Insurance - Bad Faith

An apartment complex sustained a fire loss to its business and hired a public adjuster to assist in preparing the property damage claims. Subsequently, the apartment complex assigned its interest in the bad faith claims against the insurance company and insurance agency to the public adjusting company and, in turn, the public adjuster filed suit alleging bad faith. The insurance company and agent filed motions for summary judgment in the trial court and prevailed. The public adjuster appealed.

On appeal, the Oklahoma Court of Civil Appeals found that the trial court properly granted summary judgment and held:

1) summary judgment for the insurer was appropriate because a bad faith claim arises from a tort and, under Oklahoma law, a tort cause of action is not assignable; and

2) summary judgment for the insurance agency was appropriate because, under Oklahoma law, an insured cannot bring a bad faith claim against an insurance agency or its agent because they are not parties to the insurance contract.

 

, 2013 OK CIV APP 67, 307 P.3d 400.

United Adjustment Services, Inc. v. Professional Insurors Agency, LLC

Insurance - Liquor Liability

A golf course was insured by an insurance policy which included "Liquor Liability Coverage". The parents of a 17-year-old girl working at a golf course brought a lawsuit against the golf course and its manager for allegedly providing alcohol to their daughter following a golf tournament. The girl attempted to drive after consuming a substantial amount of alcohol, crashed her vehicle into a tree, and sustained serious injuries to her spinal cord resulting in paraplegia.

The insurance policy provision obligated the insurance company to pay sums owed by the golf course if they were incurred "by reason of the selling, serving or furnishing of any alcoholic beverage." The insurance policy liability limits were set at $2 Million for the "Aggregate Limit" and $1 Million for "Each Common Cause Limit".

The insurance company subsequently filed a declaratory judgment action in Federal court asking the court to establish the maximum insurance coverage available to the golf course. A summary judgment was filed requesting the court rule that $1 Million was the applicable limit since all claimed damages arose from the injuries to one person and fell under "Each Common Cause". The girl’s parents argued the limit should be $2 Million.

The Federal court granted summary judgment in favor of the insurance company finding the maximum limit of liability was established at $1 Million for the pending county district court case and reasoned that an insurance policy is considered a contract governed by the rules for interpretation of contracts. The plain language of the policy set the limit in this circumstance at $1 Million. The court further declared that, since it did not have the ability to rewrite the policy, it must proceed based on the agreement therein. American Economy Ins. Co. v. Rutledge, et al., 833 F.Supp.2d 1320 (W.D. Okla. 2011).

Liquor Liability Exclusion

An insurance company provided liquor liability coverage to a restaurant/tavern including coverage for injuries "imposed" on the insured resulting from "selling, serving or furnishing of any alcoholic beverage".

The club was sued in an underlying state court action by the parent/guardians of three minor Plaintiffs who were purportedly injured as bystanders to a fight which broke out in the insured bar. As part of the state court lawsuit, the minors never presented evidence that showed their injuries resulted from "selling, serving or furnishing alcoholic beverages", nor were any allegations made that alcohol was a factor in the injuries sustained.

The insurance company filed a declaratory action in Federal court requesting the court to determine if the insurance policy covered the injuries in the state court action and required the insurance company to defend in the underlying lawsuit.

The Federal court ruled that since the injuries did not arise out of "selling, serving or furnishing of any alcoholic beverage", coverage did not exist, and, as such, there was no duty to defend the lawsuit. The court also noted that although there was an "assault and battery" endorsement in the insurance policy, the endorsement did not apply since the loss was not covered under the liquor liability policy. Mount Vernon Fire Ins. Co. v. Olmos, 808 F.Supp.2d 1305 (Okla. 2011).

Oklahoma's Statute Of Limitations For Contracts

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?

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.