Opinion ID: 4540320
Heading Depth: 3
Heading Rank: 2

Heading: Pertinent Oklahoma Law

Text: In this diversity suit brought in the U.S. District Court for the Western District of Oklahoma, the substantive law of the forum state of Oklahoma applies. Edens v. The Netherlands Ins. Co., 834 F.3d 1116, 1120 (10th Cir. 2016). Contract Law “Oklahoma contract law applies to this diversity action.” Automax Hyundai S., LLC v. Zurich Am. Ins. Co., 720 F.3d 798, 804 (10th Cir. 2013). Under Oklahoma law, an insurance policy is a contract and interpreted accordingly. First Bank of Turley v. Fid. & Deposit Ins. Co. of Md., 928 P.2d 298, 302 (Okla. 1996).3 In the absence of ambiguous language, Oklahoma courts enforce an insurance contract’s express terms and take the language’s plain and ordinary meaning. Pitco Prod. Co. v. Chaparral Energy, Inc., 63 P.3d 541, 546 (Okla. 2003). “The test for ambiguity is whether the language is susceptible to two interpretations on its face from the standpoint of a reasonably prudent lay person, not from that of a lawyer.” Am. Econ. Ins. Co. v. Bogdahn, 89 P.3d 1051, 1054 (Okla. 2004) (quotations and alterations omitted). 3 Under Oklahoma law, “[t]he general declaration of insurance coverage, as established by the insurance policy and limited by its provisions, normally determines the insurance carrier’s liability.” Dodson v. St. Paul Ins. Co, 812 P.2d 372, 377 (Okla. 1991). Exclusions are read serially, and each one “eliminates coverage and operates independently against the general declaration of insurance coverage and all prior exclusions.” Id. 5 A liability insurance policy generally contains the insurer’s two basic contractual duties to the insured: the duty to defend and the duty to indemnify. First Bank of Turley, 928 P.2d at 302-03. The insurer’s duty to defend is “broader than[] the duty to indemnify” and applies “whenever [the insurer] ascertains the presence of facts that give rise to the potential of liability under the policy.” Id. at 303 (emphasis omitted). This determination must be “measured by the facts that were known and knowable—by what the insurer knows or by what the insurer was capable of discovering itself—at the time the insured’s request was tendered.” Id. at 305 (emphasis omitted); see Automax Hyundai, 720 F.3d at 804 (explaining that under Oklahoma law, “[t]he duty to defend is triggered by the facts reasonably available at the time the defense is demanded”). Duty to Defend Under Oklahoma law, “[t]he insurer’s defense duty is determined on the basis of information gleaned from the [underlying suit’s] petition (and other pleadings), from the insured and from other sources available to the insurer at the time the defense is demanded.” First Bank of Turley, 928 P.2d at 303 (emphasis omitted). Although the insured bears the initial burden to request a defense, once the request is made, the insurer bears the burden to investigate the underlying facts and determine whether they trigger coverage. Id. at 304.4 In determining whether an insured has 4 “[W]hen presented with a claim by its insured, an insurer must conduct an investigation reasonably appropriate under the circumstances . . . .” Newport v. 6 stated a plausible claim for breach of a duty to defend, the court may consider, in addition to the breach complaint, the petition in the underlying action. See Smith v. United States, 561 F.3d 1090, 1098 (10th Cir. 2009).5 In Bituminous Cas. Corp. v. Cowen Constr., Inc., 55 P.3d 1030, 1035 (Okla. 2002), the Oklahoma Supreme Court upheld as “clear and unambiguous” a total pollution exclusion provision nearly identical to the one here.6 Because the provision was not limited to environmental pollutants, the Bituminous court determined it USAA, 11 P.3d 190, 195 (Okla. 2000) (quotations omitted). “Under Oklahoma law, an insurer’s investigation need only be reasonable, not perfect.” Shotts v. GEICO Gen. Ins. Co., 943 F.3d 1304, 1317 (10th Cir. 2019) (quotations and alterations omitted). 5 To survive a motion to dismiss, the insured party must state a plausible claim showing the insurer’s duty to defend. In evaluating a Rule 12(b)(6) motion to dismiss, we may consider the petition in the underlying case. See Smith, 561 F.3d at 1098 (“In evaluating a Rule 12(b)(6) motion to dismiss, courts may consider not only the complaint itself, but also attached exhibits, and documents incorporated into the complaint by reference[,] . . . [and] documents referred to in the complaint if the documents are central to the plaintiff’s claim and the parties do not dispute the documents’ authenticity.” (quotations and citations omitted)). MJH’s amended complaint references the underlying petition, which, under First Bank of Turley, is central to whether Westchester had a duty to defend. 928 P.2d at 303. 6 In Bituminous, the total pollution exclusion provision exempted from coverage third-party actions for “[b]odily injury or property damage arising out of the actual, alleged or threatened discharge, dispersal, release or escape of pollutants.” 55 P.3d at 1031 n.1. It defined “pollutants” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.” Id. 7 excluded the third-party claimant’s lead poisoning claims against the insured from coverage. Id.7 Good Faith Under Oklahoma law, “[a]n insurer has an implied-in-law duty to act in good faith and deal fairly with the insured to ensure that the policy benefits are received.” Badillo v. Mid Century Ins. Co., 121 P.3d 1080, 1093 (Okla. 2005) (quotations omitted). A plaintiff seeking damages for the insurer’s alleged bad faith conduct must prove insurance coverage for its claim. See id. at 1093-94 (finding district court did not erroneously dismiss plaintiff’s bad faith claim where plaintiff failed to show entitlement to insurance coverage); Edens, 834 F.3d at 1129 (“Under Oklahoma law, an insured must show that he is entitled to coverage to prevail on a bad-faith claim.”).