Case Title: BROWN v. PATEL

Citation: 

Docket Number: 102402

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2007-03-27T00:00:00Z

Document:
BROWN v. PATEL  BROWN v. PATEL 2007 OK 16 157 P.3d 117 Case Number: 102402 Decided: 03/27/2007 THE SUPREME COURT OF THE STATE OF OKLAHOMA JOHNNY WELDON BROWN and BETH ANN BROWN, Plaintiffs/Appellants, v. APPEAL FROM THE DISTRICT COURT OF PAYNE COUNTY ¶0 An insured brought an action against an alleged tortfeasor. The insured's uninsured motorist carrier/workers' compensation carrier intervened. Insured objected to the intervention and alleged that the non-payment of workers' compensation benefits, non-payment for subrogation, and insurer's assertion of claims also asserted by the alleged tortfeasor showed bad faith conduct on the part of the insurer towards its insured. Intervenor/insurer sought summary judgment on insured's bad-faith claim and the Honorable Donald L. Worthington, District Judge, granted the motion for summary judgment. Subsequent to a defendant's verdict and judgment thereon, the insured appealed the order granting summary judgment to insurer. We granted the insurer's motion to retain the appeal. We hold that an uninsured motorist insurer may, under certain circumstances, intervene in the action brought by its insured against an alleged tortfeasor, and that a judgment for the alleged tortfeasor does not relieve the insurer of all bad-faith claims relating to its handling of the uninsured motorist claim. JUDGMENT OF DISTRICT COURT REVERSED; AND PROCEEDING IS REMANDED TO THE DISTRICT COURT Joe E. White, Jr., Charles C. Weddle III, White Law Firm, Oklahoma City, Oklahoma and William J. Baker, Hert, Baker & Koemel, Stillwater, Oklahoma, for Plaintiff/Appellant. Loyal J. Roach, Steven V. Buckman and Diane M. Black, Buckman and Roach, Tulsa, Oklahoma, for Intervenors/Appellees. EDMONDSON, V.C.J. ¶1 The issues in this appeal are (1) whether a UM insurer may, without either denying or granting a UM claim, seek intervention in the action brought by its insured against the alleged tortfeasor and assert both potential subrogation rights and the defenses raised by the tortfeasor; and (2) whether a subsequent judgment for the tortfeasor necessarily relieves the UM carrier of any bad-faith liability arising from its handling of the UM claim. We hold that a UM insurer may, in certain circumstances, intervene in the action brought by its insured against the alleged tortfeasor and assert certain defenses, and that a subsequent judgment for the tortfeasor does not relieve the insurer of all possible bad-faith claims based upon the insurer's handling of the UM claim. I. ¶2 Brown and Patel were involved in a motor vehicle collision. Brown ¶3 OneBeacon Insurance Group was granted leave to intervene via two different motions, once in the name of OneBeacon and once in the name of Commercial Union Insurance Company. The first in time, Commercial Union's petition to intervene, was based upon the carrier's status as Brown's UM carrier. Approximately four months later, OneBeacon filed a petition to intervene alleging that it had paid $2,841.45 for Brown's medical expenses as a result of a workers' compensation policy. Brown answered and, while admitting that OneBeacon was his workers' compensation insurance carrier and that he had filed a Form 3 seeking workers' compensation benefits, denied that OneBeacon had paid $2,841.45 for his medical expenses. Commercial Union Insurance Company had previously changed its name to OneBeacon and we treat the intervenors as a single entity, OneBeacon, for the purpose of this opinion. ¶4 Brown's allegation of OneBeacon's bad faith centers on one of the petitions to intervene. This petition combined (1) a petition for intervention that adopted allegations from Brown's petition, asserted a potential subrogation interest and sought a determination of the rights of OneBeacon; (2) an answer that denied certain allegations of Brown's petition, adopted Patel's defenses and requested that Brown's petition be dismissed; and (3) a cross-petition that asserted a cross-claim against Patel and requested a judgment against Patel for any amount OneBeacon would be required to pay Brown. ¶5 Brown filed an amended petition that added claims against OneBeacon. Brown alleged that (1) OneBeacon was his uninsured/underinsured carrier; (2) in the year 2000, Brown had put the carrier "on notice of the claim for underinsured motorist benefits and medical pay benefits" and (3) his insurer had breached its duty to deal fairly and in good faith. ¶6 OneBeacon filed a motion for summary judgment, Brown responded and OneBeacon replied. The motion for summary judgment states that OneBeacon did not commit bad faith because (1) An uninsured/underinsured obligation was never "triggered" because Brown's damages were below Patel's (alleged tortfeasor's) $300,000.00 insurance coverage, (2) OneBeacon's employees reasonably questioned the causation of Brown's claim and (3) OneBeacon's employees reasonably questioned the value of Brown's claim. ¶7 Brown responded and stated that OneBeacon did not question the cause of Brown's injuries prior to OneBeacon's intervention. Brown argued that OneBeacon was not sued for bad faith in evaluating the amount of Brown's claims. Instead, he argued that OneBeacon's conduct showed bad faith when it (1) intervened and asserted a subrogation claim against Patel, and thus adopted Brown's allegation's that his injuries were in excess of $300,000 and (2) asserted a subrogation interest while "actively defending Patel." Plaintiffs' Brief at p. 22. Brown's complaint is that OneBeacon never denied or granted the claim, but sought intervention to assert judicial remedies based upon both granting and denying the claim. ¶8 The District Court granted the motion for summary judgment. A verdict was returned for Defendant Patel, judgment entered on that verdict, and then Brown appealed the summary judgment granted to OneBeacon. This Court retained the appeal. OneBeacon filed motions for oral argument and permission to file appellate briefs in addition to those that were before the trial court. II. ¶9 Generally, an implied duty of an insurer to act in good faith and deal fairly with its insured is imposed by law upon the insurer-insured relationship, and a breach of that duty arises from a breach of the insurance contract where the breach occurs in a manner constituting a lack of good faith; i.e., constituting bad faith. Christian v. American Home Assurance Company, ¶10 Of course, a part of every contract in this state is the law applicable to that contract. Public Service Co. of Oklahoma v. State ex rel. Oklahoma Corp. Com'n, ¶11 The bad-faith action may also be based upon an insurer's failure to perform an act that is derivative or secondary in nature; that is, an insurer's duty that owes its existence to a preexisting implied contractual, ¶12 In our case today, this latter category of derivative or secondary duties is raised by Brown, in that he asserts bad faith is shown by OneBeacon's litigation efforts to both press a subrogation claim while denying that such a claim exists, all without either granting or denying a UM claim. Specifically, Brown asserts that OneBeacon acted in bad faith by intervening in Brown's action against Patel and asserting a subrogation claim against Patel and adopting Plaintiffs' allegations, and secondly, that OneBeacon acted in bad faith by asserting a subrogation interest "as a ruse to actually harm" Brown by OneBeacon's litigation conduct in defending Patel. Brown also asserts in his brief that he has not sued OneBeacon for bad faith in evaluating the amount of his claim. Brown contends questions of disputed fact exist regarding the reasonableness of OneBeacon's litigation conduct in light of its claims file showing a claim and the tortfeasor's liability. ¶13 OneBeacon asserts a right to intervene, and that an exercise of this right cannot be the basis for a breach of a duty owed to Brown. In other words, it argues that the outer limit of the duty to act in good faith and deal fairly cannot expand so as to prohibit OneBeacon's right to intervene. OneBeacon's view of the controversy presents the scope of an insurer's duty, a question of law. ¶14 In Keel v. MFA Ins. Co., ¶15 The third option in Keel expressly allows the insurance company to intervene in the insured's action against an uninsured motorist. We subsequently relied upon Keel and held that a UM insurer was a proper defendant in an insured's action against an alleged tortfeasor. Tidmore v. Fullman, ¶16 After Keel we adopted a procedure for intervention based upon its federal counterpart. A. INTERVENTION OF RIGHT. Upon timely application anyone shall be permitted to intervene in an action: 1. When a statute confers an unconditional right to intervene; or 2. When the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest. B. PERMISSIVE INTERVENTION. Upon timely application anyone may be permitted to intervene in an action: 1. When a statute confers a conditional right to intervene; or 2. When an applicant's claim or defense and the main action have a question of law or fact in common. Intervention of right pursuant to § 2024(A)(1) may occur when a statute confers an unconditional right to intervene. OneBeacon pled that it was entitled to intervene pursuant to ¶17 OneBeacon argues for a right of intervention pursuant to § 2024(A)(2) based upon its status as Brown's UM Carrier. Section 2024(A)(2) states that intervention of right occurs when "the applicant claims an interest relating to the property or transaction which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect that interest." The language of § 2024(A)(2) is also found in its federal counterpart, and we may look to the federal court interpretation when we apply similar language from our pleading code. ¶18 OneBeacon's potential subrogation interest against Patel is of the same nature as Brown's asserted claim against Patel. Generally, intervention as of a right will be denied when a party to a controversy adequately represents the interest of the intervenor. A putative intervenor does not have an interest not adequately represented by a party to a lawsuit simply because it has a motive to litigate that is different from the motive of an existing party. So long as the party has demonstrated sufficient motivation to litigate vigorously and to present all colorable contentions, a district judge does not exceed the bounds of discretion by concluding that the interests of the intervenor are adequately represented Natural Resources Defense Council, Inc. v. New York State Dept. of Environmental Conservation OneBeacon's motion to intervene based upon subrogation was not based upon allegations that Brown's litigation conduct was less than vigorous. ¶19 We also note that an intervenor's interest must be "significantly protectable" or "direct, substantial, [and] legally protectable." ¶20 Conventional (or contractual) subrogation is created by an agreement or contract between parties granting the right to pursue reimbursement from a third party in exchange for payment of a loss. U.S. Fidelity and Guar. Co. v. Federated Rural Elec. Ins. Corp., ¶21 An insurer's payment on a policy of insurance clearly creates a subrogation interest for the purpose of intervention. III. ¶22 We arrive at a slightly different conclusion when we examine an insurer's interest to intervene for the purpose of denying coverage of the policy based upon either an element of its insured's cause of action or an element of the alleged tortfeasor's defense. A plaintiff's uninsured motorist insurer may possess an interest that coincides with the defendant. The insurer may want the defendant/uninsured motorist to contest fault and damages. ¶23 Courts in several states have allowed an uninsured motorist carrier to intervene in a tort action between its insured an uninsured tortfeasor. Lima v. Chambers, ¶24 The Lima court next examined whether the insurer's interest would be adequately represented in the particular controversy. The court noted that the uninsured motorist admitted liability, lacked the assistance of counsel, and proposed to litigate the issue of damages pro se. Lima, 657 P.2d at 283. The court also noted that the uninsured motorist did not appear to be concerned with minimizing damages, but "in bringing the whole matter to a close as soon as possible." Id. Although the legal interests of an UM insurer seeking to deny coverage and the tortfeasor appeared on the surface to be identical, they were divergent in practice because of the tortfeasor's litigation conduct. The court concluded that the insurer's interest to deny coverage was not adequately represented. Id. at 284. ¶25 OneBeacon's intervention for the purpose of contesting the cause of Brown's injuries or the amount of his damages was not based upon the inability of, or any lack in, Patel's defense to Brown's claims. Patel admitted liability at trial, but the admission is consistent with OneBeacon's claims file and OneBeacon has not asserted that Patel's admission was inappropriate. Patel successfully litigated his side and a judgment on a defendant's verdict was entered for Patel. OneBeacon did not utilize the four-step analysis of § 2024(A)(2). Nothing in the record on appeal shows that OneBeacon had a right to intervene pursuant to § 2024(A)(2). IV. ¶26 Legitimate disagreements can arise concerning the amount of coverage, cause of loss, and breach of policy conditions, and the tort of bad faith does not prevent the insurer from resisting payment or resorting to a judicial forum to resolve a legitimate dispute. Skinner v. John Deere Ins. Co., ¶27 In Keel v. MFA Ins. Co., ¶28 OneBeacon also argues for a UM insurer's right to intervene in an action by its insured against an alleged tortfeasor when the insurer seeks only to monitor the action. Intervention for the purpose of monitoring serves the insurer's purpose of determining whether the alleged torfeasor is appropriately defending the action during the course of the litigation. OneBeacon argues for the right to seek permissive intervention, and if subsequent litigation circumstances would justify an intervention as a matter of right pursuant to the four-step analysis of § 2024(A)(2), then the insurer could present its interests on the tort issues between the insured and the alleged tortfeasor. We agree with OneBeacon that courts favor intervention and joinder of party defendants as a convenient or pragmatic method of settling controversies relating to the same subject matter. We also conclude that § 2024 specifies when intervention is permissible. ¶29 In Landrum v. National Union Insurance Co., ¶30 A UM insurer has a right to judicially contest the conditions that would give rise to an obligation to pay UM insurance. Skinner v. John Deere Ins. Co., supra. When a UM Insurer does not satisfy the conditions of intervention as a matter of right pursuant to § 2024(A), it may seek § 2024(B) permissive intervention in the cause of action brought by its insured against the alleged torfeasor based upon its assertion of contesting coverage due to an element of the tort cause of action or a defense thereto. If permissive intervention is granted a district court may make the intervention subject to conditions that prevent prejudicing the parties. V. ¶31 Brown asserts that the bad-faith action against OneBeacon must be adjudicated by a jury. Brown must point to some act or conduct of OneBeacon as the basis for the bad-faith claim. Brown asserts that OneBeacon's intervention is bad faith because it asserted a subrogation right when none existed, it adopted Patel's defenses, and OneBeacon's valuation of Brown's claim was less than the insurance available to Patel. ¶32 The district court granted the motion to intervene. Brown asserts that "OneBeacon set themselves up as an adversary instead of being on Brown's side, all of which is unreasonable and unjustified." Brown's Brief at 10. A UM insurer possesses a right to contest the "insured's side" and doing so, by itself, is not per se unreasonable. This is so because of the insurer's right to contest an insured's clam. Skinner, supra, and Ballinger, supra. Thus, intervention by a UM insurer is not by itself a violation of its duty to act in good faith towards its insured. On the other hand, the fact that an insurer was granted leave to intervene does not insulate that activity from a bad-faith action. An insurer may engage in certain litigation conduct pursuant to a procedural right and yet by that act violate its duty to an insured. Badillo v. Mid Century Insurance Co., ¶33 A distinguishing characteristic for a bad-faith action is the particular duty owed to its insured that has been breached by the insurer. In the controversy before us, the essence of Brown's bad-faith claim is not merely that OneBeacon filed its petition to intervene without sufficient legal reasons for doing so; but that by maintaining mutually inconsistent subrogation claims and adopting Patel's defenses, OneBeacon was continuing to maintain a fence-sitting position two years after the claimed injury, neither denying or approving a UM claim; in sum, that OneBeacon abrogated a duty to timely investigate and either to pay Brown and seek subrogation or to deny the claim. ¶34 Brown's brief states the issues for the purpose of responding to OneBeacon's summary judgment request: The issue(s) in this case are (1) OneBeacon asserting a subrogation claim against Patel and adopting Plaintiffs' allegations, essentially admitting Plaintiffs' claims are in excess of $300,000; (2) OneBeacon has falsely and wrongfully asserted such subrogation interest herein as a ruse to actually harm its insureds by actively defending Patel. Brown's Brief at pg. 22. In support of this characterization Brown argues that OneBeacon had almost two years to investigate Brown's claim prior to the intervention, and that OneBeacon's claims manager stated that "We filed intervention so we could find out what his injuries were and we could evaluate his claim to determine whether now we have a UM claim or not." Brown's Brief at 21. Brown asserts that OneBeacon never questioned the cause of Brown's injuries prior to the intervention. Id. at 22. Brown asserts that OneBeacon's claims manager and a legal opinion provided to OneBeacon prior to the intervention agreed that OneBeacon had no subrogation rights until it made a payment to Brown. Id. at 3, 11, 33-35. Brown asserts that Throughout the claims file, OneBeacon noted that Mr. Patel was 100% at fault, never questioning the same. Further, OneBeacon's claims adjusters evaluated Brown's bodily injury, noting his bodily injuries, pain, suffering, and medical bills were causally related. OneBeacon never took statements of its insured, the eyewitnesses, the adverse driver (Mr. Patel), or the police officer. OneBeacon never requested that a medical examination be performed. In over a year and a half, OneBeacon never questioned medical causation in the file. Brown's Brief at 3. Brown also asserts that OneBeacon had no written guidelines, claims manual, or training regarding how to evaluate damages. Id. at 8, 38. And again, "It is OneBeacon's responsibility to investigate and evaluate the claims. OneBeacon is abdicating its responsibilities and asking the Court and jury to be part of its claims department . . ." Brown's Brief at 5. ¶35 OneBeacon asserts that it has a right to litigate contested claims, a right to intervene and that the jury's verdict for Patel forecloses, as a matter of law, any bad-faith claim. It argues that an insurer's methods in investigating and litigating a UM claim may be conclusively justified if a court subsequently determines that no UM payment is owed. In other words, it seeks for a "means justified by ends" rule of law for an UM insurer's handling of UM claims. A related complaint is made by Brown concerning OneBeacon's use of information that OneBeacon did not possess until after OneBeacon's intervention. Evidence relating to facts that OneBeacon did not have or rely on until after the time period in question, that is, from the time of OneBeacon's notice of the collision until the intervention, is not relevant to an adjudication of a bad-faith claim concerning the intervention. Newport v. USAA, ¶36 An insured in an action of this nature is required to show that (1) he or she was covered under an automobile liability insurance policy issued by the insurer and that the insurer was required to take reasonable actions in handling the UM claim, (2) the actions of the insurer were unreasonable under the circumstances, (3) the insurer failed to deal fairly and act in good faith toward the insured in handling the UM claim, and (4) the breach or violation of the duty of good faith and fair dealing was the direct cause of any damages sustained by the insured. Badillo v. Mid Century Insurance Co., ¶37 In two opinions applying Oklahoma law the Tenth Circuit Court has stated that an insurer does not breach the duty of good faith to pay a claim "by litigating a dispute with its insured if there is a 'legitimate dispute' as to coverage or amount of the claim, and the insurer's position is 'reasonable and legitimate.' " Vining on Behalf of Vining v. Enterprise Financial Group, Inc., 148 F.3d 1206, 1213 (10th Cir. 1998), quoting, Oulds v. Principal Mut. Life Ins. Co., 6 F.3d 1431, 1436 (10th Cir.1993). The Oulds opinion relied upon Thompson v. Shelter Mut. Ins., 875 F.2d 1460, 1462 (10th Cir.1989) and Manis v. Hartford Fire Ins. Co., ¶38 OneBeacon contested Brown's claim when it intervened and asserted Patel's defenses against Brown in Brown's action against Patel. It sought a legal adjudication that Brown's claim was not covered by the policy. OneBeacon, as an insurer, possessed a procedural right to take such action, but for the purpose of the bad-faith action the question remains whether such conduct was legitimate and reasonable. ¶39 Summary judgment is appropriate where it appears there is no substantial controversy as to any material fact and one party is entitled to judgment as a matter of law. Baker v. Saint Francis Hosp., ¶40 The facts presented by the parties conflict on why OneBeacon filed its petition for intervention. The facts presented by Brown, viewed in a light most favorable to Brown, reveal a claims file showing a value of Brown's UM claim; that his injuries were caused by the motor vehicle collision involving Patel; that no, or least a very minimal, investigation was performed by OneBeacon during the two years before it intervened in Brown's action; that the major concern expressed by OneBeacon in its claims file was whether OneBeacon needed to file an action against Patel to preserve subrogation rights; the amount of reserve OneBeacon needed for the UM claim; and OneBeacon's representative stating that intervention was made to evaluate the UM claim. Brown's asserted facts do not agree with OneBeacon's assertions that it was concerned prior to intervention whether Brown's claim was covered by the policy. A substantial question of material fact exists regarding the reasons for the petition for intervention, or legal action, OneBeacon instituted against Brown. The district court's order granting summary judgment to OneBeacon must thus be reversed. ¶41 EDMONDSON, V.C.J., LAVENDER, OPALA, WATT, AND COLBERT, JJ., Concur. ¶42 KAUGER, J., Concurs in result. ¶43 WINCHESTER, C.J., Concurs in part, dissents in part. ¶44 HARGRAVE, TAYLOR, JJ., Dissent. FOOT