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

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

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

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Toppins v. Minnesota Life

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

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

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

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

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

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

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

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

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

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

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

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

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In 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. 

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

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. 

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