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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 canstockphoto3602332$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 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.

Sworn Proof of Loss formThe purpose of a sworn proof of loss is to document the amount claimed is accurate and a genuine loss. If it later turns out the claim was inflated or fraudulent, the sworn statement can be used by a prosecutor for insurance fraud in a criminal case or denial of the claim for insurance for fraud in Oklahoma.

According to Oklahoma insurance law attorneys, there is a wide and varied practice in the insurance industry concerning the requirement for a signed, sworn proof of loss before payment of an insurance claim.  Some insurers insist on a signed proof of loss and others could care less.

Oklahoma law provides an insurer cannot assert the failure of the insured to tender a proof of loss as a defense to payment of the homeowners’ claim unless the insurance company has furnished the policy holder with two blank proof of loss forms and warned the insured that the proof of loss must be tendered to the insurer within 60 days from the date of receipt of the blank forms. An insurer adjusting a loss under a fire policy can waive the requirement for a signed proof of loss if it doesn’t make demand within a suitable time.

Insurers sometimes overlook the requirement to submit two blank proof of loss forms. Many Oklahoma insurance defense lawyers are critical of the requirement.  The reason for providing two forms appears to be a carryover from many years ago when scanners, copiers, and other means of reproduction were not as common and convenient. The second blank form was so the insured would have a copy for their own records.  Insurance attorneys in Oklahoma see the requirement for submission of duplicate blank forms as a requirement that no longer meets any real need of the insured.

canstockphoto1080025Most homeowners’ insurance policies provide disputes over the value of the claim can be taken to appraisal and the amount determined by disinterested parties. The appraisal clause has its roots in the statutory fire policy addressed in earlier posts. The statutory provision provides for appraisal upon the request of either party to the claim. The insurer can request appraisal or the insured can request it. The process is one in which each side selects a competent and disinterested appraiser to determine the extent of the loss. Before the appraisers ever meet to appraise the damage, they select a competent and disinterested third person to serve as an umpire for the resolution of any disputes between the appraisers. If the two appraisers cannot agree upon an umpire, there is a provision made for appointment of the umpire by the court.

Initially, it is the job of the appraisers to try to reach an agreement as to the amount of the claim. The umpire is supposed to resolve any dispute upon which an agreement cannot be reached by the appraisers.  In many cases, the umpire is never actually utilized as the two appraisers are able to reach an agreement. In other situations, the dispute is so contentious that the decision of the appraisers and the umpire is rejected by one or both parties and suit filed.canstockphoto1080024

It is important to remember in Oklahoma that the party invoking the appraisal process is usually bound by the decision of the appraisers, while the non-requesting party has the right to litigate the amount of the award.  You will want to carefully consider the aspect of the appraisal provision before actually making demand for the procedure.

canstockphoto8352Bubba‘s insurance company sent him a letter by certified mail. Bubba didn’t sign for it “’cause he wasn’t about to let some @#$%^ serve him any legal papers!”  He tried to talk the lady at the post office into letting him see inside the envelope without signing for it. She really wanted to help him out and said her decision had absolutely nothing to do with Bubba having knocked out her son’s four bottom teeth a few years back when the boy tried to grab the last box of shotgun shells at the Super Saver Ammo Sale down at the flea market. I sent Bubba back to the post office.

canstockphoto19794886The letter scheduled an EUO and asked Bubba to bring any available documents evidencing title to both real and personal property as well as some other documents concerning his financial condition. While Bubba is no arsonist, I already knew his financial situation was a red flag to the company. I explained to Bubba “EUO” is shorthand for examination under oath and has nothing to do with flying saucers or unidentified flying objects. Although Bubba did mention he thought the adjuster would be unidentifiable when he finished “flying ’em across the pasture.”

It turns out the letter actually came from legal counsel for the insurance company, one of those “tall building lawyers” from Oklahoma City. He realized that some sworn testimony from Bubba would provide a good factual basis for how the company should handle things and scheduled the Examination Under Oath to obtain the needed information. I feel torn between the obligation owed to a fellow member of the bar and my family ties to Bubba. I’m really afraid Bubba will be a little humiliated going into the EUO in a straight jacket, but I also don’t want to watch a fellow member of the bar choked by Bubba’s grease-stained fingers.

Oklahoma insurance law attorneys agree there are a number of reasons why a policy may be voided by an insurance company.  Fraud by the applicant or policy holder is the most common reason an insurance company would rescind or void an insurance policy.  Rescission is defined as:

1. A party’s unilateral unmaking of a contract for a legally sufficient reason, such as the other party’s material breach, or a judgment rescinding the contract; voidance.  Rescission is generally available as a remedy or defense for a nondefaulting party and is accompanied by restitution of any partial performance, thus restoring the parties to their precontractual positions. — Also termed avoidance.  Black’s Law Dictionary (8th ed. 2004)

According to Oklahoma statute 15 O.S. § 235, a party seeking to rescind or void a contract (which includes an insurance policy) must:

  • act promptly upon discovering facts which entitled him to do so
  • restore to the other party everything of value

In other words, experienced Oklahoma insurance attorneys advise their insurance company clients wanting to rescind a policy on the grounds of fraud to act quickly and also to return all premiums paid.  Sneed v. State ex rel. Department of Transportation, 1983 OK 69, 683 P.2d 525 and Berlands’s Inc., of Tulsa v. Northside Village Shopping Center, 1972 OK 152, 506 P.2d 908.

As a caveat fancy legal wording for caution or warning), accusing a policyholder of fraud needs to be done carefully.  In Oklahoma, an insurer really should consult with competent legal counsel before doing so.

Oklahoma recently passed a tort reform bill into law which will be effective November 1, 2009. The following are the highlights of the legislature’s actions.

Expert Affidavits 12 O.S. 19

In any civil action alleging "professional negligence", the Plaintiff must attach an affidavit to their Petition attesting that:

1.   The Plaintiff has consulted with a qualified expert;

2.   The Plaintiff has obtained a written opinion from the expert that identifies the Plaintiff and that, based on a review of all the available relevant material, the expert believes that a reasonable interpretation of the factors supports a finding that the acts or omissions of the Defendant constitutes professional negligence; and

3.   Based on this review by the expert the Plaintiff believes the claim is meritorious and based on good cause. The expert’s written opinion must include the specific acts and omissions which constitute professional negligence and the reasons why. These written opinions are not admissible at trial and may not be used or discussed for any reason during discovery or at trial.

If the Petition if filed without this affidavit and the court has not granted an extension, the court shall dismiss the Petition without prejudice upon motion of the Defendant. The court may grant an extension of time to provide an affidavit, not to exceed 90 days, for good cause shown.

Voluntary Dismissal 12 O.S. 683

Changes existing law to allow a Plaintiff to voluntarily dismiss an action at any time prior to pretrial. After pretrial a Plaintiff may dismiss without prejudice only by agreement of the parties or by order of the court If a Plaintiff dismisses and later refiles, alleging the same cause of action, the court may award costs to the Defendant of the previous action.

Prejudgment Interest 12 O.S. 727.1

In personal injury or injury to someone’s personal rights, prejudgment interest doesn’t start until 24 months after the filing of the lawsuit. The prejudgment interest rate was lowered to the United States Treasury Bill rate.

Appeal Bonds 12 O.S. 990.4

Appeal bonds will not exceed $25 Million and no appeal bond needs be pledged to appeal an award of punitive damages. The court can still lower the statutory bond requirements, which have not been changed, upon a showing of substantial economic harm. This hasn’t been a problem for most of us!

Summons 12 O.S. 2004

This change is significant. If a summons is not served within 180 days the petition shall be deemed dismissed without prejudice.

Pleading 12 O.S. 2011

A Plaintiff’s petition must state whether the Plaintiff is seeking damages in excess of the amount required for diversity jurisdiction under 28 U.S.C. 1332 (presently $75,000). If the Plaintiff seeks less than the current $75,000.00, the petition must state the actual amount sought.

Summary Judgment 12 O.S. 2056

This statute adopts Federal Rule 56 and requires a court grant summary judgment if it finds that there is no genuine issue of material fact. The change is not really significant.

Expert Testimony 12 O.S. 2702, 2703

The legislation essentially incorporates Federal Rule 702 and 703 which adds language from Daubert v. Merrill Dow, 509 U.S. 579, as to the requirements for expert testimony. This is not a significant change.

Discovery 12 O.S. 3226

The Plaintiff must disclose, within 60 days of service of the petition and without request by the Defendant, a computation of the damages and provide all documents and evidence used to calculate the damages. Sorry, we fail to believe this statute will be useful. Plaintiffs will be forced to exaggerate their claims or risk a court implying some prejudice to defendants.

Joint and Several Liability 23 O.S. 15

Under the present law, the liability of joint tortfeasors is several unless:

– a Defendant is greater than 50% responsible; or

– a Defendant acted willfully and wantonly or with reckless disregard; or

– the Plaintiff is fault free.

Under the New Act, the liability of joint tortfeasors is several unless:

– a Defendant is greater than 50% responsible; or

– a joint tortfeasor acted willfully and wantonly or with reckless disregard, in which case all Defendants are jointly and severally responsible.

Damages 23 O.S. 61.2

Non Economic Damages in any suit alleging bodily injury are capped at $400,000, except:

a) in suits against a physician, if the judge and jury find by clear and convincing evidence the Plaintiff suffered a permanent and substantial physical abnormality or disfigurement, loss of use of a limb or loss of, or substantial impairment to, a major body organ or system; or

b) the Plaintiff has suffered a permanent physical functional injury that prevents them from being able to independently care for themselves and perform life sustaining activities; or

c) The Defendant’s acts were with reckless disregard, grossly negligent, fraudulent or intentional and with malice.

d) In other cases not involving doctors, if the jury finds, by a preponderance of the evidence, that the Plaintiff suffered a permanent and substantial physical abnormality or disfigurement, loss of use of a limb or loss of, or substantial impairment to, a major body organ or system; or

e) Plaintiff has suffered a permanent physical functional injury that prevents them from being able to independently care for themselves and perform life sustaining activities; or

f) The Defendant’s acts were with reckless disregard, grossly negligent, fraudulent or intentional and with malice.

The jury will not be told about the cap, on non-economic damages but will be asked to return a general verdict with answers to the following interrogatories:

– what is the total amount of damages awarded to Plaintiff?

– What portion of these damages are being awarded for economic loss?

– what portion of these damages are being awarded for non economic loss?

– did Plaintiff’s injuries, for which they are being compensated, include damages for a permanent and substantial physical abnormality or disfigurement, loss of use of a limb or loss of, or substantial impairment to, a major body organ or system?

– did Plaintiff’s injuries, for which they are being compensated, include damages for a permanent physical functional injury that prevents them from being able to independently care for themselves and perform life sustaining activities?

– did the Defendant act with reckless disregard, grossly negligently, fraudulently or intentionally and with malice?

For lawsuits against doctors, any damages awarded over and above the $400,000 cap are to be paid from the Health Care Indemnity Fund, a fund to be created and funded by the State of Oklahoma. A physician must carry professional liability insurance of at least $1 million to be eligible for the protection of the fund.

This act will not apply to claims governed by the Oklahoma Governmental Tort Claim Act or claims for wrongful death.

The legislation has some Constitutional problems and may not stand up to judicial scrutiny.

Seat Belts 47 O.S. 11-1112

Evidence of the use or nonuse of seatbelts will be admissible in a civil action except for minors under the age of 16.

Immunity 63 O.S. 683.9

The Uniform Emergency Volunteer Health Practitioners Act provides immunity to health care providers who volunteer during times when the Governor has declared a state of emergency.

Common Sense Consumption Act 76 O.S. 33

The distributor or seller of food will not be responsible for food that caused a Plaintiff to become obese. It does not preclude suits alleging a food product was adulterated or misbranded, and caused a Plaintiff injury. If you want to blame someone else for your weight, better do it before November 1st.

Livestock Activities Liability Limitations Act 76 O.S. 50.2

The statute gives greater protection to people conducting “agritourism” activities on their property.

Firearms 76 O.S. 51

Immunity is granted to firearms manufacturers from lawsuits alleging that a manufacturer’s gun was used by another person to injure or kill someone. The statute does not apply to suits alleging product liability, breach of warranty or suits against the transferor ofa gun.

Product Liability 76 O.S. 57

This section adopts existing case law, as well as the Restatement of Torts, and puts it in the form of a statute. A manufacturer or distributor of a product may not be held liable if the product is inherently unsafe and known to be unsafe by the ordinary consumer who consumes or uses the product with the knowledge readily known to the community. A Defendant must show:

– the product is a common consumer product;

– the product’s utility outweighs the risk created by its use;

– the risk imposed by the product was one known by the ordinary consumer who consumes the product with the knowledge common to the community;

– the product was properly prepared and reached the consumer without a substantial change in its condition; and

– adequate warnings of the risk posed by the product were given to the consumer.

This statute does not apply to claims alleging a manufacturing defect or for breach of warranty.

Subsequent Remedial Measures 76 O.S. 58

The statute essentially adopts Federal Rule 407 (but does not repeal existing 12 O.S. 2407). The legislature left lawyers and judges to fight over what they intended.

Fire5

It has come as a surprise to many an attorney that Oklahoma has a one year statute of limitation in which to file a lawsuit for a claim involving a fire loss. The one year limitation is set forth by statute in the statutory fire policy. This rule is a significant exception to the typical five year statute of limitations for a written contract. The one year time period has been given the approval of the Oklahoma Supreme Court since 1916 in the case of Wever v. Pioneer Fire Ins. Co., 1915 OK 1046, 153 P. 1146.

canstockphoto35287867Legal writers have observed over the years this one year statute of limitation may not be valid under Oklahoma’s Constitution. The Supreme Court has held in other cases that special legislation designed to protect a certain industry or class of individuals is unconstitutional. The one year requirement in which to file a suit involving a fire loss under a homeowners’ policy has been considered the law for close to 100 years and is recognized by most Oklahoma attorneys as the required time period.

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The Oklahoma legislature in 36 O.S. § 4803 has adopted a statutory version of a fire policy sometimes referred to as the “New York Standard Fire Policy”. The statute requires all insurance companies issuing homeowners’ policies in Oklahoma to have the minimum coverage required by the statute unless special approval has been received from the insurance commissioner allowing them to sell something less than the minimum requirement. Typically, obtaining the commissioner’s approval for a nonstandard policy form is difficult unless the insurer is enlarging or expanding the available coverage.

Section 4803 provides for many of the defenses that are normally used by insurers in denying claims.  Fraud by insureds upon Oklahoma insurance companies is a valid concern.  There is provision for denial for fraud or concealment on the part of the insured. The statute also provides that bills, currency, deeds, evidences of debt, money, or securities are not covered by the insurance policy unless specifically provided by the insurance contract.

The statutory insurance policy provides there is no coverage for certain types of perils such as military invasions, rebellions, insurrections, civil war, neglect on the part of the insured to use all reasonable means to save and preserve property, and further that the insurer is not responsible for theft losses.

The statute sets minimum time periods in which the policy can be cancelled and the type of notice that must be given to an insured as well as a mortgage company before coverage is actually cancelled. In the event of a claim, it requires the insureds to tender a proof of loss within 60 days of the event and allows the mortgage company to submit the proof of loss if the policy holder does not take timely action.

The statute also makes provisions Oklahoma insurance attorneys use in taking examinations under oath, inspection of damaged property, and require preparation of a complete inventory detailing the quantities, cost, and actual cash value of the items claimed.

Most homeowners’ policies provide more coverage than the statutory minimum. For instance, the typical homeowners’ policy will have coverage for theft, wind storm, liability coverage, and contain other clauses that give greater protection to a homeowner than the statutory framework enacted many years ago.  Questions about the minimum required coverages under a homeowners’ policy should be reviewed by a competent attorney knowledgeable about Oklahoma insurance laws.

canstockphoto7074702Bubba still hasn’t been paid for his mobile home that burned when the squirrel’s tail caught fire and went running through the house. The squirrel seems to be doing okay even though he doesn’t have a tail anymore. Bubba saw him the other day from his tent he pitched underneath the tree to live in till he gets his claim paid.

I faxed the Conti v. Republic Underwriters Insurance Company opinion to the adjuster and he faxed me a copy of the policy and dec page. The policy has raised a whole new issue. The dec page shows the dwelling was insured for $38,000. If I could find people that would buy mobile homes like Bubba’s for anywhere near the price of $38,000, I’d go into the mobile home business today! The actual cash value is probably $12,500. I am curious to see if the insurance company is aware of 36 O.S. Section 4804 that states:

No insurance company shall, knowingly, issue any fire insurance policy upon property within this state for an amount which, with any existing insurance thereon, exceeds the fair value of the property, nor for a longer term than five (5) years. If buildings insured against loss by fire, and situated within this state, are totally destroyed by fire, the company shall not be liable beyond the actual value of the insured property at the time of the loss or damage, and if it shall appear that the insured has paid premiums on an amount in excess of said actual value, the insured shall be reimbursed the proportionate excess of premiums paid on the difference between the amount named in the policy and said actual value, with interest at six percent (6%) per annum from the date of issue.

If I was Bubba’s insurer, I would rather reimburse him part of his premiums along with some interest than agree his mobile home is worth anywhere near $38,000.