment against the builder, and sought damages from American, claiming that American denied the claim in bad faith. Summary judgment to the insurer was affirmed. The policy clearly excluded damages caused by construction defects and by fungus.
Before the issue of an insurer's alleged bad faith may be submitted to the jury, the trial court must first determine as a matter of law, under the facts most favorably construed against the insurer, whether the insurer's conduct may be reasonably perceived as tortious." Further, determination of liability pursuant to the insurance contract "is a prerequisite to a recovery for bad faith breach of an insurance contract." Because this Court has found that the Brownings' claimed losses are excluded under the homeowners policy and that American National did not breach the policy terms by denying payment for those losses, we also find that the Brownings cannot recover for bad faith breach of the insurance contract. "Indemnity for loss under the contract is the centerpiece of a bad faith action."
In Berendes v. Geico Casualty Co., the 10th Circuit (Utah) (unpublished) affirmed summary judgment in favor of the defendant insurance company on a bad faith claim. Plaintiff said the insurance company was in bad faith because there was no offer of policy limits within 30 days. Plaintiff sued the tortfeasor, got an excess judgment, and went after the insurance company. But the insurer HAD offered policy limits, which were rejected by plaintiff’s counsel as conditional, since the insurer asked for a waiver of subrogation from Plaintiffs insurer and requested information on the hospital lien. Rather, it was the plaintiff’s rejection of the settlement checks which caused undue delay; and those actions did not amount to bad faith by the insurer.
The assignability of tort claims was raised; and the court also found there was no duty of good faith to a third party claimant.
In Anchondo v. Dunn, (10th Cir, NM, unpublished), the lawyer (Dunn), who represented the defendant ACA in a class action under the Fair Debt Collection Practices Act, was ordered to pay the plaintiffs' damages and fees as a sanction for failing to disclose the existence of a professional liability policy which could have covered the claim. The insurer denied the claim as untimely.
More specifically, the district court found that Mr. Dunn and Mr. Backal (Mr. Backal was ACA’s president, his bankruptcy precluded any finding against him) knew ACA had a professional liability policy sufficient to cover the amounts owed to plaintiff; that the pair acted in bad faith in failing to disclose (indeed, denying) the existence of this coverage despite appropriate requests during the discovery process; that the pair acted in bad faith in failing to file a timely claim on the policy; and that Mr. Dunn’s special relationship with ACA and his participation in the scheme made it appropriate to hold him jointly liable with Mr. Backal.
The district court cited a number of facts supporting its decision including its disbelief of Mr. Dunn’s and Mr. Backal’s explanations for their conduct. The court relied on the fact that ACA had professional liability coverage for suits arising from its wrongful acts; that Mr. Dunn and Mr. Backal knew this; and that during discovery Mr. Dunn failed to turn over documents reflecting insurance applicable to the suit; and that the pair allowed the period for filing a timely claim to lapse. All these facts, quite apart from and in addition to the court’s disbelief of Mr. Dunn’s and Mr. Backal’s testimony, contributed to its inference of bad faith.
The sanctions were affirmed and the matter remanded to determine attorneys fees on appeal.
In Tran v. Nationwide Mutual Ins. Co, (unpublished) Ms. Tran was injured in an accident with an uninsured motorist. She filed a claim with Nationwide. After Nationwide made several requests for medical bills, Ms. Tran's attorney submitted them with a demand for payment of policy limits. The bills totaled approximately $11,000. There followed several rounds of offers between Nationwide and Tran's attorney. At some point, the lawyer demanded payment of the undisputed amount of the damages, but Nationwide declined. Eventually, Tran sued Nationwide for breach of contract and bad faith. The parties filed summary judgment motion on the issues of bad faith and breach of contract. The trial court granted Nationwide's motion and denied Tran's motion and Tran appealed. The 10th Circuit affirmed.
Tran claimed that Nationwide was in bad faith for not tendering the undisputed amount of the claim until after suit was filed, and was in breach of contract for not paying her the non-economic (pain and suffering) damages to which she was entitled. Tran relied on the Quine case which was previously summarized here. There was no bad faith because there was a legitimate dispute as to the value of Ms. Tran's claim. There was no breach of contract because there was no evidence of Ms. Tran's non-economic damages presented to the trial court.
In Porter v. Farmers Insurance Co., (unpublished decision) the insured, Porter was in a one car accident in 2007. Porter anonymously called in the accident in 2008, and then identified himself and told Farmers about the accident in 2009. Porter initially claimed he did not recall the circumstances of the accident, but thought it was a one car accident. Later, he claimed another car was involved which caused the accident. Before the accident, Porter added the car to his policy. Porter said he wanted to add it as an additional car, but the agent replaced the truck Porter had insured with the car. Porter had previously signed a UM waiver on his truck, but did not sign one on the car.
Farmers decided that UM coverage was imputed as a matter of law and tendered payment. Porter's lawyer told Farmers to withhold payment while it was determined whether there were any liens on the payment. Eventually, in October, 2011, payment was made. Porter sued for breach of contract and bad faith. Summary judgment to Farmers was affirmed by the Tenth Circuit. The trial court held that to the extent UM coverage was imputed by law, Farmers’ payment of the statutory limit entitled it to summary judgment on the breach of contract claim. Denying Mr. Porter’s bad faith claim, the court held that Farmers’ investigation was adequate and its delayed payment was reasonable.
The Tenth Circuit states:
Mr. Porter’s breach of contract claim fails for two reasons. First, Mr. Porter has not offered evidence from which a reasonable jury could find that Farmers breached its contractual duties—express or implied. Farmers only has a duty to pay UM coverage where its insured suffers damages due to an uninsured motorist or a hit-and-run. In the event of an accident, “notice must be given to [Farmers] promptly” and must include “the time, place and circumstances of the accident.” The first time Mr. Porter gave notice of his UM claim was August 4, 2009—over two years after the accident. Farmers promptly investigated this allegation but found no evidence of a second driver. . . .It was not until his November 2009 EUO that Mr. Porter first mentioned the other vehicle. Less than seven weeks later, Farmers offered full payment of the UM coverage. Second, Mr. Porter failed to offer evidence of any damages resulting from the alleged breach. Mr. Porter claimed he was entitled to prejudgment interest on the UM payment. It was Mr. Porter who initially requested a delay in payment, and the later delays were not the fault of Farmers. Accordingly, it would be improper to hold Farmers liable for delays beyond its control.
As to bad faith, the delay in payment was reasonable while Farmers investigated the claim. Also, there was a legitimate dispute as to whether the accident involved an uninsured motorist. Farmer's decision to seek counsel did not cause unreasonable delay as stated by Porter's expert, Diane Luther. "Ms. Luther contends that the retention of counsel and subsequent EUO were unnecessary because Farmers already had the information necessary to decide Mr. Porter’s claim. But this conclusion is simply contrary to the facts viewed against a backdrop of the applicable law, and we need not accept it as true." It was in the EUO that Porter mentioned the other car for the first time. And, the delay in payment was reasonable, since Porter's attorney requested the delay.
There was no inadequate investigation. It is unclear whether additional investigation would have uncovered other facts. There was no duty to investigate based on the telephone call where Mr. Porter failed to identify himself.
In Blakely v. USAA Casualty Insurance Co., the insureds had a fire in their basement. USAA paid for part of the loss, but the Blakely’s were dissatisfied and sought arbitration. The arbitration awarded the Blakelys much more than USAA paid, but less than the Blakelys wanted. The Blakelys sued for bad faith. Summary judgment was granted to USAA, and the Tenth Circuit reversed.
Under Utah law, the implied obligation of good faith and fair dealing requires “at the very least, that the insurer will diligently investigate the facts to enable it to determine whether a claim is valid, will fairly evaluate the claim, and will thereafter act promptly and reasonably in rejecting or settling the claim.” In this case, although the facts were undisputed, it was still improper to grant summary judgment because under Utah law, “[w]hether there has been a breach of good faith and fair dealing is a factual issue, generally inappropriate for decision as a matter of law.” Furthermore, “the fairly debatable defense should not be resolved through summary judgment if reasonable minds could differ as to whether the defendant’s conduct measures up to the standard required for insurance claim investigations.” The court found that the undisputed facts demonstrate that “reasonable minds could differ” as to USAA’s compliance with Utah’s standard for good faith and fair dealing, such that summary judgment was improper. The court also found that the parties entire course of conduct was relevant.
The facts relied upon for denial of summary judgment included: 1) USAA refused to replace a number of charred floor joists, and only replaced a small section of burned subflooring after repeated complaints from Plaintiffs. Even if USAA“performed all the repairs identified in [the structural engineer’s] report,” it is irrelevant, since the report specified that it only addressed structural concerns. In fact, the report suggested additional repairs were necessary to address the joist manufacturer’s warranty and “odor, or finishing difficulties;” 2) USAA’s structural adjuster refused at times to communicate with Plaintiffs; 3) USAA’s adjuster claimed not to be able to smell smoke, even though the appraisers could smell smoke three years later; 4) USAA’s personal property adjuster did not travel to Utah, but instead delegated her duties to the wife of the contractor, who was not an adjuster.
USAA then claimed that Plaintiffs never submitted a sworn statement in proof of loss as required by the policy. USAA did not invoke this provision when it denied Plaintiffs’ additional claims, and USAA never told Plaintiffs they needed to provide a proof of loss. In fact, USAA apparently made its initial payouts without receiving a proof of loss. USAA cannot, at this late date, invoke a contractual provision it failed to rely on in its initial settlement of Plaintiffs’ claim. Additionally, the signed proof of loss was only necessary to trigger USAA’s duty to pay money. It was not relevant to whether USAA acted reasonably in investigating and evaluating the claim.
In Colony Insurance Co. v. Burke, a child placed in foster care by the state died, apparently of neglect while in Jones' care. Oklahoma purchases liability insurance for foster parents who are licensed and/or certified by the DHS. Two companies which provided that insurance are United National Insurance Company (“United”), which defended Jones (Foster parent) in the wrongful death action, and Appellee Colony Insurance Company (“Colony”). Colony’s and United’s policies each had a $300,000 policy limit. Colony claimed that its policy did not cover the claim, yet before trial the insurers offered $300,000 total to settle the claim. The Estate of the child rejected the offer, but countered for the limits of both policies. This offer was rejected by the insurers and at trial, the jury awarded $20 million.
After the judgment, Colony filed a declaratory judgment action, claiming it had no duty to defend or indemnify Jones as a result of the Estate's wrongful death action. Of course, Jones and Estate counterclaimed for bad faith, breach of contract, etc., and Estate brought in United and asserted similar claims against it. Before United's motion to dismiss was granted, however, Estate, Jones and United settled their claims. United paid the Estate $2.75 million and the Estate dismissed its third-party claims against United. Separately, Jones agreed to pursue her pending counterclaims for breach of contract and bad faith against Colony, and to dismiss her state-court appeal of the underlying wrongful-death judgment, in exchange for which the Estate promised to limit its execution on the underlying judgment against Jones to 75% of any amounts Jones ultimately recovered from Colony.
Meanwhile, Colony filed a motion to dismiss claiming the Estate had no standing to assert contractual or bad faith claims against Colony. The district court granted Colony’s motion as to all of the Estate’s claims except for its claim for garnishment. Colony and Jones then settled for $4 million. It was agreed that $300,000 of the $4 million was Colony's policy limits and that Jones would pay Estate 75% of the $4 million per the prior agreement between Jones and Estate. Colony then sought summary judgment against Estate on the garnishment claim, claiming the payment to Jones (and Jones payment to Estate) in amounts in excess of the policy limits extinguished the garnishment claim. The district court agreed and the Tenth Circuit affirmed.
While an insurer has a duty under Oklahoma law to deal fairly and in good faith with its insured, an insurer has no such duty to a third party claimant. Third parties may have standing to bring contractual or bad-faith claims against an insurer, however, where there is “a contractual or statutory relationship” between the insurer and the third party. While the foster child was an insured under the policy, it was a liability policy; thus, the child/Estate was only insured by the policy for claims against the child/Estate, not for claims by the Child/Estate. Where a person making a third-party claim under a given liability policy also happens to be an insured, the insurer’s duty to that person, with respect to that claim, is defined not by the person’s status as insured, but by the person’s status as claimant.
The Court then found the Estate is not a third-party beneficiary with standing to enforce the Colony policy because the policy was not made expressly for the foster child's benefit. Colony’s policy, as a third-party liability policy, did not pay first-party benefits even to foster parents, let alone to foster children. The Oklahoma statutes do not indicate that the provision of liability coverage to the foster parent is intended or required to benefit the foster child. Instead, it could protect the foster parent from liability resulting from the foster care arrangement. This case cannot be decided by the types of insurance policies DHS was authorized to purchase. It must be decided by the type of insurance policy DHS in fact purchased, and the type of policy Colony in fact wrote.
The Tenth Circuit found there was no requirement to certify the questions to the state supreme court. It then affirmed the summary judgment on the garnishment issue. It is only where the insurance company has been found liable for bad faith that it has liability in excess of policy limits. No such finding was made in this case and Jones dismissed the claims against Colony. Thus, Colony's liability to the Estate was limited to its policy limits. Since the Estate received the policy limits and more, it had no further claims against Colony.
A judgment creditor (such as the Estate) may proceed against a garnishee (such as Colony) only to the extent that the garnishee (Colony) is liable to the judgment debtor (Jones). The fact that a judgment debtor (Jones) owes the judgment creditor (Estate) more than the garnishee (Colony) is liable for does not mean the judgment creditor (Estate) may indiscriminately garnish third parties until fully satisfied. The Estate’s apparent argument that a garnishment claim still lies against Colony because Jones still owes the Estate more money is meritless.
Furthermore, the trial court properly denied the Estate more time for discovery because the Estate had failed to state with specificity how the additional discovery it sought to undertake was relevant to its opposition of the summary judgment motion.
Finally, the court denied the parties' unopposed motion to seal certain records and briefs, citing the presumption in favor of access to judicial records. While part of what the parties wanted to seal were the settlement agreements which said they were confidential, the parties made those agreements central to the case -- in particular through the Estate’s garnishment counterclaim and Colony’s motion for summary judgment on that counterclaim.
Morton v. Progressive Northern Ins. Co. (unpublished)
While boating over a Memorial Day weekend, Paul Morton’s boat motor was damaged, he claims from a submerged object. His insurer, Progressive Northern Insurance Company, concluded the damage was caused by wear and tear and mechanical failure, and refused to pay for the repair. Morton sued Progressive for breach of duty to deal fairly and to act in good faith. A jury found in favor of Progressive. Mr. Morton appeals, challenging several of the district court’s evidentiary rulings and its grant of Progressive’s motion for attorneys’ fees.
The Court of Appeals affirmed. It found that Morton failed to identify his mechanics as experts as required by the rules. Thus, the trial court properly excluded their opinions as to how the motor was damaged. Further, such opinions were not proper lay testimony. The court found that disparaging remarks about the Progressive adjuster were properly admitted as at least marginally relevant to rebut Mr. Morton’s character and credibility evidence as well as to rebut his characterization of his interactions with the adjuster and other Progressive employees. Objections as to Progressive’s witnesses testimony were not specific, or were not made on the record. There being no plain error, the trial court’s ruling was affirmed. Finally, attorneys fees were properly awarded to Progressive as “the ‘core element’ of the damages sought . . . [was] composed of the insured loss.”
Andres v. Oklahoma Farm Bureau is the second case arising out of the denial of a homeowners claim. In the first case, Andres v. Oklahoma Farm Bureau Mut. Ins. Co., 2009 OK CIV APP 97, 227 P .3d 1102, (Andres 1) the court held that, although OFB had a reasonable basis for denying coverage and therefore was not liable for bad faith, Plaintiffs claim was in fact covered under OFB's policy. Thus, Plaintiff was entitled to judgment on her breach of contract claim as a matter of law. The case was remanded with directions to the trial court to enter judgment in Plaintiffs favor on the latter claim, and to "set the matter for trial on the issues of damages, attorney fees, and costs."
After remand, OFB made an offer of judgment and then sought a scheduling order and additional discovery. When OFB objected to Plaintiff’s motion for summary judgment, Plaintiff filed this action, claiming that OFB’s actions since the remand amounted to bad faith. OFB was granted summary judgment and Andres appealed.
The essence of Plaintiffs bad faith claim is her contention that OFB failed to initiate and pursue an independent investigation to evaluate her claim once the appeal in Andres I was concluded. Oklahoma law is clear that an insurance company has a duty to its insured to conduct an investigation of a claim that is "reasonably appropriate under the circumstances," and to "promptly settle the claim for the value or within the range of values assigned to the claim as a result of its investigation." Newport v USAA, 2000 OK 59, 11 P.3d 190, 196-97. What is "reasonably appropriate under the circumstances," in terms of an investigation, of necessity will differ depending on the facts of a particular case. In this regard, it has been noted that "[o]nce a court ... proceeding is commenced seeking insurance benefits, normal claim handling is superseded by the litigation proceeding." "To date, the courts have uniformly rejected the argument that an insurer can be guilty of bad faith for simply defending itself in a coverage litigation and taking advantage, even zealously so, of every right afforded under applicable state and federal discovery rules."
Thus, the court found that Plaintiff could not pursue a bad faith claim based on failure to investigate while the matter was in litigation. Neither party suggests that the value of Plaintiffs claim, or the amount of her damages, was undisputed. Thus, summary judgment was proper.
Please note this is an unpublished decision and is not precedential.
In Bannister v. State Farm, Bannister was involved in a one vehicle accident. Bannister claimed that a car cut off the car in front of him, and the car in front of him slammed on the brakes. Bannister had to lay his motorcycle down, and was injured. When State Farm denied the claim, Bannister sued for breach of contract and bad faith. Later, though, Bannister withdrew his breach of contract claim. The jury found for Bannister on the bad faith claim and awarded him $350,000 actual and $350,000 punitive damages. The trial court granted State Farm's judgment as a matter of law, saying there was a reasonable dispute as to whether the accident was Bannister's fault. The Tenth Circuit affirmed.
The court noted that Bannister admitted he was driving under the influence, speeding and following too closely. These facts reasonably supported a legitimate dispute as to whether Bannister was majority at fault in his accident; and that no evidence suggested that further investigation would have undermined the State Farm’s legitimate basis for disputing the claim. No other witnesses were found regarding the accident, so the determination was based on the police report and Bannister's own statements.
On appeal, Bannister asserts that State Farm’s investigation was inadequate. For example, Bannister argues that “had State Farm taken a recorded statement, it could have and should have asked Bannister whether he was (1) drunk, (2) speeding and/or (3) following too closely.” But Bannister does not explain how the answers to those questions would have altered the factual basis on which State Farm reasonably disputed coverage. Critically, Bannister’s truthful answers to those questions would have confirmed that his blood-alcohol level was above the legal limit; that he was speeding by 5-10 mph; and that he was following too closely. All of these show that State Farm had a reasonable basis to deny the claim.
Bannister claimed that because an element of the claim of bad faith is that the insurance company owed but did not pay benefits under the policy, he should be able to keep at least the policy limits of $125,000. Bannister cited some criminal cases dealing with lesser included offenses. But the court said that Bannister made a tactical decision to withdraw the breach of contract claim and could not get it in through the back door. The court states:
[W]e are unaware of any precedent extending that criminal doctrine to this civil context, such that a forsaken contract claim would be transformed into an independent sub-claim of a separate tort claim, upon which recovery could be independently awarded. We do not interpret the Court of Civil Appeals of Oklahoma’s decision in Cales v. Le Mars Mut. Ins. Co., 69 P.3d 1206 (Okla. Civ. App. 2002), to compel a contrary conclusion. Cales held that a new trial was warranted in light of the trial court’s improper decision to bifurcate the plaintiff’s breach of contract and bad faith claims into separate trials. . . .However, notwithstanding Cales’s “not[ing]” that the plaintiff’s breach of contract claim and bad faith claims comprised “one cause of action,” the actual holding of Cales was that it was improper to bifurcate the consideration of the “two interrelated theories of recovery” when both theories had been asserted. Id. Cales did not hold that a plaintiff could recover under the ‘lesser-included’ theory of breach of contract when he had earlier chosen to abandon that theory.
Because there was a reasonable basis for State Farm's determination that Bannister was mostly at fault for the accident, the trial court's grant of Judgment as a Matter of Law is affirmed.
In Mendenhall v. Property and Casualty Insurance Company, the widow of a man killed when a truck overturned while he was working at another man’s farm appeals the trial court’s grant of summary judgment in favor of an insurance company. The Missouri Supreme Court reversed and remanded, finding policy language ambiguous. Ambiguous language in an insurance policy is construed against the insurer and in favor of the insured. This case turns on whether the man was “furnished to” the farm owner for employment. It is not necessary for a business to have an agency or employment relationship with a person to “furnish” him for other employment. Here, a business owned wholly by the farm owner referred the man to the farm owner, who hired the man solely on the basis of that referral. Under these facts, the man was “furnished to” his employer and, therefore, was a “temporary worker” subject to coverage under the policy.
The dissent disagrees with the majority’s finding that a third party can furnish a temporary worker to an employer merely by recommending or referring the worker and, therefore, would affirm the trial court’s grant of summary judgment. "To furnish" is not synonymous with recommending or referring the worker. By holding a person furnishes an employee to an employer by recommending or referring him, all part-time and seasonal employees who are recommended or referred to their employers will be treated as temporary workers not covered by their employers’ workers’ compensation insurance, which defeats the purpose of the workers’ compensation laws.
In Watts v. Lester E. Cox Medical Centers, a woman whose son was born with catastrophic brain injuries filed a medical malpractice suit against the medical center and her doctors for providing negligent health care services. The jury awarded $1.45 million in non-economic damages. It also awarded $3.371 million in future medical damages reduced to a present value of more than $1.747 million. The trial court allowed the providers to pay half the future damages in a lump sum immediately and the other half over 50 years. In a 4-3 decision written by Chief Justice Richard B. Teitelman, the Supreme Court of Missouri found the non-economic damage cap on common law claims violates the right to a jury trial guaranteed by the Missouri constitution since it caps the jury’s award of non-economic damages wholly independently of the facts of the case. As such, it necessarily infringes on the right to trial by jury. Statutory damage caps were not permissible when the constitution was adopted in 1820 and, therefore, remain impermissible. The right to trial by jury cannot “remain inviolate” when an injured party is deprived of the jury’s constitutionally assigned role of determining damages according to the particular facts of the case. To the extent Adams by and Through Adams v. Children’s Mercy Hospital, 832 S.W.2d 898, 907 (Mo. banc 1992), holds that the section 538.210 cap on non-economic damages does not violate the right to trial by jury, it is overruled. Because the trial court here reduced the non-economic damages in reliance on Adams, that aspect of the judgment is reversed.
The court also remanded the determination of the payout for future damages.
In Remund v. State Farm Fire & Cas. Co., the plaintiff built his cabin over a creek. He wanted flood insurance to cover any damages caused to his cabin or to the piers and channel which supported his cabin and affected the flow of the creek. He was told the policy would cover any damage to his property. But when high runoffs did damage the piers and channel, the claim was denied. He sued State Farm for breach of contract, breach of warranty, estoppel, and bad faith. The federal regulations on flood insurance say that representations regarding the extent and scope of coverage which are not consistent with the National Flood Insurance Act or the Program’s regulations, are void. Summary judgment to State Farm was affirmed on appeal.
The court found that the claims were preempted by federal law. 44 C.F.R. § 61.5(e). The regulation creates the legal fiction that an insurance agent “acts for the insured,” instead of for her employer (the private insurance company). Thus, § 61.5(e) shields the private insurance company from liability for certain of the agent’s tortious acts. Whether this is good public policy because it makes participation in the NFIP more attractive to private insurance companies, or bad public policy because it may result in injustice for some insureds, is not for the courts to decide.
In Walker v. Progressive, the Tenth Circuit affirmed a summary judgment in favor of the insurer on the plaintiffs’ bad faith claim. The bad faith claim involved the investigation of the theft loss of plaintiffs’ Tahoe while they were on vacation. The Tahoe was found later, burned. Progressive found that the steering column was not damaged, the car was for sale when it was stolen, it was a gas guzzler and plaintiffs had all the keys. Progressive said these were red flags for fraud, and had its Special Investigation Unit (SIU) investigate the claim. Plaintiffs were out of town when the theft occurred and Progressive wanted photos of the vacation. When the photos were received, they appeared altered. In addition, although the plaintiffs had said there were two keys, a third showed up. The key and the photos were explained and the claim was paid.
Plaintiffs’ bad faith claim is founded on the contention that Progressive’s investigation was both “untimely” and “improper,” and does not concern the disagreement between the parties concerning the value of loss or Progressive’s right to conduct a fraud investigation. The gist was the way Progressive handled the third key and photo issues. Plaintiffs offered no explanation as to how they were damaged by the alleged unreasonable actions of Progressive, which is a required element of the bad faith claim.
Once Progressive verified that the Walkers were out of town during the date of loss, it authorized
coverage for the claim, even though the origin of the third key remained unresolved. Thus, “it was irrelevant when Progressive determined the origin of the third key because Progressive agreed to pay for the repairs to The Vehicle in November 2008.” The expert report prepared after the lawsuit was filed and after payment was authorized was irrelevant to the claim at issue – and was prepared in response to the lawsuit itself.
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.
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.
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.
While on the face of the decision, it limits the UM carrier's liability for bad faith where the bills have been paid, the flip side of the decision is to place a duty on the UM carrier to pay bills related to the accident without a release.
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.
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.
Insurer Did Not Act in "Bad Faith" by Delaying Payment of a Settlement Pending Determination of Medicare's Conditional Payment Amount
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
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.
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.
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.
In Blakely v. USAA, the Blakelys, (Homeowners) sued USAA after a fire damaged their home. USAA had paid the Homeowners nearly $100,000 for the loss. Dissatisfied, the Homeowners invoked the appraisal provision and were awarded nearly $200,000 more. Homeowners then sued USAA for breach of contract, bad faith, and intentional infliction of emotional distress. USAA sought summary judgment on the breach of contract and bad faith claims. It was granted, and the court also dismissed the bad faith claim. The Tenth Circuit affirmed the dismissal of the breach of contract and intentional infliction of emotional distress claims but reversed the dismissal of the bad faith claim.
The breach of contract claim was properly dismissed because by paying all amounts awarded under the appraisal, USAA had fulfilled its contractual obligations to Homeowners. The intentional infliction of emotional distress claim was properly dismissed because the conduct complained of was not outrageous enough. But the bad faith claim was dismissed as frivolous. It was not raised in summary judgment motions. Because the Tenth Circuit did not think the bad faith claim was frivolous, this part of the trial court’s decision was reversed.
It is always interesting when the court finds that the insurance company can be liable for bad faith even where it has fulfilled its contractual obligations to the insured.
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.
Attorneys fees opinion
This case has some interesting issues. First, it is interesting that the trial court (United States District Court for the Western District of Oklahoma) and the Tenth Circuit found that Oklahoma law should apply because it would provide a fuller measure of damages for the failure to pay insurance benefits.
In addition, it shows the need to study appellate procedure before trial so that arguments are not waived by failing to properly preserve them in the trial court.
Finally, it shows that mechanical breakdowns which occur within weeks after an accident and for which there is evidence that the accident caused or contributed to the breakdown, should be covered by insurance.
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.
The bad faith discussion is interesting. The court says it won't find bad faith in the absence of coverage, and that conduct by an insurance company that doesn't cause damages to the plaintiffs will not support a bad faith claim. This language will be seen quite a bit in bad faith litigation in Oklahoma.
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.
It is interesting that the court found that a definition could create coverage, as usually coverage is found in the coverage clause, not in definitions. It is also interesting that the court was not interesting in trying the claims handling process of the defendant insurance company.
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.
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.
Mansur did not dispute that that benefits under the APC provision were dependent on the parties’ agreement to an alternate plan. Mansur claimed, however that an agreement was reached on the type of care to be given and it was not necessary to agree to the amount of benefit in order for there to be a valid agreement. PFL claimed that the payment level was an essential part of the plan, and failure to agree on that level meant that no agreement was reached. The court agreed with PFL. The examples of APC benefits in the policy included building a ramp or making bathroom modifications. The court reasoned that if PFL agreed to make those modifications, it would not be paying the contractors $80/day. It further found that PFL did not act in bad faith by failing to pay even the amounts it initially offered. There was no duty under the policy to offer any APC benefits because Mansur was not in a nursing home when she sought additional benefits, as required by the policy. An insurer does not act in bad faith by refusing to provide benefits that it has no obligation to provide.
(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.
“Swiss Reinsurance and Westport are two of the two member companies in the unincorporated association known as Industrial Risk Insurers,” the judge noted. “In its complaint, Felman alleges that it ‘purchased a commercial Property Insurance Policy issued by the Insurers,’ which it identifies IRI, Westport and Swiss Reinsurance. Based on the abovementioned evidence, the Court finds that the policy is, at a minimum, ambiguous as to Swiss Reinsurance’s role. The insurance contract must therefore be construed against Swiss Reinsurance and liberally in favor of Felman.”
In a case which has involved the interpretation of Oklahoma's arbitration statutes and the amendments to those statutes, a federal judge has ruled that an arbitration agreement between an insurer and its reinsurer is broad enough to require that any bad faith claim the insurer may have should be arbitrated as well.
The case was filed in the Northern District of Oklahoma by MidContinent against GenRe (Case No. 06-cv-00475) The order prohibits MidContinent from amending its complaint to add a bad faith claim but notes that MidContinent could include such a claim in the arbitration.
This case was undoubtably complicated by the recent flurry of amendments to the Oklahoma arbitration statutes. Those statutes have always prohibited arbitration of insurance matters unless permitted by statute. But there was always an exception to that prohibition for agreements between insurance companies -- at least until the statutes were amended in 2005 and the legislature omitted the exception. The 2005 amendments were retroactive; and then, in 2008 the "between insurance companies" exception was put back in. The 10th Circuit has ruled that the 2008 amendment was also retroactive, so would apply to the dispute.
When Pitts' car was totaled, he got his insurance company to get him another. But his totaled car had a full powertrain warranty on it, while his replacement car did not. He figured that cars with warranties were worth more than cars without them. The insurer claimed that the warranty was not covered as the policy limits liability to the lesser of actual cash value or cost of replacement. Since the matter was undecided, and there was an arguable basis for the denial of the claim, the summary judgment to the insurer on the bad faith claim was affirmed.
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.
The court notes that in Duensing v. State Farm Fire and Casualty Company, 2006 OK CIV APP 15, 131 P.3d 127, the Oklahoma Court of Civil Appeals construed the identical provisions and found the lead-in clause unambiguous, but found the earth movement clause was ambiguous. The trial court found both clauses unambiguous. The Tenth Circuit noted that the opinion of the Oklahoma Court of Civil Appeals is not precedential. On appeal, the homeowners claimed that the earth movement clause was ambiguous, not the lead-in clause, even though the lead-in clause had triple negatives and other courts had found it ambiguous.
The homeowners claimed the earth movement clause was ambiguous because the term “earth” is not defined in the policy and “earth” could be interpreted to mean many different things, citing Duensing. The court disagreed, stating that “A word in an insurance policy is not ambiguous simply because it is undefined.” When read in context, the word “earth” was not ambiguous. The court states:
The evidence in this case shows that water leaked through the slab of the home to the sub-grade, causing it to swell and then shrink. The policy states, “Earth movement [means] the sinking, rising, shifting, expanding or contracting of the earth, all whether combined with water or not.”
The record is clear that the earth supporting the slab expanded and contracted, as a result of water, from whatever the source, and caused settlement damage. Coverage for this damage was unambiguously excluded by the earth movement clause.
Further, because the term “earth movement” is not ambiguous in context, the court did not reach the issue of bad faith, noting that a determination of liability under the contract is a prerequisite to a recovery for bad faith breach on an insurance contract.
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.
Ball was driving a loaner car owned by Drumright while her car was being repaired. She collided with another car, causing serious injuries. Wilshire, Drumright’s insurer, refused to defend or pay on the subsequent lawsuit, but it did pay the statutory minimum limits to the injured parties in the garnishment action. Ball then sued Wilshire, claiming that Wilshire should have defended her, and also claiming that she was entitled to UM benefits.
The court ruled that public policy required minimum liability limits to be available to the general public. To the extent that the loaned vehicle exclusion meant that no insurance was available to the public, it was invalid. Presumably, the exclusion would be upheld as to any amounts over the minimum required limits.
The opinion does not state whether Ball had her own insurance. We suspect that if she had, however, the loaned vehicle exclusion would have been upheld because the victims would have had minimum limits, even though such limits were inadequate.
The court then said that just because minimum limits were required for the protection of the public, did not mean that there was any duty to defend Ball in the underlying action. The defense duty was contractual, and not required by the compulsory insurance law. Similarly, the court dodged the question as to whether the loaned vehicle exclusion could permissibly remove Ball from the definition of an insured for UM purposes. Instead, the court merely stated that the issue was unsettled, and therefore, Wilshire did not act in bad faith.
In Sizemore v. Continental Cas. Co, the Oklahoma Supreme Court said that if a workers compensation insurer refused to pay benefits when due, the employee could get a certification from the workers comp court about the amount of benefits due. From there, the employee could either (1) file a certified copy of the certification order, with the award attached, in the district court as a judgment and proceed to execution pursuant to section 42(A) or (2) the claimant may file a claim in tort for the insurer's bad faith -- in which case, the amount of unpaid benefits would be part of the damages.
But what about the employee who was ordered to receive treatment, which the insurance company did not provide? That is the situation in SUMMERS v. ZURICH AMERICAN INSUR. CO.,just decided by the Oklahoma Supreme Court. Since there is no monetary award to garnish, the court decides that the only recourse for a worker in that situation is to proceed directly with a bad faith action.
A claimant who has obtained an order certifying that non-monetary benefits have not been provided as ordered does not have the option of enforcing the award as a judgment in the district court. See Okla. Stat. tit. 85, § 42(A). That claimant's remedy is to proceed with a tort claim for bad faith in district court.
The "bad faith conduct by a workers' compensation insurer in refusing to pay an award of benefits to an injured worker is judged by the same standard as bad faith conduct by any other insurer." Id. citing Badillo v. Mid Century Ins. Co., 2005 OK 48, ¶ 28, 121 P.3d 1080, 1094 ("the minimum level of culpability necessary for liability against an insurer to attach is more than simple negligence, but less than the reckless conduct necessary to sanction a punitive damage award against said insurer").
It should be noted, however, that the workers comp insurer is only liable for bad faith after notice and a hearing in the workers comp court. In Summers the court found that there were fact issues precluding dismissal.
In Gaither v. Allstate Insurance Company, the Gaithers sued Allstate for bad faith for failing to pay them under their UM coverage. Summary judgment to Allstate was affirmed on appeal.
The Gaithers with their children stopped at a convenience store to get drinks. There was an altercation inside the store and Mr. Ramirez ran out, grabbed Mrs. Gaither, and put a gun to her head. One child was still in the car, but got away; and Mrs. Gaither was able to get away as well. Mr. Ramirez then drove off and crashed the car. Allstate paid for the car and also paid for medical expenses under its medical payments coverage. But Allstate refused to pay UM to the Gaithers for their injuries. The trial court granted summary judgment to Allstate on all claims:
First, the district court concluded that the injuries suffered by the Gaithers regarding the incident with Mr. Ramirez did not “arise out of the . . . use of an uninsured auto,” thus falling outside the scope of UM coverage.
The court further granted summary judgment in favor of Allstate on the Gaithers’ bad faith claim. The court then concluded that Plaintiffs failed to raise any genuine issue of material fact relating to the Medical Payments coverage. Although the Gaithers had submitted bills that allegedly remained unpaid, the court found that they failed to demonstrate how the bills related to treatment regarding the injuries incurred on September 18, 2005.
In order to be covered for UM, there must be injuries caused by an accident, arising out of the “ownership, maintenance or use of a motor vehicle.” The court found there were accidental injuries, but that those injuries did not arise out of the ownership, maintenance or use of the car. In order for the injuries to be causally related to the use of the car, the use of an uninsured motor vehicle must be related to its transportation nature and the injuries must be “connected to that use.” The court discussed the various cases dealing with the issue of when an injury is caused by the car. Eventually, the Court found that the assault took place outside the car; the Gaithers were not injured by any part of the car; the car was not running when the assault occurred; and that therefore, the Gaither’s injuries were not connected to the transportation use of the vehicle. The fact that the assaults occurred while Ramirez was trying to escape was not sufficient to raise a fact question.
The Tenth Circuit focuses on two facts to deny coverage: first, there was no injury to the Gaithers from physical contact with the car; and second, the car was not running at the time of the injuries. Plaintiffs may have been able to survive summary judgment in state court where the standard is higher than in federal court. But the cases are not helpful. To me, it seems that those injured while someone is stealing their car are injured because of the transportation nature of the vehicle, and are arguably entitled to UM coverage. But, without more, the courts seem unwilling to extend coverage.
Ellis fell through Spaniol’s deck and was injured. She claimed that Spaniol’s insurer, Liberty Mutual, acted in bad faith when it failed to properly investigate and pay her claim. The court held that Ellis, a stranger to the insurance contract, could not bring suit directly against Liberty, and had no claim for bad faith.
The court states: “‘[T]he insurer’s duty to deal fairly and act in good faith is limited. It does not extend to every party entitled to payment from insurance proceeds. There must be either a contractual or statutory relationship between the insurer and the party asserting the bad faith claim before the duty arises.’ Roach v. Atlas Life Insurance Company, 1989 OK 27, ¶ 8, 769 P.2d 158, 161. The record does not reveal, and Ellis does not assert, a contractual or statutory relationship with Liberty Mutual. Her status was one of third-party claimant under the policy.”
Thus, Ellis’ status as a third party beneficiary is not sufficient to state a claim for bad faith against Spaniol’s insurer, Liberty.
Ellis v. Liberty Mutual Insurance Co.
We were recently asked whether a workers compensation carrier could be liable for bad faith for denying a claim. The quick answer appears to be no, there is only bad faith in workers comp where the insurance company fails to pay an award.
This appears to be a contentious issue with the Oklahoma Supreme Court. In the latest pronouncement, Sizemore v. Continental, the court said that it recognizes a tort for bad faith when a workers compensation carrier refuses to pay a workers compensation award. The decision was 5/4 with one concurring and two dissenting opinions. The reason for the multiplicity of opinions is that the court's decision in Sizemore reversed recent opinions in DeAnda and Kuykendall which held that the sole remedy for failure to pay an award was interest on the payment as set forth in the workers comp statutes.
In Whitson, the court said that a workers comp insurer could not be liable for bad faith for a vigorous defense of a claim. But in the seminal Oklahoma bad faith case, Christian, the insurance company had no defense but went to trial anyway, allowed the insured to present his case and then rested without presenting any evidence.
So perhaps the next chapter of this saga will provide some sort of guidance on a bad faith defense without just cause, (bad faith) vs providing a strong defense -- or litigation tactics (not bad faith).
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.
The Embrys bought a truck and financed the purchase. They also purchased a "Debt Relief Waiver Addendum" (DRWA); which would pay the remaining balance owed to the finance company if the truck were destroyed or stolen and the comprehensive coverage paid was less than the amount owed. In other words, it would cover the gap if the insured value was less than balance owed on the note. A clause in the DRWA specifically said that the parties agreed it was not insurance.
The truck was totaled, and after the insurance paid for the loss, there was still owing some $9,000. When that amount wasn’t paid, the finance company took a default judgment against the Embrys for about $10,000. Eventually, the DRWA paid the finance company the balance on the note. Embry then sued under the DRWA, claiming he was treated unfairly and negligently, that the claim was handled negligently, that he was a beneficiary of the DRWA, and that there was a breach of the duty of good faith and fair dealing.
The trial court granted summary judgment and the Court of Civil Appeals reversed.
First, the court distinguished the case from a classic third party beneficiary contract because here, Embry paid for the contract. In a classic third party beneficiary contract case, the third party has not paid for the benefits he or she seeks to recover.
Then, the court found that despite the language of the contract, the DRWA met the definition of “insurance” under Oklahoma law: “Insurance” is a contract whereby one undertakes to indemnify another or to pay a specified amount upon determinable contingencies. 36 O.S. § 102. Whether or not a contract is one of insurance is to be determined by its purpose, effect, contents, and import, and not necessarily by the terminology used, and even though it contain declarations to the contrary.
Thus, the court held that Embry is entitled to the benefit of his bargain. Here, his "bargain" is a DRWA program product composed of an issuer, an administrator of claims, and an underwriter. All three components must function and perform, otherwise the DRWA product is of no value. If he is denied the benefit of that bargain and sustains damages through the bad faith or negligence of any entity that is a necessary component of the bargained-for product in order to make it function as intended, then he is entitled to recover his damages from that entity. Further, Embry is entitled to seek damages against the defendants for bad faith and/or negligence.
EMBRY v. INNOVATIVE AFTERMARKET SYSTEMS , 2008 OK CIV APP 92 , ___ P.3d ___ (OSCN 2008)