Dabbs v. Shelter Mutual Insurance Company et al

Filing 127

ORDER Granting re 92 MOTION for Summary Judgment filed by Shelter Mutual Insurance Company, 113 Order on Motion for Summary Judgment. Signed by Chief Judge Timothy D. DeGiusti on 11/23/2021. (mb)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA

JOHANNA DABBS,
Plaintiff,
v.
SHELTER MUTUAL INSURANCE
COMPANY aka SHELTER MUTUAL
INSURANCE CO.,
Defendant.

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Case No. CIV-15-148-D

ORDER
In an order dated September 27, 2019, the Court entered summary judgment against
Plaintiff Johanna Dabbs on her bad faith claim against Defendant Shelter Mutual Insurance
Company. Order [Doc. No. 113]. The Court denied summary judgment on Plaintiff’s
breach of contact claim. Id. The parties then filed a joint motion seeking permission to
submit further briefing for a legal determination of what damages, if any, remain available
to Plaintiff on her breach of contact claim. [Doc. No. 118]. The Court granted the motion.
Order [Doc. No. 119]. The parties then submitted additional briefing on the contract
damages issue. [Doc. Nos. 120, 121, and 123]. The Court’s most recent order notified the
parties that it intends to address the issues raised in those filings in summary judgment
proceedings pursuant to Fed. R. Civ. P. 56 and permitted the parties to file additional
supplemental briefing. Order [Doc. No. 124]. The parties both submitted additional
briefing. [Doc. Nos. 125 and 126].

After considering the case record and those supplemental filings, the Court is
compelled to withdraw the previous interlocutory order partially granting Defendant’s
Motion for Summary Judgment [Doc. No. 113].1 Therefore, Defendant’s Motion for
Summary Judgment [Doc. No. 92] is currently at issue. Upon consideration of the parties’
initial summary judgment briefing and every supplemental brief filed thereafter, the Court
issues its ruling.
BACKGROUND
The underlying facts in this matter previously noted by the Court have not changed.
They are undisputed unless otherwise noted. Plaintiff was insured under an automobile
insurance policy issued by Defendant. [Doc. No. 92 at p. 5]. The Policy had maximum
liability coverage limits of $25,000 per person and $50,000 per accident. [Doc. No. 92-2
at p. 1]. After purchasing the Policy, Plaintiff was involved in an automobile accident in
Harris County, Texas. [Doc. No. 92 at p. 5]. Since the accident occurred in Texas, the
policy limits were increased to comply with the Texas minimum coverage requirements;
they increased to $30,000 per person and $60,000 per accident. See Tex. Transp. Code §
601.072.
The accident happened when Plaintiff ran a red light. [Doc. No. 92 at p. 5].
Plaintiff’s car then clipped a vehicle driven by April Andrade and struck another vehicle

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Under Fed. R. Civ. P. 54(b), “[a] court's disposition of a single claim in a suit involving multiple
claims is subject to reconsideration until the entry of judgment on all of the claims, absent an
explicit direction for the entry of judgment on the single claim.” First Am. Kickapoo Operations,
L.L.C. v. Multimedia Games, Inc., 412 F.3d 1166, 1170 (10th Cir. 2005).
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which Mayra Sierra was driving and in which Vincent Calderon was a passenger. Id.
Andrade, Sierra, and Calderon were all injured. Id.
The accident took place on Saturday, August 13, 2011. Id. On Monday, August 15,
2011, Sheri Edwards, the adjuster for the injury claims, contacted Plaintiff, Andrade, and
Sierra, and attempted to contact Calderon. Id. During that initial contact, Andrade and
Sierra stated they had been injured and informed Defendant that Calderon was injured as
well. Id. at p. 10. On August 17, Defendant learned that the same attorney, Joseph Gourrier,
would represent Calderon and Sierra. Id. Gourrier informed Defendant that Calderon had
a broken leg and Sierra had both neck and arm injuries. Id.
On September 15, Gourrier made a policy limits demand for Calderon’s claim,
offering to settle for $30,000. Id. Gourrier gave Defendant five days to respond to the offer.
Id. Defendant, at that time, still did not have Andrade’s medical authorization, Sierra’s
medical bills or records, and had incomplete records for Calderon. Id. at 10–11. Concerned
that she had insufficient information about all injuries and a policy limit that could subject
the insured to excess liability, the claims adjuster discussed her concerns with her
supervisor, requested more information and an extension of the offer deadline from
Gourrier, and attempted to recontact Andrade. Id. at 11.
On September 21, Gourrier responded to the claims adjuster, providing more
information about Calderon’s injuries and extending the offer for five more days. Id.
Around this time, Defendant retained counsel to assist with handling the insurance claims.
Id. at 12. Counsel advised that Gourrier’s time limit was unreasonable and that—under
Texas law—Defendant had no obligation to consider competing claims before accepting
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the settlement offer. Id. The offer to settle Calderon’s claim for the $30,000 policy limits
expired on September 26.
Defendant’s counsel, nonetheless, recommended Defendant attempt to settle
Calderon’s claim for the policy limits. Id. at 12. Three days after the expiration of
Gourrier’s deadline, Defendant offered $30,000 for Calderon’s claim. Id. at 13. Gourrier
refused to accept the policy limit tender. Id. Calderon sued Plaintiff, and Defendant
retained counsel for Plaintiff in the litigation. Id. A jury ultimately found Plaintiff liable to
Calderon and awarded damages in the amount of $622,135.60.
STANDARD OF DECISION
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); Universal Underwriters Ins. Co. v. Winton, 818 F.3d 1103, 1105 (10th Cir.
2016). “An issue is ‘genuine’ if there is sufficient evidence on each side so that a rational
trier of fact could resolve the issue either way,” and “[a]n issue of fact is ‘material’ if under
the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart
Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)).
The Court’s inquiry must be whether the evidence, when viewed “through the prism
of the substantive evidentiary burden,” Anderson, 477 U.S. at 254, “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. Although the Court views all facts in the
light most favorable to the nonmoving party at the summary judgment stage, “there is no
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issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to
return a verdict for that party.” Id. at 249.
The Court, through a choice of law analysis, has previously ruled that Oklahoma
law governs the resolution of this diversity action. See Order [Doc. No. 64].
DISCUSSION
The Court’s initial order on Defendant’s Motion for Summary Judgment found a
genuine dispute of material fact existed which precluded summary judgment on Plaintiff’s
breach of contract claim. After considering the parties’ supplemental filings, the Court is
compelled to reconsider that finding. Further, the Court previously ruled that Defendant
did not act in bad faith when it failed to accept attorney Gourrier’s policy limit offer. The
Court, however, did not adequately analyze Plaintiff’s bad faith claim under the standard
set forth in Badillo v. Mid Century Insurance Co., 121 P.3d 1080 (Okla. 2005), and also
applied principles from cases which differ contextually from the instant case. Therefore,
after considering the supplemental filings, the Court is also compelled to reanalyze
Plaintiff’s bad faith claim.2
I.

Defendant did not breach the duty to defend or the duty to indemnify, and
Plaintiff must establish bad faith to succeed on a claim for failure to settle
within the policy limits.
“The elements of a breach of contract action are: (1) formation of a contract; (2)

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Since neither party offered a reason to reconsider the Court’s decision regarding Plaintiff’s
Exhibit 1, Order [Doc. No. 113 at pp. 4–10], and since the Court can find no reason to reconsider
that ruling, the Court reaffirms its holding on that issue. The Court will consider Gourrier’s
affidavit attached to Plaintiff’s Response [Doc. No. 99] only to the extent that it contains
statements that could be reduced to admissible evidence at trial.
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breach of the contract; and (3) damages as a result of that breach.” Morgan v. State Farm
Mut. Auto. Ins. Co., 488 P.3d 743, 748 (Okla. 2021). Insurers generally bear two duties
under liability insurance policies: the duty to defend and the duty to indemnify. First Bank
of Turley v. Fid. & Deposit Ins. Co. of Md., 928 P.2d 298, 302–03 (Okla. 1996). The duty
to defend relates to the obligation of the insurer to pay for and provide defense to litigation
for claims covered under the policy. Id. at 303.
In accordance with these duties, Defendant provided a competent defense for
Plaintiff through the appeal of the jury verdict and paid the policy limits to Calderon after
the appeal was denied. Plaintiff, nevertheless, argues Defendant breached the duty to
defend by failing to accept a settlement offer within the policy limits.
The duty to defend affords the insurer “the right to control the course of the defense
of the liability claim and to decide on litigation strategy.” Milroy v. Allstate Ins. Co., 151
P.3d 922, 927 (Okla. Civ. App. 2007). This, of course, includes weighing the merits of
settlement offers. Id. “It is this right to control the litigation that exposes the insurer to a
claim for bad faith in a case where the verdict against the insured exceeds policy limits.”
Id.
Under Oklahoma law, an insurer’s failure to accept a settlement offer within the
policy limits potentially exposes the insurer to liability for the “entire judgment obtained
against the insured, regardless of policy limitations.” Magnum Foods Inc. v. Cont'l Cas.
Co., 36 F.3d 1491, 1504 (10th Cir. 1994) (citing Am. Fid. & Cas. Co. v. L.C. Jones
Trucking, 321 P.2d 685, 687 (Okla. 1957), overruled on other grounds by Badillo v. Mid
Century Ins. Co., 121 P.3d 1080, 1093–94, 1094 & n.7 (Okla. 2005)). Such liability must
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be “premised on a finding of bad faith.” Colony Ins. Co. v. Burke, 698 F.3d 1222, 1237
(10th Cir. 2012). And claims premised on bad faith arise in tort—not contract. See
Christian v. American Home Assur. Col., 577 P.2d 899, 904–05 (Okla. 1977); see also
Magnum Foods, 36 F.3d at 1504 (“If an insurer fails to act cooperatively to reach a
settlement . . . then the insurer's conduct may be reasonably perceived as tortious, and the
trial court may submit the issue of bad faith to the jury.”). Further, a clear pronouncement
of an insurer’s duty to settle a claim against its insured is found in Badillo v. Mid Century
Insurance Co., which discusses the duty only in terms of bad faith. 121 P.3d 1080 (Okla.
2005).
Therefore, Plaintiff’s claim that Defendant breached the duty to defend by failing to
accept a settlement offer within the policy limits is merely a repackaged version of her bad
faith failure to settle claim. Oklahoma law does not support this claim as one for breach of
contract. Therefore, because Defendant fulfilled its contractual obligations to defend and
indemnify Plaintiff, there is no evidence to support a breach of contract claim. Summary
judgment is granted to Defendant on Plaintiff’s breach of contract claim.
II.

Defendant’s conduct does not meet the minimum culpability requirement for
bad faith under Oklahoma law.
For bad faith claims, a jury question arises only where the relevant facts are in

dispute “or where the undisputed facts permit differing inferences as to the reasonableness
and good faith of the insurer’s conduct.” City Nat’l Bank & Trust Co. v. Jackson Nat’l Life
Ins., 804 P.2d 463, 468 (Okla. Civ. App. 1990). On a motion for summary judgment, “the
Trial Court must first determine, under the facts of the particular case and as a matter of

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law, whether insurer’s conduct may be reasonably perceived as tortious.” Id. “Until the
facts, when construed most favorably against the insurer, have established what might
reasonably be perceived as tortious conduct on the part of the insurer, the legal gate to
submission of the issue to the jury remains closed.” Id. at 468–69. “To hold otherwise
would subject insurance companies to the risk of punitive damages whenever litigation
arises from insurance claims.” Oulds v. Principal Mut. Life Ins. Co., 6 F.3d 1431, 1437
(10th Cir. 1993).
Oklahoma law places “a very great duty” upon an insurer to determine whether
litigation against its insured should be settled, when possible, within policy limits.
Hazelrigg v. Am. Fid. & Cas. Co., 241 F.2d 871, 873 (10th Cir. 1957) (citing Nat’l Mut. &
Cas. Co. v. Britt, 200 P.2d 407 (Okla. 1948)). That duty requires an insurer to treat thirdparty claims against an insured as if the insurer alone is responsible for the entire claim.
Badillo, 121 P.3d at 1093.3 The insurer must “act in a diligent manner in relation to
investigation, negotiation, defense and settlement of claims being made against the
insured.” Id. at 1096.
Mere negligence will not suffice to support a bad faith claim. “The minimum level
of culpability necessary for liability against an insurer to attach is more than simple
negligence, but less than reckless conduct necessary to sanction a punitive damages award
against an insurer.” Id. at 1094.

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Though Badillo instructs insurers to approach settlement negotiations as if the policy limits do
not exist, Id. at 1093, this Court is aware of no Oklahoma state court that has applied this standard
in a case involving multiple third-party claimants.
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Defendant’s conduct does not meet the minimum culpability requirement for a bad
faith claim under Badillo v. Mid Century Insurance Co., 121 P.3d 1080 (Okla. 2005).
Promptly after learning of the accident, Defendant attempted to gather the medical
information of all three potential claimants. Attorney Gourrier made the initial settlement
demand for Calderon’s claim just over a month after the accident. At that time, Defendant
lacked important information regarding Calderon’s claim, including the extent of his
injuries and the amount of his medical expenses. Defendant requested more information
from Gourrier regarding Calderon’s injuries and asked for an extension of the deadline for
the settlement offer. Defendant also sought advice from legal counsel regarding Gourrier’s
offer; counsel advised Defendant that the offer’s time limit was unreasonable.
In response to Defendant’s requests, Gourrier provided more information about
Calderon’s injuries and extended the deadline of the offer. At that point, Defendant knew
more about Calderon’s claim, but it still lacked adequate information about the extent of
the other claimants’ injuries.
The timing of Gourrier’s offer and the compressed time constraints he placed on it
presented significant challenges to Defendant. A reasonable settlement offer requires a
reasonable investigation. See Newport v. USAA, 11 P.3d 190, 197 (Okla. 2000), as
corrected (Aug. 1, 2000) (“The duty of good faith and fair dealing merely prevents an
insurer from offering less than what its own investigation reveals to be the claim's value.”).
But Gourrier’s offer required Defendant to negotiate a settlement for Calderon’s claim
before it could fully investigate all the claims against Plaintiff.

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To be sure, Defendant considered the policy limits in that it was seeking a potential
comprehensive resolution to all the claims against Plaintiff. But Oklahoma law does not
instruct insurers that they may not seek a comprehensive resolution of all claims against an
insured, and Defendant’s attempt to do so, under compressed time constraints, does not
rise beyond the level of mere negligent conduct.4
Defendant, by conducting diligent investigation, earnest negotiation, and competent
(although unsuccessful) defense of the claims against Plaintiff, made a reasonable attempt
to avoid liability for Plaintiff—for the total damage she caused—in excess of the policy
limits. The facts do not indicate that Defendant failed to approach settlement negotiations
as if it alone were liable for the entire amount of the claim. Defendant’s conduct cannot
reasonably be perceived as tortious; therefore, summary judgment on Plaintiff’s bad faith
claim is appropriate. See City Nat’l Bank & Trust Co. 804 P.2d at 468.
CONCLUSION
For the foregoing reasons, the Court finds that, according to the undisputed material
facts, Defendant is entitled to judgment as a matter of law on Plaintiff’s breach of contract
and bad faith claims. Accordingly, Defendant’s Motion for Summary Judgment [Doc. No.
92] is GRANTED, and this Order disposes of all of Plaintiff’s claims in this action. A
separate judgment will thus be issued.

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“Most insurers feel obligated to protect their policyholders against uninsured liability if possible,
so leaving some claims unresolved is an unappealing option. Insurers further recognize that if the
policyholder is exposed to uninsured liability for the remaining claims, that will almost certainly
lead to bad faith litigation.” Douglas R. Richmond, Too Many Claimants or Insureds and Too
Little Money: Insurer’s Good Faith Dilemmas, 44 Tort & Ins. L.J. 871 (2009).
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IT IS SO ORDERED this 23rd day of November, 2021.

TIMOTHY D. DeGIUSTI
Chief United States District Judge

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