Uninsured Motorist coverage and Bad faith -- failure to pay undisputed amount -- Okla law

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 Co, (unpublished) Ms.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. 

 

 

No bad faith where delay in payment was requested by insured Oklahoma law

In Porter v. Farmers Insurance Co., (unpublished decision) the insured, Porter was in a one car accident in 2007.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.

No Bad Faith Where Policy Did not Cover Claim

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.

 

Fee dispute not covered under professional liability policy

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

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

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

This policy does not apply:

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

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

. . . .

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

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

No bad faith where policy doesn't cover the claim

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.