Bryant et al v. Sagamore Insurance Company

Filing 117

ORDER by Judge Ronald A. White granting defendant's motion for summary judgment (Re: 39 MOTION for Summary Judgment and Brief in Support ) as to the bad faith claims only(lal, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF OKLAHOMA
KELLY BRYANT and
HOLLIE BRYANT,
Plaintiffs,
Case No. CIV-13-240-RAW
v.
SAGAMORE INSURANCE COMPANY,
Defendant.
ORDER & OPINION1
Plaintiffs Kelly Bryant and Hollie Bryant (hereinafter referenced individually as “Kelly”
and “Hollie”) brought this action against Defendant Sagamore Insurance Company (hereinafter
“Sagamore”) on May 31, 2013 seeking damages for breach of contract and bad faith. The court
previously denied Plaintiffs’ motion for summary judgment [Docket No. 41] as to the bad faith
claims. The court now addresses Sagamore’s motion for summary judgment [Docket No. 39] as
to the bad faith claims.2
Plaintiffs claim that Sagamore acted unreasonably and in bad faith when it denied
coverage under an automobile policy purchased by Kelly on a car driven by Hollie even though
Kelly specifically excluded Hollie as a covered driver. Plaintiffs rely on a recent Oklahoma
Supreme Court decision finding that some, perhaps many, named driver exclusions are
inconsistent with public policy. Sagamore argues that at the time it denied coverage, the recent

1

For clarity and consistency herein, when the court cites to the record, it uses the docket,
exhibit and page numbers assigned by CM/ECF.
2

The court summary judgment motions remain pending as to the breach of contract
claims. The court will enter a separate order as to the breach of contract claims once it has
reached a decision.

Oklahoma decision was not binding precedent and that under the current law, the named driver
exclusion was a valid and reasonable basis to deny coverage. Sagamore further argues that
Kelly’s lack of cooperation was a second independent basis for its denial of coverage. For the
reasons set forth below, the court now grants Sagamore’s motion for summary judgment as to the
bad faith claims.
UNDISPUTED MATERIAL FACTS3
On June 29, 2011, Hollie was driving a 2003 Ford Mustang and had an accident with
Cuba Lawrence. Docket No. 40, Exh. 13 (Collision Report). The Mustang was insured by
Sagamore under a policy purchased by Kelly. Docket No. 40, Exh. 2, p. 23 (Kelly Dep.); Docket
No. 40, Exh. 7, p. 10 (Revised Declarations); Docket No. 40, Exh. 1, pp. 1-5 (Application);
Docket No. 40, Exh. 3 (Policy). Hollie was an excluded driver on the policy. Docket No. 40,
Exh. 2, pp. 23, 24, 26 and 28 (Kelly Dep.); Docket No. 40, Exh. 7, p. 10 (Revised Declarations);
Docket No. 40, Exh. 1, p. 1-5 (Application). Kelly excluded Hollie from his policy so that his
policy premium would be less expensive. Docket No. 40, Exh. 2, pp. 23-24 (Kelly Dep.).
The policy provides that “any person who is specifically excluded is not an insured
person.” Docket No. 40, Exh. 3, p. 5 (Policy). The policy also provides: “We do not provide
coverage for bodily injury or property damage . . . resulting from the use of a car by a person
3

“A party asserting that a fact cannot be or is genuinely disputed must support the
assertion by: (A) citing to particular parts of materials in the record, including depositions,
documents, electronically stored information, affidavits or declarations, stipulations (including
those made for purposes of the motion only), admissions, interrogatory answers, or other
materials; or (B) showing that the materials cited do not establish the absence or presence of a
genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.
Fed. R. Civ. P. 56(c)(1). “Conclusory allegations that are unsubstantiated do not create an issue
of fact and are insufficient to oppose summary judgment.” Harvey Barnett, Inc. v. Shidler, 338
F.3d 1125, 1136 (10th Cir. 2003)(citation omitted). Additionally, the court “need consider only
the cited materials, but it may consider other materials in the record. Fed. R. Civ. P. 56(c)(3).
2

specifically excluded.” Docket No. 40, Exh. 3, p. 5-6 (Policy). The policy further requires
cooperation from the insured:
A person claiming any coverage under this policy must also:
(1) cooperate with us and assist us in any matter concerning a claim or suit, including
presence at a trial.
(2) send us promptly any legal papers received relating to any claim or suit.
***
(6) submit to an examination under oath if required by us.
(7) upon our request, allow us to obtain a written or recorded statement concerning the
circumstances of the claim and any damages claimed.
We shall not be liable for damages or costs assessed as a result of or due to an insured
person’s failure to cooperate with us under the terms of this policy, or for an insured
person’s failure to appear at trial, in court hearings, or at other court-ordered conferences
when the insured person’s attendance is necessary for defending the interests of you, the
insured person, or us.
Docket No. 40, Exh. 3, p. 16 (Policy).
Kelly contacted his insurance agent on June 30, 2011 to report the accident. Docket No.
40, Exh. 2, pp. 32-33 (Kelly Dep.). Kelly called Sagamore on July 8 and 15, 2011.4 Docket No.
40, Exh. 2, pp. 30-31, (Kelly Dep.). Cuba Lawrence submitted a claim against the policy.
Docket No. 40, Exh. 4 (Claim Report).
Sagamore sent a reservation of rights letter to Kelly dated July 11, 2011 to the address
Kelly listed on his insurance application. Docket No. 40, Exh. 16 (July 11, 2011 letter); Docket
No. 40, Exh. 1 (Application). Kelly received the letter. Docket No. 40, Exh. 2, p. 40 (Kelly
Dep.). Sagamore called Kelly and did not reach him on July 15, 2011. Docket No. 40, Exh. 4, p.
18 (Claim Report). Sagamore called Kelly on July 20, 2011 and left a message. Docket No. 40,
Exh. 4, p. 17 (Claim Report).
4

Kelly has argued that he understood the claim was denied at this juncture. It is clear
from the Sagamore communications that followed, however, that the coverage decision had not
yet been made. Kelly’s mistaken assertion that the claim was denied does not make it so, nor
does it negate his cooperation obligation under the policy.
3

Sagamore sent a second reservation of rights letter to Kelly dated August 23, 2011 to the
address listed on his insurance application. Docket No. 40, Exh. 17 (August 23, 2011 letter).
Sagamore noted in the letter that he had not responded to correspondence and that his
cooperation was needed to resolve the claim and required under the policy. Id. On September 7,
2011, Sagamore sent an independent adjuster to Kelly’s home to get a statement. Docket No. 40,
Exh. 4, p. 11 (Claim Report). Kelly was not home, so the adjuster left a card. Id.
On September 21, 2011, Sagamore’s attorney, Mr. Babb sent a letter via Federal Express
to Kelly at the address listed on his application and at his home address. Docket No. 40, Exh. 18
(September 21, 2011 letter). The letter noted Plaintiffs’ failure and/or refusal to respond to
Sagamore’s inquiries and the policy’s cooperation requirement, including the requirement to
submit to an examination under oath. Id. Mr. Babb informed Kelly that an examination under
oath was scheduled for both Plaintiffs at September 30, 2011 and that if they failed to appear,
Sagamore could decline coverage due to his failure to cooperate. Id. Mr. Babb also stated that if
they could not appear on that date, to contact him to schedule the exams at a “mutually
convenient time and date.” Id. Plaintiffs did not appear. Docket No. 40, Exh. 19 (September 30,
2011 Transcript); Docket No. 40, Exh. 2, p. 51 (Kelly Dep.).
In a letter dated October 19, 2011, Sagamore denied coverage of the claim on two bases:
(1) Hollie was an excluded driver on the policy; (2) Kelly’s failure to appear for examination
under oath and cooperate in the investigation of the claim. Docket No. 40, Exh. 23 (October 19,
2011 letter). The letter included the statement: “if you believe this decision has been made in
error, please contact us and provide specific information which you believe would provide
coverage.” Id. Kelly did not respond to this request.

4

BAD FAITH CLAIMS
“Every insurance contract carries with it the duty to act fairly and in good faith in
discharging its contractual responsibilities.” Garnett v. Government Employees Ins. Co., 186
P.3d 935, 944 (Okla. 2008). In Oklahoma, “a tort claim for bad faith and a claim for breach of
contract are separate and independent bases for recovery.” Ball v. Wilshire Ins. Co., 221 P.3d
717, 724 n.40 (Okla. 2009)(citation omitted). “Where the tort claim is factually based on a
coverage dispute as to which no controlling legal authority provides an indisputable resolution, a
determination of the coverage dispute is unnecessary because the elements of unreasonableness
and bad faith are not present as a matter of law.” Id. (emphasis added).
Plaintiffs carry “the burden of proof and must plead all the elements of the intentional
tort.” Garnett, 186 P.3d at 944.
The elements of a bad faith claim against an insurer for delay in payment of firstparty5 coverage are: (1) claimant was entitled to coverage under the insurance
policy at issue; (2) the insurer had no reasonable basis for delaying payment; (3)
the insurer did not deal fairly and in good faith with the claimant; and (4) the
insurer's violation of its duty of good faith and fair dealing was the direct cause of
the claimant's injury.
Ball, 221 P.3d at 724. “The absence of any one of these elements defeats a bad faith claim.” Id.
Before the bad faith claims may be submitted to a jury, this court “must first determine as
a matter of law, under the facts most favorably construed against the insurer, whether the
insurer's conduct may be reasonably perceived as tortious.” Garnett, 186 P.3d at 944 (emphasis
added). “The critical question in a bad faith tort claim is whether the insurer had a ‘good faith
belief, at the time its performance was requested, that it had a justifiable reason for withholding
5

As Sagamore argues, Hollie is not a first-party claimant. Nevertheless, because the bad
faith claims fail as a matter of law on the second element, the court need not address whether she
can recover under a theory of bad faith as a third-party beneficiary.
5

[or delaying] payment under the policy.’” Ball, 221 P.3d at 725.
“If there is a legitimate dispute concerning coverage or no conclusive precedential legal
authority requiring coverage, withholding or delaying payment is not unreasonable or in bad
faith.” Id. (emphasis added). “The tort of bad faith hence does not prevent an insurer from
denying, resisting or litigating any claim as to which the insurer has a reasonable defense.” Id.
In other words, an insurer may, without breaching its duty of good faith, “resort to a judicial
forum to settle legitimate disputes as to the validity or amount of an insurance claim.” Garnett,
186 P.3d at 944.
ANALYSIS
Plaintiffs argue that Sagamore had no reasonable basis to deny the claim, as the
Oklahoma Supreme Court decided Mulford v. Neal, 264 P.3d 1173 (Okla. 2011) on March 15,
2011, which held that named driver exclusions issued to both parents of a minor driver are
unenforceable, as they are inconsistent with the clear public policy in Oklahoma’s compulsory
insurance law.6 Mulford, however, was not published until December of 2011, after Sagamore’s
denial decision.7

6

In this case, Sagamore was unaware that Hollie’s mother’s insurance covered her. Had
Kelly cooperated in the claim investigation, Sagamore may have learned this fact.
7

After Mulford was published, Sagamore paid Cuba Lawrence the policy limits.
Plaintiffs have argued that the court should disregard Federal Rule of Evidence 408 and look to
Florida law to find that payment of the policy limits establishes the breach and bad faith. Even if
the court were to accept such an argument as to the breach, it does not establish bad faith. As
noted above, Plaintiffs have the burden of proving each element. Plaintiffs have not met that
burden.
6

Recognizing that until an opinion is published it has no precedential effect, on July 1,
2011, an Oklahoma Civil Appeals Court held that “the compulsory insurance statutes, as well as
Oklahoma Supreme Court precedent, continue to uphold the validity of an exclusion from
coverage of a named driver.” Rodriguez v. Gutierrez-Perez, 273 P.3d 69 (Okla.Civ.App. 2011).
The court need not venture further into this issue. An Oklahoma appellate court agreed with
Sagamore’s attorney. Clearly, Sagamore had a reasonable basis to deny the claim on the basis of
the named driver exclusion. At the very least, at the time of the denial, no controlling legal
authority provided an indisputable resolution. Ball, 221 P.3d at 724 n.40. Plaintiffs have not
met their burden of proof as to the bad faith claims.
Moreover, Sagamore repeatedly attempted to reach Kelly with the contact information he
provided on his application and wherever they could find him through their own investigation.
Kelly failed to respond to any of Sagamore’s messages or letters.8 Kelly failed to appear for the
examination under oath. Under the terms of the policy, Sagamore had a reasonable basis to deny
coverage for failure to cooperate. Even if the court finds that whether Kelly cooperated is a
question of fact for the jury, Sagamore had a reasonable basis to believe that he did not
cooperate, and thus a reasonable basis to deny coverage under the policy. Plaintiffs have not met
their burden of proof as to the bad faith claims.

8

Kelly has argued that he may not have received all of the letters at the address he
provided to Sagamore, which was his father’s address and next to his own. In Oklahoma,
“[w]hen a letter is placed in the mail system bearing a correct address and sufficient postage to
reach its destination, a rebuttable presumption arises that the letter did in fact reach the addressee.
In the absence of sufficient rebuttable evidence, the presumption prevails.” Visteon Corp. v.
Yazel, 91 P.3d 690, 700 (Okla.Civ.App. 2004)(citation omitted)(emphasis in original). Kelly has
not provided sufficient rebuttable evidence. Furthermore, it was Kelly’s duty to provide
Sagamore with his correct address.
7

CONCLUSION
Sagamore had a reasonable basis to deny the coverage under the policy. Accordingly,
Sagamore’s motion for summary judgment [Docket No. 39] is hereby GRANTED as to the bad
faith claims. Plaintiffs’ bad faith claims are dismissed.
IT IS SO ORDERED this 21st day of April, 2014.

Dated this 21st day of April, 2014.

J4h4i0

8