Western Medical Park Owners v. United States Liability Insurance Group et al

Filing 10

ORDER granting in part, denying in part [6-1] Defendant United States Liability Insurances Motion to Dismiss. Signed by Honorable Robin J. Cauthron on 11/24/14. (lg)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
WESTERN MEDICAL PARK OWNERS, )
)
Plaintiff,
)
)
vs.
)
)
UNITED STATES LIABILITY
)
INSURANCE GROUP;
)
ENGLE MARTIN & ASSOCIATES,
)
INC., and SCOTT S. BOWERS, SR.,
)
)
Defendants.
)

Case Number CIV-14-1266-C

MEMORANDUM OPINION AND ORDER
Plaintiff owned commercial property which was insured by Defendant United States
Liability Insurance Group (“USLI”). After Plaintiff’s property was damaged in a hail storm,
it made a claim with USLI for coverage. Unable to agree on the amount of damage to
Plaintiff’s property, Plaintiff filed suit against USLI and others. The claims against all
parties other than USLI have been dismissed. Defendant USLI now seeks dismissal of
Plaintiff’s case, asserting it fails to state a claim for relief.
USLI first challenges Plaintiff’s claims under the Oklahoma Unfair Claims Settlement
Practices Act, 36 Okla. Stat. § 1250.1 et seq. arguing that there is no private cause of action
under this statute. Plaintiff concedes the point and Defendant’s Motion will be granted on
this issue.
USLI challenges Plaintiff’s claim for violations of the Oklahoma Consumer Protection
Act (“OCPA”). According to USLI, a provision of the Act, specifically 15 Okla. Stat.
§ 754(2) (“Nothing in this act shall apply to: . . . Actions 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 . . .”) exempts any claim here, as
USLI is regulated by the Oklahoma Department of Insurance. In response, Plaintiff does not
dispute that USLI is regulated by the Department of Insurance; however, it argues that the
specific actions or transactions challenged here, such as accepting insurance premiums and
refusing to pay benefits, offering a product that provides illusory coverage, or other actions
related to the adjustment of Plaintiff’s claim, are not subject to regulation by the Department
of Insurance.
Contrary to Plaintiff’s arguments, the Oklahoma Department of Insurance does
regulate the very types of claims at issue here: the sale of property insurance and adjustment
activities related to that insurance. Therefore, the exception to the OCPA noted above would
exclude Plaintiff’s claim under that Act. USLI’s Motion to Dismiss will be granted on this
issue.
USLI argues Plaintiff’s claim for breach of fiduciary duty should be dismissed, as
Oklahoma law does not recognize the existence of a fiduciary duty between an insured and
insurer. In support of its motion, USLI directs the Court to Cosper v. Farmers Insurance Co.,
2013 OK CIV APP 78, 309 P.3d 147. Plaintiff argues that Cosper is not as broad as
suggested by USLI and should be narrowly construed. According to Plaintiff, Oklahoma law
permits fiduciary relationships to arise any time the facts and circumstances surrounding a
relationship would allow a reasonably prudent person to repose confidence in another person.
Quinlan v. Koch Oil Co., 25 F.3d 936, 942 (10th Cir. 1994).
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The allegations brought by Plaintiff in this case and those by the plaintiff in Cosper
are indistinguishable. In rejecting the claim for fiduciary duty by the plaintiff in Cosper, the
Oklahoma Court of Civil Appeals recognized “‘[t]here are no Oklahoma cases holding that
an insurance agent owes a fiduciary duty to a prospective insured, or to an established
customer with respect to procurement of an additional policy’” (quoting Swickey v. Silvey
Cos., 1999 OK CIV APP 48, ¶ 12, 979 P.2d 266, 269). Further, in Silver v. Slusher, 1988
OK 53, ¶ 7, n.11, 770 P.2d 878, 882, n.11, the Oklahoma Supreme Court recognized that the
relationship between the insured and insurer was arm’s length, and they did not stand in any
recognized form of “special relationship.” In light of these clear statements from Oklahoma
courts, the Court finds that Oklahoma would not recognize a claim for breach of fiduciary
duty under the circumstances present here. Consequently, USLI’s request for dismissal will
be granted.
USLI argues that Plaintiff’s claim for negligent underwriting should be dismissed.
According to USLI, in this claim Plaintiff asserts that USLI was negligent because it was
obligated to utilize reasonable validation methodology to determine the cost which it would
consider necessary to cover the replacement costs and that USLI wrongfully wrote the policy
for more insurance than was necessary to cover the replacement cost. USLI argues that this
claim is unsupportable under Oklahoma law on two fronts. First, the Oklahoma Court of
Civil Appeals in Mueggenborg v. Ellis, 2002 OK CIV APP 88, ¶ 6, 55 P.3d 452, 453, held
that insurers have no duty to advise an insured as to his insurance needs. Second, in Cosper,
2013 OK CIV APP 78, ¶ 8, 309 P.3d at 149, the Oklahoma Court of Civil Appeals held that
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an insurer breaches no duty by providing a policy with coverage that may exceed the amount
needed to replace an insured’s property. The court in Rotan v. Farmers Ins. Grp. of Cos.,
Inc., 2004 OK CIV APP 11, ¶ 2, 83 P.3d 894, 895, reached a similar conclusion. Based on
these cases, it is clear Plaintiff’s claim for negligent underwriting is unsupportable under
Oklahoma law. USLI’s Motion will be granted on this issue.
The same cases are fatal to Plaintiff’s claims for constructive fraud/negligent
misrepresentation. Because the duty suggested by Plaintiff in its Petition does not exist,
Plaintiff’s claims fail as a matter of law.
USLI’s Motion requests dismissal of Plaintiff’s case in its entirety. However, the
Petition raises claims for breach of contract and bad faith. USLI has offered no argument
challenging either of these claims. Upon review, each states a claim for relief. Therefore,
to the extent USLI seeks dismissal, its Motion will be denied.
CONCLUSION
For the reasons set forth herein, Defendant United States Liability Insurance’s Motion
to Dismiss (Dkt. No. 6-1) is GRANTED in part and DENIED in part.
IT IS SO ORDERED this 24th day of November, 2014.

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