Opinion ID: 4533613
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Heading Rank: 2

Heading: analysis

Text: First Certified Question ¶ 8 The federal court's certified questions ask us to define the proper scope and application of a provision of the Oklahoma Insurance Code, 36 O.S. § 3629(B). 3 This is a question of first impression in a matter that offers no controlling Oklahoma precedent. Barrios v. Haskell Cty. Pub. Facilities Auth. , 2018 OK 90, ¶ 6 n.6, 432 P.3d 233, 236 n.6. In pertinent part, the terms of section 3629(B) provide that [i]t shall be the duty of the insurer, receiving a proof of loss, to submit a written offer of settlement or rejection of the claim to the insured within sixty (60) days of receipt of proof of loss. Upon judgment rendered to either party, costs and attorney fees shall be allowable to the prevailing party. For purposes of this section, the prevailing party is the insurer in those cases where judgment does not exceed written offer of settlement. In all other judgments the insured shall be the prevailing party. 4 The primary goal of statutory interpretation is to ascertain and, if possible, give effect to the intention and purpose of the Oklahoma Legislature as expressed by the statutory language. Raymond v. Taylor , 2017 OK 80, ¶ 12, 412 P.3d 1141, 1145. Every provision of every Oklahoma statute is presumed to have been intended for some useful purpose and every provision should be given effect. Darnell v. Chrysler Corp. , 1984 OK 57, ¶ 5, 687 P.2d 132, 134. And statutes are interpreted to attain that purpose and end, championing the broad public policy purposes underlying them. Estes v. ConocoPhillips Co. , 2008 OK 21, ¶ 16, 184 P.3d 518, 525. ¶9 The plain language of section 3629(B) imposes an affirmative duty on an insurer to submit a written offer of settlement or rejection of the claim to the insured within a definite time period: sixty days. A statute will be given a construction, if possible, which renders every word operative, rather than one which makes some words idle and meaningless. Estes , 2008 OK 21, ¶ 16, 184 P.3d at 525. This interpretive principle applies to every word, phrase, and clause of the statute. Matthews v. Rucker , 1918 OK 29, ¶ 5, 170 P. 492, 493. Moreover, when construing a statute, relevant provisions must be considered together, where possible, to give force and effect to each. Ledbetter v. Okla. Alcoholic Beverage Laws Enf't Comm'n , 1988 OK 117, ¶ 7, 764 P.2d 172,179. Section 3629(B) speaks of a specific kind of offer--an offer of settlement or rejection of a claim. Its preceding subsection, in turn, contextualizes and clarifies precisely what is meant by a claim: An insurer shall furnish, upon written request of any insured claiming to have a loss under an insurance contract issued by such insurer, forms of proof of loss for completion by such person . . . . Id. § 3629(A) (emphasis added). ¶10 We construe the words in a statute according to their plain and ordinary meaning. In re Protest of Hare , 2017 OK 60, ¶ 10, 398 P.3d 317, 319--20. And so in this case we take section 3629(B)'s words in their plain and ordinary sense--just as would the layperson who purchases an insurance policy, suffers a covered loss, and submits proof of that loss to the insurer. The statute tells both parties what to expect when the insured submits the claim. Upon receiving the insured's claim--that is, the proof of loss--the insurer must act within sixty days to settle (or else reject outright--as happened in this case) that claim. ¶11 By its own plain terms, then, section 3629(B)'s claim--toward which the offer of settlement or rejection is directed--must be an insured's request to the insurer to be made whole for a covered loss. This does not equate to, and must not be mistaken for, a claim arising in later litigation. Had the insured's claim been promptly resolved, no litigation would have arisen at all. A section 3629(B) claim directly flows from the insured's written claim of loss, arising under the insurance contract and duly submitted to the insurer for payment of benefits. That is the only claim with which this statute is concerned. ¶12 In an earlier examination of section 3629(B), we provided the following gloss on the statute: The insurer is the prevailing party only when the judgment is less than any settlement offer that was tendered to the insured, or when the insure[r] rejects the claim and no judgment is awarded. The insured, on the other hand, is the prevailing party when the judgment is more than any settlement offer that was made, or when the insured receives a judgment when the insurer has rejected the claim. Shinault v. Mid-Century Ins. Co ., 1982 OK 136, ¶ 4, 654 P.2d 618, 619. 5 More recently, we observed (albeit in obiter dictum) that [section] 3629(B) provides for prevailing party attorney fees where an insurer fails to submit an offer of settlement or rejection of the claim within 90 [now, sixty] days after proof of loss and where judgment is entered. Barnes v. Okla. Farm Bureau Mut. Ins. Co ., 2004 OK 25, ¶ 8, 94 P.3d 25, 28 (emphasis added). These prior statements were fundamentally sound, and they guide us to our conclusion today. ¶13 An incorrect denial of an insured's claim or an inadequate tender of benefits within the statutory window of section 3629(B), followed by a judgment in the insured's favor after suit is filed, enables the insured to recover attorney fees as the prevailing party in litigation. See Shinault , 1982 OK 136, ¶ 4, 654 P.2d at 619. At the same time, an ultimately correct denial of an insured's claim or an adequate tender of benefits--within the statutory window, but improvidently rejected by the insured--may likewise permit the insurer to recover its attorney fees as the prevailing party. See id. ¶14 Oklahoma places a premium on incentivizing prompt payment of insurance claims. As we have before explained: The statutory duty imposed upon the insurer to accept or reject the claim within ninety [now, sixty] days of the receipt of the proof of loss recognizes that a substantial part of the right purchased by the insured is the right to receive benefits promptly. Unwarranted delay causes the sort of economic hardship which the insured sought to avoid by the purchase of the policy . . . . Lewis v. Farmers Ins. Co. , 1983 OK 100, ¶ 6, 681 P.2d 67, 69; see also Christian v. Am. Home Assurance Co ., 1977 OK 141, ¶¶ 20--21, 577 P.2d 899, 903 (Our Insurance Code requires insurance companies to make immediate payment of claims. . . . This statutory duty imposed upon insurance companies to pay claims immediately , recognizes that a substantial part of the right purchased by an insured is the right to receive the policy benefits promptly.) (emphasis added). As also noted by the Tenth Circuit Court of Appeals, statutes such as Oklahoma's section 3629(B) seek to prevent insurance benefits from unjustly being consumed by litigation costs and are designed to make the beneficiary whole rather than to punish the insurer. Smith v. Equitable Life Assurance Soc'y , 614 F.2d 720, 723 (10th Cir. 1980) (discussing similar Wyoming attorney-fee statute). Statutory provisions like those in section 3629(B) are therefore designed to allow[] recovery of expenses incurred in pursuing a just and reasonable claim. Id. Such statutes are not penal, but remedial or compensatory, in that actual loss is at issue, traceable directly to the insurer's improper conduct. Id. ¶15 These same rationales are reflected in our state's adoption of the Unfair Claims Settlement Practices Act (UCSPA), 6 which mirrors section 3629(B) by requiring insurers to either pay or deny a claim within sixty days of receiving a proof of loss. See 36 O.S. Supp. 2018 § 1250.7(A) (Within sixty (60) days after receipt by a property and casualty insurer of properly executed proofs of loss, the first party claimant shall be advised of the acceptance or denial of the claim by the insurer, or if further investigation is necessary.); id. § 1250.7(C) (directing that the insurer shall complete investigation of a claim within sixty (60) days after notification of proof of loss unless such investigation cannot reasonably be completed within such time and further providing that [i]f such investigation cannot be completed, or if a property and casualty insurer needs more time to determine whether a claim should be accepted or denied, it shall so notify the claimant within sixty (60) days after receipt of the proofs of loss, giving reasons why more time is needed.). Indeed, we may presume the Legislature's 2018 amendment to section 3629(B)--narrowing its time limit from ninety to sixty days--was done in furtherance of ensuring uniformity with the UCSPA's sixty-day mandate. Relatedly, in the bad-faith context, we have clarified that the timeframe for judging the reasonableness of an insurer's actions is that initial window in which the insurer makes the decision to pay or deny the claim. Buzzard v. Farmers Ins. Co. , 1991 OK 127, ¶ 14, 824 P.2d 1105, 1109 ([A] claim must be paid promptly unless the insurer has a reasonable belief that the claim is legally or factually insufficient. . . . The knowledge and belief of the insurer during the time period the claim is being reviewed is the focus of a bad-faith claim.). ¶16 We hold that courts may consider only those offers of settlement of the underlying insurance claim --and not offers to resolve an ensuing lawsuit that might result from the insurer's denial of the same--made within the (now) sixty-day statutory window when determining the prevailing party for purposes of awarding attorney fees under 36 O.S. § 3629(B). To the extent the Oklahoma Court of Civil Appeals previously arrived at a conflicting interpretation of section 3629(B) in Shadoan v. Liberty Mutual Fire Insurance Co. , 1994 OK CIV APP 182, 894 P.2d 1140--a non-precedential opinion cited by the Tenth Circuit Court of Appeals in its certification order--that opinion fails to align with the principles announced today and is hereby expressly overruled. 7 Second Certified Question ¶ 17 It follows that litigation-settlement offers--as opposed to claim-settlement offers--fall beyond section 3629(B)'s initial sixty-day timeframe and, therefore, are simply not within the statute's contemplation. In other words, an offer of litigation settlement cannot serve as the catalyst for section 3629(B)'s fee-shifting provision. In the specific context of a section 3629(B) prevailing-party analysis, our answer to the certifying court's second question is no--for the very basic reason that the type of offer described does not fall within the definition of a section 3629(B) settlement offer. ¶18 The settlement-offer scenario described in the second question would inevitably invite litigation gamesmanship and eleventh-hour offers. The structure of section 3629(B) affords no room to either. The reality is that once the benefits have been denied and the plaintiff retains counsel to dispute that denial, additional costs that require relief have been incurred. Johnson v. Omega Ins. Co. , 200 So. 3d 1207, 1215 (Fla. 2016). 8 And all the good faith and settlement offers in the world after suit is filed will not immunize a company from the consequences of an unjustified refusal to pay which made the suit necessary in the first place. Sloan v. Emp'rs Cas. Ins. Co., Dallas, Tex. , 521 P.2d 249, 251 (Kan. 1974). ¶19 Were this Court to allow insurers to skirt the sixty-day requirement entirely, offer payment at a later date, and then use that untimely payment to deny attorney fees owed to the policyholder, then the purpose of a statute intended to ensure prompt payment of claims would be thoroughly thwarted. To interpret a statute containing a definite time limit, while giving no credence to the readily discernible rationale underlying that time limit, would epitomize a vain and useless act. TRW/Reda Pump v. Brewington , 1992 OK 31, ¶ 5, 829 P.2d 15, 20. We reject any invitation to graft this illogical interpretation onto section 3629(B). See AMF Tubescope Co. v. Hatchel , 1976 OK 14, ¶ 21, 547 P.2d 374, 379 ([A] statute should be given a sensible construction, bearing in mind the evils intended to be avoided or the remedy afforded.); see also Christian , 1977 OK 141, ¶ 22, 577 P.2d at 903 (acknowledging generally the express intent of our legislature to impose upon insurance companies an obligation to pay a valid claim on a policy promptly). The sixty-day limit prescribed by section 3629(B) is not a suggestion, and it is not an invitation for an opening offer: it is a legislative directive to insurance companies that ensures the prompt and timely handling of claims. ¶20 If indeed this sixty-day time limit were inconsequential to the eventual determination of prevailing-party status, then section 3629(B) would essentially operate identically to an offer-of-judgment statute, which could be deployed as a fee-shifting mechanism at any time throughout the litigation. 9 But section 3629(B) is functionally distinguishable from the traditional offer-of-judgment statute, the purpose of which is to encourage judgments without protracted litigation. Dulan v. Johnston , 1984 OK 44, ¶ 10, 687 P.2d 1045, 1047. Section 3629(B) is specific to the insurance context, and its sixty-day requirement furthers a definite and different legislative objective--namely, the prompt payment or denial of claims. ¶ 21 In this case, Northfield attempted to use section 3629(B)'s written offer of settlement as a vehicle to include a lump-sum payment for the resolution of Hamilton's lawsuit, while incorporating at least some [attorney] fees. But the very language of the statute--which explicitly applies to an offer of settlement or rejection of the claim--forecloses its use in this manner. Northfield's June 2017 offer of $45,000 to resolve Hamilton's lawsuit is not a statutory settlement offer within the meaning of section 3629(B). Again, section 3629(B) serves to ensure the swift payment of insurance claims, not of lawsuits. The claim referenced is the insurance claim alone, and the benefits owed under the insurance contract are the only true settlement amounts to which the statute refers.