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

In Hale v. Allied Insurance, Plaintiff was hurt in an accident involving a non-owned ATV on a wilderness trail.  The ATV was not registered, and not covered by insurance.  Plaintiff claimed he was entitled to UM coverage under his own policies for his injuries.   The insurer denied the claim, relying on an exclusion for accidents involving “any vehicle or equipment . . . [d]esigned mainly for use off public roads while not upon public roads.” Reasoning the ATV was designed for off-road use and the trail was not a public road, the insurer denied the claim.  The trial court agreed, granting summary judgment to the insurer. 

The Tenth Circuit affirmed.  It noted that although "road" wasn't defined in the policy, the policy  distinguishes between public roads and terrain suitable only for specially designed vehicles.  The policy’s language excludes coverage for accidents involving vehicles “designed mainly for use off public roads while not upon public roads.”  The trail where the accident happened was not a road, but an obstacle course, which inexperienced drivers were told to avoid. 

In addition, Plaintiff argued that UM coverage was mandated by Wyoming law, which required motor vehicles be covered; since ATV 's are defined as motor vehicles, they are required to be covered.  But, since this argument wasn't made to the trial court, the Tenth Circuit declined to consider it. 

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 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.

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Brendan Johnson was killed when a vehicle driven by Mark Royal collided with his Chevrolet Cavalier, which he was driving. At the time of the accident, neither Johnson's nor Royal's vehicle was covered by an automobile insurance policy. Johnson was residing with Addrea Stewart, his mother, when the accident occurred. Stewart owned a Ford Explorer, which was insured by American Family Mutual Insurance Company and provided uninsured motorist coverage with policy limits of $100,000 per person/$300,000 per occurrence. Stewart sought Uninsured Motorist ("UM") coverage benefits for the death of her son, Johnson, under the UM provisions of the policy covering her Explorer. American Family filed a motion for summary judgment contending that Johnson was not an insured person under Stewart's policy, relying primarily on a "named driver exclusion" ("NDE") endorsement. The NDE was added to Stewart's policy after its original issuance due to the termination of coverage for Johnson and for his vehicle. The exclusion was in effect on the date of the accident and read as follows:

    This policy does not apply under any of the coverages to any vehicle in the care, custody or control of, or while operated by Brendan Johnson. . . . . All other terms, agreement, conditions and provisions remain unchanged.

Stewart opposed the granting of summary judgment, claiming that she was the injured "insured person" making a claim under her own policy. She claimed that she, as a named insured, was covered under the UM coverage of the policy for wrongful death damages with respect to the death of any person as to whom she is entitled to bring a wrongful death claim; in this case Johnson. The trial court relied on the NDE endorsement, finding the Stewart policy did not apply to any of the coverages if Johnson was driving, and granted summary judgment in favor of American Family. Stewart appealed.

Division One holds: While courts will enforce an NDE when it clearly excludes coverage when any named excluded person is driving, the language of the NDE section here is not effective, by itself, to bar a claim as to UM coverage. Nevertheless, the trial court obtained the right result in the case because the record shows that Johnson owned his own vehicle and thus could not qualify under the policy as an insured person, and because the "bodily injury" was sustained by Johnson, who was not an "insured person." Because Stewart did not suffer the bodily injury herself, as required under the policy, and Johnson was not an "insured person," Stewart could not recover under UM coverage for Johnson's death. The judgment is affirmed.

Stewart v. American Family

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In Hartford Underwriters Insurance Company v. Donna Ledbetter, the Missouri Court of Appeals considered whether an insurance policy’s language was ambiguous thus warranting coverage in favor of the insured.  Ledbetter received injuries in a car wreck  when another car driven by Danny Harris struck her car.   Ledbetter sued Harris for her personal injuries and later settled the suit in exchange for his liability insurance policy limit of $50,000.   Ledbetter then attempted to recover $200,000.00  against her insurer, Hartford, under the Underinsured Motorist provision of the Policy. Hartford denied that Harris’ vehicle was underinsured.  Both parties filed a Motion for Summary Judgment and the trial court entered judgment in favor of Hartford finding that Harris’ vehicle failed to meet the Policy’s definition of an underinsured vehicle.  Ledbetter appealed. 

 The appellate court’s review focused on the Policy’s “Other Insurance” clause pertaining to underinsured motorist coverage. The applicable provision stated, “Any insurance we provide with respect to a vehicle you do not own shall be excess over any collectible insurance providing such coverage on a primary basis.”  Ledbetter argued the provision was ambiguous and required a construction that the underinsured motorist coverage was excess to the tortfeasor liability coverage regardless of whether she occupied the non-owned vehicle because a requirement that she actually occupy the non-owned vehicle was not contained in the policy.

 “Language in an insurance policy is ambiguous if it is reasonably open to different constructions, and the language used will be viewed in the light of the meaning that would ordinarily be understood by a layman who bought and paid for the policy.”  Hobbs v. Farm Bureau Town & Casualty Ins. Co., 965 S.W.2d 194, 197-98 (Mo. App. 1998).

 The Court considered Goza v. Hartford Underwriters Ins. Co., 972 S.W.2d 371, 372 (Mo. App. 1998) where Hartford’s  “Other Insurance” clause, which mirrors the “Other Insurance” clause in question, was found ambiguous and resolved in favor of the insured despite the fact that Goza was driving her own insured vehicle at the time of the accident.  The Goza  Court found the policy ambiguous because one could reasonably interpret the ‘excess coverage’ language as providing coverage for a vehicle that the insured did not own, while the ‘excess coverage’ language could also be interpreted as providing underinsured coverage in excess to amounts recovered from tortfeasor. 

This Court held that an objective examination of the ‘excess’ language of the “Other Insurance” clause suggests that the language might reasonably be interpreted by an average lay person to mean underinsured coverage was excess to amounts recovered from the tortfeasor.  It also could be interpreted to mean that the ‘excess’ language prevailed over the conflicting language contained in the Policy’s definition of an underinsured and Limits of Liability sections. 

 The trial court’s grant of summary judgment was reversed and remanded.

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In Morris v. America First Insurance Company, 2010 OK 35, the Oklahoma Supreme Court in answering a question certified from the United States District Court for the Western District of Oklahoma, found that a UM exclusion violated Oklahoma public policy.  Specifically, the court found that an exclusion which precludes UM coverage for bodily injury sustained by a resident family member, who is otherwise insured by such policy, violates public policy and is void insofar as it requires separate UM coverage on a specific vehicle even though the owner is otherwise covered by the UM provisions of a liability policy he purchased on another vehicle. Morris was injured by an underinsured motorist while in his semi-truck.  Morris did not have UM on the truck, but did have UM on his personal auto.  In addition, Morris qualified as an insured on his mother’s policy because he was residing with his mother when the accident happened.  The court said that the mother’s insurer could not exclude Morris from coverage simply because the policy covering the truck involved in the accident did not have UM coverage where Morris had other UM coverage available to him. 

The court states: 

To now say that an insurance company may exclude UM coverage from a resident insured because a specific vehicle, Mr. Morris's Freightliner semi, did not include UM coverage in its specific policy, violates the line of cases holding that UM coverage follows the person, not the vehicle. Mr. Morris was entitled to rely on this Court's previous holdings in his decision to include UM coverage for his automobiles but not to purchase a separate UM policy for his semi.

 

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In Traders Insurance v. Johnson, the question was whether the daughter, not a named insured, had authority to reject UM (uninsured motorist) coverage on a policy issued to her parents. The answer is “maybe.” Oklahoma’s UM statute limits the right to reject UM to named insureds and applicants. (36 O.S. § 3636 (G)) The daughter was neither, so the court found summary judgment to the insurer was properly denied. Fact issues as to whether the daughter acted as an apparent agent of her parents in signing the UM rejection precluded summary judgment in favor of the insureds. So, the whole case was remanded.

This result surprised me as I would have guessed that the statutory enumeration of who may reject UM coverage would have been considered exclusive, such that agents of the insureds would not be able to reject UM for the insureds.

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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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