It’s crucial to consult with an Oklahoma lawyer with experience in bad faith law in the initial stages of your claim. Oklahoma uses bad faith lawsuits to protect its citizens from inappropriate claim practices. Bad faith lawsuits are the tool used by the courts to correct unfairness. As the first sign your claim appears headed for disagreement, then you really should be talking to a bad faith lawyer licensed in Oklahoma.
History of Bad Faith
Bobby Christian’s Story
The first bad faith lawsuit in Oklahoma was the case of Bobby Christian. The claim involved a disability policy. For Bobby, life was pretty good. He worked for Dow Chemicals. Dow was a big company and the job paid well. The company offered perks and some important employee benefits. If Bobby became disabled, then the insurance policy was supposed to pay the benefits. The contract was simple. The terms and conditions were fair.
As the primary breadwinner, Bobby’s income was essential for his household. A lengthy illness or injury taking him from the job would cut off the income he needed. This was the reason Bobby had disability coverage.
In a sudden and unexpected turn, Bobby’s life changed all at once. He was injured in a devastating accident which left him totally disabled. The injuries were permanent. The doctors said he wouldn’t really recover. Since he was unable to work, the wages from his job ended.
With Bobby incapable of doing his job, he was faced with the loss of his paycheck. It wasn’t a pretty picture so he really needed financial help. Bobby never intended to make a claim under the disability insurance policy. Although the premiums had been paid, you always hope accidents won’t happen.
A company called American Home Assurance had sold the coverage. The face amount of the insurance policy was $50,000.00, which back in 1977 was quite a lot. As such, it made sense to turn in a claim and make use of the coverage. Since Bobby’s financial situation was dire, the insurance money would really help out.
Bobby’s Claim Denied
The insurance company refused to pay Bobby and didn’t give a reason. American Home just withheld the benefits, leaving Bobby in a real bind. The denial was a surprise to Bobby so it seemed very unfair.
Bobby located a lawyer familiar with insurance coverage. He wasn’t an Oklahoma bad faith lawyer. The Oklahoma courts had never let a lawyer sue for bad faith. But, he read over the insurance policy and said it seemed pretty straightforward. In the event of a disabling accident, the insurance company was supposed to pay.
Since Bobby’s doctors said he wasn’t going to recover and go back to work, payment was due. Therefore, American Home’s refusal to pay the claim just didn’t make sense. Bobby was permanently disabled. The lawyer was really bothered by the insurer’s refusal to honor the contract.
The attorney sued American Home for not keeping its promise to pay Bobby the $50,000.00 like they were supposed to do. By the middle of the trial, it was really clear to everyone that the insurance company didn’t have a reason for refusing to pay the claim. The denial was just because the adjuster didn’t want to pay Bobby the money.
After all of the hearings in the lower courts, the case continued on appeal to the Oklahoma Supreme Court. This is the highest court in the state.
The Supreme Court Was Frustrated
The Supreme Court didn’t like the idea that the insurance company refused to pay the claim. It was obvious to anyone that Bobby was totally disabled for the rest of his life. The contract wasn’t hard to understand. The company had agreed to pay in the event Bobby became unable to work. The denial of the claim and refusing to give Bobby the benefits wasn’t a mistake. So, American Home had made a conscious choice to make Bobby fight. In some respects, it looked like the company hoped Bobby would get tired and give up.
We’ll Fix This Problem
The Supreme Court said this kind of bad faith conduct should’ve never happened. It was just downright wrong! Not only was Bobby mistreated, but the situation brought extra emotional distress.
If you only get what you’re owed, years later, insurance doesn’t really help. If you have to hire lawyers and sue, the amount is reduced by the litigation costs. The Supreme Court knew that ordering American Home to pay the amount owed wasn’t the answer.
Bobby was out his lawyer fees so he would still lose. He had been emotionally upset resulting in loss of the emotional security that he purchased. If you don’t get the coverage at the right time, then what’s the point in buying it?
Not paying legitimate claims also meant American Home could earn profits while honest insurers were keeping their promises. A dishonest insurer can lower its premiums and drive the competition out of business by not paying claims. It was bad business all the way around.
So, the court ruled that Bobby could get the $50,000.00 face amount. Additionally, Bobby was going to receive money for his emotional damages for the hard-fought years of the lawsuit. Additionally, all of Bobby’s legal fees and court costs were going to be reimbursed.
This was the first bad faith lawsuit in Oklahoma. Bobby’s lawyer became the first Oklahoma bad faith lawyer in state history. As a result, the case caused quite a stir in the insurance industry.
The Supreme Court explained that the relationship between the insurance company and the customer was based upon trust. Bobby paid the premiums in advance because he needed protection if something bad happened to him. This unique trust was more than just a contract. It was a special relationship that required good faith and fairness in Bobby’s claim.
In a normal contract, a broken promise is more of a commercial transaction. In the context of insurance, the insured places an extraordinary amount of trust in the insurer. You don’t pay premiums so you can wind up in a lawsuit. The premiums are paid under the belief the company will be there for you in an emergency.
Think of it like the advertising slogans that many insurance companies use. Maybe you have heard the marketing along the lines of you’re like a good neighbor or even part of their family. In short, the company’s got your back when you need a helping hand.
Differences In Size
The Oklahoma appellate courts also consider the bargaining power of the parties. The typical insured has very small financial backing compared to an insurance company. Although Bobby had a good job, his wages were tiny compared to American Home’s assets. As a result, this places the customer at a distinct disadvantage in terms of negotiating the terms.
It’s generally more difficult to fight a larger opponent. Like the account of David and Goliath, the odds aren’t good for the little guy. The financial disparity between Bobby and American Home resulted in an unlevel playing field. The insurer obviously held the upper hand with far more resources.
Dire Financial Circumstances When There’s A Claim
Another reason behind bad faith lawsuits is the extraordinary circumstances faced. The policyholder, when a claim is made, has suffered some kind of loss. With a permanent disability, the last thing Bobby needed was a bunch of legal problems and having to deal with lawyers. As the already weaker party in the deal, he was less able to protect his rights. Because he was now disabled, he was even more vulnerable.
The court considered it significant that (even without knowing anything would ever happen) the insured had paid for protection against a loss. So, it meant Bobby’s predicament required good faith by the insurance company.
Implied Duty Of Good Faith And Fair Dealing
In looking at these points, the Supreme Court made a decision. The court said all insurance policies have an implied duty. There’s words that are part of the contract. The language may not be spelled out in a way that you can read, but the duty is still there. In other words, the written language in the insurance policy may not say it, but the court will read an implied duty into it.
This invisible clause in the contract says that claims will be adjusted fairly and in good faith. You may not be able to read the actual words in the policy, but the obligation is there just the same.
Harm Caused Or Damages
In order for things to turn out fair, Bobby would have to receive a court judgment for far more than the $50,000.00. He was already due the benefits. The court observed there needed to be compensation for the emotional distress. The peace of mind that Bobby bought when the coverage was purchased wasn’t provided. So, the court ruled that Bobby could recover for his emotional damages in addition to the policy benefits.
The court further stated that punitive or examplary damages could be given to make an example of the misconduct and discourage it from happening again in the future.
Oklahoma Supreme Court Isn’t Out To Get The Insurance Industry
You might think the Oklahoma courts don’t like insurance companies. We don’t want you to conclude our courts are out to get insurers. Nothing could be further from the truth.
The Oklahoma Supreme Court (and all of the appellate judges in the various divisions) work extremely hard. The judges want there to be fair and just outcomes. Bad faith lawsuits have to be proven with genuine evidence. As an insurer, you shouldn’t have to be afraid of a false accusation of bad faith. The courts recognize there are people who might try to take advantage of the law. So there has to be evidence for an insured to prevail. Without proof of bad faith, the case isn’t going anywhere.
Screening Mechanism For Frivolous Bad Faith Cases
The appellate courts want the insurance industry to thrive and earn reasonable profits. Bad faith awards are only given for really bad conduct. Before cases go to trial, the insurance company has the right for an initial review by the judge.
A motion, known as a motion for summary judgment, asks the trial judge to review all the evidence. If the bad faith isn’t really there, then the court is going to rule for the insurance company without a full-blown jury trial.
The summary judgment procedure is designed to keep legitimate disputes from becoming bad faith cases. The courts look to see if there’s sufficient evidence to go to a jury. If not, then the insurer wins.
As an insurer, you sometimes find yourself in a sincere disagreement about paying a claim. There can be differences of opinion over the amount owed, questions over insurable interests, and exclusions in the policy language.
The Supreme Court made the point that just because you litigate a dispute doesn’t mean it was done with an evil intent. The court wants insurance companies to feel comfortable in challenging coverage, the amount owed, fraud, arson, etc. Any legitimate concerns can be litigated without fear. The scales of justice are for everyone, not just the insureds.
The trial judge is the gatekeeper for cases that shouldn’t go to trial. Not only does it protect insurance companies from going through trial on bogus bad faith cases, it also saves judges (and tax payers) the time and expense of a wasteful jury trial.
Oklahoma trial judges are hardworking men and women dedicated to handing out justice. They do everything possible to make proper decisions and follow the law. Frivolous cases are dismissed. Disreputable claimants aren’t allowed to abuse the bad faith law.
Damages Must Also Be Proven
As any competent Oklahoma bad faith lawyer will tell you, there must be evidence of actual harm in order to recover for bad faith. Without admissible evidence of harm, no damages will be awarded. The importance of evidence should not be overlooked. As an insurer, you have every right to contest the evidence. Evidentiary challenges can block any mention of irrelevant things to ensure the trial is fair.
Even though there’s not bad faith, the benefits of the policy can still be recovered. Bad faith and insurance coverage are distinct, separate matters. In many bad faith lawsuits, the insured sues for two things. The suit filed by the Oklahoma lawyer is to collect coverage (breach of contract) plus the damages allowed for bad faith (tort).
In addition to compensatory damages, in certain circumstances the courts will allow punitive damages. These are also known as exemplary damages. An award of punitive or exemplary damages is to punish any misconduct and to prevent similar misconduct in the future. We discussed this earlier in the post.
A Person Must Also Prove Punitive Damages
It’s not enough to just make a demand for punitive damages. In other words, the courts won’t allow punitive damages without proper evidence. The time and place for exemplary damages is for really egregious situations. The proof offered is required to meet a higher standard for certain levels of punitive damages.
In a bad faith case, the person filing suit will usually ask for the coverage purchased, compensatory damages for bad faith, and sometimes punitive damages.
Remittitur Is Another Safety Valve
Remittitur is a fancy legal word that means you have to give the money back. In short, in cases where there is actually too much money awarded by a jury, the money has to be returned. If there’s a big bad faith award that isn’t fair, the amount is reduced by the courts.
The Oklahoma courts are not interested in running a “lawsuit lottery”, and rightfully so! Oklahoma needs and wants the insurance industry.
Attorney Fees and Awards
If successful in the lawsuit, there will likely be a follow up request for attorney fees and costs. The issue of attorney fees is normally a separate stage after a trial. The court cannot award attorney fees until a person proves the case and prevails at trial.
The hearing on attorney fees is usually before a judge with no jury. The hearing is typically abbreviated and lasts anywhere from a couple of hours to a day.
Much of the evidence is given to the court in paper records. These show the hours billed and the amounts charged. The award in bad faith litigation is considered fee shifting under Oklahoma law for the reimbursement of lawyer costs.
It’s important for you to understand just a little bit about fee shifting rules. You see, the courts don’t want lawyers running up the bill because someone else is paying it. (Would you think a lawyer would do that anyway? Wink, Wink!)
The courts have used various analogies to describe fee shifting. The idea is that you can have any lawyer you want, even the most expensive Oklahoma bad faith lawyer in the State. But, you can only make the other side pay for a reasonably priced one. One court explained the winning party was entitled to travel to the courthouse in a Chevrolet, not a Cadillac or Mercedes.
Although the fees may be okay because they have the right to drive an expensive luxury car, the extravagance can’t be shifted to the losing side. The courts are only going to award fees that should be reasonably shifted to the losing party. You can give your own lawyer a bonus if you want, but don’t think the court’s going to make the other side pay for it.
Insurers Can Remove A Bad Faith Case
If you’re an insurer with headquarters outside of Oklahoma, maybe you don’t want our state courts deciding the case. Since you aren’t from here, then leaving the decision to local folks may be a little scary. In other words, you may be worried about what lawyers sometimes call “Hometown Cookin’!”
You have the option to move the case from the state court to Federal court. The removal to Federal court is a decision that has a very short deadline. While there are exceptions, you generally have to file the removal pleadings within 30 days. Otherwise, the Federal courts won’t have jurisdiction.
Removal to Federal court can have advantages as well as disadvantages. If you’re sued for bad faith, then the decision should be discussed with a reputable Oklahoma bad faith lawyer as soon as possible.
The scope of removal is far too broad for this post, but all that’s really required is diversity of citizenship and an amount in controversy exceeding $75,000.00 exclusive of costs and interest.
Bad Faith Law Applies To Nearly All Insurance
Bobby Christian’s case was over non-payment of a disability policy. However, bad faith applies to all types of insurance. Every policy of insurance written in the State of Oklahoma includes the implied duty. The only real exception is insurance the Federal government regulates.
Oklahoma lawyers who aren’t really familiar with bad faith insurance law fall into this trap. If the lawyer mistakenly assumes the bad faith laws will apply, then it’s a shock to find out the United States Congress passed laws that trump the Oklahoma courts. The legal term is called “preempting the field” and a lawyer considering filing a bad faith action in Oklahoma should be aware of this exception.
If Federal law controls, then the implied duty of good faith isn’t there.
We aren’t going to try to give an exhaustive list, but here are some categories of insurance claims that are usually subject to bad faith:
- Homeowners’ claims
- Business losses
- business interruption
- Uninsured motorist claims
- Underinsured motorist claims
- Liability accidents where the insurer is defending the insured
- Disability claims not regulated by Federal law
- Health insurance claims not regulated by Federal law
You almost have to be an Oklahoma lawyer with years of real life experience in the bad faith arena to readily tell what is subject to bad faith.
Technically, The Term Is Not “Bad Faith”
Bad faith is really a shorthand used because the actual duty is rather lengthy to say. If you want to say it using the correct verbiage, then first take a deep breath. It’s actually the “implied duty to adjust insurance claims in good faith and with fair dealing”.
Now you see why the nickname “bad faith” is used by Oklahoma lawyers. If the technical name was used during a bad faith trial, it would take a whole extra day to finish the case.
Bad Faith Lawsuits
As every lawyer knows, you can write any words you want in the legal papers. In fact, some lawyers draft 50-60 page pleadings filled with all kinds of supposed wrongs.
As the case progresses, judges toss out count after count for lack of evidence.
We personally like straight answers. It’s like going to a C.P.A. who tells you to take all these deductions. You don’t want to find out 3 years later in an audit the deductions weren’t legit. Not everyone sees it that way. Some lawyers in Oklahoma waste years in bad faith cases that don’t pan out. We find this distasteful.
Our comments aren’t intended to leave the impression that the plaintiff lawyer should know everything at the start. No lawyer has a crystal ball. The second phase of a lawsuit is called discovery where facts come out that you didn’t know. So just because the case ends in favor of the insurance company doesn’t necessarily indicate the attorney did something wrong.
The author has been litigating bad faith cases since 1984. The Bobby Christian case was decided in 1977. Having the ability to watch each Supreme Court case come down in real time has definitely made it an easier learning curve.
A number of the appellate opinions bear our firm name. Others were litigated with our firm actively consulting in the appeal briefs filed at the court. But, with all this experience and a genuine interest in bad faith cases, we don’t pretend to know it all. Bad faith is a fluid, changing legal theory that is in some ways more like an art than a science.
Don’t Wait To Talk To An Oklahoma Bad Faith Lawyer
You need quick legal advice in the claim now. One of the biggest mistakes we see is delay in speaking with a lawyer knowledgeable about bad faith claims in Oklahoma.
You also need good legal advice. Oklahoma law doesn’t let a lawyer say that he “specializes” in bad faith. Legally speaking, any licensed attorney can legally file or defend a bad faith case. While experience in insurance claims is helpful, more is needed in our opinion. We’ve seen plenty of adjusters who became lawyers. The insurance background was obviously beneficial. But, bad faith law involves far more than insurance claim principles. It’s a niche area of law in which relatively few are really considered to be an Oklahoma bad faith lawyer.
In over 30 years of bad faith litigation, we suggest it’s a plus to have someone who’s already been down the road you’re traveling.
The number of attorneys who really practice in the bad faith arena are few. In comparison, there’s large numbers of divorce, criminal, bankruptcy, probate, real estate, patent, and other types of law practices.
If you need to talk with an Oklahoma bad faith lawyer, give us a call. Coffee’s free and we’ll make sure the brief initial consultation won’t be a waste of your time!