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

In ABC Seamless Siding & Windows, Inc. vs. Brian K. Ward, et al, Martin wanted to start a window and sidings business.  He asked Brian Ward about insurance generally, and workers compensation insurance specifically.  Martin claims that Ward told him if he only had two employees which were officers, he did not need workers comp insurance.  This followed the information Martin received from his former employer, who also told him to be sure to get certificates of liability insurance from his subcontractors to verify that the subcontractors carried workers compensation insurance in the event of a work-related injury.  Of course, Martin did not get workers comp insurance, and an employee of a subcontractor was hurt on the job.  Martin had not gotten a certificate of coverage from the subcontractor, and coverage had lapsed at the time of the injury.  Summary judgment to the insurance agent was affirmed.

The elements of claim for professional's negligent misrepresentation include: in the course of professional's business with specific persons in a specific transaction,  professional gave information that was false for lack of due care, on which those persons reasonably relied to their detriment.  Reliance depends on whether the information was a material factor in decision on the matter advised. Because plaintiff did its own investigation before making a decision on whether to buy workers' compensation insurance, plaintiff could not show reliance on insurance seller's advice.

Because ABC cannot, as a matter of law, demonstrate any reasonable reliance upon the statement attributed to Ward, and because reasonable reliance is a necessary showing for each of the claims ABC raised below, the trial court committed no error in granting summary judgment in favor of Ward. The trial court’s judgment is affirmed

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In Zaloudek Grain Company v. CompSource, 2012 OK 75, Zaloudek had a workers compensation policy with CompSource for 10 years.  Each year, CompSource asked to audit the payroll information to determine the amount of premium for the next year.  When CompSource did not receive the audit information, it cancelled the policy, and refunded the premium.  Four months later, Zaloudek sent in an application and a check for insurance.  A few days after that, two workers were seriously injured in Zaloudek's grain auger.  When CompSource said there was no coverage, Zaloudek sued, claiming that CompSource lacked legal justification for terminating its policy and requested orders to establish there was no lapse in coverage and requiring CompSource to provide coverage for its two injured employees. Zaloudek further requested a finding that CompSource was in breach of contract. On cross motions for summary judgment, the trial court found for Zaloudek.  The trial court found that  36 O.S. § 3639 (Oklahoma statute regarding cancellation of insurance policies) applied to Compsource.  On appeal, the Supreme Court reversed. 

Section 3639 (C) specifies what conditions must occur before a "licensed insurer" may cancel certain coverage. Cancelation for failure to provide audit information is not one of the listed conditions. The Oklahoma Supreme Court found that CompSource is neither an "insurer" for purposes of section 3639 (C) nor is it licensed by the Insurance Commissioner. Therefore, section 3639 (C) does not apply to CompSource.

The trial court found CompSource to be an insurer for purposes of section 3639 (C) based upon CompSource's inclusion in the definition of "insurance carrier" found in 85 O.S. § 3. But those definitions only apply within the Workers Compensation Act. CompSource is also not an insurer as defined by the insurance code.  CompSource is a state department created for the purpose of insuring employers against liability for compensation pursuant to the Workers' Compensation Code. The rational conclusion obtained from the legislature's silence in the general definition of "insurer" along with its specific treatment of CompSource in other parts of the Insurance Code is that the legislature intended for the provisions of the Insurance Code to only apply to CompSource when it specifically refers to CompSource.

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In Waltrip v. Osage Million Dollar Elm Casino, an injured employee of a tribal enterprise brought a claim against his employer's workers' compensation insurer in Oklahoma Workers Compensation Court.  The case was dismissed, based on previous cases where the Tribe had a tribal workers compensation court which reviewed such claims.  But in this case, there was no tribal workers compensation court, so the case should have proceeded in the Oklahoma Workers Compensation court. 

The Oklahoma Supreme Court states: 

The Tribe's sovereign immunity does not place Insurer beyond the reach of the estoppel act when there is no tribal ordinance or forum for the adjudication of workers' compensation claims under a policy of "sovereign nation workers' compensation." Such claims will be adjudicated in tribal court under a tribal ordinance when both law and a forum exist. Only when such law and forum are unavailable to an injured employee will the estoppel act operate to bring the Insured alone under the purview of Oklahoma's Workers' Compensation Code.

It is the absence of a tribal workers' compensation ordinance and the lack of a tribal forum that distinguishes this matter from Cherokee Nation cases in which the Court of Civil Appeals refused to apply the estoppel act to claims asserted under a "sovereign nations workers' compensation" policy. The Cherokee Nation has a tribal workers' compensation ordinance by which it adjudicates workers' compensation claims in its tribal court. If Insurer wishes to be certain that the claims of tribal enterprise employees will not be adjudicated in the Oklahoma Workers' Compensation Court pursuant to the Workers' Compensation Code, it should require that a tribe enact a tribal ordinance and provide a forum for the adjudication of workers' compensation claims before it contracts to insure those claims pursuant to tribal ordinance.

Today's decision in no way holds or implies that the Osage Nation is not immune from the jurisdiction of the Oklahoma Workers' Compensation Court. The Indian sovereignty causes resolved that issue long ago. Additionally, tribal sovereign immunity for the actions of tribal enterprises has been acknowledged widely. That acknowledgment is not diminished by today's holding which is directed only at Insurer's promise to provide workers' compensation benefits to employees of the tribal enterprise. The Osage Nation is entirely within its authority should it choose to enact a workers' compensation ordinance and provide a tribal forum. In the absence of such ordinance or forum, however, Insurer is not entitled to evade liability. Regardless of the tribes' sovereign immunity, the Oklahoma Workers' Compensation Court may exercise jurisdiction over Insurer, which is a Delaware corporation, and its third party administrator.

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Decedent was killed on the job in a traffic accident.  His estate received workers comp death benefits.  His estate also sued the parties involved in the accident for wrongful death.  The workers comp insurer sought to intervene in the tort action, claiming a right to be reimbursed for the payments it made under the workers comp law.  

HELD:  

The Oklahoma State Legislature has not included the insurance company the rights to subrogation for monies paid to an employee's beneficiaries and thus, the workers comp  insurance company has no standing to intervene in the case.  The statutory language is neither ambiguous nor uncertain. The workers comp insurer  may not stand in the shoes of the Employer and since the Employer did not pay any benefits to the employee's beneficiaries, the Employer has no right to seek reimbursement for benefits paid by the workers comp insurer.

McBride v. Grand Island Express, 2010 OK 93

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In McBride v. NES Rentals, an employee was killed on the job in a multi vehicle accident.  The employee's family received workers comp death benefits, then sued the various tortfeasors.  The employer and the workers comp carrier sought to intervene.  The trial court denied the intervention, but the COCA (Court of Civil Appeals) found that the employer should have been allowed to intervene and press its claim regarding death benefits and both the employer and the carrier should have been allowed to intervene and recoup expenses of the last illness and the funeral.  

The case is rather difficult because of recent changes in the workers comp laws in Oklahoma.  It used to be that an employer had no right to subrogate against comp death benefits.  But the statute was changed, and allowed the employer to recover from a third party the amount of death benefit payments made to a claimant's survivors under the Workers Comp Act.

The court states: 

Because §44(d) grants employer the right to recover from the third party causing the death ofits employee, but specifically independent of the death benefits paid to claimant's survivors under the Workers' Compensation Act, the claimant's survivors suffer no unconstitutional reduction or limitation of their recovery against the third-party tortfeasor.

Thus the employer has the right to intervene for death benefits paid by the carrier, and both the carrier and the employer have the right to intervene for last illness and funeral expenses.

This case has not yet been released for publication, and is subject to change. 

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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.

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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). 

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