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Oklahoma Bad Faith – What Is It?

Posted in Uncategorized

In Oklahoma, an insurance company has a legal duty to fairly pay claims. This duty is technically to act in good faith and with fair dealing. An insurance company that refuses to fairly pay claims can be sued for bad faith for not complying with the law. The insured policyholder can claim emotional distress, financial losses, etc., caused by the bad faith.

It is good to keep in mind that the term bad faith is a short hand version of the duty of good faith and fair dealing. Most adjusters and insurers use “bad faith” to describe this type of litigation. In everyday communication, saying breach of the implied duty of good faith and fair dealing is a mouthful. Bad faith is a whole lot shorter and easier to say.

The concept of bad faith is to keep insurance companies promptly paying the amount owed. Historically, there have been a few disreputable insurers who tried to take advantage of certain situations to avoid paying claims. Like every industry, there are always a few bad actors. On the whole, the vast majority of insurance companies pay their claims timely and appropriately.

In some respects the bad faith law protects honest insurance companies, not just the policyholder. The law acts as a shield to the good companies. Imagine how hard it would be for an insurance company to compete against another company that takes advantage of people by not paying claims. The bad actor company would reap profits by not paying. In time, the good companies would be forced out of business.

Not all Oklahoma lawyers understand bad faith law. We have seen a lot of attorneys who threatened to sue for bad faith that did not exist. Some actually sued and wasted a lot of time and money. Just because an insurance company doesn’t pay the amount the insured wants does not make it bad faith.

Just like all litigation, bad faith requires proof. Lawyers without experience in insurance may reach the wrong conclusion. The lawsuit is filed. Years later the court rules there’s not bad faith. Having sound knowledge about insurance coverage is a must. It is rare to see a successful bad faith lawsuit unless there is first coverage for the loss. There are very few exceptions.

Trained adjusters can spot an inexperienced attorney a mile away. One easy way is the misuse of common terms in the industry. Adjusters speak a language using words that have precise meaning to the claim industry. Lawyers who don’t speak the language stand out. In one or two conversations, it is apparent the lawyer doesn’t really know what he is talking about.

For example, the attorney may talk about a bad faith claim hoping to scare the adjuster. It doesn’t work. An experienced adjuster knows how to do their job. The lawyer’s threats of bad faith just illustrate how little the attorney really knows. Once the lack of experience is revealed, the attorney loses a lot of credibility.

In conclusion, bad faith is a separate right to sue, but only if the insurance company wrongfully adjusts the claim. The legal right to recover money for bad faith is not based upon mere conclusions. Evidence is necessary of the bad faith acts. If the bad faith causes financial loss, emotional distress, etc., damages can be awarded. In severe cases, punitive damages can be given.

Oklahoma’s New Insurance Business Transfer Law

Posted in Uncategorized

A forum on Oklahoma Business Transfers was conducted in Tulsa, Oklahoma on August 21, 2018. The conference provided speakers from the insurance industry with expertise in business transfer and runoff business.

The discussion was interesting as the panel discussion explained the comparison to the new Oklahoma legislation effective in November, 2018, with the structure in the Part VII transfer familiar to the London insurance market. The Oklahoma model was implemented in an attempt to emulate Part VII.

Members of the legal team of the Oklahoma Insurance Department along with the Commissioner spoke about the history of the legislation and the guidance the insurance department is providing to insurers wanting to make use of the new law. Obviously supportive of the new transfer law, the insurance department is working to assist insurers who wish to transfer business with the intended result of legal finality.

Time will tell how the industry reacts to the new transfer act and the courts’ approach to the process.

Using Appraisal To Settle Oklahoma Insurance Claims

Posted in Damages, Homeowners' Insurance

The typical homeowner’s insurance policy has a clause allowing the parties to use appraisal to resolve disputes. Appraisal is intended to quickly and economically determine the amount of a loss in cases of disagreement. Like many aspects of Oklahoma law, appraisal should be approached with the advice of an experienced attorney. The Oklahoma appellate decisions impact the process.

In simple terms, appraisal involves three parties that serve as a panel. Each side chooses one appraiser to act as a disinterested appraiser. The two appraisers choose the third person by agreement. The third individual is called the Umpire. If the two appraisers are not able to pick the Umpire by agreement, then either side can ask the court to select the Umpire.

The intended result is a decision as to the amount due and a closed file. Appraisal can be an efficient, fair means to settle a disagreement. When appraisal is requested by parties who do not know the law, it can end most unpleasantly. Some insurers and some policyholders have the DIY or “Do It Yourself” approach to problems, preferring to avoid lawyers and fees. In our experience, the DIY thinking is a good way to end up very, very unhappy.

The problem is that appraisal on the surface looks to be something that might avoid lawyers and legal fees. The reality is that appraisal gone wrong can be quite expensive.

In certain situations, appraisal is a wonderful tool. It just has to be done the right way.

The insurance claim process seems to go through cycles. We see periods where appraisal is requested on claims, then we don’t see appraisal used for quite awhile.

If we can assist you with an insurance claim or an appraisal, please let us know.

Good News In 2018 For Tornado Damage In Oklahoma

Posted in Homeowners' Insurance, Property Insurance, Storm Damage

Tornadoes cause so much destruction and damage to property in Oklahoma. So far, 2018 is a notable exception to the number of tornadoes and the extent of the damages. The National Weather Service reports there have been 18 tornadoes this year; the strongest being an EF2 and only one reported with this wind speed and strength.

This is great news for Oklahoma property owners and insurers. Property damage by tornadoes costs insurance companies a lot of money in claims.

Hopefully the lack of damages and claims will give everyone a bit of a financial break for 2018.

Motels, Apartment Complexes, Restaurants, And Businesses Serving People Should Manage Risks

Posted in Coverage Disputes, Liability

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The typical Oklahoma business manages a considerable part of its liability risks by purchasing insurance coverage. While hardly news, businesses sometimes take their insurance coverage for granted and just assume insurance will be there if an accident happens. It is not a wise risk management practice to simply assume you will have coverage for every situation.

A recent decision by the Oklahoma Supreme Court brings the point home. In Siloam Springs Hotel, LLC v. Century Surety Company, 2017 OK 14, a hotel purchased liability coverage to protect against accidents and negligence. The policy was sold by Century Surety Company.

Guests at the hotel were injured when carbon monoxide entered the air ducts due to leakage from the heater for indoor swimming pool.The hotel believed it had insurance to cover the claims and potential lawsuits. The insurance company said there was no insurance to cover the injuries due to an exclusion in the insurance policy.canstockphoto8944045

There was no suggestion in the opinion by the Supreme Court indicating the cause of the leak was an intentional action the part of the hotel management. The incident appeared to be an accident.

The hotel argued the exclusion for indoor air pollution was against public policy and should not be enforced. It asserted the leak was sudden and unexpected like an accident:

¶27. . . according to Siloam, because the Indoor Air Exclusion as applied to a sudden carbon monoxide leak violates public policy because it potentially denies compensation to victims under circumstances in which a reasonable person would expect that liability insurance would be available to compensate for the injury. “

Siloam explained that an indoor air exclusion for long-term air quality issues like mold might not violate public policy, as a reasonable person would not expect liability coverage in that situation. In those situations the policy holder would have ample time to detect and fix the problem.

The hotel also pointed out that the average person would expect there to be coverage for a sudden, accidental discharge of carbon monoxide and the reasonable expectation for coverage. In other words, there should be coverage for acts of negligence.

The Oklahoma Supreme Court drew a clear distinction between insurance coverage and whether the hotel was responsible:

¶31 The issue before this Court is not potential compensation to injured parties and the reasonableness of expecting it, but the enforceability of an exclusion limiting insurance coverage. Even were the exclusion to fully exclude the events of this cause from coverage under the insurance contract, that does not necessarily mean injured individuals will be unable to recover from Siloam itself. The insurance contract limits what Century must pay, and does not serve to limit Siloam’s potential liability. Just because one believes the air they breathe might become contaminated, and expects a business should carry insurance to cover that eventuality, does not mean the law requires it.”

canstockphoto8750756In other words, the hotel may still be legally responsible for the damages and injuries even though it had no coverage. Risk management is assessing potential risks and attempting to control them. It is a challenging task and sometimes seemingly impossible. Oklahoma businesses need to know the coverage purchased to properly manage  risks.

Long story made short, businesses should not presume to have insurance for injury claims just because the premiums were paid.  Mistakenly assuming there is insurance coverage when it’s not there can bankrupt the family business.

We review insurance policies and assist in coverage questions all the time. If you have a coverage dispute or want some assistance with an insurance policy question, give us a call.

Arbitration Might Not Be Required If No Mental Capacity To Knowingly Enter Into Contract

Posted in Damages

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The Plaintiffs Walker Bark and Debra Yahquo signed two contracts with Lake Country Chevrolet to purchase automobiles. A disagreement arose over the vehicles. Unable to resolve the dispute to their satisfaction, the Plaintiffs filed a lawsuit. They asked the court to rescind or set aside the contracts and to recover damages for fraud by the car dealer. The car dealership filed a motion to compel arbitration to avoid litigation in court. The dealership argued that the contracts signed by the Plaintiffs said any disputes were to be determined through arbitration, not a lawsuit.

In response, the Plaintiffs asserted that Mr. Bark suffered from a service-related disability and cognitive impairment and because of this, he did not knowingly agree to any of the terms of the contract including the arbitration clause. As an alternative, the Plaintiffs requested the court hold a hearing where it could hear evidence on the issue of whether cognitive impairment existed and the affect, if any, it had on the Plaintiffs ability to comprehend the contract. The trial court refused to hold a hearing or hear evidence and instead denied the dealership’s motion and allowed the lawsuit to proceed.

arbitration2The dealership appealed the decision. The appellate court reversed the ruling of the trial court and remanded the case back to the trial court with instructions that it conduct an evidentiary hearing. As part of this hearing the trial court was instructed to make a determination as to the existence of the Plaintiffs’ mental capacity and ability to knowingly enter into a contract and agree to arbitration.

Arbitration clauses are present in many contracts as a means to resolve disputes. Legal scholars  disagree over the advantages/disadvantages of arbitration. For businesses, one benefit can be the confidentiality of the proceeding and the absence of any public proceedings that other customers might discover. A disadvantage is the courts are provided at taxpayer expense to everyone. In arbitration the participants are in reality paying for the services of a private decision maker. The courts generally speaking will require arbitration if it appears the parties to the contract agreed to do so.

If you have questions about a contract, arbitration or need legal assistance with legal problems, maybe we can help you. Give us a call!

Bark v. Lake Country Chevrolet Cadillac, LLC, 2014 OK CIV APP 24, __ P.3d __.

Oklahoma Wildfires Destroy A Staggering 800,000 Acres

Posted in Fire Loss

A grass fire burns March 7 in Harper County, Oklahoma. (KOKH/Steven Anderson)

Fires in northwest Oklahoma have damaged more than 800,000 acres. The extent and size of the area damaged is hard for many of us to comprehend. As a couple of measuring sticks, there are 640 acres in one square mile. So it means you would have to jog four miles to go around a section of land with 640 acres in it. If you divide 800,000 acres by 640, then you have 1,250 sections of land if each parcel was a separate property. When you consider the Boston marathon is considered a grueling 26 mile run, the entire race would be less than 8 sections if you ran around them one at a time.

Many people in Tulsa and Oklahoma City shop for homes with an acreage to have a little space from their neighbors. Often, these properties sit on 2.5 acre or 5 acre lots. The ones that mow their 5 acre yards know how long it takes in the Summer months to mow 5 acres even on a yard tractor or riding mower.

The size of this fire and the amount of the damage is difficult to imagine. The photographs from the news account shows the entire skyline lit with fire. At night the specter of the fire becomes more real against the night sky.

Fire in Oklahoma is always serious, but rarely this widespread.

Insurance Coverage For Restaurants; You Definitely Want Drive Through Coverage

Posted in Damages, General Insurance

Fortunately no one was hurt when a car drove into the Silver Dollar Restaurant in Collinsville, Oklahoma.

 In a news account by Emory Bryan with the above photograph, she reported:

The police started an investigation, but witnesses told them the car that went inside first grazed another car, went over a curb and through the intersection before it hit the Silver Dollar Cafe.

“It didn’t really look like he slowed down until he hit the building, enough force to go right inside it,” witness Gary Nunley said.

Nunley was across the street on the sidewalk.

“Surprised me to see that, but when I saw the whole front of the building collapse, implode, and a huge cloud of dust roll across the street. . . .”

The car was barely visible under the roof with a large beam down on the trunk.

A firefighter told News On 6 the car knocked down the main support pillar at the front of the building. He said the next support pillar is what stopped the car.

The event offers all sorts of potential insurance issues. The driver should have liability insurance coverage for property damage. Of course, the minimum limits of insurance coverage in Oklahoma require only $25,000 of insurance. Although the damages aren’t estimated in the news report, the photograph shows extensive damage to the building. It is unknown if there is sufficient liability insurance to pay for everything.

Damage alone isn’t enough to require the auto liability insurer to pay for the loss. The driver must have also been negligent in some fashion. Granted at first blush, hitting a building with your car carries a bit of a presumption that proper attention wasn’t being paid. Nonetheless, negligence must be proven for there to be responsibility for the accident.

The police investigation will reveal more, but the obvious questions are what was the driver doing and where was he going. If the driver was working in the scope of his employment, then the employer may have some potential exposure to the damages by virtue of the employment status. Depending on the type of coverage of the employer, there might or might not be coverage for the losses.

Assuming the restaurant leased or rented the space, there could be a question about division of the liability insurance. For example, if the building was owned by someone other than the restaurant, there may be disputing claims for the available insurance. The building owner would potentially have a claim for structural damage while the restaurant might have its own claims for damaged equipment and downtime.

If the building was owned by someone other than the restaurant, the owner may have property damage insurance providing protection. We constantly advise our business clients to purchase insurance for the unexpected circumstances. Here is just one more example. It would be a safe bet that the building owner went to bed the night before without any concern a car was going to crash into the structure the next morning.

The restaurant, like most businesses, hopefully purchased property insurance with some form of business interruption coverage. The business personal property would usually be covered by the insurance policy allowing replacement of the items. The loss of revenue while the facility is closed is another matter. Business interruption claims can be a little more complicated than property damage to equipment, chairs, and tables.

Still yet is the vehicle and the damage to it.  The owner, who may or may not be the driver, may have collision coverage for the car. If so, payment may be available for the vehicle. Of course some people elect not to buy collision coverage if there isn’t a loan on the vehicle.

We haven’t touched on health insurance, disability insurance, or workers’ compensation insurance. All three might be implicated depending upon the facts and circumstances. To top it all off, the various insurance companies who end up paying the claims will probably want to subrogate or sue to recover for the amounts that have to be paid out.

It can simply be amazing how many types of insurance can come into play with a simple automobile accident with no report bodily injuries. Insurance is needed by everyone for those unforeseen emergencies.

There’s More Than One Way To Burn Down An Apartment Complex!

Posted in Fire Loss

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You can take the girl out of the country, but you can’t take the country out of the girl! A woman burned down an apartment building causing reportedly $2 Million in damages. She was cleaning a squirrel for dinner by using a propane torch to remove the fur. A lot of folks enjoy squirrel, but they don’t like the cleaning and skinning part. This was first time we heard about using a propane torch. Well, here are a couple of takeaways for you:

  • Renter’s insurance is a great idea, you never know when a fire will occur.
  • Apartment owners need to make sure they have sufficient coverage limits.
  • There always a better way to skin a squirrel, well maybe?

Fire Season Isn’t Over As Oklahoma Heads Into Storm Season

Posted in Damages, Fire Loss, Storm Damage

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Insurance claims for loss of property or damage seem more predictable in previous years. It used to be that fires and the resulting insurance claims were over by March. It didn’t mean there would not be a fire or a claim, but the winter rains and the warmer weather reduced the number. This year fire officials are warning the drought has left the vegetation drier than normal and winds create the danger of grass fires and wild fires. 

Simultaneously, Oklahomans know that March – June tends to be the time of year for hail, tornadoes, strong winds, lightning, and all sorts of storm damage. These storms produce a large number of insurance claims as a rule.

While tornadoes and fire are always the most dreaded property insurance claims due to the obvious dangers, hail accounts for a lot of damage. Driving in to work, there is a RV dealership with what looks to be $7 – 9 Million in inventory. One hail event could be devastating if it landed there.

Hail4Car dealers, RV dealers, and all types of commercial coach and trailer distributors are wise to carry sufficient dealer open lot coverage to protect against hail. Homeowners and vehicle owners should make sure their property is properly covered. Some people prefer not to pay for comprehensive coverage for their older vehicles, yet one hail storm can total a car.

The question we sometimes ask, is what other piece of property worth say $6,500 do you leave sitting outside in the driveway uninsured. Our law firm doesn’t sell insurance and we do not receive any commissions for recommending people to carry insurance coverage. We routinely see all kinds of insurance claims and disputes over losses. It is sad to hear about those situations where people or business suffer damages without adequate insurance.

If you have questions or issue involving insurance coverage or bad faith, consider calling us to discuss the situation. 918-587-1525.

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