ROC ASAP LLC et al v. Starnet Insurance Co
Filing
85
ORDER granting in part and denying in part 45 Motion for Summary Judgment; granting 53 Motion for Partial Summary Judgment. Signed by Honorable Timothy D. DeGiusti on 2/20/2014. (mb)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
ROC ASAP, L.L.C., a Utah corporation, and
ABAB, INC., an Oklahoma corporation, as
Assignee of ROC ASAP, L.L.C,
Plaintiffs,
vs.
STARNET INSURANCE CO., et al.,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
NO. CIV-12-461-D
ORDER
Before the Court are Defendant Starnet Insurance Company’s Motion for Summary
Judgment [Doc. No. 45] and Plaintiff ABAB, Inc.’s Motion for Partial Summary Judgment [Doc.
No. 53]. The motions have been fully briefed and are at issue.
Background
Plaintiff, ABAB, Inc. (Plaintiff) brings a breach of contract claim and a bad faith claim
against Defendant, Starnet Insurance Co. (Defendant). Plaintiff’s claims arise out of a property
insurance policy issued by Defendant to Silverleaf Financial, LLC (Silverleaf). Silverleaf is the
only named insured under the policy. At one time Silverleaf was a party to this lawsuit but has since
been dismissed.1 Plaintiff brings its claims against Defendant pursuant to Silverleaf’s assignment
of insurance claims and proceeds to Plaintiff.
Defendant seeks judgment as a matter of law on Plaintiff’s breach of contract claim.
Defendant contends Silverleaf did not have an insurable interest in the subject property at the time
of loss and, therefore, Plaintiff, as assignee of Silverleaf, has no claim to any insurance proceeds.
1
On September 28, 2012, Plaintiff filed an Amended Complaint [Doc. No. 13] and joined Silverleaf
as a defendant. However, Plaintiff subsequently dismissed its claims against Silverleaf without prejudice.
See Notice of Voluntary Dismissal [Doc. No. 34].
Alternatively, Defendant contends the claim is barred by a contractual one-year limitations period.
Defendant further seeks judgment as a matter of law on Plaintiff’s claim for bad faith. Defendant
claims under Maryland law, a bad faith claim is not legally cognizable. And, under Oklahoma law,
Defendant claims a bad faith claim is a tort claim not subject to assignment or, alternatively, that
there is no triable issue of fact that Defendant acted in bad faith.
Plaintiff seeks partial judgment as a matter of law on its contract claim. Plaintiff contends
that Silverleaf did have an insurable interest in the subject property and that Plaintiff, as assignee
of that interest, is entitled to recover any insurance proceeds payable under the policy.
Standard Governing Summary Judgment
Summary judgment is proper “if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A
material fact is one that “might affect the outcome of the suit under the governing law.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if the evidence is such that
a reasonable jury could return a verdict for either party. Id. at 255. All facts and reasonable
inferences must be viewed in the light most favorable to the nonmoving party. Id. If a party who
would bear the burden of proof at trial lacks sufficient evidence on an essential element of a claim,
all other factual issues concerning the claim become immaterial. Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986).
The movant bears the burden of demonstrating the absence of a dispute of material fact
warranting summary judgment. Celotex, 477 U.S. at 322–23. If the movant carries this burden, the
nonmovant must then go beyond the pleadings and “set forth specific facts” that would be
admissible in evidence and that show a genuine issue for trial. See Anderson, 477 U.S. at 248;
Celotex, 477 U.S. at 324; Adler v. Wal–Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir.1998). “To
2
accomplish this, the facts must be identified by reference to affidavits, deposition transcripts, or
specific exhibits incorporated therein.” Adler, 144 F.3d at 671; see also Fed.R.Civ.P. 56(c)(1)(A).
“The court need consider only the cited materials, but may consider other materials in the record.”
See Fed.R.Civ.P. 56(c)(3). The Court’s inquiry is whether the facts and evidence identified by the
parties present “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.” Anderson, 477 U.S. at 251–52.
Statement of Undisputed Facts
Silverleaf procured insurance coverage from Defendant pursuant to a Lender Placed and
Foreclosed Property Policy (the Policy). The Policy period ran from May 27, 2010 through May 27,
2011 [Doc. No. 45-9]. Effective January 7, 2011, property described as Heritage Mall (the Mall)
was added to the Policy [Doc. No. 54-3].2
On February 3, 2011, a fire occurred at the Mall [Doc. No. 45-12]. At the time of the fire,
ROC ASAP, LLC (ROC) owned the Mall.3 Through a series of assignments, the underlying
mortgage and note regarding the Mall was assigned to ROC on March 5, 2010. See Defendant’s
Motion [Doc. No. 45 Undisputed Fact No. 7]. Through foreclosure, ROC purchased the Mall on
October 28, 2010, and obtained a deed dated November 23, 2010 [Doc. Nos. 54-11 and 54-12].
Also, at the time of the fire, Silverleaf was the sole member and 100% interest holder of
ROC [Doc. No. 45-10]. On February 4, 2011, a Property Loss Notice on the Mall was completed
2
The Policy requires that as newly foreclosed properties are acquired, the insured report those
properties [Doc. No. 45-9 at 28]. Coverage is effective upon compliance with the reporting requirements.
No challenge has been made to Silverleaf’s compliance with the Policy’s reporting requirements as to the
Mall.
3
ROC is no longer a party to this action. On January 18, 2013, ROC moved to dismiss its claims
without prejudice [Doc. No. 31] which the Court granted. See Order [Doc. No. 33].
3
[Doc. No. 54-8]. Plaintiff received from Silverleaf an Assignment of Insurance Claim, with an
effective date of April 11, 2011 [Doc. No. 54-24]. On April 26, 2012, Plaintiff filed this action.
Discussion
A.
Choice of Law
The parties dispute whether the claims at issue are governed by Oklahoma law or Maryland
law. “A federal court sitting in diversity . . . must apply the substantive law of the forum state,
including its choice of law rules.” Otis Elevator Co. v. Midland Red Oak Realty Inc., 483 F.3d 1095,
1101 (10th Cir.2007). Thus, the Court looks to Oklahoma’s choice-of-law rules in determining what
law to apply.
1.
Breach of Contract Claim
Oklahoma’s choice-of-law rule for contract actions is governed by Okla. Stat. tit. 15, § 162
which provides: “A contract is to be interpreted according to the law and usage of the place where
it is to be performed, or, if it does not indicate a place of performance, according to the law and
usage of the place where it is made.” Id. (emphasis added). Here, the parties agree that the Policy
does not expressly designate a choice of law forum. On this basis, Defendant contends the law
where the contract was made governs. Defendant seeks application of Maryland law because the
Policy was “produced” in Maryland and, therefore, it was “executed” and “issued” in Maryland.
Conversely, Plaintiff contends Oklahoma law governs. Plaintiff correctly points out that
even where no place of performance is expressly stated in a contract, the controlling issue is whether
the contract indicates a place of performance. See Panama Processes, S.A. v. Cities Service Co., 796
P.2d 276, 287 (Okla. 1990). Plaintiff claims the contract indicates the place of performance to be
Oklahoma because the insured property is located in Oklahoma.
4
Although Defendant contends that under Oklahoma’s choice of law rules, Maryland law
governs Plaintiff’s contract claim, Defendant further contends that Oklahoma law and Maryland law
are indistinguishable as to the substantive breach of contract issue in this case – the requirement that
the insured have an insurable interest in the subject property.4 Additionally, Defendant relies
exclusively on Oklahoma law to support its statute of limitations defense arising under the one-year
period designated in the Policy. Defendant has in essence, therefore, waived application of
Maryland law. Compare Mauldin v. Worldcom, Inc., 263 F.3d 1205, 1211-12 (10th Cir. 2001) (where
defendant’s brief relied substantially more on one forum’s precedent, argument that other forum’s
law should apply was so feeble as to constitute a waiver); see also Koch v. Koch Industries, Inc.,
203 F.3d 1202, 1231 n. 18 (10th Cir. 2000) (noting waiver of choice-of-law issue where party
contended the laws of Kansas and Texas did not differ on the issue). Under these circumstances,
the Court applies Oklahoma law to the contract claims at issue.
2.
Bad Faith Claim
Under Oklahoma law, a bad faith claim is an independent tort. See, e.g., McCorkle v. Great
Atlantic Ins. Co., 637 P.2d 583, 587 (Okla. 1981). Oklahoma applies the law of the state having “the
most significant relationship to the occurrence and the parties” in tort disputes. Hightower v. Kansas
City Southern Ry. Co., 70 P.3d 835, 842 (Okla. 2003); see also Hambelton v. Canal Ins. Co., 405
Fed. Appx. 335, 337 (10th Cir. 2010) (applying Oklahoma law’s “most significant relationship” test
to determine whether Oklahoma or Missouri law governed bad faith tort claim).To determine which
state’s relationship is most significant, Oklahoma courts consider four “place” factors: (1) where the
injury occurred; (2) where the conduct causing the injury occurred; (3) each party’s domicile,
4
See Defendant’s Motion [Doc. No. 45] at pp. 21-22 citing Md. Code, Insurance § 12-301 and Okla.
Stat. tit. 36, § 3605 (both provisions addressing and defining requirement of insurable interest for enforcement
of insurance contract).
5
residence, nationality, place of incorporation and place of business; and (4) where the relationship,
if any, between the parties occurred. Brickner v. Gooden, 525 P.2d 632, 637 (Okla.1974).
The parties dispute whether Oklahoma law or Maryland law governs Plaintiff’s bad faith
claim. Defendant seeks application of Maryland law, as a bad faith claim is not cognizable under
that state’s law. See Johnson v. Federal Kemper Ins. Co., 536 A.2d 1211, 1213 (Md. Ct. Spec. App.
1988).5 Plaintiff, conversely, seeks application of Oklahoma law. The analysis is complicated by
the fact that Plaintiff brings its bad faith claim as assignee of Silverleaf.
For purposes of Plaintiff’s bad faith claim, the “injury” is not the loss occasioned by the fire,
but the alleged improper claims handling by Defendant. Although aspects of the claims handling
occurred in Oklahoma (e.g. inspection of the Mall), the parties’ communications, issuance of
payment and other aspects of claims handling were directed out of Maryland and primarily occurred
there. Thus, the first two factors weigh in favor of applying Maryland law. Defendant’s principal
place of business is Maryland, while Plaintiff is an Oklahoma company with its principal place of
business in Oklahoma.6 The place of the relationship between the parties is not determinative. As
stated, Plaintiff brings the bad faith claim as assignee of Silverleaf. As such, Plaintiff and Defendant
have no direct relationship.
On balance, it appears Maryland has the most significant relationship to the occurrence and
the parties. The Policy issued out of Maryland, a significant portion of the claims handling occurred
there, and Defendant’s principal place of business is located there. However, as set forth infra, the
5
Plaintiff concedes a bad faith claim is not cognizable under Maryland law. See Plaintiff’s Response
[Doc. No. 54] at 14 (“Plaintiff acknowledges that Maryland does not recognize a tort claim for bad faith
against an insurer.”).
6
The insured, Silverleaf, is a Utah company with its principal place of business in Utah. No party
contends Utah law applies.
6
claim is barred under either Maryland or Oklahoma law. For that reason, it is not necessary for the
Court to decide the choice of law issue.
B.
Breach of Contract Claim
1.
Insurable Interest
Plaintiff brings its claims in this lawsuit pursuant to an “Assignment of Insurance Claim”
from Silverleaf [Doc. No. 54-24].7 Plaintiff may bring this claim only if Silverleaf had an insurable
interest to assign. See Snethen v. Oklahoma State Union of Farmers Educ. and Coop. Union of Am.,
664 P.2d 377, 379 (Okla. 1983) (under Oklahoma law, “[i]t is well settled that both the validity and
enforceability of an insurance contract depend upon the presence of an insurable interest in the
person who purchased the policy”); see also Delk v. Markel American Ins. Co., 81 P.3d 629, 633-34
(Okla. 2003) (“An insurable interest is the relationship or connection a person must have with the
subject matter of an insurance policy in order to insure it.”). Thus, as an initial matter, the Court
must determine whether Silverleaf had an insurable interest in the Mall.
7
When Plaintiff filed its Complaint on April 26, 2012, Plaintiff brought suit as “assignee” of ROC.
Plaintiff alleged its right to pursue claims against Defendant pursuant to an assignment from ROC.
See Assignment [Doc. No. 54-23]. On March 14, 2013, Plaintiff filed a Supplemental Complaint [Doc. No.
42] and alleged it obtained an assignment of insurance claims and proceeds from Silverleaf on February 14,
2013, with an effective date of April 11, 2011. In its Reply to Plaintiff’s Motion for Partial Summary
Judgment, Defendant states: “the assignment that forms the basis of Plaintiff’s allegations for breach of
contract and bad faith did not exist until ten (10) months after the lawsuit was filed.” See Reply [Doc. No.
56] at p. 2. The validity of the assignment speaks to the issue of whether Plaintiff is the real party in interest
to pursue the claims for breach of contract and bad faith. But Defendant has not briefed issues surrounding
the validity of the assignment and/or its effective date. Nor has Defendant briefed the effect, if any, of the
lack of the assignment’s existence at the time Plaintiff filed suit. The real-party-in-interest issue is for the
benefit of defendants and, therefore, can be waived by defendants. Federal Deposit Ins. Corp. v. Bachman,
894 F.2d 1233, 1236 (10th Cir. 1990). Moreover, an assignment can give the assignee proper standing as the
real party in interest even where a claim is not assigned until after the action has been instituted. See
generally Kilbourn v. Western Sur. Co., 187 F.2d 567, 571-72 (10th Cir. 1951); see also 6 Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure § 1545 (2010). For these reasons the Court finds
the validity of the assignment is not at issue.
7
The insurable interest requirement arises under both Oklahoma common law and statutory
law. See Delk, 81 P.3d at 633 (citing Okla. Stat tit. 36, § 3605).8 The requirement exists to
discourage illicit uses of insurance. Delk, 81 P.3d at 635. An insurable interest exists in property
where “the insured would gain some economic advantage by its continued existence or would suffer
some economic detriment in case of its loss or destruction.” Snethen, 664 P.2d at 380. The
Oklahoma Supreme Court has stated that in determining whether an insurable interest exists, judicial
consideration must be given to the following: (1) whether it appears the insured was betting on the
loss of property with which he or she had little or no connection; and (2) whether recovery by the
insured would exceed the loss actually suffered thereby providing motivation for destroying the
property. Delk, 81 P.3d at 637. Further, the determination should not be based on an overly technical
construction that would frustrate the legitimate expectations of the insured or would allow the
insurer to avoid the very risk it intended to insure. Id.
The insurable interest need not be a strictly legal interest in the sense of title. See, e.g., Conti
v. Republic Underwriters Ins. Co., 782 P.2d 1357, 1360 (Okla. 1989) (“It has long been recognized
in Oklahoma that an insurer may not escape its contractual obligation to one who has equitable title,
beneficial ownership and undisputed possession of property, even though bare legal title rests in
another.”). See also Gray v. Holman, 909 P.2d 776, 781 (Okla. 1995) (to ascertain a person’s
insurable interest “[e]quating insurable interest with a legally cognizable estate is no longer
sanctioned by our jurisprudence”) (emphasis in original).
Here it is undisputed that Silverleaf is the only named insured under the Policy. It is further
undisputed that on the effective date of coverage as to the Mall and at the time of loss, the Mall was
8
Section 3605 states in pertinent part: “No insurance contract on property or of any interest therein
or arising therefrom shall be enforceable as to the insurance except for the benefit of persons having an
insurance interest in the things insured.” Okla. Stat. tit. 36, § 3605.
8
owned by ROC and Silverleaf was the sole member and 100% interest holder of ROC. Defendant
concedes this much. See Defendant’s Motion [Doc. No. 45] at p. 23 (“[A]t the time of the fire loss,
Silverleaf’s only real connection to the property was its position as the sole member and manager
of the entity that possessed any interests in the property, ROC ASAP, LLC.”). Contrary to
established case law, Defendant’s contention that Silverleaf did not have an insurable interest is
based on the false premise that the named insured must hold legal title to the property in order to
have an insurable interest. Defendant fails to address, therefore, whether Silverleaf’s interest in
ROC is sufficient to create an insurable interest in the Mall.
In moving for partial summary judgment on this issue, Plaintiff asserts that because
Silverleaf is the sole member and 100% interest holder of ROC, Silverleaf has an insurable interest
in the Mall. Courts have found interests in a limited liability company or interests in related-type
entities sufficient to create an insurable interest. See, e.g., McQuay v. Penn-America Ins. Co., 91
Fed. Appx. 626, 628-30 (2003) (applying Oklahoma law and finding insurable interest where
insured was one-third interest owner of LLC and LLC owned tavern destroyed by fire); Standard
Morgan Partners, Ltd. v. Union Insurance Co., 2011 WL 1806499 at * 5 (S.D. Tex. May 11, 2011)
(unpublished op.) (plaintiff had an insurable interest arising from its ownership of entity that in turn
owned the subject property); Continental Ins. Co. v. Emerald Star Casino Natchez, LLC, 2008 WL
1884046 (E.D. La. April 25, 2008) (unpublished op.) (as 100 percent owner of LLC, plaintiff had
insurable interest in boat, title of which was held by LLC at time of loss); see also Steven Plitt,
Daniel Maldonado, and Joshua D. Rogers, Couch on Insurance 3d, § 42:10 (3d Ed. 2013) (“A
majority shareholder, especially in a closely held corporation, has generally been recognized to have
a significant insurable interest in the corporate property . . . .”) (citations omitted).
9
It is undisputed that ROC held legal title to the Mall. As the 100 percent interest holder of
ROC, Silverleaf had an insurable interest in the insured property. It is undisputed that Silverleaf’s
interest existed at the time coverage was effective as to the Mall as well as at the time of loss.9
Destruction of the Mall property, as an asset of the LLC owned solely by Silverleaf, would
necessarily cause economic detriment to Silverleaf. Compare Thompson v. Trinity Universal Ins.
Co., 708 S.W.2d 45, 48 (Tex. Civ. App. 1986) (sole owner of corporation who obtained insurance
on property in her name and not on behalf of corporation clearly suffered pecuniary loss from
destruction of property and had insurable interest). For these reasons, the Court denies Defendant’s
motion for summary judgment on Plaintiff’s breach of contract claim to the extent Defendant bases
its motion on the faulty legal premise that the named insured must hold legal title to the insured
property. And, the Court grants Plaintiff’s motion for partial summary judgment on grounds
Silverleaf’s interest in ROC is sufficient to create an insurable interest in the Mall.
9
As Defendant contends, Silverleaf had no interest in ROC at the time it procured the Policy from
Defendant on May 27, 2010. But as a reporting-type policy, Silverleaf could add properties to the Policy as
acquired. See n. 2. Silverleaf had acquired a 100 percent interest in ROC by the effective date of coverage
on the Mall under the Policy.
10
2.
The Contractual Limitations Period
Defendant further seeks summary judgment on Plaintiff’s breach of contract claim on
grounds it is barred by the one-year limitations period set forth in the Policy which provides:
TIME LIMITATION FOR ACTION
No suit, demand for an arbitration or other action on this policy for the
recovery of any claim shall be sustainable in any court or other forum unless all the
requirements of this policy have been complied with and unless commenced within
twelve (12) months after the inception of the loss.
See [Doc. No. 45-9] at p. 14.10
It is undisputed that the loss at issue occurred on February 3, 2011, the date of the fire. This
action was not filed until April 26, 2012, more than one year following the loss. Defendant has met
its initial burden of proof demonstrating a contractual violation of the limitations period. Under the
plain language of the Policy, this action is untimely absent waiver or some other bar to Defendant’s
right to enforce the provision.
Plaintiff contends Defendant has waived enforcement of the limitations period. First,
Plaintiff claims Defendant failed to raise the limitations provision as an affirmative defense in its
answer as required by Fed. R. Civ. P. 8(c). But Plaintiff has not alleged any prejudice from
Defendant’s failure to raise the defense until summary judgment and has had adequate opportunity
to address the defense. Under these circumstances, Defendant is not precluded from raising the
defense. See Ahmad v. Furlong, 435 F.3d 1196, 1200-1202 (10th Cir. 2006) (standard governing
motions to amend applies to determine whether defendant should be allowed to constructively
amend answer to add affirmative defense by means of summary judgment). See, also, Ring v.
Lexington Apartments & Motor Inns-Oklahoma, 3 Fed Appx. 847, 851 (10th Cir. 2001) (allowing
10
Oklahoma law provides that a property insurer may limit the time when a lawsuit arising under the
policy can be filed, but “such time shall not be limited to less than one (1) year from the date of the
occurrence of the event resulting in the loss.” Okla. Stat. tit. 36, § 3617.
11
statute of limitations defense to be raised in summary judgment motion despite defendant’s failure
to plead defense in its answer where no legally cognizable prejudice is shown).
Next, Plaintiff contends Defendant failed to comply with Oklahoma’s Unfair Claims
Practices Act (UCPA) and specifically, the notice requirement of Okla. Stat tit. 36, § 1250.7(E)
which provides:
Insurers shall not continue or delay negotiations for settlement of a claim
directly with a claimant who is neither an attorney nor represented by an attorney,
for a length of time which causes the claimant’s rights to be affected by a statute of
limitations, or a policy or contract time limit, without giving the claimant written
notice that the time limit is expiring and may affect the claimant’s rights. Such notice
shall be given to first party claimants thirty (30) days, and to third party claimants
sixty (60) days, before the date on which such time limit may expire.
Okla. Stat. tit. 36, §1250.7(E). Plaintiff claims Defendant’s alleged failure to comply with the
UCPA renders the contractual limitations period unenforceable. Oklahoma’s UCPA does not give
rise to a private right of action. Walker v. Chouteau Lime Co., Inc., 849 P.2d 1085, 1086-87 (Okla.
1993). Nonetheless, under Oklahoma law “provisions of an insurance contract may arise from
statute as opposed to the express writing contained in the document agreed to by the parties.” Brown
v. Patel, 157 P.3d 117, 121 (Okla. 2007).
Defendant responds that it provided notice in a letter to Silverleaf dated December 30, 2011
[Doc. No. 54-31]. The letter advises that Defendant continues: (1) “under a full Reservation of
Rights”; (2) that Defendant was requiring “the original purchase and sale documents from Silverleaf,
LLC to show ownership for the date of loss”; (3) identifies the conditions of the Policy and the
insured’s duties following a loss; (4) identifies the time limitation provision of the Policy; and (5)
sets forth the conditions for waiver under the Policy. Assuming the notice provisions of §1250.7(E)
apply, Defendant appears to have satisfied those notice requirements.
12
Finally, Plaintiff contends Defendant waived its right to enforce the contractual one-year
limitation period because Defendant made partial payments on the claim and continued its
negotiations even after the expiration of the limitations period. Under Oklahoma law, an insurer
may waive a contractual limitations period in an insurance policy if by its conduct, it leads the
plaintiff to believe the claim will be paid. See Prudential Fire Ins. Co. v. Trave-Taylor Co., 152
P.2d 273, 275 (Okla. 1944). Even where waiver is found, however, it is not absolute. Instead, the
insurer must bring an action within a reasonable time of the insurance company’s denial of the
claim. See Insurance Co. of North America v. Board of Ed. of Independent School Dist. No. 12,
Texas County. Okl., 196 F.2d at 901, 904 (10th Cir. 1952) (applying Oklahoma law).
In Prudential, the insurance company hired an adjustor to determine the amount of fire loss
sustained by the plaintiff’s property. The adjustor then hired several experts and the experts took
up the entire limitations period in completing their reports. The experts ultimately concluded the
property suffered no appreciable damage but this information was not communicated to the insured
until the limitations period had expired. Under these circumstances, the Court determined the
evidence “was sufficient to support an inference that the defendant intended by its conduct to admit
liability” and that the defendant waived the limitations period by not denying liability within enough
time to allow plaintiff to bring suit within the limitations period. Id. at 275.
The instant action was filed within only a few months of the expiration of the limitations
period and before any denial of the insurance claim. At the time the limitations period ran, the
record shows Defendant had made prior assertions that it was negotiating under a reservation of
rights [Doc. No. 54-31; see also Doc No. 56-2]. But it appears Defendant continued to negotiate the
claim after the one-year limitations period ran.11 For instance, just weeks before the expiration of
11
These facts distinguish the instant case from Clipperton v. Allstate Ins. Co., 151 Fed. Appx. 652,
(continued...)
13
the limitations period Defendant issued a report stating that it was “continuing to investigate” the
claim [Doc. No. 54-32]. And during that same time frame, Defendant hired a new appraiser as part
of its investigation of the claim [Doc. No. 54-34]. But, there is also evidence that the insured’s
own conduct was causing delay in ending negotiations on the claim – namely Silverleaf’s failure to
provide the purchase and sale documentation as requested by Defendant. See, e.g., [Doc. Nos. 5435; 54-36; 54-37]; see also [Doc. No. 45-17]. The parties continued to address these issues for
several months after the expiration of the limitations period and even after this lawsuit was filed.
On the record presented, disputed issues of material fact exist as to whether Defendant has
waived enforcement of the limitations period. See Prudential, 152 P.2d at 275 (where evidence
supports an alleged waiver of enforcement of the limitations period, the issue becomes a question
of fact for the jury). Therefore, Defendant’s motion for summary judgment on grounds Plaintiff’s
breach of contract claim is untimely is denied.
C.
Bad Faith Claim
Defendant also seeks summary judgment on Plaintiff’s bad faith claim. Plaintiff’s claim is
premised on Defendant’s alleged failure to deal fairly and in good faith with Silverleaf on its claim
under the Policy. Plaintiff brings this claim as assignee of Silverleaf.
As previously set forth, the parties agree that Maryland law precludes a tort action for bad
faith breach of an insurance contract. The Court further addresses here whether the claim is
cognizable under Oklahoma law.
11
(...continued)
654-55 (10th Cir. 2005). There the parties’ negotiations ended one month before the expiration of the
contractual limitations period which ran from the date of loss. But the insured waited nearly sixteen months
before filing suit. The fact the insurance company had not formally denied the claim did not alter the
limitations period. The negotiations had clearly ended before expiration of the one-year period and the
insurance company had not engaged in conduct that would indicate a waiver of the limitations period. Under
those circumstances, Plaintiff’s sixteen-month delay in filing the action rendered the action untimely. Id.
14
Under Oklahoma law, an insurer has an implied-in-law duty of good faith and fair dealing
which extends to all types of insurance policies. Roach v. Atlas Life Ins. Co., 769 P.2d 158, 161
(Okla. 1989). But the duty is limited. “There must be either a contractual or statutory relationship
between the insurer and the party asserting the bad faith claim before the duty arises.” Id.
In this case, there is no contractual or statutory relationship between Plaintiff and Defendant.
Plaintiff’ s contention that the assignment from Silverleaf creates such a relationship is to no avail.
This issue was addressed by the Oklahoma Court of Civil Appeals in a recent decision, United
Adjustment Services, Inc. v. Professional Insurors Agency, LLC, 307 P.3d 400 (Okla. Civ. App.
2013). In United Adjustment, the court applied Okla. Stat. tit. 12, § 201712 and held the insured’s
bad faith claim against its insurer was not assignable to its adjuster.
The court relied on established Oklahoma Supreme Court precedent holding that a bad faith
claim is a tort claim. Id. at 404 citing Christian v. American Home Assurance Co., 577 P.2d 899,
904 (Okla. 1977). And, therefore, the court concluded that section 2017 prohibits the assignment
of a bad faith claim. Id. (“Section 2017(D) of Title 12 prohibits the assignment of claims not arising
from contract . . . . Because a bad faith claim sounds in tort under Oklahoma law, this is such a
case.”).13
12
Section 2017 provides: “The assignment of claims not arising out of contract is prohibited.” Okla.
Stat. tit. 12, § 2017.
13
Plaintiff relies on an earlier decision of the Oklahoma Court of Civil Appeals, Chimney Rock Ltd.
Partnership v. Hongkong Bank of Canada, 857 P.2d 84 (Okla. Civ. App. 1993), as authority that Okla. Stat.
tit. 12, § 2017(D) does not preclude assignment of a tort claim where such claim “arises out of” a contract.
Chimney Rock addressed the assignment of claims for interference with business relations and conspiracy to
interfere with business relations related to a beneficiary’s attempt to draw on a letter of credit.
Plaintiff contends like the claims in Chimney Rock, a bad faith claim against an insurance company
arises out of the contract of insurance and, therefore, is subject to assignment. But Plaintiff’s argument
ignores the clear pronouncement by the Oklahoma Supreme Court that a bad faith claim is an “independent
and intentional tort.” See, e.g., McCorkle, 637 P.2d at 587. Because the more recent pronouncement by the
Oklahoma Court of Civil Appeals directly addresses the assignment of a bad faith claim against an insurance
company, the Court finds more persuasive the holding in United Adjustment and concludes the claim is not
(continued...)
15
Here, Plaintiff only brings its bad faith claim as assignee. A bad faith claim is a tort claim
under Oklahoma law. Because Oklahoma law prohibits the assignment of a tort claim, Plaintiff’s
bad faith claim fails. See also Lester v. Minnesota Life Ins. Co., 2014 WL 183937 at *3 (N.D. Okla.
Jan. 14, 2014) (unpublished op.) (dismissing the plaintiff’s tort claims against insurance company,
including bad faith claim, where his claims were based solely upon an assignment as such claims
are precluded by Okla. Stat. tit. 12, § 2017(D)). Accordingly, under either Maryland or Oklahoma
law, Defendant is entitled to judgment as a matter of law in its favor on Plaintiff’s bad faith claim.
IT IS THEREFORE ORDERED that Defendant Starnet Insurance Company’s Motion for
Summary Judgment [Doc. No. 45] is GRANTED in part and DENIED in part. Defendant’s Motion
is DENIED on Plaintiff’s breach of contract claim. Defendant’s Motion is GRANTED on Plaintiff’s
bad faith claim.
IT IS FURTHER ORDERED that Plaintiff ABAB, Inc.’s Motion for Partial Summary
Judgment [Doc. No. 53] is GRANTED.
IT IS SO ORDERED this 20th day of February, 2014.
13
(...continued)
subject to assignment. In so finding, the Court recognizes that neither opinion of the Oklahoma Court of Civil
Appeals has precedential value. The Court relies on United Adjustment for its persuasive value. See Okla.
Stat. Ann. tit. 20, § 30.5 (“No opinion of the Court of Civil Appeals shall be binding or cited as precedent
unless it shall have been approved by the majority of the justices of the Supreme Court for publication in the
official reporter.”); id. tit. 12, Appendix 1, Rule 1.200(d)(2) (establishing that opinions of the Court of Civil
Appeals ordered released for publication by that court but not by the Oklahoma Supreme Court have
persuasive effect but are not accorded precedential value).
16
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?