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.