Reinsurance Law Blog

UM and Intentional Acts; Colorado law

Jody Nathan — Tue, 24 Aug 2010 18:32:02 -0600

In State Farm v. Fisher, Fisher was shot and killed by Brown. Fisher had stopped his car and was in the highway signaling for help after a passenger was shot by Brown as Brown rammed the Fisher car and then fired a shotgun at the vehicle after pulling even with it. Brown stopped his truck, got out and shot Fisher, who was signaling for help in the road. Fisher's family sought UM benefits from its insurer, State Farm, for his death. Summary judgment to State Farm was affirmed.

Citing State Farm Mut. Auto. Ins. Co. v. Kastner, 77 P.3d 1256 (Colo. 2003), the court noted that to be entitled to UM benefits under Colorado law, a claimant must demonstrate 1) that an uninsured motor vehicle was being “used” at the time he or she sustained an injury; and 2) that the use is causally related to the injury. The “use” must be contemporaneous with the injury. Because both Brown and Fisher were out of their vehicles when Brown shot Fisher, the motor vehicle was not being used at the time of the injury. Apparently, a different result would obtain as to the passenger who was shot in the Fisher vehicle while Brown was in his truck. Because it was debatable whether there was any UM coverage, State Farm was entitled to summary judgment on Fisher’s bad faith claim as well.

More on Attorneys fees

Jody Nathan — Tue, 17 Aug 2010 15:31:36 -0600

In Anchondo, the Tenth Circuit discusses the ins and outs of attorneys fees applications and objections. The plaintiff was successful in getting a class action settlement for violations of the Fair Debt Collection Practices Act and then was awarded fees on top of that. The defendant thought the fee award was too high -- Plaintiffs counsel was apparently awarded all their hours at a set hourly rate. But the trial court is in the best position to determine whether the tasks billed for were necessary, and the trial court need not address all factors in making a fee award. Further, while certain travel hours could have been discounted, the defendant did not ask that the hours be discounted -- so the court wouldn't do it now on appeal. And, the court remanded the case to the trial court to award appellate attorneys fees.

Here the court refused to find that just because there were multiple firms that the time should be discounted. Apparently, the time records were clear and concise, and the conferences between the two firms was not excessive. There was not much duplicative work. The court indicated it might have considered reducing the hourly rate for travel, but it wasn't argued. Defendants were placed in the position of arguing its position was so bad, anyone could have handled the case, there was no need for experienced national counsel to become involved. The Tenth Circuit declined to adopt this view of the case.

Even expired reinsurance agreements subject to arbitration

Jody Nathan — Tue, 17 Aug 2010 00:38:47 -0600

In Newmont USA vs. Insurance Co. of North America, the Tenth Circuit affirmed an order requiring arbitration of a reinsurance disagreement. “The arbitration provision in the Reinsurance Agreements encompasses the parties’ dispute concerning the BHP Litigation and neither the Reinsurance Agreements’ expiration nor the Settlement Agreements extinguish arbitrability. Accordingly, the district court did not err in compelling arbitration.” The trial court erred, however, in not applying the postjudgment interest rate in the reinsurance agreement, rather than the federal postjudgment interest rate.

Recoupment of defense costs where defense is under a reservation of rights

Jody Nathan — Tue, 17 Aug 2010 00:05:55 -0600

In Valley Forge v. Health Care Management, the insureds were sued for medicare fraud and asked their insurers for a defense. The insurers agreed, but told the insureds that it was under a reservation of rights and that if there was no duty to defend, the insurers would ask the court to make the insureds pay the insurers for the defense costs. The court previously held there was no duty to defend (see Zurich Am. Ins. Co. v. O’Hara Reg’l Ctr. for Rehab., 529 F.3d 916 (10^th Cir. 2008)) and sent it down to determine the amount of fees owed. The trial court gave the insurers all their fees but no interest and both parties appealed. The Tenth Circuit affirmed in a wonderfully written opinion by Judge Gorsuch.

The insureds claimed that the insurers cannot recover the defense costs they expended for the simple reason that no provision in the parties’ insurance contracts contemplates that possibility. The insurers argued, however, that Colorado law requires an insurer to pay defense costs, but at the same time provides the insurer with this assurance: if it pays defense costs pursuant to a reservation of rights letter, the insurer may later seek and obtain recoupment of its defense costs if the facts at trial prove the claim against the insured wasn’t covered by the policy. The court notes it must follow Colorado law on the issue and sides with the insurers – and cites Sherlock Holmes! (See below) The court also finds that the insurers need not wait until the underlying action is completed before seeking a declaration of no coverage.

Having decided that the insurers were entitled to recover the defense costs, the next question is are they entitled to all of their defense costs or might the amount be limited in some way? The court says it does not matter since the case was decided on summary judgment and no factual issues are presented. The insured’s expert affidavit was not quite sufficient under Rule 56(f) to get them more discovery. As to prejudgment interest, the statute talks about money wrongfully withheld, not wrongfully paid, and there are no cases awarding insurers interest on recoupment.

Here is the part that cites to Sherlock Holmes:

The fact that the [Hecla decision] did not mention any other comparable condition — such as specific contractual language — cannot be so easily ignored. It’s the dog that didn’t bark. Cf. Chisom v. Roemer, 501 U.S. 380, 396 n.23 (1991) (noting that silence on the issue can be probative evidence of legislative intent); United States v. Lopez, 518 F.3d 790, 798 n.2 (10th Cir. 2008); Sir Arthur Conan Doyle, Silver Blaze, in The Memoirs of Sherlock Holmes (1894).

Police pursuit

Jody Nathan — Tue, 06 Jul 2010 19:19:35 -0600

In two decisions today the Oklahoma Supreme Court decided cases which involve police pursuits. In one, the court said the police could be liable for damages caused when the pursued vehicle causes an accident with an innocent citizen, and in the other the court held that the tort claims act did not provide immunity under the “recognized standards” exception to liability. The dissent in the first case indicates that such a change in the law should be done by the legislature, not the courts. See, State ex rel. Oklahoma Dept. of Public Safety v. Gurich, 2010 OK 56 (law enforcement could be liable for damages caused by fleeing vehicle; reckless disregard standard used) ; and Ray v. Broken Arrow Police Dept., 2010 OK 57 (the exemption from liability for "[a]cts or omissions done in conformance with then current recognized standards" did not apply, reversing summary judgment to the police department.

Withdrawal of Motion to reconsider results in untimely appeal

Jody Nathan — Mon, 03 May 2010 11:25:06 -0600

Vanderwerf v. SmithKline Beecham Corp. involved a claim by surviving family members that the drug Paxil caused or contributed to a suicide. Over the course of the proceedings, several partial judgments were granted, with the end result being that all claims were eventually dismissed. A Rule 59(e) motion to reconsider was timely filed by plaintiffs, but no decision was made on the motion for over 7 months. So Plaintiffs withdrew their motion to reconsider and appealed the summary judgment. But the court said the appeal was untimely, because when the motion to reconsider was withdrawn, the date of the order appealed from was more than 30 days before the notice of appeal was filed.

There is a strong dissent which notes the unfairness of this "catch 22". The dissent notes that the tolling starts with the filing of the motion, and only ends when the court enters an order on the motion.

While not an insurance case, this case notes a trap for the unwary. The court notes the plaintiffs had other options:

The Vanderwerfs had other options, which may have allowed this court to take jurisdiction. First, the Vanderwerfs could have filed a motion requesting a ruling. Second, they could have continued to wait for a ruling, or sought a writ of mandamus in this court, which, if granted would compel the district court to rule on the Rule 59 motion. Third, they might have filed a motion for an extension of time under Federal Rule of Appellate Procedure 4(a)(5)(A)(ii), provided that they might show good cause or excusable neglect underlying the untimely notice. Fourth, they might have filed a premature notice of appeal that would ripen into a timely notice of appeal when the district court finally ruled. See Fields v. Okla. State Penitentiary, 511 F.3d 1109, 1111 (10th Cir.2007). Finally, it seems the best option may have been for the Vanderwerfs to have moved to withdraw the motion, in hopes that the district court would rule on that motion thereby triggering a 30-day period for the filing of a timely appeal.

The court dismissed the appeal for failure to timely file it.

Trial court order remanding to plan administrator not immediately appealable

Jody Nathan — Mon, 03 May 2010 10:47:25 -0600

In Miller vs. Monumental Life Ins. Co. the trial court ordered (after remand from a prior appeal) that the ERISA based case be sent back to the plan administrator so the record could be completed. The plaintiff, Miller, appealed from this order, claiming it was improper on various grounds. The Tenth Circuit ruled that it was an interlocutory order over which it had no jurisdiction to determine.

Aside from a few well-settled exceptions, federal appellate courts have jurisdiction solely over appeals from final decisions of the district courts of the United States. A final decision is one that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment. The order remanding the case to the plan administrator was not a final decision.

The court considers whether ERISA remand orders are reviewable on a case by case basis, and considers “practical finality.” Neither the cost or delay associated with additional review of the “sole cause” defense, nor Miller’s unfounded fear about loss of his argument that Monumental was not entitled to raise this defense, justifies treatment of the remand order as a final order for purposes of review. Miller’s contentions are not “effectively unreviewable.” The appeal was dismissed for lack of jurisdiction.

Oklahoma's Tort Claims Act does not prohibit action against City for loss covered by insurance

Jody Nathan — Tue, 20 Apr 2010 18:03:22 -0600

In Salazar Roofing & Construction, Inc. v. City of Oklahoma City, 2010 OK 34, a city dump truck driver backed up into Salazar’s dump truck, causing damages. The City admitted that the city driver was in the course and scope of his employment and admitted liability, but claimed it was only liable for Salazar’s insurance deductible. The City claimed that an exclusion from liability for “Any claim or action based on the theory of indemnification or subrogation;” applied and precluded any liability in excess of the insurance deductible, since the loss had been paid by Salazar’s insurer. The Supreme Court disagreed, noting that “the Claim filed under the Governmental Torts Claim Act by Salazar was filed in Salazar's name, directly against the tortfeasor, for the benefit of the owner of the damaged vehicle. The action was not filed by the insurance carrier to recoup the amount paid to insured. Therefore it appears that this matter is a first-party claim, not a claim for subrogation. No subrogation is at issue in the instant matter. There is no party secondarily liable for the damage caused by the City's negligence present in the case at bar.”

UM exclusion violates public policy

Jody Nathan — Tue, 20 Apr 2010 17:20:30 -0600

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.

Confession of liability results in no coverage

Jody Nathan — Tue, 13 Apr 2010 20:51:33 -0600

Alea London Ltd. v. Canal Club, Inc., 2010 OK CIV APP 33 is an odd case. It starts out as a liquor liability exclusion case and ends up being an assumption of liability case. Canal Club was the insured, and Alea the insurer. Canal Club was sued when an intoxicated patron (Valle) left its premises and was involved in a car accident which hurt two people. It was claimed that Canal served Valle when he was obviously intoxicated, a dram shop claim. Alea refused to defend the case because of its liquor liability exclusion. Another insurer (with lower limits) defended Canal, and Alea filed a declaratory judgment action, seeking a declaration that it had no coverage under its policy. The underlying case was then amended to add a second claim that Valle became intoxicated before entering Canal Club’s premises, its employees escorted him from those premises while he was still in an intoxicated state, and those employees negligently breached a duty of reasonable care when they “failed to make sure” Valle did not leave the area outside its premises, get into his car, and drive while he was intoxicated. Alea was not notified of the change in the allegations.

In the underlying action, the first claim was dismissed, and Canal admitted liability on the second claim. A non-jury trial settled the amount of the damages. Then, the action switched back over to the declaratory judgment case. On cross motions for summary judgment, the trial court found that Alea was liable for the claims. The Court of Civil Appeals (COCA) reversed, finding no coverage for the claims.

First, it found that Canal Club had an obligation to notify Alea of “critical post-denial developments” and the failure to do so “may modify, excuse or provide a defense to the performance of an insurer’s contractual duties.” Second, the COCA found that there was no duty under Oklahoma law which required Canal Club to prevent a drunk patron from leaving its premises and driving his own vehicle. As a result, the admission of liability in the underlying case triggered an assumption of liability exclusion. That exclusion precluded coverage” for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement;” but the exclusion does not apply if the insured would be liable even in the absence of any agreement.

The court finds there would be no duty on the part of Canal Club to restrain Valle if he were not drunk, and no duty to restrain him simply because he was drunk – where Canal Club had not served Valle any drinks. As a result, “Coverage under the CGL policy was not triggered by the basis for judgment in the underlying lawsuit.” In other words, the only reason Canal Club had any liability is because it agreed or confessed it. This brought the claim within the assumption of liability exclusion and the policy did not provide coverage. The court reversed and remanded, ordering that judgment be entered for the insurer.

Apparent Authority to reject UM?

Jody Nathan — Tue, 13 Apr 2010 13:09:21 -0600

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.

Business pursuits exclusion

Jody Nathan — Mon, 12 Apr 2010 16:43:09 -0600

A homeowner’s policy did not cover a claim for the wrongful death of a high school girl who was mauled by a tiger. In Safeco v. Hilderbrand, the insureds ran an animal sanctuary for exotic animals no longer wanted by zoos and circuses. While it was a non profit organization, the insureds also created a for profit company, Animal Entertainment Productions (AEP), to generate income to maintain the sanctuary. The insureds kept their jobs as social workers, but got a small business loan for AEP, and AEP earned some money, but was always operated at a loss. The insureds did not have a business policy, but had a homeowners policy with Safeco. When demand was made on the claim, Safeco filed a declaratory judgment action, claiming it had no duty to defend or indemnify its insureds for the claim because of a business pursuits exclusion in the policy. The policy excluded “bodily injury or property damage: . . . arising out of business pursuits of any insured . . . , ” but the exclusion did not apply to: “Activities which are ordinarily incident to nonbusiness pursuits.” After a bench trial on the merits, the trial court found the policy did not cover the claim and the Tenth Circuit affirmed, finding the business pursuits exclusion applied and the exception to the exclusion did not apply.

Under Kansas law, “To constitute a business pursuit, there must be two elements: first, continuity, and secondly, the profit motive.” Both elements were found. The activities of the insureds in operating AEP showed the engagement in a business over time. To show a profit motive, the business must be capable of being run for profit; the evidence showed the insureds operated AEP with a profit motive, even though no profit materialized. It is the profit motive and not any actual profit which the court considers. The court states:

In sum, we conclude the [insureds] operated AEP with both continuity and a profit motive when the incident occurred. At the time of the accident, Doug’s “trade, profession or occupation” was animal trainer for AEP. Therefore, AEP qualifies as a business pursuit and any incidents arising from its operation, including the tiger attack, are not covered by the [insureds’] homeowners policy.

The Tenth Circuit then found the non business pursuits exception did not apply. The accident arose out of the insured’s exotic animal shelter and entertainment business. The victim was a volunteer at the animal shelter and the insured used his business property and his expertise as an animal trainer for the photo shoot. The fact that there was no payment for the photo shoot was not determinative.

Workers comp carrier, Employer may sue for certain death benefits

Jody Nathan — Thu, 08 Apr 2010 12:40:56 -0600

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.

Auto policy reformed regarding Family Exclusion

Jody Nathan — Wed, 31 Mar 2010 19:56:39 -0600

In Allstate v. Moser, Moser was injured in a one car accident. Moser was a passenger, and her brother was driving. Allstate’s policy was issued in Colorado to Moser’s parents . It had $100,000 limits and contained a family exclusion. There was an accident in Kansas. Kansas had a compulsory insurance law which required that all policies provide at least $25,000 per person, up to $50,000 per accident. Allstate’s policy also provided that when the vehicle was operated in other states, the policy would comply with the liability insurance requirements in those states. Moser also had an umbrella policy which provided coverage in excess of $100,000 when the primary policy limits were exhausted. When Moser sued, Allstate filed a declaratory judgment action. In that action, it was determined that Allstate’s liability under the policy was limited to the minimum requirements under Kansas law – $25,000.

On appeal, the issue was whether Allstate’s liability was limited to $25,000 or whether the entire policy limit was available to Moser. The Tenth Circuit affirmed the trial court’s ruling that limited Allstate’s liability to $25,000. Because $25,000 was less than the policy limits, the underlying policy was not exhausted, and therefore the umbrella policy did not apply.

ERISA preemption may not apply to Indian tribes

Jody Nathan — Wed, 31 Mar 2010 13:11:05 -0600

The Tenth Circuit has determined that ERISA’s exception for governmental plans applies to plans sponsored by Indian tribes, so long as those plans meet the requirements of the definition. This means that ERISA preemption does not apply to insurance plans involving Indian tribes. Dobbs v. Anthem Blue Cross Blue Shield was the second time the case came before the Tenth Circuit. The first time, the Tenth Circuit remanded the case, asking the district court to make factual findings, and stating that “i]f the Dobbses’ benefit plan meets the new definition of governmental plan under § 1002(32), ERISA will not preempt their state-law causes of action against Anthem.” On remand, the district court found that the plan would be preempted under the new statutory language regarding governmental plans, but that the amendment was not retroactive.

The Tenth Circuit explained “law of the case” principles and stated that it had already determined by implication that the amendment would retroactively apply to the Dobbses’ claims. It questioned whether it could affirm a district court decision that rejects a prior panel decision as clearly erroneous, citing In re Smith, 10 F.3d at 724 (noting that the Tenth Circuit is bound by the precedent of prior panels absent en banc reconsideration or a superseding contrary decision by the Supreme Court). T he court discussed the general principles regarding when statutory amendments are applied prospectively or retrospectively.

The court reversed and remanded the case, once more asking the district court to make the factual determination it had previously asked it to make.

Rather than looking to Mr. Dobbs’ duties, the court must determine whether all plan participants are employees ‘substantially all of whose services . . . are in the performance of essential governmental functions but not in the performance of commercial activities (whether or not an essential government function).’

Finally, the court held that the Dobbses could not claim fraud as to benefits. Those claims relate to the contracted for benefits, thus, if the plan was subject to ERISA, those claims would be preempted.

Federal Judge Vacates Reinsurance Award for Evident Partiality

Jody Nathan — Wed, 03 Mar 2010 08:25:34 -0600

Federal Judge Vacates Reinsurance Award for Evident Partiality

A federal judge has vacated a reinsurance arbitration award on grounds of evident partiality, ruling that the failure of two arbitrators to disclose their involvement in a second arbitration involving affiliates of the parties in the first arbitration and a common witness constituted a material conflict of interest.

The rest of the story is here

Bad Jury Instruction results in New Trial

Jody Nathan — Wed, 17 Feb 2010 22:44:29 -0600

In FFE Transportation Services, Inc. v. Pilot Travel Centers, L.L.C., the plaintiff, Medlin, had slipped and fallen while fueling at the defendant's station. Plaintiff received workers compensation benefits from FFE, and then sued the defendant. FFE also sued defendant for the benefits it paid to Medlin. The verdict form had a place for the jury to fill in for the amount to award to plaintiff and to FFE. The jury found against the defendant and filled in separate amounts for each of the plaintiffs. This was reversible error.

The verdict form did not permit damages to be awarded to Medlin without awarding damages to FFE, nor did it permit a jury to award damages of less than a stipulated amount to FFE. The court said, "Moreover, it is not clear from this form whether FFE's stipulated damages are to be deducted from Medlin's award, or whether Medlin's award was over and above that given to FFE. FFE's derivative subrogation claim would normally be deducted from any damages awarded to Medlin; however, the verdict is not clear whether this was the intent of the jury."

The court held: Because FFE has paid Medlin's medical expenses and lost wages (which are the subject of FFE's subrogation claim), if FFE is an active, named party participating at trial, Medlin cannot request and seek to recover damages for those medical expenses and lost wages; only FFE can do so. However, if FFE is not an active, named party participating at trial, the trial court must ask the jury, if it finds in Medlin's favor, to set out the amounts, if any, attributable to medical expenses and lost wages so that the court and the parties can ascertain what compensation FFE is entitled to for its subrogated interest.

Failure to meet requirements of the Unfair Claims Act is negligence

Jody Nathan — Wed, 17 Feb 2010 21:23:19 -0600

In Roberts v. Printup, Ms. Roberts was injured in a one car accident. She was a passenger, her son Printup was driving. The accident was promptly reported to Shelter, the insurance company, and she received the limits of the medical payments. Eleven days before the statute of limitations ran on the claim, Roberts sent a letter to Shelter offering to settle for policy limits ($25,000) and estimating her medical bills to be in excess of $125,000. The letter said she needed a response within 10 days because of the statute of limitations. Ms. Roberts had an agreement with her attorney that if Shelter paid the claim upon demand, she would not owe any attorneys fees on the amount paid. Shelter did not respond for three weeks and then attempted to accept the offer. Ms. Roberts refused. After liability was admitted, a judge determined Ms. Roberts damages to be in excess of $1 million. Shelter paid its limits and Ms. Roberts then was assigned Printup’s claims against Shelter for the excess judgment.

The trial court granted summary judgment to Shelter on the claims of bad faith and negligence. The Tenth Circuit reversed, affirming the dismissal of the bad faith claim, but sending back the negligence claim. See, Roberts v. Printup, 422 F.3d 1211, 1212 (10th Cir. 2005). In the first appeal, the court found that Shelter’s failure to respond to Roberts letter within 10 days was a violation of the Unfair Claims Practices Act as adopted by Kansas. In the second go around, the district court found that Shelter did not have a written policy, procedure, or mechanism in place to ensure that a claim would be acknowledged within ten working days, that Shelter was negligent in handling the letter and that Roberts was not trying to manufacture a bad faith claim. Nevertheless, the district court found that the failure to timely respond did not cause the excess judgment, thus ruling that Shelter was not liable for the excess judgment.

The Tenth Circuit reversed again. The court states:

It is readily apparent that it was foreseeable to Shelter that its negligence in failing to implement a system to handle reasonable time-sensitive settlement offers from an injured party could result in a lawsuit being filed against its insured. Accordingly, its attempt to accept the expired offer in this case did not absolve it of liability for damages to its insured caused by its earlier negligent failure to settle.

* * * *

Shelter did not give Mr. Printup’s interest the same consideration as its own or it would have set up an appropriate system to handle time-sensitive settlement offers.

The Tenth Circuit found that based on the district court’s findings, “it is apparent that it was Shelter’s failure to implement a system to handle reasonable time-sensitive offers in negligent disregard of its insured’s interest that exposed Mr. Printup to damages in excess of policy limits.” Thus, the court reversed and remanded the case with directions to enter judgment in favor of Roberts.

No UM where Insured settled for less than tortfeasor's limits

Jody Nathan — Tue, 16 Feb 2010 19:22:43 -0600

In Porter v. State Farm Mutual Automobile Insurance Co., 2010 OK CIV APP 8, the plaintiff, Porter, was a passenger who was injured in a car wreck. State Farm insured the driver and also insured Porter on her own car. The driver had limits of $100,000. State Farm offered to settle her claim against the driver for $85,000 and Porter accepted, even after being told that she would not be entitled to UM if she did so. She took the settlement and then continued her claim for UM. Plaintiff believed she was entitled to UM because State Farm was the automobile insurance carrier for both Plaintiff and the tortfeasor, despite having settled with the tortfeasor for an amount less than the liability limits of tortfeasor’s policy.

Before an insured can proceed in an action to recover UM/UIM benefits under the contract, he must prove the existence of two simultaneous conditions precedent: 1) that he has a legal right to recover against the tortfeasor, and 2) that his claim exceeds the available liability coverage of the tortfeasor. These conditions precedent must both be present at the same time in order to obtain UM/UIM coverage. Porter could not meet the first requirement because she released the driver from liability. She could not meet the second requirement because by accepting less than the liability-policy limits and releasing the driver from further liability, she established that the claim did not exceed the available liability coverage. In other words, Plaintiff cannot prove the driver was underinsured.

Class action claims allowed to proceed against Farmers for med pay claims

Jody Nathan — Tue, 16 Feb 2010 19:22:43 -0600

In Houck v. Farmers Insurance Company, Inc., 2010 OK CIV APP 12, plaintiffs complained that Farmers used a claims management company to reduce the amount of medical payments made on claims. The trial court granted class certification and Farmers appealed.

The trial court certified the following class:
All persons who made a covered claim pursuant to the Medical Payments Coverage of a private passenger automobile insurance policy written by [Farmers] where:
A. Zurich Services Corporation (“ZSC”) was utilized to review medical expenses;
B. Farmers applied ZSC’s RC 40 reduction to the medical expenses; and
C. The insurance policy was written in one of the following states:
1. Alabama;
2. California;
3. Idaho;
4. Illinois;
5. Indiana;
6. Iowa;
7. Montana;
8. Nebraska;
9. Nevada;
10. New Mexico;
11. Ohio;
12. Oklahoma;
13. South Dakota; and/or
14. Wyoming.

The listed states were states in which the same policy language was used. The appellate court found all requirements for a class action were met, and affirmed the trial court’s ruling.