McFadden v. Arch Insurance Company
Filing
40
OPINION AND ORDER by District Judge James H. Payne: denying 20 defendant's Motion for Summary Judgment (cjt, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF OKLAHOMA
MARK KENDALL MCFADDEN.
Plaintiff,
v.
ARCH INSURANCE COMPANY,
A Missouri Corporation,
Defendant.
)
)
)
)
)
)
)
)
)
)
Case No. 12-CV-208-JHP
OPINION AND ORDER
Before the Court is Defendant Arch Insurance Company’s (“Arch”) Motion for Summary
Judgment [Doc. No. 20], and Plaintiff’s Response to Defendant’s Motion for Summary
Judgment [Doc. No. 26]. After consideration of the briefs, and for the reasons stated below,
Arch’s Motion for Summary Judgment is DENIED.
BACKGROUND1
On January 15, 2010, Plaintiff was injured in a motor vehicle accident after the
Muskogee County EMS (“MCEMS”) ambulance in which he was travelling was struck by a
vehicle driven by Kimberly Hackman (“Hackman”). Hackman, who was determined to be atfault for the accident, was insured by a policy with State Farm Mutual Automobile Insurance
(“State Farm”) with liability limits of $25,000 per person and $50,000 per accident. Arch
provided insurance to MCEMS, including UM/UIM coverage (the “MCEMS Policy”). Arch’s
Oklahoma Uninsured Motorist Coverage endorsement provided, in relevant part, the following:
1
The following facts are either not specifically controverted by Plaintiff in accordance with Local Civil Rule
56.1(c), not subject to a genuine dispute, or are described in the light most favorable to Plaintiff. Immaterial facts
are omitted.
1
A person seeking uninsured motorists coverage must also notify us, in writing, of
a tentative settlement between the ‘insured’ and the insurer of an ‘uninsured
motor vehicle’, and allow us 60 days to advance payment in an amount equal to
the tentative settlement to preserve our rights against the insurer, owner or
operator of such ‘uninsured motor vehicle’.
[Doc. No. 20, Ex. 2 at 3].
Following the accident, Arch engaged Gallagher-Bassett (“Gallagher”), a third-party
administrator, to investigate the accident to determine if a potential UM/UIM claim existed. On
June 22, 2011, Gallagher sent a letter to Plaintiff’s counsel explaining:
This letter is to advise you that Gallagher Bassett Services, Inc. is the third party
administrator handling this claim on behalf of [MCEMS]. We are in receipt of
your letter of representation of [Mark McFadden] for a claim against our client.
…
Since this is our first notice of the above claim, we are in the process of
investigating the facts surrounding this accident.
[Doc. No. 26, Ex. 1 at 2].
On July 19, 2011, Plaintiff’s counsel responded to the June 22, 2011 letter, explaining that
Plaintiff’s only claim against MCEMS was a workers compensation claim, and requesting more
information as to the purpose of the June 22, 2011 letter. On November 22, 2011, without
notifying Arch, Plaintiff signed a general release of his claims against Hackman and settled his
UM/UIM claim with State Farm for $25000. On March 8, 2012, having received no response to
the July 19, 2011 letter, Plaintiff’s counsel sent Gallagher another letter inquiring as to whether
Gallagher represented MCEMS on UM claims and requesting a copy of any UM policy in effect
at the time of Plaintiff’s injuries. Gallagher responded on April 19, 2012, with a letter requesting
information regarding Plaintiff’s claim and injuries; however, this letter did not reference
MCEMS’s UM policy.
2
DISCUSSION
Summary judgment is proper where the pleadings, depositions, answers to
interrogatories, and admissions on file, together with affidavits, if any, show there is no genuine
issue as to any material fact, and the moving party is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(c). In making the summary judgment determination, the Court examines the
factual record and draws reasonable inferences therefrom in the light most favorable to the nonmoving party. Simms v. Oklahoma, 165 F.3d 1321, 1326 (10th Cir. 1999). The presence of a
genuine issue of material fact defeats the motion. An issue is “genuine” if the evidence is
significantly probative or more than merely colorable such that a jury could reasonably return a
verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A
fact is “material” if proof thereof might affect the outcome of the lawsuit as assessed from the
controlling substantive law. Id. at 249. Thus, the inquiry for this Court is “whether the evidence
presents a sufficient disagreement to require submission to a jury or whether it is so one-sided
that one party must prevail as a matter of law.” Id. at 251–52.
A. The Porter doctrine
Arch contends that it cannot be held liable for breach of contract or bad faith, arguing that
the Porter doctrine is a complete defense to Plaintiff’s claims. Specifically, Arch argues that
Plaintiff’s UM/UIM claim with Arch was extinguished when Plaintiff signed a general release of
his claims against Hackman and settled his UM/UIM claim against Hackman’s insurer, State
Farm, without giving Arch the notice required pursuant to the terms the MCEMS Policy. Arch
asserts that if Plaintiff’s UM/UIM claim is barred, then there can be no viable breach of contract
or bad faith claims arising from Arch’s handling of the extinguished claim.
3
Okla. Stat. tit. 36, § 3636(F) provides insurance carriers with a right to be subrogated,
stating:
F. In the event of payment [by UM carrier] to any person under the coverage
required by this section [insured] and subject to the terms and conditions of such
coverage, the insurer making such payment shall, to the extent thereof, be entitled
to the proceeds of any settlement or judgment resulting from the exercise of any
rights of recovery of such person [insured] against any person or organization
legally responsible for the bodily injury [tort-feasor] for which such payment is
made, including the proceeds recoverable from the assets of the insolvent
insurer.... Provided further, that any payment made by the insured tort-feasor shall
not reduce or be a credit against the total liability limits as provided in the
insured's own uninsured motorist coverage.
Okla. Stat. tit. 36, § 3636(F) (“ § 3636(F)”). The UM carrier's statutory “right to be subrogated
is derived from, and limited to, the tort claim of the insured.” Frey v. Independence Fire and
Cas. Co., 698 P.2d 17, 21 (Okla. 1985); Hartford Ins. Co. of Midwest v. Dyer, 61 P.3d 912, 915
(Okla. Civ. App. 2002) (“[UM carrier]—as the subrogated UM insurer—could only assert
whatever rights [its inured] had against the tort-feasor ...”).
Therefore, “[i]f the insured releases the wrongdoer from liability, the insurer's
subrogation rights may be viewed ... as having been destroyed .... because the insured no longer
has a tort claim against the wrongdoer to which subrogation may be effected.” Johnny Parker,
Uninsured Motorist Law in Oklahoma, 34 Okla. City U.L.Rev. 364, 408 (2009); see Porter v.
MFA Mut. Ins. Co., 643 P.2d 302, 305 (Okla.1982) (“[I]f an insured settles with and releases a
wrongdoer from liability for a loss before payment of the loss has been made by the insurer, the
insurer's right of subrogation against the wrongdoer is thereby destroyed.”).
In addition to extinguishing a UM carrier’s subrogation rights, such a release also
provides the UM carrier with a defense to an action to recover UM proceeds. See Porter, 643
P.2d at 305. In Porter v. MFA Mutual Insurance Company, the Oklahoma Supreme Court held
that an insured was precluded from bringing an action on an UIM policy because the insured
4
“voluntarily and knowingly ma[de] a settlement with and g[ave] a general release to [the tortfeasor], barr[ing] [the UIM carrier] from exercising its lawful right of recourse against the
responsible party,” in violation of the terms of the UIM policy. Id. Following the Porter
decision, the Oklahoma Legislature, seeking to balance the rights of the UM carrier and the
insured, “created a mechanism by which an insured could receive the equivalent of a settlement
offer from the tort-feasor, while at the same time protecting the [UM] carrier’s subrogation rights
against the wrongdoer.” Brambl v. GEICO Gen. Ins. Co., 2011 WL 5326076 (N.D. Okla. Nov.
4, 2011) (citation omitted).
Specifically, Oklahoma’s UM subrogation statute requires an insured to notify her UM
carrier of any “tentative agreement to settle for liability limits with an insured tortfeasor,” and
submit written documentation to her UM carrier of any pecuniary losses incurred, including
copies of all medical bills. See Okla. Stat. tit. 36, § 3636(F)(1), (2). A UM carrier may then opt
to “substitute its payment to the insured for the tentative settlement amount.” Id. § 3636(F)(2).
If the UM carrier substitutes its own payment for the liability insurer's settlement offer, the UM
carrier is “entitled to the insured's right of recovery to the extent of such [liability settlement]
payment and any settlement under the [UM] coverage.” Id. If it does not elect to substitute, the
UM carrier “has no right to the proceeds of any settlement or judgment ... for any amount paid
under the uninsured motorist coverage.” Id.
However, even if a Plaintiff does not provide the statutorily-required notice to the UM
carrier, the Porter defense does not serve as an absolute bar to an insured UM claim. In order for
the defense to apply, the insured must, at the time of executing the release to the tortfeasor, be
voluntarily and knowingly interfering with its UM carrier’s subrogation rights. See Phillips v.
N.H. Ins. Co., 263 F.3d 1215, 1222 (10th Cir. 2001). To be sure, a UM “carrier’s legal ability to
5
exercise subrogation rights is not an indispensable condition of its obligation to pay an otherwise
valid [UM] claim.” Strong v. Hanover Ins. Co., 106 P.3d 604, 610 (Okla. Civ. App. 2004)
(citing Phillips, 263 F.3d at 1222); see also Torres v. Kan. City Fire & Marine Ins. Co., 849
P.2d 407, 413 (Okla. 1993); Robertson v. U.S. Fid. & Guar. Co.,836 P.2d 1294, 1297 (Okla.
1992); Barfield v. Barfield, 742 P.2d 1107, 1112 (Okla. 1987); Uptegraft v. Home Ins. Co., 662
P.2d 681, 686-87 (Okla. 1983).
These limitations to the Porter defense are consistent with the Oklahoma Supreme
Court’s avowed “tendency to protect the insured’s rights to collect from the UM carrier.” Burch
v. Allstate Ins. Co., 977 P.2d 1057, 1061 n.14 (Okla. 1998). The Oklahoma Supreme Court has
also noted that “the initial responsibility to act to protect subrogated rights rests upon the
insurer,” and that “[a]n insurer must aid its insured in the preservation of its subrogation rights.”
Sexton v. Continental Cas. Co., 816 P.2d 1135, 1138 (Okla. 1991). Certainly, an insurer may
waive its right to subrogation or be estopped to assert it due to its conduct. See Buzzard v.
Farmers Ins. Co., 824 P.2d 1105, 1113–14 (Okla. 1991).
The Court finds that Plaintiff’s UM claim is not barred by the Porter defense because
Plaintiff did not voluntarily and knowingly interfere with Arch’s right to subrogation. In order to
prevail on its motion for summary judgment, Arch must establish that Plaintiff was aware of the
existence of the MCEMS Policy at the time he released his claims against Hacker. While
Gallagher contacted Plaintiff after he was injured, its correspondence never unambiguously
informed Plaintiff of the MCEMS policy. Instead, the letters sent by Gallagher specifically state
that Gallagher is seeking information regarding a pending claim against MCEMS; specifically,
the pending claim for which Plaintiff’s counsel was providing representation at the time the
letters were received. At the time the letters were received, Plaintiff’s only claim against
6
MCEMS was a workers compensation claim. In addition, Arch has presented no evidence to
suggest that Plaintiff was aware of the MCEMS policy at the time he released his claims against
Hackman. In fact, the undisputed facts establish that Plaintiff was confused by the ambiguous
nature of Gallagher’s correspondence. Indeed, in his July 19, 2011 letter to Gallagher, Plaintiff’s
counsel inquired as to the purpose of Gallagher’s June 22, 2011 letter.
Under these
circumstances, the Court finds it impossible for Plaintiff to have voluntarily and knowingly
interfered with Arch’s right to subrogation. Accordingly, the Porter defense may not be asserted
by Arch, and Arch’s motion for summary judgment is denied.
CONCLUSION
After consideration of the briefs, and for the detailed above, Arch’s Motion for Summary
Judgment is DENIED.
IT IS SO ORDERED this 8th day of January, 2013.
7
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?