Oklahoma Insurance Law

Insurance Brokers Doing Business In Oklahoma Subject Themselves To Suit

Steven V. Buckman — Mon, 02 Nov 2009 08:00:00 -0500

Insurance brokers from London traveling to Oklahoma and marketing for business subject themselves to the personal jurisdiction of the State of Oklahoma when negligence is alleged for their failure to fulfil obligations. In Willbros USA, Inc. v. Certain Underwriters at Lloyd''s of London, 2009 OK CIV APP 90, Mandate Issued: 10-22-2009, the Oklahoma Court of Appeals determined a London-based insurance broker had sufficient contacts with the state to be subject to the jurisdiction of the court. In a well written opinion by Deborah B. Barnes, Presiding Judge, the appellate court correctly determined there were sufficient contacts to give the Oklahoma court the authority to resolve allegations asserted by the plaintiff, Willbros USA, Inc.

The facts were fairly simple. JLT, a London-based insurance broker, with its principal place of business in London, England, made trips to Tulsa, Oklahoma to meet with representatives of Arthur J. Gallagher & Co. of Oklahoma, Inc., for purposes of obtaining business. Willbros, a Delaware corporation, maintained its risk management department in Tulsa, Oklahoma. Willbros purchased a $25 Million excess liability policy through certain Underwriters at Lloyd's, London. The business was placed using Gallagher as the retail agent and JLT as the London broker.

In April, 2004, individuals were killed on Olero Creek in the Nigerian River delta. Willbros was eventually sued by the families as a result of the deaths and reached an agreement for Willbros to pay $2,310,000.00 over and above its $1 Million liability limit under its primary coverage.

Lloyd's asserted the claim was not timely reported as one of the grounds for refusing payment of the $2,310,000.00 excess claim. Willbros asserted it gave notice to Gallagher and JLT and accused the brokers of negligence in reporting the claim to Lloyd's.

JLT, as a London broker, attempted to avoid jurisdiction in Oklahoma by claiming it did not have sufficient contacts with Oklahoma to subject itself to personal jurisdiction by the courts.

If a non-resident has minimum contacts with the state that do not offend traditional notions of fair play and substantial justice, then there is jurisdiction by Oklahoma's long-arm statute. A single act or transaction in the state can make the non-resident amenable to suit for damages arising out of the transaction. The focus is on whether there is some act or activity in which the non-resident has availed itself of the privilege of conducting activities within the state thereby invoking the benefits and protections of its laws.

The appellate court determined JLT could have refused to enter into a contract with Gallagher, but knowingly and purposely engaged in business with Gallagher to place the risk of Willbros in the London market. Secondly, the court found JLT made several trips to Oklahoma where its representatives met with both Willbros and Gallagher to discuss insurance. Although JLT argued the visits were social in nature rather than related to the insurance coverage. Third, JLT maintained communications from its London offices with Gallagher in Tulsa about brokering insurance business, some of which was directly related to the policy at issue in the litigation. The communication took place by e-mail, telephone conversations, as well as regular mail. Lastly the court determined JLT voluntarily entered the stream of communications in Oklahoma to "purposely avail itself" of business.

In summary, if you are going to do business in Oklahoma (or probably any other state), then you are subjecting yourself to the jurisdiction of the court. The appellate court noted the opinion was solely on the basis of personal jurisdiction and made no comment as to the underlying merits of whether or not there was negligence by JLT or Gallagher.

Legal Opinion Stating No Coverage Did Not Prevent Bad Faith Judgment

Steven V. Buckman — Fri, 30 Oct 2009 08:00:00 -0500

An Oklahoma insurance company's reliance upon a legal opinion that there was no payment due under the policy did not prevent a judgment for bad faith and punitive damages. In Barnes v. Oklahoma Farm Bureau Mutual Ins. Co., 2000 OK 55, 11 P.3d 162, the insurer purportedly obtained a legal opinion from an Oklahoma lawyer before refusing to pay UIM coverage. The case was submitted to the jury on the issue of bad faith as well as punitive damages and an award entered in favor of the plaintiffs.

Oklahoma Farm Bureau Mutual Insurance Company was sued by its insured, Julie Barnes, for underinsured motorist (UIM) benefits and for breach of the implied duty of good faith and fair dealing in failing to pay her claim. The trial judge granted partial summary judgment to Barnes for the $15,000.00 of UIM policy limits and submitted the remainder of the damages to a jury. The jury awarded an additional $10,000.00 in actual damages and $1.5 Million in punitive damages. Additionally, the trial court granted her $300,000.00 in attorney fees.

Barnes had been injured in a head on collision with another vehicle and her injuries were extensive. The other driver had liability coverage of $10,000.00 per person and Barnes had uninsured motorist/underinsured motorist coverage with Oklahoma Farm Bureau and another $25,000.00 with State Farm Mutual Automobile Insurance Company.

Barnes incurred $15,000.00 in medical bills and lost over $10,000.00 in wages. She submitted a claim for UIM benefits to both of her insurers. The claims not being timely paid, Barnes filed suit.

Eventually, the tortfeasor tendered its $10,000.00 of liability limits, but Oklahoma Farm Bureau refused to waive subrogation and further refused a proper substitution under 36 O.S. § 3636(E). Likewise, the insurer refused to pay the $15,000.00 in UIM benefits claiming it was entitled to the liability coverage from the tortfeasor.

State Farm, unlike the other insurer, evaluated Barnes' claim to be at least $50,000.00 and paid its full UIM limits of $25,000.00 without claiming entitlement to a portion of the liability policy. State Farm elected not to substitute its own $10,000.00 payment for the tentative settlement from the tortfeasor and instead waived any right at subrogation.

The main defense to the bad faith claim was that Oklahoma Farm Bureau reasonably relied upon the advice of its legal counsel concerning the proper interpretation of 36 O.S. § 3636(E) and, therefore, its behavior in litigating the issue was a legitimate dispute.

The Oklahoma Supreme Court stated:

In a tort case against an insurer for breach of the implied duty of good faith and fair dealing (i.e. for bad faith) it is the unreasonableness of the insurer's actions that is the essence of the tort. Conti v. Republic Underwriters Ins. Co., 1989 OK 128, 782 P.2d 1357, 1360; Alsobrook v. National Travelers Life Ins. Co., 1992 OK CIV APP 168, 852 P.2d 768, 770. Although reliance on the advice of counsel can be a defense to a bad faith suit, the reliance on counsel's advice must be reasonable. Durbin and Loy, Current Status of Good Faith Law in Oklahoma, supra, 24 Okla. City U.L.Rev. at 169-170. Particularly applicable here is the following statement made by the United States Court of Appeals for the Fifth Circuit concerning the advice of counsel defense in bad faith insurance claim litigation:

[I]t is simply not enough for the carrier to say it relied on advice of counsel, however unfounded, and then expect that valid claims for coverage can be denied with impunity pursuant to such advice. The advice of counsel is but one factor to be considered in deciding whether the carrier's reason for denying a claim was arguably reasonable. We believe that where, through verbal sleight of hand, the advising attorney concocts an imagined loophole in a policy whose plain language extends coverage, such advice is heeded at the carrier's risk.

Szumigala v. Nationwide Mutual Ins. Co., 853 F.2d 274, 282 (5th Cir.1988). Further, even where there has been no judicial interpretation of a relevant statutory provision, the reasonableness of reliance on advice of counsel will normally be a fact question where counsel misreads the plain language of a statute. Murphree v. Federal Ins. Co., 707 So.2d 523, 532-535 (Miss.1997).

In short, the Oklahoma Supreme Court held the opinion of the attorney was not reasonable and the insurer should not have relied upon advice that it knew or should have known from its own judgment was patently wrong.

Failure To Obtain A Legal Opinion Can Be Bad Faith

Steven V. Buckman — Tue, 27 Oct 2009 14:24:32 -0500

Bad faith can result in Oklahoma from failing to obtain a legal opinion before denying coverage. In Harrell v. Old American Ins. Co., 1991 OK CIV APP 91, 829 P.2d 75, a claims examiner failed to seek legal advice regarding a coverage question before denying payment. The Oklahoma Court of Appeals said it was reasonable to infer the lack of a legal opinion was either because the examiner knew there was coverage or she did not want confirmation the claim was not properly excluded under the terms and conditions of the policy. The Court determined the trial court was justified in submitting the issue of punitive damages to the jury.

Some advantages to obtaining a legal opinion as to whether coverage exists before issuing a denial are:

demonstrates good faith on the part of the insurer
having an objective, third person gives a different perspective
qualified, competent Oklahoma attorneys give insight into the law
the cost for a legal opinion is substantially less than a bad faith award

Insurance Agent Responsible For Failing To Obtain Coverage

Steven V. Buckman — Tue, 13 Oct 2009 08:00:04 -0500

An insurance agent was held responsible for failure to obtain workers' compensation coverage. In a blog post by Tred Eyerly, a summary of the decision is set forth. Essentially, the agent held herself out as an expert on insurance for certain types of automotive dealerships. The plaintiffs purchased insurance without specifying any particular type of coverage needed and allowed the agent to select the coverages purchased.

Although the agent was aware California required mandatory workers' compensation coverage, the initial policy provided no such coverage. One year later, the policy was renewed with another insurer and again no workers' compensation coverage was obtained.

Later, an employee was severely burned in a fire at the dealership. When he learned there was no workers' compensation coverage available, he sued and obtained a judgment for $11 Million, $6.8 Million of which the dealership was responsible.

The dealership then sued the insurance agent for negligence. There was a factual dispute over whether or not workers' compensation coverage was discussed and the documentary evidence tended to show the conversation never happened. Judgment was entered against the insurance agency for $5.8 Million, the outstanding amount of the judgment after one insurer tendered payment of $1 Million in partial satisfaction simply to extricate itself from the situation.

Oklahoma's Statute Of Limitations For Contracts

Steven V. Buckman — Fri, 09 Oct 2009 08:00:14 -0500

The statute of limitation under 12 O.S. § 95 requires that a lawsuit for breach of contract must be brought within five years if the claim arises from a written contract and within three years if the dispute comes from a contract not reduced to writing. The time in which to file the lawsuit starts at the completion of the contract. In the case of Kirby v. Jean's Plumbing Heat & Air, 2009 OK 65, the contract for installation of a new sewage pipeline was completed in 1996. The homeowner did not file his breach of contract suit until eleven years later in 2007. The statute of limitations had clearly expired and Oklahoma declined to apply the "discovery rule" to suits based upon breach of contract in construction cases.

One reason for the court's refusal to extend the "discovery rule" to construction cases is that to do so would defeat the intention of the legislature with the statute of repose. The court, in upholding the intention of the legislature, has determined there should be some outside limit on when a lawsuit can be brought regardless of the circumstances.

What Is A Statute Of Repose?

Steven V. Buckman — Mon, 05 Oct 2009 08:00:20 -0500

A statute of repose as well as a statute of limitation is a legislative means of ending or terminating the time in which a lawsuit may be brought. "In practical terms, a statute of repose marks the outer time boundary for judicial enforcement of a substantive right whereas a statute of limitation interposes itself only procedurally to bar solely the remedy after a substantive right has vested and a claim accrued." Kirby v. Jean's Plumbing Heat & Air, 2009 OK 65.

Many people are more familiar with statutes of limitation which bar a person from bringing a lawsuit after a certain period of time has expired. Typically, statutes of limitation are more commonly thought about in situations in which there is a car accident or other negligent act committed. The time in which to file the suit starts upon learning about the damages resulting from the negligent act. The damaged party has a certain period in which to file a lawsuit or forever lose the right to do so.

In contrast, a statute of repose marks the absolute end of any available lawsuit. The courts have allowed statutes of limitation to be tolled or extended because of the "discovery rule". The discovery rule is simply the device used to trigger the time in which to file a lawsuit after learning about the damage. Once a person learns about the damage, the lawsuit must be timely filed or the right to judicial relief is surrendered. With a statute of repose, it doesn't matter if a person learns about the damage after the deadline or not. The statute of repose bars the lawsuit simply because of the passage of time.

There are some other technical distinctions. The statute of limitation does not bar the filing of the lawsuit but rather terminates the remedy available or the relief the court may allow. The statute of repose blocks the entire lawsuit and prohibits it from going forward.

Plumber Saved By Statute Of Repose

Steven V. Buckman — Wed, 30 Sep 2009 11:30:49 -0500

A homeowner hired a plumber to install a new sewer pipeline to his property in 1996. Many years passed until 2007 when a backup of raw sewage was allowed to seep into the home and damage the property. The homeowner filed a lawsuit against the plumber for breach of contract and the negligent work performed installing the new sewage line.

The Oklahoma Supreme Court ruled the replacement of a sewer pipeline constitutes an "improvement to real property" within the meaning of the statute of repose found in 12 O.S. § 109.

The Supreme Court determined the Oklahoma legislature intended there to be a limit on how long lawsuits could be brought that was absolute. As such, the defective installation of the sewer pipeline was no longer actionable. Kirby v. Jean's Plumbing Heat & Air, 2009 OK 65.

Appraisal Process As A Substitute For Trial

Steven V. Buckman — Wed, 23 Sep 2009 12:01:42 -0500

If the goal of both the insurer and the insured is to obtain a prompt resolution of a property damage dispute, appraisal is sometimes an appropriate means to end the discussion and allow everyone to move forward. I have seen appraisal used in $1,000,000.00 disputes and $5,000.00 disagreements.

The Supreme Court in Oklahoma has ruled the party requesting the appraisal is bound by the decision while the non-requesting party is not. The rule makes sense from the perspective of both the insurance industry as well as the individuals or companies having purchased the coverage in the sense that neither side can be forced into a binding appraisal award. The right to jury trial is a constitutionally protected right in Oklahoma.

If you want to insist upon forcing the other side through the appraisal process, then you have to agree to be bound by the decision of the appraisers and/or umpire. On the other hand, if you are forced to go through the appraisal process, you will not be bound by the decision.

Does the appraisal process always work? No. Just like the jury system and any other dispute resolution device created by man, it is imperfect. On the other hand, when a dispute needs to be resolved without years of litigation, expert witnesses, depositions, appeals, and legal maneuvering, the appraisal process offers an alternative to people.

While care should be given to the choice of both the appraisers and the umpire, I have witnessed situations in which there was so much maneuvering by the participants the parties ended up in litigation. Both sides clearly want their own appraiser to be competent and knowledgeable, but it is also important to have one that is reasonable and fair-minded. If both sides merely hire their own advocate to serve solely as their "fighter in the ring" it creates more disputes for resolution by the umpire. Locating an umpire who has some experience can be extremely beneficial. Since the umpire's job is strictly intended to resolve disagreements between the appraisers, prior experience in how appraissals function is helpful. More important is willingness to listen, fairly look at the circumstances, and make a rational decision.

Having personally served as an umpire at the request of attorneys representing insureds as well as insurance companies, there is a keen responsibility that you feel as an umpire to try to do the right thing. In particular, I recall one situation in which the appraisers with me acting as the umpire essentially reached a conclusion unanimously as to the amount. The determination was exactly the midpoint between the polarized positions of the parties. I recall thinking before the award was entered that we would probably hear grumbling that we simply "split the baby" and divided everything down the middle. I personally disdain the practice of some umpires submitting a decision in the middle to avoid the appearance of showing favoritism. The practice of "splitting the baby" is not the purpose of appraisal. The job of the umpire is to make the right decision. He should not be concerned with future work from the parties or making either side unhappy.

At the end of the day, lawyers, adjusters, and insureds owe a duty to try to reach results that are fair and appropriate for the situation.

Is Deleting Photographs From A Cell Phone Spoliation Of Evidence?

Steven V. Buckman — Mon, 31 Aug 2009 08:00:00 -0500

The "tall building lawyer" found out during the EUO that Bubba took photos of all the hand guns one week before the fire. Bubba was going to send the photos to a disabled vet who just returned home due to a medical discharge for combat injuries. Bubba has a big heart and wanted to do something for one of our soldiers wounded in the service of our country. He was going to let this soldier have his pick of any gun he wanted and give it to him as a gesture of appreciation. The fire destroyed the guns so he never sent the photos. The insurer learned about the photos and wanted a copy to document the claim.

The photos no longer exist. Bubba, while scouting his favorite deer stand, saw a "buck with a rack that makes ya as giddy as a schoolgirl gettin' ready for her first date." He took so many pictures of the buck that he overwrote the photos of the guns.

The Advisory Committee, in addressing Fed. R. Civ. P. 37(f), noted that once litigation is anticipated or is commenced, a party is under an obligation to halt or alter its destruction policies such that electronically stored information relevant to the litigation will be preserved.

The good faith requirement of Rule 37(f) means that a party is not permitted to exploit the routine operation of an information system to thwart discovery obligations by allowing that operation to continue in order to destroy specific stored information that it is required to preserve. When a party is under a duty to preserve information because of pending or reasonably anticipated litigation, intervention in the routine operation of an information system is one aspect of what is often called a litigation hold.

When evidence is destroyed, an adverse jury instruction can be imposed as a sanction. See Stevenson v. Union Pac. R.R., 354 F.3d 739, 747-750 (8th Cir. 2003) (although audio tape recordings were destroyed prior to the litigation as a matter or routine subject to the destruction policy, the adverse inference jury instruction spoliation sanction was affirmed as voice recordings were related to the litigation and lawsuit was certain to arise rendering destruction unreasonable and inferring intent.); In re Prudential Ins. Co. Of Am. Sales Practices Litig., 169 F.R.D. 598,615 (D.N.J. 1997) (adverse inference would be drawn from destruction of computer records when company had a haphazard and uncoordinated retention policy).

If it ends up with a jury deciding whether or not the photos were destroyed to keep the insurance company from seeing them, there better not be any animal rights activists sitting on the jury!

Bubba Sued With A Declaratory Judgment Action

Steven V. Buckman — Mon, 24 Aug 2009 08:00:00 -0500

Bubba had "another one of them envelopes" sitting down at the Post Office. The lady wouldn't let him peek at this one either. He figured it was the "declaration of war suit." After the EUO, the other lawyer made the comment this might end up as a "dec action." I had explained to Bubba that insurance companies often file declaratory judgment actions when there is an issue as to coverage. It allows a judge to decide the question. Our law firm has filed many of them to resolve all sorts of disputes and it's an appropriate method for an insurer to ask the court to make a decision in a fair and impartial way.

One disadvantage to bringing a declaratory judgment action is the potential risk the insured will view it as a hostile act. Bubba thought suing the policyholder sounded more like "fightin' words" and called it a "declaration of war." Knowing our firm regularly files dec actions for insurance companies didn't really make Bubba feel any happier. He was ready to "scrap it up!"

Logically, what else can an insurance company do that would be fair? If the company doesn't believe there is coverage, asking a judge to decide the question is reasonable. A dec action brings the issue to the court for resolution as opposed to simply saying, "No, we won't pay you." Franky, our firm believes it is generally a "good faith" practice to ask the court to settle disagreements over coverage. But, it sometimes results in the insured filing a counterclaim for "bad faith."

Code And Ordinance Upgrades: An Exclusion Of Coverage Under Property Insurance

Steven V. Buckman — Mon, 17 Aug 2009 10:30:00 -0500

Code compliance or ordinance and law exclusions in property insurance policies are intended by insurers to prevent damage claims turning into windfalls for policyholders. These cases are often hotly debated by both sides. From the perspective of the policyholder, the insured wants coverage to return the house or building to the same or similar use as before the catastrophe that occurred.

Insurance companies on the other hand do not want to pay for expensive upgrades to the property as a result of changes in building codes and ordinances that have been implemented over numerous years from the time the structure was originally built. The debate was blogged about recently in the property insurance coverage law blog. Oklahoma addressed the question about five years ago.

In Spears v. Shelter Mutual Ins. Co., 2003 OK 66, 73 P.3d 865, lightning struck the Plaintiffs' home and caused damage to part of the electrical wiring. The home and its wiring were about 60 years old, the entire house had to be rewired to meet the current code construction adopted by municipal ordinances. Shelter Insurance paid $1,700.00 to repair the portion of the wiring directly damages by the lightning, but refused to pay the additional $4,280.00 to rewire the entire home. The Oklahoma Supreme Court stated:

¶4 Oklahoma law governing insurance coverage disputes is well-established. The foremost principle is that an insurance policy is a contract. Cranfill v. Aetna Life Ins. Co., 2002 OK 26, ¶5, 49 P.3d 703, 706. "Parties are at liberty to contract for insurance to cover such risks as they see fit and they are bound by the terms of the contract. It necessarily follows that courts are not at liberty to rewrite the terms of an insurance contract." Id.

In concluding its decision, the Oklahoma Supreme Court declared the ordinance or law exclusion was not ambiguous. Neither was the exclusion hidden in the policy's provisions or masked by technical or obscure language. The court determined the plain and ordinary meaning of the words used in the exclusion required Shelter's limit of liability to be $1,700.00 (the cost to repair the section of wiring directly damaged by the lightning).

Many companies actually sell additional coverage as an option for policyholders in which supplemental coverage is provided for necessary upgrades. Although it increases the cost of the premium, it is usually fairly insignificant as compared to the risk of the expense for the upgrades if many years have passed from the time of construction.

At the end of the day, it is an economic or marketplace decision between the seller of the insurance and the purchaser of the coverage. If the property owner wants to spend less money on insurance coverage by not purchasing the additional coverage for code upgrades, it is an economic decision. Likewise, if an insurance company chooses to structure its product so as to make coverage available at an increased cost, it is an open and free marketplace.

The Inventory Contents List Was Reviewed During The EUO

Steven V. Buckman — Mon, 17 Aug 2009 08:00:00 -0500

During the EUO, opposing counsel marked Bubba's personal inventory list as an exhibit and said he wanted to go over some of the items destroyed in the fire. EUOs are a good tool for finding out information and evaluating the credibility of the insured. On its face, Bubba's contents list probably caused an "inquiring mind" to want to know more. There were only 9 pages, but Bubba had more handguns than socks, even counting the ones that didn't match. Shotguns took almost 2 pages, the rifles and semi-autos used almost another 6 pages. Most homeowners' policies have maximum limits for guns and jewelry. The Wewoka Worldwide policy limited guns to $2,500.00. And it was a safe bet Bubba wasn't claiming any jewelry.

I heard the "tall building" lawyer say, "You know sir that your policy has a $2,500.00 limit on your guns?" Bubba sounded off like he was back in boot camp, "NO SIR, I bought full coverage for my guns, sir!" I couldn't help laughing when Bubba started telling him "his guns wuz covered under the fishin' " part of the policy. I amused myself listening to the conversation until I saw opposing counsel reach into his brief case and pull out one of those big bottles of Tums. I decided to help him out just a little and said. "I think Bubba might be talking about his inland marine floater for coverage on the guns." Bubba's agent had helped Bubba by covering the guns under a floater. Bubba just associated "floater" and "marine" with "fishin'".

One significant difference between an EUO and a deposition is the "read and sign" part. In deposition, witnesses commonly waive the right to read and review the transcript. In an EUO, most insurance policies require the witness to read and sign. Bubba's going to "let me do the readin' " of his transcript before he signs. Lucky me!

Oklahoma Does Not Allow Plaintiffs To Recover For Unnecessary Losses Which Could Have Been Avoided

Steven V. Buckman — Mon, 10 Aug 2009 11:30:00 -0500

Unnecessary damages which could have been avoided by the insured cannot be recovered in a lawsuit for breach of contract as every Oklahoma insurance lawyer well knows. A party who asserts a claim for breach of contract against an insurance company has a duty to use reasonable efforts to mitigate his damages. Hidalgo Properties, Inc. v. Wachovia Mortgage Company, 617 F.2d 196, (10th Cir. 1980) A party, including a policyholder, has a duty under Oklahoma law, to make all reasonable efforts to minimize his damages. Sabine Corp. v. ONG Western, Inc., 725 F.Supp. 1157, (Okla. W.D. 1989).

The principle of mitigation of damages is summarized in the Restatement (Second) of Contracts Section 350 comments (1979) as follows:

As a general rule, a party cannot recover damages for loss that he could have avoided by reasonable efforts. Once a party has reason to know that performance by the other party will not be forthcoming, he is ordinarily expected to stop his own performance to avoid further expenditure. . . . Furthermore, he is expected to take such affirmative steps as are appropriate in the circumstances to avoid loss by making substitute arrangements or otherwise.

A promisee is not required to go to extraordinary lengths or expense to avoid loss; only efforts that are reasonable under the circumstances are necessary.

Any Oklahoma insurance law attorney defending a case brought against an insurance company for breach of contract, fraud, bad faith, or any other cause of action will always look to see if the losses could have been reasonably avoided to prevent the insurance company from being forced to pay more than the law requires. The lawyer representing the insured will attempt to show reasonable efforts were used or it was impossible to lessen the damage.

My favorite example is the hail storm that knocks a hole in the roof. The insured needs to do something to stop the water from raining inside and soaking the furniture, i.e., mitigate or lessen the damage by tarping the hole in the roof. He can't just sit back and watch the water run down the walls!

Bubba Gives Sworn Testimony In The EUO

Steven V. Buckman — Mon, 10 Aug 2009 08:00:00 -0500

An EUO is a lot like a deposition or testifying in court. There is a court reporter present who swears in the insured and takes down the sworn testimony. The insured is asked a lot of questions about their background and the reported claim. A lawyer wouldn't be worth much if he didn't at least try to prepare his client for the questions and go over what to expect. I did my best to help Bubba.

The EUO started with the court reporter asking Bubba to raise his right hand to be sworn. She then told him "to raise his other right hand to take the oath." The background questions were anticipated and Bubba managed to answer them.

It was entertaining to hear Bubba explain his temporary housing expenses. He ran 275 feet of electrical extension cords from Pudge's kitchen to his tent so he could watch TV. Bubba, who can fix almost anything with duct tape and baling wire, bought a brand new plasma television and it just barely fit inside the 6' wide tent he used as his temporary residence.

The "tall building lawyer" was skeptical Bubba had run extension cords from Pudge's kitchen window down to his tent and he bluntly told Bubba he didn't believe anyone would hook up a 50" plasma TV inside a tent.

Bubba's third wife is the only person I ever saw call Bubba a liar that didn't pay a hefty price for saying it. Judianne, his wife, was 5'2" and 104 lbs., when wearing her tallest, heaviest pair of cowboy boots blurted out in the middle of the "day-vorce" hearing, that Bubba was lying. When he stood up to protest, she stuck one finger up his nose, another finger in the corner of his eye, and yanked his head around to where he didn't need a rearview mirror to back up. Judge Smith and I still disagree over whether she whispered in his ear or bit it! Every time the bailiff tried to pull her off, Bubba howled like a calf at branding time. Judge Smith was threatening to hold Judianne in contempt, while alternately yellin' "Order in the Court!" It wasn't till he threatened not to grant the divorce that she finally turned loose.

It could have been downright ugly at the EUO if Bubba had realized his honesty was being questioned. Fortunately, Bubba was so busy explaining how he installed the satellite dish in the tree next to the tent, he didn't even notice his integrity had been challenged.

Property Damage From A Continuous And Ongoing Event

Steven V. Buckman — Mon, 03 Aug 2009 11:30:00 -0500

Property damage that results from a continuous and ongoing process over an extended period of time rather than from a defined, identifiable event such as a tornado or hail damage creates disagreements and disputes as to when property damage "occurred." Coverage under most insurance policies is triggered by an "occurrence." As Dana Ferestien commented, insurers and insureds continue to litigate over whether or not particular damages are an occurrence under a particular insurance policy.

These coverage disputes become even more complicated when there are multiple insurers during the period of time in which the damages occur. Not only is there disagreement over the time period in which the damage occurred, the policies may have different policy language resulting in different outcomes. The "occurrence" issue arises in homeowners' policies as well as commercial properties. Since the damages often go unnoticed for long periods of time, the damages often turn out to be significant in terms of the dollar amount for repair/replacement. The questions over the cause for the damage often results in both sides hiring experts who have differing opinions.

I agree with Ferestien the "occurrence" litigation will likely continue as policyholders and insurers assert their competing and opposing positions. In Oklahoma, attorneys familiar with insurance litigation over coverage routinely defend claims asserting there was no "occurrence" under the terms of the insurance policy and will likely continue to do so.

Oklahoma Attorneys Often Use Bad Faith To Increase Damage Awards

Steven V. Buckman — Mon, 03 Aug 2009 11:30:00 -0500

Oklahoma lawyers suing insurance companies for breach of contract in first-party cases find themselves limited by the damages which can be awarded for breach of contract. Under 23 O.S. § 21, the measure of damages for breach of contract is the amount which will compensate a party for the damage. In Osborn v. Comanche Cattle Industries, Inc., 1975 OK CIV APP 67, 545 P.2d 827, the Oklahoma Court of Appeals explained the reason for limiting damages:

This interest is given legal protection to achieve the paramount objective of putting the promisee injured by the breach in the position in which he would have been had the contract been performed.

The law philosophically intends for people who have been harmed to receive compensation, not a windfall. The concept can be illustrated by the employment relationship. People are paid (compensated) for the work they do -- an employee receives a windfall if the business owner decides to give him a new Porsche!

Bad faith allegations asserted in Oklahoma courts allow the plaintiff lawyer to ask for money in addition to what might be recoverable under the insurance policy such as:

financial losses
embarrassment and loss of reputation
mental pain and suffering
punitive damages

Oklahoma plaintiff attorneys file bad faith claims to try to recover for damages not available under the terms of the insurance policy. Although it is technically "compensation" for damages, a bad faith claim places the insurance company at greater risk than just what the policy covers. Problems develop when unscrupulous attorneys or vindictive insureds falsely accuse the insurer of wrongdoing simply as leverage to get their claim paid. Oklahoma judges, however, protect insurance companies from paying damages for bad faith if the underlying disagreement is a legitimate dispute.

Cancellation Of Homeowners' Policy

Steven V. Buckman — Mon, 03 Aug 2009 10:30:00 -0500

Cancellation of a homeowners' insurance policy requires compliance with terms and conditions of the policy. It may sound simple, but we have seen several full blown lawsuits arise over the years where the manner in which the policy was cancelled before a loss occurred was challenged. The starting point is a review of the requirement and the procedure for cancellation inside the insurance policy as well as a review of the Oklahoma statutes. The statutory fire policy provides five days' written notice of cancellation with or without tender of the excess premium pro rated for the remaining time not used. The notice of cancellation is required to state that the excess premium (if not tendered) will be refunded on demand.

Some insurance policies provide for a greater notice period than the statutory five days. An insurance company should comply with its own policy terms and conditions for cancellation and provide the additional time per the policy. Some policies prescribe notice of cancellation by registered mail which is not the same as certified mail. In these cases, the insurer should use the procedure for registered mail.

We saw an interesting blog not long ago by Jason W. Anderson commenting on a Washington Supreme Court decision. The insurer attempted to cancel a policy by using certified mail as opposed to regular mail. The State of Washington has a statutory requirement for notice of cancellation and the question was whether certified mail was the equivalent of mailing under the statute.

The court decided certified mail was not the equivalent of regular mail and the policy was never actually cancelled. The court found there were some practical differences between regular mail and certified mail in that there is a greater imposition placed upon the insured as it requires the policy holder to be at home to receive the letter or actually travel to the post office to retrieve it. A cancellation notice sent by regular mail would arrive without the hassle and aggravation of signing for the certified envelope or going to the post office to pick it up.

In summary, when there is an issue of cancellation involved, the insurer should follow the applicable regulations as well as the insurance policy guidelines. When the applicable regulation and the policy provide different notice requirements, then the insurer should follow the insurance policy (provided it doesn't attempt to give less notice than the statute). If in doubt, consult with an attorney who practices in areas of insurance coverage.

Bubba's ALE, Additional Living Expense

Steven V. Buckman — Mon, 03 Aug 2009 08:00:00 -0500

Bubba came by for an appointment to discuss his fire loss claim. It was one of those meetings that wasn't on my calendar; he just stopped by "to see how things were goin'?"

When I told Bubba we needed to submit his receipts for ALE, he quietly spelled "a-l-e" to himself and suddenly asked "you mean they'll pay for my beer?" I explained to Bubba ALE is an abbreviation for additional living expense. Most homeowners' policies have coverage for the extra expenses the insured will usually have living in a motel, eating out at restaurants, and using temporary facilities until their house can be repaired. After I finished the explanation, I could tell Bubba was trying hard to remember the money he had spent. Bubba isn't much of a record keeper and his memory is sometimes rather short. He only recalled three expenses, $79.95 for his tent, $75.00 for three 100' extension cords, and $0.78 for a new toothbrush.

This was the first time I have ever seen a tent submitted under the ALE provision of a policy for temporary housing (and our firm has defended quite a few fire claims) - in the end the tent was less expensive than a motel or rent house.

He probably had some other expenses, but Wewoka Worldwide, like most insurance companies, require receipts, credit card bills, or some type of documentation. Bubba found his receipts on the floor of his truck preserved amongst his other valuable papers, lottery tickets, traffic citations, and coupons for 20% off Bar-B-Q at the Wild Pig.

Coverage Questions - A 19 Year Veteran's Experience

Steven V. Buckman — Wed, 29 Jul 2009 11:30:00 -0500

Coverage decisions tend to be expensive one way or the other. If an insurance company determines coverage exists, then it has to pay for the underlying claim. If the claim was not really covered by the terms of the insurance policy, then the company has incurred an expense that was unnecessary and which adversely impacts the year end financial picture. Decisions to deny coverage, when in fact it exists, is even more expensive. There is the litigation expense plus the potential bad faith claim.

Christopher J. Boggs wrote a commentary about what his 19 years of experience in the insurance industry had taught which he was kind enough to share.

Only good lawyers realize they don't know everything about the law
Someone who truly understands insurance can explain its concepts in simple language. The person with no idea how it works masks his ignorance with $10.00 words and legalese
There is ALWAYS more than one possible answer to a coverage question. One is just more correct than the others based upon the particular situation
Only "newbies" know everything about insurance
Regardless of how much I know (or think I know) about insurance, there is always MUCH more to learn. It is NEVER okay to guess at the answer to a coverage question
It's perfectly acceptable to say, "I don't know", as long as you follow it up with "but I'll find out and get right back to you."

The only other thing I have to add from my 25 years of coverage analysis is the answer is always simple - just ask either side! They always know the answer!

Oklahoma Insurance Law Attorneys Know Special Damages Must Be Forseeable

Steven V. Buckman — Tue, 28 Jul 2009 11:30:09 -0500

Oklahoma attorneys defending lawsuits brought by policyholders against insurance companies regularly use the defense of forseeability to limit special damages which are claimed in the lawsuit. Special damages for failure to pay under an insurance policy must be the kind of damages that would ordinarily result from breach of contract. The concept comes under the rule of law in Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854) which limits damages for breach of contract to losses that were forseeable at the time of contracting. Oklahoma courts limit damages which are not forseeable. Coker v. Southwestern Bell Telephone Company, 1978 OK 85, 580 P.2d 151, Missouri Pacific Railroad Company v. Ridley, 1962 OK 277, 383 P.2d 227.

The term "forseeable" is best understood as the consequences one would expect from a certain action. As an example, a mistake in accidentally denying a $500.00 property damage claim from a fender bender would not forseeably end up with the insured filing for bankruptcy. On the other hand, refusing to promptly pay a valid business interruption claim could "forseeably" result in a business having to close its doors and shut down. Experienced attorneys defending litigation in which the insured wants to be paid for things not directly related to the insurance policy will challenge whether the insurer could have anticipated the events.