Supermart #7 v. North Star Mutual Insurance Company

Filing 11

ORDER granting 7 defendant North Star's motion for judgment on the pleadings, and dismissing the following causes of action: (1) Second Cause of Action Bad Faith; (2) Third Cause of Action Breach of Fiduciary Duty; (3) Fourth Cause of Action N egligence in the Procurement of Insurance; (4) Fifth Cause of Action Negligent Underwriting; and (5) Sixth Cause of Action Violations of Oklahoma Consumer Protection Act (as more fully set out). Signed by Honorable Vicki Miles-LaGrange on 2/20/2015. (ks)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
SUPERMART # 7,
Plaintiff,
v.
NORTH STAR MUTUAL
INSURANCE COMPANY,
Defendant.

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Case No. CIV-14-1129-M

ORDER
Before the Court is Defendant North Star Mutual Insurance Company’s (“North Star”)
Motion for Judgment on the Pleadings, and Brief in Support, filed November 7, 2014. On
November 28, 2014, plaintiff Supermart # 7 (“Supermart”) responded, and on December 4, 2014,
North Star replied. Based on the parties’ submissions, the Court makes its determination.
I.

Background
Supermart filed this action in the District Court of Logan County, State of Oklahoma. On

October 15, 2014, North Star removed this action to this Court. In its Complaint1, Supermart
alleges it entered into a contract with North Star to provide insurance coverage for its property
and its contents. On May 31, 2013, Supermart’s property insured by North Star was damaged in
a wind/hail storm. Supermart alleges that it timely submitted a claim for the property damage due
to the wind/hail storm to North Star and that North Star confirmed the cause of the property
damage was due to the wind/hail storm and that the losses were covered by the terms and
conditions of the insurance policy provided by North Star. Supermart now alleges that North Star

1

Supermart originally filed a Petition [docket no. 1-2] in the District Court of Logan
County, State of Oklahoma. For purposes of this Order, the Court will refer to Supermart’s
Petition as Complaint.

has breached its contractual obligations with Supermart by failing to pay Supermart all benefits
owed.
Supermart alleges the following causes of action against North Star: (1) breach of
contract for failing to pay Supermart all benefits owed; (2) bad faith for violating the Unfair
Claims Settlement Practices Act; (3) breach of fiduciary duty; (4) negligence in the procurement
of insurance; (5) negligent underwriting; (6) violation of the Oklahoma Consumer Protection
Act; and (7) breach of common law duty of good faith and fair dealing. North Star now moves
this Court, pursuant to Federal Rule of Civil Procedure 12(c), for judgment on the pleadings as to
the following causes of actions: (1) bad faith for violation of the Oklahoma Unfair Claims
Settlement Practices Act2; (2) breach of fiduciary duty; (3) negligence in the procurement of
insurance; (4) negligent underwriting; and (5) violation of the Oklahoma Consumer Protection
Act.
II.

Standard for Dismissal
“After the pleadings are closed--but early enough not to delay trial--a party may move for

judgment on the pleadings.” Fed. R. Civ. P. 12(c). When reviewing a motion for judgment on the
pleadings under Rule 12(c), the Court applies the same standard that applies to a Rule 12(b)(6)
motion. Park Univ. Enters., Inc. v. Am. Cas. Co. of Reading, PA, 442 F.3d 1239, 1244 (10th Cir.
2006).
To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is
plausible on its face. A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct
alleged. The plausibility standard is not akin to a “probability
requirement,” but it asks for more than a sheer possibility that a
2

In its response, Supermart voluntarily dismisses this cause of action against North Star,
therefore; the Court will not address this cause of action in this Order.
2

defendant has acted unlawfully. Where a complaint pleads facts
that are merely consistent with a defendant’s liability, it stops short
of the line between possibility and plausibility of entitlement to
relief.
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotations and citations
omitted). Determining whether a complaint states a plausible claim for relief is “a contextspecific task that requires the reviewing court to draw on its judicial experience and common
sense.” Id. at 1950. Further, “where the well-pleaded facts do not permit the court to infer more
than the mere possibility of misconduct, the complaint has alleged - but it has not shown - that
the pleader is entitled to relief.” Id. (internal quotations and citations omitted). Finally, “[a]
pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of
action will not do. Nor does a complaint suffice if it tenders naked assertion[s] devoid of further
factual enhancement.” Id. at 1949 (internal quotations and citations omitted).
III.

Discussion
A.

Breach of Fiduciary Duty

“In order to prove a claim for breach of fiduciary duty, plaintiff must establish (1) the
existence of a fiduciary relationship; (2) a duty arising out of the fiduciary relationship; (3)
breach of the fiduciary duty; and (4) damages proximately caused by the breach of duty.” Miller
v. Farmers Ins. Grp., No. CIV-10-466-F, 2012 WL 8017244, at *15 (W.D. Okla. Mar. 22, 2012).
“[A] fiduciary relationship springs from an attitude of trust and confidence and is based on some
form of agreement, either expressed or implied, from which it can be said the minds have been
met to create a mutual obligation.” Lowrance v. Patton, 710 P.2d 108, 112 (Okla. 1985). North
Star asserts that it does not owe a fiduciary duty to Supermart. Supermart counters and asserts
that the insurance contract created a special relationship and, therefore, a fiduciary relationship
exists between the parties.
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Having carefully reviewed Supermart’s Complaint, and presuming all of Supermart’s
factual allegations are true and construing them in the light most favorable to Supermart, the
Court finds that Supermart has failed to state a claim for breach of fiduciary duty against North
Star. Supermart alleges “[d]ue to the unequal bargaining power between Plaintiff and Defendant,
the quasi-public nature of insurance, and the potential for Defendant to unscrupulously exploit
that power at a time when Plaintiff was most vulnerable, a special relationship akin to that of a
fiduciary exists between Plaintiff and Defendant.” Compl. ¶ 32. However, the Oklahoma
Supreme Court has found that the special relationship that exists between an insured and insurer
creates a nondelegable duty of good faith and fair dealing. Wathor v. Mut. Assurance Adm’rs.
Inc., 87 P.3d 559, 561-562 (Okla. 2004). Since Supermart has already pled a cause of action for
breach of the duty of good faith and fair dealing, the Court finds that North Star is entitled to
judgment on the pleadings as to Supermart’s breach of fiduciary duty claim.
B.

Negligent Procurement of Insurance

“In order to prevail on a claim for breach of contract to procure insurance, a plaintiff
must show that the insurance agent agreed to procure insurance coverage effective as of a certain
date and time, or of a certain breadth, and then failed to do so.” Swickey v. Silvey Co., 979 P.2d
266, 268 (Okla. Civ. App. 1999). “[A]n agent has the duty to act in good faith and use reasonable
care, skill and diligence in the procurement of insurance and an agent is liable to the insured, if
by the agent’s fault, insurance is not procured as promised and the insured suffers a loss.” Smith
v. Allstate Vehicle and Prop. Ins. Co. No. CIV-14-0018-HE, 2014 WL 1382488, slip op. at *2
(W.D. Okla. April 8, 2014) (citing Swickey, 979 P.2d at 269). Further, no duty exists upon an
insurer to provide an “adequate amount” of coverage when the insurer did not fail to procure
insurance for the insured. See Cosper v. Farmers Ins. Co., 309 P.3d 147, 149 (Okla. Civ. App.

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2013). North Star asserts that Supermart’s Complaint fails to allege it lacked property insurance
during the May 31, 2013, wind/hailstorm. Supermart asserts that North Star failed to procure the
type of coverage requested and promised to Supermart and, therefore, Supermart’s claim is
viable.
Having carefully reviewed Supermart’s Complaint, and presuming all of Supermart’s
factual allegations are true and construing them in the light most favorable to Supermart, the
Court finds that Supermart has failed to state a claim for negligent procurement of insurance.
Specifically, the Court finds that Supermart has failed to show that it lacked property insurance
on May 31, 2013, during the wind/hailstorm. Supermart alleges that its “insurance agent
procured the subject replacement cost policy for plaintiff.” Compl. ¶ 42. Supermart also alleges
that “North Star Mutual confirmed that the cause of Plaintiff’s property damage claim was due to
the wind/hailstorm and that the loss was covered under the terms and conditions of the insurance
policy . . . .” Id. ¶ 11. Supermart does not allege it did not have insurance coverage during the
wind/hail storm, but that:
Plaintiff’s insurance agent and Defendant breached their duties
owed to Plaintiff by:
a.
Procuring an insurance policy that did not serve to actually
replace its business and personal property when it was
damaged or destroyed by a covered loss.
b.
Procuring an insurance policy that did not accurately reflect
the replacement cost of Plaintiff’s dwelling.
c.
Failing to inform Plaintiff of the limitations of the
insurance policy procured for Plaintiff.
Id. ¶ 47. As a result of Supermart’s failure to demonstrate it lacked property insurance during the
May 31, 2013, wind/hailstorm, the Court finds that North Star is entitled to judgment on the
pleadings as to Supermart’s negligence in the procurement of insurance claim.

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C.

Negligent Underwriting

The Oklahoma Supreme Court has “recognized the two causes of action which may be
asserted premised on the existence of an insurance contract: an action based on the contract; and
an action for breach of the implied duty to deal fairly and in good faith.” Lewis v. Farmers Ins.
Co., 681 P.2d 67, 69 (Okla. 1983) (internal citation omitted). Further, the Oklahoma Supreme
Court has found that “the minimum level of culpability necessary for liability against an insurer
to attach is more than simple negligence, but less than the reckless conduct necessary to sanction
a punitive damage award against said insurer.” Badillo v. Mid Century Ins. Co., 121 P.3d 1080,
1094 (Okla. 2005). North Star asserts that Oklahoma law does not recognize a theory of
negligent underwriting and any alleged claims Supermart has against North Star lie in breach of
contract and a duty to deal fairly and in good faith. Supermart asserts that all that is needed for a
claim of negligence is the establishment of a duty. Supermart further asserts that the Oklahoma
Supreme Court has established this duty by stating that “an insurance agent, who undertakes to
procure insurance for another is under a duty to exercise reasonable diligence and skill in
obtaining such insurance.” Plf.’s Resp. at 7 (citing DeWees v. Cedarbaum, 381 P.2d 830, 837
(Okla. 1963)).
Having carefully reviewed Supermart’s Complaint, and presuming all of Supermart’s
factual allegations are true and construing them in the light most favorable to Supermart, the
Court finds that Supermart has failed to state a claim for negligent underwriting. The Court
specifically finds that Supermart has failed to identify any authority showing negligent
underwriting is a recognized form of recovery against insurers in Oklahoma. Further, Supermart
alleges that “Defendant owed a duty to Plaintiff to exercise good faith, reasonable care, skill and
expertise in the underwriting analysis to ensure the insurance policy provided appropriate and

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adequate coverage once the insurer-insured relationship was established.” Compl. ¶ 56. The
Court finds that this allegation is essentially a bad faith claim, and since Supermart has already
pled a cause of action for the breach of the duty of good faith and fair dealing, North Star is
entitled to judgment on the pleadings as to Supermart’s negligent underwriting claim.
D.

Oklahoma Consumer Protection Act
To recover under the Oklahoma Consumer Protection Act
(“OCPA”), a consumer must show: “(1) that the defendant engaged
in an unlawful practice as defined at 15 O.S. (1991), § 753; (2) that
the challenged practice occurred in the course of defendant's
business; (3) that the plaintiff, as a consumer, suffered an injury in
fact; and (4) that the challenged practice caused the plaintiff's
injury.” Patterson v. Beall, 19 P.3d 839, 846 (Okla. 2000). An
unlawful practice includes “a misrepresentation, omission or other
practice that has deceived or could reasonably be expected to
deceive or mislead a person to the detriment of that person. Such a
practice may occur before, during or after a consumer transaction
is entered into and may be written or oral.” 15 Okla. Stat. §§
752(13); 753(20).

Passenger Transp. Specialists Inc. v. Caterpillar Inc., No. CIV-12-0732-HE, 2014 WL 5092470,
slip op., at *5 (W.D. Okla. Oct. 9, 2014). Further, “[a]ctions or transactions regulated under laws
administered by the Corporation Commission or any other regulatory body or officer acting
under statutory authority of this state or the United States” are exempted from the OCPA. See
Okla. Stat. tit. 15, § 754. North Star asserts that as an insurer its activities and transactions are
regulated by the Oklahoma Department of Insurance and, therefore, are exempt from the OCPA.
Supermart contends that North Star’s alleged actions of
(engaging in unconscionable conduct by accepting insurance
premiums but refusing to pay benefits due and owing without a
reasonable basis; offering products that provide illusory coverage;
offering replacement cost coverage and then not explaining the two
step process) are not the subject of regulation by the Department of
Insurance.
Plf.’s Resp. at 8.
7

Having carefully reviewed Supermart’s Complaint, and presuming all of Supermart’s
factual allegations are true and construing them in the light most favorable to Supermart, the
Court finds that Supermart has failed to state a claim for violating the OCPA. Specifically, the
Court finds that North Star is an insurer regulated by the Oklahoma Department of Insurance,
and Supermart’s alleged actions against North Star all fall under the premise of doing business
with an insurance company; actions regulated by the Oklahoma Department of Insurance. Since
North Star’s transactions are exempted from the OCPA, the Court finds North Star is entitled to
judgment on the pleadings as to Supermart’s violation of the OCPA claim.
IV.

Conclusion
Accordingly, for the reasons set forth above, the Court GRANTS Defendant North Star’s

Motion for Judgment on the Pleadings, and Brief in Support [docket no. 7] and DISMISSES the
following causes of action: (1) Second Cause of Action Bad Faith; (2) Third Cause of Action
Breach of Fiduciary Duty; (3) Fourth Cause of Action Negligence in the Procurement of
Insurance; (4) Fifth Cause of Action Negligent Underwriting; and (5) Sixth Cause of Action
Violations of Oklahoma Consumer Protection Act. 3
IT IS SO ORDERED this 20th day of February, 2015.

3

The First Cause of Action Breach of Contract and Seventh Cause of Action Breach
Common Law Duty of Good Faith and Fair Dealing still remain in this case.
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