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

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

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

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

Hambelton v. Canal Insurance

Attorneys fees opinion

Hambelton v. Canal Insurance 2

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.

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Choice of Law / Service of Suit Endorsement

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

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

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

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

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

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

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

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

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

Summary judgment had been argued without any mention of choice of law rules.  The court also discusses the differences between Kansas and Missouri law on bad faith failure to settle claims.

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

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

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

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