Oklahoma Bar Journal
Selected Scenes From the Upcoming Netflix Series: Good Faith – The Uninsured /Underinsured Motorist Episode
By Jacob L. Rowe and Simone Fulmer Gaus
Oklahoma bad faith law is complex. This is especially true of claims involving uninsured/underinsured motorist (UM) coverage. This article was originally intended as an unsmiling analysis of the intersection of these two, complicated areas of law; however, given that the authors, and our readers, have just endured one of the most traumatic years
in recent history, we now believe the subject matter deserves a slightly different approach.1
As such, we invite you to join us in a moment of levity as we explore some common issues we deal with in many cases we have handled involving an insurance company’s violation of the duty of good faith in its handling of UM claims. We hope you enjoy it.
THE UNINSURED/UNDERINSURED MOTORIST EPISODE
VOICEOVER: In the civil justice system, the people are often represented by two separate yet equally important groups: the lawyers who handle claims victims make against tortfeasors and the lawyers who represent victims against their own insurance companies. These are their stories.2
INT. A Swanky, Local Bar – Happy Hour
Good Faith Lawyer sits in a corner booth nursing a club soda with lime, iPhone in hand. In walks Referring Lawyer wearing a beautiful pair of alligator cowboy boots. He sees Good Faith Lawyer and smiles. She rises to shake his hand. He gives her a hug and leisurely slides into the booth.
REFERRING LAWYER: I hope I didn’t keep you waiting too long! I was on the phone with my client. She’s got a helluva bad faith3 case, and I think I could get her a ton of money!4
GOOD FAITH LAWYER: No worries. I just got here. You know, I don’t really care for the term “bad faith.” I think it sends the wrong message. The law says an insurance company is obligated to handle claims submitted by its policyholders in good faith and deal fairly with them, thus the duty of good faith and fair dealing. When people hear the phrase “bad faith,” they think of some sort of a villain in a smoke-filled backroom twirling his handlebar mustache.5
REFERRING LAWYER: What do you mean?
GOOD FAITH LAWYER: Well, the duty of good faith and fair dealing comes in a lot of different forms, but at its core, it just requires an insurance company to conduct a reasonable investigation of the claim made by its insured,6 fairly evaluate the facts gathered7 and pay all benefits it promised the insured it would pay. And it has to do all those things promptly.8So, tell me about this client!
REFERRING LAWYER: She got rear-ended and was hurt pretty bad. When she finished her medical treatment, I made a demand on her UM carrier and told them I needed a response within 30 days, but I heard nothing until 47 days later. They blew the deadline!
GOOD FAITH LAWYER: That’s not good … but it’s not necessarily a violation of the duty of good faith and fair dealing.
REFERRING LAWYER: What do you mean? Under Title 36, they only have 30 days to respond. They broke the law! That’s gotta be bad faith, right?
GOOD FAITH LAWYER: Not exactly. You’re talking about Okla. Stat. Tit. 36, §1250.4(C). That’s part of the Unfair Claims Settlement Practices Act9 that requires an insurer to respond to pertinent communications from a policyholder within 30 days. The Oklahoma Supreme Court has been pretty clear that the UCSPA “does not establish standards of care or standards of conduct for measuring whether an insurer has violated the duty of good faith and fair dealing.”10
REFERRING LAWYER: You mean an insurance company can just ignore people and break the law like that?
GOOD FAITH LAWYER: Did they break the law, though? An insurance company only violates the UCSPA if it violates the statute flagrantly or as part of standard business practice.11 And even then, the UCSPA was designed to give the Oklahoma Insurance Department additional legislative support in regulating insurance companies. It does not create a private cause of action for policyholders.12
But that doesn’t mean it can’t play a role in your case. The Oklahoma Insurance Department tells insurance companies that compliance with the UCSPA is the minimum standard of performance for all insurers.13 Also, insurance companies have to know the law.14
REFERRING LAWYER: So, what do I do?
GOOD FAITH LAWYER: One of the foundational components of the duty of good faith is reasonable conduct.15 If there wasn’t a good reason for the violation of the statute, you might be able to argue it was unreasonable. But you won’t be able to slam your fist on the lectern and tell the jury the insurance company was in “bad faith” and “broke the law.”
Thunder rolls in the distance as the lawyers continue their discussion. The sky darkens. Raindrops begin to fall on the ceiling-height, glass windows.
Two Months Later. INT. Law Office – Late Afternoon
The desk is messy. Files are stacked on both sides of the desk. An iPhone rests on a well-read copy of David Ball’s “Damages 3.” It rings. The display reads “Good Faith Lawyer.”
REFERRING LAWYER: Hey, there! I didn’t think I’d hear from you after you told me my big bad faith case was a no-go.
GOOD FAITH LAWYER: That’s what I was calling about. I wanted to check in on you and your client.
REFERRING LAWYER: Since we talked, I spoke to the UM adjuster. She told me she needed additional medical records before she could complete her evaluation because my client had another car wreck several years ago.
GOOD FAITH LAWYER: How did you handle that?
REFERRING LAWYER: I wanted to tell her to go pound sand! But I gathered the records they requested and sent them in a few weeks ago.
GOOD FAITH LAWYER: That was the right thing to do, you know. Every automobile insurance policy I see places a duty on the insured and their attorney, if they have one, to cooperate in the insurance company’s investigation of the claim. If you or your client refuse to cooperate in reasonable information requests, it jeopardizes their entitlement to their insurance coverage benefits.16 Have you heard anything from the adjuster?
REFERRING LAWYER: Not yet, but she’s on my list. I’ll probably call her when I get off the phone with you.
There’s a knock on the office door accompanied by a garbled voice.
REFERRING LAWYER: I’ll let you know what happens. Gotta go.
Ten Months Later. INT. A Modern Office – Morning
Good Faith Lawyer sits at a conference room table typing on a MacBook Pro while reading from a thick, three-ring binder. Her iPhone buzzes. It’s Referring Lawyer.
GOOD FAITH LAWYER: Hey there! Long time no see. How are you?
REFERRING LAWYER: I’ve been better…
GOOD FAITH LAWYER: Say more about that.
REFERRING LAWYER: Well, I filed suit on that bad faith case we talked about a while back, and I just finished reading the insurance company’s motion for summary judgment. They’re arguing there was a legitimate dispute17 on the value of my client’s claim.
GOOD FAITH LAWYER: That’s pretty common. What exactly are they saying is the legitimate dispute?
REFERRING LAWYER: Their argument is this is just a dispute over the value of the claim. After I gave them the prior medical records they asked for, they offered my client a few thousand dollars. I say it is worth her entire UM policy limit – they say it’s only worth a few thousand dollars. They are also saying that because the $25,000 my client received from the tortfeasor settlement was more than her medical bills, there can’t be a violation of the duty of good faith and fair dealing!
GOOD FAITH LAWYER: There is definitely some authority for that argument. Quine v. GEICO, 2011 OK 88, 264 P.3d 1245 dealt with a similar situation. In Quine, the insured was in the same spot your client is in – the tortfeasor’s insurance payment covered the UM insured’s special damages. Although the Supreme Court was answering a certified question from the Western District about whether a UM insurer’s failure to tender partial payment of a UM claim violated the duty of good faith and fair dealing, its ruling seemed pretty clear.18 It’s easy for an insurance company to get summary judgment in a case involving only general damages where the insured’s special damages have been paid.
REFERRING LAWYER: So, I’m dead in the water, huh?
GOOD FAITH LAWYER: Not necessarily. An insurance company arguing legitimate dispute isn’t the end of the world. Quine was pretty limited in its holding.19 Plus, a legitimate dispute between the insurance company and its insured doesn’t automatically warrant summary judgment unless the insurance company actually relied on it for making its claims decision.20 For example, an insurance company may not win on summary judgment if it didn’t perform a proper investigation of the claim.21 You can also survive summary judgment based on a legitimate dispute defense if there is evidence the insurer “has constructed a sham defense to the claim or has intentionally disregarded undisputed facts” of the claim.22
There is actually still a lot you can work with. The defendant’s insurance company may claim there is a legitimate dispute as to the value of your client’s general damages, but the main focus here should be how the insurance company arrived at its evaluation and why it is evaluating the claim so much differently than you are. You need to take another look at the insurance company’s claim file and make sure they conducted a detailed review of the materials. You need to make sure they didn’t overlook any critical facts23 or misconstrue them against your client. If you can isolate that type of conduct, you need to figure out why it happened. Were the adjusters trained properly? Did they know and follow the law applicable to the claim?24
The key is to properly frame your case and arguments. If you are dealing purely with a dispute about general damages, you’re probably done. But if there is something else there that led to the undervaluation of general damages, you’ve got a fighting chance.
REFERRING LAWYER: Wow. I guess I better get to work. There’s a lot of claim file here to review!
GOOD FAITH LAWYER: Good luck!
ABOUT THE AUTHORS
Simone Fulmer Gaus’s practice focuses on traumatic brain injury litigation and holding insurance companies accountable for violating the duty of good faith and fair dealing. She is a founding partner of Fulmer Sill, a firm designed to create a supportive environment for talented lawyers to seek justice for their clients.
Jacob L. Rowe is a trial attorney with Fulmer Sill PLLC. His advocacy is based on a belief that clients, jurors and other decision makers have the potential to become heroes, and great advocacy comes from crafting compelling stories that empower them to fulfill that destiny.
- This article was written in Dec. 2020. A year the authors believe is best described by a recent advertisement from the online dating service match.com, titled Match Made in Hell, in which Satan and a personified version of the year 2020 fall in love. See www.youtube.com/watch?v=YPq23RWpgPM.
- The substantive language of this introduction is very clearly attributed to the long-running television series Law & Order, created by Dick Wolf.
- In Christian v. Am. Home Assurance Co., 1977 OK 141, ¶6, 577 P.2d 899, 901, the Oklahoma Supreme Court recognized “a distinct tort based upon an implied duty of the insurer to act in good faith and deal fairly with its insured.” It held that such an action is grounded in the “special relationship” between an insurer and its insured. Id. At ¶10, 904. In describing this relationship, the court noted the insurance industry is heavily regulated and “quasi-public” in nature and that insureds have “no bargaining power” or “means of protecting himself [or herself] from the kinds of abuses” that may violate the duty of good faith and fair dealing. Id. The duty of good faith and fair dealing applies to insurance claims made under Oklahoma automobile policies, including those for uninsured/underinsured motorist (UM) coverage benefits. See generally Burch v. Allstate Ins. Co., 1998 OK 129, 977 P.2d 1057.
- A successful plaintiff proving an insurance company violated the duty of good faith and fair dealing is entitled to damages for “financial losses,” “embarrassment and loss of reputation” and “mental pain and suffering,” as well as any other detriment proximately caused by the insurer’s conduct. Oklahoma Uniform Jury Instruction No. 22.2. Moreover, the mental suffering of a plaintiff need not be “severe” or “outrageous” to justify a damages award. See Timmons v. Royal Globe Life Ins. Co., 1982 OK 97, ¶32, 653 P.2d 907.
- Timmons v. Royal Globe Ins. Co., 1982 OK 97, ¶25, 653 P.2 907, 914. “The gravamen of a Christian-type tort is failure to deal fairly and in good faith. Failure to abide by the implied duty imposes liability. The trial court did not err in refusing [a proposed jury instruction requiring plaintiff to prove] ‘an actual existing evil intent to mislead or deceive.’”
- A UM insurer “must conduct an investigation reasonably appropriate under the circumstances.” Buzzard v. Farmers Ins. Co.,1991 OK 127, ¶14, 824 P.2d 1105, 1109.
- Newport v. USAA, 2000 OK 59, ¶15, 11 P.3d 190, 196. “An insurer may not treat its own insured in the manner in which an insurer may treat third-party claimants to whom no duty of good faith and fair dealing is owed.”
- Buzzard v. Farmers Ins. Co., 1991 OK 127, ¶30, 824 P.2d 1105, 1112.
- We will refer to the Unfair Claims Settlement Practices Act as the “UCSPA.”
- Aduddell Lincoln Plaza Hotel v. Certain Underwriters at Lloyd’s of London, 2015 OK CIV APP 34, ¶24, 348 P.3d 223.
- 36 O.S. 1250.3.
- Aduddell, ¶13, citing Walker v. Choteau Lime Co., 1993 OK 35, ¶7, 849 P.2d 1085, 1087.
- Okla. Admin. Code. §365:15-3-2.1.
- Timmons v. Royal Globe Ins. Co., 1982 OK 97, ¶20, 653 P.2d 907, 913-14.
- See Badillo v. MidCentury Ins. Co., 2005 OK 48, 121 P.3d 1080, citing McCorkle v. Great Atlantic Ins. Co., 1981 OK 128, 637 P.2d 583, 587. “The essence of an action for breach of the duty of good faith and fair dealing ‘is the insurer’s unreasonable, bad-faith conduct. And if there is conflicting evidence from which different inferences may be drawn regarding the reasonableness of the insurer’s conduct, then what is reasonable is always a question to be determined by the trier of fact by a consideration of the circumstances in each case.’” See also Oklahoma Uniform Jury Instruction No. 22.2.
- See First Bank of Turley v. Fid. and Deposit In. Co. of Md., 1996 OK 105, ¶14, 928 P.2d 298, 304. "An insured in turn has an obligation to cooperate with the insurer, which is both contractual and implied in law,” (internal citations omitted). See also Dixson Produce, LLC v. Nat’l Fire Ins. Co. of Hartford, 2004 OK CIV APP 79, ¶19, 99 P.3d 725, 729, insureds “belated claim and failure to provide proof of loss as required and requested also formed the basis of a legitimate dispute between insured business and insurance company over expense of coverage, cause of loss, amount of loss, and breach of policy conditions. It is well settled that a bad faith cause of action will not lie where there is a legitimate dispute over such matters.”
- See Vining v. Enter. Fin. Grp., Inc. 148 F.3d 1206, 1213 (10th Cir. 1998) “An insurer does not breach the duty of good faith to pay a claim by litigating a dispute with its insured if there is a legitimate dispute as to coverage or amount of the claim, and the insurer’s position is reasonable and legitimate,” (internal quotations and citations omitted).
- Quine v. GEICO, 2011 OK 88, 264, ¶19, P.3d 1245, 1250-51. “The only portion of [the UM insured’s] claim remaining after payment from the tortfeasor were those indeterminate sums attributable to general damages …”
- Quine v. GEICO, 2011 OK 88, 264, ¶20, P.3d 1245, 1251. “[W]e conclude 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.”
- Vining v. Enter. Fin. Grp., Inc., 148 F.3d 1206, 1215. “[M]erely because there is a reasonable basis that an insurance company could invoke to deny a claim does not necessarily immunize the insurer from a bad faith claim if, in fact, it did not actually rely on that supposed reasonable basis and instead took action in bad faith.”
- Capstick v. Allstate Ins. Co., 998 F.2d 810, 815 (10th Cir. 1993).
- Oulds v. Principal Mut. Life Ins. Co., 6 F.3d 1431, 1442 (10th Cir. 1993).
- Failure to investigate critical facts related to a loss can be violative of the duty of good faith and fair dealing. See Hall v. Globe Life and Accident Ins. Co., 1998 OK CIV APP 161, 968 P.2d 1263.
- Failure to properly train claims handling employees on applicable law can be violative of the duty of good faith and fair dealing. Likewise, evidence of an insurer’s “deliberate willful pattern of abusive conduct” in handling first-party claims can be used to support a plaintiff’s position on summary judgment. See Vining v. Enter. Fin. Grp., 148 F.3d 1206, 1214 (10th Cir. 1998).
Originally published in the Oklahoma Bar Journal – OBJ 92 Vol 6 (August 2021)